Under Labour, state intervention has no limits
ELIOT WILSON
Technological progress exposes us to new vulnerabilities as surely as it opens up new opportunities: the two are inseparable. When Jaguar Land Rover was hit by a major cyber-attack on August 31, the effects were of a magnitude which would have been incomprehensible to Jaguar founder William Lyons, or to veterans of the dark days of state-owned money pit British Leyland.
The attack forced JLR to shut down computer systems tracking parts, vehicles and tooling in its factories, as well as almost all the infrastructure involved in Land Rover’s sales. JLR effectively froze, ceasing production altogether with potentially huge financial consequences for its extensive network of supply-chain partners: JLR employs 34,000 people directly and its supply chain represents another 120,000 jobs, many of them in SMEs.
JLR hopes to resume production gradually as of October, but this has been a major crisis for the company and its suppliers. It has cost JLR around £50 million a week, reportedly exacerbated by the fact that the company was not properly insured against cyber threats. Insurance Times claimed that JLR had ‘failed to finalise’ coverage before the attack took place. For some suppliers, the prevalent ‘just-in-time’ model means that the interruption to business could be fatal.
Inevitably, there were early and urgent calls from business and trades unions for the Government to intervene. Peter Kyle had been appointed Business and Trade Secretary in Keir Starmer’s ‘reset’ on September 5, and he arrived in his new role facing demands which ranged from costly through extravagant to outlandish. The gargantuan sums disbursed during the Covid-19 pandemic – state support for businesses and individuals exceeded £150 billion – have created an expectation that public expenditure is now a kind of safety net for private enterprise.
Unite, the UK’s second-biggest trades union, was quick to call for a furlough scheme to subsidise the wages of JLR workers who were temporarily laid off; its General Secretary, Sharon Graham, spoke of the ‘Government’s responsibility to protect jobs and industries that are a vital part of the economy’. Ministers also reportedly considered a scheme, which Sir Humphrey Appleby might have described as ‘courageous’, to purchase components from JLR’s supply chain then sell them on to the manufacturer when it resumed production.
What eventually emerged was a request from JLR for a loan guarantee of £1.5bn to allow it to borrow large sums of money to maintain payments to suppliers and replenish its cash reserve. UK Export Finance, the state agency which underwrites borrowing to support the sale of goods and services abroad, will provide backing which should allow JLR to raise a loan from commercial banks more quickly and easily. It is expected that the loan will be paid back within five years, hopefully leaving the taxpayer with only theoretical exposure.
This was not primarily a failure of public policy or generalised economic conditions. A malign actor targeted JLR because it is a large and high-profile company, and the scale of JLR’s potential losses are partly attributable to its own failure to have adequate insurance. By contrast, Marks and Spencer, which was the target of a cyber-attack in April, had taken out coverage and is expected to claim at least £100m.
The Business and Trade Secretary sounded a cautionary note early on which was drowned out by dirigiste panic. Kyle pointed out that JLR was a ‘profitable company backed by a wealthy global company’; it is owned by India’s Tata Motors, itself a subsidiary of the giant Tata Group, India’s largest conglomerate with a market capitalisation of £325bn worldwide.
Such a rationale was not in line with the Government’s image as the perpetual strength and shield of British industry. The Chancellor of the Exchequer was much closer to the vibe demanded:
We are protecting thousands of jobs with up to £1.5 billion in additional private finance, helping them support their supply chain and protect a vital part of the British car industry.
Jobs and industry must always be ‘protected’. It was another Tata Group subsidiary, Tata Steel, which received a subsidy from the Department for Business and Trade of £500m last September to modernise its steelworks at Port Talbot in south Wales (though nearly 3,000 jobs will still be lost there). One hopes the Government at least receives a Christmas card from Tata chairman Natarajan Chandrasekaran.
An exception was made by Kyle’s predecessor, Jonathan Reynolds, in the case of iconic Belfast shipbuilder Harland and Wolff. He refused to provide a £200m loan guarantee, citing a ‘very substantial risk that taxpayer money would be lost’. In fact the result was Harland and Wolff going into administration and being bought by Spanish state-owned shipbuilder Navantia. Perhaps a Belfast company did not qualify as ‘British industry’.
No one wants to see jobs or businesses at risk. But what is now the underlying philosophy? What are the limits to the Government’s ‘responsibility’ to ‘protect’ employment?
Public expectation is already dangerously inflated, seeing state intervention as a generalised insurance policy. But there is a sense that the private sector has learned a lesson: frame your problems as potentially costing ‘British jobs’, and ministers will consider almost any proposal to avoid such an outcome. The Government’s Modern Industrial Strategy promises businesses ‘strategic certainty’. It sometimes looks as if this translates into certainty that business will not be allowed to fail – but that is not a strategy. That is a journey towards state-insured capitalism, risk-free and ultimately underwritten by the taxpayer. Sound good? No, me neither.
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This article (Under Labour, state intervention has no limits) was created and published by CAPX and is republished here under “Fair Use” with attribution to the author Eliot Wilson
Featured image:planet radio.co.uk
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