Select Committee on Scottish Affairs Minutes of Evidence

Examination of Witnesses (Questions 460 - 480)



Miss Begg

  460. Mr McFall, you have perhaps half-answered the next question already. You described the actions taken to alleviate the impact on the local community, which you said was devastating. Can you tell us a little more about the formation of the local development company and any other initiatives that you have not already mentioned?
  (Mr McFall) There are two stages: the establishment of the task force and the formation of the Strathleven Regeneration Company. The establishment of the task force was an element of good practice, with different groups getting together. I believe that, as a company that undertakes its social responsibilities, Diageo would in any event have done quite a lot of work that we did on the task force. Given that we had the major players in the task force, the job was made easier. For example, we undertook consultation with the community. We also had task force sub-groups which dealt with local suppliers of J&B whose businesses would also suffer. Diageo worked with us on the task force sub-groups.

  461. How easy was it to pull together the task force? You make it sound easy.
  (Mr McFall) It was definitely not easy. There were many ups and downs in getting it together. All of us came to it with different agendas. For example, the council might say, "Look, we are involved in planning. Wait for someone to come in to develop the site, and then we shall become involved, but not before." Scottish Enterprise Dunbartonshire might say, "We are the economic development arm in the local community. We shall become involved when there is anything that is concerned with economic development." Some might say that the MP was upfront and ask what he was doing there. I was in a good position to influence people and bring them round. From a situation in which people had, say, six or seven agendas, two years later the people involved have only one. Relationships between the different organisations are now the best they have ever been, because we have been through the pain to get the gain.
  (Mr Robertson) Remember that we are well into our third year, so it has not been the easiest of processes. One of the unique factors in this situation was that we sat around the table with everyone involved. To have the unions there in particular was immensely powerful; they played a major role from start to finish. We were able to see changing attitudes. Positions might have been entrenched before but later there was no room for it: all of us had to get together and do something different. Looking at how the example can be used, one of the trickier parts is leadership. There is no doubt that in John McFall we had someone who not only had a vision but tirelessly pursued it. He was determined to bring about change. In the circumstances we had the right person in place. In other communities one of the first things to be done is to find that kind of dynamic leadership. Whether that leadership comes from politicians, the business community or the public sector is to an extent immaterial. However, one needs someone to keep driving it, and that was one of the key roles performed by Mr McFall. The ability to sit round the table together and, at the end of the day, to be pragmatic is critical.
  (Mr McFall) That personalised it, which was very important. People suggested that perhaps Diageo would walk away. I said that it would not because Ken Robertson had given me his commitment. It was important to emphasise Ken Robertson's name all the time. With regard to West Dunbartonshire Council, its leader, Andy White, gave me his commitment; Dan Henderson, Director of Planning, and his subordinate Ian Hodgson also became involved. As for Scottish Enterprise Dunbartonshire, Dave Anderson and Alan McQuade have been supportive and given a fantastic amount of time. Therefore, the whole thing has become very much personalised. That is very important when people suggest that things are not moving along. We all know each other and are all signed up to the same objective.

  462. Therefore, it is a matter of putting trust in the individual rather than the organisation or agency that he represents?
  (Mr McFall) It is not that we do not place trust in the agency, but by naming the individual there is someone there with a personal stake in the task force.

  463. You make it sound very rosy. Was there anything about that approach which was unsuccessful?
  (Mr Robertson) We had to do a considerable amount of learning and return to a number of matters again. We did not get everything right. If we started it again, undoubtedly we would do some things differently. We had a couple of setbacks; for example, early on we had a buyer lined up for the plant, but the deal fell through just before Christmas. That cast considerable gloom over the whole process. It was by no means rosy or easy. However, over the piece the process itself allowed us to deal with that. To have everyone there with a commitment and an open manner meant that those adversities could be dealt with.
  (Mr McFall) You may study a subject for a year and the night before the exam say, "To heck with it." I felt like that. Ken Robertson or others would say, "Settle down; we're getting there." In the two-and-a-half years there have been ups and downs, but when we look at the global picture tremendous moves have been made. The task force has done good work, but the Strathleven Regeneration Company has a vision for the economic redevelopment of the area. I commend that model to government. I am putting it to John Reid and Stephen Byers and suggesting that when a tragedy strikes a particular community, for example Vauxhall in Luton, such an approach should be attempted. It is not just a matter of putting people together; it is a new model.

  464. Do you agree with the report of the Fraser of Allander Institute that the whole was more successful than the parts?
  (Mr McFall) Very much so. At times when one is right at the centre of it one can be a bit down, but when one stands back one realises exactly what has been achieved. We have achieved that because people have kept their word. Years ago Allied kept to its word and invested £20 million. Ken said that the company would keep to its word, and it has.

  465. Assuming you had not set up that task force, what would have happened?
  (Mr McFall) The company would have been on its own in carrying out its objectives to retrain people and try to put them into jobs. We would have had, not simply the 90-acre J&B site, but a 400-acre derelict site, with no plan or vision. With the establishment of the regeneration company we have the land put in by Diageo, West Dunbartonshire Council and Scottish Enterprise Dunbartonshire. The regeneration company is at the centre of it. We are now talking to an inward investor to persuade him to go to the J&B site. That would not have been achieved had it not been for the task force. The plans for redevelopment include the main trunk road: we want to develop a new roundabout on the A82. We want roadside development and access to Allied's plant and the Vale of Leven industrial estate so that we market the area as a place to which people go for jobs. That could not have been achieved had we not established the task force.
  (Mr Robertson) We would have done everything for employees in the normal way and the site would have been sold commercially. The town would have lost not only the jobs but the opportunity to think about its future. There is a dynamic here with which we are all too familiar: the decline of industry in Scotland. Industry evolves, grows and ultimately declines or moves out. The difficult task is to get communities to readjust to that. A lot of modern thinking is to ponder what the community needs to do to adapt to changed circumstances. Had we not had the task force the story in Dumbarton would be much the same as it was after the last closure: we would not have had the necessary fresh thinking and dynamism to try to approach the future in a different way. Frankly, two-and-a-half years ago a good many attitudes were set or atrophied; now people are much more flexible, particularly in relation to what the town has to offer. At the point of closure the first thing that Mr McFall would have heard would be a list of Dumbarton's disadvantages, whereas now people are much more energised in thinking about what the community has. The community can build on that and look at how to do things in a different way. Without the task force that change would not have occurred.
  (Mr McFall) Perhaps one of the inspirations which drove me at that time was the job that I held as Minister for Economic Development in Northern Ireland. People came to see me about their areas and as a Minister I knew just how little I could help. I thought that, surely, there had to be something better, and that was why I wanted the task force to look elsewhere. It went to England and visited Lancashire Enterprise and the Republic of Ireland. One thing in the Republic which energised the task force was that everyone in the community got together, even the local bishop. They asked where the road was leading. It led to Dublin and then Europe. That impressed upon people exactly what the situation was so that the community got something better out of it.


  466. Mr McFall, you laid great stress on the fact that named individuals were, almost by implication, known and trusted in the community. Just how important was it that those named individuals were also the leading people in their respective organisations? You mentioned the leader of the council, the director of planning, the director of Guinness UDV and yourself. We have all seen projects, perhaps on a smaller and less important scale, where the participants are much lower down the tree; they may be third, fourth, or even lower-tier, officials who cannot make decisions but are there only to take part in discussions. How important is it to have the decision-makers participate in the process?
  (Mr McFall) I cannot emphasise enough the need for those at the top to have been there. For example, the political and administrative leadership in West Dunbartonshire Council was signed up. A number of the issues that we raised with the council regarding the land perhaps run against the local plan. It is important, therefore, to ensure that the council are aware of such issues early on. The director of economic development and his staff will be the ones to deal with the new site. To establish a master plan and point the way forward is very important. From day one of Scottish Enterprise Dunbartonshire there was contact with Scottish Enterprise. Scottish Enterprise Dunbartonshire submitted a document entitled Lifting the Rock which illustrated the impact on the wider area. As a result, £1 million came in for the area. That helped us considerably. If we had not had those at the top involved in it it would not have worked. If Mr Robertson had not been there representing, and giving the opinion of Diageo's board people would have said, "Don't believe him. I've dealt with so and so at such and such a level, and nothing will happen."
  (Mr Robertson) Everybody is busy. A massive commitment in time is required. If one is not prepared to make that commitment while it may work ultimately it will take a lot longer and the decision-making will be fairly tortuous. That was a key factor in the success of the project.
  (Mr McFall) The management and officials have given more than adequate time. There has been an unfair burden on all the organisations. I do not think I can compute the amount of time that has been put into it, but it could not have been achieved without them.

Sir Robert Smith

  467. You may not want to answer the next question because it may undermine what has been achieved. Did the different organisations worry slightly about the long-term justification of their roles; namely, that by coming together they would lose some of their identity or credit for their participation?
  (Mr McFall) Yes. Right at the very beginning everybody was paralysed. They asked themselves what it meant for them as separate institutions if they entered into it. Would they be subsumed within the task force? Would it take over where they had left off? The key to it was to sit around with others and say, "If you come into it your strategic role elsewhere will be maintained. You have freedom when you come in and, since everybody will be putting something in the pot, you will be able to pursue your own ends." For the council it meant that it would have economic development and the land would be used; it would not be a blight on the landscape. Scottish Enterprise Dunbartonshire would have the opportunity to attract inward investors to that site; it could trumpet the success of the task force and the regeneration company which would be in line with its aims and ideals. Diageo could say that it had given a commitment to stay with the community and had shown its corporate and social responsibility. I cannot praise Diageo enough for its commitment: its word is as true now as it was the first day.

  468. How important was it that a local approach was taken to deal with the closure?
  (Mr Robertson) It was extremely important. Literally, around the table we had representatives of the people most directly affected. We had links with the suppliers who were affected, the local college, employment services and so on. It was absolutely critical to deal with it there. We received support from further afield as and when we asked for it, but basically it was driven at the meetings held on site.
  (Mr McFall) As to the unions, Tony Davies, John Toal and Willie Glover took a hit on the first day; they had to explain to the workforce exactly what they were involved in. I remember that on one occasion they were terrified about going to the Republic of Ireland. I did not go there. Some people suggested that they had gone there for a freebie and there was nothing in it. I do not believe that John Toal went as a result. We said that it was not a freebie; it was important to see how other communities could do it. They had to show their strength of purpose, and they did. Had we not had them the whole thing would have been lost. All of them had different points of view. Indeed, one of them, who shall be nameless, told me that he was a Tory trade unionist, but he signed up to the aims and objectives of the task force.

  469. How did the approach adopted in Dumbarton differ from that following closures in other areas?
  (Mr Robertson) Having looked at others, in part there was a difference in the allowance of time. A two-year period implies a different discipline. To have everyone one needs around the table is critical. There was an evolution from the task force into the regeneration company. We looked at the strengths of Dumbarton and tried to see other possibilities. We considered a major development at Lomond Shores where £60 million had been invested in a new tourism project at Loch Lomond. There is potential for town centre and other redevelopment in Clydeside. There was a feeling that the move from task force to regeneration company would provide the opportunity to approach it in a joined-up way for the purposes of planning. I believe that one fundamental difference is that the agencies that have become involved are now much better able to handle the wider issues and look to the future of Dumbarton in a more strategic way than was ever possible before.
  (Mr McFall) Diageo has had deeper involvement in this exercise than in anything else. It was a measure of Mr Robertson's ability that he was able to persuade the board that this was the right strategy to adopt in Dumbarton. There was a tentative approach at the very beginning. At the end of the day, it will give the different organisations a little more confidence to deal with things in future. They have now taken the plunge and find that they can still have their own identity and integrity, which is extremely important.

  470. You mentioned the closure in Essex. Do you have much understanding of what happened there?
  (Mr Robertson) I was also involved in that. These things differ from place to place. The plant which was located in Basildon New Town, Essex, had been there since the early 1980s having moved out of old premises in the centre of London. The mood there and the industrial set up were very different from Dumbarton. We did not have a task force because the demand for it was not there. However, we worked closely with the local council and economic bodies. There was not a big issue about finding jobs for people. Ultimately, there was no question about the future of the site: it went straight into industrial redevelopment to provide different factory units. It was a totally different situation. The basic principles adopted in handling our employees in the community were the same but the execution was different.

Mr Tynan

  471. Obviously, other plant closures may take place in the whisky industry. Is this a unique model because the circumstances have driven it, or can it be used to identify lessons to be learnt in other communities where there have been merger or closure programmes? I think of Corus which has serious problems. Obviously, there are steel plants in places like Clydebridge and Motherwell. There may be a problem as a result of a closure programme. Do you regard this project as unique, or can it be transposed to other areas?
  (Mr Robertson) I do not think that you can drop it in as a blueprint. On the other hand, there are some lessons to be learnt which can help. Obviously, different companies approach these matters in different ways. Our view in UDV and Diageo has always been that we will talk to the community and political leadership as far in advance of the event as possible. Obviously, our prime responsibility in that situation is to our employees; they must be the first to know what is happening. You must talk to everybody to prepare them for what is about to happen. We did not get everything right first time, and hopefully the blind alleys that we followed will be avoided by people who tackle it again. There were specific factors: the leadership supplied by Mr McFall; the willingness to look at other models; the bringing together of the key players, which was of critical importance; and getting local agencies, which sometimes do not always work together, to think about a different model and submerge their individual needs for the collective good. One needs someone to fund and support that, which was our role as a company. Therefore, the role of the company is very important. Fundamentally, what sticks in my mind is the engagement with the community. We had two community days: one with the business community and the other with the wider community. We got them to think as well. You cannot drive a solution if people are not prepared to work with it. Therefore, it is the response of the community to the issue which is the most important element.

  472. Therefore, you believe that there are lessons to be learnt?
  (Mr Robertson) Yes.

  473. You do not believe that it is unique; it can be used as a model for other situations?
  (Mr Robertson) I hope so. One of the reasons we wanted a report to emerge at the end was so that we had a formal record of what was done. The report does not say that people have to go off and do this or that; it sets out the narrative for people to look at. They can say, "There are some good things here which can be used in our situation, but there are other things that we do not want to do."

  474. I should like to deal with the question of corporate responsibility. It appears that the company took on the responsibility and did not just walk away. While companies in any industry will always be a very significant part of the local economy and closure decisions will almost inevitably cause severe local difficulties, in situations where large-scale closures are inevitable what type of corporate responsibility should large companies have towards the local community? Do you think that they should do more in that respect?
  (Mr Robertson) We have to start with definition. In Diageo we use the phrase "corporate citizenship". That is very different from "responsibility" which always implies an onus on someone to be charitable, or whatever. We have always felt that "citizenship" implies that the company has those responsibilities but also rights and an active role to play. The company draws its employees from large or small communities, whether in an urban or rural setting. It works in partnership wherever it can with local authorities and other local agencies. If something happens and the fabric of the local community must change in a major way the only thing you can do is go in and take a leading role to try to provide solutions to the problems which, to be frank, we have helped to create. Companies must take their roles very seriously, and that is something which we have always demonstrated. That problem also exists across other companies, but others approach it in a different way.

  475. Do you agree that other companies should do more in that respect in relation to "corporate citizenship", or whatever expression is used? Companies should take on that responsibility in an area where for many years they have been able to utilise the local community and create profits?
  (Mr Robertson) The company must have a relationship with the community that supports it. You cannot be an island; your employees are part of the community. They may be your employees but when they go home at night they are part of the local community. That community supports and nurtures the plant and in turn the plant helps to drive the local economy. In the case of Dumbarton, it supported the people who worked there and the local supply base. In answer to an earlier question, there was great pride in the J&B product which went around the world. In all these things you must take into account that when you close the plant it will not be easy. Any company that does it must carefully think through all the impacts. One of the first things to happen in the decision-making process, certainly in our company, is to think through the impact on the community. You must put in place sometimes quite considerable resources and budgets to deal with it.
  (Mr McFall) Like Mr Tynan, I have read a lot of annual reports of companies which talk about corporate citizenship. As far as I can see, a lot of companies will sometimes, not often, dip their toes in the local community and so do something called "corporate citizenship". I believe that Diageo has lived up to that concept. There is a story to tell. With the establishment of the task force we got right into the local political environment. Not many companies want to get themselves deeply into it; generally speaking, they do not want to know. I had said to Mr Robertson that I thought it very important for Diageo to get in and understand the local political environment. I did not mean simply "party-political" but how the community worked, who were the people with influence and how it could be taken forward. To understand the local community the company must be in there. Perhaps to begin with one or two people in Diageo did not want to get into it to that extent. However, Mr Robertson had given his word and persuaded the board of the merits of it. Therefore, the company was in deep. To me, that represents good corporate citizenship. While the company has left Dumbarton, its presence is still felt. The company has generated surpluses for the area. The land is now at the disposal of the regeneration company, and that is a huge commitment. I believe that corporate citizenship has merit. We have looked beneath the surface with Diageo, whereas perhaps in some other companies it is expressed by a few lines in an annual report.

Sir Robert Smith

  476. How do you think the shareholders measure the benefit of corporate citizenship? Is there a way of quantifying what would have happened had you just done the bare minimum and walked away?
  (Mr Robertson) I think that that can be answered at two levels. John McFall put his finger on it right at the beginning. If we had gone straight into confrontation there is no doubt that we could have had walk-outs, strikes and the place could have been closed for weeks on end. The resultant impact on the supply of Europe's number one scotch whisky brand would have been immediate. Therefore, from a business standpoint what we did was absolutely right. At a second level, the company has been able to live up to its values and beliefs, which is important these days. People who invest will look much more at the ethical dimension of the company and how it behaves in terms of the environment, the people and so on. Some shareholders may not view it in that way but others will. I think that Diageo is able to say that it acted responsibly and fully in line with its policies throughout. When one intends to close down a plant one must look at the full cost, which includes working on the solutions with the community. There will be massive write-off and redundancy costs, and to that you must add all the other costs of time and money to be spent in helping repair the damage done and allow the community to continue. Hopefully, the shareholders feel that the right thing has been done in terms of the business generation and the company's reputation.

  477. Do you believe that, given the nature of your product and the company's image from the point of view of the consumer, what was done had greater driving force than if the company had acted more at arm's length?
  (Mr Robertson) I do not believe that there has been such a linkage, particularly in the case of J&B which by and large does not sell in this country: it sells in Spain, the USA and so on. We have never made that kind of linkage. However, the company is known by its brand, so arguably there may be something in that. Certainly, we did not set out to do that.
  (Mr McFall) I believe that the company could have walked away with less of an impact because J&B is not sold locally. However, the possibility of a strike was a very real one in the first few days of the announcement. The trade unions, the management and ourselves sat down and asked ourselves what a strike would achieve. There was a unanimity of view: it would not achieve anything. If people keep their word they can get something better out of it.
  (Mr Robertson) The first thing that people ask is what they can do to change the decision. My experience is that when a company plans something like that the decision will not change. What one must then do—the model was led by Mr McFall—is accept it and not waste time and effort in constant head-to-head confrontation to try to reverse the decision. We had to try to drive something different for the future.


  478. You have referred to problems and difficulties. In my experience, you just cannot please everybody. Was there much opposition to what was proposed, as against uncertainty and perhaps unhappiness? If so, is it ongoing? Is everyone happy with the activities of the task force and the Strathleven Regeneration Company; if not, what problems do you still face?
  (Mr McFall) I do not know that I would use the word "happy". I should like the company still to be there, but the reality is that it is not. The workforce to whom I have spoken are very happy about the way that Diageo has discharged its responsibility as an employer. Let me give you a light-hearted example. I was in a local pub a couple of months ago and a man said, "John, if you tell me that J&B is going to open I'm going to throw this whisky over you." It was a good deal.

  479. Apart from the workforce, was every section of the community behind it? Were there some individuals, organisations or groups opposed to what was going on?
  (Mr McFall) Every section of the community has been behind it. The local newspapers were behind it, because we sat down and explained to them where we were going. The council received the Task Force delegation. We gave our views to the council. The council comprises many political parties and independents. That was accepted unanimously. People signed up to it because they realised that it was for the benefit of the whole area, that each was subsuming his own particular agenda for the big one: economic regeneration in Dumbarton. Earlier Mr Robertson alluded to the fact that the attitude of some communities was perhaps a bit depressive; they felt that there were high levels of unemployment and not much future. I believe that since the advent of the task force there is a buoyancy which has not existed before. There is also an outward-looking element which was non-existent in the past.
  (Mr Robertson) We have not finished the job yet. We must still get jobs back on site, which was the first objective of the task force. We need to get the site redeveloped. Until we can hand over a report which says that that is what has been achieved we are not finished. There will always be cynical people who doubt it, but overall the response has been extremely positive. We will wait until we get the job finished.
  (Mr McFall) Diageo will be involved for years to come.

  480. We have exhausted our questions. Are there any final comments or questions that you would like to make?
  (Mr McFall) I should like to thank the committee for the opportunity to come today. The drinks industry is a global market. This could happen elsewhere and there are lessons to pass on. I am delighted that you have given us this opportunity.
  (Mr Robertson) Thank you for the time.

  Chairman: In turn, on behalf of the committee I thank you both for asking to be heard and giving us a copy of the report, which is perhaps an example of how partnership between employers, employees and the local community can overcome adversity and achieve a great deal.

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