Examination of Witnesses (Questions 140-159)
GERARD COYNE
8 JUNE 2009
Q140 Joan Walley: I am trying
to understand what specifically has been done to help your members
as a result of the taskforce.
Gerard Coyne: In terms of the
ability to put forward an argument, it is not whether the taskforce
listens and accepts—there have been areas where it has done
that—it is whether the Government are prepared to listen
to what the taskforce is saying.
Q141 Joan Walley: But you cannot
say what those are.
Gerard Coyne: There would be other
issues in relation to access to finance. We have argued that there
is a specific need in relation to manufacturing and developing
a coherent finance strategy there which would require packages
of support. We have also argued on skills that the short-time
working payment should not just be related to straightforward
payment in respect of short-time working, but that there are other
initiatives related to the provision of skills in that period
that would also be important. There have been a number areas where
we have tried to articulate those comments. They have gained the
support of the taskforce, but it is the implementation thereafter
that has been a little slow in following.
Q142 Joan Walley: Do you think
that there is anything that the West Midlands can learn from other
regions where there have been specific mechanisms in place to
help through the recession?
Gerard Coyne: Obviously there
is. The general impression that I get from talking to colleagues
around the country—particularly those in the East Midlands—is
that from a union engagement point of view, it is born out of
adversity. But a strength of engagement with the agencies is now
there in the West Midlands. I am not so sure that that is replicated
in other regions. They have been able to put together packages
to support the aerospace industry, and I am aware of the work
being done in the East Midlands. Yes, we could look to replicate
it in the west.
Q143 Chairman: I will bring in
David Kidney in a moment. Perhaps I can pursue the issues that
you have raised. You mentioned areas where there has been unanimity
or virtual unanimity among the taskforce and the loyal stakeholders
in the West Midlands about some initiatives that need to be taken.
But then they get a bit uncertain when they go above that level.
Do you get the impression that that is—I was struck by the
last thing you said—to do with uncertainty nationally about
the merits of those initiatives, whether they work or are desirable?
Is that the problem? Does it say something more fundamental about
the level at which decisions are made in terms of various economic
interventions that need to be made, and whether there is a more
fundamental issue about governance—about where those decisions
are made in the UK?
Gerard Coyne: There is clearly
that issue. There is not a level of regional devolution in expenditure
arrangements. That is clear from what is happening in terms of
the budgetary cuts imposed on Advantage West Midlands in the foreseeable
future. You can see that underpinning it in terms of a wish and
a desire to do this nationally. There are a couple of things where
I do not think that the immediacy of the financial crisis has
focused people's attentions. The support for the banking system
seemed appropriate at the time. With the size and scale of that,
it was felt that it would automatically lead, I think, to support
for business. Clearly, that was not the case, as many banks chose
to focus on recapitalising their own business and not necessarily
on the importance of ensuring that money then flowed to businesses.
We have seen some fairly extreme illustrations of loan renegotiations,
cutting back on finance and how that interacts with some of the
Government offers as well. The Enterprise Finance Guarantee scheme
is a good illustration of that, where, in theory, it should be
heavily subscribed to. But the reality is that it is not. Part
of that is because the liability that the Government are prepared
to take is only up to 75%, which still factors in the 25% risk
factor for the bank and the business involved. That has had a
real effect, we believe, in terms of restricting access. Numbers
have started to rise, on it being utilised, but for a system that
is supposed to inject finance into companies in the depths of
a recession, it is nowhere near what you would expect. There is
also a lack of coherent strategy for certain key sectors. Manufacturing
is one of those. At the national and—to a lesser degree—the
regional levels, the interaction between those two levels on manufacturing
strategy is virtually non-existent. It has really been shown during
the recession that that sectoral approach has not been in place—not
during economic upturn, and particularly not during economic downturn,
which is when it is most needed.
Q144 Mr Kidney: Gerard, in the
written evidence from Unite, the union called for a car scrappage
scheme. There is one now. What is your assessment of its effectiveness?
Has it worked to the union's expectations?
Gerard Coyne: It is probably a
little too early to talk in terms of the overall impact. Particularly,
for West Midlands's manufacturers, I am not convinced that it
will be as helpful as we hoped for, in terms of the process that
has been put in place. Part of that is the reality of who the
producers are in the West Midlands. Obviously, in Jaguar Land
Rover, you are looking at the upper-market share in terms of the
sort of cars that it produces. The reality is that somebody is
not likely to turn in a 10-year-old vehicle in replacement for
a Jaguar or Land Rover. As I understand it, it has decided not
to participate in the scheme in any event. The scheme will not
have any direct impact on the major original equipment manufacturer
in the West Midlands. In that sense, no, it has not necessarily
directly assisted the situation in the West Midlands. In terms
of some of the other OEMs, there is more likelihood that it will
have an impact outside the region in terms of Vauxhall, Nissan,
Honda and Toyota. Yes, there is a likelihood that it will have
an impact there.
Q145 Mr Kidney: Moving on to access
to finance, before I come on to your point about specific packages
for specific sectors, what is the union's experience of the banks'
lending now generally?
Gerard Coyne: In the past month
or six weeks, it has certainly eased compared with where we were
in the December, January, February—part of the end of 2008
and the beginning of 2009. But most of those in the at-risk sectors—those
that are seen to be at the depths of the economic recession—are
still finding difficulty in obtaining funds, which is partly because
they are seen as high-risk organisations that are likely to go
out of business. It is about limiting that risk in terms of the
loan arrangement, which is where I return to the enterprise finance
scheme. That was supposed to ameliorate that situation, but it
has not.
Q146 Mr Kidney: I will ask about
that separately in a second. On your argument about specific packages
of finance for specific sectors—in our case manufacturing—what
is the rationale behind calling for a specific assistance scheme
for manufacturing?
Gerard Coyne: There are two arguments
in relation to manufacturing itself. I have taken the overall
view that the lack of assistance is compounding and worsening
the recession, particularly for the West Midlands, but more generally
for the UK economy. The overall rationale is that, 12 or 18 months
ago, any number of economic predictors would have said that actually
employment growth will be in business finance and professional
services. You would be a very brave economic forecaster to say
that finance will be the area that generates employment opportunities
to the degree that was predicted 18 months ago. The view of the
union and my own view is that, if we are to learn anything from
the speed with which we were hit by this economic recession, it
has to be about the need to have a balanced approach to economic
growth. That means that you do not put all your eggs in one basket
and become too dependent on one sector—in this instance,
the finance sector—and you do not expose your economy to
complete meltdown in the way that Iceland did through over-dependence
on one sector. If you are arguing that you have to take a balanced
approach and have a balanced economic model that incorporates
a modern, thriving, vibrant manufacturing sector, you should look
at the more successful economies in the world. They still have
at their core a manufacturing sector—although, admittedly,
it is reduced—that is high value added and that helps to
generate wealth and growth in their economies. There is an overall
argument, in relation to the lessons of this recession, for why
we should be supporting manufacturing. The specifics relate to
the fact that every other European country seems to be in a state
of realising that that is the fact and has put in place exactly
the sort of measures that we have been calling for in terms of
short-time working payments. Their redundancy arrangements are
far more punitive. I have had a number of discussions with employers
that are multinational companies and with production outlets right
across Europe. Whether in America or anywhere else, two questions
are asked by their managing boards: are they getting assistance
from the Government to keep a plant open and how much would it
cost to shut that facility? I have had a number of fairly difficult
conversations with employers, where they are clearly balancing
a decision on a production facility in Telford or Wolverhampton
against somewhere in France or Germany, where they are getting
substantial assistance from the Government and it will cost them
more to make the work force redundant there. It unfortunately
becomes a bit of a no-brainer for them in terms of the decision
that they have to take, despite their loyalty and commitment to
wanting to stay in the UK. To my mind, it is not only an overall,
general argument about what sort of economic structure we want
when we come out it this recession; it is also about the fact
that this is actually compounding for the UK economy our experience
of this recession, compared to some of our European counterparts,
because those decisions are being taken on a virtually daily basis
about production facilities across Europe.
Q147 Mr Kidney: When you talk
about the package of support, it is clearly not just the access
to borrowing money: your package was also about short-term working
support, difficult redundancy costs and making people redundant
being made more difficult. That is what you mean by "package"—all
those things together.
Gerard Coyne: I do. I also believe,
at this particular time, that there is also an argument for flexibility
around skills provision. Much of the thrust of Government policy
has been around the achievement of particular qualifications,
which, as a union, we generally support. But the consequence of
that is that many short courses have been lost, although they
are exactly the sort of things that can assist someone who has
just been made redundant. We have experience of this in terms
of a project operating in the West Midlands. For many people who
have been working in a manufacturing setting for 20 or 25 years,
it is about knocking the rust off, re-guiding them back into employment
opportunities as quickly as possible and giving them the confidence
that they can secure future jobs. The phrase that I use is that
it is important to get to them before daytime television does.
That is the reality of it. You do not want a culture developing
of people being used to benefits. For a lot of people who have
been in one job, particularly in manufacturing, it is important
to have that short course availability to encourage them back
into either further learning or new employment opportunities.
There is a host of things, including short-time working and having
the skills support there for people who are made redundant. Access
to finance is critical. Those things all come down to a package
of activity that is particularly pertinent, in my view, for the
West Midlands because of our manufacturing dependency.
Q148 Mr Kidney: Train to Gain
is still reasonably new. Do you find that it is more able to be
tailored to the kinds of flexibilities that you have just described,
or is it making the same mistakes that we made historically?
Gerard Coyne: No, the experience
that we are picking up on is that Train to Gain is making some
progress, both in terms of the uptake and the flexibilities. But
you have to be in employment to access it, and that is the critical
factor. Certainly, the project that has been operated in assisting
redundant workers in the West Midlands has utilised Train to Gain
helpfully in terms of guiding people back into employment, but
then making sure that the bolt-on of Train to Gain to gaining
formal qualifications is accessed quickly after that. It has shown
the flexibility to be able to facilitate that sort of interaction
between a short course arrangement, leading into other arrangements
once people are in employment. The critical bit here is that you
have to be in employment to gain those qualifications. That comes
back to issues around the easement of the 16-hour rule.
Q149 Mr Kidney: I mentioned earlier
the scheme in North Staffordshire developed with the ceramics
trade union Unity, which is able to deliver training courses for
people who have been made redundant.
Gerard Coyne: Yes, that is correct.
That was the basis of the scheme that has now been rolled out
across the whole of the West Midlands, so Unity undoubtedly pioneered
that, but is now consulting other trade unions to deliver that
scheme right across the West Midlands. Now, it is working across
all sectors. It was restricted to manufacturing; but as a result
of a successful tender, it has been able to lever down funding
for all sectors that are affected by the recession.
Q150 Mr Kidney: When is that effective
from?
Gerard Coyne: It was started in
manufacturing last September, I think, and was overcommitted and
hit its targets by the middle of January. It was successful in
the tender at the end of February, and commenced its work on,
I think, 1 April.
Q151 Mr Kidney: I must tell my
Jobcentre staff, because I do not know whether they know that.
My final question concerns the enterprise guarantee scheme. Your
solution to its slow take-up is to change the guarantee amount
from 75% to 90%. Is that correct, and is it your policy solution?
Gerard Coyne: That would be our
preferred option. If it were possible to do more, that would be
even better, but I understand that the restriction that EU legislation
sets is that it can be expanded to 90% under the EU directive.
We will certainly push for it to go to the maximum.
Mr Kidney: Okay. I have finished. Thank
you very much.
Q152 Mr Bailey: You have already
made a number of comments about wage subsidies and so on. May
I flesh out some of the issues with you? The report from the TUC
and the Federation of Small Businesses estimated that the short-term
reductions in staff hours or temporary lay-offs as a result of
the downward turn would cost the Government £1.2 billion.
A subsidy would prevent the redundancy of 600,000 workers a year.
Have you any estimate of what that would be in financial terms
to obtain a cost benefit balance to put to the Government?
Gerard Coyne: I have seen some
analysis on that. Unfortunately, I do not have it with me, but
I am happy to provide it to the Clerk.
Q153 Mr Bailey: It might be helpful,
because just as you have campaigned on this, I and other Members
have also. A scheme was introduced in Wales—ProAct. Have
you any preliminary assessment of how successful it has been,
how many jobs it might have saved, what the cost was to the Government,
and so on?
Gerard Coyne: I have not seen
any preliminary work on that, but I am obviously aware that it
was underpinned by the European Social Fund. That enabled the
funding to happen, and it was not provided directly by the Government
there. I have not a seen any assessment yet of its success.
Q154 Mr Bailey: From your perspective,
what support is currently available to workers who agree to a
reduction in hours, or whose company closes temporarily?
Gerard Coyne: There is the statutory,
long-standing provision of five days' payment, which is a fixed
payment of around £21.80 paid as a result of short-time working.
It is that limited. There was an announcement in the Budget about
using working tax credits as a mechanism to provide some assistance
to people facing short-time working hours. Our experience so far
is that it is notoriously difficult to get changed circumstances
worked through quickly by the Inland Revenue to enable that to
be a realistic option. In many respects, employers do not see
that as assistance. It may in the medium term assist an individual,
but it is not seen as being a direct help to a company. That is
one of the problems with comparisons across Europe, and the mechanism
by which that is done. It is a straightforward payment and indeed
the previous scheme that operated in the UK in the 1980s was a
payment that was administered to individuals through unemployment
offices. It is not seen as a direct payment when it is paid through
the tax system, and it is a bit slow afoot in terms of the tax
credit changes.
Q155 Mr Bailey: An ACAS report
seemed to imply that a lot of businesses did not really know what
options were available to them to reduce that cost; obviously,
they are considering reducing costs in the current climate. Therefore,
they could make the wrong policy decisions, or close work either
temporarily or in the long term, as a result of not being able
to examine all the options available to them. What is your experience
of that?
Gerard Coyne: From about October
onwards, I would support ACAS's underpinning theory. In truth,
many HR managers in reasonably senior positions have not experienced
a recession of this nature and have found it very difficult to
deal with the consequences of restructuring on such a huge scale.
Quite frankly, from a union point of view, that was also true
of our representatives in the workplace. In January and February
of this year, we engaged in a massive education programme for
our workplace reps in which more than 600 people attended sessions
to talk through redundancy and short-time working and how to deal
with negotiations about them. Effectively, from about 1995-96
onwards—generally, outside manufacturing—we have been
through a period of sustained economic growth. The skills and
competencies to deal with a rapid downturn and engage properly
with a work force about how to handle that have clearly been lost
somewhere in the mists of time. That is outside manufacturing.
Generally, inside manufacturing, the experience was one of having
had to deal with that on a yearly basis, what with offshoring
and the development of globalisation, which meant that work force
decrease had been a natural point of negotiation. The difference,
again, is the speed and swiftness with which people had to move,
because of how quickly the recession hit.
Q156 Mr Bailey: The fact that
you have trained your representatives to deal with that should
imply that businesses must know the options available, if only
through the information and negotiating positions of your representatives.
Would you say that that is still a problem with businesses, six
months on?
Gerard Coyne: Yes. It is on an
even broader scale. Yes, in terms of dealing with the process
of handling redundancy, it is the consultation, the appropriateness
of it, the detail of it, the skills balance with which they look
at the work force and seek for retention and other alternatives,
such as the consideration of redeployment. There have been some
very successful experiences in the aerospace industry in particular
about redeployment of skills to help over a period of economic
downturn, particularly after the aerospace industry was hit following
the twin towers. There was a real knowledge base around that.
That has not been rolled out into other sectors for consideration
at the moment. Yes, those skills still need to be addressed.
Q157 Mr Bailey: I have one last
question. In your previous comments, you pointed out your difficulties
in negotiating with employers who have other branches of their
business in Germany or France, where there are operating wage
subsidies. Have you got any hard evidence that the German or French
continental method is working to preserve jobs and is not a disproportionate
strain on their Exchequers?
Gerard Coyne: I am reliably informed
that General Motors' management had identified a plant in Germany
for closure. That plant, after the intervention of the Government
in support of General Motors in Europe, will now not be closing.
So yes, there is some pretty hard evidence around that more direct
involvement and engagement and being quick off the mark in terms
of discussing with the global players, particularly in the automotive
industry, can result in securing facilities and production in
a particular European country. There are smaller examples, but
there is evidence that that is the case. I also fear that, as
the recession continues, organisations and companies that have
hung on by their fingernails will have to make a second round
of decisions that are not just about short-time working and reducing
capacity, but about total closure. That is the much-talked about
double dip. A number of companies illustrate that. Some of our
members at Goodyear in Wolverhampton are working four days a month,
effectively. The impact of that on their personal and financial
circumstances, such as covering their mortgages, is being replicated
inside the company, with hardly any production taking place. At
some point, a decision will be made about that plant.
Q158 Chairman: I have a couple
of questions to wrap up. The first looks ahead to the upturn.
Where do you think it will come from? In particular, will it be
export led? If so, does that hold any lessons about actions that
need to be taken now to prepare for it?
Gerard Coyne: This comes back
to my earlier comment about the sort of structure you think the
UK and West Midlands economy should have in the future. If it
is export-led, a number of companies are reasonably well placed
for that. From talking to employers, the general view is that
because the downturn is happening across the world, it will be
difficult to punch into the export markets, even with the value
of the pound and the fact that it is now creeping up against the
euro and the dollar. The possible exceptions to that are China
and India, but gaining access even in those markets is notoriously
difficult. I return to what shape you want the West Midlands and
UK economy to have in the future. Of course exports will be important
for any country that has a manufacturing element. There is a strong
argument about how you can lead the economy out of recession.
Construction, in particular, was affected early on. There has
been a massive drop-off in the provision of private and social
housing. There is a strong argument for kick-starting refurbishments
of existing properties in the region and nationally that could
be retrofitted on a green basis. That would hit some of our important
environmental targets. That is one of the first areas where you
could start to reinvigorate the economy through a concerted effort
on environmental standards in construction for social housing
and retrofitting. It would also tackle the lack of provision of
affordable housing. Those issues would have an impact in the manufacturing
sector as it relates to the construction industry. The much talked
about green economic revival is something that Unite takes very
seriously. However, there must be high-level R and D and manufacturing
processes based in the UK. At the moment, we are not seeing such
investment in existing companies. I cite LDV, which has interesting
proposals on electric vehicles. However, as we sit here today,
it is in administration and is unlikely to find a successful organisation
to take it on, particularly on the electric vehicle issue. Companies
may well be interested in stripping it and moving elsewhere, but
we are letting an opportunity go by that would directly benefit
our commitment to the development of the green economy.
Q159 Chairman: That was going to
be my next question, given the news that has come out today about
LDV. What do you think needs to be done in relation to LDV, even
at this late stage, to help it to achieve any potential in the
future, or is it too late?
Gerard Coyne: Clearly, extensive
efforts have been made to underpin LDV to enable a market solution.
This is where it comes down to the discussion and debate that
has got to be had. If we are serious about creating a green economy,
then at the moment—particularly in the midst of a recession—the
market does not have the ability to lead on this. It requires
some intervention by Government to kick-start that. At the moment,
it appears that the response from Government is based on a view
that this is an attempt to manipulate an argument to facilitate
old-fashioned state intervention. I think that there must be a
grown-up debate. This is not state intervention in terms of part-nationalisation
or whatever. If we are to set priorities about economic growth
after the recession that take on board environmental concerns,
we must think about where we engage now. Yes, we could be doing
more and we could be putting financial support particularly around
the green vehicle—electric vehicle—proposals that
would see LDV returning to the UK.
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