Steel Industry (Nationalisation) Bill

Baroness Noakes Excerpts

2nd reading
Tuesday 16th June 2026 Lords Chamber

[Baroness Noakes (Con)]

My Lords, when the Government took powers to take control of British Steel’s operations last year, they were clear that they had no intention of nationalising it. Now nationalisation is the name of the game. This pivot has nothing to do with the Government’s failure to reach an agreement with the owners of British Steel; the weakness of the Prime Minister has driven it. In his desperate attempt at another reset after last month’s local government elections, the Prime Minister reached for the socialist playbook of nationalisation. This was aimed at placating the trade unions and the left wing of his party, and they duly reacted with joy. There is no plan for British Steel other than to take it into national ownership. The Government have not said how much this socialist adventure will cost British taxpayers. The impact assessment is very long on words but has no financial analysis, as my noble friend Lord Redwood has said. Parliament is being asked to buy a pig in a poke.

Nationalisation is not the answer to the root causes of unprofitability in the steel industry, as many have said today. As for all British businesses, high unemployment costs and taxes are an issue, but it is the ruinous level of the cost of electricity that is killing our energy-intensive industries. Now, I am not proud of the former Government’s net-zero policies, which made so much of British industry uncompetitive, but the current Government’s policies are much worse. Industrial electricity prices are among the highest in the western world, as we have heard, and the reliefs already announced but not yet enacted barely scratch the surface of the problem. That is where the Government’s attention should be, not this Bill.

As a matter of principle, I oppose state ownership of businesses. I spent much of my professional working life working first on nationalised industries while in state ownership and later on privatising them, and I am clear that the state was a terrible owner of commercial businesses. There were many downsides of state ownership. Instead of the informed judgments of capital markets, nationalised industries were overseen by civil servants who had little or no experience of business. Key decisions, such as those on investment, were made by Ministers for reasons that were political rather than economic, while trade unions typically called many of the shots and prioritised job protection over commercial success. The result was massive inefficiency that only privatisation could unlock.

One of the biggest problems that faced nationalised industries in the past, and will surely face British Steel if it is nationalised, was financial pressure from the Treasury. Nationalised industries are rightly classified to the public sector, so their borrowing scores as public sector debt. It does not matter whether the debt is provided via the Treasury or borrowed from the market; it is all public sector debt, so there is no escaping the Treasury’s interest in keeping public borrowing in check. We know that the UK’s public debt is not far short of 100% of GDP, a long way from its pre-financial crisis norm of no more than 40%, and the risks are all on the downside. If the powers under this Bill are exercised, we can expect public sector debt to rise as British Steel sucks in more and more cash. The Treasury is unlikely simply to nod in approval.

While I do not favour nationalisation, one of my main problems with this Bill is that it is not a nationalisation Bill. I remember what nationalisation legislation looks like and it is not like this Bill. When businesses were nationalised in the past, there was a clear legislative formula. The Government controlled all key appointments, such as the governing board and the chief executive. The Government had wide powers of direction, which were generally not used but acted as a reminder to the nationalised industry that the Government called the shots. The Government had powers over borrowing, for the reasons I have just mentioned. There were also arrangements for parliamentary accountability, such as the laying of annual reports and accounts.

There is none of that in this Bill. Instead, the Government make great play of basing this Bill on legislation designed to deal with the fallout from the financial services sector after the global financial crisis. That legislation was never conceived in terms of creating nationalised banks and building societies. It was used as a mechanism to sell any saleable bits of the failed financial institutions and to wind down the rest. Its use as a precedent for the nationalisation of British Steel is a category error.

The Banking (Special Provisions) Act 2008 lasted for only one year and it allowed the Government to deal with a very small number of failures such as Northern Rock, which could not find a private sector buyer. The Banking Act 2009, which set up a permanent resolution regime for failing banks and building societies, has been used only once, and that was for a very small building society. I cannot think of a less suitable legislative foundation for a nationalised industry.

While the Government seem to have no idea about the future of British Steel and what role, if any, the private sector might have, they have been clear that the purpose of this Bill is nationalisation. If that is the case, a completely different Bill is needed to give the Government the correct powers and levers. If the Government intend state ownership to be temporary—which I would applaud, though it would doubtless upset their left wing—they need to make this clear on the face of the Bill. For example, there should be regular reports to Parliament on the progress made in returning British Steel to the private sector. There should be a duty on the Secretary of State to seek all reasonable ways of encouraging private sector ownership, as well as an explicit duty to ensure that the cost to the public purse is minimised.

I was pretty shocked by the lack of financial analysis accompanying the Bill, so I have just two questions that I ask the Minister to answer when he winds up. First, do the Government accept that the debt of British Steel will be classified as public sector debt from the day that the Government exercise the power to acquire it under this Bill? Secondly, will the Government commit to giving Parliament a full analysis of the impact on the public finances when they choose to exercise this power and seek parliamentary approval?