Steelworkers vote to accept Tata deal – what are the next steps for the industry?

17 February 2017

Article by Gareth Thomas,  National Assembly for Wales Research Service

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Picture showing Port Talbot Steelworks

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

On 15 February 2017, trade union members from Community, UNITE and GMB all voted to accept the deal offered by Tata Steel relating to pensions, future investment and job security.  The three trade unions had recommended that workers accept the deal, while recognising the difficult decision workers would have to make on their pensions.  Tata have said that work continues with the unions and others to build a secure future for the industry.

What is in the deal?

The UNITE trade union has set out details of the proposal that union members were balloted on, which included:

  • Closing the British Steel Pension Scheme to future accrual on 31 March 2017 and introducing a Defined Contributions Pension Scheme. Additional one-off payments to pension scheme employee members aged 50+ who retire between 60 and 64 will also be available in some circumstances.
  • Commitment to run 2 blast furnaces at Port Talbot until at least 2021, and proposed investment in Blast Furnace 5 to extend its lifespan beyond 2021.
  • Commitment to an investment plan which proposes £1 billion of investment over 10 years, conditional on Tata Steel UK making at least £200 million in earnings before tax, interest, debt and amortisation (EBITDA) per year.
  • Protection against compulsory redundancies until 2021, equivalent to the commitment given to the workforce at Tata’s IJmuiden plant in the Netherlands.

Tata will also seek to restructure its UK Profit Bonus, and introduce new rates and conditions for new employees. It also aims to make £13 million of employment cost savings across the UK.

How have the Welsh and UK Governments invested in the steel industry and steelmaking communities?

The previous Welsh Government offered Tata a package of over £60 million, with conditions attached, prior to the announcement on the sale of its UK assets in March 2016, including investment in environmental improvements and developing the galvanising line at Port Talbot. Following the vote, the Cabinet Secretary for Economy and Infrastructure said that he hopes to be able to bring forward announcements shortly on these projects.

The Welsh Government also established the Port Talbot Waterfront Enterprise Zone in response to the job losses announced in January 2016. The UK Government also agreed to fund Enhanced Capital Allowances for three sites within the Enterprise Zone, which enable businesses to claim a 100% first year allowance for the capital cost of new investment in plant and equipment.

In December 2016, the Welsh Government agreed to contribute £8 million towards a total investment of £18 million in improvements to the Port Talbot power plant and setting up a R&D base in Swansea. In February 2017, it contributed funding of £1.6 million towards environmental improvements at Celsa Steel in Cardiff, and £1.2 million for investment in three other companies in the industry.

In December 2016 the Welsh Government agreed to provide £4 million to Tata to match its investment in training staff and managers across Wales. The Welsh Government’s ReAct redundancy support scheme has assisted workers from Tata and supply-chain companies.

The UK Government has provided assistance to mitigate high electricity prices and the impact of climate change policy. Over the two compensation schemes that have been introduced, the UK Government has provided over £100 million in compensation to the steel industry.

Has this support addressed the key challenges the industry faces, and what further action is needed?

In October 2015, the steel industry identified five areas where action could be taken to address the challenges it faces in the longer term. UK Steel says that of these, one has been actioned fully, three partially and one not at all. In contrast, the UK Government considers it has addressed four of these actions.

On energy prices, while the steel industry welcomed the UK Government’s package of support, electricity prices for UK producers remain considerably higher than those for European competitors. UK Steel highlight a differential of £17 per Mega Watt Hour between UK and German producers, impacting on investment decisions between steelworks in different countries.

Action around the ‘dumping’ of steel will be a key area where the UK Government will need to make decisions after the UK leaves the EU, as it will need to establish trade defence measures. There has been concern that previous EU anti-dumping tariffs have not been high enough, and that the UK Government has not supported the lifting of the ‘lesser duty’ rule by the EU. The sector is concerned about the potential for tariffs being imposed after the UK leaves the EU.  While WTO tariffs on steel products are 2%, tariffs such as the 10% on the automotive industry are of greater concern.

On business rates, the steel industry has called for plant and machinery to be exempt from business rates bills.  UK Steel found that UK companies pay five to ten times more business rates than producers in France and Germany. The Welsh Government has not taken this forward, as they consider it complicated to operate and have preferred to support the industry in other ways.  However, the recent business rates revaluation has seen a fall in the average rateable values of steelworks in Wales.  UK Steel have noted that under the Welsh Government’s transitional relief scheme steelworks will not have business rates bills reductions capped as will happen in England.

Both governments have also taken action on procurement.  The Welsh and UK Governments have published infrastructure pipelines of which projects will require steel. Additionally, the Welsh Government has changed its transport contracts to require that ‘dumped’ steel is not used.  The UK Government has also introduced procurement measures, including requiring central government departments to consider economic and social impacts of the steel they source. Key areas of future action for the steel industry include monitoring compliance with guidance, and developing transparent reporting mechanisms.

In May 2016, Swansea University called for backing for a new proposal for a national innovation and technology centre for steel.  The IPPR have argued that foundation industries such as steel should be better integrated into the Catapult networks, which are designed to boost innovation in key sectors across the UK.

Looking forward, while the UK Government’s proposals for an industrial strategy have been seen by some as not sufficiently considering steel, the UK Government and the steel industry are discussing the potential for a ‘sector deal’ for the industry, which is supported by the Welsh Government.  Sectors will develop plans to boost productivity.  The UK Government could then assist in a number of ways, including skills and training policy, changes to regulation, helping address barriers to trade and supporting the creation of new sectoral institutions.

Tackling Hate Crime – Progress and Challenges

07 October 2016

Article by Megan Jones, National Assembly for Wales Research Service

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Image of the Senedd Chamber

On Tuesday (11 October 2016), Assembly Members will debate the progress made, and challenges still remaining, in tackling hate crime in Wales.

Statistics published by the UK Home Office (see table below) in October 2015, show a substantial increase in recorded hate crimes across Wales in 2014-15 compared to 2013-14 (appendix table 1.02). There were 2,259 recorded offences across the four Welsh Police Force Areas in 2014-15, compared to 1,877 in 2013-14.

The Welsh Government’s Tackling Hate Crimes and Incidents: Framework for Action 2015-16 Progress Report suggests that the increase in recorded hate crime offences could be viewed as a positive indicator, attributable to better awareness and a greater accuracy in recording. However, any increase in hate crime remains concerning, especially in light of the European Commission against Racism and Intolerance’s latest report on the UK, which highlighted a number of areas of concern. The report found that ‘there continues to be considerable intolerant political discourse focusing on immigration and contributing to an increase in xenophobic sentiments’.

According to the Welsh Government (page 2), evidence still suggests that approximately 50% of hate crimes remain unreported.

megtable2

Source: UK Home Office

Defining hate crime

The Association of Chief Police Officers and the Crown Prosecution Service have agreed a common definition of hate crime:

  • A hate crime is defined as: ‘A criminal offence which is perceived by the victim or any other person, to be motivated by hostility or prejudice based on a person’s race or perceived race; religion or perceived religion; sexual orientation or perceived sexual orientation; disability or perceived disability and any crime motivated by hostility or prejudice against a person who is transgender or perceived to be transgender’.
  • A hate incident is: ‘Any non-crime incident which is perceived by the victim or any other person, to be motivated by hostility or prejudice based on a person’s race or perceived race; religion or perceived religion; sexual orientation or perceived sexual orientation; disability or perceived disability and any crime motivated by hostility or prejudice against a person who is transgender or perceived to be transgender’.

Hate crime is currently recorded and monitored by police forces across the protected characteristics of disability, race, religion/ belief, sexual orientation and gender identity, although people may experience hate crime due to other characteristics. Some people may experience hate crimes and incidents because of a combination of more than one identifying factor, such as their race and disability. A victim of a hate crime or a hate incident does not, necessarily, have to belong to any of the above protected characteristics, but is perceived to do so by the perpetrator.

Tackling Hate Crimes and Incidents – A Framework for Action

In May 2014 the Welsh Government published Tackling Hate Crimes and Incidents – A Framework for Action. This framework’s success is measured against a high-level outcome:

Individuals and communities are enabled to be resilient, cohesive and safe to tackle hate incidents and crimes.

This high-level outcome is supported by three strategic objectives:

  • Prevention – by challenging the attitudes that underpin it, raising awareness, early intervention to prevent it escalating, training organisations and using the specific equality objectives to work with Public Sector Organisations;
  • Supporting Victims – by increasing reporting levels, encouraging the further development of third party reporting, enhancing safety and wellbeing, and exploring quality support to victims; and
  • Improving the Multi-agency Response – by exploring relevant data and barriers to sharing information, increasing multi-agency working, and tackling the motivations of offenders.

Annual Delivery Plan

Following the publication of the framework, the Welsh Government started producing an Annual Delivery Plan which contains specific actions to implement the framework’s three strategic objectives. These actions are grouped into eight delivery areas:

  • Tackling hate-related bullying and promoting respect;
  • Promoting inclusion and resilience;
  • Promoting equality and good relations;
  • Training and awareness in service delivery;
  • Increased reporting of hate crimes and incidents;
  • Increased support for victims;
  • Improving the partnership approach; and
  • Tackling perpetrators.

Progress Report

The Welsh Government’s annual Progress Report shows the progress made towards implementing the framework’s three strategic objectives. The actions taken are also grouped under the eight delivery areas.

The 2015-16 Progress Report provides an update on the action taken to tackle hate crime, including work undertaken in schools and with families, Hate Crime Awareness training sessions provided, campaigns organised in conjunction with other organisations, such as Show Racism the Red Card and participating in events, such as Hate Crime Awareness Week.

New Publication: The Wales Bill 2016

14 June 2016

National Assembly for Wales Research Service

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The Wales Bill was introduced in the House of Commons on 7 June 2016 and accompanied by a statement by the Secretary of State for Wales, Alun Cairns MP. It will receive its second reading in the House of Commons on Tuesday 14 June 2016. This paper provides some background to the Bill; outlines the contents and summarises early reaction to the Bill.

Bill Summary Paper: The Wales Bill 2016 (PDF, 880KB)

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New ways of thinking about poverty

25 May 2016

Article by Hannah Johnson, National Assembly for Wales Research Service

Do we need a new understanding of poverty to effectively reduce it?

Our understanding of poverty is changing. Good evidence, which recognises the individual experiences of poverty, is needed to design successful interventions and well-targeted programmes.

Using an income-based definition, poverty can never be completely eradicated as it is measured relative to the income of the population, but the number of poor families can be reduced. Will future Welsh Governments consider different dimensions of poverty in policy-making, such as needs, experiences or even national targets?

Minimum needs

‘Minimum human needs’ are food, shelter and warmth. They are essential to survival, and their absence has severe consequences for physical health and the ability to work or learn.

As argued by the Bevan Foundation, basing policy and interventions around minimum needs moves the poverty debate away from whether or not people on low incomes have 52-inch televisions to the very basics of life – a warm, damp-free home and enough to eat. Of course, experiences of poverty go beyond just minimum needs.

If we look at the minimum needs alongside the traditional income measurement, it is possible to gain a deeper understanding of the nature of poverty, and how future governments can minimise or eradicate it:

  • food: taking foodbank usage as a measure of food poverty, just under 15,000 people in crisis in Wales were provided with three days’ emergency food by the Trussell Trust charity in 2011-12. By 2015-16, this figure had risen to nearly 86,000 – an increase of 483%;
  • shelter: the number of households accepted as homeless fell slightly from 6,515 in 2011-12 to 5,070 in 2014-15; and
  • warmth: fuel poverty in Wales has risen, from 29% in 2011 to 41% in 2013.

Evidence and benchmarking

Sound data and analysis at a Wales level, broken down by work status, gender, location, disability, ethnicity and other factors, are critical to ensuring poverty reduction programmes are targeted towards the people that need them most.

Official data on food and fuel poverty are not currently collected or published in Wales. There is also a distinct lack of data on the depth (the severity and persistence) of poverty. Poverty data is also not broken down by demographic factors such as gender, disability and ethnicity. Without these dimensions of information, it is not possible to accurately attribute government actions to progress, and decision-makers are arguably working in the dark. Calls for a better evidence base on poverty in Wales were repeated during the Fourth Assembly, and the issue is likely to arise in the Fifth Assembly.

People versus place

Another debate about effective poverty reduction is the targeting of anti-poverty programmes, which can be:

  • geographic: where services are focused in the poorest areas;
  • demographic: where services are targeted at specific groups of people who are at a higher risk of poverty; or
  • universal: where services are provided to everyone regardless of location, income or demographics.

There are advantages and drawbacks to all of these methods.

Basing programme delivery on location is a logical approach, as geographical poverty data is currently collected, and certain areas have noticeably high concentrations of poverty. But poor people do not only live in poor areas; asylum seekers are an example of how specific high-poverty groups frequently fall outside targeted areas as they have no control over where they are housed, and may be far from the services they need.

Targeting programmes at specific groups of people (such as women, older people, or people with a disability) has the benefit of tailoring services to needs. The problem is the lack of data on who is living in poverty, and how to deliver services to groups of people that are disparately located and have different needs. For example, single women aged over 80 are known to be at a high risk of severe poverty, but the identification of this group, and the effective and efficient delivery of services to them, would be difficult with the current data.

Universal programmes guarantee the same level of service to everyone and are usually ‘early interventions’, but do not take account of different levels of need. As a case in point, free prescriptions for everyone aim to prevent illnesses from getting worse and reduce the cost of administration, but some people receive the service even if they could afford to buy medicine without government help.

The future – obligations and targets

The Well-being of Future Generations (Wales) Act 2015 came into force in April 2016, and aims to improve the social, economic, environmental and cultural well-being of Wales.

The Act introduced seven well-being goals that public bodies must work to achieve, including ‘a more prosperous Wales’ and ‘a more equal Wales’. Progress will be tracked through a set of indicators, which include: the poverty rates for children, people of working age and pensioners, and the material deprivation rate, which will be collected by the National Survey for Wales for the first time in 2016-17.

But the indicators do not include targets – for instance, the poverty level will be measured, but there is no target to reduce the number of people on low household incomes by a specific number or percentage.

The issues discussed here highlight that the current lack of evidence is a barrier to effective poverty reduction. If better data is collected, it will be easier to attribute progress or failure. Will future Welsh Governments take the risk of setting poverty reduction targets when they may fall short?

Key sources

Fourth Assembly Communities, Equality and Local Government Committee, Poverty and inequality (2015)

Bevan Foundation, National programme to spread prosperity and improve life chances (2016)

Welsh Government, Well-being of Future Generations (Wales) Act 2015 – national indicators (2016)

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The future of the steel industry

19 May 2016

Article by Gareth Thomas, National Assembly for Wales Research Service

This article is taken from ‘Key issues for the Fifth Assembly’, published on 12 May 2016.

Developments in the steel industry have been one of the most high profile political issues of 2016. What are the key pressures facing the industry and how might the new Welsh Government help it secure a sustainable long-term future?

The decision by Tata Steel in March 2016 to put its UK assets up for sale was the latest development in a ‘perfect storm’ of recent challenges for the steel industry in both Wales and the UK.

As well as the Port Talbot steelworks, Tata has a number of other operations in Wales, at Llanwern, the Orb in Newport, Shotton and Trostre near Llanelli. Other producers with Welsh operations include Celsa Steel and Liberty House Steel UK. The iron and steel industries employed 6,420 people across Wales in 2015, with the primary steel industry and its supply chain accounting for close to 20,000 jobs.

The Welsh Economy Research Unit at Cardiff University found that the total economic impact of Tata was £3.2 billion in Wales per year, with a supported gross value added of £1.6 billion. Tata contributes £200 million in wages into the Welsh economy each year, and each job at Tata supports an additional 1.22 jobs throughout the Welsh economy.

steel Map

What are the options for securing the future of the Tata Steel plants?

Reaching a conditional sale agreement for the Tata plant in Scunthorpe in April 2016 took nine months, and both UK and Welsh Governments have urged Tata to allow sufficient time for a sale to take place. In March 2016, the Scottish Government purchased two Tata steel plants before selling them on to Liberty Steel the same day.

Potential options for the Tata sites include the sale of all plants; management buyouts of certain sites; nationalisation; co-investment between the public and private sectors; temporary ‘mothballing’ of sites in their current condition to enable future reopening; or closure.

The previous Welsh Government offered Tata a package of over £60 million, which included funding for environmental products and skills and training, and a commercial loan to develop a galvanising line for steel coating. It also discussed co-investing in a power plant at the Port Talbot works, which would lead to lower energy costs and greater energy efficiency.

Given the scale of the investment needed across the Tata plants, UK Government assistance will also be required. The UK Government has indicated that it would consider co-investing with a buyer on commercial terms, including potentially taking on some of the debts associated with the plants. Other areas for potential UK Government support include the power supply, the British Steel Pension Scheme and infrastructure.

How can the key challenges facing the sector be addressed?

Of the industry’s five ‘key asks’ at the start of the crisis, four remain major concerns for the sector. Some of these are in non-devolved areas, meaning that the new Welsh Government will need to work in partnership to address these issues.

What is dumping, and what measures are currently used to combat it?

Dumping is where the export price of a product such as steel is lower than the exporter’s home market price, or perhaps even lower than cost price. The EU investigates these cases, and can impose tariffs that are based on the dumping margin unless a lower tariff would remove the injury caused to EU producers. This is known as the ‘lesser duty’ rule

The ‘dumping’ of steel is dealt with at EU level, and concerns centre on the global competitiveness of European steel against exports from China and Russia. The European Commission launched proposals to address these challenges in March 2016, including reducing the length of time that anti-dumping investigations take and changing the way that anti-dumping tariffs are calculated in certain circumstances. A further issue is the impact that awarding Market Economy Status to China would have on action that could be taken against ‘dumping’.

Energy prices for UK steel producers are higher than other European nations, despite the UK Government introducing compensation for energy intensive industries. While steel producers have welcomed the compensation package, they are still paying significantly more for electricity than European competitors and would like further action taken.

Business rates paid by UK producers are said to be between five and ten times higher than in other European nations. In Wales, powers over business rates are wholly devolved to the Welsh Government. The sector has called for the removal of plant and machinery from business rates bills, which are seen as a disincentive to invest. At the end of the Fourth Assembly, the previous Welsh Government was still considering how to address this issue across the whole of the manufacturing industry in Wales.

The steel industry also wants the Welsh public sector and the Welsh and UK Governments to use procurement for major infrastructure projects to better support UK steel. The previous Welsh Government considered that its procurement policies support the principles of the Charter for Sustainable British Steel, although the industry has called for procurement policies to be implemented and monitored more closely. The Tata Taskforce, established by the previous Welsh Government, is developing a list of infrastructure projects that could help the steel industry, and looking at how major capital projects are setting criteria for steel procurement.

The steel industry has also cited Welsh and UK Government co-investment in research and development as ways to take the steel sector forward.

The decisions taken by the Welsh and UK Governments will affect both the immediate and long-term future of steel. With thousands of jobs and the future of an industry at stake, working with partners to relieve the pressures faced by the sector will be one of the first major challenges for the new Welsh Government.

Since this article was produced for the hard copy Key Issues publication, there have been a number of developments:

  • The UK Government has provided further details of potential support available to the successful buyer, including the possibility of it taking an equity stake of up to 25%;
  • Tata has announced that seven bidders have reached the next stage of the bidding process.  These include Liberty Steel and Excalibur Steel UK, and are also rumoured to include Greybull Capital, JSW Steel and Nucor; and
  • The Welsh Government has confirmed that it has made an offer of financial support to the Excalibur Steel UK bid, although the value of this support is not yet known.  However, this is not a formal endorsement of the Excalibur bid as support is open to other bidders should they request it.

Key sources

Promoted by the National Assembly for Wales Commission, Cardiff Bay, Cardiff, CF99 1NA

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