Examination of Witnesses (Questions 1-19)|
23 FEBRUARY 2009
Q1 Chairman: Lord Jones, welcome. I think
this is your third appearance before the Committee.
Lord Jones of Birmingham: Two
while at the CBI and one as a minister.
Q2 Chairman: In this Parliament, it is
the third time. This is a slightly unusual session. We are beginning
a new inquiry into exporting out of recession and to what extent
exports can help lift the country out of recession. The prime
questions we are going to ask today are in that area. As we talk
about a recession, and you have been quite vocal recently on "the
recession", we thought it would be helpful if we began by
giving you the chance to say briefly something about what you
have been saying publicly in the media recently, on Channel 4
and in other places, about the recession and possible cures, just
to put your other remarks in other contexts.
Lord Jones of Birmingham: Thank
you, Chairman, and thank you for asking me to come and contribute.
I would just like to declare two interests: I am Corporate Ambassador
for Jaguar (about a day a month) and I am the very recently appointed
Chairman of the International Business Advisory Board of HSBC
(about 20% of my time). I believe that 2009 is going to be probably
the most difficult year economically for this country since the
Second World War. I do not see much hope of any green shoots,
subject to two things I will come back to, but I do believe that
2010 will be a year of a degree of bottoming out. I do not mean
suddenly we are going to go off into sunlit uplands of boom or
anything but I think we are going to see stabilisation and a slight
growth in the economy. That might bring it from greater contraction
to less contraction but it will be going in the right direction.
I am not one of those who think this is a three-year recession.
I did say there were two exceptions. I get around the country
a lot and I am hearing from various house-builders that at the
bottom end of the house-building market, social housing definitelyand
that is good because it is a job creator in building, and I hope
it also provides good homes for many peoplebut also in
private sector housing, they are seeing greater activity. They
are seeing more applications for mortgages, they are seeing more
people interested. That is good to see and, with any luck, maybe
my prediction will be a little too pessimistic and it could be
happening a little earlier. I also think we have to get this completely
into context, Chairman. I think there are a lot of people around
the country who would like to cure us of what I will call "Robert
Pestonitis". We are not, as a nation, going to hell in a
handbasket. So much of this is about confidence. I remember doing
Any Questions in the autumn, and on Any Answers
on the Saturday one guy, a picture framer from Harrogate, rang
up Jonathan Dimbleby and said he was absolutely at the wrong end
of discretionary spendingit was a complete luxury item
that he was sellingand he said he was having an awful time,
but he had had two good weeks, and one was the week that Barack
Obama was elected and one was the week that Jonathan Ross and
Russell Brand did all their silly stuff. You know why? Because
the recession was not the first item on the news every day. For
two weeks the spenders were told something else about news in
the world and on that basis they went out and spent a bit. It
is true to say, however, and I say this with great sensitivity
to those who are out of work and those who are worried sick about
their jobs and obviously those who are losing their homesI
do not belittle that for one minutethat the vast majority
of this country is still in work and the vast majority of those
who went into the recession owning their homes still do. A lot
of the issue is about confidence. It is also true to say that
this is a global recession and there is a global contraction in
the economy but no two countries are the same. China's economy
is contracting but she is still going to deliver some 6%/7% growth
in GDP this year. India's is contracting, but is still going to
deliver 5% or 6% growth in GDP. In America, with all this effort
that Obama and his colleagues are putting into this, there will
be areas of America that are going to come out of this more quickly.
Eastern Europe is not going to suffer as badly as others. So many
aspects of British business are accented to the global trading
aspect, that I will tell you that the only way this country is
going to get out of this quickly is to trade its way out of it.
If Britain was a company I would be saying, "The fundamentals
are okay, you're not going to go bust, but this is going to be
bloody". Now, how do you address it? You trade your way out
of it. If this was a business, you would be trading your way out
of it: head down, batten down the hatches, work hard and deliver
the goods, and get the profit and start regenerating the business.
That would be the same for this country. On that basis, we have
to do everything we possibly can to get businesses trading globally,
to still be an attractive place for inward investmentcompanies
are still going to be looking for places to investand at
the same time to ensure that we preserveand I think this
is probably the greatest danger medium term of this recessionthe
skills base for the nation. We need a vibrant financial services
sector. Our economy does have the biggest or the second biggest
financial services sector. It is pointless saying, "We don't
want to do that any more". Of course we want to do it, and
we want to be a global standard for doing it, but there are other
sectors where we should be accentuating the positive. Think of
retail: Asda's recent figures. Did they feature as number one
in Robert Peston's article? No. And yet a fabulous set of figures.
Look at Morrison's recruiting some 5,000 people. It is all good
stuff in one mass sector. Do we read about it at the top of the
news? No. If you look at manufacturing, we have some amazingly
good global brands that really do stand up around the world, making
quality stuff in a restructured and value-added and limited environment,
and if we lose the skills base that keeps those people doing it
in Britain then this Government should be blamed for that. That
is the most damaging aspect of this recession. A good contrast
would be to look at what the American Government is being asked
to do in Detroit. There is a name for that in Britain: it is called
British Leyland. That is exactly what we did. They are unrestructured,
they are unproductive, they are uneconomic, they are not really
going to change just because government is going to give them
money, and they are being driven solely by "Keep the people
in work". If you look at British manufacturersautomotive,
yes, but others: Rolls Royce Aerospace, JCB, whateverthey
have won markets around the world by having restructured and gone
through the pain 10/20/30 years ago and they are now global champions.
They cannot put people on to short time permanently, because,
frankly, there is not the mechanism here, the government assistance,
so they make loads of redundancies and then what happens is those
people are lost to manufacturing for ever. You mentioned that
I did Channel 4 Dispatches last week, Chairman, and there
are skilled guys who used to be at JCB, applying to be bin men
in Derby. I am sure there are some fabulous bin men in Derby,
but they are not making a global, manufactured product, are they,
and selling it around the world? When the sun comes upand
it will come up in the morning, the world will go round, this
will passthose companies, be they overseas investors investing
here or British manufacturers, will say, "Well, where are
my skilled people?" If they are all doing the bins in Derby,
that stuff will be made in India, China, America, Germany, Eastern
Europe and we will lose it forever. I cannot for the life of me
understand why this Government will not follow the German example
and ask for a three-way sacrifice: ask for the employer to, yes,
only pay them for the two-days' output they will give but keep
them on the payroll, keep their sickness and holiday and pensions
and length of service going; have the employees say, "Look,
the end result of this is you're going to get 80% of what you
normally get, so you're going to have to pull your horns in";
and we, the taxpayer, make up the difference for a short period
of time, basically to keep them around, so that (i) we have a
skills base that we can be proud of, (ii) kids understand that
manufacturing matters and is cherished by the nation, (iii) we
do not have the social cost, the health cost, the destruction
of communities costs that go with redundancies on a mass basis
in a small place, and (iv) the nation is fit for manufacturing
purpose exporting and trading our way out of it going forward.
That, I think, is the aspect I do not see happening. And it is
not to the exclusion of any other sector: there are many sectors,
I think, that really can do well. I would perhaps close this aspect
of it and say that there is another aspect of the economy where
we have to pay some real serious attention at the moment, and
that is our higher education sector as a business.
Q3 Chairman: It is quite a problem.
Lord Jones of Birmingham: They
sell their services around the world, and the world is not paying
for these students to come here, and therefore you have the issue
of universities as well.
Q4 Chairman: You have thrown up an
awful lot of ideas, and I do not want to spend too long on them
Lord Jones of Birmingham: Well,
the different sectors of the economy.
Q5 Chairman: we want to talk
mainly about tradingas you have said, exporting out of
Lord Jones of Birmingham: Sure.
Q6 Chairman: There are a number of
things you have said that I am interested by, but, in a sense,
Digby Jones's two sound bites are: protect the skills base and
export out of recession.
Lord Jones of Birmingham: Spot
Q7 Chairman: That is it.
Lord Jones of Birmingham: Skills
and trading. This country is made for globalisation, and if you
skill your workforce and trade around the world, this nation has
nothing to fear.
Chairman: Maybe it is the second I would
want to concentrate on, but Mick Clapham would like to ask a question.
Q8 Mr Clapham: Lord Jones, before
we get into other areas, the one thing about the economy you have
said is that you perhaps see the sun beginning to rise again in
2010, so that it is maybe halfway through 2010 when we will see
the benefit coming through. Given the other two aspects that you
have referred to, trading our way out of it and making sure that
the skills base is retained, you seem to be happy with the way
in which the Government is tackling the situation. Would that
be correct? Do you agree with the Government's approach?
Lord Jones of Birmingham: I think
there have been one or two things they have done which I would
not have done. I would not have reduced VAT. There are better
ways to spend 12 billion quid than that. If people are worried
about their jobs or they are out of work, they do not go and buy
a big ticket item for which you do enjoy the benefit of a VAT
reduction: a car, white goods, or whatever. I personally would
not have done that. Secondlyand this is the biggest thing
I would criticise them forI think a lot of the initiatives
are very worthy, I think they are quite well-thought through to
be honest, and I think it is important that a government is not
only seen to be doing something but is also doing it, but the
problem isand I see this everywhere, both in business and
in society generallythat you could stop people in the street,
someone from a small business through to an unemployed person
who has just lost their house, and they would say, "I don't
see it. I don't see it making a difference? Where is it? How is
it?" The challenge for any democratically elected government
of any colour at any time is: How do you get what you want to
do through to making a difference in society? The delivery mechanisms
are not doing the business. Now, how much of that is down to government
having the initiatives and making ideas and putting our money
into it and how much of it is not down to government but to society,
where the mechanisms are not working? We now have a situation
where you and I own nearly 70% of one bank and just under half
of another bank, and yet those banks are not lending and putting
money into the business economy in the way that they should be,
and at some point somebody somewhere has to be big and brave and
say, "You will". I think the community and the electorate
want to see that. I, for one, think the Government was absolutely
right to put the money in. None of us wanted to have to do it
but I see why they did it. Why do they not make a difference?
Q9 Mr Clapham: To sum up, Chairman:
Lord Jones, you are saying that the initiatives are good but it
is the delivery mechanism.
Lord Jones of Birmingham: Yes.
Chairman: There is lots of what you have
said that I would like to take you up on, but we must move on
to other areas. Lindsay wants to come in.
Q10 Mr Hoyle: Interestingly, and
quite rightlyI cannot disagree with what you have been
saying: we are both passionate about British manufacturing and
obviously recognise the housing problems in this countryif
we are going to stimulate the economy, we have to get house-building
going, which is the quickest way to get the wheels of manufacturing
turning. Do you share my concern that we have local authorities
sitting on money that does not belong to them? It is 106 money
which has been given by developers that could be used for social
housing, for building community centres, railway stations, whatever.
In my own council we have £3.5 million for social housing
and £9 million for other schemes which is 106 money that
they are not spending. We believe there could be up to £4
billion sat in accounts around the country that local authorities
are sat on, that they are not spending, and that would be a real
drive. Do you agree with me that we should be bringing in and
spending this money?
Lord Jones of Birmingham: And
factually they are statutorily allowed to, are they not?
Q11 Mr Hoyle: Yes. They are meant
to have spent it. They cannot spend it on anything else, so it
is sat there.
Lord Jones of Birmingham: It is
not the bit that they are not allowed to spend.
Q12 Mr Hoyle: No. But there is no
point having interest.
Lord Jones of Birmingham: No,
Q13 Mr Hoyle: I know some of them
have put money in Iceland, but ...
Lord Jones of Birmingham: I completely
agree with you. I think one of the ways out of this, linked in
with trading our way out of it, is, also, investing our way out
of it domestically, in the infrastructure. It is not just about
creating employment as you build whatever you build, a school,
an airport, a road or a house, but it is also that you are making
your economy more productive in the medium to long term, because
business enjoys better transport, better facilities, education
and all of that. There is a double win-win here: it is a short-term
job creator and it is a long-term productivity enhancer. But the
local authorities have to have the leadership to do it. Of course
one of the problems with this is that it is long term, is it not?
A democratically elected local politician, or, indeed, a senior
cabinet minister, probably is not going to see the benefit inside
the time to the next election of whatever it is they are. Politicians
are not known as people who are quite happy to take risk and then
let someone else enjoy reward. It was Harry Truman who said "It's
remarkable what you can achieve when you don't care who takes
the credit," and at the moment we could do with more of that.
But there is one aspect that we have to changeand local
authorities could do a lot here, as could central government,
and indeed, may I say, as could media and other vested interests,
and environmentalists come to mindand that is the planning
regime of the nation.
Q14 Chairman: Wait a minute.
Lord Jones of Birmingham: It is
no good you and I criticising local authorities and them turning
round and saying, "But I've got a planning regime that will
Q15 Chairman: We need to move on
to the main subject.
Lord Jones of Birmingham: And
if the great crested newt, by the way, is so rare in this country,
why is it in every building site in the land? That is what I want
Q16 Mr Hoyle: There is some good
news out there. If we take Optare, the bus builder, because of
the bus passes and older people going on them they are taking
lots of people on and the manufacturing of buses has taken off
in the North West. The second is the hundreds of new apprentices
that BAE Systems have taken on in the North West. That is second
to none. So there is some good news within industry, and we are
seeing growth in the North West.
Lord Jones of Birmingham: If BAE
Systems are doing something big in the North West, I bet you there
will be loads of small businesses that are doing better and exporting.
In each of the regions in this country I can take you to small
businesses doing fabulous stuff in the Gulf, in China, in India,
and still doing it today and making money. Do I see that as the
first item on the BBC? No way. I would love to take Robert Peston
to some quality and successful businesses.
Chairman: Let us move on.
Q17 Mr Hoyle: I take it he is off
your Christmas card list.
Lord Jones of Birmingham: No,
he is not actually. I would send him one, but I would send him
one made in Britain and say, "Come with me on a journey to
Q18 Mr Oaten: Do you blame him?
Lord Jones of Birmingham: Do I
blame him a bit?
Q19 Mr Oaten: Yes.
Lord Jones of Birmingham: I do
not blame him a lot, but I blame him a bit, yes. If you took a
page of newsprintand everything else is equal and you have
one final bit to filland you had a good news story and
a bad news story about this recession and everything else is equal,
I reckon he and a lot of his colleagues would choose the bad news
story. By the way, I do not think at the end of the day I blame
them, on the basis that they will say, "Bad news sells. And
bad news sells better than good news. Don't blame me," they
will say, "blame the reader and the guy who buys the print".
There is an element of truth in that and perhaps we have only
ourselves to blame.