Examination of Witnesses (Questions 149-159)
UNIFI
10 FEBRUARY 2004
Q149 Chairman: We are very pleased to
welcome you this morning. As you are aware, we are looking at
the knowledge economy in the round, the knowledge-driven economy,
and obviously part of it is the impact of technology on work opportunities
and also the way in which globalisation is changing some of the
job opportunities of people in the UK and we are very grateful
that you were able to come along this morning. We are aware that
the financial services sector, in particular companies like HSBC,
Abbey and Axa, are either outsourcing or moving their operations
overseas. Could you maybe give us an impression as to the extent
to which this is happening in your specific sector? We will be
talking to other trade union colleagues throughout the morning,
but we know that you are specifically organising your members,
I would imagine, in the financial services sector.
Mr Sweeney: That is correct, Chairman,
yes.
Q150 Chairman: So perhaps you can start
by giving us a picture of where you see things at the moment and
where you think things are going to go in terms of whether you
have identified other jobs which are at risk at this time?
Mr Sweeney: Can I first of all
thank the Committee for the invitation to come along and give
evidence. My two colleagues next to me are, on my right, Rob O'Neill,
the National Secretary responsible for negotiation at HSBC and,
on my left, Liz Cairns, my research officer with particular responsibility
for the whole question of offshoring and outsourcing. If I may,
Chairman, what I would like to do in covering your point is really
to start out with the statement that there seems to be a misunderstanding
probably cultivated by a failure on a number of peoples' parts
not to actually look at the issue. The jobs in question that are
being offshored and outsourced are not simply low-paid jobs, but
a whole range of jobs, and I think that became very evident in
the DTI's Round Table discussion which we had back on the 2 February,
so it is not simply a question of the financial services, though
we can certainly speak for the financial services industry. We
cover what are really known as the "Big 12", so you
have mentioned a number, but Barclays, HSBC and Lloyds TSB either
all have plans or are currently implementing offshoring arrangements.
It is predominantly at the moment in our industry in the call
centres because that is getting the headline arrangements and
I think we sent some details to your Committee about the
numbers that are involved. This is full-time equivalents, but
we have currently about 4,000 jobs which have been offshored within
the three organisations of HSBC, Barclays and Lloyds TSB, so that
gives a sort of flavour of that, and there is a potential further
possibility of 5,500 jobs from those three institutions also going,
so that is the sort of magnitude. There is also the question that
there are jobs being outsourced internally as well and that is
an area that we have looked at in other remits. The jobs which
are open in financial services to be offshored, to be moved out
of the UK, are multiple. It is certainly the call centre jobs,
but if you take, for instance, the example of a city analyst,
why does a City analyst need to live in London or to commute into
London to do the City's work when information can be gleaned down
the line, so the jobs actually are capable of being moved around.
The question for ourselves, and certainly we have been asking
the opinion pretty forcefully of a number of major financial players,
is: why is there a dichotomy between certain institutions which
are saying, "No, we won't move jobs offshore", and certain
others who are saying quite simply, "Well, no we will"
on that side of it? It seems that the same business model that
applies to financial services institutions—so whether it
is HBOS, whether it is RBOS, whether it is HSBC, it is the same
model—but people seem to give different weights to the actual
factors which determine whether or not offshoring and outsourcing
takes place.
Q151 Chairman: Do you think that the
differing weights that are given at the moment might well align
themselves at a later point when the financial advantages of going
to low-cost labour markets become more apparent?
Mr Sweeney: I think we would not
be naive enough to assume that those institutions which have so
far stayed their hand would not look at the financial implications,
but there is also a sort of herd instinct and a lemming-like arrangement
in some of the financial services. I do not wish to question their
efficacy or the salaries, I will leave those for another day,
but realistically it is, "If you've got one, we have to do
the same thing", and we certainly detect that in certain
institutions. In other words, the profile of the company and what
they are doing offshore, if that institution has got one and they
are allegedly making the sort of savings on labour that they are
purporting to make, although I would stress to the Committee that
that requires a much more thorough investigation than some of
the headline figures we have seen, but there is that move. I think
also there is a business advantage to be gained in not offshoring.
Certainly if you take evidence, I would imagine, from some of
those institutions that have decided not to offshore, they see
a business advantage and a customer advantage in saying, "Well,
we're keeping the jobs within the UK and we're providing a greater
throughput through our corporate social responsibilities under
ethical arrangements". It is certainly the response you would
get from the CWS and the Co-op. We have been surprised, but certainly
pleased, that HBOS and RBOS, the Royal Bank of Scotland Group,
have agreed that they will not offshore, but there is a little
caveat, "at this time", so we are holding back just
a little to see where we are, so I would not want the Committee
to think we have come here this morning with a table of, "They're
good, they're not so good and they're really awful"; we are
not prepared to do that. We have looked at each case on its merits
and the crucial point I would go back to again is the business
model. When the business model is severely questioned and tested,
many of the groups that we have spoken to come up wanting in some
of the responses they have given and you have then to contrast
that with the responses you have received from that particular
institution with the response elsewhere and what is, to all intents
and purposes, the same business model.
Q152 Chairman: I do not think around
this Committee too many of us have too many illusions about the
philanthropy of financial institutions either in our individual
dealings as consumers or, for that matter, as politicians.
Mr Sweeney: Well, we do not at
all, Chairman, as you know.
Q153 Mr Berry: Could I pursue a point
you referred to a moment ago. In your submission you say that
the greatest threat posed by overseas outsourcing appears to be
directed at the call centre sector and you made the qualification,
"but by no means all", and you have talked about the
possibility of other jobs in the financial sector increasingly
being offshored. Could you say a little more about two things:
one, what hard evidence is there about other jobs in the financial
services sector being offshored or being lined up to be offshored,
and two, do you think this is a trend which will extend to other
sectors of the economy as well?
Mr Sweeney: The answer to the
second question is yes, I think it would extend. If you look at
the type of jobs that are capable of being, and some have actually
been, offshored, they are high-quality IT jobs and consultancy.
If you talk to some of the institutions that look at the provisions
for consultancy work, you will find that the demand for that work
has dropped dramatically. A lot of that work is actually now shipped
overseas primarily to English-speaking nations or second-language
English-speaking nations like India, so that sort of work has
gone over. We have noticed that ourselves in terms of the level
of IT jobs that are capable of being, and have actually been,
moved over. The reason for the concentration on the question of
call centres is that that is what has really hit the headlines
because that has been the bulk of the jobs and I think there are
probably two reasons for that, and one is the understandable concern
for the institutions where those jobs are centred. I well remember
some years ago in a previous incarnation at the DTI talking about
where the call centre jobs would go as there were areas which
had suffered industrialisation already, so there was a preponderance
in south Wales, in the north-east and in certain parts of the
west of Scotland, so the concentration has been on those jobs.
Equally, in the call centre arrangements, they are not poorly
paid jobs. Although those jobs have a gender issue, women are
the primary earners and they have been part of the community structures,
but if you ask me to take a glance at the second question outside,
what was interesting at the DTI Round Table discussions last week
was that there was a spurious question raised about air traffic
controllers, but you do not need to be in West Drayton to bring
an aircraft down and in actual fact there are opportunities to
get the information programmed anywhere. I think the important
point for the Committee, if I may say so, Chairman, is to grasp
that particular view, and it would be a misunderstanding,
I think, just simply to concentrate on financial services call
centres. There is the prospect elsewhere, and I think at the Davos
Summit one of the entrepreneurs who was talking about the nature
of work in the future said, that there is no job that is capable
of digitisation which would not be capable of being moved around.
If you look at the situation we find ourselves in with call centres
and looking at India for a moment, clearly if there is a rush
towards low-wage economies, then clearly if voice recognition
comes on to a greater extent, those jobs may well migrate to China,
so it is a continuous move.
Q154 Mr Berry: In your submission to
the Committee you say that your Union is not against globalisation
and indeed you support globalisation with a social dimension.
Since this inevitably means that in some areas jobs will be created
in the UK and in other areas jobs will be lost, how do you think
(a) the Government and (b) the unions should respond in terms
of helping workers who lose their jobs?
Mr Sweeney: I think I can certainly
deal with (b) first in terms of the unions because we have an
alliance certainly with my colleagues who will give evidence later
on, Amicus and the CWU, because we are probably the unions most
directly affected by it, but from a union perspective this is
not something new either. There was the de-industrialisation of
manufacturing jobs in the 1970s and 1980s, so in many ways this
is a cyclical thing that we are picking up. In terms of our response,
we have reached, I suppose, a groundbreaking understanding with
Barclays, not because they wanted to, but because we actually
forced the issue on them because we held up a spotlight as to
what their corporate social responsibility arrangements were.
We are in the middle of, I think, reaching an agreement with HSBC
again largely for the same arrangements, and my colleagues managed
to extract, following an industrial action ballot and the threat
of industrial action, an agreement with Lloyds TSB concerning
Newcastle, so our view is that agreements can be reached, but
those agreements have to call for a number of things. One is early
consultation because we want to examine the business model, and
we are as adept as any employer at understanding a business model
for finance. We do not operate just in one institution, but we
are all-pervasive in terms of the information we have. Secondly,
you have to look at, and you cannot ignore it, the skills agenda
and what is available. In both our Barclays and probably our HSBC
agreements we will extract and understand from employers that
there will be money earmarked for training and reskilling, and
that is quite unusual in terms of the way through. Now, we were
certainly pleased about that, but that is one of the issues from
a union point of view. From the Government's point of view, well,
I think this is the area. From a simple, naked, political point
of view, these issues cannot be ignored. They affect, putting
it at its baldest, voting patterns possible for MPs in the future,
and I do not mean that with any disrespect to yourselves, but
realpolitik will dictate that. The situation as to what is left
in terms of the communities that lose these jobs has to be looked
at and that is the whole question, I think, of the skills agenda
and upskilling. They are very trite words, if I may say so, but
they actually have a real meaning certainly for our people. We
have found that with the Learning Fund, when it put learner reps
on the ground to cater for areas that are losing jobs, there was
an immense take-up of people who wished to be upskilled and retrained.
We are fortunate in some ways that the sort of job moves which
are taking place at the moment are when the economy is buoyant
and when our industry, the finance industry, is in a process of
stability and some expansion. If this was back in the late 1990s
when we had lost 150,000 to 160,000 jobs in the finance industry,
the issue would be much sharper. We are still seeking to obtain
from every employer we deal with a guarantee of no compulsory
redundancies and whilst we have never gone as far to extract that
understanding from any of our employers yet, we have gone as near
as damn it as we think we can do in terms of being professional
negotiators.
Q155 Mr Berry: Is there anything else
that the Government should do, apart from the one example you
have given which is retraining?
Mr Sweeney: Well, that is a whole
agenda on its own because I would not denigrate it by saying just
retraining and it is the whole question of the skills agenda,
the marketability of skills. I do not think it is an accolade
to our part of the world to have the numeracy and literacy levels
that we have for school-leavers, so there is a whole area to be
looked at there. The Government, I think, also has to recognise
that there is a role here for the RDAs crucially about involving
them in it. There are a number of community responsibilities as
well. We have found that where we have been able to involve ourselves
in the initial debate and construction of what is going on in
the business decision, then we have had some significant influence
on that side of it. I think the Government can do much to set
that tone, that policy arrangement. I think it would be foolish
if the Government ran away from the argument, saying, "Oh,
this is further red tape regulation". For my sins, I served
for three years on the Better Regulation Task Force from 1997
through to three years later, though I cannot remember when it
was actually because it put so many years on my life, but realistically
the debate about red tape is not an area here. From the Government's
perspective, it cannot ignore the needs of its own citizenry.
I think the Secretary of State summed it up as not protectionism,
but protecting the people and I think we would go along with that
to some extent.
Q156 Linda Perham: Just looking at it
from the other point of view, how about the comparative advantages
that there would be for companies coming into the UK as opposed
to going to low-cost economies straightaway? Have you got any
views about that and how other countries could be persuaded to
invest here rather than what we are talking about of jobs from
here going out to other countries?
Mr Sweeney: Yes, I think it is
really raising the game. There is so much spoken about the relative
soft skills that certainly my people in finance have. They tend
to be associated a lot with women workers. They offer immense
quality for people coming in and you only have then to look back
and say, "Well, how many have actually sited their call centres
here because of the training and the skills?", and there
has been a very hot market in certain areas because of the qualities
of jobs and the qualities that people learn. The difficulty that
we find ourselves in is that if you are faced with a naked position
of lower labour costs, and you cut away all the arguments we have
heard in the business model, that is where most people race to
and you have to deal with that first. We have argued that at the
service level that is applicable here in this country in terms
of the quality of people certainly that we have, that in financial
services it is second to none, and that has been proven, I think,
by the number of people who have stayed here. I think one of the
very first call centres we ever established was First Direct,
and that is still around and it is sort of an exemplary service
arrangement. That then leads you to the argument, "Well,
what are the service levels likely to be like for those jobs that
are moved offshore?", and that is an area where the jury,
in my view, is still out. In terms of the situation within the
UK, the jury is very much in in terms of the qualities of the
jobs and peoples' abilities, et cetera. An example of that would
be the number of people who have switched between the skills developed
in financial services call centres and telecommunications and
there is quite a lot of throughput, so I think we have an enormous
advert for the quality of the skills of our people, but that is
not to be, I think, reticent at shouting that, but it is equally
not to be slow about trying to improve on those skills and the
level of skills that are available to us.
Q157 Linda Perham: Do you have any evidence
that other countries are bypassing the UK altogether and going
straight to places like India?
Mr Sweeney: We have certainly
got evidence that it is not just simply a UK problem. If you talk
to our German trade union counterparts, they have got problems
or not problems, but issues to deal with with regards to the countries
that are coming into the EU in May with obviously German as a
second language, the Czech Republic and Hungary, so it is not
simply a British complication and it is more a complication about
the globalisation, as the Chairman would say. I do not personally
have any hard evidence to answer that question. What we have done
with our international trade secretariats is tried to gauge the
movement of jobs across, across the whole range, but you simply
cannot then just deal with financial services and you have to
look at the whole question of services, textiles and manufacturing.
You then have to look back at the blueprints that we have had,
for instance, in shipbuilding, et cetera, and you then have to
balance that with the argument, or I remember certainly arguments
from American unions in the 1960s about jobs coming over to Merseyside
and Dagenham for Ford, so it is that sort of arrangement, and
I think employers can do much to encourage and put the argument
forcefully for their own workforce.
Q158 Sir Robert Smith: In your evidence
on the impact on the employees, you talk about anecdotal evidence
of the effects that the threat to outsource work overseas has
had on employees, paragraph 16, but I am just wondering if you
could expand some more on the actual impact offshoring has had
on the workforce.
Mr Sweeney: We can probably leave
you with a set of anecdotal quotes that we picked up from one
of our institutions, but if you just step outside of the argument
for a moment, if an employer constantly advertises on the television
and in the media about the efficacy and, "I will take your
money and I will lend you money and give you a mortgage. We are
solid and able and we want to sell you our products", and
at the same time they then severely question the range of skills
of their own people by putting jobs elsewhere, the anecdotal evidence
is that you automatically damage that trust relationship with
an employer and it would be a natural reaction. Certainly the
people I have spoken to on the ground who have been affected by
this, their initial reaction is one of, I suppose the word would
be, betrayal from that employer. We are trying to gauge that with
our own research as to how that knock-on effect would be and I
think we have quoted the Work Foundation and other organisations
who have done some work about that and about the impact it has
basically on the people who are left on the side of it and how
the employer has been viewed. Most employers in my industry all
want to be the employer of choice, which is another buzz phrase.
In other words, the people who come on to them would be those
who would want to work for this financial institution. Most financial
institutions, in fact all financial institutions, would die in
a ditch to argue about their ethical training arrangements because
they need to in terms of their view. My personal view is that
they are damaging their own corporate image by some of the decisions
and the quality of the decisions that they have made and I think
we have witnessed that with some of the problems we caused Lloyds
TSB over the situation in Newcastle and the north-east.
Q159 Sir Robert Smith: Just back to the
impact on the employees, does it have a different impact if the
operation is transferred to another UK location, or if in fact
it has been transferred offshore, does it increase the impact?
Mr O'Neill: We deal with restructuring
and reorganisation all the time, and job structures are changing
all the time. Quite regularly we will be talking to members who
are told that their jobs do not exist anymore and that is why
they are disappearing, because they do not exist anymore. When
you come to offshoring, employers are basically saying to people,
"Well, you've done a very good job. Your job still exists,
but we can get it done cheaper somewhere else and, therefore,
we are moving it", and that has a very different psychological
impact on people because they are trying to search for the justification
of why their job is not there. It has not disappeared, it is still
there, but it is being done somewhere else and it is being done
cheaper and that has a major impact on their morale and their
attitude to the organisation and of course other staff in the
organisation watch that, see that and they believe that the same
thing can happen to them and it has that impact on them as well.
In terms of whether moving offshore makes a difference, I suppose
it does really because when jobs are being moved within the UK,
there is the prospect that you can move with the job and we have
seen that. Going back eight or nine years when jobs were being
stripped out of the branch network, when back-office jobs were
being taken out of the branch network in the UK and moved into
centres, then people could theoretically go with the jobs as well,
but they cannot go with the jobs when they are going overseas,
so in that sense it does have an impact.
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