TUESDAY 12 DECEMBER 2006

TUC

  Q100  Mr Clapham: We got some good news in the announcement of the Chancellor on future spending proposals. For example, he referred to the fact that we would be likely to see a demonstration project for carbon capture and storage. That is the kind of thing you would like to see. At the same time, you see it perhaps as one area in which jobs will be created but in a regional context, and therefore there is a need to think about how the RDAs will play their part.

  Mr Lent: Absolutely. Carbon capture and storage is a very good example of where we think there are British companies well placed to take advantage of that. The current demand for power stations across the world is phenomenal, especially given the growth of the Chinese and Indian economies. We are in a good position to do that. That was good news but only to a certain extent. Our view is that one carbon capture and storage demonstration project is good, but we need far more than that seriously to develop CCS in the UK. Geographically, the UK is incredibly well placed to develop that technology, so this should be something of which the government now takes advantage.

  Q101  Mr Clapham: If the government gives more encouragement for the replacement of old coal-fired stations we may well see the new technologies being established there, for example the use of super-critical boilers and carbon capture?

  Mr Lent: A company like Babcock, for example, which has huge experience in this area, is already taking some orders in China. But this technology, both clean coal and CCS, needs to be developed further and that is where government strategies can bring a huge advantage to the UK economy.

  Q102  Mark Hunter: UKTI's "Business UK" campaign talks about the UK having six main qualities, including its stable business environment and the culture of creativity. Do you think that the six qualities highlighted by UKTI adequately represent the strengths of the UK economy as you see it, or are there any glaring omissions from your perspective?

  Mr Lent: I think that the six qualities as they stand are good, and I certainly could not object to anything there. We feel that probably two factors could be added. One of them is industrial relations, which I have already mentioned, and the very positive approach to partnership working that unions and the best employers have within manufacturing. The second one that is overlooked is the regional dimension. London is given pride of place in these six qualities, but we have very strong regions. Certainly, manufacturing in the North East is an example of an area where there have been very significant success stories with regard to overseas investment in manufacturing. That should not be downplayed and we should not put all the focus on London, important as that is.

  Q103  Mark Hunter: And the North West?

  Mr Lent: Yes. I give just one example.

  Q104  Mark Hunter: Have you made representations perhaps about having those factors included as part of this? Has it been followed up?

  Mr Page: We make the same point as before. We have looked at it in that level of depth in order to prepare our evidence, but it is certainly something that we will take forward.

  Ms O'Grady: We are actively involved in the RDAs and, similarly, some are better performing and, frankly, more imaginative than others. Sometimes what is called intervention is all about having a bit of imagination and using the resources that one has effectively. One way of describing it is industrial relations, but it is about the UK workforce. I think we should be proud of our workforce. People have shown themselves in manufacturing to be incredibly productive and willing and interested in fair change and flexibility. We should be talking it up, recognising and giving credit to some of the efforts of real people in real workplaces and what they contribute to the UK's image.

  Mark Hunter: I certainly agree with you on the latter point. I do not want to draw out the question into another angle about RDAs; otherwise, we would be here all day. My question was not specifically about RDAs, although I accept that the regional dimension, which is not one and the same thing to most of us, is hugely important. That is why I am keen that you follow it through.

  Q105  Mr Bone: Why is it important to maintain "a UK manufacturing process in certain key areas"?

  Mr Page: Do you mean certain key industries rather than geographical areas?

  Q106  Mr Bone: Yes.

  Mr Page: In a sense, this is related to the question why manufacturing is important. Manufacturing is important for exports, research and development and the provision of high quality skilled jobs in all kinds of different regions of the UK. We believe that there are certain areas of manufacturing where the UK is competitive now and can be competitive in the next five, 10, 20 or 50 years. Those are the areas where there ought to be a specific focus. As a trade union movement, we will defend our members' jobs in manufacturing wherever they are, but we recognise that with globalisation and the trend of low cost, low skill and low value manufacturing migrating to cheaper economies that will be a real struggle for us. Where will we be competitive now and in the future? In the industrial strategy document that we have produced we have focused on aerospace, defence and pharmaceuticals where the best British companies can compete with the best companies anywhere in the world. Looking forward and referring to the example that my colleagues have given of green manufacturing where with a bit of support and lead development we can compete with the best in the world. We should do what we do best, and there are certain sectors where we can do that.

  Q107  Mr Bone: The argument you advance is that we do things like defence very well and that is why we should pursue that, and we should sell worldwide?

  Mr Page: Yes.

  Q108  Mr Bone: But it does not really happen in the EU, does it? We talk about defence. Germany builds roll on-roll off ferries; the RAF has its flying suits made in Germany, but it does not go the other way, does it?

  Mr Page: If you are asking me whether we should have a level playing field, yes, we should. We were very encouraged by the defence industrial strategy, for example. That was an example of a government department, the Ministry of Defence, saying to industry, "This is what we need now; this is what we will need in the future. Plan your capacity accordingly." That is a good example of government working with British industry in order to develop the UK industry and allow it to plan its markets in future. There is nothing illegal about it. There will still be defence equipment bought from other countries by the Ministry of Defence, but it gives our industry the best possible chance to compete. That is what we would like to encourage. In the previous evidence session someone mentioned the cultural point, namely that the French tended to buy French and the Germans tended to buy German. There is a cultural history here. We do not have a tradition of the British buying British. We are not calling for a "buy British" policy, but we are calling for British companies to be given the best possible opportunity to compete, and there are ways in which the government can do that.

  Q109  Mr Bone: I believe that the EU Commission has woken up to the fact that our European partners protect their defence industries, for example. I believe that very soon the Commission will produce a report to get the ball rolling on this. Do you agree that what happens in this country is that our government plays by the rules and has a very fair open market but British companies do not have the same opportunity when they go to other EU countries?

  Mr Page: Yes.

  Ms O'Grady: I think that it is about rigidity. It seems to me that other EU Member States are more creative in their approach. They help their companies to be procurement-ready so that when they put in bids they are more likely to win them, not because they are given special favours but because they can perform and show they will create best value. They also take into account issues like unemployment which I believe is perfectly legitimate. If one has huge unemployment in one's local area and here is an opportunity to provide quality jobs for people that is a good and fair thing to do. What is more, it is perfectly allowable under the EU directives. Why not use it?

  Q110  Mr Bone: In the boot and shoe industry in my area we have seen unemployment levels as high as they were nine years ago. There has been a 17.6% rise in unemployment in the past year. You are saying that, for example, RAF boots should be made in my constituency in future not based on price but taking into account unemployment?

  Mr Page: We lobbied hard on the way that the new European procurement directives were implemented in the UK. There are specific clauses in the directive that allow us to take into account in procuring social, economic and environmental factors. In one example, known in legal circles as the Nord-Pas-de-Calais case, a local unemployment problem was specifically taken into account in the way a particular procurement decision was made in France. That was found to be legal by the European Court. To take your example, a procuring authority could say that it wants a facility set up in your constituency and under one clause in the contract it must bear in mind the needs of local unemployed youth in the way that contract is put together. That would be legal under European rules. You would need to get the lawyers to look at it, but we could do it legally under the EU rules. That is what other European countries have done creatively to satisfy the needs of procurement but also their unemployment problems. We are saying that we should try to learn a trick from that. It is deliberately written into the directive. Let us use it in the way others do.

  Q111  Mr Bone: That is a very good point, which leads on to my next question. There are examples of Germany and France giving state aid to sectors. There is no real evidence that that has produced much of a net gain for those sectors, or am I wrong about that?

  Mr Page: I think the manufacturing employment performance in some of our major competitors is much better than ours. We have done some number crunching of the latest EUROSTAT figures which show manufacturing employment in some of our major European competitors to be either stable or in some places falling or increasing slightly. In Germany it increased quite a lot; in the UK it has fallen quite a lot. We are one of the few European countries that have practically no sectoral aid at all. What the TUC has said is that a small proportion of government support should be given sectorally as it is in France and Germany. We are not talking about huge subsidies to industry. We like the general emphasis on supporting skills and research and development across the piece, but where there are specific industries with specific needs trying to reconfigure in the face of global forces which may need a bit of sectoral support in order to do that, our government ought to develop an aid policy that is sympathetic to those needs under tight conditions.

  Q112  Mr Bone: Can you name one sector in the UK where that might apply?

  Mr Page: One can take as an example an industry that wants to develop into green manufacturing but is not producing in a way that is green at the moment. With a bit of sectoral support it would have the capacity to do that. That industry may not survive for 10 years if it does not do that but it provides a number of high quality jobs and can continue to do that with a bit of government support. That is the kind of imaginative approach that we would like to see.

  Q113  Judy Mallaber: On the question of sustainable development, in your evidence you talk approvingly of various other countries having gone hell for leather for some green technology areas. Are you suggesting that foreign governments have done better than the UK in using public procurement to promote sustainable development? You mention the Low Carbon Vehicle Partnership initiative. There is also a suggestion that we have not pushed clean coal technology as hard as we might. Do you say that other governments are doing more than us and, if so, what do we need to do to use public procurement to promote green technology and sustainable development? Are we not following up those initiatives?

  Ms O'Grady: Clearly, Germany and some of the Scandinavian countries were straight off the starting blocks. We have been a little slower, but there is potential for us to get in there. There is a range of measures, including clean coal, that we need to deploy but we must also get the Emissions Trading Scheme right. We still do not believe that it is right. At the moment our government's approach I understand it is to treat every energy source as equal, as it were, whereas if it is accepted that we need a mixed energy economy, not least for security of supply, and a balance between them we believe there is a case for helping clean coal to get up there. We are not talking just about technology but potentially production. More could be done. We think that we have been slower than we should have been.

  Q114  Chairman: We are talking here about public procurement and energy and power stations are not procured by the state but by private sector companies. I do not quite understand the role of public procurement in this area.

  Ms O'Grady: I give one practical example. Today I received an email from a company looking at water treatment technology. The cost benefit ratio over the longer term is good and it will certainly reduce pollution, but in the short term it will be a little more expensive. What is not clear I do not know the answer yet, but I suspect there may be a problem is the product specification and route for that company in respect of procurement. I suspect that there are green products and services like that where our procurement policy is not yet so clear that it incentivises the development of those sorts of products and services.

  Judy Mallaber: Take another example. I do not know enough about it to understand how it would work. I mentioned the Low Carbon Vehicle Partnership. In your evidence you relate that to the amount of money that would go on transport procurement and you suggest that that would enable initiatives to support the supply of low carbon vehicles and fuels which should help British industry, but I am not clear how those connections are made and whether or not we are doing anything about it at the moment.

  Q115  Chairman: Let me be practical about this for a second and name names. I hope that I do not offend Judy Mallaber by saying this. Junior ranking ministers have now got Toyota Priuses because they are deemed to be a good thing for the environment. Those cars are not made in the UK. A lot of other UK motor vehicle manufacturers say that there are big issues about recycling Toyota Priuses and what you do with their batteries. They are not as fuel efficient as other conventional cars. Other UK-based car manufacturers there is no such thing as a UK-owned car manufacturer say that they are doing carbon offset programmes and their cars are more environmentally friendly than Toyota Priuses, yet the government has bought those cars to appear environmentally friendly. For me, that is a hard-edged example.

  Mr Page: Perhaps I may name names as well. I take the example of Eminox. I borrowed it from the Manufacturing Forum which we have not mentioned today but is another social partnership body on which the TUC and employers sit to take forward manufacturing. Eminox has developed a stainless steel exhaust system that uses the best emission-reducing technology. London Buses has started to buy that technology to reduce pollution through LT procurement. This technology has been developed and is being sold wider than London Buses. Here is an example of a British company building an environmentally friendly product developed through procurement. That has now strengthened the company and it can sell that product elsewhere. That is the kind of solution that we want to see happen more and more.

  Mr Lent: To go beyond specific examples and talk about broader strategic approaches to this, we are in an area of industrial development that is still quite new. What many of the companies working in this area need is stability and a degree of certainty so they can start to do the blue skies R&D that sometimes needs to be done to develop future markets. That is where government procurement can play a role. It comes down to a question of planning. Major private sector companies do this all the time. They nurture and work with their supply chains and tell them their future needs so that those companies can start to develop with a reasonable certainty that they will be able to make some profit out of that and then expand into other markets. All we are asking government procurement to do is replicate that good practice and nurture some of the best green enterprise in Britain so it can start developing into global markets in the future.

  Q116  Mrs Curtis-Thomas: Has the TUC itself set an energy reduction target that is to be achieved?

  Ms O'Grady: Do you mean for our own car fleet of three?

  Q117  Mrs Curtis-Thomas: It goes to the point that you argue for sustainability. Have you introduced it at home? If I looked at your energy consumption last year and this year would it show a reduction?

  Ms O'Grady: As you would expect, we are developing an agreement and audit with our staff side trade unions which covers the full range of activities from the examination of our extensive car fleet to recycling and so on. We also have our "Greening the Workplace" initiative which uses what we believe is at least as important as leading by example; namely, our collective bargaining power. We are developing a whole range of initiatives concerned with green issues in different workplaces that we have piloted.

  Q118  Judy Mallaber: Going back to the use of social clauses and other mechanisms to benefit UK manufacturers, you gave some examples, but how far can we go? If there is an area which would not necessarily be regarded as having a high level of unemployment and unemployment has reduced is it legitimate to use those clauses to benefit local people, and, if so, how do you do it? Is that just us cheating and not playing by the rules?

  Ms O'Grady: When we first started to work on this we hit blank walls and found what we could not do. We wanted to shift the debate into what we could do. Recital 33 is very clear in terms of vocational training, unemployment and broader labour standards which we believe we can show lead to better performing workplaces. It is not about charity. In many ways the expression "social clause" is unfortunate because it makes it sound as though one is doing good, whereas we regard it as an essential part of being a decent, high-performing business.

  Q119  Judy Mallaber: Does that lead to UK manufacturers getting the contracts? Cannot foreign manufacturers say that they are assisting the poor and dispossessed in our areas?

  Ms O'Grady: Of course they can.