Exporting out of recession - Business and Enterprise Committee Contents

Examination of Witnesses (Questions 140-159)


23 FEBRUARY 2009

  Q140  Miss Kirkbride: So what has been announced already would be enough to be working for Jaguar, to take a specific example?

  Lord Jones of Birmingham: If there were sufficient credit in the system. It is a big one—if there were sufficient credit in the system. It is easy to say quickly, "Let us get the goods in market and have people being able to borrow money so they buy a Jaguar". That has taken five seconds to say. That is a huge ask. Is that sufficient? Yes, in many ways, but it is a big thing. Secondly, if we are going to carry on asking companies like Jaguar to green up what they make—and there is nothing wrong with that but it is expensive—then direct, proportionate, taxpayers' help there is a good thing. Third is preservation of the skills base.

  Q141  Miss Kirkbride: What about someone like LDV that has come out this last week as a potential cause for concern? Its MD on the radio this morning said that it had not made a profit in the last four years and yet clearly it will be looking for taxpayer insurance for any loans that it takes out. What would your take be on that?

  Lord Jones of Birmingham: I think this is very difficult.

  Q142  Miss Kirkbride: But you are sitting on Mandy's shoulders giving him advice.

  Lord Jones of Birmingham: As you may imagine, I do answer the question, do I not? I have got a reputation for that, and I will not duck it. It is difficult because I am a Brummie. They have been making vans there for as long as I have been alive. It is difficult because there are good, decent people who are in this predicament through no fault of their own. However, there is a difference in downturns and recessions between two types of business. There are those who fall victim to this cyclical nature of economies that go into recession because either what they make or the way they make it or where they make it is no longer in tune with where society has moved to. I have in mind Woolworth's. I think Woolworth's is a classic example. I say this with huge sensitivity to the 27,000 people who worked there and anybody saying, "You would not be saying it if it was you"; I do understand the issue, but nevertheless Woolie's is caught by an economic downturn of a cyclical nature and perhaps LDV is partly caught in that. That is different from this type of recession, ie, starving the business environment of liquidity so they do not go and buy a JCB, they do not go and buy a Jaguar, they do not go and buy a Nissan or whatever. That is not the same as the other type and there are two different victims in this recession: those who are caught only because of the banking crisis and those who would have been caught in a downturn anyway. It makes not a jot of difference, does it, to the poor soul who is made redundant in either case who cannot pay his or her mortgage in the morning? It makes not a jot of difference to the taxpayer who has to look after that person in the safety net of state benefit, but it is a different way of analysing what you would do. I will criticise the Government if they are not getting behind the ones which are first-class products and are there only because of the financial crisis. It is more difficult to criticise the Government for not doing something about those that are caught in the normal cycle of an economy.

  Q143  Miss Kirkbride: In terms of the way those two separate categories are handled, to go back a little bit on what we have said, it is really for the initiatives that have already been taken in terms of loan guarantees to become effective and then for that assessment to be made not by government ministers but by the banks which must resume their lending and the decision they then take is fine and the Government should not get involved?

  Lord Jones of Birmingham: Are you saying that with relevance to LDV or generally?

  Q144  Miss Kirkbride: LDV.

  Lord Jones of Birmingham: No, I do not think that is applicable to LDV at all. Of course, it is applicable partly to LDV, but no, you should not be looking at these government initiatives and saying that application of all those in the morning would solve LDV.

  Chairman: I do not think that is what she said.

  Q145  Miss Kirkbride: No. I did not explain myself correctly. What I am saying is that, subject to the Government's initiatives working and the credit getting through, the assessment of that insurance-backed credit by the Government should be made by the banks.

  Lord Jones of Birmingham: Oh, right, so in other words—

  Q146  Miss Kirkbride: Or these companies.

  Lord Jones of Birmingham: And the banks will do their usual task of picking winners as opposed to the Government?

  Q147  Miss Kirkbride: Yes.

  Lord Jones of Birmingham: Yes.

  Q148  Miss Kirkbride: And then que sera.

  Lord Jones of Birmingham: Yes, but as long as the banks are doing their job. I get called by a building company down in the south west and they want to borrow £20,000 from a bank with "Scotland" in its name, so you have got a 50/50 chance of guessing the right one. He has got a letter and it basically says, "Here it is and after two years it will have cost you £23,000 to borrow it". Why do they not just take two lines to say, "I do not want to lend you the money"?

  Q149  Chairman: Yes, but hang on. You did declare your interest at the beginning, the fact that you are working for a bank. I have to say my understanding is that all banks are going to be doing the same thing. I am picking on the ones that are state owned and have names.

  Lord Jones of Birmingham: Except—

  Q150  Chairman: HSBC is doing the same thing.

  Lord Jones of Birmingham: Chairman, I am not going to comment on that. What I am merely saying is that you as a taxpayer have no say over what Standard Chartered or HSBC say. You do have an involvement in the other two.

  Q151  Chairman: Except, by definition, they are the banks in the biggest trouble and therefore have to rebuild their capital whereas the most prudent, and we will take HSBC, has got more liberty which it is not using.

  Lord Jones of Birmingham: Quite right; I agree with you, but you were asking me who would decide—

  Q152  Miss Kirkbride: Who is going to decide, yes.

  Lord Jones of Birmingham: Your question was, "Would you leave it to the banks?".

  Q153  Chairman: Yes.

  Lord Jones of Birmingham: I am answering you, yes, if the banks did the job. If you are a small business down in Taunton and you are told in a letter, "You can have your £20,000 but it will cost you £23,000", you might as well just say, "I do not want to lend you the money". The banks in that case, all other things being equal, stack it up, make sure it is right, are not doing their job. The reason, Chairman, I chose that was not a cheap jibe at rivals of the bank that pay my wages. It was because the Government has a stake in those and not any other.

  Chairman: Actually, the bank that is causing most difficulty to small business anecdotally is one you have not even mentioned today.

  Q154  Miss Kirkbride: What I was meant to be asking you about was training policy. In earlier exchanges you had with Mr Hoyle I did not disagree with what you were saying about trying to back Britain more particularly when it comes to procurement but I wonder how you reconcile that little love-in with the Buy America programme that we have had from Obama, which, of course, has caused quite a lot of shock waves around the world.

  Lord Jones of Birmingham: You know I come to this Committee as an inveterate free trader. I do not support tariffs, I do not support a Buy America programme.

  Q155  Miss Kirkbride: What would be the difference be?

  Lord Jones of Birmingham: I am about to explain. I would not support putting into legislation a Buy British programme, no matter how much I would find that frustrating, because we cannot really go round to the French and the Germans and Americans and say, "Why are you protecting yourselves?", if we are doing it too. I think our love-in was actually about the sentiment to procurement where we do not even give ourselves a chance. We do not even compare apples with apples. We put our companies up against different procurement processes in different countries or in this country where they are not even competing on a level playing field. I would not support protectionist measures in the short term, let alone in the long term. In the short term it would not be in our interests as a nation because we are such a free trading nation and we want to pay our way in the world by trading round the world. You cannot do that if you protect your home market in an unfair way, but in the sentiment of procurement we really do not give ourselves even a level playing field on which to operate and I think that is where the love-in was.

  Miss Kirkbride: As I say, as much as I have a lot of sympathy with your love-in, a true free trader would not allow what Mr Hoyle said, which is to say that you take into account the taxes paid in one country. You say wherever the goods are made the cheapest that is the place where you buy.

  Q156  Mr Hoyle: That is not what I said.

  Lord Jones of Birmingham: Do you think it is right that a Cabinet minister in this country goes round in a car made in Japan, not, notice, a Japanese car, because I think there is nothing wrong with him going round in a Japanese car made in Britain, nothing wrong with that at all, but do you think it is right? Just answer me that.

  Miss Kirkbride: It is competition, is it not? I feel I should point out that we are asking you the questions.

  Mr Hoyle: I want to clarify whether I have been used.

  Miss Kirkbride: But the point is that in proper free trade you would buy the goods and services which are made where they are done most cheaply in the world and are the most designed for that kind of production, and therefore you increase the purchasing power of the country that is buying those goods and services so that they can produce more. You do not take into account the whole macro view of it all. You just do it straightforwardly on where the cheapest things are made. You buy them even if they have come from Japan because of the benefits that would ensue. You do not take into account the more holistic view of the loss of tax and income and jobseekers' allowance that would be created by buying there, which is what Mr Hoyle did say.

  Chairman: Mr Hoyle wants to clarify what he actually said.

  Miss Kirkbride: Let him clarify what he said. What did you say?

  Mr Hoyle: What you are not doing is comparing where I started from. We are on about a state-owned factory in China which is completely at an advantage because it is owned by the country so therefore how do you end up putting it in China when you would not even be able to sell—

  Chairman: We must not be protective.

  Mr Hoyle: Obviously, a state-owned factory has a complete advantage when it is going to do work for the UK. The point on the Japanese was that it is not cheaper, far from it, and the fact is that it has done all "It's green" in the valuation and the fact is, as we have said, that it has got a bigger carbon footprint than British built cars because it has been shipped round the world.

  Miss Kirkbride: You have made the point, so what things should be taken into account?

  Chairman: Can I from the Chair point out that that you are not a free trader because you think a British minister should drive a British-made car? That is a perfectly reasonable view to hold but it means you are not a free trader.

  Mr Hoyle: I will answer it.

  Chairman: No. It is a perfectly reasonable view and I have got a lot of emotional sympathy with it, but it means you are not a free trader.

  Mark Oaten: A pick-and-mix free trader.

  Mr Hoyle: Woolworth's is, essentially.

  Miss Kirkbride: To go back to where we have been.

  Q157  Mr Hoyle: A free trade alliance.

  Lord Jones of Birmingham: Ah—ping! You seem to be saying that most free traders would find a convenient place where they are not. Is that what you are saying?

  Q158  Chairman: If you think a British minister should drive a British car you are not a free trader.

  Lord Jones of Birmingham: I believe that if my wages are paid by the British taxpayer and paid by people who risk their livelihoods and invest in Britain the minister or a civil servant provided with a car should be supporting the people who pay their wages. If there is an area where that car encounters no competition, for instance, to my knowledge I do not think Britain makes a people carrier, clearly that is different, but where you can and within the realms of competition then I believe that someone who relies on the taxpayer for their wherewithal should be supporting those taxpayers' jobs. You are telling me that conflicts with genuine free trade?

  Q159  Miss Kirkbride: I think it gets very difficult.

  Lord Jones of Birmingham: I could go into the early hours arguing with you on that.

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Prepared 24 June 2009