The government’s £500m rescue package for the Port Talbot steelworks is an unsatisfactory trade-off between job losses and industry efficiency, says Eliot Wilson
Was it a welcome reprieve or another sad measure of decline? Last week the business and trade secretary, Jonathan Reynolds, announced a revised deal with Tata Steel to provide a £500m subsidy for modernising its Port Talbot facility and allowing steel-making to continue. The government also promised to publish a ‘steel strategy’ next year and invest a further £2.5bn to redevelop Port Talbot and contribute to the decarbonisation of the steel industry.
Ministers are clear this is good news. Reynolds called it “strong action” for “a bright and sustainable future” while the Welsh secretary, Jo Stevens, claimed that the agreement “secures the immediate future of Port Talbot steelworks [and] lays the foundations for future investment”. A headline in The Guardian, however, lamented a “Blow for British steel industry as 2,500 jobs go at Port Talbot”, while The Daily Telegraph mourned “Thousands of Port Talbot steelworkers to lose jobs despite £500m state lifeline”.
In a sense, all of these things are true. The deal the government has concluded with Tata provides £500m towards the £1.25bn cost of building a state-of-the-art electric arc furnace which will prevent the closure of the site: in Reynolds’s slightly misty-eyed phrase, “Port Talbot has always been and will always be a steelmaking town”. At the same time, the new furnace will not be operational until 2028, and while its construction will create an extra 500 jobs, there will be 2,500 redundancies in the short term with another 300 expected to follow.
The trade union response has been characteristically glass-half-empty. Community and the GMB warned that the deal was “not something to celebrate” and lamented that there had not been more support for their “credible alternative decarbonisation strategy” which, as trade union alternatives somehow always do, would have protected jobs, maintained activity and provided a “just transition for all of the workforce”. (In fact, Community and the GMB could not even persuade the giant Unite trade union to support the plan, which it rejected as a “strategy for job cuts”.)
Tata Steel’s decision-making has been straightforward and logical. In its current form, the Port Talbot Steelworks are operating at a loss, plagued by high energy costs, cheap imported steel from China and weak demand, and the company had originally planned to sell its entire UK-based operation. Its two previous blast furnaces required large amounts of coal, and Tata made it clear that their replacement with an electric arc furnace — which is more flexible, can recycle scrap steel, produces vastly lower carbon emissions and requires fewer workers — was an essential part of keeping the steelworks open.
No-one should make light of the prospect of nearly 3,000 redundancies, especially in difficult economic circumstances (though Port Talbot is not the benighted South Walian wasteland some commentators patronisingly assume). But we should ask ourselves why there is such anguish and outrage at a compromise which inevitably balances advantages and disadvantages.
Cost-effective manufacturing will always mean a smaller workforce
Making manufacturing facilities more efficient and therefore cost-effective will almost always result in a smaller workforce in that immediate sector; if trade unions make the maintenance of current employment their first line of defence, they are ultimately opting out of a realistic discussion of the future. Remember that Aslef initially boycotted British Rail’s Inter-City 125 trains in the 1970s because the cabin only had space for a driver, not a ‘secondman’ who was, unlike in steam locomotives, largely unnecessary on a diesel train.
Notwithstanding the ‘Multi-Union Plan’, there was little chance that the status quo in Port Talbot was a possibility. The options, therefore, were Tata making a brutally rational economic judgement and closing the plant, or the government intervening on broader strategic and social grounds.
Even the government does not claim the Port Talbot deal is perfect. It remains to be judged. It is, however, a microcosm of unsustainable expectations, that employment and productivity can somehow be maintained as they are, with the level of taxpayer-funded subsidy the only variable. That economic model was at breaking point 50 years ago, when industry secretary Tony Benn was championing greater trade union control over failing and uncompetitive nationalised industries.
If the Starmer government is to achieve its overarching ambition of economic growth, British industry will need to be the best, most efficient and most agile in the world. That really will require the “tough decisions” we are hearing so much about.
Eliot Wilson is co-founder of Pivot Point Group