Examination of Witnesses (Questions 80-89)
NICK BEAUMONT-JONES,
VIV RAYNER
AND DAVID
ROSSER
8 JUNE 2009
Q80 Mr Drew: Can I just make one
rejoinder? If we made this sector-specific—clearly, the
sector most at risk is automotive industries—would that
make more sense, and would we get more unity? I accept that there
is a dilemma if you talk about the whole of manufacturing or agriculture
or whatever. If we made it sector-specific, would that unify the
core, and do you think Government would be more receptive?
David Rosser: I cannot say whether
Government would be more receptive, but it would probably unify
the position. It reduces the overall cost the public purse, and
clearly, the automotive sector is exposed to international competition
and particularly competition within groups. There is more of a
case for it to be applied in the automotive sector, and I suspect
that that would reduce some of the concerns of those who have
them.
Q81 Dr Naysmith: Mr Rosser, in
your written evidence, you suggested that there is very little
that regional government organisations could be expected to do
that would make a real difference for south-west firms. Do you
think that central and regional government have any significant
role in assisting the south-west out of the downturn, or are you
just sceptical about the whole business?
David Rosser: That comment refers
to the scale of the recession and where the real levers of power
and assistance lie. From the CBI from the start, the things that
have been absolutely paramount are fixing the capital markets,
getting liquidity moving and sorting out confidence in the banking
system.
Dr Naysmith: They are the important ones.
David Rosser: Set against that,
does that mean that regional government and agencies have no role
to play? No, it does not. I was trying to set the context. It
is quite small beer compared with getting that big picture sorted.
Q82 Dr Naysmith: It could be significant,
as Mr Drew is suggesting, in particular sectors and industries.
It could be much more significant for some than others.
David Rosser: It could, but I
doubt whether the kind of wage subsidy scheme that Mr Drew is
talking about could be applied at a regional level with regional
funding. We have talked about funding already this morning. One
of the barriers to regional government and agencies doing anything
is the amount of funding they have to apply, which is quite small.
If that money is focused, useful things can be done for certain
sizes and sectors of companies in the region. But set against
the big picture it is quite small beer.
Q83 Dr Naysmith: It is interesting
because some of the regions are larger, much larger, than Wales.
Mr Drew was talking about the effect in Wales. There must be some
things that regional development agencies and so on can do for
their areas that are significant and important, if properly targeted.
You need the finance I am talking about, although there is not
very much. Does it all have to be done exactly the same everywhere?
Viv Rayner: The south-west RDA
is to be congratulated as the first RDA to get a fund up and running
and open for business—but it is just £10 million. The
north-east was talking about a £143 million fund. That difference
gives a very clear indication of the difference in funding between
the south-west and the north-east. Reference was made earlier
to support for tourism. I am trying to remember the figure. I
have an idea that something like 0.3p per visitor is the amount
we are able to spend on promoting the south-west for tourism.
I think Scotland gets £7. We are talking about major and
significant differences. If we had the funding, there are things
that could be done to improve the economy now by investing in
infrastructure, which would leave us in a better position for
the future. But we just don't have the funds.
Q84 Chairman: Assuming that the
news we are likely to get on RDA funding later today is probably
not going to be good, what would your advice be to the RDA? Should
it hone and focus on targets rather than try to spread, or do
you think it should carry on trying to do its best to help every
sector and project?
David Rosser: The worst thing
in a situation like this would be for the RDA to take an ever-smaller
dollop of jam and spread it even more thinly across the whole
region. If one looks for a benefit out of a difficult financial
situation for the RDA, it should be that it enables it to focus
absolutely on what is going to have the biggest economic return,
either by place or by project or a combination of both. It cannot
look to do a little bit in every local authority part of the region,
I'm afraid. Some of the actions which were nice to do—around
town centre regeneration and the public realm—may have to
go. We would like to see it focus its spend in future on improving
the infrastructure for the region, improving capacity to do research
and development, focusing on a few key sectors where the south-west
has a real advantage and reinforcing that advantage—so aerospace
would probably be one of those. That is the only sensible route
out of the situation for it.
Chairman: Doug, did you want to come
back on that or can we move on?
Dr Naysmith: No, that was excellent.
Q85 Chairman: Can we move on,
as we are starting to run out of time? A whole range of Government
measures was introduced to try to hit different sectors and target
different problems. Which, in your view, have worked and why?
Which have completely missed the target or have not yet taken
off?
Viv Rayner: On tax and VAT, it
is the first time I have ever had a 100% positive response from
members—everybody who phoned up the business support line;
they could not have been more helpful. It is getting a bit of
a sting in the tail now, whereby they are going back for more
help and are told, "You only get one bite of the cherry."
As I said in evidence, that was ridiculous in terms of VAT. As
for things that have not worked well, I have to say the cut in
VAT. By cutting it across the board, we think a big opportunity
was missed. If you had cut VAT, say, to 5% on labour-intensive
sectors such as construction and hospitality/tourism, you would
have encouraged economic activity but you would have sucked in
fewer imports. You would also have had a beneficial structural
effect on construction, in that the 5% differential was a lot
less temptation to use the cowboys and pay cash. So you would
have reinforced the good businesses within the sector.
Nick Beaumont-Jones: I absolutely
go along with that. There is a certain amount of cynicism now
about the reduction in VAT. Generally, most people accept that
it is going to go to 20% when it goes back up again. Certainly
for my sector, it created an awful lot of work with relatively
little benefit. God knows what that must have cost—HMRC
changing its systems and so on; our view is that it probably cost
the Government more than it helped the economy.
David Rosser: I endorse the comments
regarding HMRC and its willingness to defer VAT; members have
been pleasantly surprised with the response. There are huge concerns
around trade credit insurance and the length of time that it took
Government to intervene in that market; frankly, the extent and
effectiveness of the intervention when it did come was quite disappointing.
There was a lot of real anger around the decision to put up business
rates by 5% at a time of negative RPI, just because it happened
to coincide with the wrong month. And the refusal, which I still
think we do not understand, to reverse the abolition of property
rates and property rate relief we think will have a detrimental
effect on recovery.
Chairman: Kerry, do you want to speak?
Q86 Kerry McCarthy: Going back
to what you said—that it would have been better to target
the VAT on certain sectors—I believe that there would be
complications in administering it and divvying things up.
Viv Rayner: The French do it—the
French have differential rates. If you go on holiday in France
and you look at your hotel bill, you are only paying 5.5% on the
accommodation. If they can do it, why can't we?
Nick Beaumont-Jones: We do it
already with books, newspapers and so on.
Q87 Kerry McCarthy: That is fairly
easy when you are talking about products. When talking about something
like the construction sector, at what stage along the supply line
do you deem something to have fallen within the construction sector?
Viv Rayner: I don't know. At the
moment, we are having some very negative results from the environmental
suppliers—people who install the energy-efficient boilers,
renewing all sorts of things. Anybody who has "construction"
in their title or their operation is having grave problems with
the banks, unless we can go a long way to helping them. I am not
an HMRC person, but I cannot think that it is beyond the wit of
man to work out some way of doing it. If they are members of the
CITB, for example, or fall within its remit, then perhaps it should
be applied. I don't know.
Q88 Kerry McCarthy: As a more
general point, do you think that rather than looking at measures
that are helping businesses across the board we should focus on
particular sectors, in the same way that we have done for the
car manufacturing sector and car retailers? Are there particular
sectors that all the Government help should be going into?
Viv Rayner: It's horses for courses.
In terms of engineering and automotive, it is to preserve it until
the upturn comes. I think that if you change the VAT in the two
sectors I have mentioned you have an opportunity to achieve a
structural change in terms of improving quality and removing the
incentive for the cowboys, which I think we would all welcome.
You can help a sector, and if there are other things that come
with that as well, then I think that's a reason for doing it.
Q89 Kerry McCarthy: Just following
on from that, to what extent should we be using this as an opportunity
to go forward and move the economy of the south-west down slightly
different paths? You mentioned green technology and environmental
things. Should we be targeting the assistance to encourage ones
that we perhaps see as long-term survivors, or real prospects
for growth in the future, rather than those British-based industries
whose days, we would accept, are probably numbered in the medium
to long term?
Viv Rayner: There are two comments
there. First of all, it is impossible to pick the winners. Much
of the work that is going on is targeted on the growth potential
companies—the RDA's £10 million loan fund very definitely
is. If you look at the small print and the criteria for the enterprise
finance guarantee, it is again focused on growth. Certainly the
Business Links are tasked with putting most of their effort against
the growth businesses. So I think as much is being done there
as can be. More can be effected by removing the issues around
trade credit and banking support, which is particularly affecting
the construction industry.
Chairman: On that point we have to say
thank you. I'm sure we could have gone on a lot longer, but we
have other witnesses. So thank you all very much for coming.
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