Examination of Witnesses (Questions 100
TUESDAY 11 JULY 2006
Q100 Mr Mudie: The TUC seem to be
calling for government help to offset the difficult effects. Community
development funds, earnings insurance schemes and the globalisation
adjustment fund, could you just tell the Committee about those?
Certainly, the first two are things you have suggested; the others
Mr Exell: Yes. The earnings insurance
scheme is more in the nature of an interesting idea that we would
like to look into further rather than a well-developed plan, but
certainly the globalisation development fund is one that we have
welcomed, as has the European TUC. The difficulty is that the
level it is set at at the moment, 500 million, I think works
out at about 1 a year per head of population in the European
Union. It is not a fantastically generous level, so we would like
to see the UK Government investing more in it. An example of the
sort of approach that we would like to see came up recently in
Denmark. Denmark has a textiles industry which has come under
the same sorts of pressures as we have had. We have lost tens
of thousands of textile jobs in this country. The Danish response
to it was really interesting. There the employers, the unions
and the municipal, regional and national governments all got together
on a plan to cope with the competitive pressures, so instead of
just closing down the company, they had a plan for upgrading the
skills of workers who were going to go lose their jobs, of moving
to more value-added production for the company itself though with
fewer workers, and with public subsidies to enable the company
to upgrade and for the workers who are going to lose their jobs
to upgrade their skills. The end result of all of that was, instead
of global competition being a threat to all the workers concerned,
that everyone ended up with a better job than they had had before.
For that, you need the sort of institutional strength that Denmark
has got including, in particular, well-developed traditions of
social partnership, collective bargaining and trades unionism.
Q101 Ms Keeble: This might be practical
for the Amicus rep to answer this. When we went to India recently,
we saw some examples of outsourcing some of the functions of the
financial services industry. I wondered how concerned your union
would be about what might be seen to be a "race to the bottom"
in terms of labour standards for companies that outsource in developing
Mr Dubbins: I think we are obviously
very concerned about the way it is being done at the moment for
a number of reasons. We have witnessed thousands and thousands
of jobs of our members being transferred, particularly to India
as you mentioned there. While we would understand part of globalisation,
redistribution of wealth and economic growth are going to entail
some of that, what we are particularly concerned about are a couple
of factors. One is the fact that sometimes the savings that the
companies envisage have apparently not always come through, and
we sometimes see the repatriation of those jobs; the other issue
is the loss of skills that go with that as well. More importantly
we have managed to get globalisation agreements with a couple
of companies, such as Axa, Lloyds and Barclays, that have engaged
in those activities. Those have tended to deal with re-training
though and no compulsory redundancies and so on, so it is the
issues at this end. What we are much more focused on now is trying
to get a commitment from those companies that they will respect
trade union rights, the rights to organise and the right to bargain
collectively in those countries because if there is going to be
a transfer of work, what we need to make sure is that the people
taking up those jobs are at least entitled to have proper working
conditions and healthy and safe environments.
Q102 Ms Keeble: That work in getting
the international level playing field is very important, but would
you accept that, first, it can mean then in some instances, because
they cannot frankly provide cheaper labour rates, that undermines
the ability of developing countries to attract jobs and, secondly,
it can also lead then to jobs being outsourced to countries and
by companies which are prepared to support decent labour standards
and, therefore, you get a much more dramatic erosion of workers'
rights and protection?
Mr Dubbins: I do not think we
are na?ve enough to think that we will have equality of wages
in the short run or anything like that in those countries.
Q103 Ms Keeble: No, it is protection.
Mr Dubbins: Yes, it is much more
about making sure that those basic ILO standards and trade union
rights and so on are adhered to and respected. That is very much
the case in a number of developing countries where there are obviously
not those safeguards in place and where unions are not fully developed.
It is also the case in other countries, such as the United States,
where basic labour standards are also not observed or respected.
Q104 Ms Keeble: I was going to ask
you about that because would you not accept that one of the reasons
why the UK has been quite successful in competing in the globalised
world is that we have had more flexible labour markets? How do
you regard the balance between protecting some traditional practices
and ensuring we can be competitive? Where do you think the balance
should be struck in the interest of securing our long-term economic
Mr Dubbins: I think you need to
be careful with the argument and be sensible in that respect in
competing globally and so on. I think in manufacturing, coming
back to that debate that was being discussed earlier, we have
not been very successful in investing long-term and protecting
our position there, whereas countries with much more regulated
labour markets, such as Germany or the Nordic countries, have
had a far slower erosion and, as Martin Wolf was saying, they
have been very successful in attracting long-term investment.
I think there tends to be a rather na-£ve assumption sometimes,
and it is very much based on the dominant neo-liberal agenda at
the moment that flexiblisation, deregulating labour markets and
making labour very vulnerable is the way to maintain competitive
advantages, and I do not think that is borne out in reality.
Q105 Ms Keeble: When I say "successful",
I mean we have got 71% employment in the UK. We are the only EU
country which is above the Lisbon target, I think I am right in
saying. It is about how do you strike a balance between being
able to compete and ensuring that you respect standards in a globalised
Mr Dubbins: I think, again, with
those figures you also need to take into account things such as
fixed-term contracts and part-time work which in the UK are far
higher than in other countries and the protections in comparison
with European countries have not been there. I think we obviously
need to have the basic ILO standards, the real minimums that need
to be applied everywhere which are a healthy and safe working
environment, the right to form unions and the right to bargain
collectively and see how things develop on that basis. I think
the other side of it that is missing is very much often seen that
the labour market regulation is negative, something which is a
barrier to further employment and yet, historically, that has
not really been shown to be the case. Highly regulated markets,
like Austria and the Nordic countries, have had very low unemployment.
Social partnership involvement in the long-term planning of the
economy has produced a lot of good and a lot of benefit, but it
is often forgotten at the moment.
Mr Exell: It is important to remember
the assumption that Britain leads Europe on dealing with the globalised
world is mistaken. We lead Europe on imports per head of population,
we account for a sixth of EU imports, but we only account for
an eighth of EU exports. We do well to match German standards
of export performance.
Q106 Mr Love: Can I take us back
to a couple of questions ago. I have been reading Joseph Stiglitz's
book on globalisation and his basic pitch is if we are to maintain
political support for globalisationand there has to be
redistribution from those who are benefiting from globalisation
to those who do not benefita number of options have been
put forward: Tobin tax, a lot of people think is unrealisable,
if I can put it that way, at a European level. I think George
mentioned the globalisation adjustment fund, but that is pretty
small beer. When Richard talked about the situation in Denmark,
he talked about the institutional strength of the Nordic companies,
accepting that in this country we do not have a tradition of institutional
strength. What do each of you think are the best practical ways
in which we can redistribute from the benefits of globalisation
to ensure we keep the political support for it in this country?
Let us start with you, Richard, since you want to talk about institutional
strengths and weaknesses.
Mr Exell: One of the reasons that
we are interested in the idea of re-adjustment insurance is it
would be a way for companies that benefit from globalisation to
compensate those of their employees who lose out. It is an idea
that has been developed by some American economists and for about
4 or 5% of the gains to a company from globalisation it could
invest in insurance for each of its workers to be invested in
re-training as their skills become in need of updating or upgrading.
One of the advantages of this is that when someone gets a new
job, they then have a pot that they can take on to their next
employer. Certainly, we would see companies which gain from global
trade as being one of the vehicles which should be paying towards
the cost of adjustment, but all of us gain from it to some extent.
When you see steam irons for a fiver in Tesco, that is the rest
of us gaining to some extent. The old idea which has always underlain
the welfare state of society's duty to pay to help people who
face redundancy is still relevant here. At the moment our welfare
state and, in particular, our social security benefits are at
such a low level that it is not providing anything that could
be seen as a fair compensation for people who lose out.
Mr Dubbins: On the structural
fund, again I would echo what Richard said. I think it is a welcome
development that and I really think long-term, even broader than
Europe, there is room to have some sort of fund like that to make
sure the losers are also compensated and there is some re-distribution
there. I think again that fits very much into that broader agendaMake
Poverty History, the whole aid-trade debt debatebut the
reality is we have got a lack of adequate infrastructure at the
global level which is aimed at redistributing wealth and making
sure that we are combating poverty and tackling the adverse effects
of globalisation. I was interested to hear Martin Wolf again saying
that something like the Tobin tax or at least a tax on finance
and speculation is not something which is impossible. I am not
sure we have really explored to the fullest extent we can the
possibility of moving in that direction. I am not sure if you
are aware as well that the ILO recently produced a report, A
Social Dimension to Globalisation, and I think there are a
number of issues in there that would be useful to look at as ideas
we can take forward about trying to make sure there is a more
Q107 Mr Love: Anything to add, Nick?
Do not repeat the same.
Mr Clark: No, I certainly will
not. We need also not get seduced by the idea that the sole beneficiaries
are corporations. There is an awful lot of very wealthy individuals
who have made their money out of global trade and I think we need
to look at levels of income tax, personal income taxation as a
realistic definitive. We also need to be clear that the benefits,
such as they are, even in developing countries, are very unevenly
spread. If you look at somewhere like Bangalore, where a lot of
the IT industries are based and where a lot of call centres are
based, just down the road in that state farmers are so crippled
with debt because of global commodity markets, they are committing
suicide at record rates. I think we have to talk not just about
the damage done by global trade under the current circumstances
to people in this country but also to people in the developing
world as well.
Q108 Mr Love: Martin Wolf poured,
in my view, some cold water on the levy which, as I would I understand
it, is a policy of each of you sitting there. If I am reading
between the lines, he suggested that since it is likely in the
future people will have to change jobs on a regular basis and
re-skill regularly, it may not be quite appropriate for the employer
to take on as much responsibility as the levy would suggest. I
wonder what your response to that would be and how you think we
can ensure that the levels of skills training is carried out in
order to respond to the changes that globalisation is producing.
Richard, perhaps you could comment?
Mr Exell: One very brief point
on the levy is that employers' opposition is, to a large extent,
misguided from the point of view of their own self-interests.
If you look at America's advantage in terms of global competitiveness,
there is a strong body of evidence to suggest that where America
does well in skills utilisation is in the specifics of linking
individual skills to the company context. Now, you can only do
that when a large and important bit of the training is being done
by the company itself. That gives the company the opportunity
to make sure that its workers' skills are relevant to the way
in which the company is developing. A levy, by focusing companies'
minds on how best to make use of training that they have got to
pay for, would be a tremendous opportunity for getting British
industry to develop some of that sort of advantage that American
companies have got at the moment.
Q109 Mr Love: Can I shift us on to
manufacturing. Again, Martin Wolf seemed to be suggesting that
mass manufacturing, looking specifically at the motor car industry,
may well have reached its zenith in future investment by the major
automotive companies which shift, he suggested, mainly to Eastern
Europe. Perhaps I will start with Amicus because I know you have
major interests in the car industry. What is your view about what
the future holds for the motor industry and for mass manufacturing,
and how we can ensure that Britain remains in that particular
Mr Dubbins: We just produced a
document which we lobbied MPs with as well about the graveyard
of the UK motor industry and the closures that have been going
on in recent years, such as Jaguar and Peugeot now more recently,
General Motors is in problems in Ellesmere Port. The total output,
as I understand it, of numbers employed has remained fairly constant
there, but what we have certainly seen with Peugeot, for example,
is relocation towards the East. There seems to be more and more
incentive to do that on the basis though of increasing profit
levels. The plant at Ryton, for example, as I understand it, makes
millions of profit per year. The incentive to relocate to Eastern
Europe is going to push that profit margin even further. If that
is the case, it is not really boding particularly well for the
future if the incentive will be to relocate to maximise profits.
The other side of that, the aerospace industry, for example
Q110 Mr Love: Before you go on to
that, let me ask, what do you say to the argument that a lot of
people use that the production of a car in Eastern Europe will
be mainly to satisfy the new emerging market that will develop
in Eastern Europe for car purchase and that, overall, Britain
will not lose out because we are expanding the marketplace for
those cars even though we are moving production to Eastern Europe?
Mr Dubbins: I am not really sure
that is the case. Certainly, we had a conference a couple of months
ago with the European Metal Workers Federation, and the indication
we are getting from a lot of the companies is that there
will be further rationalisation of their production centres, some
of them are talking about having perhaps one or two major production
centres on each continent. Okay, there might be an extent to which
they can satisfy a growing demand in those countries, but certainly
I think if the production is concentrating, as was indicated earlier,
it is likely to be shifting towards those low-wage countries where
the returns on that are going to be much more. The question the
companies and the broader society have got to keep asking is:
"If you shift production away, to then feed that back into
developed markets, who is going to have the money to keep buying
those products if we are moving towards service-sector jobs which
are considerably lower paid?"
Q111 Mr Love: How do we stall that
process without cancelling the benefits of globalisation, Richard?
Mr Exell: The answer has got to
be in making sure that Britain is in a position to move up the
value chain. At the moment we have got a tendency to concentrate
on low-value added, low-skills input, cutting down on the costs
of inputs including labour as a competitive model, that is the
labour element of success. We need to upgrade to a high-road approach,
high investment, high wages, high skills plus compensating the
individuals who lose out as we change the mix of production that
we have got in this country. That is a very short version of a
Q112 Mr Newmark: I just have a brief
question for Simon because it seems that the argument you are
giving is the main motive for a company shifting from, let us
say, the UK to Eastern Europe is a profit motive. I am trying
to understand what is wrong, from your perspective, with a profit
motive other than your particular angle where you clearly see
job losses here. From the manufacturer's standpoint, if the quality
of the goods being produced is just as good here, but they can
produce it in an economy which has a lower wage structure, I am
curious as to why the company is at fault for making that rational,
Mr Dubbins: I think it pretty
much depends on whether you think the companies have got some
sort of broader social responsibility as well, or if they exist
simply to maximise their profits and that is the end of the story.
The reality I would argue there is okay, they are moving production
to increase profits from £10 to £20 million out of a
particular plant, and yet the social responsibility, the taxes
that would help retrain them and so on are no longer in the place
where they are leaving the workforce unemployed there. We have
seen also the situation with JaguarI think it is in the
TUC reportmost of the people who have found work again
have found it with considerably lower wage rates. We have got
to ask ourselves is globalisation here to serve the companies
Q113 Mr Newmark: To serve the consumer,
the consumer wants cheaper and cheaper goods.
Mr Dubbins: As I was making the
point a moment ago, if we keep moving production in that way,
we will have nobody left on wages to be able buy those sorts of
Mr Newmark: People shift to the service
sector from manufacturing which is what has been going on in this
Chairman: An ideological rift here.
Q114 Mr Gauke: May I ask Mr Clark
about the issue of outsourcing the public sector, and I know you
were present for the first hearing we had, but I will make the
same point again. We saw some very impressive companies in India
which were doing lot of work with private sector companies in
the UK: reducing costs for those companies, improving, therefore,
shareholder returns and reducing costs for consumers. Why can
the same principle not be applied to the public sector?
Mr Clark: The interesting distinction
between government and private companies is that private companies
do not have to ask anyone about what they are doing or to be accountable
to anyone but their shareholders. I think if you ask most consumers
about where they wanted their call centres, they would pretty
soon say, "We do not want them in India", for a variety
of reasons, one of them being is they think it is less to do with
the service to them. Anyone who has spent 20 minutes on the line
listening to a recorded message would say the same, they do not
think that the way call centres are being set up has their interests
at heart, but, of course, the boards of directors, as long as
everyone else is doing the same, are immune from public opinion
whereas a government is not.
Q115 Mr Gauke: I would argue to the
contrary, that companies have to be accountable to their customers
because if customers do not like it, they will go elsewhere. There
is a bank that runs its marketing campaign on that point, so there
are commercial pressures there that make companies more accountable.
There are huge savings that appear to be made by outsourcing.
Mr Clark: Presumably, this is
information you have had from the companies who provide the outsourcing?
Q116 Mr Gauke: On the basis that
the private sector goes out there.
Mr Clark: They are not going to
tell you it costs more, are they?
Q117 Mr Gauke: They are not going
to do it if it costs more.
Mr Clark: They may very well do
on occasion. The system is not perfect; they get their fingers
burned, they sometimes come back as a result of very bad experiences.
There is a broader social context for it as well, that a lot of
people are not particularly happy about it. To be honest, it is
very hard to find, for example, a privatised energy company which
has not got call centres remote from where you are, sometimes
it might be in the UK, sometimes it might be in Europe and sometimes
it might be elsewhere, but the option of not having a call centre
no longer exists. You cannot go to a gas showroom and get anything
done, you cannot go to an electricity board, those options do
not exist and I think if you ask people they would say it should.
It is rather like the arguments about what you are offered on
the shelves of supermarkets is driven by customer demand. I do
not think anyone really believes that.
Q118 Mr Newmark: The market will
shift. If you look at banks, the banks are doing exactly that,
they are going back on the high street from having been so remote
because the consumer is driving that demand. Banks are shifting.
Mr Clark: That tends to suggest
that the idea of going to call centres in the Far East was not
a good one and those issues were driven by cost considerations.
Q119 Mr Gauke: The point I am trying
to make is the private sectorand we heard Martin Wolf make
the casehas to respond to market pressures whereas the
public sector responds to political pressures.
Mr Clark: Democratic pressures,
you could call them.