Exporting out of recession - Business and Enterprise Committee Contents

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 definitely—and that is good because it is a job creator in building, and I hope it also provides good homes for many people—but 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 spending—it was a complete luxury item that he was selling—and 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 homes—I do not belittle that for one minute—that 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 investment—companies are still going to be looking for places to invest—and at the same time to ensure that we preserve—and I think this is probably the greatest danger medium term of this recession—the 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 manufacturers—automotive, yes, but others: Rolls Royce Aerospace, JCB, whatever—they 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 up—and it will come up in the morning, the world will go round, this will pass—those 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 because—

  Lord Jones of Birmingham: Well, the different sectors of the economy.

  Q5  Chairman: — we want to talk mainly about trading—as you have said, exporting out of recession.

  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 on.

  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. Secondly—and this is the biggest thing I would criticise them for—I 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 is—and I see this everywhere, both in business and in society generally—that 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 rightly—I cannot disagree with what you have been saying: we are both passionate about British manufacturing and obviously recognise the housing problems in this country—if 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, quite.

  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 change—and 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 mind—and 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 not—

  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 to know.

  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 success".

  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 newsprint—and everything else is equal and you have one final bit to fill—and 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.

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