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My hon. Friend also referred to the common permit to work. I agree that benefits could arise from the introduction of such a system, in particular for contracting employees. However, there are difficulties to overcome in implementing a common system offshore. The offshore regulations do not require a common permit to work system. The UK health and safety legislation regime uses goal setting and it encourages operators to develop fit-for-purpose systems. That approach has been successful in encouraging a diverse range of new entrant organisations into the UK offshore sector. Such organisations often have existing permit to work systems that work well for them. There is no evidence that forcing them to change to a common system would bring any safety benefits. Indeed, it might introduce additional hazards and overheads.

The most widespread permit to work system used in the North sea is the computerised integrated safe system of work, which is used by 60 to 75 per cent. of organisations. That is a capable system, but some small operators may not be able to justify the running costs for a single installation. The mandatory introduction of such a common computerised system could introduce additional hazards relating to the system's initial operation and future development.

My hon. Friend raised doubt over the accuracy of the percentages for the UK and Norway, to which the hon. Member for West Aberdeenshire and Kincardine (Sir Robert Smith) also referred.

Mr. Doran: Will the Minister give way?

Jonathan Shaw: I will give way, but I believe that I will answer my hon. Friend's point in my next paragraph.

Mr. Doran: I spelled out how I and others see the system. The key point is that we do not know enough about the benefits or disbenefits of this or that system. I want the Minister and the HSE to investigate and to carry out a proper inquiry so that we can see what the advantages and disadvantages are.

Jonathan Shaw: My hon. Friend is right. The HSE takes this issue seriously and will shortly ask the advisory committee to consider what steps are needed to improve the use of permit to work systems in the North sea. That will be the first step. The committee will be asked to consider what further information, if any, is required to address the issue. That could include the consideration of future research needs. The HSE takes this matter seriously and will not disregard it. Further work must be undertaken.

I will now respond to the comments on personal locator beacons and helicopters. Given the recent incidents involving helicopters offshore, it is not surprising that the issue was raised in this debate. As hon. Members have said, helicopter travel is the principal means of transportation of personnel to and from offshore installations. Despite there being a good safety record, it still remains an important issue for duty holders and all those who travel offshore.

The regulatory responsibility for helicopter travel is shared between the HSE and the Civil Aviation Authority. As the right hon. Member for Gordon (Malcolm Bruce) mentioned, communities and workers who travel backwards and forwards are not concerned about the myriad
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organisations, but want to know that everything that should be done is being done by the powers that be. Each body has its area of expertise and they must work together. For example, the HSE enforces the requirement to provide a good prospect of rescue for individuals who enter the sea close to an offshore installation.

The HSE and the CAA have a memorandum of understanding that explains the roles and responsibilities of each, especially in areas of overlap. They meet on a regular basis to ensure that the memorandum of understanding remains up to date. The HSE and the CAA sit together on relevant groups and committees, and, when appropriate, they meet on a one-to-one basis to discuss relevant offshore helicopter safety issues and research matters. A good example of industry, the work force, the HSE and the CAA working together effectively was the contribution of the Oil and Gas UK personal locator beacon working group to addressing the issues related to personal locator beacons. I can report that a risk assessment exercise has been undertaken, which concluded that the future optimum arrangement would involve all beacons being of a similar power output and non-smart.

Agreement with the helicopter operators has also been reached, so that the Civil Aviation Authority will replace the smart beacons in life rafts with non-smart beacons. That work should be completed by the end of this year. Work is continuing on identifying a suitable non-smart PLB of similar power output to the aircraft beacons, which will be compatible with the personal protective equipment worn by helicopter passengers.

I am also pleased that progress has been made on tackling the inadvertent activation in flight problem. A series of environmental tests, which beacons will be required to pass, have been agreed with the CAA. Candidate beacons that are compatible with passenger personal protective equipment will be subjected to those tests over the next couple of months. Negotiations are also under way between Oil and Gas UK and the RAF to explore the possibility of the industry's funding an upgrade to the RAF's directional finding equipment in order to eliminate the potential difficulty with resolving multiple signals from non-smart beacons.

In concluding my remarks, I will attempt to address some of the issues raised by hon. Members. Concern has been expressed about helicopters and search and rescue in the wider context. Duty holders offshore do not rely on national search and recovery arrangements; they need to make their own arrangements. The HSE is not aware of any duty holder's not being able to secure the helicopters, vessels or ships that they need for search and recovery activities.

As I have said, personal beacon locators make a valuable contribution to search and rescue. It is important that we get the technology right, so that if people are in the sea because of a crash, they can be located quickly. Reference has been made to the February accident when people were found within the time frame laid down in very difficult conditions. As has been said, visibility was poor and personal beacon locators were important to that operation. As I have said, it is important
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that we get the technology right. I hope to have given some reassurance to colleagues that all the relevant bodies in the industry are working together to ensure that we have a response in place. Colleagues do not need to be concerned about our capability in terms of search and rescue helicopters.

On the efforts of the industry and its determination to respond to this important review and the recommendations, as my hon. Friend the Member for Aberdeen, North said, it is important to note that oil prices have resulted in a reduction in the revenues coming into the industry. At a time when the finances are not as rich as they have been, demands on the industry are greater to ensure that it makes the resources available to guarantee that there is asset integrity and that health and safety is a priority. Health and safety needs to remain high in the order of priorities and the industry should spend the necessary resources at this time. As all hon. Members have said, the gas industry is crucial to the UK and its economy. We need to ensure that our health and safety standards are the highest in the world-not just for our workers, but, as has been said, to make the most of the industry's opportunities to sell itself across the globe.

I welcome the industry's commitment to continuing to invest in the important area of asset integrity. However, again as hon. Members have said, if we get this right, there is no reason why the industry should not enjoy a long, safe and prosperous future. This is not a dwindling industry; it has a long life ahead of it, and we need to ensure that we play a key role and take a keen interest in it.

Despite recent progress on health and safety, there is still room for improvement, especially as the industry is facing new challenges. As I have said, the current recession is increasing the pressures on North sea operators in a high-recovery cost environment. The Health and Safety Executive is aware of the potential for health and safety to be compromised in the current climate. It is actively monitoring the developing situation to ensure that standards and recent improvements in performance are maintained, and I hope that performance will continue to improve. Everyone, including employers and workers, has an important role in ensuring that that happens.

Finally, everyone here today recognises that the work force have a vital part to play in taking forward the recommendations of the KP 3 review. As all hon. Members have said, health and safety is everyone's concern, and the role of the work force is central to that. The work force are truly the guardians of safety, but they must operate in a culture that promotes rather than discourages people's raising awareness of health and safety-my hon. Friend mentioned concerns about that. We need to work together to introduce the procedures and systems that will support effective worker involvement offshore. As all hon. Members have said, there is no room for complacency. There has been considerable progress and a cultural change, but we are not there yet. We must continue to focus, work hard and ensure that the UK leads the world in health and safety in the oil and gas industry.


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China and the West

10.57 am

Mr. Mark Field (Cities of London and Westminster) (Con): May I welcome you to the Chair, Mr. Taylor? I often hear your interventions from the other side of the Chamber, but I hope that there will be slightly fewer interventions today than there normally are during the debates that I introduce on economic affairs. I shall speak in some detail about the implications for UK policy of relations between China and the west, and about the global economic implications of those relations in what is obviously a globally trading and highly integrated world economy.

The collapse of Lehman Brothers last September triggered an unravelling of the global economy so swift that its cause and scope was beyond the comprehension of not only a bewildered public but most politicians and financiers. Since that time, a huge number of jobs have been junked, global trade has slumped spectacularly and Governments across the globe have borrowed unimaginable sums to shore up our ailing economies. The implications are so colossal and, indeed, so long term that we do not know their true cost, and I suspect that we will not do so for a considerable time.

If we are to understand the broader reasons why that unravelling has occurred, we should examine the crucial relationship between the world's biggest economy-the United States-and its eastern pretender, China. For many years, that relationship has driven globalisation, but it now has the potential to wound fatally that same project. For a decade or more, the United States-along with the UK-has pursued a model of growth based on debt-fuelled consumption, and the cash and cheap goods provided courtesy of China. Pursued to its limits, that relationship has become dangerously unbalanced, and the myth of its sustainability was brutally uncovered when the complicated financial mechanisms that had hitherto propped it up dramatically collapsed during the past year or so.

The consequences of that imbalance are not yet fully apparent and their impact is still difficult to predict. However, it seems certain that the change will be profound and troubling and that the west's position in the world may never be the same again. In the 1970s and 1980s, Wall street received a number of breaks, which began with the dollar's link with gold being broken by the Nixon Administration's repudiation of Bretton Woods. Later, of course, when Ronald Reagan was President, he ended capital controls. The global bond market expanded and the US economy was liberalised, opening up American savings and pensions. With US pension funds ballooning, Wall street for the first time had access to a huge new source of finance, which it sought to invest to maximum value. Corporations were encouraged to invest globally, to exploit new markets and to demand the highest return for their shareholders, who were often ordinary American pension holders.

Alongside all that came a hollowing out of the US manufacturing industry as companies looked abroad for cheap goods and labour. Indeed, similar trends were afoot on these shores. By the mid-1980s, the American manufacturing sector was increasingly taking advantage of competitively priced, non-unionised foreign workers by moving much of its production abroad. That process
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only accelerated when the end of the cold war introduced millions more workers to the global economy. The working classes of America were invariably the losers of that deal, but politicians made the case that the benefits to the US would somehow outweigh their collective plight as new employment would be found in services, technology and the like. Workers would be reskilled and the vulnerable would be caught, in the short term at least, by the welfare system.

China was poised and ready to take advantage of those developments following decades of economic darkness, at least as far as the west was concerned, since the emergence of Chairman Mao in the 1940s. The more pragmatic regime of Deng Xiaoping adopted an open-door policy from the late 1970s. The country moved away from command socialism and concentrated on developing strategic industries with the global market very firmly in mind. The United States happily paved the way for further Chinese integration into the global economy, culminating in China's eventual admission to the World Trade Organisation in 2001. That final step was partially aimed at shrinking the trade deficit between the two countries, but in reality that deficit has ballooned, especially in the past decade.

Whilst China did liberalise and open certain sections of its economy, it also kept the door closed to its domestic market. By casting aside the established rules of free trade, China became the overwhelming beneficiary of globalisation, exploiting western markets while reinforcing its own role at the centre of an increasingly powerful Asian market block. That powerful Asian market block will be the reality that we will all face. It will be a challenge, but should also present great opportunities in this country in the decades to come. China simultaneously built up its own internal market and service sector, accrued vast reserves and began to secure stakes in strategically important commodity corporations and those that agreed to transfer technological know-how.

By the late 1990s, the income of the average US citizen had begun to stagnate as the hollowing out of western economies continued apace. To disguise that somewhat unpalatable problem, politicians in the US and here in the UK, its most closely related economic cousin, eagerly took advantage of the low inflationary environment provided by cheap Asian labour. They turned to high consumption as an economic model, fuelled by debt, which was often racked up against Chinese reserves, in the private and public sector. With easy credit and cheap mortgages, US and UK individuals were able to borrow cash as never before, with a false perception of wealth embedded by access to cheap Chinese goods.

Meanwhile, financial services in the west thrived to manage the seemingly insatiable demand for new investment instruments. For politicians in America and China, the relationship between the countries seemed, for so long, to be a classic win-win situation. In the US, citizens could enjoy cheap money and cheap goods, while in China, the immature manufacturing sector boomed as hungry western markets were exploited. For sure, even in the late 1990s, there were some nagging doubts about the sustainability of that arrangement, but to rectify them would have caused short-term economic difficulties and would have got politicians in the west, who always have an eye on the electoral calendar, into hot water
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with angry voters. Furthermore, the United States was still in the driving seat and would be able to dictate the terms of that relationship with China-or so we thought.

Make no mistake: China will not emerge entirely unscathed from this global recession. A slump in demand has already led to extensive Chinese unemployment, and social upheaval may follow. Given that China relies so heavily on the healthy US consumer, it is conceivable that the unbalanced, overly dependent relationship may yet develop into a tight economic alliance. Nevertheless, China remains on a growth trajectory that seems likely to take its economy past that of the United States by 2050. The US Treasury and its ailing banks have without doubt been stabilised by Chinese loans and loans from other sovereign wealth funds from the middle east. The US market remains very dependent on cheap Chinese imports, and it is hard not to conclude that China holds most of the cards when negotiating the terms of its bargain with America. What is more, its ascendancy, and that of its near neighbour, India, may be just beginning.

Last year, as the financial system collapsed at a breathtaking rate, US and European banks and Governments quickly borrowed colossal sums to shore up their operations. That borrowing was largely funded by China's vast surplus. In that way, a trend that was already in motion-a shift, as I always put it, of economic power eastwards-has been markedly accelerated. The legitimacy of western capitalism has always been bound up in the idea that it can best deliver prosperity to the masses, offering many millions a route to middle-income stability each year. But as jobs and money have been sucked eastwards, that mass prosperity, for the west at least, may no longer be guaranteed.

The wealth of the past two decades is increasingly being regarded as an illusion, and the competitive edge that the US and Europe might have had over China and India in services, technological development and scientific research might just as easily be taken from us. China is churning out millions of industrious, well-qualified engineering and technology graduates every year or two. As it controls stakes in so many western corporations, it is also able to transfer and copy intellectual wealth with ease. Soon the powerhouses of Asia could be undercutting western labour in not only manual but white-collar and the most highly qualified management positions.

I have visited China twice-three times if one includes my trip to Hong Kong in 2006-and I have seen at first hand how rapidly China has been able to transform itself. On my last trip, I led a delegation of local Chinese business folk from my constituency-Chinatown, in Soho, is, of course, in the Cities of London and Westminster-and we visited the two booming cities of Beijing and Shanghai. I was accompanied by half a dozen British-born business men from the London Chinatown Chinese Association.

During the first leg of our trip, we stayed in the Pudong district of Shanghai. Only 15 years ago, Pudong was just a handful of small farming villages, but it has since been swallowed up into the enormous Shanghai metropolis, and the Chinese have built from scratch a financial district that, in addition to having countless skyscrapers, is populated by 2.8 million people. Shanghai's
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overall headcount is now about 20 million, which is three times the population of London, which is Europe's biggest city.

Whilst out there, I also travelled on the Maglev train that links Pudong to Shanghai's international airport. The technology for that electromagnetic train system dates back to the 1930s-it was a German invention-but it was adapted for commercial use only relatively recently. We smoothly travelled at some 430 kph, or 275 mph, on that state-of-the-art transport system. In all, the 21-mile journey took eight minutes from start to finish; one can just imagine the degree to which a Maglev link between the City of London and Heathrow would ease the strain of doing business here, although I suspect it would also mire us in the endless planning wrangles to which major infrastructure projects in the UK are subject.

During that visit, I also saw the sparkling, state-of-the-art dock development. That involved driving across the 20-mile Donghai bridge, which is the longest bridge across water in the world, but took a mere three years to build. The port, which has been developed on largely reclaimed land in the bay outside Shanghai, features acres of containers stacked up, literally, as far as the eye can see. It had been only a few years since my first trip to Beijing, but the change in China's political capital was enormous, not least because that metropolis was, at that juncture, preparing for the 2008 Olympic spectacular. So, we can only imagine what China will achieve in the coming decade.

So, what will China do with the strong hand that it has now engineered? Many assume, perhaps naively, that along the path towards economic superpower status, China will inevitably become more open, democratic and western. We assume, in this country-or perhaps just hope-that it will abide by the western ideals that have shaped the world's international institutions and laws in the past 60 or so years, and that it will perhaps play by our rules. But all those notions betray a fundamental misunderstanding of how China operates. Westerners have confused the material wealth brought by access to cheap credit and cheap goods as a physical demonstration of our superiority in the world. However, the debt accrued by the west has come at a cost, a cost that perhaps too many outsiders, certainly in the political class, do not fully appreciate, but that will become apparent in the decade ahead, in terms of both future economic health and, more importantly, global influence.

China has played, and continues to play, a patient game. Not for that country are the quick fixes and instant gratification inevitably pushed for by western democracies. Indeed, a more long-term strategy has been pursued, best illustrated by Deng Xiaoping's 24-character strategy: observe calmly; secure opposition; cope with affairs calmly; hide the extent of our capacities; bide our time; maintain an assiduous low profile; never claim leadership; and make some contributions apparently from the sidelines. I believe that it is inconceivable that China will not now seek to exercise its muscle on the international, diplomatic and military stages as a result of the strong hand that has been quietly won economically in the past decade.


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