IWA Analysis: Tata Steel Port Talbot – A lesson in how not to deliver a just and fair transition

After much consternation, debate and delay, last week the future of Port Talbot’s steel works was finally sealed.

Tata Steel will invest £700 million and receive £500 million from UK Government, to keep the site open. Investment will pay for the transition to produce greener steel using electric arc furnaces instead of its current blast furnaces. 

With the site being among the UK’s largest carbon polluters, the case for transitioning to less carbon-intensive production methods was clear from an environmental point of view.

But the transition comes at a huge cost, with up to 3,000 jobs at risk, with seemingly little consideration given to the workers or the Unions who represent them.

I’m going to have a look at the Tata Steel incident, and question what this means for future efforts to decarbonise our economy, and how this case illustrates how feeble allusions to a ‘just and fair transition’ can be.

Governance grievances

First, one of the key takeaways from this event has been to once again spotlight the poor intergovernmental relations between Welsh and UK Governments.

As rumours of the announcement started to filter out on the evening of Thursday 14 September, Wales’ Economy Minister Vaughan Gething’s calls for cooperation with UK counterpart Kemi Badenoch had seemingly fallen on deaf ears. The tone of his letter, published on X/Twitter, highlights the lack of coordination and cooperation between the two governments. Indeed, Gething notes that it was from Sky News that he heard that talks between Tata Steel and the UK Government were reaching a conclusion.

That Ministers from Welsh Government had to resort to publishing letters to UK Government on social media underscores the lack of consultation and engagement between the two governments. How have the state of intergovernmental relations fallen so precipitously?

That UK Government met with union representatives a full five days after the announcement is a damning indictment. The adversarial relationship with unions isn’t working in anyone’s interest.

It’s an illustration of the fact that, despite the sense that relations between Welsh and UK Governments have improved post-Boris Johnson and Liz Truss, they are still under intense strain.

Whilst this may seem like a relatively minor point in a case that is to do with UK Government subsidy, it goes far beyond that. It exemplifies the entrenchment of the so-called ‘muscular unionism’ approach, with Welsh Government frozen out of decision making processes which will have a huge impact on communities in Wales. It showcases the shortcomings of the Levelling Up agenda more broadly, with UK Government taking an approach which bypasses Welsh Government’s legitimate interest and its democratic mandate from the Welsh electorate.

Cases such as this further erode a fragmented and strained relationship which is not set up to deliver in the best interests of the people of Wales. This is not news, but is brought once again into the spotlight by this farcical example.

Social Partnership

Another key partner in this space has likewise been frozen out of deliberations: the unions representing workers.

We understand that the trade unions representing Port Talbot workers, Community, Unite and GMB, were not involved in the negotiations between Tata Steel and the UK Government. That this will result in around 3,000 job losses, without trade unions having any meaningful input to this point, displays a lack of consideration for workers and their families. Clearly not a priority, were they even a consideration for Tata or the UK Government? Surely this could have been handled better.

This stands in stark contrast to the aspirations of the Social Partnerships Act in Wales, which seeks to ensure that workers’ voices are represented alongside sectoral representatives in such negotiations.

Vaughan Gething’s meeting with union representatives in light of the news demonstrated this difference of approach between the two governments. But ultimately both Welsh government and Welsh workers were left shouting outside of the room they should have been inside, sitting around the negotiating table and making positive contributions on the future of the Tata Port Talbot site and for the area more broadly.

That UK Government met with union representatives a full five days after the announcement is a damning indictment. The adversarial relationship with unions isn’t working in anyone’s interest.

A Just and Fair Transition?

This incident takes place in a wider set of issues surrounding how the transition to net zero is managed. The environmental case for decarbonising the process of manufacturing of steel coming out of the site is clear, with the site being Wales’ largest carbon polluter. But what this transition, which has long been posited, hasn’t taken into consideration is the need, over the medium term, to secure meaningful work for those who will lose their jobs.

This shines a light on the need to be proactive, in industrial and economic policy terms, and on the contrasting lack of action to secure the long term future of those put out of work by the journey to net zero. Ensuring a just and fair transition must be part of this strategy. 

Welsh Government’s Net Zero Skills Action Plan makes many of the right noises. But in the context of the Tata Steel example, many of its aspirations crumble when faced with the reality of retraining and securing jobs from those currently working in carbon-heavy sectors.

It begs serious questions around how proactive both governments are in setting the terms of the retraining needed, identifying the green skills needed, and how they fit with the existing skills base as well as how they are involving Unions in the mix. It is not clear at all that any large-scale active labour market retraining programmes are actually being delivered in Wales. Where is money being invested to not only protect those whose livelihoods are at risk in the coming decade, but equally to secure the skills Wales needs to play a leadership role in the transition to net zero? We must be proactive and interventionist in this area and the Tata Steel example suggests we are not meeting the needs of workers.

As we know, the transition to net zero is not an economic cost, but an opportunity to develop a more successful, cleaner and fairer economy. The economic benefits offered by the future green economy are many, as the IWA highlighted as far back as 2019 with our Re-energising Wales series of reports.

For Wales to attract private sector investment, which will be pivotal in driving forward Wales’ economy of the future, the availability of green skills is crucial. Can investors both internal and external be sure that the skills base is here in Wales, or if not, that it will be through retraining? It’s vital that private investment is used to drive forward investment in green skills. As our Fiscal Firepower paper highlighted, despite having a budget in the tens of billions and fairly strong powers, the Welsh Government only has a limited ability to kickstart major projects to improve people’s lives. This argument is only strengthened by the £900 million budget shortfall announced by the Welsh Government for this financial year.

The 3,000 skilled workers who find themselves in danger of losing their jobs should not be left in this state of purgatory. There are skills gaps in the area that need to be filled

So it is vital that the money coming to Wales from private sector investment is felt in communities in Wales. But equally, it is incumbent on both UK and Welsh Government’s to help incubate the type of environment where green skills are at the forefront of the economic agenda.

Echoes of history

Many in Wales will fear that history is repeating itself. That, like with the decline in heavy industry in the 1980s, many workers will lose their livelihoods and be left with skills that have nowhere to utilise them.

The Tata Steel debacle shows these fears are real. Yes the context has changed, but the risks feel the same.

Unless urgent action is taken, we are sleepwalking towards repeating mistakes which ripped communities apart. Without planning and consideration now, co-created with unions, employers, and workers alongside the public sector, then we risk repeating these historical mistakes which still blight our economy.

Public Money – Private Benefit?

This all takes place in an environment where millions of public money is being used to subsidise private industry. In this instance it’s the UK Government’s estimated £500 million for Tata Steel, but the same is the case for Welsh Government. We have heard of £45 million for a new plastics plant in Swansea, and £825,000 to support a new European headquarters for a game developer in recent weeks alone. In an environment where Welsh Government are looking to cut expenditure due to a £900 million budget deficit, are these the priorities? Yes, they create jobs and stimulate economic activity, but do they represent a long-term industrial strategy aimed at incubating talent in Wales, or are they merely attracting foreign direct investment?

When public money is used to subsidise private benefit, the question needs to be raised. 

What now?

The immediate priority will now, rightly, be on how to protect as many jobs as possible at the Tata Steel Port Talbot site.

But the 3,000 skilled workers who find themselves in danger of losing their jobs should not be left in this state of purgatory. There are skills gaps in the area that need to be filled, with renewable energy projects needing to get underway across the region, especially with the promise of floating offshore wind off the coastline. We must be better at making these links, offering genuine employment and skills opportunities to those in high carbon-emitting sectors. We’ve known for years that jobs were at risk at the Port Talbot site, yet we still find ourselves in this situation.

Serious lessons need to be learnt about how we create the green skills we need to realise our net zero ambitions. 

Without investment, collaboration and cooperation between governments, the opportunities of the green transition will begin to not feel like opportunities at all. Should this happen, the very nature of our commitment to net zero will be called into question, with all of the political upheaval that would entail.

JFK was right: ‘we choose to do this because it’s hard; because that goal will serve to organise and measure the best of our energies and skills, because that challenge is one that we are willing to accept, one that we are unwilling to postpone, and one we intend to win, and the others, too.’

If you want to support our work tackling Wales’ key challenges, consider becoming a member.