Have you spotted that when there is consensus support for some bold new measure of state intervention, it proves especially costly and disastrous? Lockdown. HS2. Net Zero. It is not just a political consensus across the main parties. But also the academics and the media. Cue articles beginning, ‘Both sides of industry’. When you hear them all singing the Kumbaya, watch out for your wallet. We had another example on Saturday with the emergency session of Parliament to pass legislation enabling the ‘likely’ nationalisation of British Steel.
Steel nationalisation is a traditional sport of Labour Governments. Clement Attlee did it in 1949. Harold Wilson did it in 1967. Both times saw mismanagement, political interference, industrial decline and heavy taxpayer losses. Third time lucky?
But the Conservatives also have some recent form in this area. In 2021, the Conservative Government nationalised the loss-making Sheffield Forgemasters. The claim was made that this was necessary on ‘national security’ grounds, to supply the defence industry and avoid dependence on China. But there are plenty of friendly countries already supplying us with steel and keen to sell us more. While we live in an uncertain world, the scenario that they all impose an embargo on selling us the stuff is pretty implausible – were we to be at war with the rest of the world, it would be the least of our worries.
Then in 2023, the Conservative Government announced that Tata’s Port Talbot steelworks would be given up to £500 million by the taxpayer ‘in a bid to keep the plant open and produce steel in a greener way’. Here, the main justification seemed to be to ‘save jobs’ – though the number of jobs will still fall from 4,000 to 1,000. (It’s down to 2,000 so far.) So £500m from the taxpayer will ‘save’ a thousand jobs – £500,000 a job! Doubtless soon another half billion will be stumped up on some pretext or another. How many jobs will be destroyed by higher tax? Surely far more. But they can’t be identified. As Frédéric Bastiat put it, they are unseen.
‘Keynesians’ argue that increasing public spending is an effective way to reduce unemployment. They often go rather further than Keynes himself by disregarding his caveats. But this ‘punk Keynesianism’ was able to flourish. As Keynes died in 1946 aged 62, he did not live long enough to refute his errant followers.
Hayek said of Keynes:
I knew him very well. After the War I asked if he wasn’t getting alarmed about what his pupils would swallow. He said do trust me if this ever becomes dangerous, I’m going to turn public opinion back around. Six months later, he was dead.
But for even the most extreme ‘Keynesians’, the steel subsidies could scarcely be portrayed as offering good value for money in terms of employment protection.
Perhaps this bailing out of the steel industry would be an issue for Reform UK to denounce the Conservative-Labour ‘uniparty’ advocating the same misguided socialist policies? Not so. The only complaint from Nigel Farage and Richard Tice is that nationalisation should go further and faster.
Hansard for Saturday’s Commons and Lords sittings makes for depressing reading. The same assertions about jobs and security repeated from both sides of each chamber.
Daniel Hannan was a brave exception. ‘To have security of supply, whether of steel or anything else, is to source from the widest possible variety of sources so that you are not subject to a localised shock or disruption, which might as easily happen in your own territory as anywhere else,’ he argued.
He then continued:
That is exactly where we are with steel. There is no foreign country that accounts for more than 15% of our total imports, not our total use, our total imports. It is an extremely comfortable position. There is a very widespread view, I think, outside this Chamber that we are somehow dependent on China or other unfriendly autocracies. We heard it from the noble Baroness, Lady Drake, a moment ago, but which countries actually are our chief suppliers? The first is Germany, the second is Spain, the third is the Netherlands and the fourth is Belgium. If, in some bizarre world, we were blockaded by the EU, we would still be able to import from Algeria, Turkey, Vietnam and South Korea before we got to China, which accounts for only 7% of our imports. We need to be realistic about the numbers.
Most exasperating were all the eco-zealots expressing their sympathy for the steel workers. The Green Party backed the expensive panic measure to save the blast furnaces. Of course, our planning system and high labour costs were always likely to make it more competitive to produce steel elsewhere. But our much higher energy costs were the killer blow. If the Net-Zero requirements were lifted, then perhaps steel could still turn a profit in this country. But there is no prospect of that under this Government.
Daisy Cooper for the Liberal Democrats lamented that ‘the Conservatives were asleep at the wheel. They failed to tackle energy costs’. Some nerve.
Stephen Flynn for the SNP asked about saving the Grangemouth oil refinery on the same logic. Jessica Morden, the Labour MP for Newport East, inquired as to when the steel industry in South Wales was getting ‘its share of the £2.5 billion clean steel fund’.
Andrew Griffith, the Shadow Business Secretary, certainly had some robust criticisms:
From midnight, the Chancellor will be standing behind the payroll, settling every bill with every supplier, even if they are in arrears. If these decisions no longer sit with the plant owner, where does the buck stop? Old Admiralty Building? The Treasury? No. 10? How can other steel providers have any confidence in the impartiality of the Government’s steel strategy if the umpire is now on the pitch? What assessment have the Government made of the impact of the Bill on public finances? There is no impact assessment.
But that was rather spoiled by the Conservatives allowing the legislation to be nodded through without a vote.
Richard Tice was upbeat. ‘There is now a great opportunity for the House to unify. As the Secretary of State confirmed, we have the opportunity to take British Steel into public ownership,’ he said, adding that it could be ‘a great deal for the taxpayer. We should invest in refurbishing and relining these blast furnaces, in the same way that the French are doing in Dunkirk. They are spending a quarter of a billion euros in Dunkirk, and we should do the same.’ If it’s such a ‘great deal’, then why doesn’t he invest his own money?
The privatisation of steel was a success story. The massive increase in productivity enabled it to become profitable. Output increased to over 18m tons. It became world-beating, but other economies developed and adopted new technology and competition increased. Even with lower energy bills, viable steel making in the UK would be a challenge. Nationalisation is the last thing we need.
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