A couple of decades back it was a standard observation about European labour markets that easy to fire made for easy to hire, hard to fire, few hires. The other axis was about what happened to the people fired - substantial welfare support and retraining or not. We could thus carve up the European labour market, the north - especially the Nordics - were easy to fire with substantial support. The Latins were very hard to fire and support was variable. The UK - as so often - was different in that we had easy fire and very little support.

The observation of those different markets was that the easy hire/fire markets have lower unemployment rates and, as ever with any stickiness in labour markets, this burden fell most heavily upon the young and untrained/untested. Youth unemployment rates in the Latins were terrible, mulitple tens of percents simply unable to get a job as a result of the costs of trying to reverse a mistake if one were made.

It was also pointed out that it’s possible to think that UK solution was not optimal. But if that were so then more effort should be made on the support/retraining rather than making the firing harder, more expensive.

Hmm:

Other documents showed Mandelson demanded £547,000 as compensation for his sacking as UK envoy to the US last September — his salary over his full contractual term.

He ultimately received severance pay of about £75,000, consisting of £34,670 of discretionary payments on his departure, on top of the £40,329 to which he was legally entitled.

Given the circumstances here why was anything over those legal entitlements paid (we’re fine with contracts stating payoffs, contracts are contracts after all. Especially if someone has just moved countries to do the job, seems fair to us)?

Now yes, we know Andrew Griffith is a politician making hay but still:

The award of £75,000 was less than the cost of employment tribunal fees, which led the government to “reluctantly agree”.

And, well, we are always going to hire someone or other to be Ambassador to Washington so these costs are not going to impact upon that decision. But in a more general sense across the economy what is the effect going to be on the hiring of the young and untrained of these sorts of employment tribunal costs of a firing, even for cause?

The reason the UK youth unemployment rate is rising up above the EU average and moving toward that of the Latins is?

Well, yes, as the conventional wisdom has had it for decades that’s the wrong way to reform the UK labour market, isn’t it?

Tim Worstall

You don’t have to go far leftwards in economic debate to find those insisting that financial markets are just speculative froth. Things of no value extant only to enrich the bankers. A usual observation is that futures and options markets are many, many, times “real” trade and therefore we can stop all that froth. Tax it out of existence with a financial transactions tax perhaps.

And yet there’s a value to them even so:

For those worried that @ryanair might follow SAS, Qantas and Thai Air in hiking up prices due to soaring jet fuel costs:

MOL: "We're hedged for the ⁠next ​12 months out to March 2027 at ​about $67 per barrel, So it won't affect our costs and it won't affect ​our low fares."

Someone, somewhere, has to take the risk of aviation/jet fuel changing in price. As we can see we never really do know when someone’s going to launch a war of liberation for the inhabitants of an oil producing state despite our having had two just in the past couple of months. Or, OK, actions to etc.

Airlines typically - and yes, we’ve checked with Ryanair’s website on this - sell tickets a year out. So, someone in the system has to take that risk of fuel prices changing. It could be passengers. Book your ticket now but the price is unknown because there might be a fuel surcharge by the time you come to fly. It could be the company itself - the airline takes the risk of fuel prices changing in a year while setting prices now.

Or, of course, it’s also possible to have speculators take that risk. Which is how those futures markets work. People who actually want to gamble their money shift that risk away from consumers or the airline and take that risk onto their own books. Of course, if prices fall from now then we’re all, as the airline or passengers, out of luck. The profit accrues to said speculators. Or, if as is happening now, prices rise then it’s the speculators - who, nota bene again, have actively decided they’d like to carry this risk - who lose money and we passengers and the airline don’t have to worry about the change in oil prices.

That is, futures and options markets do have a purpose - they transfer risk. Given the number of people who trade in them, the number who actively seek risk and those who seek to lay it off, this is something a lot of people desire to do as well. After all, those futures markets are indeed many times the underlying physical ones.

Isn’t speculative froth in financial markets such a wondrous thing?

Tim Worstall

There is something almost admirable about the audacity of it. On the same day the Bank of England held interest rates at 3.75%, citing, among other things, rising energy costs and economic uncertainty, the Government announced it would double tariffs on steel imports to 50% and slash import quotas by 60%. Making things more expensive, it seems, is now an industrial strategy.

Peter Kyle stood in Port Talbot yesterday and declared that Britain was "closing the decades-long chapter of destructive de-industrialisation." A bold claim from a Government presiding over the most aggressive increase in trade barriers this country has imposed since the Corn Laws. The Business Secretary might have added that he was also opening a new chapter of destructive price rises for every British manufacturer, builder, and consumer who uses steel. Which is to say, almost all of them.

Let us be clear about what has actually been announced. From July, the amount of steel that can enter this country without punitive tariffs will be cut by 60%. Anything above those thinned-out quotas will face a 50% levy, which is double the current rate. The Government is simultaneously raising its bound WTO tariff to 50%, signalling that this is not a temporary emergency measure but a permanent feature of British trade policy. Gareth Stace, the mercantilist-in-chief of UK Steel celebrated the move as a shift "from protecting the ideology of free trade at any cost, to defending critical industries and national security." One suspects Adam Smith is spinning fast enough to power an electric arc furnace.

The national security argument is doing a lot of heavy lifting here. Steel accounts for 0.1% of UK GDP. The sector supports 37,000 jobs, which though a meaningful number, is hardly the commanding heights of the economy. Britain currently produces about 30% of its own steel demand, moving towards the Government's stated ambition of 50%, backed by up to £2.5 billion from the National Wealth Fund. That is a great deal of taxpayer money to subsidise domestic production that remains uncompetitive on energy costs alone, with British steelmakers still paying substantially more for electricity than their European and American counterparts, which is to say nothing of the tariff wall now being erected to shield them from the consequences.

Who pays for tariffs? As our President, Madsen Pirie, has repeatedly observed: you do, one way or another. The consumer. The business. The builder buying structural steel. The car manufacturer sourcing components. The construction firm pricing a hospital or a school. Every penny of this tariff will be passed through supply chains and land, inevitably, on the people least able to bear it. A 50% out-of-quota tariff on steel is, in practice, a tax on building things in Britain at a time when the construction is in long-term decline despite government rhetoric. Coming from a Government that claims to “Build, Baby, Build" this is an act of breathtaking cognitive dissonance.

The Government's defence rests on the spectre of Chinese overcapacity. The OECD estimates global steel overcapacity exceeded 680 million tonnes in 2025 and could reach 721 million tonnes by 2027. Chinese exports hit a record 118 million tonnes in 2024, up 10% the following year. China's steel subsidies, per the OECD, run at ten times the rate of those in OECD countries. These are real problems. But tariffs do not solve overcapacity but instead redistribute its costs. Instead of cheap Chinese steel reaching British buyers at low prices and making our construction, manufacturing, and infrastructure projects cheaper, it will now either be blocked at the border or taxed into oblivion, and British firms will pay more for an inferior domestic alternative or an equally tariffed import. As Tim Worstall in these pages (if a blog has them) has argued on these pages, the price rise is not some unfortunate side effect of tariffs—it is the entire point.

Trade Minister Chris Bryant insisted the policy was "not very Donald Trump" and "very, very specific." One wonders what Sir Chris thinks the Trump tariffs are, if not very, very specific taxes on imported goods. The mechanism is identical and the economic illogic is exactly the same. The only difference is that Trump is at least candid about his protectionism, and more blatant in his (in our opinion misplaced) concerns about trade deficits. The British Government wraps identical policies in the language of "fair trade" and "sovereign capacity," as if dressing up mercantilism in modern branding changes its fundamental character.

The existing WTO safeguard on steel, inherited from the EU in 2018, expires on 30 June. Under WTO rules, safeguard measures can last a maximum of eight years, which is a time limit that exists precisely because safeguards are supposed to be temporary. They exist to give domestic industry time to adjust, rather than to provide permanent protection from competition. What the Government has done is allow the temporary safeguard to expire and replace it with something permanent and far more restrictive. The EU is doing much the same, cutting its own tariff-free quota by 47% and raising its out-of-quota duty to 50%. That the Europeans are also being protectionist is not, despite what Ministers seem to believe, a justification for Britain to follow suit, and is very much in-character for the Zollverein nature of the Bloc. 

There is a deeper irony still, as the Government frames this as a response to global overcapacity driven by Chinese state subsidies. But the policy response of tariffs, quotas, state financing through the National Wealth Fund, procurement mandates for UK-made steel is itself a programme of state intervention indistinguishable in kind, if not yet in scale, from the Chinese model it claims to oppose. If the problem is that Beijing subsidises its steel industry and distorts markets, the answer is hardly for Westminster to do the same, only less competently and at greater relative cost.

The shadow Business Secretary, Andrew Griffith, called the announcement another tax on business from a Government that does not understand it. And he is right, though one wishes the Conservatives had been half as eloquent about the costs of protectionism when they were in office. The truth is that both parties have, for years, treated steel as a political totem rather than an economic question. Communities in Port Talbot, Scunthorpe, and across South Wales depend on these jobs, and no politician wants to be seen letting them go. But sentiment is not a substitute for sound and fair economics. Propping up uncompetitive domestic production through tariffs, subsidies, and mandates does not create sustainable industries but rather drags up permanent dependents on state support. Industries that survive not because they are good at making steel, but because the Government has made it illegal to buy it cheaply from anyone else.

Adam Smith had something to say about this, naturally. "By means of glasses, hotbeds, and hotwalls, very good grapes can be raised in Scotland, and very good wine too can be made of them at about thirty times the expense for which at least equally good can be brought from foreign countries." You can make steel in Britain and even mandate that people buy it. But if it costs substantially more than the alternative, you have not created prosperity. You have merely redistributed it from consumers to producers—from the competitive to the protected.

If we want to save the British industrial economy, it means getting the basics right first - delivering cheap energy, relaxing planning rules, and ensuring that our regulatory environment is conducive to innovation, as our learned Fellow Sam Bidwell pointed out for us.

The Steel Strategy is not a strategy but a very expensive confession—that this Government, like its predecessors, has no answer to the structural decline of British heavy industry that does not involve reaching for the oldest and most discredited tool in the economic policy cupboard. Tariffs did not save the Corn Laws, nor Smoot-Hawley America. They certainly will not save British steel. They will simply make everything else more expensive while we pretend otherwise.