Sunday, 3 April 2016

Tata Steel

Should we be concerned about the welfare of the people made redundant at Tata Steel? Sure, absolutely. But I don't remember people talking about recalling parliament when Burberry closed its factory in Treorchy a few years ago at the loss of 300 jobs. And I'd much rather take my chances with redundancy in Port Talbot than Rhondda. No-one talked about intervention when Comet went out of business, destroying 7000 jobs, or the 27000 Woolworth employees being put on the scrap heap.

The important thing about the Tata Steel story is that it has many angles that mean that the media can run numerous stories about it. These include things like:-

  • union involvement, so conflict between political parties
  • romanticised nostalgia about heavy industry
  • single place, so "damaged community"
  • a vague sense among the public that producing steel is strategically important
Because of all those factors, it becomes a media narrative, in a way that a clothing factory or an electronics chain doesn't. The media see it as an investment to pursue it because of how much can be milked from it.

In reality, there is no difference between this and a clothing factory in the valleys closing. It's cheaper to make raincoats in Bangladesh or China, so production moves to China or Bangladesh.

What are the practical things we can do? Well, we generally disapprove of tariffs, so we shouldn't do that. I'd suggest two things: a) reducing taxes in poorer areas, and the efficient way to do that is to switch more tax to LVT and b) getting serious about retraining.


Rich Tee said...

Maybe, but Burberry is just a clothing company and a posh one at that, and Woolworths and Comet were, at the end of the day, just shops.

Steel is used to make bridges, ships. skyscrapers and, famously in this case, electrical transformers. There is a company near me that makes air conditioning for server farms, I wonder if they use steel? It has gravitas. It is serious.

DBC Reed said...

Moving business rates to LVT would be a big help.The land under the steel works must have nil or negative value because remediation would be so expensive: the Land tax fund should pay people to take it on!

john b said...

Rich: so what? It doesn't cost very much and there's no suggestion we won't be able to keep buying it.
DBC: Ooh, LVT and negative land value is indeed an interesting one!

The Stigler said...

Rich Tee,

"Steel is used to make bridges, ships. skyscrapers and, famously in this case, electrical transformers. "

So? What's the problem with buying it from China or elsewhere? We need it for bridges? Well, we need people to make bridges and boots for workmen to do it. Should we then subsidise bootmakers as well? If we don't have boots, we can't make bridges either. Those workmen can't go out and do it barefoot. We'll also need to subsidise welding equipment, hard hats, spirit levels and glass making companies.

Mark Wadsworth said...

Agreed. Sad but true.

Rich Tee said...

The responses here show why the YPP will never get anywhere in politics. You might as well give up now, you're wasting your time.

Bayard said...

"The important thing about the Tata Steel story is that it has many angles that mean that the media can run numerous stories about it."

You missed out "Evil foreign owner who can be demonised with impunity" and " A chance to say 'Now look what happens when you sell our industries to foreigners'".

"The responses here show why the YPP will never get anywhere in politics."

Please explain how. AFAICS, the reason that YPP is not getting anywhere is that LVT is pure political poison, but that's not a reason to give up. The less people try to change the political status quo, the worse that status quo becomes.

Staffordshire man said...

Tara's decision is based on competitiveness and survival, Burbury's was simply greed, sure clothes are cheaper to make in Bangladesh but when you're making polo shirts that cost pence and sell for eighty quid the case for moving is not so convincing.

The Stigler said...

Staffordshire man,

So, you've never switched supplier for anything because someone else was cheaper?

Mark Wadsworth said...

John,B, I disagree with DBC's comment on negative land values leading to LVT rebates. The lowest value of land for these purposes is nil, and quite probably the steel works would be paying zero LVT (instead of a fair bit in business rates). But landowners wouldn't get LVT rebates (especially if they were the ones who polluted the land in the first place), all citizens - including Tata Steel workers - get it as a personal allowance or Citizen's Dividend or whatever.

Shiney said...

See my comment on the post about Free Trade.

It applies here as well. But I wouldn't dream of cross posting ;-D

Bayard said...

"But I wouldn't dream of cross posting ;-D"

I just tend to forget which post I'm commenting on until it's too late.

paulc156 said...

There's huge oversupply of steel at the moment but when China knocks a lot of marginal/ loss making producers out of the game the prices will shoot up and we will be doubly disadvantaged. No steel industry to take advantage and forced to pay higher world prices PLUS shipping costs.

Germany increased their steel production in 2015 but they are the beneficiaries of greater investment, lower rates and much lower energy costs. All types of indirect subsidy but a joined up strategy nonetheless. Or have the Germans missed a trick?

DBC Reed said...

If the company fucked up its own land ,it might pay nil LVT because the employment it provided would have put up local residential land values reciprocally .It shouldn't get an LVT rebate but somebody taking over might, if the land were next to impossible to use.

Lola said...

BTW, FWIW, I have occasion through my passion to want to buy components made of good material - steel and aluminium. These are now mostly pattern parts made in China or similar and the material is often poor quality. I have seen a Chinese made quick shift gear lever for a 1960's Ford gearbox simply break. The original Ford (UK) part never breaks.
So I agree that there are issues here. One I think is the tenuous grasp of contract law in China. London Cab steering boxes being an example of both the poor quality and the lack of understanding of contract law.