Nationalisation not the answer to steel crisis, says David Cameron

tata steel

The prime minister was speaking after a meeting of ministers at Downing Street over the crisis surrounding Tata Steel’s British operations.

The Guardian reports that shadow chancellor, John McDonnell, had called on the government to “get a grip” after Cameron began the emergency discussions on the issue.

McDonnell reiterated Labour’s call for a temporary nationalisation of the Indian-owned company’s UK plants and said Cameron should swiftly come up with a plan to save an estimated 40,000 jobs, one on which he could get cross-party consensus.

“The prime minister could take a lead in this. The government’s been in a bit of disarray over the last 48 hours,” McDonnell told BBC Radio 4’s Today programme, noting that the junior business minister Anna Soubry had hinted at possible nationalisation before the business secretary, Sajid Javid, ruled it out.

“There’s a bit of chaos in government and we’re trying to say, look, get a grip now and then come to parliament with a clear plan that hopefully we can back on a cross-party basis,” McDonnell said.

Cameron held an emergency meeting with ministers across the government about how they could intervene to help the company, but Javid was not present, because he was still travelling back from Australia, while George Osborne was in Paris for a meeting of the G20 finance ministers.

Those present included Soubry, Alun Cairns, the Welsh secretary, and Stephen Crabb, the work and pensions secretary and former Welsh secretary. Arriving at Downing Street for the meeting, Soubry was asked if the government would let Welsh steel fail. “I hope not,” she replied.

Cameron returned from holiday in Lanzarote on Wednesday, while Javid was flying back from Australia after Tata announced it would be selling off British plants including the Port Talbot steelworks in south Wales as well as sites at Rotherham in South Yorkshire, Corby in Northamptonshire and Shotton in Deeside.

The company said it was losing £1m a day, with a source claiming that the government’s failure to back calls in Europe for higher tariffs against cheap Chinese imports was the last straw, prompting the decision to sell the business that was once British Steel and more recently Corus.

The decision to sell the operation could cost 15,000 jobs inside the company but the thinktank IPPR said that up to 40,000 could be affected more widely across the supply chain.

McDonnell said Labour was proposing a four-point plan, comprising temporary nationalisation, restructuring of the business, reduced business rates and the use of British steel in public procurement.

Asked whether the billions of pounds in likely spending to achieve this could be justified, McDonnell said that the industry could be made sustainable if it could “weather the storm” it currently faced.

“Because in the long term it will prove cost-effective,” he said. “It isn’t just the cost of losing those jobs. As we’ve seen elsewhere, it’s the cost of devastation of whole communities. Remember, we will be paying out in unemployment and other benefits to those people who lose their jobs. Isn’t it better to keep them in work?”

Also speaking on the Today programme, Len McCluskey, general secretary of the Unite trade union, said there was a comparison to be made with the bailout of the banks amid the 2008 financial crisis.

“Yes. Undoubtedly,” he said. “The National Audit Office tells us that we put one thousand billion of British taxpayers’ money into the banks in order to secure their continued survival because the governments of the day thought it was important for the country as a whole and that’s precisely what we should be doing now.

“That’s why we should be appealing to the prime minister to take personal responsibility to recall parliament. This is an industrial crisis of enormous proportions, not just affecting the 40,000 or 50,000 or 60,000 jobs that you mentioned, but it indeed affecting the whole of our manufacturing base.

“It’s absolutely essential that a foundation industry like steel is protected in order that we can have the much vaunted ‘march of the makers’ that the government talks about.”

Javid rejected the idea of nationalisation on Wednesday. ,Government officials believe it would cost £1.5bn a year. He said: “I think everyone would want a long-term viable solution and, if you look around Europe and elsewhere, I think nationalisation is rarely the answer, particularly if you take into account the big challenges the industry faces.”

But the government is thought to be considering other forms of aid, including stepping in with temporary financial support during the search for a buyer.

The prime minister will travel to Washington DC on Thursday. There dozens of world leaders are gathering for the nuclear security summit, hosted by the US president, Barack Obama. Cameron is expected to raise the issue of Tata Steel with the Indian prime minister, Narendra Modi.

The financial problems facing Tata are so significant that the value of its British steel operations are now “almost zero”. The company source said Tata was now prepared to “give it away for nothing”. They warned that Tata had tried and failed to find a buyer over the past 18 months because of the amount of money needed to get the company back on track.

Tata’s decision came after Javid opposed calls last month to scrap a regulation known as the “lesser duty rule”, which would have allowed the EU to increase tariffs on Chinese steel beyond the current 9%. The government said this would lead to higher costs for users of steel and was not a proportionate response.

McDonnell told Today he was “extremely disappointed that our government hasn’t stood up for our industry in Europe”.

Port Talbot, and other Tata sites with blast furnaces that actually make steel, are understood be particularly at risk because the financial losses are so large. Senior staff at Port Talbot are thought to be willing to launch a management buyout, but this is likely to need the unions to agree to cuts to the pension scheme and financial support from the government.

Tata has written off £2bn from the value of its UK assets, meaning they are effectively worthless. Koushik Chatterjee, the finance director of Tata Steel, said the UK business had become “quite a burden for the company” and that the board had decided “we can’t sustain this kind of exposure”.