SIR KEN JACKSON, MR IAN BORKETT AND DR JOHN LLOYD

TUESDAY 26 FEBRUARY 2002

  223. Sir Ken, welcome. Would you like to start off by introducing your colleagues, for the record?

  (Sir Ken Jackson) Yes, indeed. Ian Borkett is the Head of our Policy Unit, and Dr John Lloyd is one of our National Secretaries and responsible in the main for education, training and development, and they will obviously be supporting what we are trying to say today. But, first of all, thank you for the opportunity. As the largest union, Amicus, in the manufacturing sector, you have seen our written submission, and you have obviously had the opportunity of the TUC's submission, prior to us, we came at the back end of that. But, as you see, the TUC submission was based upon the TUC-CBI working parties, one of which I chaired, which was the innovation one, and obviously was a co-operation that has been long overdue, and both sides of industry actually looking at and trying to identify the problems of the industry and the way forward. But I think we would like to say, at the outset, we accept that there is no single problem with industry, there is no one area that we can say, if we did that, that would solve the productivity deficit, as opposed to our chief competitors in industry, there is no easy answer, we all recognise that. I think we have got to look at the problems, and, of course, since we did our survey, some weeks ago, we have seen the deterioration of manufacturing, and engineering in particular, over the last two years in particular, but over the last few months it seemed to accelerate, and output, I think, is down 4.7 per cent overall, but in engineering it is down about 11 per cent; something like 146,000 jobs have gone in the last 12 months, and we are all anticipating something like another 150,000 jobs that will go again this year. And, of course, our output per hour is a deficit, if you look at the American model, something like 55 per cent ahead of us, in terms of output per hour, in France, 32 per cent, and in Germany it is 29 per cent. And, of course, one of our biggest problems is investment, and that is down, as we understand it, about 14 per cent. So our physical investment is 40 per cent behind the Germans and 60 per cent behind the French, and obviously investment in R&D, 1.8 of GDP in Britain, compared with 2.4 in Germany and 2.2 in France, and, of course, we spend vastly more on defence R&D, so it is quite an imbalance that we have got to make up. And I think the National Institute for Social and Economic Research figures show that the lower-level skills account for 24 per cent of the Germans' productivity advantage, and 14 per cent advantage for the French. And, of course, UK state-aided manufacturing is the second lowest in the European Union, at 35 per cent of the average number of euros invested per person employed. So we have quite an imbalance that we have got to find answers to. I have already said, there is no magic wand, there is no single answer to productivity improvements; however, we believe that the importance of manufacturing demands that we all look at ways of trying to resolve this problem, including the trade unions. And, of course, it is easy for us to come and say what the problems are; we have obviously tried to bring some of the solutions as well, as a trade union movement, and we are not here just to blame everyone else, that it is everybody else's fault that our productivity, and certainly manufacturing, is not up to what it should be. And, of course, one of the things that we do want to say is that we would like to follow the logic of the Engineering Employers' statement, in the lessons from Uncle Sam; the EEF concluded, if UK manufacturers are to narrow the productivity gap with the US, barriers within firms to effective team working have got to be removed. And, of course, we are a union that has pioneered partnership, we do believe that co-operation in industry is the way forward, and we have certainly tried to get that across to our members and to the major companies in this country, that we believe that working together is far more advantageous than the conflict that we saw in other areas of industrial relations. And this is where you can see some of the practical ways of our partnership working, you can see in our submission the way we handled the September 11, at Airbus, and the way we handled the waste saving at Perkins Engines, you know, more practical contributions to the problems that the companies were having and obviously trying to resolve those problems in a way that improved productivity, and of course defended employment security. We think these are good examples of partnership, without sentimentality, bottom-line stuff that is based on mutual respect in the workforce, and recognising that the company has got to make a profit and it has got to be competitive, and it has certainly got to have the productivity that it needs in order to compete in the world markets. And we believe that the Government should build on the good start that has been made with the Partnership Fund; we would like to see a much more viable commitment to social partnerships, perhaps giving ACAS the resources it needs to encourage best practice and partnership, as we believe it should operate, both in highly unionised plants and non-union firms, large and small, trust the ACAS integrity. And we believe they are the right people to spearhead the clear support for partnership that we believe that we have all got to be involved in, if we are to overcome the problems that we have got. And, of course, the real gains are long-term. At Perkins, where the union initiated waste savings, it impressed the company, and the management have now seconded two leading shop stewards to lead a year's work on lifelong learning, so the company are recognising the contribution, through our shop stewards, that we have made to the problems that hinder productivity. And, of course, there is a productivity impact, and the union role, here, too, is important; and if we do something about people's literacy skills, for example, we will close that mid-skills gap with the French and the Germans. This is an area that we have got real concern about, and that, of course, is the lower and mid-skill areas, in skills where we really feel that we have fallen behind, especially in comparison with our European competitors. And we already run a session on every shop stewards' course, where we try to get our shop steward to identify people who have got problems, and, of course, steer them, their colleagues, towards literacy training that will be an advantage and certainly give them opportunities to address the problems and the inadequacies that some people find, because of their schooling and other things.

  224. Sir Ken, forgive me for interrupting. We are quite anxious to move onto questions, if that is okay?
  (Sir Ken Jackson) Fine, that will be great.

  Mr Berry: We are grateful for the memorandum, but we have got a number of specific questions that we would like to put to you. I had better, first of all, I suppose, declare a-non-financial interest, as a member of Amicus-MSF. I pay the union, they do not pay me, is what I mean.

  Mr Hoyle: Can I declare the same interest.

  Dr Kumar: And can I declare the same.

  225. Could we take up some of the specific proposals you raise in the written submission, because there are some that back up the TUC's, but there are some that are quite distinctive; for example, you specifically say that the Government should appoint a Minister for Manufacturing. We all tend to think, you know, there is a problem, appoint a Minister, and that might solve it. I am sure you have got a better reason than that. And I just wondered if you could perhaps comment a little on what role you would see for a Minister for Manufacturing? How does this fit in with the debate about restructuring the DTI, do you see an opportunity here that should be grasped?
  (Sir Ken Jackson) I think, first of all, the reorganisation of the DTI does give us the opportunity of addressing that problem, and this is not a criticism of the DTI, or the Secretary of State, in terms of what we say, and that we believe it is something that should enhance the role of the DTI and the Secretary of State. But, obviously, the Secretary of State has got many facets, in terms of industrial policy, but we feel that someone who is focused on manufacturing and the problems that we have had, not over just the last two years but over the last 20 years, in terms of decline, in terms of investment, certainly inward investment. And we came in when John Monks was talking about training, and, of course, this is another area where we find that we have got massive skills shortages and, at the same time, unemployment figures, over the last number of years, that have made us ask the question, why can you have so many people unemployed and still have a skills shortage when we can use resources to do that. So we do feel that manufacturing, in particular, does need someone who is focused on developing the investment, developing skills training, developing partnership, developing all the areas where we believe, working together, we can make a difference, in terms of how manufacturing is sponsored and the way forward. So we have got Ministers for other areas and we believe that a Minister dedicated to manufacturing, which is still something like 20 per cent of GDP, it is not a small area, in terms of the GDP, it is 20 per cent, it does employ something like three million people, we are going through major changes, I am not quite sure whether we are in the first, second or third industrial revolution, in terms of modern times, but certainly manufacturing is moving on at a pace, and we believe that a Department specifically in terms of manufacturing would be ideal. For example, one of the things that we are told, over and over again, is that we have got a very strong economy, the fourth strongest economy in the world, and we have got a boom economy, in terms of, for example, motor manufacturing, but yet, even though we have got companies like Nissan, who are probably the most productive car producer in the world, not just in Europe, Toyota who are probably the second, no-one is making any money out of it, they are actually selling more cars than they have ever done, but at the same time they are not making a profit. And I think we all, round this table, whatever our political point of view, recognise that if you are not making a profit you cannot reinvest in the future, and therefore there is a real problem. So people should be looking at things like research and development, and, yes, we are looking to the Chancellor, hopefully, in the forthcoming Budget speech, to make some tax concessions in terms of research and development and encouragement for companies to invest, certainly not only the major companies but the small and medium enterprises, we believe that these are the areas that a Minister for Manufacturing could actually address and focus and drive through.

  226. Do you think there is any risk that if you appoint just one person, presumably a Minister rather than a Secretary of State, is there not a danger that (a) the Secretary of State, who recently has been very actively involved in our manufacturing debate, that the Secretary of State might not be, and therefore that downgrades the importance, but also that other Ministers might think, "Well, it's him (or her) who is dealing with it, it's not in our patch"? Do you not see a risk, if the DTI were to appoint just one Minister with that brief?
  (Sir Ken Jackson) I am not suggesting that the Secretary of State abandons all responsibility for manufacturing; he, or she, will still have overall responsibility. But we actually need someone who will give all their attention, focus on and drive through the changes and the resources that we need to build up. And, of course, in terms of inward investment, of attracting inward investment, of persuading, yes, the trade unions that they have got to change, in terms of recognising that competitiveness and productivity are key elements in the way forward, as far as British industry is concerned. We have all got a role to play, and I think it is someone to lead both sides of industry, in partnership with Government, and we think that we need, and feel that we need, someone full-time who is identified with that task.

  227. Sir Ken, what would you say would be the key elements of a UK manufacturing strategy, and do you believe that Government has got it right, as far as the strategy it has; if you do not, what do you think it should be doing that it is not doing at this very moment in time, given the limits and constraints it finds itself in?
  (Sir Ken Jackson) I am not criticising the strategy that we have got at this moment in time, because we are going through a difficult period; there are a number of issues that are coming together in terms of inhibiting inward investment, one, of course, is the strength of the pound, the weakness of the euro, whichever way you look at it. And we certainly believe that, and my views on the euro are well-known, but I know that is not universally accepted.

  228. Can you just remind us, for the record?
  (Sir Ken Jackson) I am certainly in favour that we should be a full player in Europe and that we should be part of the single currency, and that we should be a leading player in Europe and that we should play our full part. But I recognise there are people who have different points of view. Our view on the euro is that we do need to get that issue out of the way, it is undermining confidence, people are not investing because they do not know what is going to happen in the next five, 10, 15 years; and even if we are not going into the euro I think people do need to understand the playing-field that they will be playing on over the next few years and invest accordingly. So that is the problem, that the very nature of globalisation is attracting the low-skills manufacturing out of our economy into the former Eastern Europe, and of course the Far East as well; there are changes in technology that are taking place, that we are all trying to come to terms with, and investment in technology. But when I chaired the joint TUC-CBI working party on innovation, I went into that believing that the way forward was to invest heavily into the latest technology, the most up-to-date technology, I accept that that is the way forward, in terms of you need the latest and most up-to-date technology. But the biggest investment we can make is in people, you can get a bigger return on investing in people and in people's skills; and, certainly, that is in conjunction with actually investing in the latest technology. So I think we have got to recognise that there is no place for Britain, in my view, at the bottom end of the skills market, we have got to develop skills in this country where we can move into the higher technology, higher value areas, in terms of manufacturing, and we have got to have people both in the DTI and outside in industry who recognise that. I think one of the tragedies of the Dyson thing, a couple of weeks ago, relocating to Malaysia, well this was a product that had been developed in Britain, was manufactured in Britain, and all the research and development will remain in Britain for the time. But, nevertheless, these are the areas that we have got to develop, of developing products in this country and actually manufacturing them in this country, so that we do provide the jobs that we need, in order that we create the investment that actually does give us the social benefits and the social services and public services that we all need. So we really do feel that the strategy, as far as Government is concerned, is developing and emerging, but I do feel there are a number of issues where we have got to really push forward, in terms of getting our skills, our productivity, our competitiveness, up with the best in the world, and that we have got to develop the higher skill, higher technology, yes, high salary, high wages, economy that we all believe is in the interests of where we are going.

  229. Sir Ken, do you think the Department of Trade and Industry is sufficiently focused to deal with manufacturing and all the concerns that you have expressed this afternoon?
  (Sir Ken Jackson) I think the problem that we have got is that I think the DTI certainly, even from the days when Stephen Byers was there, where we built up quite a rapport, in terms of the support we got for Rolls-Royce, the support we got for Airbus, the support we got for Rover, any number of areas where we did get support. But I think we all recognise that the enormity of the problem, in terms of investment, in terms of the number of companies that are now finding difficulty in terms of manufacturing and exporting, in particular, that there just is not the resources that Government can put forward, we have got to find that from inward investment. One of the things that does concern me, of course, is what is happening with pension funds at the moment, not only in terms of people who are in pension funds, and we have seen what has happened over the last few days, the last few weeks, in terms of final-salary pension funds; but, of course, pension funds are one of the major investors in industry, these are one of the vehicles that have been investing in Britain, in manufacturing and other areas, over the last few years. And because of the downturn in the market, certainly since 11 September, that has been one issue in terms of drying up investment in pension funds in manufacturing, but, of course, now, there are underlying problems in terms of final-salary and for money-purchase pension schemes. But, of course, one of the things on FRS17, whereby where there are deficits in pension funds they will be identified, and obviously companies will have to earmark funds to eliminate those deficits, that, of course, also inhibits their ability to borrow on the market as well, it will inhibit their way forward, in terms of investment for the future. So this does cause us serious concerns about a number of issues that are actually coming together, and which does undermine what could be an area where we need investment and we need investment to pick up on areas and industries that we need to develop for the future. So the strategy is emerging, we are all seeing the globalisation, moving products out, we are seeing problems being built up, certainly financial problems, again because of the global economy. But I think we have really got to say to the DTI that really we need to focus on what Britain needs to do to attract investment, both inward investment, as far as other companies are concerned, and to build on what Britain did become over the last 30 years, and that, of course, was a bridge into Europe, and a manufacturing base into Europe.

  230. Sir Ken, I am sure you will agree, but the Canadian Government state that aerospace is a technology incubator, the results from which can feed across into other industrial sectors. I wonder, what other sectors can fulfil this role in the United Kingdom, in the same way?
  (Sir Ken Jackson) You did see, in our submission, that we pay tribute to the Canadian Government support for its aerospace industry and where the spin-off from that did help other industries. But, certainly, in terms of digital technology, we are a world leader; in terms of electronics and telecommunications, we were amongst the best in the world; certainly in chemicals, and there is no doubt, in terms of IT, we are still one of the leading countries in the world; and there are any number of areas where we, as a union, are deeply involved. And, certainly, we have got to look at the financial services sector, the City of London itself is a major earner of foreign currency, it is certainly a major area in terms of consultancy work across the world. So there are areas where we are still amongst the world leaders and where we need to develop, and, if we can, protect what they are doing and try hopefully to expand and build upon what we have got, in the causes in which, over the last 30 years, we have been seen to be as good as anyone in the world; but there are certain sectors where we are very good, and I think those sectors we need to build on.

  231. Of course, one of those sectors we recognise is the aerospace industry, and we are still a world leader. Is there anything that you can do, with your European counterparts, with the trade union movement, for the help and assistance with the A400M, to ensure that, that contract, not only is it brought forward but also ensure that Rolls-Royce, Airbus and all the component manufacturing in the United Kingdom will benefit from that? But it seems to us stalled—not the aeroplane but just the project—at the moment, and I just wonder what you can do, and is there anything that you believe the DTI ought to be doing to give it that extra shove?
  (Sir Ken Jackson) It is ironic that you raise that, because only a fortnight ago we were in Germany having discussions with IG Metall, which, of course, is the biggest manufacturing union in Germany, probably in Europe, and the M400 was one of the issues that we raised. And certainly the German unions are as concerned as we are that if that project does not go ahead the serious implications that will have, both in terms of jobs in Germany but also, of course, of technology development, that is another area that they are very concerned about. So I think you will find that ourselves, the Germans and others are actually co-operating very closely in ensuring that, hopefully, the Germans do continue with that project and that we can develop, and, hopefully, not only is it in terms of internally within the European Union but, of course, could be an export earner that would support all of the industrial development, indeed. But what we did with Airbus, in particular, and certainly in some of the areas that we are involved with Rolls-Royce in, launch aid, that was supported by this Government, was beneficial, and certainly welcome, and I think certainly in some of the areas that were feeling the strain, in terms of investment. I think one of the things we have got to remember, in terms of manufacturing, is that probably 95 per cent of it is in the regions of Britain, where they have gone through an extremely difficult period; as in Scotland this morning, where, of course, we have seen a massive downturn in terms of manufacturing industry, certainly in what we considered were the future technology areas, people like Motorola and the electronics side. So we look at Wales, Scotland, the north of England, in particular, where we have had major problems, in terms of investment, a lot of that investment was starting to come to fruition, because of, in my view, our bridge into Europe; but, of course, over the last couple of years, that has now started to deteriorate. And obviously we want to get back, as far as inward investors are concerned, to selling Britain as a high skill, high technology area, but a bridge into Europe, and a stable bridge into Europe, both politically and industrially.

  232. I just wonder if I could pick up the point about aerospace as a technology incubator, and the relationship to other sectors. One of the disappointments of recent years has been the lack of application of information and communication technologies to deliver productivity gains in UK industry, and I suspect that a considerable part of that has been to do with the lack of application of those technologies at all levels of a business, not simply, as it were, in management levels, which the Engineering Employers' Federation also pointed to. What does the experience of the aerospace industry in that respect tell us, was the aerospace industry applying such techniques and then it was not feeding across to other sectors, or were they failing to do so?
  (Sir Ken Jackson) I think, two things. One, of course, is, over the years, there has been the lack of investment across industry in general, but in terms of the high-tech areas extremely low investment, and certainly in terms of people skills. One of the areas that we found—and this is not just my thing but the Engineering Employers' as well—was that our lack of investment in managerial skills, managerial training, has been one of the major areas where advancement has not been made. And I think this is something that Government should look at, and many people do not get the opportunity, in terms of training, but managerial training seems to be less well invested in rather than on the shop floor, where we find it is extremely difficult. But you are quite right, in terms of spin-off, in the aerospace industry in particular; we have only got to look at the United States and the spin-off that they certainly got from space technology, certainly from investment, in their aerospace industries, enormous advantages, as far as the Americans are concerned. Of course, the American Government does invest quite a lot, in terms of R&D and support for manufacturing, certainly in the military field, where most of the major advances have come over the last few years; but I think you have seen the spin-off in American industry from space and aeronautical technology, which has been a tremendous boost. And whilst they may well have lost a lot of the lower-skill jobs in America, the boost in IT and aerospace and other leading industry has more than compensated for the lack of the lower-skill jobs that they have lost.

  233. I suppose the point I was making was that there can be direct returns from launch aids, and I remember that launch aid invested in things like the earlier Airbus projects and the V2500; but the question here is about whether there are substantial indirect spin-offs into UK industry, and I am afraid the evidence is not so persuasive, as has appeared to have been the case in America?
  (Sir Ken Jackson) Yes. And, of course, one of the areas that does cause us concern, both in the aerospace industry and in motor vehicle manufacture, of course, is component manufacturers, where we do not seem to have the investment. And I think one of the points that Dyson made, when he said he was relocating to Malaysia, was that he was getting nearer to the supply chain; so it was obvious that the component manufacturer had already moved out, and is moving out, to former Eastern Europe, in a lot of instances, but certainly to the Far East as well, certainly in component manufacture.

  234. You say, in the submission, that you believe a greater level of public funding and resource needs to be allocated to long-term aerospace research and technology, to match the spending levels of other countries. What sort of money would we be looking at, if we were matching the spending levels in other countries?
  (Sir Ken Jackson) Do you start with the Americans, or do you start with the French; and, quite obviously, I think, one of the success stories, of course, has been Airbus, and I think, if you look at the investment that has been made by Governments, over a number of years now, in launch aid for Airbus, for wing technology, and the actual return on that loan, because it has not been grants that have been made in the past, it has been loans for launch aid, and, of course, that has attracted benefits to Government, in terms of repaying the loans and also repaying in terms of royalties for when the success of Airbus was there. So how much do you need, in terms of support? The unfortunate thing, in this country, of course, is that one of the major problems we have got is long-term investment, and we do have problems in terms of persuading the financial institutions that they have got to think longer than three or four years. And, of course, one of the major areas, if you can persuade Government, they are prepared to take a longer-term view, especially in the technologies that we are talking about, and these are technologies that need years to develop and then come to fruition; and if you look at Airbus, which is now a success story, that took quite a number of years before (a) it was successful, and (b) started to make a return. But we are talking in terms of loans, soft loans maybe but loans, in order that people can develop products and then, hopefully, repay those loans and repay royalties, in terms of the success of that product. And, of course, the M400 could well be one of those, if we could develop and expand that, not only through Europe but also throughout the world.

  235. You talk also about better co-ordination of resources; have you got evidence that that is not happening now, and what could be done about that?
  (Sir Ken Jackson) One of the things that, again, was in the press, in terms of British Aerospace, at the weekend, and our market is open to European competitors, but we seem to have difficulties in breaking into German or French aerospace industries, for example, or defence industries. We have seen, in terms of the six roll-on/roll-off ferries that were procured just a few months ago, where people tender and they are successful from European countries, where we never seem to have that degree of success where we tender ourselves. So I think we have got to look at public procurement as well, and we have got to recognise that the Government is the biggest purchaser of manufacture equipment in this country, and that there is no doubt that we have got to have a level playing-field. And cheapest is not always best, and cheapest is not always cheapest, because, if you had a situation of the six roll-on/roll-off ferries, for example, going to foreign yards, and, at the same time, Harland & Wolff, or another major yard, went to the wall, then the loss of National Insurance and tax receipts, payment of benefits, then we have got to look at what, across the board, is in the interests of British manufacturing. And there are real costs, in terms of allowing manufacturing, in terms of benefits being paid and the loss of revenue, in terms of tax and National Insurance, but, of course, loss of skills, loss of investment, loss of future technology, that we do not have the opportunities. So I think co-ordination, in terms of what we can do across industry, and I think Government, as a procurement agency, does some of it, but I think there are still areas where we believe that there is not the co-ordination that there might be between, for example, the MoD, the DTI, the Ministry of Transport, for example, where we think that there could be more co-ordination. And that would be, hopefully, if we did get a Minister for Manufacturing, one of the areas that that Department could take on board, that we could actually see what the opportunities were. And this is where the Americans are very good, although they do not have a Minister for Manufacturing, at developing and spin-offs that come from research and development, certainly in the armaments and aerospace industries, but it does seem to go right across the USA, in terms of industrial benefits, and certainly the technology does go across to other industries; and that is where we do not seem to have the same spin-off benefits in this country.

  236. You identified the TPC programme, the Technology Partnerships Canada programme, as being a good way of injecting public funding into commercial R&D projects and programmes; and, obviously, from the evidence you provide, the evidence is that that does create a sizeable number of jobs. It is also quite an expensive programme in itself, and very often the argument is put forward that Government is not good at picking winners and should not try to pick winners. Would you say that that approach to so-called picking winners is the wrong approach, or that that is not a picking winners programme, it is something else; perhaps you could describe some of that?
  (Sir Ken Jackson) I think one of the tendencies that we have got in this country, certainly in industry, is to sell ourselves short, and I do not think any investor, whether it be private, public, or otherwise, that every one they pick is a winner, there are some that are going to be losers; even the most successful companies in this country will tell you that quite a number of projects that they bring forward are not always as successful as they would like. But we do have success as well in this country. Airbus, for example, and the investment we have made into Airbus, into Rolls-Royce, and in the seventies was, bankrupt now, if not the leading engine manufacturer, it certainly was joint top; so we have had successes, we have supported successful industries, innovations. So, yes, the real question is that you cannot invest into every project that is put forward, there just are not the resources; but certainly there are areas where we have got to be involved, there certainly are areas for the future, like the aerospace industry. The Canadians invested something like Canadian $240 million, which is repayable, in loans, but they improved their world ranking from seventh to fifth. So they are expanding, in terms of the aerospace industry, which we all agree is one of the future growth areas, and one of the areas that we all believe are what people in the western world would like to see, the high technology, the high skills, the high earners, the high inward investors, that we would all like to see. So I think you are quite right, that we cannot always pick winners, but there are certainly areas where we can, and do, know that we have got world leaders who need support and need help in expanding, not grants, not handouts, but, in effect, investment for the future, and in things like aerospace, where it is a long-term investment, in a lot of industries. And that is where the Japanese have certainly outstripped us, both in terms of manufacturing in Japan and manufacturing in this country. I went to a plant, only a few months ago, which had been taken over by the Japanese, they had had it for about four years, and the guy said that, over that four years, they have invested, invested, invested, and he made the point, he said, "If we'd been a British company, we'd have been closed years ago;" when they were prepared to invest, they were prepared to look long term. He said, "We are now coming to a point where, yes, they will be expecting a return on the investment in mid May, but they have been very, very supportive and very patient, in investing and knowing that the investment will be repaid over 20, 30 years."

  237. So, if we were to introduce something like TPC in the UK, what would be the kind of mechanism you would see developing, or would you use an existing mechanism, for identifying the kinds of companies that would receive support and to evaluate that? Would you see that that would be done at national level, or would you see it as something that would be done regionally, you mentioned the regional dimension before, and do you think we have the institutions in place to be able to handle a programme like that?
  (Sir Ken Jackson) At this moment in time, I think we do need to have more investment at regional level. I think both the Scottish and Welsh Development Agencies, over the years, have probably been more successful than the English regions in attracting investment, because they have been focused on the areas in which they have been trying to attract the inward investment. And I think, now, with the RDAs, we have got more chance of actually achieving that, and I think you saw what happened in terms of, for example, Rover, a couple of years ago, and how that was turned round, because of the local support that it got. The local public support that it got in there, I think, (a) drove the Government to support it, as it did at the time, but, more importantly, that then has developed, and can develop, into being a success story; there are still difficulties in there, because obviously they need a partner, they need new models, etc. But I think we all looked at what was happening in that area and developed it, and I think that could well go on, hopefully, to be a success story. But I think you have got to have both. I think you have got to have Government, where, at the end of the day, if you are talking about the kind of investment, if you are looking at the Canadian example, it is major investment, and that can only be done at national level, by Government, but there is no doubt that you have got to have the local involvement, the local Regional Development Agencies, who know what is happening on the ground, know what the commitments are, and who, jointly with Government at national level, can look at where support is needed. I think, and we have all seen it, that the regions have certainly benefited over the years from our involvement in Europe, and if you look at, as I said earlier, the Welsh and the Scots, how they have attracted inward investment, certainly the north east of England was, before the major problems that we have had, in terms of the global economy; and if you look at southern Ireland, for example, the investment that has gone into southern Ireland, because of their involvement in the European Union, and, again, the investment in there. So regions are obviously important, regions know what the skills levels are, what the expertise is, what they need to develop, in terms of companies. And I think the resources that we need, if we are looking at Government investment, can only be brought about by the Government at national level actually supporting those schemes, based upon its support in the locality and the regions.

  238. Do you suppose, if the Government were to take up your proposal for a UK version of TPC, that it would be consistent with EU state aid rules?
  (Sir Ken Jackson) It depends which rules you mean. I see the investment in France and Germany, certainly at regional level, and certainly they seem to have a more flexible approach to EU investment rules than we have. Let me give you an example, probably not the best example, because, unfortunately, it did not go the way we wanted; but Cammell Laird, which was investing heavily, just a couple of years ago, bought a yard in Marseilles, where there were, I think, something like 600 people in the yard when they took the yard over, and there was a gap of nearly a year in the order book, where, yes, they would need these people in a year's time but they did not have orders that would keep them occupied at the time when they took over the yard. At a local level, a decision was made within 24 hours that they would be supported in a training scheme for a year to keep those people in training and enhance their skills until the orders came to fruition. Now we have not had that kind of support at regional level, and I think that what we have got to look at is developing both support and skills training in the regions that does allow regions to develop, in terms of industry, the support that they need, to get the skills that they need, and to attract the inward investors that obviously look for particular skills. So I take the point in terms of the European funding rules, but there seems to be more flexibility with the German Länder and the French regions than certainly there is in this country.

  239. You mention, in your memorandum, about setting the rate for tax credits for larger firms, at a rate likely to have a significant impact on R&D. In your view, is the current 150 per cent of rate applied to small firms a level you would regard as sufficient for this purpose?
  (Sir Ken Jackson) What we have said, in our TUC-CBI report, which went to the Chancellor, which was incorporated into one report, was, we did say that research and development incentives had got to be at a level whereby people would invest, would find it beneficial to invest. At this moment in time, we do not believe it is at a point where people are investing to the degree that we would like to see it, and it is quite obvious that, we are hoping that, in his Budget speech, the Chancellor will address that, knowing that we do not believe that the level at this moment in time is sufficient to attract the kind of research and development investment that we believe is needed, certainly in the small and medium-size enterprises.