Labour is only making plans for Nigel. But nationalising steel would be deeply misguided.

A warm welcome to Comrade Nigel! This week the Leader of Reform UK was holding trade union posters and demanding the nationalisation of the steel industry. Has he gone mad? It is hardly the most obvious pitch to disillusioned Conservative voters who feel the last Conservative Government drifted away from true Conservative principles. Yet that is not the main cohort of voter that Reform UK is going for. The main potential they have is to win over millions of traditional, working class, Labour voters. All those seats where they came second to Labour last time. Seats like Runcorn and Helsby where the forthcoming by-election will be an important test. Or like Stalybridge and Hyde, represented by Jonathan Reynolds, the Business Secretary – where Reform UK gained a Council by-election from Labour on Thursday with a huge swing. We can quibble about boundary changes but there are parts of the country with “safe” Labour seats that have stuck with the Party for decades – remaining impregnable through the Thatcher and Boris landslides – that no longer look at all safe.

Often it is assumed that Reform UK is mainly a threat to the Conservatives. This is by those who see politics in term of right and left and conclude that to win you need to be on the centre ground. But Farage has spotted that the common ground is the territory to conquer. Usually, that will mean a Conservative stance – tough on such issues as crime, welfare and immigration, cutting wasteful public spending, rejecting woke follies on Net Zero and other matters. But “save our steel” is also a shrewd way to reach the silent majority. It is considered traditional and patriotic. The sentiment is that a nation no longer producing its own steel is synonymous with a nation in decline. That in a turbulent world, we need the security of being self-sufficient in such an important commodity. The industry must be “rescued” as a national imperative.

Thus, the Labour Government has responded. Parliament has been recalled. “All options remain on the table.” As XTC used to croon presciently:

“We’re only making plans for Nigel.
“He has his future in a British Steel.”

So I can see the political temptation to advocate steel nationalisation. But the policy is deeply misguided. The only thing to be said for it is that it’s better than seeking to protect our steel industry with a tariff wall. Instead, we should lift the modest quotas and tariffs we already impose. Pushing up the cost of steel would harm British industry – motor cars, aerospace, construction, manufacturing and engineering. It would hit many of our great exporters. Then it wouldn’t seem such a patriotic idea after all.

Instead, if we do want to keep producing steel that is uncompetitive, it would be better for the taxpayer to pay for the losses. Nationalisation would not be necessary for this. Nor would it be necessary to avoid foreign ownership. The Government could let it go into liquidation under Jingye, its existing owners, and then provide whatever financial “package” was required to persuade new owners to come forward. Subsidies, depending on the form they take, could still allow some market discipline. The profit motive could still spur increased sales and greater efficiency to reduce costs. Nationalisation means the rewards for success and the penalties for failure are removed.

To quote Sir Humphrey Appleby:

‘If you must do this damn stupid thing, don’t do it in this damn stupid way.”

A more sensible approach would be for the state to get out of the way. That would include ceasing the disastrous meddling in the energy market with the folly of Net Zero. Of course, it will be a struggle for our steel makers to compete when our electricity prices are 50 per cent higher than the Europeans and three times higher than the Americans. Especially when our producers are ordered to phase out blast furnaces as part of the decarbonisation effort. Supposing we were to get fracking, unravel the Net Zero contracts, scrap VAT on fuel, and generally pursue policies to slash energy bills. Then it might be reasonable to keep the steel industry going for a couple of years with transitional funding until those lower energy bills kicked in. Perhaps we would discover that one market distortion (subsidies) merely balanced out another market distortion (artificially high energy costs.)

Yet if the steel industry continues to lose money is it really our patriotic duty as taxpayers to keep it going forever? At any cost? What if it cost the taxpayer £1 billion per thousand jobs “saved”? So £1 million a job. Every year. This would be beyond reason. HS2 levels of insanity.

A siege economy where our economy is cut off from the rest of the world would be a recipe for ruin. Few would advocate such a model – with the possible exception of the Green Party. So why make an exception for steel? Two contradictory arguments are put forward. Firstly, that we don’t want to be dependant on China. Secondly, that every other G7 economy produces steel so it would be a poor show if we didn’t. It is added that steel is “strategic” – as it’s used for armaments and so we shouldn’t rely on foreigners for the stuff.

But the logic of that would be that we should produce all our steel ourselves. But more than two-thirds of our steel is imported. Germany is our main source, followed by Italy. China, France and the United States are lower down the list of suppliers. Is the suggestion that we would be at war with all of them at once? Should we have defence equipment made with less suitable or more costly steel than necessary? We would be better defended by seeking the best value for money.

Allowing free trade to operate means we will produce some things but not others. It means those decisions are taken by customers rather than by politicians. It means what we produce may change over the years. Our buccaneering history of inventiveness and enterprise should fill us with confidence despite such inherent uncertainty. In any case, other nations prospering and innovating is not a threat to us but an advantage – it is not a “zero-sum game.” There is a danger that sentimentality can lead to prejudice. An understandable one is against services. We used to call them “invisible exports” – for which some meant imaginary. They didn’t count in the same way as making things and putting them into crates and loading them onto ships. But the growth of the services sector has been a measure of success – better-paid jobs with less drudgery. We will still make things but often different things. Or requiring less backbreaking labour to make them – with all the technological advances.

Impoverishing ourselves due to nostalgic impulses is not something the voters would really thank their leaders for delivering. The broadcaster and former Labour MP Brian Walden once remarked:

“Those who lament how sad it is that we are seeing the break up of traditional working class communities are invariably those who didn’t actually have to live in those communities.”

Was Walden on to something? What did the romantic associations really amount to? Do the old coal miners with lung disease really want their sons working down the pits? Steel making is a much better job than it used to be in the poorly paid metal bashing days. Is it the future for British workers? Maybe. But economic reality must decide that. Not the populist interventionism demanded by Farage and Starmer.