Saving British Steel leaves taxpayers with £900m bill
The government’s decision to take emergency control of British Steel is poised to cost the taxpayer just short of £1bn, according to initial government estimates, sparking warnings from opposition politicians that the Chancellor’s narrow fiscal headroom is in jeopardy.
The Office for National Statistics (ONS) expects the public finances to suffer a £900m hit from the last-ditch choice in April to bring the steelmaker under state control, it has said in its latest assessment of the public finances.
Ministers argued their actions saved the Scunthorpe-based plant from certain collapse, after negotiations between its Chinese owners and the government broke down.
The dramatic fallout after lengthy talks sparked fears that the plant, which contains Britain’s last remaining blast furnace, would hit the wall, putting over 2,700 jobs at risk.
Keir Starmer was forced to recall Parliament from recess for a rare Saturday sitting so MPs could vote to hand the government powers to wrest control of the steel producer from current owners Jingye.
Ministers claimed that putting the plant under the auspices of the Department for Business and Trade (DBT) would save the taxpayer billions of pounds due to the dearth of private sector interest and the eye-watering costs associated with reigniting a blast furnace.
But Labour’s political opponents argued the costly nationalisation was avoidable, with Conservative Party leader Kemi Badenoch blaming the government for failing to negotiate a settlement with Jingye, which still technically owns the steelmaker, or find an alternative buyer.
The ONS figures represent the first official estimate of how the decision to take British Steel into public control will affect government finances.
As part of the assessment, government statisticians said the decision to save British Steel would lead ‘public sector net debt’ – a narrow metric – to increase by £600m.
But they also found under ‘public sector net financial liabilities’, the government’s preferred fiscal measure and the one used by the Office for Budget Responsibility (OBR), British Steel would put £900m of additional pressure on government finances.
Responding to the figures, Andrew Griffith, the shadow business secretary, said: “As I requested back in April, the ONS has confirmed… that despite remaining Chinese-owned, the British taxpayer is on the hook for British Steel’s losses to the tune of £1bn with no doubt billions more to come.
“The Chancellor has spent her inadequate headroom many times over, and the next OBR forecast is expected to show she has broken even her own fiddled fiscal rules.”
A spokesman for the DBT said: “We acted quickly to ensure the continued operations of the blast furnaces but recognise that securing British Steel’s long-term future requires private sector investment.
“We have not nationalised British Steel and are working closely with Jingye on options for the future, and we will continue work on determining the best long-term sustainable future for the site.”