Select Committee on Treasury Minutes of Evidence


Examination of Witnesses (Questions 120 - 138)

TUESDAY 11 JULY 2006

MR RICHARD EXELL, MR SIMON DUBBINS AND MR NICK CLARK

  Q120  Mr Gauke: One could call them that, yes. What I am putting to you is that if it were left to market pressures or if it were about getting the best return for the taxpayer and, indeed, the person to whom services were being provided, we would make much greater use of outsourcing than we currently do in the public sector.

  Mr Clark: It depends what the considerations are. If the market was such a good provider, it would be providing health, it would be providing housing for the homeless and we would not have to have a welfare state, but the market does not provide everything that is socially necessary.

  Q121  Mr Gauke: I am not disagreeing with that, but where there are areas where the market cannot provide, does it still not make sense to you to provide those services in as efficient a manner as possible? What we have seen in visiting outsourcing centres in India is very often—not always but very often—the most efficient way of providing services, whether they be public or private services, is by making use of the competitive and comparative advantages which exist in places like India.

  Mr Clark: I certainly remain to be convinced that is demonstrable for an awful lot of the work that has already been put there, but in terms of a lot of public service work which relies on contact with individuals, we already have a problem. For example, a pensioner cannot go and speak to somebody face-to-face about their pension because everything has been put to a call centre. Removing that call centre even further, as Martin Wolf—who is an exponent of the market, he is not a defender of social provision in a way that we are—would say, it gets too complex and difficult to manage. If there are problems already, which there certainly are in areas like the DWP and the Pensions Service, with job cuts in the UK, meaning the service cannot be provided to people, they cannot go and see someone, they have to make a phone call, now you are saying the phone call will be fielded by somebody on the other side of the world where the management problems are even greater, where the political accountability is even less because someone stands somewhere to make some money out of it, I think the political repercussions and hostility to that are perfectly justified. I think bringing more democracy into the operation of the market would be a good thing rather than less.

  Q122  Mr Gauke: Do you think in five or 10 years, more or less in the public sector will be outsourced overseas?

  Mr Clark: It depends how successful we are in campaigning and fighting against it.

  Q123  Mr Gauke: How successful do you think you are going to be?

  Mr Clark: We are very optimistic.

  Q124  John Thurso: That was fascinating. I think I am with you if the evidence of my constituents is anything to go by, where the service has dropped dramatically with the removal of face-to-face contact. However, what I want to ask about is resources and raw materials. In your submission, you noted that you would support energy self-reliance in the UK, perhaps it is an auspicious day to be asking you about this. Given that UK-produced energy is said by some to be relatively expensive compared with that produced by countries that have natural resources, how do you see that impacting on growth in the UK?

  Mr Exell: It would be a mistake to assume that Britain lacks energy resources. We are built on coal and surrounded by oil and gas. We have got a tremendous opportunity in this country in the immediate future. Clean coal is in many ways the energy of the future. Developing the ability to scrub the exhausts from coal-fired power stations will not take the lead-in that nuclear power stations will take. China is building a coal-fired power station every week and is beginning to be really concerned about the costs of pollution. Countries that develop clean coal technology—and we have got the opportunity to do that—are going to be at the head not only of leading to a richer, cleaner world but a tremendous commercial opportunity at the same time. If we invest now in this country in clean coal technology, we can promote jobs in Britain, reduce global warming and help developing countries to industrialise in a sustainable manner. It is a tremendous opportunity for this country.

  Q125  Mr Gauke: And continue to develop our own economies.

  Mr Exell: Yes.

  Q126  John Thurso: How much do you think that security of supply is an issue, given that we will not have the gas very shortly, we will be net importers if we go down the gas route?

  Mr Exell: I think if you were asking this question in Ukraine, you would get a very clear answer to that question and certainly there are risks to having a preponderance of one's own energy coming from abroad. Especially in this country, when we have got so many opportunities for people developing our own energy resources, it is something that we should put on the scales when we are making our judgments.

  Q127  John Thurso: Is this one of those areas where the market is not a particularly good way of deciding because we have long-term decisions to make, long-term investments to make, whether they be a baseload of new civil nuclear, whether they be a much stronger investment in renewal or whether they be a serious investment in clean coal, these are government decisions rather than market decisions?

  Mr Exell: Yes, and also talking about "the market" is not always the best way of thinking about things. Markets vary from one another according to the circumstances in which they are established and the rules by which they are run. The Government, in turn, in energy can make a huge difference, so there would still be a market but the outcomes of it will vary tremendously. Markets are never neutral any more than governments are.

  Q128  John Thurso: What business wants, I always find, is security and stability, and if they have got that, the rest is rather peripheral.

  Mr Exell: Exactly.

  Q129  John Thurso: Martin Wolf was arguing that in theory environmental taxation does not lead to pollution-intensive output moving abroad.

  Mr Exell: He did say providing that was done on a concerted basis. That is an important proviso.

  Q130  John Thurso: Can I ask for your views on that, because there is tremendous pressure growing, I think, for political consensus to see more regulation, more greening.

  Mr Exell: I think my colleagues have done quite a bit of thinking on this.

  Mr Clark: There are a lot of arguments about how you are most effective in dealing with things like emissions and pollution, but certainly currently governments are moving in the wrong direction in reducing enforcement and regulation. I think, certainly from our point of view, the consequences of the push towards less regulation and inspection are already showing up in health and safety and it is the same with the environment. In terms of energy, issues like carbon taxation and so on are tinkering at the edges; there needs to be a shift in policy. If, for example, renewables got a tenth of the subsidy that are being deployed to nuclear, we would see a huge increase in the quality and reduction in the cost of investment in renewable energy. Certainly I would echo Richard's points about clean coal technology. Unfortunately, our energy policy has not been driven by economics. We did move to gas from coal because gas was cheaper but because gas did not have the miners.

  Q131  John Thurso: Amicus, I assume, would quite like to see some new civil nuclear.

  Mr Dubbins: We certainly have been arguing that there needs to be a balanced energy policy. We have members in the nuclear industry, yes, and they obviously argue that there should be a clear political lead on the nuclear question, but we have also stressed the balanced policy and it comes back to what you were saying about security of supply being very important. I think the other issue just mentioned there, coal seems to be coming back as an energy supply of the future and we would certainly support that as well. It is a shame that we went so far closing it down in the first place, so we are in a difficult situation to use that again in the future, but that is the situation we are in. Certainly, we have said a balanced policy in which nuclear and renewables have a part to play. I think the broader question about security of supply has obviously got to be looked at in terms of global politics as well and what is going on in that particular arena.

  Q132  Ms Keeble: You have talked quite a lot about what you would like to see happen in other countries in terms of regulation and so on. What you have not made absolutely clear is whether you regard it as partly a CSR obligation, which would be imposed by UK companies by this country's government, or how far you also see it as being a matter of the kind of work that goes on to get developing countries to improve governance of their countries and deal with some of the public service issues and regulation and how far you also see it as making some of the international machinery work effectively. Just a brief thing on that because CSR by UK companies is a drop in the ocean.

  Mr Dubbins: CSR is unfortunately very poorly developed. The biggest problem there as well has been the lack of a proper leading enforceable framework. I understand in India for listed companies they are at the point of imposing that with proper social auditing. When it was discussed at the European level, we were very much in favour of there being a legal framework for CSR which included the social partners and proper three-line auditing, which included the social aspects. Unfortunately, that was opposed lock, stock and barrel by certain governments. In a broader context, we have been arguing for a level playing field particularly within the European Union on social and labour rights, and the UK is usually vastly inferior compared with some of our continental colleagues, and that should be then the platform through which and within which we push for better standards globally. That includes within the ILO, within the broader machinery of the UN and it would endorse entirely moves towards better governance in developing countries, but I think if we are being honest about this, we really have to ask ourselves why is there a governance problem in some of these developing countries. I do not think the IMF and some G8 countries are absolutely innocent of the situation that exists there. For example, in Tanzania where we were involved with encouraging water privatisation which then led to quite serious incidents of unrest in that country, they have now moved back towards public ownership. I fail to see how that sort of agenda fits into the picture of proper governance and development.

  Q133  Ms Keeble: When I say "governance", I mean in terms of regulation of labour. I was thinking of China in particular and some of the labour conditions there, for example in the boot and shoe industry. It was meant to be a small question.

  Mr Exell: One of the arguments that we frequently hear is that it is somehow imperialistic or chauvinistic for us to insist on core labour standards across the world. The people who have made the opposite point to us most strongly are trades unions in developing countries which are very often in an analogous position to us, with their governments and their employers. They say they are continuously getting employers saying to them, "If you negotiate for better pay for your members, we are not going to be able to compete with China", and governments saying that if they legislate for basic health and safety at work, "We will not get the investment that will go to China". Core labour standards would be good for British workers but they would be even better for workers in developing countries.

  Q134  Mr Love: A short question. I wanted to go into this whole taxation issue. You probably heard Martin Wolf's comments in relation to corporate taxes. I wonder what your view is in relation to that? There is also a lot of discussion which we are having that inequality is increasing partly as a result of globalisation. How should we respond to the increasing inequality in society? Is there a way in which new forms of taxation could address some of these issues?

  Mr Clark: We have got some old forms of taxation which could address the issue, quite honestly. There is a real problem with the general consensus that there is an actual cap on income tax at 40% for the highest paid which is bizarre as far as I can see, particularly since National Insurance does not extend beyond a certain level, 41% is the maximum rate, that is low. It is very interesting to hear Martin Wolf say that he does not regard corporate tax as crucial as the lobbyists do. In terms of decision making, of course any company worth their salt is going to pay a lobbyist to say, "We should pay less tax", and one of the arguments they are going to use is, "We will not come to you". I think it is probably right that it is a much less significant decider of where to locate. I think there is also some scope for leadership in saying the downward trend in corporate taxation is not particularly good for social cohesion but nor is the ceiling on income tax.

  Q135  Mr Newmark: Although there is evidence that the lower the tax goes, the more the tax take seems to increase, but I will not get into a philosophical debate with you on that. Simon, I agree with your point on coal, but the problem was when the price of oil went down to 10 bucks a share, it made it uneconomic to produce the deep-mined coal we had in this country, but now that it is over $50 a gallon, I  am curious from Richard's standpoint—and I agree  with you, we need to encourage carbon sequestration for 200 years of coal—what do you think the Government should be doing to encourage us to harness that technology or should the Government be doing nothing?

  Mr Exell: My understanding is that the industry is saying that what is needed at the moment is some technical changes on regulation of the industry, which I am not expert enough to go into, plus some pump-priming, especially support for research and development, and the same planning relaxation that is being proposed for the nuclear industry also for other forms of energy. I am not an energy specialist, those headlines are the limits of my knowledge.

  Mr Newmark: I know of your enthusiasm for it, so I wondered if you had any thoughts.

  Q136  Chairman: Martin Wolf has had a few good articles in the Financial Times, one today, and they are pretty good in terms of energy and the issue of consumption. Maybe a last question from me. Are trades unions and workers too sceptical about the benefits of globalisation, and how do your organisations attempt to educate people around the opportunities?

  Mr Exell: The first thing about trades unions is that our first job is to protect our members against threats. We are temperamentally more inclined to recognise problems.

  Q137  Chairman: So the glass is half empty all the time?

  Mr Exell: To some extent. We would not be doing our job if we did not notice when the glass is half empty, but we are also keen to make sure that we never throw out the baby with the bathwater, to use another cliché, because at the same time as protecting members from threats from globalisation it is also important to protect the interests of the members who benefit from it. As I said right at the start, there are hundreds of thousands of jobs that depend on global trade investment, so we must never put them at risk because of concerns about people who might lose their jobs or see their terms and conditions worsen.

  Mr Clark: In educational terms, the problem with the £5 steam iron is it may be made by slave labour in China and that is not in our interests as workers here or, indeed, trade union workers anywhere in the world to tolerate that, there are points where you say, "Actually, it is not all about cost".

  Q138  Chairman: Simon, do you want a final word?

  Mr Dubbins: I think it has been touched on there. It is very difficult, particularly when Amicus has got large manufacturing sectors, to look at globalisation in a particularly positive light. Having said that, we are not of the view that we are opposing it lock, stock and barrel. What we have consistently argued about is having some sort of social dimension to globalisation and that globalisation can help lift developing countries and people out of poverty, but it is essential it is done with that key element of being socially regulated and controlled in a manner that brings benefits to the bulk of the population.

  Chairman: Your evidence has been very helpful to us. It is good to get that dimension, there are a few barriers to go yet, but building on Martin Wolf and yourself, we will take a break over the summer and then come back to you on it. Thanks very much.





 
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