The decision by Tata’s board to sell off its British steel business is a nightmare for the UK government. The Conservatives are ideologically hostile to industrial intervention, as the business secretary Sajid Javid has made clear. The priority that George Osborne, the chancellor, accords to deficit reduction places severe constraints on spending. Yet the likelihood is that without substantial intervention and spending, basic steelmaking will disappear from the UK.
The steel crisis has two interacting causes. There is a long-term problem of competitiveness. British steelmaking operates in old industrial sites, and although Tata invested in a major new blast furnace at Port Talbot , its UK operations are not as productive as, for example, its Dutch plant, let alone the competitor operations in the Far East. British unions have been co-operative and the UK plants produce high quality steel, but that has not been enough to cancel out the effects of neglected investment by state and private owners.
To add to the competitiveness problem, governments have allowed relatively high energy costs to accumulate. In the coalition government, I worked with Conservative ministers to obtain state aid approval for compensation payments to energy-intensive industries. The process was time-consuming, but we secured agreement and payments are now being made.