The story of the steel crisis has been a salutary one in the politics of global economic power. It was the dumping of cheap Chinese steel that precipitated the problem. Yet the British Government has been the stoutest defender of Chinese interests, touting market economy status and seeing off the more punitive levies through the lesser duty rule. The United Kingdom is the ultimate “flag of convenience” economy of the 21st century, genuflecting at the altar of global trade and investment and the new titans of the East.
This colonialism in reverse does not just extend to China, but also to that other rising power, India and its largest conglomerate. The British Government has singularly failed so far to hold Tata to account. Indeed there has been almost an air of gratitude for the company’s decision to delay committing, as it originally intended, the act of industrial vandalism that switching off the blast furnaces would have constituted. From the moment that Tata announced its decision to divest from the UK, the UK Government should have insisted that Tata Group met the entirety of its liabilities, providing, if necessary, an ‘exit dowry’.
Instead the British Government has signalled its willingness to subsume some or all of these debts in order to sweeten the pill for any prospective buyer. Yet the wider Tata Group has unlimited liability for the pension deficit as the Pension Regulator has the power to seize assets, even overseas if necessary. While the environmental liability, maybe worth as much as £750 million at Port Talbot alone, does lie with Tata Steel UK Ltd, Tata Group owns 30% of the company and the reputational damage of using bankruptcy to walk away from its responsibilities on such a scale would be unprecedented.
The Government’s soft-peddling on Tata is driven in part by a mixture of fear of provoking the company into precipitous action and the wider geo-economic considerations being emphasised within the Foreign Office. According to some very well-placed sources the Government is now trying to convince Tata to reverse its decision to sell out by offering it the same substantial injection of public money it is promising others.
One particular scenario being canvassed does not include a future for the heavy end of primary steel production at Port Talbot – although it’s likely there would be a temporary reprieve at least until after the EU Referendum. Instead it will focus on Tata Steel remaining in the UK but moving up the value chain of specialist steel through a programme of publicly-funded R&D, conducted perhaps by the university-based Warwick Manufacturing Group, chaired by Lord Bhattacharyya, who has impeccable Tata links at board level, and was instrumental in the Tata Motors Jaguar Land Rover deal.
The closure of Port Talbot, the write-down of its liabilities and the retention of its profitable assets might be an attractive proposition for Tata. But it would be a disaster for the British steel industry – not least as it is unnecessary. Tata’s own advisers have demonstrated a path back to profitability at Port Talbot as early as later this year. Those who have seen the figures know that the million pounds a day loss, repeated again on last night’s Panorama, is a myth, perhaps a convenient one for those who want to justify the plant’s demise. The closure of Port Talbot would allow Tata Steel to maximise the market share of its Ijmuiden plant, and eventually some of the other downstream operations would also be moved to mainland Europe. It would be the ultimate capitulation by a British Government, more interested in placating global power, than defending the interests of the very people they are meant to represent. The Welsh Government, which has its own people to represent, must insist that we don’t fund Tata to become its own asset-stripper and turn its own steelworks into scrap.
Adam Price is Plaid Cymru Assembly candidate for Carmarthen East and Dinefwr, and the party’s Shadow Finance & Treasury Minister