Select Committee on Trade and Industry Minutes of Evidence

Examination of Witnesses (Questions 419 - 440)




  419. Mr Samuel, could I ask you to introduce your colleagues?
  (Mr Samuel) Thank you, Chairman. I am Bill Samuel, Chief Executive of East of England Development Agency. Starting on my left, Barry Symonds from the Employment Service and Dai John, Vice-Chancellor, University of Luton. Then Councillor Bill McKenzie, Leader of Luton Council, James Gray, Chief Executive of East of England Investment Agency, and Simon Ash who is from the Regional Supply Network. We are representatives of the Partnership but we are not its entire force.

  420. Thank you. I think you have been sitting in so you know some of the ways we are coming at this issue. Perhaps you could tell us briefly, and it may be that Councillor McKenzie may be able to help us on this one, what is the Council's assessment of the human and financial consequences of the 12th December announcement and the knock-on effects? Has there been any assessment of that made? What are the views of the Council about the announcement?
  (Cllr McKenzie) In terms of the Council's position on this, we are here today as part of the Partnership to give evidence, but we would like the opportunity to make it clear the Council sees its primary role at the moment to get a change in this decision. For many of the reasons which have been explored by the Committee earlier, I would like to place on the record that that process has all-party support within the Council and indeed within Bedfordshire amongst its Members of Parliament and Council leaders. In terms of the impact of the announcement, if carried through clearly it would be savage. We are talking about 2,000 identified jobs. We know most of those are likely to be within Luton. We do not know the details of the knock-on effects through the supply chain and colleagues here are heavily involved in seeking to do that analysis. If you look at Vauxhall's own 1999 Report, it makes reference to 10,000 direct jobs at Vauxhall, supporting up to 100,000 jobs throughout the UK. If that multiplier effect is valid for these jobs, it is going to be very profound indeed. One other point I would like to make is that the employment profile at Vauxhall is more male orientated than female, and although Luton has an unemployment level of 3 per cent, the male unemployment is higher and unemployment in some of the inner wards, particularly where the Asian communities are focused, is something like two or three times that.
  (Mr Samuel) The impact is going to be extremely significant and I will ask my colleague, Simon Ash, to comment on that in a moment. I am aware you have had our briefing put to you. Because these figures and information and data intelligence is getting better and better daily, and it will continue to do so, I think I ought to correct one figure and it relates to the figure Mr Reilly gave you of the 1,290 in terms of direct suppliers as far as Vauxhall is concerned. Under the Automotive Industry section where we have set out a number of statistics, we made a judgment at the time this paper was put together that there were some 600 to 700 jobs being lost in components suppliers like BTR Sealants and Trico. That figure we have now been advised has been put up to around about 1,200 to 1,400 jobs. It is very difficult to actually get a firm, discrete handle, a robust set of figures, and that is part of the job which falls to the Partnership, to get data and to plan support. We recognise there is a fair way to go. These decisions are being challenged and if they are not reversed then of course we are well placed to start to provide the support to workers and their families.
  (Mr Ash) Chairman, it is obvious we have only just started the work to identify in the supply chain. In the Rover Task Force work, which we were involved in on the fringes as a region, the number of job losses was relatively slow and was only about 105, 115 businesses which reported job losses. Obviously with the announcement of Dagenham and now of Vauxhall, our concern is of the domino effect which will occur in the supply chain. To a certain extent for those companies which make up the third and fourth tiers, and to a certain extent the second tiers, it is very difficult for them or us initially to identify whether or not they are vulnerable since many companies are not aware they actually supply into the Luton plant. They will probably know they supply into an automotive industry supplier but what they will not know is if the components are anything more than generic and it is only when the orders start to dry up that they will know whether they are affected. So the work of the supply chain group which I am chairing is very much to identify those companies in the lower tiers of the supply chain as quickly as we can and identify whether or not that is going to affect job losses in those lower tiers.

  421. Do you have any information on the suppliers to the Vectra and the suppliers signed up to the new Vectra?

  (Mr Ash) Not as yet, no. We have only just started the work obviously, because this was only announced just before Christmas. As we talk today, there is a delegation from the Partnership in with Vauxhall's purchasing team identifying the top 70 companies which make up their first tier. We anticipate that information will include both national and international companies, not just those in the region. Our experience of the first tier suppliers in this region is that we have probably only got four but what is going to be key is identifying those 70 suppliers and identify from them as soon as we can who makes up the second tier. Then we may start to have the information you are seeking.

  422. If you can provide us with multiplier figures in a reasonable time, because our report will be drafted fairly soon, it would be helpful, but we realise from your point of view it will take time. We are grateful to you for explaining it the way you have.
  (Mr Samuel) We will certainly do that. It would be helpful if we could learn from the clerk what the timescale is you are working to.

  423. We are not quite sure yet but soon. Councillor McKenzie has made the point about seeking to defend the jobs which are under threat, but as a group have you a great deal of faith in employment continuing in the Vivaro and Frontera plant and the IBC activities? How hopeful are you that things will be sustained there?
  (Mr Samuel) I do not think we have made a judgment about that and perhaps nor should we at the moment. I think it is important for us as a partnership which has met twice to start to assemble good, sound information as far as we can, to start thinking through what ranges of support and, if the decision is confirmed which we hope it is not, what opportunities flow from this for Luton and the region. We are going through the data-collection exercise and I have no doubt we will be starting to get into areas where we can respond on those things.
  (Cllr McKenzie) The key issue is the site of the car plant, because as I understand it part of the Frontera production which is to remain in Luton is going to be undertaken in the car plant but I am not clear as to how much of the car plant is going to be utilised for that, but if the Frontera production is going to be sustained through to 2004 then obviously Vauxhall cannot sell off three-quarters or two-thirds of the plant. I do not know how much of the footprint has been used and that might be a matter of enquiry that you perhaps might wish to pursue.

Ms Perham

  424. You very helpfully provided in your briefing information about the funding opportunities and you mentioned Assisted Area Status which you have for Luton. Is that of any help in this situation or would you have to look for further funding?
  (Mr Samuel) It is certainly of help but the designations and the projects which comprise those things which relate to the Luton economy were put together prior to the announcement itself. Of course many of the actions which will flow from Assisted Area Status and Objective 2 funding will have an impact but there is a resource beyond that which is going to be needed. We have made mention of that in our Conclusion, we have not put a figure on it and we do not think it would be right to do that without better data, but ultimately I think we will be talking about tens of millions rather than tens of thousands if we are talking about assembly plans and property to attract inward investment to secure those jobs to replace those we have lost.

Mr Chope

  425. When Longbridge was threatened with closure, £125 million was put on the table to help assist, and funding was made available to help component manufacturers over the crisis. What sort of sums of money are you thinking might be appropriate in this case?
  (Mr Samuel) I am conscious of the £129 million put on the table working through the task force which was set up by Advantage West Midlands. I am very cautious about putting a figure on it, although I did say we are looking at tens of millions. All other things being equal, and of course the decision has not been finally confirmed yet, the bottom line is if there was a complete cessation of activity at Vauxhall in Luton then this property, albeit redundant, is in a very significant place—close to airports, close to motorways, close to railways—which presents a huge and exciting opportunity for inward investment. But there is a problem of preparing that land for development and providing the infrastructure support for access to be made to these sites in a more effective way. Junction 10 on the M1 needs improvement. It means looking at the way in which we take advantage of Luton Airport which is a significant economic driver for the region. So the figures are large. Just the money to put together the land would probably be £50 to £60 million but I should not quote a figure because it would be wrong to do so. You need a figure which is based on good, sound evidence and research and we will do that in time.

  426. As I understand it, there was talk about a local package of support in 1998 to support the deal that was done then. We heard from Mr Reilly that nothing actually resulted from that, can you confirm nothing resulted from that package discussed in 1998?
  (Cllr McKenzie) I was not on the Council at that time and was not involved in those discussions but I believe what he may have been referring to was the hope that planning permission might have been granted on a piece of land called the Braish. I imagine that is what he was referring to. Certainly planning for retail development was not granted by the Council. The Council has worked actively with Vauxhall in recent years on five or six key applications, they have helped them be successful in the relocation of a supply chain close to the plant, but this particular application would have been strictly contrary to the Local Plan, in particular outwith the issue of discouraging retail development on the outskirts of towns rather in town centres, and would have put the Borough Control Committee in some jeopardy had it approved it. Having said that, we did go through a huge effort to see if there was any way they could be accommodated but I think Mr Reilly, although he did not say it today, has subsequently said that that was in no way a factor in this decision.

  427. I understand the Council also commissioned a report from an ex-industry academic into Vauxhall?
  (Cllr McKenzie) Yes. That report was commissioned by the Borough Control Committee to try and answer the question, if we did not grant this planning permission would it mean that Vauxhall would up-sticks and leave, and the conclusion was that no, it did not mean that. Had the report said, "Yes, we definitely need to do that, otherwise it will go", that might have been sufficient for the Borough Control Committee to throw away the rule book.

  428. But that was just to do with the planning issues?
  (Cllr McKenzie) It was, yes.

Mr Laxton

  429. Sometimes when situations like this arise in some senses it stigmatizes an area, that there has been a big closure and so on. Is that something which you feel may be a problem here in Luton? Perhaps you could elaborate briefly a little more on the expansion of the airport and what is happening there as well.
  (Mr Samuel) Certainly it is a factor in the image and identity of any place, whether Luton or indeed our region, and it is significant in attracting inward investment. Apart from the work which has been done by the local authority, I do know the University spear-headed some work on developing the perceptions of inward investors and which people who live in Luton have of themselves and the place. That is going to be a very significant part of the work we do to realise the development opportunity should this decision be confirmed.
  (Dr John) I speak from a perspective of the University but I think it is fair to say that there is a PR-deficit in Luton. It is identified with manufacturing in the Home Counties and has been described by the Financial Times as "the brass buckle in the gold belt around London". You might say in the long-run insofar as we diversify from the manufacturing base that might assist the long-term development of the community. We felt the stereotypical image that we had, of a town with a smoke-stack economy, which many people see it as outside the region, was not fair at all. The economy had diversified. Luton had been good to a great many people and in fact the town has much to offer and so has the surrounding region. So we helped to put together a consortium of public and public sector organisations who put money into a study which looked into all the stakeholder groups within the community, both business and social, felt the strengths of the community so we could align our PR efforts together, so we could maximise the good news from the community. It so happens that that reported just after the announcement was made and we felt that was something we could put into the consortium immediately, we could get off to a fast start in projecting a much fairer and far more positive image for the conurbation, and one that it deserves, and there is no question at all about that. So we are hoping that will move fast.
  (Mr Gray) We will be doing a presentation on Dr John's group's findings at one of our sub-group meetings on Tuesday of next week. I think it is a critical part of our work that we do actually start to look at how we present Luton as an investment location much more positively. We need to ignore some of our own British views of Luton. They are in the past. We need to get away from that, whether it is the old Lorraine Chase view or whether it is the impact of this particular decision. We are all smiling but actually we still hold on to some of those perceptions. What we need to get out is the fact that companies such as Astra Zeneca, Flight Safety Boeing and Nissan, just a few miles north of here, are putting down very important investment in this area and we need to build into that to re-position this area so we do attract the investors we need.


  430. We know that we have the university here and there is this pool of skilled employment, assuming the worst scenario, that the campaign to save the plant is unsuccessful, you do have a number of skilled people, predominantly male and the age profile is yet to be established although we understand the median age is around 45, do you think you are going to be able to provide re-skilling opportunities, attractive enough qualification packages, to encourage people to make what might be quite bold steps in the employment sector?
  (Mr Symonds) Yes, I think we will be able to do that once we are in possession of the information as to the skills the workforce currently has at the moment, once we know who is going to be directly affected by this decision, once we know the terms for people being released and displaced from the company, and once we have done the assessments about the local labour market and what employers need now in terms of filling existing jobs, what new vacancies will come on to the market and what skills will be needed to fill those, and what the future growth potential is within Bedfordshire generally as well as Luton. I am confident that once those assessments are available and the information is available, we can put into place the appropriate training, re-skilling and business start-ups.
  (Dr John) There is considerable capability and capacity both in further and higher education in the area, and I speak from the perspective of having worked in different parts of the country. There is also a long tradition of further and higher education working for employers. Vauxhall are very progressive in that regard. They set up a learning centre called Guidance, which we now manage, and of course we engage our partners as well, but it does account for 96,000 hours a month of learning and many people in the plant are engaged in gaining qualifications from NVQ Level One right up to Masters level. We ourselves manage work-based local courses in business management and IT both at under-graduate and post-graduate level, so it is not as if we are dealing here with a workforce which does not have capability or potential. There is a very strong commitment. I am bound to say that like other services we are stretched, but provided funding is made available I have no reason to believe we could not rise to the challenge.

Mr Hoyle

  431. Obviously the loss of good, quality manufacturing jobs and well-paid manufacturing jobs is a great loss, but can that be replicated by new companies coming in? You will have people queuing up to buy the land because of its proximity to the airport and the motorway but at the end of the day, hotels, supermarkets, shops, whatever, are not the answer to what you have lost. So what are you going to do to address the existing skills you have got to encourage similar employment?
  (Mr Samuel) Two things. If this decision is confirmed, from the comments made by Councillor McKenzie at the beginning the impact is going to be dramatic and it will not just be felt in this locality but across the UK. It is a sad fact of life, and this was commented on by the trade union delegation a moment ago, that globalisation actually pushes us into situations where we do not have the ability, should we even want to, to go back and recreate what was there before. I have no doubt that there will still be vestiges of and hopefully effective development opportunities for vehicle manufacturing and development and R&D within Luton, but there is also the opportunity—and again we have heard about the potential for re-skilling and up-skilling—to take advantage of inward investment with the knowledge economy industries which are already starting to be seen in this locality.
  (Cllr McKenzie) There is one employment site, not yet settled in planning terms, which has the potential for some 1,500 jobs, and that is a science park on the eastern part of the town. There is another key site, apart from the Vauxhall site, which could be opened up but the infrastructure is very expensive, which has the capacity to provide 2 or 3,000 jobs. I think it is the nature of those jobs, as you say, which is going to be key. We have already had supermarkets knocking on the door and we need to be pretty mindful of that. There are plans already in train to deal with that. The airport, which was mentioned earlier, is going to be a key driver. At the moment passenger numbers are something like 6 million and it has the potential probably, without much change to the on-site infrastructure, to go to about 10 million, and I think the rule of thumb is that every million passengers means 1,000 jobs. Not all of those jobs are highly skilled jobs, although some might be, in the support services which are attracted to airport sites.

Mr Butterfill

  432. Mr Reilly told us that they had made a firm decision that the site would not be mothballed but would be closed down, and it would be their long-term intention to sell it off. Have they had any discussions with your planning department as to what the alternative uses might be?
  (Cllr McKenzie) They have not yet. As I said earlier, there is a key issue as to how they could sell it off in circumstances where they are seemingly going to keep some of the Frontera production through to 2004.

  433. There is some difficulty about the arrangements proposed on site if they want to release a clean site.
  (Cllr McKenzie) It is inconsistent with continuing production because part of the IBC output is in the car plant.

  434. Have you given any thoughts yourselves to that particular problem?
  (Cllr McKenzie) Not in great detail.

  435. It is early days, I am not suggesting you should have done. It is obviously a key site.
  (Cllr McKenzie)A key component is the East Circular route and seeking to get sufficient funding to make sure that that route, which is mostly single carriageway, can be extended both to help the airport and—

  436. So you may be looking to Government for some additional assistance?
  (Cllr McKenzie) It is possible we may be looking at that.

  437. Perhaps you would let us know what happens.
  (Mr Samuel) Can I just pick up on that point? Notwithstanding the other action which would have to take place which would determine this decision is confirmed or otherwise, I find it quite reassuring there was a statement made on behalf of Vauxhall that there was a desire to work with the Luton Vauxhall Partnership to secure those opportunities. Mr Reilly made a comment like that in the evidence he gave this afternoon. If the Partnership is going to be successful, it is not only the action of working together with the agencies and partners and getting the resources they need, it is also the long-term commitment of Vauxhall to make it work as well. That is not just in terms of the property, obviously there is a commitment to be realised on the packages which have to be put together in terms of training and re-skilling which was mentioned by the Employment Service.

Mr Chope

  438. Can I ask about the practical side of training and re-skilling? Somebody, say, who is 40, working for Vauxhall, who has a wife and kids at home to look after, if he starts going off and takes a year or more off to go on a training course, first of all, he is unlikely to be able to get state benefits to cover that because of the operation of the means test, even if he was able to get those benefits they would not be anything like his existing wage, so often what happens is that people in that sort of situation feel obliged to settle for half the earnings they were getting before in the burger bar-type employment environment. Is there any way in which, if there are sums of money available—and obviously Mr Reilly himself has been chairman of the Skills and Training Council as I understand it—you could expect an employer who has made a lot of people redundant to offer training scholarships or support in this sort of situation? Because otherwise the combination of the means test and the need for continuing financial support for a real family deters people from actually going off and re-skilling in the way you talk about.
  (Mr Samuel) I am sure my colleagues on the left will probably want to come in with some specifics but that has to be right, does it not? The scenario could well be like that. But if we take advantage of the skills which already exist in the workforce, then the packages which need to be put together to enable people to be re-trained and re-directed into jobs have to be supported by the employer, and that is something which Barry Symonds might want to talk about. Obviously the Government has its rapid response fund as well.
  (Mr Symonds) To a certain extent, first of all, echoing your words, Bill, the support of the employer is going to be vital in all of this. Secondly, yesterday there was a meeting of a sub-group of the Luton Vauxhall Partnership and it is tasked with employment training and skills matters and one of the items which they have begun to work on is to look at what we need to go into the rapid response fund application to seek funds for a variety of things which are the usual suite of programmes and what we can do for displaced workers which can be added to. Certainly within all that, consideration needs to be given to what assistance can be given to employees—and subsidies and that sort of thing—but it is at a very early stage.
  (Dr John) With reference to higher and further education, there is no question that the present student support arrangements for mature study are terrible. The Department for Education and Employment released a definitive piece of research which demonstrated that. So it does discourage people. At the University of Luton we have seen a very large decline in the number of mature students pursuing full-time study. So it may have to be done by part-time study and that is a much longer haul, and the prospect of many years before you can cash in that qualification will tend to act as a deterrent. I am not being overly pessimistic about that, we do work hard to encourage students always to stay with their work studies, but if we are going to see a dramatic impact then you will need sums of money to tied people over, as you rightly suggest.

  439. If, for example, you are in the Army and you are told you are going to be leaving the service in a year's time, you effectively are offered job re-training opportunities paid for by the employer. What I fear is going to happen here is that people will be seduced into taking the immediate severance money and then losing the opportunity of continuing their employment although not actually working here. Are there arrangements whereby people can continue to work beyond the Vauxhall employee books while looking for another job and also getting themselves re-trained using their salary, which they would still be drawing, to meet the costs?
  (Dr John) There are already many engaged on courses which they can complete in two or three years or whatever. They have come with credits for higher learning. Many of them want to finish their studies having embarked on them and they are excellent students, highly committed students, but the decisive factor may be the ability to support their families during that period. If there is a choice between doing that or staying in full-time/part-time education on very reduced income, you do not need a crystal ball to see what the likely outcome of that would be. That would be a loss for them and a loss for the skills base of the community.


  440. Perhaps you could send us a note on this question of mature students and also the numbers of people you have from within the plant who might well be affected by this because it is a useful example to point up. From our own experience as constituency members, we have had our share of redundancies in the past, and it is often helpful to have some hard figures. One last point for the Employment Service, would I be right in saying that the counselling you will be co-ordinating/offering may well incorporate a number of alternative strategies to the people who will be losing their jobs which will make them aware of some of the options? My understanding from my own patch has been that your colleagues in Scotland have been adept, perhaps out of practice, at introducing people to alternative options rather than just the first job which may not be the best one. Would I be right in saying that is what you would be doing?
  (Mr Symonds) Very much so, Chairman, and I know my colleagues in Scotland quite well as well and how they have approached things. We have also taken on board what happened at Ford at Dagenham and Longbridge and what we are trying to do is to grow from those practices and apply them to the situation we have at Vauxhall and Luton. I should say that our intention at the moment is that we will develop a temporary job shop or centre on site. Vauxhall have given us permission to do that, putting the information technology in there to do that, so there will be access to vacancies, training opportunities, job search training, CV preparation and so on. We need to know who is actually going to be affected directly at Vauxhall as well as in the wider supply chain to grow this service and to give an appropriate response to those people.

  Chairman: Thank you, gentlemen. All of us around this table as Members of Parliament have quite an experience of the termination of employment in places which have been regarded as safe as houses. Many of the people have only worked in the one place all their lives, and they have no idea about even the prospect of even looking for a job. But once that initial trauma is in some respects relieved, then the prospect of looking for job can assume a rather different prospect in the sense it becomes a wee bit easier, but it is a very difficult thing. We are very grateful for the well-organised and thoughtful and sensitive way you seem to be going about your task. Thank you very much for your evidence today. You have probably had the shortest amount of time, but it is perhaps because of the precision with which you have replied to our questions. Thank you very much.

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