Risk and Reward: sustaining a higher value-added economy - Business and Enterprise Committee Contents



EXAMINATION OF WITNESSES (QUESTIONS 360-379)

TUC

4 NOVEMBER 2008

  Q360  MR HOYLE: Did I get it right that you were saying that the interest rate should be cut to 3%? How do you feel about the Government asking for a 12% return on its money from the banks? Is that having an effect as well? Do you think if that was reduced, there would be a saving in redundancies and that it should be done voluntarily?

  MR PAGE: Yes. Basically what we are calling for is that the banks should enter into discussions with the trade unions to explore all the options for how those mergers take place with a view to minimising the pain for bank workers. It has not been proven that there have to be compulsory redundancies at the moment.

  Q361  MR HOYLE: You are saying that should be the last resort instead of the first resort? I think that is the message and it is clear that that has not been coming out. Hopefully, we can get that. Do you think the Government is asking for too much return on the taxpayers' investment?

  MR PAGE: No, I do not think so.

  Q362  MR HOYLE: That may ease the effect on the banks?

  MR PAGE: Yes.

  Q363  MR OATEN: I hate to be brutal about it but there is a total inconsistency in your argument, as far as I can see, because on the one hand you are saying the Government is right to get its 12% pay-back from the banks but, on the other hand, you are taking away the ability for the banks to be able to achieve those payments. Two of the ways in which they might be able to achieve those payments would indeed be to make 20,000 people redundant to cut costs with the merger; and the other way of course they can help to achieve those payments back is to delay the point at which they do in fact pass on interest rate cuts. With the one hand you are endorsing the fact they have to pay the Government back but you are taking away their levers for achieving that?

  MR PAGE: I do not think we are taking anything away.

  Q364  MR OATEN: You are trying to tie them down to such an extent that they will not have the freedom to perform.

  MR PAGE: What I am suggesting is that they enter into full discussions with the trade unions and explore all the options on how they move forward to repay the government debt and to try to do that in such a way that compulsory redundancies are at a minimum. I am not suggesting that there will be a pain-free way of doing this because there will not be. We in for a lot of pain right across the economy over the coming months. We are saying that we have recognised trade unions in place and we would encourage the banks' management to negotiate and to discuss all the options with those trade union representatives.

  MS O'GRADY: There is a broader point or headline point, which is about the equality of sacrifice. I am not sure how far the message has got through about just how angry ordinary people, and ordinary working people, are about what is perceived to be an inequality of sacrifice. The very people who are responsible for getting us into this mess in the first place appear to be still paying out bonuses, still requiring that they have autonomy of action and are not accountable to broader social interests, and workers are being expected to pay with their jobs and their pay and their security.

  Q365  MR OATEN: Is that not an argument actually for the banks sacking some of those staff in a merger? I would have thought that the public would be looking for the banks to lose 20,000 or 30,000 staff if they merge.

  MS O'GRADY: There is a very big difference between some heads rolling in the board room and ordinary workers on the bank floor losing their jobs. I think there is also a real danger of a counterproductive approach here where we see a contraction in employment amongst lower, middle income workers, who are the very people who spend their money in the local shops and local business that we need to keep running here. I think we need to be very careful about some of the longer-term impacts of the policies that are pursued. The very simple point here is that we want dialogue and we want agreement in the way that we pursue it.

  Q366  MR WRIGHT: This question is slightly wide of the mark. What are the TUC views in terms of what has been discussed in recent weeks about the Keynesian type of policy of buying yourself through public services out of problems which will probably create construction jobs and numerous other jobs? What is the TUC policy about that?

  MS O'GRADY: We are certainly in favour of exploring the extent to which we could bring forward spending on infrastructure, including housing. When we have a major housing need in this country, it would seem sensible to make sure that we create jobs in the building industry and also create apprenticeships for young people. There are other projects that could be looked at too, including transport, and broader infrastructure issues that I think we need to consider investing in: how do we protect our skills base through difficult times?

  Q367  CHAIRMAN: We will come to that important issue at the end of the session.

  MS O'GRADY: There are broader issues there too, and making sure that those who are least responsible for this crisis are afforded some protection throughout it. Public services, including I would say protecting some of our Job Centre Plus jobs, will be very important at this time.

  Q368  MR BINLEY: Let me put a general question to you first. There is a general consensus that we need a sort of national or business strategy. My guess is that the consensus will break down slightly lower down when you dig a bit deeper into what you want in that strategy. Could you explain that very briefly to me so that I can have an understanding of what you want from a national strategy?

  MR PAGE: What we have said in terms of our industrial strategy, and I do not know if this is the point you are driving at, is this. We have been talking about this for some years now and we have been saying that if you look across the big economies in the world, not just in the Western world but in growing Asian economies as well, different countries tend to have strengths in different areas. We have asked whether it might be a good idea for us to sit down and look at the areas of the UK's economic strengths, to look at what we are good at or what we could become good at in the area of globalisation and to try to gear our economic policy to supporting those industries. We have been calling for that for some years. A couple of years back we put this to the Manufacturing Forum. We had some quite fruitful discussions with the CBI, EEF and others about fleshing this out. We would like to raise this again. We feel that, especially in the current economic circumstances, the time might come for this idea and you might be surprised at the support across industry for a strategy that asks: where are we strong and should that be our area of focus?

  Q369  MR BINLEY: That is exactly what I was talking about. You did say in an earlier submission that the UK should identify the sectors where the UK is or could be successful and develop an industrial policy accordingly. That is exactly what you said and you have told me that that is exactly the same. Can I ask a quick and simple question? Can Government pick sector winners and sector losers, or is that a market role?

  MR PAGE: We gave some figures in our second submission that showed manufacturing job losses in the UK and compared the rate of decline to job losses in other major European economies. The one thing that other economies do that we do not do is look to where they can get the biggest bang for their buck, if you like. There are all kinds of support mechanisms that come through BERR and other government funding channels. In the UK those go right across the board. The UK does not distinguish, frankly, between a dying industry or a growing industry. We look with some envy to the growth of green technology in the Scandinavian countries or in Germany where those governments have said, "This is a growing sector". If there is one area of manufacturing that is going to grow in the next 50 years, it is going to be green technology. Let us get on the bus now rather than after the bus has left and other countries have stolen the advantage. That is really what we are trying to suggest. We quoted the sectors that Lord Sainsbury quoted because we felt that that was a very forward-thinking report. He identified some quite imaginative areas where we could grow if we focused on those areas.

  Q370  CHAIRMAN: You added the automotive sector to his list.

  MR PAGE: Yes.

  MS O'GRADY: May I add that perhaps rather than the language of picking winners and losers, what we prefer to talk about is an intelligent, modern strategy, governments intervening to accelerate success, which certainly in green industries is something that they are crying out for.

  Q371  MR BINLEY: That sounds just as much a sound bite as mine.

  MS O'GRADY: If people are more comfortable with it, then that is all right.

  Q372  CHAIRMAN: I accept this question is encompassed by this and on the Sainsbury side there is a list of sectors where they appear to be strong and directly relevant to the higher value-added economy we want to create and maintain in the UK. You have added automobiles as a sector and I agree that should be there. We should salute Lewis Hamilton of Formula 1 today of course. Can I put two other much more controversial ones and see how you react to those? He says, rather coyly perhaps, "new sources of energy". Nuclear power perhaps would be another one where we could be a centre of excellence and he has not listed the defence sector either, which is another area where a lot of very demanding, high tech work is done.

  MS O'GRADY: The TUC's position has always been for a balanced energy policy, which includes nuclear as much as renewables and also includes clean coal technology. We are hoping to build more consensus around that.

  Q373  CHAIRMAN: So not just new sources of energy as Sainsbury says, but also making existing sources of energy better as well?

  MS O'GRADY: Towards new technologies, absolutely.

  Q374  MR BINLEY: We have looked at the rather long term and the big picture. Can I come to the specific situation we now find ourselves in over the next two years maybe and ask what your views are on the proposals the Government has made to support business so far in that framework and what additional proposals you would like to see? Let me give some background just very briefly to this. My concern is that we have a very scattergun approach to the whole situation at the moment and I am not sure that we are hitting the real targets. That is where my question is coming from in this respect. Do you have any comment to make in that regard?

  MS O'GRADY: In general terms we have been very positive about the initiatives that the Government has taken so far. The test will be in their implementation—real businesses being able to get hold of the credit that allows them to keep operating and keep people in work. There are a number of other areas where we would like to see more action. Certainly on the housing front, we believe that we need up-front, bold action there.

  Q375  MR BINLEY: In what way?

  MS O'GRADY: Housing is not just a social need, though obviously it is a very important social need, and it is not even just a job-creator for construction workers; it is also crucially a way of keeping people mobile. You will be very aware and familiar with the arguments around the need for more council housing and better quality council housing and to build that in order to allow for greater positive flexibility in a workforce that may well have to be more mobile in order to get hold of the jobs that do become available and fill the vacancies that are still in the British economy. There is a wider economic benefit to house building as well as meeting social need.

  Q376  MR BINLEY: You may be surprised to know that I am a supporter of council house building and always have been. Let me move on to this business of the relationship between banks and business because that is absolutely crucial over the next nine months. You did talk about retaining an infrastructure not only of a skills base but also of an organisational management base in that respect as well. I am concerned that banks no longer have the expertise to deal at the very lowest level. The bank manager did live in a businessman's cupboard 25 years ago; they have moved those decisions up and they do not have the expertise at local level. Does that concern you? Am I hitting the right sort of target there when I point this out as a real concern?

  MS O'GRADY: That is certainly borne out I think from some of the feedback that we get through our involvement in regional development agencies, regional LSEs and so on. It is certainly a concern that we would share, particularly as I say when it comes to the real economy and new and potentially growing areas like green industries. I would add one other concern, though, and something else that the Government could do. In our discussions with green industry leaders and unions representing workers there, a key issue is about certainty of policy framework. If you take something like the feed-in tariff and the potential that offers for new and growing companies that can provide community scale energy generation, what they really need to know is: where are we going with that policy; when is it going to kick in; and on what scale? Some of that information just is not there yet. It is a current issue.

  Q377  MR BINLEY: Let me come back and dig just slightly deeper and it relates to what the Chairman said about losing 160 jobs in his patch just yesterday because that suggests to me that there is not enough real knowledge about whether a business is profitable or whether they have had a cash flow hit because of an extension of their debt repayment or a one-off hit because of a bad debt not paid. It is that level of understanding, the difference between understanding whether a business is viable or whether it is not. I do not believe they are making those decisions. What are the ways that we could make those decisions and then go to the bank with a health check in that respect? Are there any other ways?

  MS O'GRADY: We have always argued for a stronger role for RDAs; there has been patchy performance but in many areas they have been strong champions of local and regional businesses. I think we do also need to counter this British disease of short-termism, decisions being taken around short-termness rather than long-term investment.

  Q378  MR BINLEY: I have one more question. Does the provision of the substantial funding by DIUS suggest that some of its responsibilities are key to business and consequently that these responsibilities should be transferred back to BERR?

  MS O'GRADY: My own view and the view of the TUC is that the reorganisation of skills being combined with innovation and universities in one department has been a good move. I think the current Secretary of State in many ways has demonstrated some of the most advanced thinking about aligning skills strategy with industrial strategy. Certainly his speech last week at a breakfast showed very clearly his understanding of areas where Britain is strong and needs additional skills investment to try and grow jobs and grow industries and prosperity in a way that perhaps I would like to have seen from other parts of government. I think he is on the right lines there. One of the key problems for us of course is that we still in Britain have one in three employers who do not train at all, despite the very significant publicly-funded offer that is on the table in the form of Train to Gain.

  CHAIRMAN: We will get to training in more detail later.

  Q379  MR HOYLE: Can I take you on to looking at innovations, rather than R&D and focus on that? How can the Government actually extend its support for innovation and innovations within the service industry beyond science, technology and R&D?

  MR PAGE: We were very supportive of the Innovation Nation White Paper earlier this year. The White Paper breaks down innovation into the different components. I think this is why innovation is such a difficult subject. People have a sense of what we mean when we talk about skills but when we talk about innovation, we mean lots and lots of different things. An area of innovation we are particularly interested in is enabling the workforce to be more innovative in their everyday experience in work. That links with skills policy of course because an unskilled worker cannot be innovative in the way that a skilled worker can be. Ten years ago when people talked about innovation, they talked about the latest piece of machinery. Now we talk about innovative management practices, devolving power down to the shop floor, giving working people the freedom to arrange their work in a way that is most flexible and constructive for them. Trade unions of course are well placed to enter into discussions to introduce those innovative working practices. We would certainly like to see a focus on that.


 
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