In CHARTIST 278, Tim Page of the TUC explains how the steel industry crisis underlines the need for an industrial strategy
British Chancellor of the Exchequer George Osborne’s Comprehensive Spending Review announced in November 2015 will be remembered, rightly, for its massive U-turn on tax credits. But another small drama was being played out as the Chancellor presented his statement to the House of Commons.
During his speech, Osborne said: “Businesses… need an active and sustained industrial strategy. That strategy launched in the last parliament continues in this one”. Talk of a government split would perhaps be over-dramatic, but supporters of an active industrial strategy – whose number definitely includes the TUC – cheered this statement, after six months in which the new Secretary of State for Business, Innovation and Skills, Sajid Javid, has pointedly refused to speak those words, preferring the term, “industrial approach”. This cannot be dismissed simply as semantics: “strategy” suggests the active power of government; “approach” means something less tangible.
George Osborne, perhaps the leading contender for the Conservative leadership after David Cameron steps down, is recasting himself as a one-nation Conservative. This fits well with his support for a policy that meets the approval of Michael Heseltine, Peter Mandelson, Vince Cable, Andrew Adonis and Angela Eagle. Business organisations the CBI and the EEF, as well as the TUC, have signed up to support an active industrial strategy. At a time when businesses and workers seek policy certainty in the face of strong economic currents, this new commitment to industrial strategy could not have been more important. We now wait to see if the Business Secretary will step into line. If he needs even more encouragement, Sajid Javid should look at the recent turmoil in the British steel industry.
Steel is a crucial foundation industry. It contributes over £2bn to the UK’s balance of trade. It sustains tens of thousands of jobs directly, and many more in the supply chain. And it generates £90,000 of added value for each and every steelworker. If these jobs and skills are lost, they are lost forever.
Communities with steel in their DNA will be devastated. A stereotype would have you believe that heavy industries like steel are the industries of yesterday, but nothing could be further from the truth. In Germany, the wind turbine industry is the second largest user of steel, after the automotive sector.
If we want the green industries – and the green jobs – that would both help to pay our way in the world and create a cleaner planet in the 21st century, we need a strong steel sector. The TUC has championed the need for a just transition to green growth, delivering wealth, security and prosperity for decades to come. UK steel must be at the heart of that low carbon future.
So what is to be done to support our steel industry? First, government must take action to relieve the steel sector from exorbitant business rates. Firms in the UK pay business rates up to ten times higher than their competitors in France and Germany. Government can level the playing field by removing plant and machinery from business rate calculations, a measure that as well as providing greater parity with our continental neighbours, would be pro-investment and pro-business.
Second, we need a meaningful compensation package for energy intensive industries. The Chancellor announced in the budget that he would bring forward from April 2016 part of the energy compensation package for steel and energy intensive industries, once state aid clearance is received.
There are two problems with this announcement, the principle of which is welcome. The first is that the package on offer would compensate producers for the indirect costs of small-scale feed in tariffs, but not the Renewables Obligation. The sector still stands to pay 70 per cent of the policy cost the package aims to address. The second problem is that waiting for state aid approval will be a long wait, especially for an industry in immediate crisis.The government needs to use its influence to fast-track this proposal. The European steel industry is feeling the heat, so there should be a degree of understanding and flexibility for the UK’s position.
Lastly, we need to use our procurement policy wisely to secure British steel jobs.For many years, trade unions were lonely voices in the battle for the smart use of procurement policy, but finally politicians have caught up. There are a host of provisions within European procurement directives which enable the use of, for example, British steel in major infrastructure projects such as HS2. Procurement decisions are supposed to represent ‘best value’, not just lowest cost. A procurement policy that saves steel communities in the north of England sounds like good value. Tendered contracts can also include community benefit clauses, stressing the development of local skills, recruitment and reinvestment in communities as part of procurement spending. Other European governments make full use of these provisions. If the Germans can do it, the French can do it and the Italians can do it, why can’t we do it too?
Fourth, we need to take action on the dumping of Chinese steel on the European market. The TUC welcomes China’s entry into the global economy. In 2013, we published a report, ‘The Way of the Dragon’, which looked at the rise of China and East Asia, considering how the UK should respond to this massive change in the world’s balance of economic power.
We highlighted the vital export markets for UK companies as major Chinese cities like Shanghai and Guangzhou – and the consumers that live in them – became richer. As internationalists, we welcome the opportunity for Chinese workers to move out of poverty, even as we support the right of those workers to join free trade unions and enjoy basic democratic rights. But a global economy needs global trade rules that are fair and are seen to be fair. The sale of goods below the cost of production – ‘dumping’, to use the vernacular – is illegal under international trade rules. This is why the TUC General Secretary, Frances O’Grady, has written to the Prime Minister, asking him to put pressure on China to stop dumping cut price steel on European markets. Again, the wheels turn slowly in the EU – it takes EU industry at least seven months to prepare an anti-dumping complaint and an investigation by the European Commission can take up to 15 months after that – in contrast to the much swifter action taken in the United States.Seventy per cent of the public in the UK support similar, swift action here.
Fifth, it is not too late to learn from a major German experience of the economic crisis, that of short-time working. In other EU countries, such as Austria and Germany, this has been supported by the state and it allows companies to respond to fluctuations in the market without cutting jobs.
In 2009, the Welsh Assembly Government introduced support for short time working through ProAct, which offered a £2,000 wage subsidy per head, to go with £2,000 for training. If the UK steel sector is going through a short-term crisis, there are clear lessons from the European experience of short-time working. Finally, and linked to this last point, an active industrial strategy should develop the role of trade unions as social partners.
In 2011, the TUC published a report, German Lessons, which, as the title suggests, sought to learn how Europe’s powerhouse economy had achieved its success. The role of government, business and unions working together for the good of German industry and its workforce flowed through the report, including in Germany’s support for short-time working. Interviewed for the report, Dr Frederic Speidel, IG Metall’s full-time officer at Volkswagen, said: “The Grand Coalition [between the Christian Democrats and the Social Democrats] allowed a lot of good direct communication between trade unions and the government. We were able to bring in our politics, our ideas, our trade union concerns… The law on short-time working, which was limited to six months, was extended so that companies could have short-time work for eighteen months. It was eventually extended to two years.”
Norbert Kluge, the co-ordinator of the European Works Council at the German steel company, ThyssenKrupp, told German Lessons: “There was the great big coalition between the Christian Democrats and the Social Democrats, and the Labour Minister was a Social Democrat, and we made them aware simply that they needed the highest interpretation of the German labour market rules to help these people.” Norbert added: “I think this is why you read in the newspapers every day that German industry came out of the crisis better than others.”
Major job losses
The UK’s steel sector has seen major job losses in recent months. It continues to face huge uncertainty. We cannot sit on our hands and do nothing. We must not “leave this to the market”. There is a range of practical proposals that can safeguard the sector and secure its place in the thriving manufacturing economy that the UK needs to rebuild. To do that, we need an active industrial strategy. Even George Osborne understands this. Over to you, Mr Javid!
Tim Page is senior policy officer at the Trades Union Congress (TUC). This article appears in the latest issue of Chartist’s print magazine