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Jeremy Hunt has insisted Britain is not about to adopt Joe Biden’s “subsidy bowl” approach to economic policy, on the day he signed off a £500mn subsidy package for Tata to modernise the UK’s steel industry.
The chancellor declared that Britain had an “industrial strategy”, a phrase that prime minister Rishi Sunak has been reluctant to use, but that it would be “hard-headed” and would not result in big state handouts across the board.
In an interview with the Financial Times Hunt acknowledged that Britain needed to invest in switching to electric arc furnaces to cut carbon emissions and safeguard a strategic industry.
He said that the up to £500mn being paid to Tata was agreed only after he received “very credible commitments” from the Indian company that it would invest a further £750mn in developing its site at Port Talbot in Wales.
“We see this as very significant for the long-term viability of steel in Wales and the UK,” he said, adding that a negotiation was also under way with British Steel, which has similar operations at its Scunthorpe site.
“We have not got to the same stage with them,” Hunt said, referring to talks with China’s Jingye, which owns British Steel, and is also seeking hundreds of millions of pounds of subsidies.
“Our approach will be very similar,” Hunt said. “If we can get the right deal for the country that protects our future as a steelmaker and it’s good for the local area and good for the employees who work there, we will be prepared to do a deal. But it has to be the right deal.”
But Hunt said this state largesse did not mean that the UK would attempt to emulate the Biden administration’s $369bn Inflation Reduction Act, the package of subsidies and tax credits to help the US move to a net zero carbon economy.
“We are very clear — we won’t pursue the Inflation Reduction Act subsidy bowl approach to economic policy,” he said. “We are very hard-headed. We will do what is right for the long-term interests of the UK.”
Hunt said that Britain’s approach to encouraging a transition to greener energy — including the “contracts for difference” system that guarantees energy output prices — was preferable to the policies adopted in the US.
He also said he would not be handing out big subsidies as a matter of course to support the five key sectors — technology, the creative industries, life sciences, advanced manufacturing and the green economy — which he sees as vital to the future of the British economy.
“If you are asking if we are going to have big pots of subsidies for all of those five sectors, that’s not how I would interpret today’s announcement,” Hunt said. But he added: “Where there’s a strategic opportunity to progress, we will take it.”
Sunak has been criticised by former business secretaries for having a low-key approach to industry, but Hunt insisted the government’s industrial strategy was “alive and kicking”.
He said that all of the priorities identified by former Tory business secretary Greg Clark in his “modern industrial strategy” — binned by Sunak when he was chancellor in 2021 — were still being pursued.
“The UK government is taking a very holistic approach when it comes to industrial strategy,” he said, adding that all administrations like to “express things in their own way”.
Hunt’s Autumn Statement in November is expected to set out more details of the reborn industrial strategy, including a review of foreign inward investment by Lord Richard Harrington.
Meanwhile, the chancellor confirmed he was working with Sunak on addressing cost overruns on the HS2 rail project and refused to commit to building the line beyond Birmingham to Manchester.
“With any big infrastructure project, let alone the biggest infrastructure project in the country, you would expect us to have conversations about managing cost overruns.”
Asked whether the entire rail project would be built, he said: “I’m not going to be drawn on the details.”
Hunt refused to say whether he would trim spending on benefits and pensions in his Autumn Statement, a move that might create some space for tax cuts in next spring’s Budget.
He also declined to confirm whether the pensions triple lock would survive in the next Conservative manifesto, but accepted that on current trends the British state would be “unsustainable in its current form, in its entirety” by the 2070s.
Hunt will be setting out plans to make Britain more productive, and reforms to public services over the coming year. “We have to rethink how we do the state,” he said.