Examination of Witnesses (Questions 280-
TUESDAY 30 JUNE 1998
280. Would you like to see less grants and more
(Mr Jones) That is a thing which you have got to balance.
You have got to balance your profit with your cash flow, and I
think this is a question of when you do block your grants because
then you do have that cash flow addition to it, but then you have
tax breaks. For instance, in Germany they have far more tax breaks
and I know in Japan they have far more tax breaks. For instance,
in Germany they have far greater tax allowance on the depreciation
of their assets and that is a big factor on the cash-flow implications.
You have got to balance it out. I could not give you a quite categorical
statement at this stage, but it is something which we have got
to consider. These tax breaks are something we are lagging behind
on and this is really why we are not really investing in some
of the new machinery, not keeping up with our counterparts and
it is something which we have got to change.
(Mr Spratling) If I was in the privileged position
of being able to tinker with the grant system I would certainly
make grants more attractive to inward investors at least or, for
that matter, indigenous companies who maybe are not Welsh but
have their headquarters in England. If they were encouraged to
put a certain amount of their R&D expenditure into Wales I
would certainly want to tinker with the grant system to ensure
that if they put their R&D into Walesand there are
plenty of facilities for research and development within the principalitythey
should qualify for some preferential treatment. I do not sit where
I would like to sit in that particular regard, but I think it
should be an input into the thought process about how you handle
a grant. It is quite a big factor.
281. I want to go back to the monitoring aspect
you referred to earlier. Do you feel, for example, that there
should be more monitoring done on displacement and the impact
on indigenous businesses that suddenly find themselves faced with
perhaps a skills shortage as a result of displacement within inward
(Dr Haywood) I think, to be fair, that the monitoring
angle is reasonably well handled. One of the things that we have
suggested for a number of years to the Welsh Office and which
I think has now been picked up to some extent is that we need
to move somewhat down the road of actually doing some pre-training
of people, so we have almost got a pool of labour. I am a little
wary of suggesting that we go totally down the Irish route because
you can end up in the worst case scenario with a vast quantity
of fairly highly educated graduates on the dole queue which is
not a good idea either. In many cases in the past the problem
has been people have been chasing inward investment, it has eventually
arrived and then people have ought, "Ah, what are we going
to do about the skills and the jobs?" We really need to get
that angle much sharper and work at it much more sharply in terms
of actually starting the training at an earlier stage. Again with
LG to some extent that has happened and I think largely because
it was such a huge project, people had to go about it, but it
has not always happened in the past, and I would like to see that
continue. It is one of the reasons why we pushed very hard for
a skills needs survey to be expanded over the whole of Wales and
we are delighted that that is going to be happening. There is
a lot to be done there, but I think one of the points we have
continuously made in the CBI is that throughout all of this discussion
about inward investment and indigenous business, the crucial underlying
factor is business infrastructure because that is key to all businesses
and it does not matter whether they come in from outside or whether
they are home-based and that includes things like skills so that
you can look at the skills that existing companies are using and
are likely to want as well as where the gaps would be if any one
investor came in, so you are looking at transport, you are looking
at energy, you are looking at sites and premises, you are looking
at a whole range of things and all of those benefit all the companies
whether they are local or whether they are inward investors.
(Mr Jones) Can I just add to that on the skills issue?
It is not a question of skills these days, but it is a question
of higher skills because companies are demanding this extra, additional
technical expertise and it is something which is becoming quite
prevalent and this is inextricably linked with your investment
programme, with your infrastructure, with your R&D and your
technology. I think this is really the crux of the matter, that
it is the higher skills which are now coming to the fore.
282. Can I ask you then what do you think is
the priority or what should be the priority for education and
training institutions to achieve that aimhigher education,
further education and schools?
(Dr Haywood) This is a wide question. I think we have
to start with the basics and we have to get the core skills, the
key skills right. We know that there are problems, that Wales
is actually starting from behind the UK, it is starting from behind
the European base in terms of actually delivering those foundation
skills of reading, writing and arithmetic, et cetera, but we have
to get that right at the primary school level. I think there needs
to be much better liaison both between teachers and business generally
and between schoolchildren and business generally in terms of
the possibilities of careers within different parts of industry.
I actually think that we have probably been very bad at putting
that across and I would hope that the new careers services will
be able to help in that. I think there are a number of stepping
stones in there, but that is, if you like, taking the early stages
because there are still going to be companies who need to take
on school-leaver-level people whom they will then train in-house
and I think that is a good thing because on-the-job training can
be very, very valuable. On top of that, as my Chairman rightly
says, there are a number of companies now who are looking for
higher and higher skills often at technician and just above level,
but also at graduate, postgraduate, whatever. There is good graduate
development within Wales. I am not entirely sure that we use it
to our best advantage and I think again that is a question of
liaison between the higher education centres and industry generally
within Wales. Very often people leave and go to businesses outside
Wales partly because the career structure is there and they see,
for example, the South East of England as being a possibility
for development, but it is partly because companies in Wales are
unaware that they are available. There is a lot of liaison to
be done, but I think we have to be aware of the sorts of needs
that companies have and believe they will have over the next five
to ten years. That is not going to be 100 per cent correctit
cannot bethings always change and you can have an economic
crisis outside the UK which will have a major effect on sectors
within Wales. We know that from the Asian crisis and we know that
from the strength of sterling currently. So there are a number
of issues that can affect that, but you can at least make an attempt
to say what sort of training is going to be required over the
next five years and try and make some adjustment for it which
is what we hope the skills needs survey will do.
283. Do you feel you are adequately represented
on bodies like the Further Education Funding Council for Wales
and the governing bodies of further education colleges and universities?
(Dr Haywood) What we actually do is have pretty good
links with both individual colleges and universities, but also
with the councils themselves and I think we are fairly well represented.
We often get asked to go and talk to them and I think the message
is beginning to get through about the need for greater liaison
and we certainly have more discussions now than we used to have,
say, five or ten years ago.
284. One of the witnesses earlier this morning
was very dismissive of the gold standard of the A-level and was
arguing very passionately for the merging of vocational and academic
education and the introduction of a Welsh Baccalaureate. At least
one Member of the Committee, namely myself, thought that this
would be a step backwards and that it would enhance the fears
of some universities that they would have to introduce four-year
rather than three-year courses. How does the CBI look at that
sort of proposal? Would it be of benefit, instilling an enterprise
culture, or would it be a step backwards?
(Dr Haywood) I think there are a number of questions
mixed into that. I think the A-level system has served us very
well in the past with one major exception and that is that vocational
training in the UK is not seen as being first class, but it is
seen as being a second-class citizen and that is highly dangerous,
particularly in the sort of businesses that we have in Wales.
So we would like to see a system, and I am not advocating throwing
out A-levels, but we would like to see a system which somehow
showed that vocational training was actually as good as going
down the academic route of A-levels. Now, that is largely a culture
change which is terribly difficult to impose and I am not sure
that I can necessarily come up with any wonderful ideas as to
how to do it. On the question of a Welsh Baccalaureate, we at
CBI Wales supported the idea of a pilot project for the Welsh
Bacc., but that is as far as we have gone and we were quite cautious
about the idea of saying, "Yes, this is wonderful".
There is already an International Baccalaureate. That can be extremely
good and a lot of companies are actually quite keen on it because
of the breadth that it provides, in other words, it is a wider
qualification than A-levels, so it does go some way down that
route, and I suppose some of the worries that we had about a Welsh
Baccalaureate were that if we ended up with an International Baccalaureate
and we had a Welsh Baccalaureate, what we are doing is adding
to the confusion rather than removing it and I think many employers
already feel quite confused, thank you very much, now that we
have got all the new universities as well as all the old universities
and how valuable are all these various and different degrees and
do they actually match up to each other, so there are quite a
few different issues in there, but we would certainly be willing
to see a pilot project on the Welsh Bacc. if that were feasible.
(Mr Jones) The only thing I would like to add in addition
to what Liz was saying is that it does give the opportunity of
taking science at a higher level and of undertaking a language.
The limitation of the A-level is that you tend to do your sciences
or you tend to do your arts and then you tend to be restricted
in what kind of languages you can do and, by coming back to the
original statement of the export trade, you have to understand
the language of the country you are servicing and so that is a
big advantage. I think once you have that entre«e, once you
have the equipment of a language, then you are able to sell yourself
better and communicate and be much more on the same level playing
field as they are. I think that the A-level restricts you now
in that if you are doing the sciences, it restricts you entirely
to doing a foreign language and what I find in European terms
is that these people are much more equipped in languages and they
can speak two, three or four languages and they are far more advanced
than we are.
285. But that starts much younger than A-level.
(Mr Jones) You are absolutely right. They start much
younger, and it is established at that particular sort of stage
in their education and they get into the way of thinking in another
language and I think that is really the big advantage they have,
but they have got this ability to talk two or three languages
and it helps them as salesmen.
286. I just have a question briefly about transparency
and investment support. You point out that it is difficult to
assess the balance of indigenous and inward investment support
since the Welsh Office do not, for the most part, publish details
of grants made, and this is, for example, in line with the DTI,
but different from the situation in Northern Ireland where the
Industrial Development Board do publish, and nowhere are published
details of the value and composition of the total aid package.
Are you in favour of publishing details of grants and the total
aid package even where the company has requested confidentiality?
(Dr Haywood) There may be very good reasons for requesting
confidentiality, so we are not suggesting a global publication.
We did try and hedge our suggestions around this. I think the
idea in principle of more transparency is a very important one
and I think more progress could be made, which is why we suggested
they look at the Northern Ireland example because they clearly
have not lost out by reason of providing some additional information.
Clearly there are issues of confidentiality, of competitiveness,
of competition between different areas, of perhaps companies actually
trying to bid different areas up, which is one danger that we
are particularly aware of, and all of those issues would have
to be gone into in terms of how greater transparency was arrived
at, but we do think there is an argument for providing more information
than currently is available.
287. In Southern Ireland, for example, they
have now split their development agencies up into two, between
indigenous and inward investment. Do you think that is a good
idea for Wales?
(Dr Haywood) No, I do not because I think if you do
that you are losing the ability to ensure that there is a linkage
between what indigenous companies are doing so that they can actually
benefit from inward investment and I think you end up with two
totally separate vertical columns and they are not liaising directly
with each other, you are losing a lot of the economies of scale.
288. Is it still CBI policy in Wales to join
the Euro as soon as possible?
(Dr Haywood) The CBI policy on the Euro I would have
thought is fairly well known. We believe it is a good idea in
principle and we would like to join as soon as the time is right.
My own personal view is I hope to God the Euro is successful and
that it will then bring the pound down rather rapidly so that
we can become more competitive in Wales.
289. You say in your memorandum that Wales suffers
from a low level of local decision making, and point out that
there is a "glass ceiling", whereby successful Welsh
companies get taken over from outside. What consequences does
this have? What do you think can be done about it?
(Dr Haywood) The problem of a lack of autonomy really
relates to the question of innovation and entrepreneurship. If
you do not have headquarters functions in a particular location
you are unlikely to get the design, the research and development
and the innovation carried out there. You are also likely to be
fairly low down on the list and maybe bottom of the pile in terms
of strategic decisions for investment in the future. It also means
that you are less likely to get the high fliers in that particular
area, so you are less likely to get the entrepreneurs. We know
that we have a relatively low level of entrepreneurship by certain
definitions within Wales and that is disappointing. What you really
need is to provide the opportunities for entrepreneurs to thrive.
I am not suggesting that this is the only element, but it is an
important element within it. So it is those two aspects of entrepreneurship
and innovation which I think are particularly important. In terms
of the glass ceiling, this comes into it as well because if a
large number of thriving local companies want to grow they find
it very difficult to get the right sort of input, particularly
from the City, for instance, in Wales and so because they have
not got the right success system in place they are unlikely to
find a buyer in Wales, they are unlikely to find someone to come
in and join them, so they then sell off to somebody maybe in the
rest of the UK but very often to a foreign company. In competition
terms, yes, that is probably very good, but in terms of trying
to keep decision making in Wales it not necessarily so good and
again this comes back to our proposal for the Business Angels
network. We felt that that would provide at least one element
of the assistance that growing Welsh companies currently need
in order to develop to the point where they are strong enough,
for example as could well be now, to take on other companies within
Wales rather than letting the decision taking go outside Wales,
which I think is dangerous for the future.
(Mr O'Toole) We should not get too hung up on the
fact that decision making is not taken in Wales by the major companies
bearing in mind the amount of small companies that we have in
Wales where, in fact, decision making obviously is taken. There
is anecdotal evidence that if every small business in Wales took
on just one employee our employment problems would be solved.
Chairman: I think that is a very good point.
290. You refer to the importance of innovation
to Welsh competitiveness and quite rightly, of course. You also
refer to the Wales Regional Technology Plan and the Technology
Implementation Programme. What exactly do these entail?
(Mr Spratling) I declare an interest, I Chair the
Regional Technology Plan in Wales. I would think it is a good
idea, would I not? Having said that, it has been commentated on
by Brussels. Several regions of Europe were asked to go along
with the RTP which was implanting innovation and technology into
companies that did not have it or, if they did have it, with a
view to growing it. It is an all-embracing group and it is monitored
by Brussels annually. The report for the last year has just come
out and Wales is by a long way off top of the pile in achieving
success in implanting innovation and technology into Welsh companies.
I would be the first to admit it may well be because they damn
well need it. This plan was evolved by Europe. Wales was asked
to be one of the pioneers of it. There are at least three or four
other regions in Europe and consistently Wales has been ahead
of the pile in developing it. It will be alluded to in the Welsh
Office drafting of the new strategic document for Wales. It is
a success story. There is a plan to grow the very small resource
that we are using for getting this penetration from the principality.
It is a plan where there are certain small awards given in conjunction
with the agency, for example, on companies that achieve the criteria
for being included in the planning. This is by no means dangling
a carrot. You go round and explain the necessity to grow in this
particular area. Most companies, some small and some large, have
gone along with the necessity of going through a technology implementation
programme to grow their science in that particular field.
291. Bearing in mind what Mr O'Toole said a
second or two ago, how many SMEs are there involved in Regional
Technology Plans and is the business community really aware of
what is happening with the Regional Technology Plans?
(Dr Haywood) I did not bring figures with me of precisely
how many are involved, but if I can perhaps give you an example.
There has just been an evaluation of the various Regional Technology
Plans which have different names in different areas. Wales is
one of the original four. There are probably about 100 now altogether
throughout Europe. Wales once again came out on top. In that particular
piece of evaluation the consultants looked at smaller firms who
had actually been directly involved in whatever the Regional Technology
Plan was called, perhaps either on the steering group or who had
benefited directly from projects and they then took a random sample
of 1,000 companies and had a look at them to see how aware they
were of the technology plans. The number of companies that were
aware of the technology plan and who had actually been involved
in it clearly was very high. The interesting figure was on the
random sampling where Wales came out with just over 20 per cent
of smaller companies aware of the existence of a Regional Technology
Plan. In some of the other areas it was as low as zero per cent.
So although 20 per cent may not sound very high, it is, as I think
most people know, extremely difficult to get the message across
to smaller firms who have their heads down in terms of actually
delivering day-to-day bottomline results. So that 20 per cent
was actually quite good. The idea of the technology plan is to
develop this culture of innovation and that relates not just to
businesses but also to education, to a number of different areas.
So the business angle to it is only one element within the Regional
Technology Plan. There are a number of companies who have benefited.
The Technology Implementation Fund is one of the programmes which
is actually run by the WDA which does precisely that. It provides
small sums of money to companies who are looking to develop, and
it may mean adding new pieces of plant or perhaps taking up a
licensing agreement, but who are thinking of introducing an innovation
mechanism of some sort which will then enhance their bottom line
and help to grow the company and it has been extremely successful.
(Mr Spratling) The point that Jim very properly made
is that unless you have introduced these sort of cultures into
companies and enabled them to get a bigger order book, they are
not going to employ more people, which was the very point Jim
was making, so the thrust has to be through this Source Wales,
through the RTP, these sort of ideas that will grow the innovation
and awareness of companies that to live in the big, wide world,
they have to change, not only change it, but implant new cultures
to stay alive and that will result in employment. Jim has made
a very graphic statement, and I do not know how many SMEs there
are in Wales, but we are an SME-led economy and I am sure that
if we could take on one person per SME as a result of doing the
things we are doing, we would reduce the unemployment problem
to a very tenable level.
292. I am sure that is right. You say that the
regional technology plan must be strongly supported by the Welsh
Office. I take it, by implication, that it is not currently being
(Mr Spratling) I would not say it is not being strongly
supported. I would say that hitherto it has been very strongly
supported by the Welsh Office, but because of its success, you
may have to change the culture to get a more direct access using
the constituent parts of the plan, to wit education, local government,
and all the constituent parts in this partnership may have to
be persuaded to get in with this culture a little more swiftly
than has been done hitherto. My argument for the Welsh Office
is that we must put more resource into this to speed up the process
and I think that is, by implication, whilst we are not being critical
of the Welsh Office, why we are saying that the time has now come,
it has a proven track record, it is the right way to go and we
must seek from the Welsh Office some greater level of encouragement,
be it fiscal or bodies.
293. Should this not be part of the new economic
(Mr Spratling) I am led to believe it is.
(Dr Haywood) It should definitely be and that was
certainly something that we have put forward very, very strongly.
(Mr Spratling) I think it gets a mention in the draft
three or four times, so I think it is to a degree leading the
new strategy document as evidence of success in this particular
294. I have two concluding points, one very
straightforward one which relates to the section at the bottom
of page 7 and the top of page 8 and that is where you are trying
to show that there can be a complementary relationship between
inward investment and indigenous industry, and you say that both
of these require the right business support infrastructure and
not merely the incentives of grants, and specifically you point
to problems in power supplies and property infrastructure in parts
of Wales. Could you elaborate a little bit more on this and are
you suggesting that it is the responsibility of the public sector
to provide this infrastructure or do you accept that there are
opportunities here for the private sector, for example, in the
creation of business parks?
(Dr Haywood) If I can pick up the end point about
whether it is up to the public or the private sector to do that
and then I will ask Jim to pick up on the power and Ian to pick
up on sites, I think that would be helpful. There is clearly the
need for a joint approach. If you look, for example, at transport
infrastructure, it is not going to be provided entirely by the
private sector and probably not even going to be provided entirely
by the public sector. What you want to make sure of is that there
are no obstacles put in the way. Clearly in terms of energy, for
example, we have had severe problems about the possibility, as
it was, of a gas moratorium being extended for another five years
and that was likely to cause a number of problems as far as Wales
was concerned, so it is much the attitude in terms of the public
sector providing the right climate for the development which may
be then carried out either by the private sector or the public
sector and it would depend very much on the issue. Perhaps I can
ask Jim to come in now.
(Mr O'Toole) If I could pick up on the energy first,
the moratorium is adversely affecting what the proposals were
for North Wales certainly and we have already lobbied quite hard
in North Wales for our region to be excluded at least from the
moratorium because frankly we no longer have a coal industry and
our new energy and energy of the future is in fact gas and unless
we are allowed to exploit that gas, we will then not have the
basis for future inward investment. In fact, in the past few days
my own company received quite a severe shock when we asked about
energy supply, which is just not available to us unless there
are horrendous costs attached to it. In addition to that, we have
two projects on hold at the moment, one of which is holding up
inward investment on the Deeside industrial park, but the other
one, the Magnox in North-West Wales is possibly putting in danger
Anglesey Aluminium, which is probably the single largest employer
on the Island of Anglesey and they need continued secure energy
for the next 20 years. At the moment they cannot see beyond five
years. Not only is it blighting their existing business but any
potential growth which they pick up. We do need a definite energy
policy which looks directly at the regions's needs rather than
maybe at the national need. With regard to the transport infrastructure,
we have a pretty abysmal rail service into North Wales. I believe
that some might say we have it in all of Wales, but I am not sure
about that. Trying to get from north to South Wales is one problem.
You are likely to get to Crewe in a very short space of time,
but then from Crewe west is going to be quite an arduous journey.
For business purposes we really need to look for freight infrastructure
and this is a particular area where it is very difficult to interest
the operators of freight services to look at the relatively smallish
size of business which is going to be available in Wales. There
should be some incentives, possibly even some arm twisting, I
am not sure, to get the operators to look at putting these services
in. Without rail services we cannot compete in North Wales with
the rest of the UK which will have the benefit of the Channel
Tunnel Rail Link, for instance, and freightliner services, etcetera
down to the major ports for their exports. These are areas which
are of great concern and they will definitely have a knock-on
effect on the competitiveness of the region.
(Mr Spratling) If I could just touch on the property
angle for a moment. There is a severe lack of property available
and in the old days, and I do not mean they were necessarily good,
the WDA always had at least a shed to show somebody the potential.
I chair the Swansea Bay Partnership and last year we had a guy
from America who came over in his private jet with a view to looking
at inward investment in Wales. We went to the Agency and all they
could say was, "There is a swamp here, but do not worry about
it, in six months time we will put the piles down and we will
have a lovely factory." He said,"Thank you very much",
got in his plane and went to Scotland. He met with the Scottish
Development Board and, lo and behold, there is a shed available
and he can be in it in two and a half months. If we are to streamline
our property bank, and the agents here are aware of this, they
have to have property available to offer to potential inward investors
and not just a block of land and then say to them, "See you
later, mate. There will be something there in six months".
It does not work. We need something far better than that. All
we have got to show in West Wales, for example, is Velindre which
is a great heap of space with nothing on it and it just is not
the way to go about selling your area in my judgment. We have
had so many potential inward investors go elsewhere because there
is nothing really tangible for them to see. I think that needs
addressing in the future.
295. Privately or publicly?
(Mr Spratling) I hear a lot about PFI and I recognise
there is no money available to throw at this and yes, what is
wrong with a private scheme, government assistance? I have not
got a problem with that whatever way you do it, but not to do
it is not just attracting the right sort of people.
(Dr Haywood) There is another important angle on that
as well and that is that in very commercially viable areas of
Wales clearly the private sector is likely to want to become involved
in such deals. In the poorer areas of Wales, where the private
sector is unlikely to see a return on that property then they
are not going to want to be involved, which was the original reason
why the Agency became involved in the property market in the first
place. So again it is not a clear-cut answer and it has got to
be a mixture of public and private.
296. Finally, I cannot let pass the fact that
the ritualistic plug for the euro was injected into this conversation
in the face of what appears to be pretty heavy public opposition
to it. As the newest Member of this Committee, can I just put
it to you that whilst short-term concerns about the strength of
the pound are very important, is it not the case that if economic
and monetary union comes in, a great deal of control over the
economy as a whole will shift from here to the Continent and that
will make the efforts and deliberations of bodies like this Committee,
the Westminster Parliament and indeed even the new Welsh Assembly
(Dr Haywood) I should think we have probably all got
something to say on that. First of all, I would reiterate what
I said before, that to go in at the wrong level and with the economy
at the wrong stage would not do any of us any good at all. Secondly,
the euro is going to exist and as at 1st January next year, many
companies throughout the whole of Europe and some within Wales
will actually be working in accounting terms in the euro, so a
lot of companies in Wales, including the smaller ones who supply
those companies, are going to have to live with it and work with
it, so whether we are actual participants in the euro or not,
we need to be aware of it and make plans for it. Yes, there will
be a number of decisions which will be taken within EMU about
interest rates and about the economy through the Central Bank.
It is not entirely clear yet precisely what sort of an impact
that is going to have on the UK, but I think it is bound to have
one myself. Businesses, I think, generally speaking, and within
the CBI, as you well know, it has been well documented, have a
mixture of views, but the overall majority view within the CBI
is clearly that the principle of the euro is a good idea and that
if the conditions are right, we should go in. I do not think there
is any doubt about that. There is a vocal minority which is against
the euro per se and does not want to have anything to do
with it and I am not denying that. Generally speaking, within
Wales the majority of my members are certainly for the idea of
the euro and I do not think that that is necessarily particularly
surprising when you think of the sorts of companies that we have
actually based in Wales where (a) we have a lot of inward investors
from the rest of Europe, so they will be dealing in the euro in
any case, and (b) we have a lot of companies who are supplying
those companies or who are exporting to the rest of Europe and
they can see that it would be of benefit to them in terms of transparency,
in terms of actually setting up their pricing regime, as well
as the obvious ones such as exchange rates and not having to pay
for exchange transactions and so on, so there are a number of
issues there. However, I am quite sure that all three of my colleagues
would like to say something on this.
(Mr Jones) As from January, I think we will not have
any choice at all because when companies start dealing in the
euro currency, I think we are going to be sucked into it and I
think we have no choice and, as a person doing 60 per cent of
my business in Europe, we are all gearing ourselves to be ready
for that particular event. The level at which we go in is the
problem. I think at the present time we are out of synchronisation
with the level of the bank interest rate, inflation and unemployment
and that is a big situation. We find now that the bank rate is
increasing, whereas we thought it had peaked and it is now up
a quarter per cent in the last week and we are going further away
from the bank interest rate uniformity and I think that is really
the big problem that we do find with the Europeans, that we seem
to be out on a limb and out of sequence with inflation, unemployment
and the bank rate.
(Mr Spratling) I think we have got to recognise that
British interest rates are twice as high as the average on the
Continent and our inflation is twice as high as the average on
the Continent. If we stay with the pound, it is going to stay
high and every day you open the paper, "Because of the pound,
a, b and c", and, interestingly enough, recently we had a
CBI Council meeting and somebody stood up and I agreed with the
comment he made and that was simply that the pound is going to
stay high, euro or not, because even in covering the currency
with the euro, you pay quite a large fee to a bank to buy in the
currency and if anybody was going to stop the euro happening,
I think the banks would have a very serious part to play and yet
they earn a lot of money from covering the currency. The point
I am getting at is that I think we have to sow the culture that,
euro or no euro, British industry or Welsh, as we are talking
about Wales, has to realise that its competitiveness edge is not
enough and we have got to go back and look again. Now, whether
that means going into the euro or not, I do not care. What I am
trying to get across is the culture of looking at your competitiveness
and seeing whether you can become competitive enough to live in
the real world, euro or not.
(Mr O'Toole) I suppose there is always one rebel!
I have certain concerns about the Euro personally and corporately.
Corporately I feel that it will probably come. When? For most
people that is a matter of debate. My concerns arise from what
I see as the fudged convergence criteria. On the personal side,
and it is very hard at times to separate the corporate man from
the personal man, is the potential loss of sovereignty and not
being British born, as you will have probably gathered from my
name, my British passport is a very cherished thing for me and
I feel perhaps the loss of control over the nation state is not
what I particularly want in the UK.
Mr Lewis: This reflects very much a discussion
that I had with a number of businesses in my constituency at a
lunch put on by a bank and it was quite interesting to observe
that about two-thirds of them thought it was inevitable and about
only one-third of them wanted it to happen. I think we have to
differentiate between what we think is inevitable and what we
think ought to happen.
297. I am sure you would agree that the majority
of your members are self-interested, but they are responsible
business people who would regard it as the height of irresponsibility
to exclude the possibility of joining the Euro. Would you agree
with that proposition?
(Dr Haywood) Absolutely, yes. I certainly hope they
are all responsible!.
Mr Lewis: The Federation of Small Businesses,
of course, take a rather different view.
Chairman: I think we have elucidated that the
Government can take heart from the fact that CBI Wales supports
a wait and see policy.
298. I was very concerned by what Mr O'Toole
said about the implications of the gas moratorium for the North
Wales economy. It is a topical issue at the moment, as you know,
because of the incident in the Irish Sea involving BHP. It is
early days to speculate as to whether West Wales and the Valleys
will receive Objective 1 structural funds. If it does, do you
agree that those monies should be channelled in a systemic and
focused way to infrastructure being not only roads and rail but
also sites, skills and energy?
(Mr O'Toole) Yes, I do agree. It is really a case
of the total package which we have got to offer. The infrastructure,
the roads, rail and energy are obviously very very important,
I agree with that and skills are equally important, but I think
we have to be more focused on where we put our energies and where
we put our resources.
299. And to that extent we could learn from
other areas within the UK, not mentioning any names, which have
received Objective 1 funding and perhaps have not prepared the
ground in advance with a plan as to how this money is going to
(Mr O'Toole) If I can guess the area that you might
be referring to, of course the problem is that in North Wales
we are actually sandwiched between two such areas and that makes
life particularly difficult for us.
Mr Thomas: Thank you very much indeed, Mr O'Toole.
Chairman: Thank you all for coming today and
for answering the questions so helpfully.