Examination of Witnesses (Quesitons 40-59)
RT HON
JOHN HUTTON
MP
20 NOVEMBER 2007
Q40 Chairman: We are looking forward
to a response on our report on government procurement quite soon.
Mr Hutton: We very much welcomed
that report and hopefully our response will be out soon.
Q41 Mr Binley: Comments about a vehicle
going from nought to 60 in four seconds makes me worry that you
might be a boy racer and I suspect I need to look out for you
on the road. I should like to ask about the supply chain for Jaguar
and Land Rover. I am not sure we take that sufficiently into account
when we think about the automotive industry particularly in the
West Midlands but in other parts of the country. Do you know how
many people work for those two companies in the supply chain?
Mr Hutton: It is tens of thousands
but I would not be anxious to put a precise figure on that in
case I got it wrong and someone took offence.
Q42 Mr Binley: It is very sizeable,
is it not?
Mr Hutton: Yes.
Q43 Mr Binley: Have you been talking
with those supply chain people as well so you get a random view
of what it means to this country?
Mr Hutton: I have not met the
supply chain companies but I think my officials have. We have
had a number of representations about Jaguar and Land Rover from
organisations like the CBI, for example.
Q44 Mr Binley: Would you kindly let
me know what your officials have been doing?
Mr Hutton: I would be happy to
do that.
Q45 Chairman: The reason we are pursuing
these questions is that the Committee is concerned about maintaining
Britain's ability to add value, to have a knowledge-driven economy
and research and development here in the UK. Ford is responsible
for 80% of all automotive R&D in the UK and any change in
its portfolio could have potentially very serious implications
for a very important part of the UK automotive sector and UK manufacturing.
The Committee is looking at what it ought to do to address people's
concern about the consequences of the transfer of ownership of
Land Rover and Jaguar.
Mr Hutton: We have done some work
on the supply chain in automotives which I am very happy to share
with the Committee. Let me reassure Mr Binley on the "nought
to 60". My current car does not do that.
Q46 Mr Binley: Mine almost does!
Mr Hutton: Your car almost certainly
does.
Q47 Chairman: Can I push you on the
question of research and development which is what really drives
the Committee's concern about Land Rover and Jaguar and intense
high value and important R&D work in the UK. Innovation has
moved away from the old DTI to the new Department for Innovation,
Universities and Skills. Are you happy that you can properly join
up considerations about R&D, innovation and science in a new
institutional framework?
Mr Hutton: We will have to. John
Denham's department and mine have appointed a joint innovation
adviser whose job it will be to make sure those links are preserved.
The two permanent secretaries meet regularly. I also meet with
the Secretary of State for Innovation, Universities and Skills
on a regular basis. We must do it and John Denham and I are both
committed to it.
Q48 Chairman: But should not innovation
be led by a business department rather than an academic department?
Mr Hutton: You can have a debate
about that. I think it is perfectly rational for the innovation
part of government or Whitehall to be in a department that also
has responsibility for universities. I do not think that is unreasonable.
It is not a fundamental problem but that is where it is.
Q49 Chairman: It is a subject that
the Committee may well look at in future because it is of huge
importance given the next inquiry we have announced on higher
value in the UK economy.
Mr Hutton: Looking at my principal
responsibilities in areas like productivity and competitiveness,
clearly innovation is one of the significant items.
Q50 Chairman: It is the first you
put on the list of the six areas for which you are the voice for
business.
Mr Hutton: Of course it is an
issue. We are looking at the whole question of innovation in the
context of the enterprise strategy and the work that I described
a few minutes ago. We have talked to a lot of small companies
in the past two or three months about these issues. At the first
seminar I tried to make a count of the most significant words
that people used in relation to what they wanted us to do on enterprise.
The word "university" was the most commonly used word
in the discussion at No.11 Downing Street with the Chancellor.
I was quite taken by that. What were the views? It was a mixture.
There were some fantastically supportive views about particular
universities and their relationships with local businesses but
there was also some criticism of universities as being not as
pro-enterprise or as quick-moving as possible. One would expect
a range of views. I know that universities are very sensitive
to criticism like that and want to find a way forward, but looking
at innovation and enterprise I accept that they are two sides
of the same coin. Is there now a fundamental problem with innovation
and science being in DIUS? No. However, if we were to behave in
a way that historically governments have behaved—in other
words, you set up a department and have people patrolling its
boundaries night and day to stop anyone crossing it—there
would be a problem, but John Denham and I are absolutely committed
to making sure that is not what happens.
Chairman: It is a subject to which the
Committee will return, so thank you for those headline views.
Q51 Miss Kirkbride: I should like
to ask about competition policy. The latest peer review on competition
policy put us third behind the US and Germany. Whilst that is
pretty good, what is it that the US and Germany are doing that
we are not? Why are we not top?
Mr Hutton: It is widely recognised
that the US competition regime is probably the best in the world
and it has a number of very important and almost unique features.
In the Pre-Budget Report the Chancellor announced that he was
looking at a number of issues in the context of our competition
policy. OFT is currently consulting on whether or not we need
to strengthen aspects of it particularly in relation to private
actions and so on. The Enterprise Act, which is the cornerstone
of our competition policy, is only four or five years old and
is still bedding in. I think we have one of the strongest competition
frameworks in the world. Some of the evidence that the department
commissioned—recently we had a study published by KPMG—showed
that the UK was closing the gap on the leaders to a point where
we can probably now say we are on a par with Germany. We want
to be better in this regard. There is some work going on at the
moment. I cannot say to the Committee precisely when it will report;
I hope it will be in the not too distant future. Ministers can
then make decisions about how we might want to strengthen the
competition framework. But we should regard the UK legal competition
framework as being a very robust one and it is one of the reasons
why we have successful competitive markets in many sectors which
we do not see in other countries.
Q52 Miss Kirkbride: You said that
there were some unique features of the US system. What other things
have made the US so superior?
Mr Hutton: Some of the rules around
private actions in relation to breaches of competition policy
are quite significant features of US competition law and we should
study that very carefully to see whether there is an appropriate
role for that type of action here in the UK.
Q53 Miss Kirkbride: Anything else?
Mr Hutton: That is probably all
I want to say at the moment.
Q54 Miss Kirkbride: You also mentioned
the Office of Fair Trading which is getting a 5% cut in its budget.
I presume you will give me the same answers that you gave to Mark
Hunter, but I have to ask you about that as well.
Mr Hutton: I do not think the
OFT is part of my budget.
Q55 Miss Kirkbride: Does it not come
down through you?
Mr Hutton: I could be wrong, but
I do not believe it is part of my budget.
Q56 Miss Kirkbride: When the PSA
on competition was first established it contained a target of
the UK being "equal" to the US and Germany in the ranking
of its competition regime. The latest version of the technical
note has been watered down to being "one of the highest-scoring
countries". Obviously, there is a tiny bit of difference
between those two aspirations. Why?
Mr Hutton: I think you are wrong.
I do not believe the target ever referred to specific countries
but was and is for the UK to be at the level of the best. That
is my understanding. I do not think we ever specifically referred
to the US and Germany.
Q57 Miss Kirkbride: So, the aim is
still to be at the level of the best?
Mr Hutton: Yes.
Q58 Miss Kirkbride: Bearing in mind
competition policy, in the news this morning we hear that Rolls-Royce
is looking at two new facilities outside the UK in the US and
Singapore. Why do you think that is?
Mr Hutton: I do not think it has
anything to do with competition policy or the framework of free
and fair markets. Rolls-Royce has made a decision. Its business
is global. I do not think it is unreasonable that it would want
to have facilities closer to some of its new markets particularly
in the Far East where there is significant business for Rolls-Royce
which is a global company. These are the decisions that global
companies take. I think Rolls-Royce has made it very clear today
that these were not investments that would have taken place in
the UK, so there is no question that somehow this country lost
out on an investment decision about to be made here. Rolls-Royce
has made the decision to invest in new production facilities in
those countries and there is a strong reason why it should do
that, and I do not want to be critical of its decision. I am pretty
sure it has nothing to do with competition policy.
Q59 Miss Kirkbride: But it has got
to do with something. This morning the unions are blaming the
Government for not offering enough support to industry and that
was why they thought the investment might have gone to the US.
Mr Hutton: Maybe we can look at
the specific figures for support to aerospace which are very substantial.
The MoD does £½ billion worth of business with Rolls-Royce
every year. We have provided hundreds of millions of pounds for
R&D support and over £1 billion worth of launch aid investment
and significant amounts of that have benefited Rolls-Royce. It
is the job of government to be blamed for everything when anything
happens. I do not believe however that the decision made by Rolls-Royce
is attributable to any aspect of the Government's manufacturing
policy or support for aerospace. Rolls-Royce itself has made clear
that particularly in relation to the Far East it wants to be closer
to some of the new and emerging markets there. I suspect that
if you were involved in running Rolls-Royce that would be a decision
you would probably want to make yourself. I do not want to jump
on a bandwagon, and I certainly do not want to criticise Rolls-Royce
for its decision which I think is a perfectly reasonable one.
My job and that of government is to continue to provide the maximum
support we can within the state aid rules for British aerospace
companies including Rolls-Royce. I think we have done that and
the track record of support for these companies is a very strong
one.
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