Steel in Wales: potential Welsh Government support

21 January 2016

Article by Gareth Thomas, National Assembly for Wales Research Service

Second blog post pic

Image from Flickr by Ben Salter.  Licensed under the Creative Commons

 

Following our first article on the steel industry published earlier today, this article considers the support that the Welsh Government can offer the workforce and industry following recent events.

What can the Welsh Government do to assist the workforce?

The First Minister has asked the Minister for Economy, Science and Transport to chair a high-level taskforce to support workers affected by the Tata Steel announcement, which met for the first time yesterday.

Looking at specific programmes, the Welsh Government’s ReAct programme supports both individuals affected by redundancy and employers taking on workers who have previously been made redundant.

Support for individuals under the ReAct scheme is available free of charge to those under notice of redundancy, or who have been made redundant in the last 3 months and have not been in continuous employment for 6 weeks or more since being made redundant. The support offered by ReAct includes recruitment and training support, and discretionary vocational training and extra support grants.

Employers taking on workers previously affected by redundancy can benefit from two packages.

  • Employer Recruitment Support funds employers who recruit individuals made redundant in the past 3 months. The award offers up to £3,000 paid in four instalments as a contribution towards wage costs
  • Employer Training Support is a separate discretionary fund of up to £1,000 that an employer can put towards the cost of the new recruit’s job-related training. This can only be applied for in conjunction with Employer Recruitment Support.

Detailed information on qualification criteria is available from the Welsh Government’s website.

During the Business, Innovation and Skills Select Committee’s recent inquiry into the UK steel industry at Westminster, the Community trade union highlighted the Welsh Government’s previous ProAct scheme as an example of good practice in ensuring skills retention for the industry when plants are threatened by closure. ProAct was a financial support package in the economic downturn available to businesses which had introduced short time working and faced the threat of redundancies and, broadly, offered:

  • Up to £2,000 per individual towards training costs
  • A wage subsidy of up to £2,000 (at a rate of £50 a day) per individual whilst this training is being undertaken (up to 12 months

In Scotland, the Scottish Government has recently introduced a similar package where staff will be paid approximately 60 per cent of gross salary and receive advanced training to ensure plants can reopen quickly when production resumes.

What could be done to reduce the amount of business rates paid by the steel industry?

Business rates are fully devolved to Wales, and there have been calls to exempt plant and machinery from business rates. In relation to the steel industry, assistance in this area would mean that businesses would be exempt from paying business rates on infrastructure such as blast furnaces, coking ovens, turbines and generators. The current arrangement is seen by some as a disincentive to investment, and UK Steel has highlighted that UK companies pay between five and 10 times more business rates than their EU competitors. The Minister for Economy, Science and Transport has stated that, given the state aid considerations involved in supporting a specific industry, the Welsh Government has been looking at exempting plant and machinery from the calculation of business rates across all sectors. The Minister estimates this would cost roughly £25 million to £30 million per financial year.

Another aspect of business rates policy being considered by the Welsh Government includes ensuring that the overall approach to valuation considers the current challenges facing the steel industry. This is being taken forward through discussions with the Valuation Office Agency, the UK Government department that assesses business rates liability in Wales and England.

What can be done on procurement to help the domestic steel industry?

Assistance with procurement is another of the steel industry’s key asks. The Welsh Government has a Wales procurement policy statement, which sets out the procurement practices and the specific actions required of every public sector organisation in Wales. It considers that its procurement policies support the principles of the Charter for Sustainable British Steel. The latest statistics on procurement show that Welsh firms receive 55% of Welsh public sector spend.

In her Plenary statement on Tuesday, the Minister for Economy, Science and Transport noted that the Welsh Government is reviewing model contract documents for the delivery of major transport projects to ensure that they meet the aims of the Charter for Sustainable British Steel.

The Welsh Government is calling for an Enterprise Zone in Port Talbot. What is an Enterprise Zone, and what might it achieve?

The Minister for Economy, Science and Transport has written to the Chancellor of the Exchequer with a proposal to create an additional Enterprise Zone around the Port Talbot Steelworks. There are currently 7 Enterprise Zones in Wales, which focus on key business sectors, with the aim of creating new jobs and sustainable growth.

The Minister considers that to maximise the impact of the Enterprise Zone, Enhanced Capital Allowances would be needed, and has included this as part of her proposal to the UK Government. These are particularly aimed at Enterprise Zones supporting manufacturing, and enable businesses to claim a 100% first year allowance for the capital cost of investment in plant and equipment made before 31 March 2020.

The Welsh Government has also previously run business rate relief schemes for SMEs in the current 7 enterprise zones.  The scheme is focussed on businesses in the area that are new starts or are increasing the size of their workforce.

It has also been suggested that some other examples of economic development policies could be adapted to address the situation in Port Talbot. These include the Newport Unlimited programme set up in 2003 following the decline in heavy industry in the area, and the work done following the closure of the Murco oil refinery in Pembrokeshire.

What assistance is being provided relating to research and development (R&D) and environmental improvements?

A recent briefing by UK Steel raised the issue of direct funding assistance for the sector on Research and Development (R&D) and environmental improvements, which would come under the responsibility of both Welsh and UK Governments.

Examples of projects which have received funding over recent years include Steel Training Research and Innovation Partnership (STRIP), which is aimed at boosting the skills of the Welsh steel industry and its supply chain, and the Sustainable Product Engineering Centre for Innovative Functional Industrial Coatings (SPECIFIC) project.

The Minister has also stated that the Welsh Government is exploring opportunities to upgrade and modernise the steel sector through use of the European Investment Advisory Hub and the European Fund for Strategic Investments.

We’ll be returning to look at this area as and when developments take place.

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