How the Thatcher Government went to war with itself over millions in payouts for axed Ravenscraig workers

In January 1990, Nicholas Ridley, the Trade Secretary, told Norman Lamont, the Chief Secretary to the Treasury, that “after a period of stability” in the late 1980s, further job losses could be expected given the downturn in the UK steel market; production by December 1989 was 11 per cent lower than a year earlier.

“Future job losses, whilst unlikely to be on the same scale as in the early 1980s, are still likely to be significant,” explained Mr Ridley.

“Over the next four or five years, some 5,500 further job losses qualifying for Iserbs may take place. Moreover, all of these are likely to occur in areas of higher than average unemployment.”

The Secretary of State expressed particular concern about Scotland; a Sword of Damocles was hanging over Ravenscraig.

He told Mr Lamont, that taking all factors into account, “especially the situation in Scotland,” it would “not be politically possible to announce the termination of Iserbs at this juncture”.

Mr Ridley found an ally in Malcolm Rifkind, the Scottish Secretary, who said, given the uncertain future of the Scottish plants, he would “view with considerable concern any suggestion that this scheme should not continue”.

But Mr Lamont was not convinced. He pointed out, given tough public expenditure climate, it was difficult to accept there was a strong case for continuing with “this outdated scheme”.

Noting how Iserbs was the only sector-specific scheme in British manufacturing, the Chief Secretary pointed out how prospective steel redundancies were “modest” compared to those in the past.

Stressing the lower contribution from the European Community, he said Iserbs, which had cost taxpayers £253 million and was forecast to cost them another £44m by 1997, had “not been particularly effective in assisting former steelworkers obtain new employment”.

He concluded: “The case for closure, therefore, appears to be overwhelming.” Mr Lamont suggested it should close in 1990 but recognised the concerns raised and suggested running the scheme down to the end of 1991.

“The presentation and timing of an announcement would need careful consideration,” he stressed.

By mid-1990 with the announced closure of Ravenscraig and the loss of 770 job losses, Mr Rifkind appeared desperate to save Iserbs.

In a memo to Mr Lamont, he said: “I have to say that your proposal that this scheme should close at the end of 1991 causes me very considerable concern.

“The long-term future of the balance of British Steel’s Scottish workforce of around 5,000 is by no means secure and I would be most reluctant to agree to a decision being made at this stage which would result in Iserbs assistance being unavailable to any of the employees at Ravenscraig or Dalzell who may lose their job after 1991.

“The Government has come under heavy pressure following the company’s announcement concerning the hot strip mill.

“If it were to emerge that we had decided that Iserbs should close at the end of 1991, this would be seen as signifying Government indifference to the fate of steel workers,” declared the Scottish Secretary.

By June 1990, Mr Lamont told Mr Ridley there was “little doubt that on its merits we should abandon the anachronistic Iserbs scheme, which is becoming increasingly expensive to the UK”.

But he conceded Iserbs should continue to cover the 770 workers at Ravenscraig, although he noted: “The Government seems to have derived little or no public credit in the Ravenscraig controversy from the existence of this unique scheme of benefits.”

Noting how there was to be a review of the scheme in 1992, the Treasury minister nevertheless pointed out: “We must look to abandoning it as soon as the horizon is clearer in 1992.”

In fact, Iserbs was eventually closed down in 1994.