Examination of Witnesses (Questions 320-332)
MR DAVE
OSBORNE AND
MR ROGER
MADDISON
10 JUNE 2009
Q320 Chairman: Thank you. Before
we move onto too many areas—we want to talk about short-time
working and training support—could I just ask you one specific
question about the Automotive Assistance Programme? Are you surprised
it has taken so long to close the deal on support for Jaguar Land
Rover, which is another very important regional company, a national
company as far as I am concerned?
Mr Osborne: I have obviously,
as you would expect me to, taken the time to read the evidence
from other witnesses prior to coming to today's proceedings. I
have been heavily involved in Jaguar Land Rover as the lead negotiator
and we have done substantial things in JLR, which I think are
well documented, in order to protect employment in the first instance.
I know that the company have made an application to the programme
and I know it has publicly been announced that they have been
awarded £340 million from the European Investment Bank. I
think the company are frustrated. Our members, however, are angered
at the lack of progress and I will tell you why they are angered.
One of the major considerations which every automotive company
is going through at the moment, given the lack of liquidity, is
the need to make timely investment into the future. Actually,
with the lack of progress on this JLR are now in a position where
some of their investments, because of a lack of cash obviously,
are in serious jeopardy. If we are serious about this industry
remaining competitive, then delay, whatever you want to call it,
is not acceptable. One thing I would be interested to know, because
I am not aware of the details of the application, obviously, and
what would be very interesting to know from this Automotive Assistance
Programme—and perhaps you could ask the Minister the question
when he gives evidence in a moment—is exactly how much money
has left the Exchequer, to which company, and how much have they
had? That will be a very interesting answer.
Q321 Chairman: I suspect it is quite
a round figure!
Mr Osborne: Yes, I know, very
round! Absolutely.
Q322 Chairman: Very briefly, because
I want to move on to other areas, Mr Maddison would you agree
with the analysis which I and this Committee have heard in evidence
that actually JLR is crucially important to the UK components
supply sector as well, a real lynchpin?
Mr Maddison: Oh, absolutely. We
have got somewhere around 15,000 people who work in Jaguar Land
Rover. We have probably got 50,000 people who rely on Jaguar Land
Rover parts throughout the UK, not just in the West Midlands,
but the West Midlands would be absolutely decimated, for instance,
if anything was to happen to Jaguar Land Rover. Many of those
component companies right now are holding on with their fingertips,
a lot of people have been laid off for quite substantial periods
of time and companies are in real financial trouble at this moment
in time. Two GKN plants, three Visteon plants, which have all
done work for those companies over the time have all closed over
the last few months, or plan to close over the next few months.
Jaguar Land Rover is absolutely paramount to the motor industry
and paramount to local economies.
Chairman: Thank you for that.
Q323 Roger Berry: I ought to declare
an interest as a member of Unite. Could I turn to the temporary
short-term working compensation scheme, temporary wage subsidies
effectively? I personally do not need persuading that there are
circumstances where that is necessary and I do think this is one
of those circumstances. However, I would like to ask what estimates
you have made of the cost of such a scheme for the automotive
industry.
Mr Osborne: I think you may have
seen a written document which we have actually submitted as a
proposal on temporary short-time working. I am sure that was sent
to the Committee for consideration.
Roger Berry: Yes, there is reference
to, is it £30 billion?
Q324 Chairman: It cannot be that
much. It must be less than that.
Mr Osborne: I have seen evidence
which has been submitted to the Committee which talks about, I
think it was, £1.2 billion for 600,000 jobs over a twelve
month period. I think that is what I saw and Members of the Committee
will obviously know whether that is right or wrong in evidence
and other debates which have taken place. I think the point we
would make is that we see temporary short-time working and the
subsidy, or scheme, as a very, very important role—a short-term
role, temporary role—to take our companies through what
is undoubtedly an unprecedented crisis for this industry. Our
view is simply two-fold: one, the retention of skills and the
avoidance of redundancies to meet the upturn when that comes is
paramount if we want to be competitive. The days of carrying huge
surpluses of labour have gone and primarily we are lean operations
and any more loss of jobs as a result of this downturn we believe
will leave us with a skills shortage when the recession is over.
There are many examples, I think, where as a nation we once were
leaders and we have seen skills disappear and they have never
come back, whether that be machine tools or -
Q325 Roger Berry: I absolutely buy
into that argument. It may be that now is not the time to do it.
It is my ignorance. I have skimmed your document for the Committee
and I cannot find the numbers there. If at some stage, Chairman,
we could get some idea I think that will be very helpful because
if you are talking about wage subsidies it means that people in
employment will pay more tax, receive less benefits, so it has
got to be the net cost -
Mr Osborne: I think I have seen
an estimate somewhere of £300 million for the car industry.
Q326 Roger Berry: I think from the
Committee's point of view it would be useful if we can bottom
that out so that we do know what we are talking about, because
I had perhaps misread the memorandum, so forgive me. My other
question really is, you do rightly point out that other EU governments
provide support for such schemes. Are there any particular lessons
you think we can learn there and are there any particular countries
you think we should be looking to for not so much advice but for
ideas, sensible ideas?
Mr Osborne: Obviously as a national
officer I move across Europe in my role with companies which have
European bases and Germany is normally held up as the example
of best practice. I think if you look across the EU there are
different countries which have different methods because I think
most of the methods I have seen are basically state-funded, social
provision applied to short-time working. That is something we
do not have here in the UK and I think there are different amounts
of payment or different periods of time, whether you are talking
of Germany, Belgium or Spain. I can give you a sort of focus on
one. What we see as the issue is primarily the temporary short-time
working subsidy should be viewed in the context that it also avoids
taxpayer costs in terms of job losses, redundancies, unemployment,
lost tax revenues. So I do it on that basis from one end. Secondly,
of course, we can pour money into Job Centres and for some reason
that is much more palatable Taxpayers' money into Job Centres,
and we do not get the same response or outcry, as when we talk
about putting money into a strategic part of this industry going
forward: and I, for one, find that absolutely unbelievable. It
is right to do it in Job Centres to find people alternative work.
Our experience is, by and large, lower paid work, which even when
those people are back in work you are not getting the returns
you had while they were in work because inherently you do not
get the same tax revenues from low paid jobs and you certainly
are paying more tax credits on low-paid jobs. So I think we need
to look at that from an avoidance of cost issue. It also should
be viewed in the context that it allows other automotive countries
which we are in direct competition with to actually subsidise
the cost of their product because actually the state is picking
up part of the bill. Therefore, our industry has to be even more
competitive just to stand still. So it is viewed in that context,
and of course as far as we are concerned doing nothing here is
not an option on short-time working. I think all the Committee
Members know of the redundancies, the short-time working, and
I think it is important that the Government and yourselves clearly
understand the sort of financial sacrifices that our members have
taken in this downturn. Not only are we talking about short-time
working but a pre-requisite of short-time working will be people
taken off shifts where they have lost up to 25% of their earnings
in the first instance and they have lost another 10% in terms
of short-time working, so these are substantial cuts in pay. Therefore,
on top of that we have understood the need to ensure that our
members stay in work during this short-term downturn, so we have
negotiated with employers other reductions in pay. We have negotiated
pay freezes around the table, which is quite novel for the car
industry, I can assure you. Miss Kirkbride will know exactly what
we have done in Jaguar Land Rover. So our members have paid quite
a sacrifice and what we are not asking for here is a bail-out,
I want to make that clear, and anybody who believes that is misrepresenting
the facts. What I would say is that our members are taking those
sorts of sacrifices in order to preserve their jobs and maintain
their companies because they see the importance of doing that.
They understand that without the business you can have the best
terms and conditions in the world but without a job they are totally
irrelevant, and you contrast that with the sort of reward which
Sir Fred Goodwin walked away with, his performance in the Royal
Bank of Scotland and our members' performance in the car industry.
Q327 Chairman: The average bank employee
in the High Street would have much the same view about that.
Mr Osborne: Yes, I am sure he
would.
Q328 Mr Bailey: Can we just go on
to Train to Gain and training support, which in part is designed
to meet this particular need but give a training impetus with
it. So far how effective do you think it has been in helping to
support manufacturers? Do you think it has saved many jobs? Can
you give some sort of assessment?
Mr Maddison: I am not sure how
many jobs that has saved. I am convinced that done properly it
could save a lot of jobs. In the industry under normal circumstances
they are thriving profitable companies which work very lean sort
of production techniques and it leaves little time to do a lot
of job training when you are actually in work. We have an opportunity
now, when people have not got so much work, to put a day aside,
or whatever, if companies could afford to do it, to actually train
people now and I think we would be far better served with the
money that is used for training to train people to keep them in
work rather than train people who have lost their jobs to try
and find new work. So Train to Gain does great things, I am sure,
for unemployed people. I am not sure it has done a lot for working
people at the moment, but I think it could do an awful lot for
working people because they have now got the time. All they actually
need is the investment.
Mr Osborne: Yes, I think Train
to Gain has been successful and we welcome that. As a result of
the relaxation of the rules I think there is a significantly bigger
take-up, exceptionally more of a take-up on the Train for Gain
scheme. Our issue, however, is this: where we encourage employers
to recruit apprentices particularly, I think the financial pressures
again are such that it is not the number one priority for employers,
but we are always conscious of the need to develop apprenticeships.
I will say that whatever we do with Train to Gain and whatever
the future for Train to Gain, that itself is not enough. At the
end of the day it is great training people. What we are trying
to do here is establish that this industry is still in existence
so that when we have trained the people, whether it is via apprenticeships
or further Train to Gain systems, they have got jobs at the end
of it to go into and that is the real issue as far as the industry
is concerned. We welcome anything which will lead to an enhancement
of skills. You will know that in Wales on the ProAct scheme the
regional government is inviting applications from employers to
enhance the skills and where they are meeting that criteria then
ProAct is actually putting in place a sort of temporary short-time
working subsidy in order to subsidise that training. That is the
sort of thing we would like to see.
Mr Bailey: We will just talk about Wales
in a moment.
Chairman: Not for very much longer because
we are running out of time.
Q329 Mr Bailey: I shall be as brief
as I can be. The point I am trying to get to is what evidence
has the union got of the use of this budget to (a) preserve jobs,
(b) to enhance skills, because if there is effective evidence
that that provides a rationale for in effect extending the budget—I
know the automotive sector has already had the budget extended
from £65 million to £100 million—it underpins
the points which are being made, in effect, to justify some sort
of public subsidy to offset short-time working? Has the Union
got a body of evidence which it could put to the Government, to
Members such as myself who are broadly sympathetic to what you
are trying to do, to prosecute the case?
Mr Osborne: The budget was increased
from, I think you are right, £65 million to £100 million.
I know for a fact that that has enabled Jaguar Land Rover, for
example, to this year start more apprenticeships than they have
done for some considerable amount of time. We are on the brink
of new opportunities for the industry, particularly around electric
vehicles and electrification of the car, major opportunities for
this country to be a world leader in that expertise. Therefore,
what we are trying to do—and Jaguar Land Rover is a classic
example, where they are spending £800 million of their money
on developing new engine technologies, obviously, in order to
meet the challenges of the future and to meet the requirements
of the low carbon footprint out of Europe—that is a major
opportunity for us, certainly in terms of the budget, to use that
as a mechanism in the first instance to add value to that business
-
Chairman: We are really running out of
time. I think we understand the point you are making, Mr Osborne,
and we have a lot of sympathy for the point you are making as
well.
Q330 Mr Bailey: I would like to explore
this much more, but I am conscious of time. First of all, on the
basis of the Welsh experience have you got any indication there
of the success it has had, the ProAct scheme? I appreciate it
is early days, but obviously any indication helps to build the
case for it. Secondly, are the other Government skills initiatives
working, particularly the package for unemployed people?
Mr Osborne: All the evidence we
have had from the Welsh experience is that what they have done
is they have taken applications from companies around short-time
working and the temporary short-time working subsidy is not a
recipe for having people sitting at home doing nothing, it is
for utilising the time, not spending it on production but as part
of a series of programmes during working time in order to maintain
and enhance the skills so that we are best placed in the industry
to meet the upturn and the challenges of the future when the recession
is over. I think it is as clear as that for us.
Q331 Chairman: On the other skills
initiatives is there anything else you want to comment on, the
Government's skills package at present, which is relevant to this?
Mr Osborne: No. To be frank, outside
of Train to Gain there are no employers' views and we have encouraged
the use of that. Primarily we have been trying to address problems
jointly with business in terms of trying to enhance their cash
flows and liquidity issues by virtue of changes to terms and conditions
of employment.
Q332 Mr Bailey: The point was actually
about unemployed people and special training given to them. There
is funding for 75,000 people.
Mr Osborne: I think where we lose
people at work employers are obviously involving Jobcentre Plus
in trying to assist those people move from losing their jobs into
new employment, but with unemployment rising as it is dramatically
the opportunities are limited, to say the least.
Chairman: I am afraid we are going to
have to stop there. Thank you very much indeed for coming in and
we are grateful for your evidence. Thank you.
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