Examination of Witnesses (Questions 41-54)
ALAN CLARKE
AND IAN
WILLIAMS
15 JANUARY 2010
Q41 Chairman: We are starting
the third session, everybody. We are delighted to have before
us One North East, an important economic arm that the Government
have established in the region. I and my colleagues have worked
with both Alan Clarke, who is the chief executive, and Ian Williams,
who for those of us on the Tees, has often represented the clear
face of One NorthEast. I welcome them both. This has been a difficult,
if interesting, morning; at times it has been a very interesting
morning. You have heard from a number of people giving evidence
that establishing a relationship with Tata—establishing
a relationship with the parent company of Corus—is not just
difficult but impossible. We know we need to have that relationship.
Could we ask you to start by stating your relationship with Corus,
which—we are convinced through Jon Bolton—will be
very positive, and also Tata? As you are the arm of Government,
we are keen to hear, though this might be asking you to take one
step too far. Government Office for the North East is not with
us today, which is probably our mistake. If you know of the relationship—if
it is not with you, it is with Government Office for the North
East—we would appreciate it if you could pool that information.
If you could start with that, we would be very grateful.
Alan Clarke: The agency, Ian and
I have a very good relationship with Jon Bolton, the local management,
the trade unions and some of the work force. That goes back way
beyond the current difficulties. We have a strategic relationship
with it as a major company. In the early days of the consortium
agreement, I met the consortium members. That was during the good
times. Even in relation to the marketing of the region, we had
a "Passionate about Steel" banner and Corus played a
full part in that. In dealing with international companies, we
have clear arrangements with central Government, whereby the regional
development agency, for the most part, deals with plant management
within the region and central Government tends to deal with the
international headquarters. It is different for a company like
Nissan, because Nissan has only one plant in the UK, which happens
to be in Sunderland. We have very good relationships with companies
like that. Where you have companies that have different plants
in different parts of the country, or in the service sector as
well, it clearly makes sense to have one key point of relationship.
We work with the civil servants in the steel unit in relation
to this particular industry, but when it comes to a meeting with
Tata at the highest level, or Kirby Adams, it tends to be the
Secretary of State at BIS, or Pat McFadden, as the senior Minister.
We deal with the civil servants, so that we keep in touch with
each other and there is liaison, but I would say that our involvement
has been with Jon Bolton and the local team, and with the trade
unions in the region. If you think of all the companies in the
country that have different plants in different places, it makes
sense to do that. Government office is giving evidence next week,
so you can ask that specific question then. From my knowledge,
I don't think it will have had direct contact with Kirby Adams
or Tata.
Q42 Chairman: The disappointment
for us is that this gentleman lives in Hexham. It would seem,
in straight geography terms, it would be quite easy to have an
effective relationship, but I accept what you have said. In the
agenda that you have developed and determinedly set away, have
you been developing ideas of retaining and supporting the retention
of Corus on Teesside?
Alan Clarke: Yes. From the spring
of last year, when the announcement was made about a potential
mothballing, we very quickly set up a response group, which I
have chaired ever since. All of the key partners, politicians,
the company, the unions, everyone is involved and, to start with,
we met every two weeks. Right from the very first meeting, the
overall key tactics were agreed and have remained the same throughout,
the first and top priority has been to do all that we can to help
keep TCP going as a viable business in whatever way possible.
We also had to put in place contingency plans, which we hoped
we would never have to use, with people such as Jobcentre Plus.
There was such a large work force at risk, so we thought that
we needed to plan for the possibility that the worst might happen,
but hoped that we would never have to use those plans. Indeed,
until December, those plans were not required. We also put in
place work streams around the supply chains. The supply chain
companies are, interestingly, mainly outside the North East, so
we have passed those to our colleagues in other regions. We are
also looking at the acceleration of projects of the sort that
John Lowther referred to, and at the availability of land for
new projects. More recently, we led the discussions with Government
in relation to the £60 million package, which we made clear
could be delivered and does not mean you can only get that money
on the basis that TCP has to close. We made sure that we kept
that open as an option. So the twin-track approach remains. Everything
is to be done to keep TCP going and to keep the work force together
and so on, although that is incredibly difficult in the current
economic climate. We are also putting in place all of those other
plans, in the way that Kevin Rowan also referred to, in terms
of the future development of the economy. That has been the agreed
approach from the beginning. Vera Baird, who was at the first
meeting, agreed that approach as well. That is the tactic.
Q43 Chairman: That is really
valuable, and it is valuable to know that the £60 million
is here whatever happens. Frankly, many of us complain—I'm
sure you know this—that it is seen as One Newcastle rather
than One NorthEast. That irritates many of us. I accept, knowing
Ian Williams, that that is said less and less, but there is often
a concern that we do not get our fair slice of the action. Before
I finish, could you take us one more step down the road of this
journey of understanding? You have said that you had a twin-track
approach and that you were determined to ensure that, where and
however possible, you would involve One North East in the retention
of Corus on Teesside. How and in what way did you facilitate that?
How did you deliver a policy, and what was Tata's response?
Alan Clarke: I think that goes
back to the first question. The main way in which we did that
was by working closely with local management here looking at how
the price of steel was increasing, how the 90-day notices were
being put back, and how it looked a lot more optimistic with potential
buyers in the market, although, for the reasons that others have
said about confidentiality, we were never told the names of those
companies. Once it got to the summer, it all looked very much
more positive: the company was exporting internationally again
and, at the same time—obviously, within central Government,
discussions that we were not party to will have been taking place
with Tata and senior management—we always kept in touch
with the civil servants within the steel unit in BIS to see how
things were developing in that market. The management from Corus
gave an update, without naming names, on how those conversations
were going at every response group meeting that we had. It seemed
to be going in the right direction for a period of time, but there
was a lot of pessimism in the last month or so leading up to Christmas,
because the steel price had reduced a little and the discussions
were clearly not going as well with companies. I know that Ian
wants to come in on this, but the other thing to bear in mind
is that, while part of the public sector, Government and regional
agencies such as ours can assist in the process; in the end, commercial
deals are done between multinational companies and people who
are willing to sell or buy part of a business. Others, unless
they are invited into those discussions, cannot really get directly
involved. We are talking about commercial companies that have
big decisions to make. Trying to get an input into that is not
always easy.
Chairman: We would support that as a
Committee; we know that if you are not profitable, you are not
going anywhere. We actually think that there is corporate responsibility
as well. What we are not hearing this morning is that this company
has been as responsible. That is most definitely the case locally
and with Jon Bolton and his team, but we are very concerned that
this does not extend to Tata.
Ian Williams: May I make one or
two observations? It is clear that throughout this process, certainly
over the summer and into the autumn, there has been regular engagement
from the top of Government, including Lord Mandelson and Pat McFadden.
I am aware of a number of discussions and meetings that Pat McFadden
has had with senior management at Corus Tata, presumably on group
strategy and TCP in particular. I know that Alan's office has
engaged recently in two-way communication on the outcomes of those
particular discussions. Pat McFadden is aware of some of the local
issues that are happening here. In terms of ongoing engagement
throughout the summer, it needs to be noted by the Committee that
I have met the HR group director of Tata and Ian Goldsmith, the
external relations man. We have exchanged correspondence with
Phil Dryden, the commercial director.
Q44 Chairman: Okay. So you
feel as though you have had effective discussions at the appropriate
level. In those effective discussions, wherever they were, was
there no suggestion until November that we were going to face
mothballing in December?
Alan Clarke: That is not quite
the position. All I was saying was that there was increased optimism
through the spring and into the summer because the price of steel
had increased. Initially, the output was going only to other parts
of Corus, but then exports were beginning to pick up again. Talks
were obviously going on, and we were told that they were going
on, without being given a name. I don't think that at any point,
anyone within the local management said that the potential mothballing
was off the table. It was always pointed out that that was still
a possibility. The local management tried hard to push back the
date on which anything may happen. Once it got to late November
and December, the messages coming from the company and the response
group were much more pessimistic about the outcome. But I think
that throughout the whole time, mothballing has been there as
something that could well happen. I don't think the company had
ever taken that off the table.
Q45 Chairman: One last question
before I bring my colleagues in. I would like your view on a management
strategy that sends employees letters in early December stating,
"Well done, everything looks okay, we're going places."—again
that was Kirby Adams—and within a week, they are told that
the company is to be mothballed. This is a difficult question,
but frankly, we stress corporate responsibility. What is your
view?
Alan Clarke: I have worked in
the region since 1977 and have been involved with businesses,
helping people to get jobs and so on. I have dealt with positive
news when companies have expanded as well as companies that are
closing and downsizing. I have a real feel for communities, people
and families when they get bad news. I was not aware of the particular
letter that you talked about, but that is clearly a really awful
way of dealing with people. There has to be clear, honest communication
about what the position is, as has been the case with local management.
I have every sympathy with the people who were given those two
very different messages in such a short space of time, if that's
what happened.
Q46 Mr Anderson: Over the
last year, we have met you on a number of issues. I will name
some of them: the positive news around Nissan, the development
of offshore wind power and the infrastructure for things such
as electric vehicles. Those things will all need steel. If this
place goes, where will we get that steel from?
Alan Clarke: Ian might be able
to help me here. I do not have sufficient knowledge of the steel
industry to know what products are required for each purpose.
I understand that what you need for the automotive sector might
be very different from what you need for offshore wind turbines
and platforms. The offshore wind industry and the gas industry
may have different requirements. In the broader sense, I have
always supported the importance of manufacturing and of having
a range of highly productive and efficient manufacturing in our
own country to provide as much of the supply as we need going
forward. We should be developing the skills that are required
to develop those new industries. In the North East, we still have
a higher proportion of the work force in manufacturing than other
regions. Certainly, it would be ironic if in a number of years'
time we needed that sort of steel—I can understand that
point—in some of these newer industries and we weren't able
to provide that from here. But I don't feel I know enough about
the industry technically. Ian probably knows a bit more about
that than I do.
Ian Williams: In terms of the
technical aspects, that question is best addressed to Corus on
Tuesday, in terms of its internal capability to address certain
markets. Offshore wind is one example that clearly represents
a significant steel opportunity for the UK. So I am absolutely
certain that Corus, in its various guises, will be able to benefit
from an uplift in activity there. Whether it's this particular
facility, with its particular technicalities, I don't know: that
question is better addressed to Corus.
Q47 Mr Murphy: You touched
earlier on the situation with Nissan and said that it wasn't really
comparable with the current situation in respect of Corus. Nevertheless,
you played a pretty important role in assisting Nissan get through
a difficult period. As a result of all the work that was done
by yourselves, other agencies and Nissan, we ended up with good
news and the prospect of a battery plant, if not the production
of a battery vehicle. You shared that with us. All through that
process, you sensed there was determination within Nissan to succeed
and that, whatever the odds, it was determined to maintain a presence
here and to expand if possible. In your discussions with Corus
Tata, have you sensed that same determination to remain here?
Alan Clarke: From the local management,
yes. But the difference is—going back to what I said earlier—Nissan
is the only plant that it has in the UK. We have a strong relationship
with the senior vice-president, Trevor Mann, who worked his way
up through the Sunderland plant but now has much wider responsibility.
Also, through our offices in Japan, we have strong links with
the international HQ. Being the most productive car plant in Europe,
and certainly in this country, Nissan was already switching on
to new areas of technology, including possibly battery technology,
and so on. It has clearly been happy with the work force and the
supply chain in the North East. We were already knocking on an
open door with a company that was looking to the future and we
had strong support from Government, under New Industry, New Jobs,
for low carbon vehicles, and everything that goes with that, which
helped get the battery plant. Because I haven't engaged with Corus
and Tata at the same level, I genuinely don't feel I could answer
the question you've just asked me. But there was certainly, within
Nissan, a real determination at the top levels to look for new
technology and new opportunities within the Sunderland plant,
while having to accept that 1,200 people had to lose their jobs
for a while—although the car scrappage scheme has helped
since then.
Q48 Mr Murphy: But you would
accept that there is huge potential within this region. We haven't
kept it a secret that there will be a great demand for steel over
the next 20 years. Tata must be aware of that potential, not just
in respect of the offshore wind farms, but the whole idea of this
region being a world first with a carbon capture and storage grid.
That infrastructure would have to be produced and developed here.
There is a future in this region.
Alan Clarke: Yes, absolutely.
There are several things to say about that. In one sense, what's
happened to banking internationally has demonstrated that the
service sector alone can't be the solution for our economy. That
has made a lot of people who perhaps weren't as convinced by manufacturing
realise that it is important. I don't think we ever lost that
in this region. Nevertheless, everyone has woken up to the idea
that high-quality manufacturing is important. Going forward, you're
right: all the plans that we have in region, that everyone's bought
into, put a strong emphasis on manufacturing. That will require
steel and lots of other supplies, raw materials and parts, and
so on. So in the broadest sense, yes, absolutely.
Q49 Chairman: Do you know,
Ian, whether the debate about carbon capture and Tata has taken
place?
Ian Williams: I'm having that
discussion with local management here, in terms of how we are
taking forward the development work for the process industries
and how Corus could clearly benefit from and have an in input
in that process, leading up to submission to the Government in
terms of the four demonstration projects that will be announced
in September this year. We're putting forward a compelling proposition
that would suggest that the North East needs to have one of those
four demonstration projects. Corus, being where it is at the moment,
will be a significant player in that debate.
Chairman: And would benefit, enormously.
Ian Williams: Absolutely.
Q50 Phil Wilson: I just want
to ask two or three questions about the £60 million package.
What is your basic view of the package, and what do you think
can be achieved out of it? Apparently, £30 million of it
has to be found from within the region. There is talk of producing
3,000 jobs and supporting a further 10,000 in the long term. Where
would you see those jobs coming from, and what are your priorities
for apprenticeships?
Alan Clarke: I suppose I have
a vested interest in answering, in the sense that I was the main
person within the region who brokered the deal with BIS and Lord
Mandelson, so I do think that it is a valuable thing to have secured
for the region. There will be lots of views about whether there
should have been more money, and whether it is being spent on
the right things and so on. I have had a lot of experience of
engaging with Government both in good times economically and when
things are difficult as well, and you sometimes get a feel for
when you are knocking on an open door, for when the Government
are obviously very much wanting to support and help. On this occasion,
to have a meeting with Lord Mandelson and all the other partners
within just a few days of the announcement, and to be in a position
over the weekend prior to that of being able to put a package
together that in the end brought £30 million of extra money
into this region from outside, I felt was worth pushing for. There
are many other occasions, either here or in other parts of the
country, when people are not offered £30 million in that
space of time in relation to an economic setback, so I just felt
that the principle of securing an extra £30 million within
a few days was a good thing. You are quite right that the downside
is that we are matching that, but again, if we are a regional
agency and we are focused on jobs—despite the comment about
"One Newcastle" we do care about the whole region—surely
we should be able to reprioritise at a difficult time. If at the
moment the Tees Valley economy has real issues, it seems right
to me that we have to make some tough choices. We did manage to
get in there as well that we would use some ERDF money, so it
is not all One NorthEast single programme resources. We will have
to find this money over two years, and we have to take that discussion
to our board. Also at the meeting, largely as a result of Vera
Baird's intervention, it was very clearly agreed with the Government
that, to go back to what I said before, this was not £60
million that would only be available if TCP closed, but that the
twin-track approach was accepted—that "Yes, you carry
on still trying to find a viable alternative, but here's £60
million for a range of economic activities". Ian's leading
the detail on those. Some of them are around the chemical sector,
which also has some issues at the moment, some are in relation
to Teesport, some are in relation to apprentices, skills, training,
business support and so on, and some are more medium to long term,
around the carbon capture issues that we are talking about. Some
people say that £60 million is not enough to transform the
Tees Valley. Clearly it is not, but don't forget that all of the
normal programmes that everyone is involved in—us, the Learning
and Skills Council, Teesside university, the councils, the Homes
and Communities Agency—are still going on in Tees Valley
as well. We should not just think there is a £60 million
pot of money being spent in Tees Valley to help to transform the
economy. Ian is overseeing the detail of the £60 million.
Ian Williams: One of the comments
made earlier was about this money being seen to support the direct
workers, and it is important to emphasise to the Committee that
this is additional money to the response group moneys that are
already in place through Jobcentre Plus and Business Link to support
clearly the workers who will be affected should mothballing arise
here. To address some of your comments, Mr Wilson, about why we
have the programme and the sorts of things it is going to achieve,
it is to accelerate that industrial transition, to seize the new
opportunities that clearly are going to present themselves over
the next one to five years. As my colleague in Tees Valley Unlimited,
complemented by Amanda, pointed out earlier, there is a need to
diversify the Tees Valley, and so this money is specifically targeted
at accelerating the work that needs to be done. Again, in response
to some of the earlier comments about whether this money is just
going to go in consultancies and areas such as that, I will give
you a categorical assurance that the money is designed to accelerate
investment opportunities in the short and medium term. Where infrastructure
activities are required, such as carbon capture and storage, they
are investments that will leave a long-term legacy and platform
to build on and encourage further investment. In terms of the
sort of things that we did when we developed the Tees Valley industrial
programme, which has very wide buy-in from the local authorities
and Tees Valley Unlimited, we are developing proposals in conjunction
with the private sector. It is very important that private sector
proposals come forward to utilise some of the money. The industrial
programme recognises the need for diversification but it also
acknowledges the important work done by Tees Valley Unlimited
in terms of the North Tees/South Tees study, which identified
barriers to investment and some key infrastructure activity that
needs to be addressed if the Tees Valley is going to fulfil its
potential going forward. Furthermore, it complemented the work
that the process industry has done through its NEPIC leadership
team in identifying specific issues that are pertinent now to
the process industry on Teesside. In part, the Tees Valley industrial
programme acknowledges and responds to the things raised by the
TVU work and the NEPIC process leaders' work. In terms of the
activities you mentioned with regard to apprentices, we have resolved
through the response group a short-term issue with the Corus apprentices,
should mothballing occur. However, there is clearly an acceptance
in the Tees Valley that there are further issues of demand and
support for industry to accelerate the need to take on apprentices.
We are very much using some of the money to support the National
Apprenticeships Service and private industry to look at the short
and medium-term issues in the Tees Valley and at how we put a
mechanism in place that increases the throughput of apprentices,
and, more importantly, to look at some of the issues for apprentices
coming out of programmes. Where are the companies to take the
apprentices on the programmes? We are going to target some of
this cash at supporting the wider Tees Valley, in terms of where
are the issues and what are the actions required. Other elements
of the industrial programme—I highlighted Lord Mandelson's
statement—were to support the process industries. The principle
behind this is to encourage investments from the private sector
and, where appropriate, from public-private partnerships on things
such as CCS and some of the pipeline activity. There are some
barriers that we have to address on some of the rail gauge enhancement
activity, if we are to seize the opportunities that have been
talked about this morning with regard to the port. We will be
unashamedly targeting some of the money at those areas that we
feel will present a better platform for Tees Valley to grow and
seize the opportunities over the medium term. In terms of Wilton,
it is about competitiveness and sustainability. It has been a
hell of an 18 months for the process industries, in that the bulk
petrochemical industries have basically tracked the housing and
automotive sectors and, as we know, those sectors have gone into
significant decline. It is starting to emerge now, but it is very
clear that the process industries have still got issues. We have
to enable them to look at where they need to be in one to three
to five years and at how we support them in that transition. Some
of the money to support the Wilton and the process sector is quite
clearly to put in place the building blocks—the sticking
plasters—to ensure that our process industries in Tees Valley
can get through the difficulties of the next three to five years
and then seize the opportunities that low carbon and new feed
stocks will offer for the region. In terms of the infrastructure
activity mentioned in the Tees Valley programme, this is a wider
Tees Valley programme. I am not going to say today that I am focusing
on one particular patch. This is about creating job opportunities
for the wider Tees Valley. That, clearly, will come in a number
of different ways; that will come from supporting indigenous business
growth and supporting foreign direct investment, building on the
infrastructure that we've got, but the programme must also address
enterprise. We want Tees Valley to be a more enterprising area.
Some of the work that we want to do through the programme is to
make more activity available. We want to encourage, across the
wider Tees Valley, more enterprise activity. We want to see more
people in Tees Valley actively start their own businesses. The
start-up rates, while they have improved, are something that we
need to go further on. It will be a portfolio approach in terms
of addressing enterprise, investment and infrastructure.
Q51 Phil Wilson: Is the Government's
estimate of 3,000 jobs accurate?
Ian Williams: In terms of the
broad headline—3,000 jobs underpinning 10,000—given
the number of people employed in advanced engineering services
and in process industries, and the catalytic effect that would
have if the process industries were clearly not supported to grow,
about 10,000 people in the Tees Valley would be affected. Therefore,
underpinning 10,000 jobs is absolutely clear. If we cannot sustain
and make the process industries more competitive, the longer-term
threats are significant. The opportunities going forward are also
very significant, so we are almost at a watershed moment. In terms
of the 3,000 jobs on the programme, my colleague, John, outlined
the pipeline investment project. That is a robust pipeline covering
a one to three to five year period. It is absolutely robust. Will
the same names appear on that project list in a year's time? Absolutely
not; it is a fluid project list. Some will come forward and accelerate,
some will go and new ones will be added to the list. I can say
that a number of opportunities are currently being pursued—energy-related
investments, biomass-related investments, new industry and new
job-related investments, in particular in offshore wind and renewable
activity. We are, despite the difficulties in the past 18 months
in the process industries, still talking about significant investments
to be made in the process sector. We are seeing a world-class
engineering services sector in the Tees Valley in particular.
It has also had some problems in the past 18 months as demand
for their services has diminished, but there are global players.
There is a real opportunity to grow these engineering services
companies in the nuclear, oil and gas activities going forward
throughout the world. There are opportunities and reasons to be
optimistic, without being over-optimistic, because we recognise
some of the challenges that we have now and will have going forward.
Q52 Phil Wilson: I have put
together two more questions. First, we asked earlier about all
the land on the Corus site. Will you be involved in trying to
unpick that, if the worst comes to the worst? I think that that
is relevant to this. Secondly, has BIS said to go back to them
for further funding if necessary? If it has, is there any kind
of time scale?
Alan Clarke: In relation to the
land, we discussed that at the response group. We regularly talk
about acceleration of major projects. I have some sympathy with
the company on this, because in deciding to mothball the plant—if
it comes to that and if they are genuine about that, and obviously
everyone around here wants that to be the case—it needs
to draw a line around a piece of land that would enable anyone
coming in to buy it to run a sustainable steel plant. Therefore,
it has to be a bit careful about which pieces of land. We are
talking about a lot of land, as John Lowther pointed out earlier.
While there was the potential of a buyer during that period, the
company was a little reluctant to get too involved with pieces
of land that might be required as part of any sale, as you can
understand. Having said that, during that period, it invited interest
from particular companies or organisations who may have projects
to identify which pieces of land they may want for a particular
type of project. I know that very recently a meeting at national
level has taken place, and I think the company has confirmed,
for quality projects that are going to create jobs rather than
for speculative development. As long as that does not cut across
the possibility of keeping the plant going, the company will be
very positive about that. We feel now that we are in a position
to discuss major projects with the company and local partners
in Tees Valley, but there may be some that go too close to the
core of the site, so it will say, "No, we need to defer that
for the time being because we do not want to put potential purchasers
off." I wouldn't say that in agreeing the £60 million,
as we left the room, someone said, "Oh, and by the way, come
back for more if you want some." I would not say that that
was the case. Obviously, even though we are coming out of recession
as a country, there are a lot of economic issues in other regions
as well. In fact, if anything, we're having to do more with less—generally
our budgets are reducing. If anyone can assist to secure some
extra money for the North East, that would be very positive.
Ian Williams: On accelerating
investment projects, it is important to look at the wider Tees
Valley as well. Clearly we want to see Corus projects accelerated
there that are synergistic and add real value, but there are opportunities
at Wilton, North Tees and Hartlepool. It would be wrong for us
to close our eyes and not maximise those opportunities. We must
do that. In terms of moving forward, it is absolutely clear that
we have the total support of local management at Corus in opening
up those discussions. It has been a difficult process for them
throughout the last six or 12 months, in terms of what a sale
would mean, regarding their footprint, to the new owners. Clearly,
there was a moratorium, which was obviously restricting conversations
at that time. The first objective for all of us is to retain TCP
in its current form, but we have been very clear in our discussions
with John Bolton, who has been honest, professional and very open
throughout this quite difficult period.
Q53 Chairman: We accept that,
knowing him and having worked with him for many a long moon. I
know that sometimes you will feel that you are not heard fairly
and squarely. For us on Teesside, if the £60 million had
been put on the table specifically and absolutely to ensure Corus's
future, there would have been a loud cheer. To put it on the table
to secure jobs that may be there in three or four years' time
is problematic. Nobody denies all that Ian has said about the
process industry—nobody denies that—but everybody
wants, at this time and at this point, to say, "Government's
role is to focus on maintaining and retaining what we have."
We are particularly mindful of the statement that a passport for
salaries could cost us, as a Government, somewhere in the region
of £11 to £12 million over six months, but the payback
would be more than £40 million. That argument alone means
that your looking to start spreading your wings in other areas
at this time seems to us to be taking your eye off the ball. We
would have chosen for you to remain absolutely focused on saving
Corus. But of course that is our opinion and we have to live with
that. As we end this session, I promise you that if there are
still things that you want to say that you have not said, of course
we will make time. However, if you were to make an assessment
of the economic impact as a whole—on supply companies and
all—if Teesside Cast Products were mothballed, what would
it be?
Alan Clarke: We put this in our
submission. We have an economic model for the region that is independent
of any of the individual organisations, so that was the model
that we used. It said that the multiplier on this occasion was
1.9. Different people will have different multipliers, but that
is what we have put in our evidence. So, for us, clearly there
is a big impact—I am not in any way minimising it. In addition
to the 1,700 people from Corus directly, our estimate is that
there will be 1,100 job losses in the supply chain and a further
400 job losses in the wider economy. This is a science only up
to a point, but that is the best that we can say. I must say that
what surprised us when we got the supply chain information, which
was probably about six months ago—we have been working with
the supply chain through Business Enterprise North East and others
for a long time, as well as with Corus and the chamber of commerce—is
that because Corus changed its procurement processes a number
of years ago, to make it much more central, fewer companies than
you might expect in the North East will be affected. I am not
belittling that. In the good times, that is a bad thing, because
the North East has had less wealth creation and so on. However,
if the worst were to happen, it means that the impact is not so
local. Roughly speaking, there are 98 regional companies with
a value of £57.8 million, but there are 235 national companies
with a value of £270 million, and there are some international
companies, too. There are about nine companies, most of whose
business, or a very high proportion of it, is Corus business.
So we have had a supply chain activity work stream for a long
time. It's possibly because more of the supply chain is outside
the region that the multiplier is not higher in the economic model.
But I am not belittling these things. When you start talking about
thousands of jobs, rather than tens of jobs, that's significant,
particularly when we're at the back end of the recession.
Chairman: Of course, we would add that
we invariably find that the new jobs are significantly less well
paid. We would be losing a company that pays well and whose employees
spend well in the community. The gross value added loss could
be absolutely enormous.
Alan Clarke: There's likely to
be a mixture—some jobs will be created where it is entirely
as you say, and the wages will be lower—so the impact on
the community will not be as great. To take some of the areas
Ian was talking about, the wages and salaries in the new industries
will be good. So there will be a mixture, but you're right that
some of the jobs will not be as well paid, so the community will
not benefit as well from them.
Q54 Mr Anderson: May I ask
Alan or Ian whether we can explore any other avenues to get around
the problem of there being no prospect of using state aid to support
what's proposed? May I also say that One NorthEast has had a bit
of a kicking today, but I don't think that it's deserved by and
large, because it has done a great job for the region? One of
the saddest things—I will be political now—is that
if the election result goes the wrong way, One NorthEast will
quite possibly not exist any more, because the Tories are committed
to doing away with it and the Liberal Democrats, as on most things,
don't know what they're going to do about it. I make the point
to the people in the audience that the Liberal Democrats and Tories
have boycotted this Committee today, and they boycott it in general.
They could be sitting here today asking questions of everybody
who has come through the door, but they have chosen not to come
here and not to take part in this process, and people need to
notice that on Teesside.
George Dunning: Chair, that's
slightly unfair. Next to me is the leader of Stockton council,
who's a Conservative.
Mr Anderson: He's not sitting here. The
Conservative party has taken a deliberate decision not to sit
on these Committees.
Chairman: I have to say with great sensitivity
that you're absolutely right. But to keep order, I have to ask
people from the audience not to speak. I am really sorry Councillor
Dunning, but I have to put that in, because what you say will
not be put into the report. We are talking about Members of Parliament.
Alan Clarke: I am not a world
expert on state aid, which is highly complex, although we have
people in the organisation who have expertise in it. There is
no doubt that, even in normal times, checking what you can and
can't do through state aid can be very complex. With a lot of
the activity that we undertake as an agency, we have to get advice
quite regularly. We have to ask, "Can this be done? Is there
a more flexible way of doing this? Does this it meet state aid
rules?" Even in normal circumstances, that is a big issue
for us as an agency, because you can always be open to challenge
when you intervene. On things such as ports and steel, it is even
more difficult to be absolutely clear about what you can and can't
do and about whether that will be interpreted differently in different
countries. I am not just ducking this, but, generally, when an
issue becomes as big as this, and you're talking about wage subsidies,
national-level interventions and precedents that only a central
Government can really set—cases where a Dutch Government
or a German Government make a decision—it is probably more
appropriate to look at it with the Government themselves, and
they will be in the Select Committee next week. I could not discuss
that. However, I agree with one other point made in the earlier
session. There is also an issue about cost when you talk about
wage subsidies. I am not pouring cold water on the idea, but once
you set the precedent at the national level and talk about wage
subsidies during a recession, the question is where you intervene,
what the priority is, how long you go on for and what the cost
is. I'm not necessarily saying that you shouldn't do go down that
road; I'm just saying it's a very difficult area. Once you start,
you have to have a very clear view and you have to have some idea
of what it costs.
Ian Williams: My colleague in
one of the earlier sessions referred to rescue and restructuring
aid. Clearly, it is something that can be considered for certain
situations. I am not an expert in the complexities, but I understand
that certain outcomes have to be achieved and certain time limits
have to be placed on restructuring and rescue aid. That is something
that the UK Government have to consider. As was mentioned in the
session with the unions, critical to this is clearly the attitude
of and dialogue with Tata Corus. I know that your colleague, throughout
the response group process, has raised the possibility of this
with Corus, but unfortunately, didn't receive a positive response.
Conscious of what has been said about the possibility, clearly
there must be two parties in a marriage, and that is the thought
that I would leave with the Committee.
Phil Wilson: With the £60 million,
you have to look at state aid rules.
Ian Williams: We do. All the interventions
we have to make need to be state aid compliant. As we work and
develop under the programme, individual companies that receive
some of the moneys have to be state aid compliant.
Chairman: That you very much. I think
that, if we have a tremendous quality, as British people, it is
that we are honest to the point of ridiculousness at times. I
think maybe like the Greeks, we should get a few columns that
say "research" and "future development". I
know that this is not easy, but I am saying that sometimes we
dot the i's and cross the t's, and we are so fastidious, and we
are the only ones in Europe who are fastidious. We have an industry
we need to save—it is the absolute requirement. But I say
to both of you, thank you very much. We are very grateful to you
for coming here today. It has been a long and important morning.
Thank you very much.
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