Examination of Witnesses (Questions 100
TUESDAY 12 DECEMBER 2006
Q100 Mr Clapham: We got some good
news in the announcement of the Chancellor on future spending
proposals. For example, he referred to the fact that we would
be likely to see a demonstration project for carbon capture and
storage. That is the kind of thing you would like to see. At the
same time, you see it perhaps as one area in which jobs will be
created but in a regional context, and therefore there is a need
to think about how the RDAs will play their part.
Mr Lent: Absolutely. Carbon capture
and storage is a very good example of where we think there are
British companies well placed to take advantage of that. The current
demand for power stations across the world is phenomenal, especially
given the growth of the Chinese and Indian economies. We are in
a good position to do that. That was good news but only to a certain
extent. Our view is that one carbon capture and storage demonstration
project is good, but we need far more than that seriously to develop
CCS in the UK. Geographically, the UK is incredibly well placed
to develop that technology, so this should be something of which
the government now takes advantage.
Q101 Mr Clapham: If the government
gives more encouragement for the replacement of old coal-fired
stations we may well see the new technologies being established
there, for example the use of super-critical boilers and carbon
Mr Lent: A company like Babcock,
for example, which has huge experience in this area, is already
taking some orders in China. But this technology, both clean coal
and CCS, needs to be developed further and that is where government
strategies can bring a huge advantage to the UK economy.
Q102 Mark Hunter: UKTI's "Business
UK" campaign talks about the UK having six main qualities,
including its stable business environment and the culture of creativity.
Do you think that the six qualities highlighted by UKTI adequately
represent the strengths of the UK economy as you see it, or are
there any glaring omissions from your perspective?
Mr Lent: I think that the six
qualities as they stand are good, and I certainly could not object
to anything there. We feel that probably two factors could be
added. One of them is industrial relations, which I have already
mentioned, and the very positive approach to partnership working
that unions and the best employers have within manufacturing.
The second one that is overlooked is the regional dimension. London
is given pride of place in these six qualities, but we have very
strong regions. Certainly, manufacturing in the North East is
an example of an area where there have been very significant success
stories with regard to overseas investment in manufacturing. That
should not be downplayed and we should not put all the focus on
London, important as that is.
Q103 Mark Hunter: And the North West?
Mr Lent: Yes. I give just one
Q104 Mark Hunter: Have you made representations
perhaps about having those factors included as part of this? Has
it been followed up?
Mr Page: We make the same point
as before. We have looked at it in that level of depth in order
to prepare our evidence, but it is certainly something that we
will take forward.
Ms O'Grady: We are actively involved
in the RDAs and, similarly, some are better performing and, frankly,
more imaginative than others. Sometimes what is called intervention
is all about having a bit of imagination and using the resources
that one has effectively. One way of describing it is industrial
relations, but it is about the UK workforce. I think we should
be proud of our workforce. People have shown themselves in manufacturing
to be incredibly productive and willing and interested in fair
change and flexibility. We should be talking it up, recognising
and giving credit to some of the efforts of real people in real
workplaces and what they contribute to the UK's image.
Mark Hunter: I certainly agree with you
on the latter point. I do not want to draw out the question into
another angle about RDAs; otherwise, we would be here all day.
My question was not specifically about RDAs, although I accept
that the regional dimension, which is not one and the same thing
to most of us, is hugely important. That is why I am keen that
you follow it through.
Q105 Mr Bone: Why is it important
to maintain "a UK manufacturing process in certain key areas"?
Mr Page: Do you mean certain key
industries rather than geographical areas?
Q106 Mr Bone: Yes.
Mr Page: In a sense, this is related
to the question why manufacturing is important. Manufacturing
is important for exports, research and development and the provision
of high quality skilled jobs in all kinds of different regions
of the UK. We believe that there are certain areas of manufacturing
where the UK is competitive now and can be competitive in the
next five, 10, 20 or 50 years. Those are the areas where there
ought to be a specific focus. As a trade union movement, we will
defend our members' jobs in manufacturing wherever they are, but
we recognise that with globalisation and the trend of low cost,
low skill and low value manufacturing migrating to cheaper economies
that will be a real struggle for us. Where will we be competitive
now and in the future? In the industrial strategy document that
we have produced we have focused on aerospace, defence and pharmaceuticals
where the best British companies can compete with the best companies
anywhere in the world. Looking forward and referring to the example
that my colleagues have given of green manufacturing where with
a bit of support and lead development we can compete with the
best in the world. We should do what we do best, and there are
certain sectors where we can do that.
Q107 Mr Bone: The argument you advance
is that we do things like defence very well and that is why we
should pursue that, and we should sell worldwide?
Mr Page: Yes.
Q108 Mr Bone: But it does not really
happen in the EU, does it? We talk about defence. Germany builds
roll on-roll off ferries; the RAF has its flying suits made in
Germany, but it does not go the other way, does it?
Mr Page: If you are asking me
whether we should have a level playing field, yes, we should.
We were very encouraged by the defence industrial strategy, for
example. That was an example of a government department, the Ministry
of Defence, saying to industry, "This is what we need now;
this is what we will need in the future. Plan your capacity accordingly."
That is a good example of government working with British industry
in order to develop the UK industry and allow it to plan its markets
in future. There is nothing illegal about it. There will still
be defence equipment bought from other countries by the Ministry
of Defence, but it gives our industry the best possible chance
to compete. That is what we would like to encourage. In the previous
evidence session someone mentioned the cultural point, namely
that the French tended to buy French and the Germans tended to
buy German. There is a cultural history here. We do not have a
tradition of the British buying British. We are not calling for
a "buy British" policy, but we are calling for British
companies to be given the best possible opportunity to compete,
and there are ways in which the government can do that.
Q109 Mr Bone: I believe that the
EU Commission has woken up to the fact that our European partners
protect their defence industries, for example. I believe that
very soon the Commission will produce a report to get the ball
rolling on this. Do you agree that what happens in this country
is that our government plays by the rules and has a very fair
open market but British companies do not have the same opportunity
when they go to other EU countries?
Mr Page: Yes.
Ms O'Grady: I think that it is
about rigidity. It seems to me that other EU Member States are
more creative in their approach. They help their companies to
be procurement-ready so that when they put in bids they are more
likely to win them, not because they are given special favours
but because they can perform and show they will create best value.
They also take into account issues like unemployment which I believe
is perfectly legitimate. If one has huge unemployment in one's
local area and here is an opportunity to provide quality jobs
for people that is a good and fair thing to do. What is more,
it is perfectly allowable under the EU directives. Why not use
Q110 Mr Bone: In the boot and shoe
industry in my area we have seen unemployment levels as high as
they were nine years ago. There has been a 17.6% rise in unemployment
in the past year. You are saying that, for example, RAF boots
should be made in my constituency in future not based on price
but taking into account unemployment?
Mr Page: We lobbied hard on the
way that the new European procurement directives were implemented
in the UK. There are specific clauses in the directive that allow
us to take into account in procuring social, economic and environmental
factors. In one example, known in legal circles as the Nord-Pas-de-Calais
case, a local unemployment problem was specifically taken into
account in the way a particular procurement decision was made
in France. That was found to be legal by the European Court. To
take your example, a procuring authority could say that it wants
a facility set up in your constituency and under one clause in
the contract it must bear in mind the needs of local unemployed
youth in the way that contract is put together. That would be
legal under European rules. You would need to get the lawyers
to look at it, but we could do it legally under the EU rules.
That is what other European countries have done creatively to
satisfy the needs of procurement but also their unemployment problems.
We are saying that we should try to learn a trick from that. It
is deliberately written into the directive. Let us use it in the
way others do.
Q111 Mr Bone: That is a very good
point, which leads on to my next question. There are examples
of Germany and France giving state aid to sectors. There is no
real evidence that that has produced much of a net gain for those
sectors, or am I wrong about that?
Mr Page: I think the manufacturing
employment performance in some of our major competitors is much
better than ours. We have done some number crunching of the latest
EUROSTAT figures which show manufacturing employment in some of
our major European competitors to be either stable or in some
places falling or increasing slightly. In Germany it increased
quite a lot; in the UK it has fallen quite a lot. We are one of
the few European countries that have practically no sectoral aid
at all. What the TUC has said is that a small proportion of government
support should be given sectorally as it is in France and Germany.
We are not talking about huge subsidies to industry. We like the
general emphasis on supporting skills and research and development
across the piece, but where there are specific industries with
specific needs trying to reconfigure in the face of global forces
which may need a bit of sectoral support in order to do that,
our government ought to develop an aid policy that is sympathetic
to those needs under tight conditions.
Q112 Mr Bone: Can you name one sector
in the UK where that might apply?
Mr Page: One can take as an example
an industry that wants to develop into green manufacturing but
is not producing in a way that is green at the moment. With a
bit of sectoral support it would have the capacity to do that.
That industry may not survive for 10 years if it does not do that
but it provides a number of high quality jobs and can continue
to do that with a bit of government support. That is the kind
of imaginative approach that we would like to see.
Q113 Judy Mallaber: On the question
of sustainable development, in your evidence you talk approvingly
of various other countries having gone hell for leather for some
green technology areas. Are you suggesting that foreign governments
have done better than the UK in using public procurement to promote
sustainable development? You mention the Low Carbon Vehicle Partnership
initiative. There is also a suggestion that we have not pushed
clean coal technology as hard as we might. Do you say that other
governments are doing more than us and, if so, what do we need
to do to use public procurement to promote green technology and
sustainable development? Are we not following up those initiatives?
Ms O'Grady: Clearly, Germany and
some of the Scandinavian countries were straight off the starting
blocks. We have been a little slower, but there is potential for
us to get in there. There is a range of measures, including clean
coal, that we need to deploy but we must also get the Emissions
Trading Scheme right. We still do not believe that it is right.
At the moment our government's approach I understand it is to
treat every energy source as equal, as it were, whereas if it
is accepted that we need a mixed energy economy, not least for
security of supply, and a balance between them we believe there
is a case for helping clean coal to get up there. We are not talking
just about technology but potentially production. More could be
done. We think that we have been slower than we should have been.
Q114 Chairman: We are talking here
about public procurement and energy and power stations are not
procured by the state but by private sector companies. I do not
quite understand the role of public procurement in this area.
Ms O'Grady: I give one practical
example. Today I received an email from a company looking at water
treatment technology. The cost benefit ratio over the longer term
is good and it will certainly reduce pollution, but in the short
term it will be a little more expensive. What is not clear I do
not know the answer yet, but I suspect there may be a problem
is the product specification and route for that company in respect
of procurement. I suspect that there are green products and services
like that where our procurement policy is not yet so clear that
it incentivises the development of those sorts of products and
Judy Mallaber: Take another example.
I do not know enough about it to understand how it would work.
I mentioned the Low Carbon Vehicle Partnership. In your evidence
you relate that to the amount of money that would go on transport
procurement and you suggest that that would enable initiatives
to support the supply of low carbon vehicles and fuels which should
help British industry, but I am not clear how those connections
are made and whether or not we are doing anything about it at
Q115 Chairman: Let me be practical
about this for a second and name names. I hope that I do not offend
Judy Mallaber by saying this. Junior ranking ministers have now
got Toyota Priuses because they are deemed to be a good thing
for the environment. Those cars are not made in the UK. A lot
of other UK motor vehicle manufacturers say that there are big
issues about recycling Toyota Priuses and what you do with their
batteries. They are not as fuel efficient as other conventional
cars. Other UK-based car manufacturers there is no such thing
as a UK-owned car manufacturer say that they are doing carbon
offset programmes and their cars are more environmentally friendly
than Toyota Priuses, yet the government has bought those cars
to appear environmentally friendly. For me, that is a hard-edged
Mr Page: Perhaps I may name names
as well. I take the example of Eminox. I borrowed it from the
Manufacturing Forum which we have not mentioned today but is another
social partnership body on which the TUC and employers sit to
take forward manufacturing. Eminox has developed a stainless steel
exhaust system that uses the best emission-reducing technology.
London Buses has started to buy that technology to reduce pollution
through LT procurement. This technology has been developed and
is being sold wider than London Buses. Here is an example of a
British company building an environmentally friendly product developed
through procurement. That has now strengthened the company and
it can sell that product elsewhere. That is the kind of solution
that we want to see happen more and more.
Mr Lent: To go beyond specific
examples and talk about broader strategic approaches to this,
we are in an area of industrial development that is still quite
new. What many of the companies working in this area need is stability
and a degree of certainty so they can start to do the blue skies
R&D that sometimes needs to be done to develop future markets.
That is where government procurement can play a role. It comes
down to a question of planning. Major private sector companies
do this all the time. They nurture and work with their supply
chains and tell them their future needs so that those companies
can start to develop with a reasonable certainty that they will
be able to make some profit out of that and then expand into other
markets. All we are asking government procurement to do is replicate
that good practice and nurture some of the best green enterprise
in Britain so it can start developing into global markets in the
Q116 Mrs Curtis-Thomas: Has the TUC
itself set an energy reduction target that is to be achieved?
Ms O'Grady: Do you mean for our
own car fleet of three?
Q117 Mrs Curtis-Thomas: It goes to
the point that you argue for sustainability. Have you introduced
it at home? If I looked at your energy consumption last year and
this year would it show a reduction?
Ms O'Grady: As you would expect,
we are developing an agreement and audit with our staff side trade
unions which covers the full range of activities from the examination
of our extensive car fleet to recycling and so on. We also have
our "Greening the Workplace" initiative which uses what
we believe is at least as important as leading by example; namely,
our collective bargaining power. We are developing a whole range
of initiatives concerned with green issues in different workplaces
that we have piloted.
Q118 Judy Mallaber: Going back to
the use of social clauses and other mechanisms to benefit UK manufacturers,
you gave some examples, but how far can we go? If there is an
area which would not necessarily be regarded as having a high
level of unemployment and unemployment has reduced is it legitimate
to use those clauses to benefit local people, and, if so, how
do you do it? Is that just us cheating and not playing by the
Ms O'Grady: When we first started
to work on this we hit blank walls and found what we could not
do. We wanted to shift the debate into what we could do. Recital
33 is very clear in terms of vocational training, unemployment
and broader labour standards which we believe we can show lead
to better performing workplaces. It is not about charity. In many
ways the expression "social clause" is unfortunate because
it makes it sound as though one is doing good, whereas we regard
it as an essential part of being a decent, high-performing business.
Q119 Judy Mallaber: Does that lead
to UK manufacturers getting the contracts? Cannot foreign manufacturers
say that they are assisting the poor and dispossessed in our areas?
Ms O'Grady: Of course they can.