Examination of Witnesses (Questions 200
- 219)
TUESDAY 16 JANUARY 2007
AMICUS
Q200 Mr Binley: Can I say I found
myself nodding more times than I thought I would when I walked
into this room. There is still an important element of industry
left in this country that we tend to forget. However, that industry
is suffering from a very much smaller skills pool because it is
deflated, it is a shrunken part of what it used to be. You have
already told us about the drift of potential workers away from
the sector, maybe because it is looking old-fashioned, and I accept
that. We know why people are turning their backs on manufacturing,
I have not heard a lot about how we can change that and get them
to re-look at manufacturing in a more positive way. Part of my
thinking is that has got to happen on the job together with the
unions. The manufacturing sector and the unions have got to market
the whole concept of what we are doing there in a much more positive
way than has been the case for 30 years. That is my own view,
I really want your view.
Mr Simpson: I think I am going
to get the Chairman saying what he said again.
Q201 Chairman: You can enhance the
answer you have already given, if you like.
Mr Simpson: People are not going
to be attracted at, let us say, junior level production-type levels
into manufacturing. Apart from its image, it is true what has
been said, people regard it as oily rags, a dirty environment,
early morning starts, grabbed lunchtimes, not really all that
great, and the rewards sometimes are not all that great. It is
not as if you are suddenly going to retire and you have got a
villa in Spain to go to and a nice lifestyle, it is not really
well paid so no wonder people are not attracted to it.
Q202 Mr Binley: You mean we have
not got a £63.1 million package to give them at the end,
is that what you are saying?
Mr Simpson: Possibly. They do
not do it for the trade union leaders, that is my beef. To argue
that is the case, I cannot think of a worse job—I probably
could but, generally speaking—than coal-mining and yet when
we had the coal-mining industry we never had any difficulty having
people working underground because people did it for economic
reasons. That is one of the factors that we have got a problem
with here, the economic factors suggest that it is not a good
place to be in manufacturing even with all the other shortcomings.
If we could attract them, if there was some confidence that manufacturing
had got a future, it would give an impetus to all those like your
good self and others like us who would be arguing to bring out
these better features because you are doing it to people who basically
will need to do that for economic reasons. If you can put the
right training in and career developments you can generate it.
If it is turned off, it goes the other way no matter what the
efforts are from those in it, it goes the other way, and you have
got to link it to some degree to procurement. If somebody working
in a British train building factory is faced with the prospect
of redundancy and knows that the British Government is going to
stand by and buy trains that we—
Q203 Chairman: We are going on to
procurement in a minute. We will revise that in a minute.
Mr Simpson: I was just cheering
you along.
Chairman: I am enjoying greatly what
you are saying but, sadly, we have got a bit of pressure of time.
We will move on quickly to marketing UKTI and then do public procurement
so you can talk about trains.
Q204 Mr Weir: In your submission
you state that the benefits of inward investment are clear and
the Government needs to give consideration to the social economic
and employment impacts of FDI. What do you mean by this?
Mr Simpson: My UKTI "specialist"
is about to step into the breach.
Mr Jeary: I think specialist is
probably a bit strong. What we mean by that is that obviously
inward investment where it creates jobs, where it introduces higher
skill technological innovation and enhances activity across manufacturing
has to be welcomed, there are clear advantages derived from that,
and there is evidence to show that, where there have been good
practices within inward investment, increased productivity has
also resulted from those practices, so there is much to welcome
it in the sense of inward investment. However, on the downside
of inward investment we have this picture whereby effectively
you are talking about marketing UK Plc. "UK" could be
dropped from the title because increasingly manufacturing is not
UK-owned. It might be UK-based in part but it is increasingly
foreign owned through the foreign investment processes and what
we have seen there are the downsides of inward investment where
you have people coming in, buying into existing companies, taking
over companies, merging with UK companies resulting in reductions
in workforces, in some extreme cases simply asset stripping exercises,
certainly factory closures and the impacts on local communities
which frankly end up with whole social communities being decimated
by losses of industries in this way. What we are saying is that
there are aspects of what the Government needs to do in terms
of dealing with particularly greenfield investment. I accept that
the Government has less influence over merger and acquisition
approaches, which is very much dealt with by the market, but where
there are inward investments and government incentives to introduce
foreign growth investment into the UK then we think that there
should be greater emphasis placed by Government on some of the
social requirements and that there should be laid down commitments
within the terms of certainly any government incentives that are
offered in these circumstances. One of those would clearly be
a commitment to ongoing training and investment in skills and
the commitment to raising skills levels. What we also want to
see is some commitment that the profits made by these inward investors,
a proportion of those profits, remain in the UK and are reinvested
into the operation. What we want to see also is that incoming
companies would continue to recognise existing agreements of a
collective nature with trade unions and we would also like to
see some restrictions on those companies, and I guess there is
less of them now than used to be the case, who come in, make promises,
do not deliver those promises, take public money and then leave.
We would want some stricter clawback of grants et cetera
which would ensure that did not happen. That is really what we
are referring to when we talk about the economic, social and employment
impacts of FDI, that we want to see governments having a stricter
control and maybe some aspect of more global agreements on industry
which ensure that they do honour the commitments which they always
promise when they are coming but often fail to deliver on.
Q205 Mr Weir: Can you give us your
view on some successful examples of companies who have invested
in the UK given the criteria that you have set out?
Mr Jeary: I think one of the most
obvious ones to turn to would be Nissan in Sunderland where there
has been tremendous investment in both a capital way but also
an investment in the people there. There also have been good close
working relationships with the trade union, with ourselves and
the development of that. There has been ongoing investment, the
work for new models being delivered to Nissan showing an ongoing
commitment by a company whose own investment and work with the
workforce—I think it is the highest productivity level in
the motor industry in Europe from that factory—goes to show
that where the effort is made by the employer in conjunction with
the trade unions working together to develop high skills, high
productivity manufacturing, then we can succeed and we can compete
with the rest of Europe and, indeed, globally as well. It shows
it can be done and that, I would suggest to you, is one of the
best examples where FDI has worked to the benefit of everyone.
Q206 Mr Weir: Given these concerns
that you have voiced, do you think that UKTI have got the balance
right between FDI and helping with the export market?
Mr Jeary: We are one of the highest
attracting economies of FDI at the moment and one wonders why
UKTI would need to spend an awful lot of time or an excessive
amount of time on its promotional efforts to attract yet more.
On the export side of things then I think, yes, we would like
to see greater support from UKTI, particularly probably for some
of the smaller and medium-sized employers that are interested
in export. I do think we have a problem here in the sense that
for a lot of UK companies the notion of exporting is something
which they shy away from rather than wanting to go down that route
and there needs to be greater encouragement from UKTI and its
agencies to assist in that process. I think the other issue we
have with their new five-year programme is this concentration
or certainly extra effort being developed for the financial services
sector. Whilst we have a great interest as a union in that sector
as well, it does rather smack of picking a winner.
Q207 Mr Wright: This is regarding
the UKTI proposals on specific sectors. I believe that your view
is quite clearly that they should not be focused on the City of
London but more on the manufacturing side. What sectors do you
think UKTI should focus its activities on?
Mr Jeary: Clearly it should be
looking at those areas where we are strongest in terms of current
manufacturing and there are areas both within the IT areas, within
the electronic areas, in the scientific areas as well, and also
there is the opportunity clearly as it comes on-stream to look
at some of the manufacturing areas as far as the green economy
is concerned. What we are really saying is that whilst the focus
on the financial sector in the city is clearly commendable, we
would not want to see that at the expense of the manufacturing
sector. That is what concerns us. As Derek has already said, it
appears on occasions that people have given up on manufacturing
and UKTI in their proposed plan over the next five years appears
to us to smack a little of that.
Q208 Mr Wright: Do you think they
have gone for the easy option, "we are the leaders",
rather than take on the change?
Mr Jeary: Yes, they cannot lose.
Well, I say they cannot lose, that is a dangerous phrase to use,
but certainly the finance sector, the financial services within
the UK, has shown itself to be leading in the field globally as
well as within the UK.
Q209 Mr Wright: You see them more
as an organisation actually taking on challenges rather than saying
"what we consider is the acceptable face is the City of London"?
Mr Jeary: There has got to be
a balance and I think that balance should be tipped in those areas
which need it most, I would not call the finance services in cities
needing it most.
Q210 Mr Wright: One of the ways forward
that you consider is that UKTI should provide a one-stop-shop
for services to exporters and obviously inward investors as well.
How do you see UKTI needing to change to offer that one-stop-shop?
Mr Jeary: It was touched on a
bit by Ian McCafferty and it is this link between regional and
central coordination. I think it could provide perhaps a great
coordination role in terms of providing information through the
regional structures, through RDAs and the other agencies that
exist within the regions. Certainly when it is going abroad, when
it is taking delegations abroad, currently they may decide EMDA,
the East Midlands Development Agency people on a trip somewhere,
and EMDA will represent itself as the constituency that exists.
I do not really think it is very helpful to see a factory that
may be ten miles outside the boundary of EMDA, which is not mentioned
in the prospectus, being ignored. I would imagine for potential
foreign investors or people looking at marketing opportunities
within the UK, they will not really understand that nicety, that
just because EMDA only represents within that border there may
be factories that are equally accessible but just outside that
border, and I think UKTI need to look at those sorts of issues,
particularly on overseas trips, to make sure that they are representative
of the UK.
Q211 Mr Wright: What you are saying
is that you basically agree with UKTI's views that when France
go international they go in as France or as Germany whereas we
would go as regions, there would be four or five there, and you
consider that UKTI should pull these strands together and be a
UK plc, so to speak, rather than UK eastern region or UK Midlands.
Mr Jeary: I am sure there are
examples where that would not be appropriate and there may be
specific areas of the UK which have a particular specialist interest.
Q212 Mr Wright: Oil and gas.
Mr Jeary: Yes, but in general
terms I think we would be saying that UKTI's role is to promote
UK plc and in doing that they need to draw attention to the differing
areas of the UK which can offer the opportunities for inward investors.
Q213 Mr Wright: Are there specific
roles carried out by Government at the present time that you consider
UKTI should be taking on board?
Mr Jeary: I do not think I can
answer that.
Chairman: We will move finally to public
procurement.
Q214 Mr Hoyle: Obviously Amicus has
clear doubts that there is open competition for public sector
contracts in Europe and, indeed, the wider world. It comes back
to how does the UK deal with public procurement and how could
we be more innovative in a way that will help UK plc because there
is definitely different playing fields being operated. Do you
know what the differences are and how they get around the rules?
Mr Simpson: I am afraid I do not
know how they get around the rules but they manage to do it and
nobody seems to be able to challenge. I do not think there is
the common goal all the way across to get to the bottom of it.
People who are on the losing end of that probably complain but
are not in a position to do much about it. I noted Ian McCafferty's
comments when you asked him about whether you should buy this
product or that product, his answer was the Government's role
is to get the best value for the best cost. I do not fundamentally
disagree with that, but what is often not taken into account when
you evaluate costs is not just the cost of the product, it is
the cost to the taxpayer if, as a result of buying some cheap
goods somewhere else, even if the quality is right, but very often
it is not, you end up with people unemployed in your own country
who have to be supported in some way on some sort of benefit.
It is the social costs of a product as well when you are talking
about government procurement. When I say quality is not right,
I do not know the detail, I do not carry the detail around in
my head, but I know, for example, one of the points we would make
is that there is one area where you certainly would expect and
are allowed to differentiate within the European rules and that
is on defence spending, military spending for obvious reasons.
It does not matter what it costs, you do it yourself to a point.
Q215 Mr Hoyle: Unless it is uniforms.
Mr Simpson: I was just going to
make the point that definition can be loosened so, for example,
a rather large order placed for uniforms outside the UK or placed
to—which is even worse—a UK supplier who then promptly
sub-contracts it outside. The net result of it, as I understand,
was that initial order had to be scrapped because the quality
could not match. I think that however they do it we do not push
the rules like they presumably push them. In fact, we are almost
very proper, if you like, the British with the stiff upper lip
approach, we do not do anything wrong but others seem to manage
it somehow. As I said, how do you end up in a situation where
you get so many industries pointing the finger saying, "How
is it that none of that ever gets done but ours gets done"?
I mentioned the trains. How is it that every French train is built
in France. You think a German train might compete but no, every
French train is a French built train. One or other has got to
be cheaper but none of them are in the other people's country.
You have got to say they are doing something. When we did the
steel, when we had the readaptation benefit scheme and the restructuring
in steel, I can tell you how they got round that. The Germans
were shutting mothballed plants and nobody was being made redundant;
we were shutting in active working plants and people were being
made redundant, so they went to the steel work and were made redundant
in Germany.
Q216 Mr Hoyle: It is interesting
because you have touched on trains and quite rightly you mentioned
the French, Italian and Germans. What can we do, given that the
train operating companies are private companies, to persuade them
that they should buy British anyway?
Mr Simpson: We have not got direct
control. Maybe you will forgive me for being somebody who believes
we ought to have a planned economy and that the Government have
a greater role and would be willing to re-nationalise the rail
industry, for example. Given that now we do not have direct control
the Government still has a very significant influence by the money
that is put into that industry and one wonders, given the rest
of the attitudes, whether in fact we do apply whatever pressure
we could apply even indirectly. I suspect we do now because I
think the tendency is the other way entirely.
Q217 Mr Hoyle: In reality you are
quite right, what you are saying is that money that is given to
rail companies to operate ought to have conditions in it about
rolling stock and procurement.
Mr Simpson: I think there could
be. I know it is a delicate subject and I know it gets people
really irate even in the CBI, Confederation of British Industry,
and they baulk at the idea of us insisting that their members
produce goods under government procurement because of the wider
concern that they do not want to be regulated, they want to be
unregulated and they are almost caught between two stools. They
would love to have the orders but they do not want it that way
because it goes against some basic ethics. I am sorry, I also
believe that charity begins at home. You are a UK Government,
you have got to think how can we run this country unless we do
something and one of the things we can do on procurement is try
and ensure that we underpin wherever possible the UK manufacturing
industry or UK jobs generally, and I do not suggest that is done
by tariffs because I do not think they work.
Q218 Chairman: Can I ask you a question,
we will come back to Lindsay in a second. The Wood Review was
quoted by the CBI in defence of their view that there was no problem.
Your document you gave us quotes the Wood Review extensively and
makes quite the opposite point and you have evidence in here drawn
from the Wood Review which supports Lindsay's view, so what do
we make of that?
Mr Simpson: You cannot see the
trees for the wood, I suppose!
Mr Jeary: I think the difference
is that what Wood said was that it was difficult to get evidence
of consistent breach of European Directive rules as far as procurement
was concerned. However, what Wood was able to get was a lot of
anecdotal evidence, some of which we quote in our own book there.
I think the other issue on this procurement and the reason for
the differences is that when you think about it companies that
are going into a procurement exercise and bidding for contracts
and believe they do not get them because unfair practices by that
government has given the work to their own workforce, are they
going to complain? If they are going to bid again and they have
a record of complaining against a national government, the view
that has been expressed by a number of employers is, "If
we complain, then we need not bother bidding ever again because
clearly that is going to work against us." I think Wood's
Report recognised that they can only ever get anecdotal evidence
of these practices and you will never get people to actually comment.
I remember the time the Chief Executive of Alstrom, when they
still made trains over here, recounted a trip to Germany where
the German Industrial Minister was present at a meeting, where
there were journalists present, where there were a lot of highflying
people present making the very point which Derek has made, and
Lindsay has also made, that there was no way that the German Government
would be buying any trains from anybody unless there are made
in Germany and yet those comments by a German Minister were never
reported in the press, were never leaked or never mentioned outside
that meeting. You can imagine if the reverse happened in the UK
and we, God forbid, had a minister saying we would only buy British,
what sort of headlines our media would give that.
Q219 Mr Hoyle: You are absolutely
right, it is important, and it is a point of view that UK manufacturing
makes and I think Derek touched on, it has still got the importance
it should have and Derek is quite right and spelt that out. You
go on to say in your evidence that there are two main factors
listed by us disadvantaging UK companies: cultural difficulties
and the de-centralised nature of many of the largest European
Member States. Are these factors to which UK companies should
adapt if they want to export their goods and services and do companies
make no effort to cope with cultural and constitutional differences?
Do they deserve to succeed because they really will not challenge
because of what is perceived as a real difficulty when it is not?
Mr Jeary: I can answer that in
part. If you look at the procurement processes in some European
countries, if I can use Germany, and I think Spain is another
good example, in Germany I understand there are 35,000 different
procurement agencies because they delegate procurement all the
way down the line and getting to grips with that sort of structure—this
is where we think UKTI maybe can help a bit more with the smaller
and medium-sized employers—probably in terms of cost would
be insurmountable in terms of making a bid for a process. There
are structures inbuilt in some of the other European States which
make procurement extremely difficult and we do need to have companies
that have succeeded in getting business there acting as mentors
for other companies to assist them in the process as well. Culturally,
I think, again, we have instances in parts of Europe where part
of the bid process or the bid requirement is that the bid should
be in the language of that area and that is one of the problems
that we have in UK business, not helped, of course, by government
policy on education and removing language training, as fundamental
part of education for youngsters. All these things are tied together,
it is about the whole process, but certainly in terms of cultural
differences, there is this cultural difference in Europe which
says "We have companies or we have sectors of industry that
we think are strategically important for this country and, therefore,
we will bear that in mind as part of the social cost when we are
taking into account procurement and the allocation of contracts".
We do not do that in the UK.
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