Government confirms long term gain with short term pain at Britains biggest steel plant

Truthfully, the writing has been on the wall for years. Ten years ago, TATA looked into the future and realised the numbers just didn’t add up.

When the company made profits at Port Talbot, the benefit was wiped out by the cost of maintaining and upgrading a plant that was the single heaviest polluter of C02 in the UK.

Put simply, if Port Talbot made an annual profit of say, £100m, it would have to find another £150m to keep the aged plant going.

So earlier this year, when the company said it was facing losses of £1m a day, closure became inevitable. Behind the scenes, the worrying question was would TATA pull out of the UK altogether?

For more than three years, there have been discussions about a Plan B. To shut the blast furnaces and replace them with a new clean energy solution – the installation of an electric arc process.

But that would come at a cost. And when it comes to steel production, the numbers are never small.

More than 2,500 jobs will be lost, and the plant will be shut down for at least three years while the site is cleared, and a new plant is built in its place.

TATA entered negotiations with the UK Government under the previous administration. The choice was stark. “If you want us to stay, we need your support.” Two years later, both sides agreed that the UK taxpayer would support with £500m towards the cost of the new EAF build. TATA will fund more than £750m.

That has been confirmed by the new Labour government in a deal announced by Business Secretary Jonathan Reynolds.

Labour will also commit to the £100m of support for Port Talbot announced by the previous government as the area transitions to a green energy future.

There will be enhanced terms for redundant workers and renewed vigour in seeking solutions to buffer the impact of this enormous blow.

But the economic shock to Wales will hurt. Research by Cardiff University estimates that TATA’s value to the Welsh economy is £3.2bn a year.  

It is one of the key challenges facing Labour which now dominates the Welsh political establishment. And with it, is the expectation that Labour governments in Westminster and Cardiff will work closely together to find answers to pressing problems in Wales. But first, Labour must get its house in order at the Senedd.

Buffeted by infighting and the forced resignation of the former First Minister, Vaughan Gething, his successor, Eluned Morgan has unveiled a new cabinet which she hopes will bring new energy to the top tier.

While Vaughan Gething has announced he will stand down from the Senedd at the next election in two years’ time, his archrival, Jeremy Miles, who lost a leadership contest to Mr Gething earlier this year, is back. Reinstated into the new team with the most challenging post, as Cabinet Secretary for Health.

Mark Drakeford, the former First Minister, takes over as Cabinet Secretary for Finance and the Welsh language. The new Cabinet Secretary for the Economy is the former Finance Secretary, Rebecca Evans. With a background in the charity sector, she has held several senior posts within the Welsh Government since she was first made a Minister in 2014 with responsibility for Farming and Food. In her new role she succeeds Ken Skates, who held three Ministerial positions in one under Vaughan Gething, for the Economy, Transport and North Wales. He retains the latter two.

The Conservatives in Wales say this new cabinet is largely a re-ordering of the old. While two former Ministers have been demoted, little has changed. As some old rivals are still sitting around the same table – what can the new order bring to effective government?

The transition from old steel to a green future is emblematic of what many believe could be the path to opportunity – if the right decisions are made and there is closer cooperation between government and the private sector than there has been in recent years.

The challenges for the NHS in Wales and the need to improve educational standards are well documented. But if transformational growth is going to be achieved in the economy the gradient that Team Wales must climb is formidable.