Earlier this year, three former business secretaries openly despaired over Rishi Sunak’s reluctance to develop a proper industrial strategy for Britain. One of them, Lord Mandelson, recalled that Mr Sunak had once told him “that he did not see it as part of his job to have businesses forming an orderly queue in front of his office asking for handouts”.
For much of Labour’s three terms in office between 1997 and 2010, it appeared to share this kneejerk antipathy towards state intervention in the economy. Post-Thatcher, the free-market dogma that governments should refrain from “picking winners” became a cross-party consensus that did needless damage to the country’s economic fabric.
Thankfully, Labour’s thinking on this began to change after the financial crash, and has developed further as the country faces the challenges of the green transition and a transformed geopolitics. This week there was more encouraging evidence that Sir Keir Starmer is laying the groundwork for a very different approach. During a visit to Britain’s largest steelworks at Port Talbot, the Labour leader emphasised the need to direct proper government support towards an industry that has been troubled more or less since it was privatised in the 1980s.
Sir Keir spoke against the backdrop of threatened job losses in Wales, and at British Steel in Lincolnshire, as the sector moves away from carbon-intensive production. Labour is promising to invest £3bn in smoothing the green transition should it win power at the next election. This is substantially more than the offers made by Mr Sunak’s government to Tata Steel and the Chinese Jingye Group, the respective owners of the Port Talbot works and British Steel. As Sir Keir pointed out, with the right kind of backing and vision from Westminster, domestic steel production can become a crucial component in meeting Britain’s clean power targets. That, in turn, will help protect good, well-paid jobs in regions that desperately need them.
But after years of shortsighted Whitehall priorities, a radical change in mindset is needed, as well as money. Since 2015, when a combination of Chinese steel dumping and austerity plunged the industry into crisis, hands-off governments have pursued short-term bailouts before handing over to the next foreign investor. Output has more than halved in recent years, and sectoral decline has made the country an outlier in relation to other G20 nations. At the same time, growing global instability has laid bare the dangers of neglecting sovereign capability in such vital areas.
Britain is set to require more, not less, steel as it builds net zero machinery and infrastructure at pace. That can be a catalyst for industry renewal, if a committed government shows the drive and imagination to make it so. New public procurement rules, for example, could ensure the use of clean British steel in the manufacture of wind turbines, rather than reliance on imports from abroad. The currently underpowered UK infrastructure bank could be fired up to deliver the kind of innovative financing required by a sector in transition. Equity stakes or golden shares could be considered by a future Labour government wishing to safeguard public investment and subsidies.
In contrast to Mr Sunak, who remains wedded to the laissez-faire economic instincts of a previous era, Labour is cautiously embracing the principles behind such ideas. In doing so, it is creating one of the next election’s most important dividing lines.
