The British government's decision to seize control of British steel before evaluating taxpayers' expenses raises the question of saving the final price of the country's last two explosion furnaces.
Commerce Secretary Jonathan Reynolds has issued a “ministerial guidance” to cover concerns of his own civil servants to maintain its business with struggling steelmakers on the main website of Scunthorpe in Lincolnshire.
Ministers stepped in early April to seize control of British steel, which employs about 3,500 employees, including 2,700 of Scunthorpe.
Reynolds warned Secretary Gareth Davies on April 12 against permanent secretary of Commerce and Trade Gareth Davies that he could not guarantee that he would guarantee that the money paid by taxpayers on steel rescue would fulfill his responsibilities.
Davis said the government was asked to act at such a pace that there was no time to collect “the necessary evidence” to ensure spending matches the government’s four tests.
Government spending tests require the cost of intervention to be compared with alternative recommendations or “nothing to do” to check that it represents “value for money.”
These tests also require adequate legal basis to take action and meet high standards of public conduct as well as high standards of feasible, so the move can be implemented “an accurate, sustainable and expected timeline”.
Ministerial instructions, which are rare in British politics, are formal instructions to tell the department that despite opposition from the Permanent Secretary as the highest civil servant in the ministry, the department continues to make expenditure proposals.
This is the first such direction this year. After two in 2023, there will be two directions throughout Whitehall in 2024.
British Steel was the subject of ministerial orientation in 2019 when the company fell into bankruptcy when then-business secretary Greg Clark tried to continue taxpayer spending to maintain state control while seeking private buyers. The company was subsequently acquired by Chinese company Jingye in March 2020.
The government passed emergency legislation this month after what was obvious was that Giger planned to shut down two blast furnaces of British steel. The closure will make the UK the only G7 country without the ability to make steel from raw materials.
Renault then oversaw the delivery of raw materials to the Scunthorpe site of British Steel to ensure that the two furnaces continue to operate.
The Commerce Secretary said that while officials and other industry experts are preparing “investment cases” to attract third-party buyers of UK steel, nationalization of the company remains a “possible option”. Hopefully, another private company could take over the company, although officials acknowledge that this will only happen with some form of government support.
The government held talks with Jingye on a taxpayer support package to help it invest in green technology, which was formed earlier this month, after the company rejected Reynolds' £500 million offer.
Jingye is looking for up to £1 billion in funding to support the £2 billion project to shut down two explosion furnaces and build two arc furnaces.