There is clearly growing support for bailing out the steel industry. Why, commentators ask, bail out the banks but not other major industries that are strategically important. The steel industry is certainly important. Ask anyone facing redundancy in Wales, South Yorkshire or other regions with deep connections to steel.
Indeed, it is so important that even the Conservatives are claiming not to be ‘ruling anything out’. In reality, they do appear to have ruled out nationalisation. And, of course, they ruled out an EU level agreement to use tariff measures to reduce the impact of cheap Chinese steel imports into Europe. This is, of course, the same party that have long-since opposed the propping up of ‘lame-duck’ industries and forced through the privatisation of British Steel whilst most of Europe continued to support their industries.
A generous interpretation of the current government’s strategy is that it hasn’t been fully thought through. A less generous one is that they are making it up as they go along. David Cameron is clearly concerned about more negative perceptions of the government in the run-up to the EU referendum. But Anna Soubry (Minister for business, industry and enterprise), speaking on the Today Programme today (30 March, 2016), suggested that there is neither a clear strategy on the steel crisis (a crisis that has been brewing for months) nor even a clear idea about what the options might be. When pressed, Soubry didn’t even know how the Scottish Government effectively, albeit temporarily, nationalised the Clydebridge and Dalzell branches of Tata Steel before managing a subsequent sale to Liberty House. Previous Conservative Administrations at least had a clear policy stance on key British industries which was that they should generally be allowed to fail. Better to spend public subsidies boosting new and modern industries.
In practice, of course, successive governments have continued to provide financial support to the steel industry – including several million pounds since privatisation. This was on top of the transfer of several other million when British Steel was initially privatised and sold to Corus.
Jeremy Corbyn has called for Parliament to be reconvened in order to debate a rescue plan for the Tata plants. Some may argue that Corbyn’s, and by extension my own, position is hypocritical. Not long ago he drew on my work on corporate welfare to condemn the tax breaks and subsidies that benefit British businesses. But there is nothing hypocritical and certainly nothing wrong about arguing for state intervention to save a key industry. What I argued for was more transparency in the data and a more informed debate about how public money is used – in part to consider how expenditure on public support for industry and state spending on what has been traditionally termed the welfare state can better complement each other.
With this in mind, it is right to use public money to rescue a core industry rather than use it to pay the increased social security bill. And it is necessary to invest collectively in order to reduce the inevitable high costs that would otherwise be imposed on the individuals living in decimated communities with local economies that take years to recover.
But it would be wrong to allow private companies to dictate the terms of any particular deal and to use public money to help the industry through difficult times in order to pass it over to the private sector to extract unencumbered profits when demand for steel begins to bounce back.
Inevitably comparisons are made with the banks. Few opposed the bailouts when they happened – they were necessary to prevent economic meltdown. But many have condemned the profiteering of private banks, including the subsequent cut-price privatisations. What was most heavily condemned was the idea that private-sector risks should be nationalised, but private sector profits privatised.
There are parallels between both industries. They both illustrate the fragility of capital and the fact that companies, just like the wider economy, go though periods of boom and bust. And just as governments use macro economic tools to smooth out the economic cycle, so as societies we have to devise public policies that better fit the realities of corporate growth and slump. In particular, the government needs to turn away from policies designed to encourage short-term profiteering and continue to support corporate giveaways rather than support longer-term industrial strategies. And companies need to share the costs of such investment that might help to strengthen their own positions when they, in turn, as they inevitably will, come to depend on it.
In many ways the recent crisis of the steel industry exemplifies the tensions between social and corporate welfare. What is clear is that the current crisis will cost the British taxpayer who will have to contribute towards the redundancy costs and unemployment benefits claimed by former workers. And as the closure has knock-on effects on other industries and services, so the costs of the benefits system will increase further. Let’s also remember that it is a heavily state-subsidised Chinese steel industry that is partly to blame for the current crisis in British steel production. Clearly it is better to support the steel industry in order to prevent it from closing, perhaps through a favourable loan agreement to help fund the proposed management/union buyout. But once it has been rescued, it is important to ensure that the taxpayer extracts wider benefits from the recovery in the steel industry when it comes. A management/union buyout could be based on a social enterprise model where profits could be reinvested and this could be the condition of any taxpayer support. As the government is so used to saying in relation to social welfare claims – no benefits without responsibility!