Nationalisation as a money sink
Much can be said - and we’ve said much of it over the decades - about nationalisation. How taking an organisation out of the bracing rigour of competitive markets and into the sloth of the bureaucracy tends not to increase effieicny. Say and as an example. Or that government never will invest for the long term as there’s always some more immediate purchase of votes to be done with whatever funds might be available.
But just to nod to one more point:
At the same time, British Steel’s physical assets – including property, plant and equipment – have been deemed largely worthless after an audit review.
British Steel is worth nothing. As one of us has been known to say no one will ever build another blast furnace in the rich countries. We already have too many of them - the technology has changed and we can do better by recycling steel through electric arc furnaces. But that’s to be specific rather than general.
The document, signed off by Jingye just days before the company was nationalised, says a fresh funding injection of “£275m to £330m” will be needed “over the next 12 months” alone. The Treasury has already provided some £555m of working capital to the business.
So we’ve already provided half a billion, another near half billion is to be needed.
Taxpayer-owned British Steel owed almost £1bn to its former Chinese owners
We’re also likely to have to pay another billion in settling those loans.
Two billion, plus or minus a bit of change, to buy something worth nothing. On the basis, we assume, that some still have the hots for the sort of industry where manly men do manly things in girt big factories. For it’s difficult to think of any other reason for this micturation of the public wealth.
Which does, we think, give us another argument against nationalisation. It so often happens when structural failure is already apparent. The political classes get whipped up into a frenzy - again, presumably, manly men doing manly etc - and then go waste our money on their current obsession.
We should probably stop doing this.
Tim Worstall