Examination of Witnesses (Questions 280-299)
MR IAN
AUSTIN MP, TRUDI
ELLIOT AND
ADAM JACKSON
29 JUNE 2009
Q280 Chairman: I think the estimate
we have had is that if there was a scheme brought in that would
provide a reasonable level of subsidy, it would cost the Government
about £1.2 billion, but on the plus side, it could prevent
the redundancy of 600,000 workers per year. I suppose the thing
that has been put to us, which is of concern to all of us who
are looking not just at trying to ease the problems that people
have now but to the future of our economy, is that if we lose
skilled employees, that is not just a problem now—it is
a problem for how we rebuild the economy for the future. That
is an area where we are not quite sure, to use the current jargon,
that they've got it upstairs. Is this an issue that is still a
current one in government, and is it something you are continuing
to push on?
Mr Austin: As I said, clearly
there was support for this in the region and the region put its
case. I think that decisions on things like this are slightly
above my pay grade. It is always possible for the region to advance
arguments and all that, but my guess is that the Government have
probably taken their decision on this. I cannot remember precisely
what the words were that were used, but didn't the Chancellor
of the Exchequer talk about this in the Budget when he talked
about how the Government were increasing money that was going
into tax credits and that more families had benefited from tax
credits? That is my recollection.
Q281 Chairman: I think that is
right, but our worry is that tax credits—really important
and welcome though they are—address a different issue.
Mr Austin: I know, but as always,
what does the Chancellor of the Exchequer have to do in a situation
like this? He has to make finely balanced decisions about really
difficult, thorny issues that have got huge costs and he has to
weigh up the impact a scheme could have—we all know that—with
the costs it could incur. However attractive a scheme might be,
it is worth recognising that there are all sorts of areas in which
we can compensate or support workers that perhaps are not available
in other European countries.
Q282 Mr Bailey: I assume that
a fellow West Midlands MP would have come across the argument
from employers that, in effect, it is swings and roundabouts,
but the advantage of having a subsidy is that you are retaining
skilled workers ready for the upturn. I would assume that that
has been debated and the decision has been made that effectively
rejects that argument. In Wales, it would appear that, because
of the specific circumstances with the funding they've got, they
have been able to introduce this. Are we looking at what is happening
to Wales to see if there is a case that we can prosecute for the
West Midlands?
Mr Austin: Yes, is the answer
to that. I am as worried as anybody about the potential for losing
companies in manufacturing, people in the automotive supply chain
and skilled workers through this recession—of course I am.
This is the central issue we have been working to address in trying
to save companies from going under and all the rest of it. There
is no question about that. I completely understand the point you
make. We were all there when the Chancellor read out the Budget,
and we all heard what he said. I have tried to explain why other
measures that benefit workers and businesses in the West Midlands
are perhaps not always taken into account. I think, from what
I can tell, that the situation in Wales is not directly comparable.
They have a much smaller manufacturing sector than we have, so
there are many fewer companies eligible for support under this
particular scheme. I am not sure, but I think sometimes that the
amount of support provided from it has been exaggerated. I think
that the cost of running a scheme like that nationally would be
clearly taken into account in the Treasury and BERR. It is a decision
that Ministers have chosen not to make, isn't it? Adam, is there
anything you want to add about the Welsh scheme?
Adam Jackson: We've have looked
at the Welsh scheme, and it is a salary replacement for training.
To that extent, it is as much akin to what is already available
under Train to Gain as opposed to some of the continental models,
where it is more directly a wage subsidy. So it is a matter of
degree. I suppose that the other thing, in terms of looking at
it within BIS, was the experience in the UK in the 1970s. The
concern was that there was quite a lot of dead weight there, the
danger being that you provide it to some companies that do not
need it, who would keep people on anyway. In other cases, you
are, in effect, subsidising a lack of profit rather than supporting
the training. In terms of value for money, the experience previously
is that it is not the best instrument for achieving the aim. Those
in Government share the aim of ensuring that people remain skilled
and that we do not lose skills to the economy, but then it is
a question of how you achieve that. I would add that I have had
a debate about this with a roomful of small businesses. Their
attitude to wage subsidies changes immediately when you put it
to them: do they want to pay for it? It is a significant increase
in public expenditure, and that has to be met one way or another.
Potentially, there might be more corporation tax; at that point,
the argument drains away completely. I suppose that that is another
way of looking at it for small firms. Is it the thing that they
feel most passionately about, perhaps on a national basis? It
is something that they would like to see, but it is not their
No.1 priority.
Mr Bailey: I accept that it is not really
your responsibility, but I don't feel that the intellectual case
has been sufficiently robust to take the pressure off representatives
such as myself.
Q283 Mr Plaskitt: May we turn
to the automotive industry, Minister? It is obviously most important
to our region. There are a couple of key measures in place that
we want to explore for a moment. The first is the car scrappage
scheme. Are you measuring the impact of that on West Midlands
automotive manufacturers, and if so what results are you getting?
Mr Austin: First, businesses in
the region called for the scheme. It is something that we argued
for. It is more evidence of colleagues in Government having listened
to demands from the region—the automotive sector is particularly
important—and responding.
Q284 Mr Plaskitt: What impact
has it had?
Mr Austin: Nationally, 35,000
orders have been placed, which equates to about 4,000 in the West
Midlands.
Q285 Mr Plaskitt: When we took
evidence from businesses on this, they pointed out that one of
the consequences is that there were too many good offers around
on some small cheap-end family cars. We have all seen the adverts.
They were saying that there were some good deals for a little
Fiat or Citroën, but although it is fine for the showrooms,
which are businesses in their own right, it was not doing much
to boost UK manufacturing. Would it have been legally possible
to have limited the scrappage allowance only to UK-manufactured
vehicles? Would that have been in breach of EU rules?
Mr Austin: I am not sure that
it is not being of benefit to manufacturing in the UK in that
way. It has had a significant impact on the components supply
chain. For example, one company in Cannock laid off 50 staff in
December, but is now so busy that it has been able to take them
all back. The chair of the Retail Motor Industry Federation told
the Business and Enterprise Committee that the scheme had given
a lift to the industry and that his firm is now incredibly busy.
So I do not think that it is fair to say that this has not had
an impact on manufacturing in the UK.
Q286 Mr Plaskitt: Oh no, I want
to make it clear that the evidence given to us was that it welcomed
the scheme. There is no debate about that. I am simply passing
on to you a point that West Midlands vehicle manufacturing representatives
put to us. They simply said, "Why wasn't it restricted to
UK-manufactured vehicles?" I suspect that the answer is that
that would have been illegal under EU rules.
Adam Jackson: Yes, and in the
same way in Germany and so on it is open to all manufacturers
as well.
Mr Plaskitt: We thought that that was
the case; I just wanted to tidy it up.
Trudi Elliot: It is also fair
to point out that our automotive supply chain does not just supply
UK manufacturers.
Q287 Mr Plaskitt: I want to ask
about the second scheme—the automotive assistance programme—which
has a much bigger price tag on it. How much of that has come down
to West Midlands UK auto manufacturers?
Mr Austin: I think that five companies
in the West Midlands—sorry, did you say the UK?
Mr Plaskitt: No, in the West Midlands.
Mr Austin: I think that five West
Midlands firms have been given detailed help to prepare applications.
Q288 Mr Plaskitt: Has any money
come down into West Midlands auto manufacturing yet?
Mr Austin: Only the applications
have been dealt with at the moment.
Q289 Mr Plaskitt: So that's a
no? None has come down yet.
Mr Austin: No, the applications
are being dealt with so—
Q290 Mr Plaskitt: Look, either
the money has come down, or it hasn't. It is a £2.7 billion
scheme. Is any of that currently and actively in, and supporting,
West Midlands UK vehicle manufacturing?
Mr Austin: Look, I think that
you are probably speaking for all of us when you say, "We
would like all these schemes to be operating as quickly as possible
and as many schemes as possible to be benefiting from them immediately."
Of course, we would all like that, wouldn't we? And it is fair
to say that the Government are looking at ways of speeding up
the process, but, as I say, detailed discussions are under way
with a number of companies across the country, five of which are
in the West Midlands. I hope that they are concluded really quickly
so that they can get the support that they need.
Adam Jackson: It is important
to remember that the automotive assistance package is long-term
investment. It's not like working capital, which is covered by
the bank lending commitments, enterprise finance guarantees and
so on. This is long-term investment in green technology and other
innovations. Some car manufacturers and suppliers are saying to
us that it takes time for them to work up the business case. It
is not a simple application in the sense that they actually need
to set out exactly what their future plans are. Our view is that
we are in touch with all of those who have expressed an interest.
They are happy that things are progressing as quickly as possible,
but it is important to state that it is a long-term scheme open
right up till the end of next year. As Ian says, five out of the
18 active cases being taken forward are in the West Midlands.
Q291 Mr Plaskitt: But some of
the companies are telling us that they see it as delays in implementation,
and you see it as the business case getting up and running. They
are telling us that it is very delayed. Are they being unfair?
Adam Jackson: Certainly, any specific
cases where there is concern about timing should be raised with
me or Ministers or BIS officials. The team working on it is trying
to be as flexible as possible and to speak directly to people
to get things moving as quickly as possible.
Q292 Mr Plaskitt: You talk about
all the cases where you say that active discussions are taking
place. When will that translate into some done deals for West
Midlands manufacturers?
Adam Jackson: There are five in
their final appraisal stages, but I could not say exactly when
the money will be out the door. But they are towards the end game.
Q293 Mr Plaskitt: Does it mean
that they will get the money this year?
Adam Jackson: I cannot say for
sure. I would certainly say those five, if they were approved,
should be approved and have the offer on the table well before
the end of the year.
Q294 Mr Plaskitt: But it will
be done before the end of the year.
Adam Jackson: I would expect so.
I have to confess that I am not the expert on it, but I have talked
to the team working on it.
Q295 Mr Plaskitt: And are you
aware of any more—you said there are five that are at that
stage. Are there more, further down the line?
Adam Jackson: Yes. Overall, there
are 80 expressions of interest. That is up from 70 about a week
or so ago. There are 19 advanced expressions of interest, so a
more detailed case. Then there are five which are at the sort
of final appraisal stage. It's like there is that sort of pipeline
of different things at different stages.
Q296 Mr Plaskitt: That is helpful
to know. Respecting any commercial sensitivities which you obviously
might constrain you, can you give any examples about what sort
of activities within West Midlands auto manufacturers will end
up getting supported directly by this funding?
Adam Jackson: I can't at this
stage.
Q297Mr Plaskitt: Is that because of commercial
reasons? Or don't we know?
Adam Jackson: I would have to
confess I don't know. I can find out. I can go back to the office
and find out whether we can give any. It may be that it is down
to commercial confidentiality at this stage, but we will see what
we can get you.
Q298 Chairman: That would be helpful,
thank you. A lot of the evidence we have had is that while it
is true that the assistance under the automotive assistance programme
is for long-term projects, I do not think many of the companies
concerned considered that the process of applying and getting
the money should be long term. It is the projects that are long
term. Those two things seem to be transferring, perhaps one over
to the other. Can I perhaps ask on this, from a West Midlands
perspective the editorial in today's Birmingham Post says:
"Time for Government to stop haggling over JLR loan".
Now, again, I know that the ultimate decisions and solutions are
not in your hands, but are you confident that there is a degree
of urgency, that certainly is being expressed to us, not simply
to have the discussions around the loan guarantees for JLR, but
to actually achieve a result and conclude a loan guarantee for
JLR. Are you confident that there is that urgency being attached
to it?
Mr Austin: Yes, definitely. I
think the senior management of JLR speak directly to the Prime
Minister, the Chancellor of the Exchequer and Secretary of State,
Lord Mandelson, about this issue. I think that it is fair to say
that the whole of the Government, from the Prime Minister down,
recognise the huge importance of this company. It is the jewel
in the crown of manufacturing in the midlands. More than half
of the automotive industry's entire R and D in the UK is done
by this one firm. I don't think it would be fair to say that anybody
is not seized of that.
Q299 Chairman: Is there any estimate
about when things maybe concluded here?
Mr Austin: Sorry?
Chairman: Is there any estimate about
when things maybe concluded?
Mr Austin: The Government and
the company are talking, aren't they? It is a commercial decision
as to the sort of terms that the company are able to accept.
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