Andrew Wilson: Let’s steel ourselves for hard choices

WATCHING the pain on the faces of Scottish steel workers again last week brought home sad memories of seeing the same in the early 1990s in steel towns of Wishaw and Motherwell where I grew up.

The British steel industry has had few good owners. Its private ones having failed to modernise, Clement Attlee nationalised it in 1949.

The Tories then privatised it in the 1950s. Harold Wilson nationalised it again in 1967, with about 90 per cent of the UK’s capacity controlled by the British Steel Corporation. With energy prices and competition on the rise, the state controlled an inefficient, over-capacity, under-invested industry whose very prices were controlled – effectively – by Whitehall civil servants about as close to global market reality as a Soviet five-year plan.

But it sustained work for skilled labour by men (almost entirely) who, if they had been well managed and represented, could have taken on the world, and for a period did. In the late 1980s Margaret Thatcher then privatised it again and Ravenscraig closed forever a few years later.

An entire sector was a football in a partisan policy game. The Lanarkshire towns I was born into paid a ludicrous price. We were led to believe the private management of British Steel knew best, market focus and all that. Be thankful if you weren’t a shareholder. By 1999, British Steel was Corus and the share price hit the heady depth of 4 pence. Utterly and completely risible.

Would state ownership have been worse? Could it have been worse? Not for the Scottish industry, its employees and the communities that depended on it. That much is certain.

Could state ownership have saved it and helped it compete sustainably in world markets? That, I am afraid, is an entirely different question. Would it have been worth trying? In a rational, hard-headed way, with clear purpose and an exit strategy? Definitely.

However, when an industry and its employees become a tool in the political fray, its long-term fate is sealed. That is the 20th century’s lesson from steel.

In the modern world it is pretty much unsustainable for an industry to be kept permanently alive purely as an employment policy. It is wasteful and inequitable if that is the motivation for taxpayer intervention. If industry A, why not industry B? If steel town why not paper mill town?

If the motivation is political, chasing positive headlines or support from the workers and their communities, then no-one can win long term. The business or industry will never achieve the level of performance it needs and hard decisions will never be taken. Assets will be stranded and failing, surviving only on a drip of taxpayer cash that could otherwise be invested in schools, hospitals or infrastructure. As a country we would be prioritising investment in uncompetitive assets rather than in creating conditions for potentially successful ones to be born or grow.

However, if the motivation for state intervention is temporary and strategic then a strong case can be made in both the wider national economic interest (and it must be wider) and in terms of the longer-term interest of the industry.

If private management has failed and private investment better served, short-term, in other countries it needn’t mean a permanent death.

When capacity and skills are lost they can be gone forever. Shipbuilding is a case in point. Scotland’s industry was largely destroyed by poor leadership and bad industrial relations. We were told that was our lot and nothing could be done in the face of cheaper labour abroad. Meanwhile, Norway, with labour costs far in excess of Scotland, has a modern maritime sector (across all services including construction) sustaining 7,500 companies and employing over 100,000 people. Norwegian ship owners control 7 per cent of the global fleet. Ponder that.

If state intervention kept skills alive and up to date, modernised capacity and struck a competitive bargain with employees then maybe, just maybe, an industry could transition to better private owners and a competitive future.

Moreover, if that industry is strategically important, in a very uncertain world it may be a matter of the national security as well as economic interest. Do we really want to depend on Russian piped gas or electricity, or China for nuclear power?

Putting all our faith in the clear benefits of a free global market when such a market doesn’t exist for other nations has lacked the pragmatism needed to promote and defend our own interests.

But we need to be crystal clear on the motivation and longer-term exit strategy for the taxpayer in any such intervention. The global economy is skating on very thin ice and it is very difficult to see where growth will come from next year and beyond. The risks of a serious reverse are real and the consequences for Scotland are grave. The competition for what business there is will be fierce.

Now is precisely the time when policy-makers at all levels should be looking with very hard heads at everything that can be done to attract and save investment, promote business, skills and job creation. Hard choices need to made, not avoided.

Decisions taken today will have ­implications for decades to come. Focus, ambition and leadership are ­required. «