Select Committee on Trade and Industry Minutes of Evidence


Examination of Witnesses (Questions 120 - 132)

TUESDAY 12 DECEMBER 2006

TUC

  Q120  Judy Mallaber: Why do you think that will benefit our manufacturers?

  Ms O'Grady: The experience of other EU Member States has been that where the parent companies are nationally based they tend to know the local area better and what the concerns are and take an active interest in what will be the procurement needs of the government or local authority in five or 10 years' time. These are models that have already been put out by Transport for London and are principles agreed by the, Olympic Delivery Authority, and so on. This is to do with having a bit of imagination and commitment.

  Q121  Judy Mallaber: I return to the questions asked earlier by Mr Bone in relation to other EU Member States and state aid rules and whether or not we are being fair to our own industries. Whenever companies grumble that they have not got contracts and other companies have benefited from the actions of their own governments one asks for the evidence because one cannot really argue that there has been anti-competitive behaviour without the evidence. What evidence do you have that they are interpreting the rules differently from the way we interpret them? You also referred to looking at it creatively. I can give one example where it is known that they could have used arguments to do with raw material. You have talked about the Cooneen Watts & Stone example. I am sorry that Mr Hoyle is not here now but I know that he took part in an Adjournment Debate on the matter. We know that that was a particular area where a very rigid view was taken in this country. How much evidence do you have that other European countries use the state aid rules in a very different way from the UK?

  Mr Page: The Wood review set out the conclusions on this and found that the breaking of procurement rules happened very rarely, but it talked about grey areas to do with history and culture.

  Q122  Judy Mallaber: The problem is that it is very vague and it is not sufficiently pinned down for us to be able to say that it is unfair and we have been robbed. That makes it quite hard for us to be able to argue the case or take it up under the EU rules.

  Ms O'Grady: Frankly, I do not want to stop the French doing what they are doing; I want our government to be as committed to developing quality jobs and opportunities here. This is not just a case of ownership; it is a case of decent standards.

  Q123  Judy Mallaber: That is very vague and does not help me in terms of exactly what the government should do other than say that it would like to give a contract to so and so. What are the grounds on which it can do it? We have just had a reference to cultural factors.

  Ms O'Grady: I would be very happy to share the practical principles and protocols out there. Many local authorities have been more forward-looking than central government. Transport for London, the Olympics and their approach are all very positive. It is about making commitments to apprenticeships and vocational training within contracts, for example.

  Chairman: If you have some hard-edged, practical examples it would be good to have them. You quote the Olympics in your evidence to us.

  Q124  Mr Binley: The whole OJEC notice scenario is, I believe, totally open to corruption. I wonder whether you are making any overtures about that particular process. I think that the whole tendering process under OJEC very often favours specific companies of a particular size. It is not very user-friendly for those who do not have permanent experts employed in the business of tendering. That is my concern about the whole European approach to procurement. Do you share that concern?

  Mr Page: The general point is that procurement ought to be less bureaucratic, more streamlined and done in a way that allows a wider range of companies to apply. If you imply that the OJEC rules prevent that then we certainly would have no objection to making such a proposal.

  Chairman: To be clear, we are talking about the Official Journal?

  Q125  Mr Binley: Yes. My concern is that they are made specifically to be exploited in particular areas by certain countries. I do not see a level playing field there, although it purports to be one. Do you have any experience of that?

  Mr Page: We do not have any experience of that specific issue. There is the "warlike" point that we make in our written submission. There are specific procurements that fall under the category of "warlike procurements" and do not need to be open to tender for reasons of national security. Given the very few number of military procurements that appear in the Official Journal, it suggests that companies give military procurements to their own defence companies.

  Mr Binley: I am delighted to say that most companies that I come into contact with do not make weapons.

  Q126  Chairman: Mr Page, are you suggesting that, for example, the procurement of boots is being treated as a warlike procurement by other Member States?

  Mr Page: That was the point we made in the context of the Cooneen Watts & Stone procurement, which was the example to which Judy Mallaber referred.

  Q127  Judy Mallaber: In that case the Ministry of Defence wanted it as cheaply as possible so it would not necessarily have been interested in that question. There are different arguments used by different government departments, which is one of the difficulties.

  Ms O'Grady: It is cheaper but, frankly, without any international labour standards being respected, which is disappointing.

  Mr Page: It is cheaper and also leads to the loss of jobs in Lancashire. That gives rise to costs in terms of unemployment and social cohesion.

  Q128  Judy Mallaber: How far is the difficulty about public procurement and following the rules to do with the fact that it is hard to have one overarching policy if different government departments and also local government want to do their own procurement to meet their budgets?

  Ms O'Grady: What they can have in common are certain principles. Frankly, the biggest problem for businesses of all sizes is consistency between departments and having to go through the same hoops again and again, even though they have already provided information for one contract that can be stored if there is proper coordination between and within departments, and better trained procurement managers. Unfortunately, some employer organisations will just describe it as red tape. We share the concern about the need to simplify, but that can be done without diluting standards. One can simplify and also take into account some of the key issues, for example labour standards that we have been discussing and vocational training and equality.

  Q129  Judy Mallaber: What discussions have you had with government ministers about how they can implement the Warwick commitment to UK manufacturing when it comes to procurement?

  Ms O'Grady: We have had lots of discussions.

  Q130  Judy Mallaber: Has it resulted in a change in the rules and how the structures determine the giving of contracts?

  Mr Page: One body through which we are pursuing this is the Manufacturing Forum which has a whole sub-group looking at procurement and how it can take forward some of these issues in that forum. There was a line in the National Policy Forum report, agreed at Warwick which said, "Labour will be proactive to ensure manufacturing does not lose critical mass and disappear." Given the current trend of manufacturing jobs which has been steadily downwards and is likely to go below three million for the first time next year, the question is: at what stage will we lose critical mass? How do we protect the critical mass? The TUC's suggestion as part of the solution is to focus on the areas where we can have manufacturing strengths going forward. That was the point I made earlier when I referred to aerospace, defence, pharmaceuticals and green manufacturing. We will not hold on to all of it but we can hold on to a lot of it if we focus on our areas of strength. In a sense, that is one of the key lines of Warwick. We probably ought to be talking more about ensuring that we protect our critical mass in manufacturing. We would be very interested to pursue that with you and every other forum through which we can possibly raise these issues.

  Q131  Mrs Curtis-Thomas: I do not think that there is a shortage of opportunity for the government to enforce contracts. There is no legal restriction placed on it. We have two specific problems. One is that we do not write into heads of contract major requirements with respect to the employment of people in a particular area, although we have the right to do so. The other is that when we do that we do not enforce the contract and we do not work with employers who want to help us enforce that contract. Is that your experience?

  Mr Page: There is nothing that you have said with which I would disagree.

  Mrs Curtis-Thomas: I make that point because there is nothing in the UK to preclude us copying what happens on the continent except our willingness to enforce that requirement and negotiate it with the company.

  Judy Mallaber: The reason I asked about the government structure is that there are different issues of budgetary constraints in different departments, local authorities and so on where they want to maintain the ability to sort out their own procurement.

  Q132  Chairman: You made one practical point which we also heard from industry as well. You believe that the quality of some of those doing the procurement in different parts of the government needs to be addressed?

  Ms O'Grady: I do. In particular because in many cases we have longer contracts there is a real opportunity to develop a relationship for improvement over the medium term. I think that we are missing that one.

  Chairman: That is very useful. We are beginning to have a rather interesting conversation, but perhaps we ought to call a halt now. We are grateful to you for your evidence which in many respects has been illuminating and really useful. Thank you very much indeed.






 
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