Memorandum submitted by Trades Union Congress
1.1 The TUC is the voice of Britain at work.
Our overall objectives are to raise the quality of working life
and promote equality for all. The TUC represents nearly 6.5 million
workers in 59 unions. That means that one worker in every
four belongs to a TUC affiliated union. Trade unionists include
factory workers and computer programmers; office staff and shop
workers; bus drivers and airline pilots; teachers, soap stars
and fashion models.
1.2 The TUC welcomes the opportunity to
give written evidence to this inquiry. We have taken a close interest
in the fortunes of British companies, including their ability
to export, over many years. We are represented on various Government
bodies, including the Ministerial Advisory Group on manufacturing
and the Learning and Skills Council. We have submitted evidence
to various inquiries and consultations, including the implementation
strategy for "The Race to the Top: A Review of Government's
Science and Innovation Policies", along with "A vision
for science and society", both conducted by the Department
of Innovation, Universities and Skills. We also contributed to
the Leitch Review of Skills.
1.3 In his Budget Speech on 22 April
2009, the Chancellor of the Exchequer told the House of Commons
that the UK is the world's sixth biggest exporter of goods and
its second largest exporter of services. Moreover, the TUC agrees
with the view of the Select Committee, set out in its call for
evidence, both that exporting companies enjoy higher productivity
than their non-exporting counterparts, and that exporting can
increase a firm's productivity still further. However, we take
the view that exports will not simply "happen" as a
result of the hidden hand of the market. We cannot "wish"
for more exports. Rather, the TUC shares the view, set out in
recent academic literature, that there are exporting countries
and there are consuming countries. Whichever category a country
finds itself in, it is not there by accident, but by strategy.
1.4 To this end, we do not believe that
the UK can simply export its way out of recession in the short
term. We recognise the discussion, for example in Lord Digby Jones's
oral evidence to this inquiry, that UK Trade and Investment (UKTI)
has an important role to play and we are open to the idea that
UKTI, as well as Foreign Office and BERR operations, on trade
missions and elsewhere, could be improved. That might marginally
improve our export performance, but it will not fundamentally
change the way in which our economy, its aims and objectives,
1.5 Instead, we believe the current economic
crisis provides an opportunity to restructure the shape of the
world economy. That forms the first argument of this submission.
1.6 The writer that is, perhaps, leading
this discussion is the Financial Times commentator, Martin Wolf.
In his article, "Why Obama must mend a sick world economy",
published on 20 January 2009, Wolf quotes Michael Pettis
of Peking University, who has divided the world into two economic
camps: "in one are countries with elastic systems of consumer
finance and high consumption; in the other are countries with
high savings and investment. The US is the most important example
of the former. China is the most significant example of the latter.
Spain, the UK and Australia were mini-versions of the US; Germany
and Japan are mature versions of contemporary China."
1.7 Wolf explores this theme in much more
detail in his book, "Fixing Global Finance". Describing
China, Wolf says: "Despite having the highest investment
rate of any significant economy in history, China has a huge excess
of savings over investment
The sources of Chinese
savings are also fascinating, because they are so different from
what many believe them to be. Chinese households save enormously.
But the core of the Chinese savings story over the past five or
six years has been the rise in corporate savings
government itself is also a large saver. China has about 800 million
poor people, yet the country now consumes less than half of GDP
and exports capital to the rest of the world. This is highly peculiar.
It is also why the country has such a huge current account surplus."
1.8 In European terms, the eurozone has
been in balance. Germany had a large surplus of savings over investment
(5% of GDP in 2006), while Spain had a huge deficit (of around
9% of GDP in 2006). Moreover, Germany, with its historic (and
understandable, in the light of its 20th century history) fear
of inflation, is happy to keep things this way. Speaking to the
Financial Times, the German Chancellor, Angela Merkel, argued
that Germany is an over-indebted, export-oriented economy with
an ageing, shrinking population. It cannot boost consumption at
the expense of exports. "The German economy is very reliant
on exports, and this is not something you can change in two years.
It is not something we even want to change", argued Merkel.
1.9 So what of the United States? As Martin
Wolf points out: "A number of large and important regions
have an excess of savings over investment. The United States has,
in turn, been absorbing about 70% of the surplus savings in the
rest of the world, with the difference accounted for not by increased
investment but by higher consumption and a lower rate of savings."
1.10 This leads to an interesting paradox.
In her Financial Times interview, Angela Merkel argued that the
global financial meltdown is the result of countries, the US but
also others, pumping ever cheaper money into the financial system,
thereby living beyond their means. "After the Asian crisis
(of 1997) and after 9/11, governments encouraged risk taking in
order to boost growth. We cannot repeat this mistake. We must
anchor growth on firmer ground." The problem with this argument
is that, if the US and others did not consume in the way they
did, Germany would not be able to sell its exports and its economy
would come under even more threat.
The dangers of a strategy based on export-led
1.11 In a nutshell, the TUC's message in
this submission is "balance in all things". Below we
make the case for exports, given the UK's balance of trade deficit.
From the perspective of our economy, there are too many imports
relative to exports. This could lead the observer to conclude
that exports are, by themselves, the answer. It is true that exports
are a sign of industrial strength. They are most certainly a good
thing. But an export-led strategy, to the exclusion of other economic
objectives, is problematic.
1.12 As noted above, Germany's economy is
based on exports, and it is seductive to believe, given Germany's
economic strength throughout much of the post-war period, that
this shows the way forward. However, writing, once again, in the
Financial Times, Ralph Atkins explains that the current economic
downturn, the result of reckless lending by many banks, should
not, in theory, have caused too much damage in Germany. Yet, as
is so often the case, economic theory lets us down.
1.13 Atkins quotes Jorg Kramer, chief economist
at Commerzbank in Frankfurt: "From a structural point of
view, this recession should never have happened.". Atkins
goes on to say: "With hindsight, however, Germany was a sitting
target after the collapse of Lehman Brothers investment bank in
mid-September. Its exports were equivalent to more than 47% of
GDP last yearcompared with less than 20% in Japan and about
13% in the US. It's industrial base is skewed towards producing
machinery and equipment'investment tools' account for more
than 40% of its exportsand towards emerging economies
Lehman's failure paralysed banks, and confidence nosedived globally,
companies around the world shelved investment plansleaving
German factories turning out goods nobody wanted to buy."
1.14 Gustav Horn of the Hans Bockler research
foundation makes the crucial point: export dependency "was
always a problem to some extent because it was at the cost of
domestic demand". Bart van Ark, chief economist at The Conference
Board, the New York based business research organisation, argues
that a large economy cannot be run on "export fuel"
only in the long term: "the dominant effect of Germany's
manufacturing efficiency is that consumers abroad benefit from
lower prices of goods the Germans produce."
1.15 German trade unions have made this
point repeatedly. The export-led policy of the German Government
stresses wage moderation in order to work. It has become customary,
whenever unions talk about higher wages, for commentators to fear
inflationary wage claims and to paint frightening scenarios reminiscent
of the UK in the 1970s. Yet wages have not fuelled inflation in
recent years, in the UK or in major European economies. Furthermore,
not only is it socially just that workers are paid a decent wage
for the job that they do, but wages are also, of course, the primary
factor determining demand. Germany has sought wage moderation
and then has wished to sell its products in export markets. Now
that those export markets have dried up, consumers at home cannot
afford to buy the goods produced in German factories. Put simply,
during the good years, Germany squandered the chance to boost
1.16 For all of these reasons, an export-led
UK economic policy is not what the TUC seeks. We do seek more
UK exports, but we also seek the production of goods and services
for domestic consumers. The inflationary threat at present is
of low inflation, perhaps deflation, rather than high inflation,
(at the time of writing, RPI was already negative, although CPI
remained above the Bank of England's central target of 2%) but
we must not be complacent. However, we are clear, as were the
Treasury and the Bank of England, that the inflation suffered
in recent years was the result of high food and oil prices, not
high wages. We therefore believe there is no prospect that our
proper role, to bargain for good terms and conditions for our
members, would bring the threat of inflation. Indeed, proper pay
for workers is not only just, it is necessary for a well functioning
1.17 Finally in this section, Martin Wolf
argued on 31 March that G20 leaders would fail to deal
with the big challenge that they faced at the London Summit: "What
is needed is both a large increase in aggregate demand and a shift
in its distribution, away from chronic deficit countries, towards
surplus ones. On both points, progress will be far too limited"
1.18 The TUC believes the G20 summit
was a success, although we concede that the issue of deficit countries
and surplus countries has not been dealt with. Given that Germany
believes its export led policy keeps it safe from high inflation,
and given the fear of inflation seared on the German psyche, this
issue will not be dealt with quickly. Turning China into a greater
consumer of Western goods, and moving the US away from consumer
of last resort, will all take a long time. However, if we have
a once-in-a-generation opportunity to reshape the world economy,
moving from chronic deficits and chronic surpluses, to greater
balances among all economic players, is a project that must be
WHITHER UK EXPORTS?
2.1 According to the "Pink Book",
the balance of payments draws on a series of balances between
inward and outward transactions, provides a net flow of transactions
between UK residents and the rest of the world and reports how
that flow is funded. Economic transactions include:
Exports and imports of goods, such as
oil, agricultural products, other raw materials, machinery and
transport equipment, computers, white goods and clothing;
Exports and imports of services, such
as international transport, travel, financial and business services;
Income flows, such as dividends and interest
earned by foreigners on investments in the UK and by the UK investing
Financial flows, such as direct investment,
investment in shares, debt securities, loans and deposits;
Transfers, which are offsetting entries
to any one-sided transactions listed above, such as foreign aid
and funds brought by migrants to the UK.
2.2 The Pink Book notes: "The UK has
recorded a current account deficit in every year since 1984
Since the last surplus was recorded in 1983, there have been three
main phases in the development of the current account. In the
first phase, from 1984 to 1989, the current account deficit
increased steadily to reach a high of £25.5 billion
in 1989 (equivalent to4.9% of GDP); during the second
phase, from 1990 until 1997, the current account deficit
declined to a low of £1.0 billion in 1997; in the third
phase, since 1998, the current account deficit has widened sharply.
The deficit in 2007, at £52.6 billion, is the highest
recorded in cash terms but only equates to3.8% of GDP,
which is a lower percentage than in both 1988 and 1989."
2.3 The TUC believes that current account
deficits began when the government of the day stopped believing
in the importance of manufacturing industry. The 1980s was the
decade when the service sector was elevated in importance, alongside
flagship manufacturers and inward investors. The growth of financial
services, especially the primacy of the City of London, was to
follow. Following the economic downturn, many commentators are
starting to argue for a strong manufacturing base once more. For
example, almost exactly a year ago, Ruth Sunderland, the business
Editor of the Observer, wrote: "Some observers think
any hard evidence I have seen, that the possible departure of
a few hundred non-doms is more important than tens of thousands
of lost jobs in industry. I don't. Quite apart from the social
and human consequences, manufacturing does matter to the economy:
now that the credit crunch has exposed the folly of entrusting
our prosperity to a bunch of bonus-grabbing bankers, it matters
more than ever."
What do we export?
2.4 Speaking in the House of Lords on 31 March
2008, Baroness Vadera told peers that manufacturing accounts for
50% of UK exports. The TUC has identified defence, aerospace,
pharmaceuticals and motor cars as strategic manufacturing industries
in the United Kingdom. Indeed, Shriti Vadera told peers in the
same debate that "we have the best pharmaceuticals, aerospace
and electronics industries and are now manufacturing twice as
many cars as we were 25 years ago",
suggesting that she shares the TUC's analysis.
2.5 According to BERR, the UK aerospace
industry exported 67.1% of its total sales in 2007, worth £14.28 billion,
and contributed a net £628 million to the UK's trade
Trade union members working in the aerospace industry are proud
of the contribution they make to this industry's success.
2.6 A House of Lords debate on the motor
industry on 19 January 2009 was told, by Lord Harrison,
that 73% of cars and vehicles made in Britain are sold abroad
as exports, principally into Europe. However, 86% of motor cars
sold on the domestic market in Britain are imported. Lord Rowe-Beddoe
told the same debate that the Ford engine plants at Bridgend and
Dagenham produce 25% of Ford's worldwide engine requirement, a
major export. Nissan and Toyota are consistently numbers one and
two in the European productivity league. In productivity terms,
Vauxhall's plant at Ellesmere Port is one of General Motors' best
performers, if not the best, in Europe.
2.7 Indeed, the TUC endorses the view of
Lord Mandelson: "[The motor] industry is not a lame duck
The industry has been transformed over the past decade. Productivity
has risen, catching up and overtaking that in both France and
Sweden. In Britain today, we have some of the world's most productive
Of course, there is an issue of overcapacity in motor vehicle
production at the moment that must be addressed. Nevertheless,
it is important to hold onto the skills, the research and development
and the innovation of motor manufacture, ready for when the economy
moves out of recession.
What should we export?
2.8 The TUC rejects protectionism. So if
we are importing more cars than we are exporting, for example,
there is clearly room for improvement. A "Buy British"
message will not work. Some people renew their cars regularly,
but for most, a car is an expensive, big ticket item that is bought
only once in many years. People will buy the cars they wish to
buy, based on performance, comfort, safety, design, price and,
increasingly, emissions. The future of motor manufacture is in
green vehicles. Of course, companies and workers producing older
fashioned cars must be protected, as production moves gradually
in a more environmentally conscious direction. However, consumers
are becoming more and more environmentally aware. This is not
a reason for pessimism. On the contrary, the UK has all the attributes
to be a leader of the low carbon industrial revolution.
2.9 The question should really be "what
can we export?" The answer is that we can export goods and
services which we have the skills and capacity to produce at a
level which is desired by overseas consumers. To put the question
another way: What are we good at? And what can we become good
2.10 In his report, "The Race to the
Top: A Review of Government's Science and Innovation Policies",
published in October 2007, the former Science Minister, Lord Sainsbury,
provided a helpful list of potential industries in which the UK
could succeed in the future:
2.11 "It is not possible to predict
where the new jobs will emerge in the future but it is possible
to see many opportunities for UK companies to create new products
and services, and new industries in areas as diverse as aerospace,
pharmaceuticals, biotechnology, regenerative medicine, telemedicine,
nanotechnology, the space industry, intelligent transport systems,
new sources of energy, creative industries, computer games, the
instrumentation sector, business and financial services, computer
services and education."
3.1 The TUC welcomes the publication of
"New Industry, New Jobs", on 20 April 2009. Indeed,
we have welcomed the intervention of Lord Mandelson and his pursuit
of a policy of "active industrialism" in recent months.
The TUC has been a lonely voice in arguing that the absence of
an active industrial policy in recent years has been hugely damaging
to UK economic performance. We have used our membership of the
Manufacturing Forum and its successor, the Ministerial Advisory
Group on Manufacturing, among other bodies, to press for an active
strategy. We were, therefore, a little disappointed that industrial
policy was described as a dialogue between Government and business,
with no mention of the contribution of trade unions, but we supported
the development of policy nonetheless.
3.2 Responding to the publication of "New
Industry, New Jobs", the TUC welcomed proposals to use procurement,
regulation and a focus on green growth to help sectors with potential.
However, it is Chapter Five of the document, and the summary of
next steps, that offers the real development in government policy.
3.3 In Chapter Five, entitled "Unlocking
our potential through targeted measures", the document argues:
"there is often also a very strong case for tailoring what
Government does to reflect the different circumstances of different
markets, sectors and places". This reflects two powerful
but simple truths:
"the scale of the economic opportunities
for the UK, here and internationally, are different from one area
of the economy to another, as are the challenges faced by individual
"the ability of Government to make
a positive impact through its actions can vary markedly across
sectors and markets."
3.4 The document goes on: "This becomes
even more important in an area of global specialisation. Business
and Government alike will need to focus more on, and prioritise,
areas where the UK holds, or realistically can gain, lasting advantages.
This need to tailor policy has been recognised before, but too
often in a way that has been over-cautious or reluctant
it is certainly possible to identify areas where the UK has or
may have comparative strengths. By sharing the expertise of business
and government, we can also identify broad areas of technology,
products or services within which there may be opportunities for
3.5 This is exactly the philosophy that
the TUC has championed. Furthermore, in the summary of next steps,
the paper sets out plans for a low carbon industrial strategy,
the development of ultra low carbon vehicles, the pursuit of the
"Digital Britain", project, the publication of a Life
Sciences and Pharmaceuticals Strategy and the prioritising of
a number of areas of advanced manufacturing. Such areas include:
aerospace, specifically engine and wing design and manufacture,
which must adapt to the low-carbon age; the shift from metal to
composite materials, which will have important applications in
the automotive, marine, aerospace, wind and wave, construction,
oil and gas, and medical equipment sectors; industrial biotechnology
and the redefining of chemical manufacture in the 21st century;
and plastics electronics.
3.6 The Government plans to assess the opportunities
and constraints in these industries, and whether there is a role
for Government in unlocking competitive potential in the UK in
these industries, in the next few months.
3.7 Most of these industries are highly
unionised and it is critical that the Government consults with
trade unions, along with businesses and other stakeholders, in
taking this workstream forward.
3.8 Furthermore, Budget 2009 included
the provision of £750 million for a Strategic Investment
Fund, to support advanced industrial projects of strategic importance.
£250 million of this fund will be earmarked for low-carbon
investments, a further £50 for the Technology Strategy
Board and £10 million for UK Trade and Investment.
3.9 The TUC welcomed this announcement,
but we also set this test: Government money should be provided
for strategic industries, in high skill, high value sectors, that
are job intensive. It is important to move away from the laissez
faire ideology which supposes that so long as we get the fundamentals
right, the jobs will follow. The TUC firmly believes that job
growth will not necessarily happen by accident. It will only happen
if the Government identifies it as a priority and allocates funding
3.10 The TUC also believes that the UK needs
a definition of industrial success, to act as a target and a weathervane.
Different stakeholders with have different priorities, but the
TUC believes that unless industry is providing high quality jobs,
it cannot be regarded as successful, whatever its shareholder
value or other indicators of success.
3.11 From the point of view of this inquiry,
it would also be helpful if export potential is considered among
the factors defining how Government support is offered to these
industries as part of future industrial strategy.
3.12 In summary, the sectors identifies
as strategic in New Industry, New Jobs, and the sectors that are
able to access the £750 million of Strategic Investment
Fund support, should be required to demonstrate their job creation
and their export potential.
4.1 No discussion of potential growth sectors
would be complete without a consideration of the role and potential
of the green economy. Quite simply, the environmental threat is
one of the biggest and most important global challenges that we
face. Whilst even 10 years ago, the science was questioned,
there are no serious voices minimising the extent of the challenge
we face today. Moreover, the election of a US President committed
to a new approach to sustainability across the Atlantic gives
further momentum to this issue.
4.2 The environmental goods and services
(EGS) sector includes such areas as air pollution control; cleaner
technologies and processes; decommissioning and decontamination
of nuclear sites; energy management and efficiency; renewable
energy; waste management, recovery and recycling; and water supply
and wastewater treatment.
4.3 The EGS sector was estimated to be worth
$548 billion globally in 2004, with 94% of this value residing
in the EU, US and Japan.
In the UK, the size of the sector in 2005 has been estimated
at £25 billion. It is further expected to expand in
the UK by over 40% between 2005 and 2010, and by 84% between
2005 and 2015, when it is projected to generate £46 billion.
The sector currently employs 400,000 people in the UK, a
figure that could more than double in the next few years.
4.4 Of course, there is more to greening
the economy than the EGS sector. Other manufactured products will
need to be made greener. Most obviously, the motor industry is
producing more and more environmentally friendly cars, a trend
that is set to continue, both in order to meet environmental regulations
and to satisfy consumer demand.
4.5 The UK has benefited from the growth
of the green economy, but we lag well behind European neighbours
such as Denmark, Germany, the Netherlands and Spain. This is particularly
evident when the employment records of the sectors in different
economies are compared. For example, Germany has generated half
a million jobs in its renewable energy sector alone, while the
UK has managed just 7,000. And whilst our 400,000 green economy
jobs are vitally important, Germany's figure of 1.5 million
jobs is more impressive.
4.6 There is inevitable TUC concern about
the decision of Vestas, the world's biggest maker of wind turbines,
to cut more than half its UK jobs, as reported on 29 April
Ditlev Engel, the Chief Executive of Vestas, told the Financial
Times: "we had been planning additional investment in the
UK [because of Government targets to increase renewables]. But
the UK is probably one of the most difficult places in the world
to get permission [for wind projects]." The reason for the
decision to cut jobs was the inability of the Government to deliver
the conditions needed for renewables growth, according to Engel.
4.7 In our view, Government has a key role
to play in setting the right policy framework to ensure that UK
businesses are best placed to take advantage of the national and
global transition to a low-carbon economy. Specifically, our competitor
economies recognise that the state has a central role to play
in stimulating the green economy. This is not about "picking
winners", but is about having the boldness to set clear direction
and incentives to kick start a key sector. Furthermore, levels
of investment in technology, research and development and green
innovation in the UK lag behind those in other countries.
4.8 The TUC, therefore, applies its "test"
of Strategic Investment Fund support to the green sector. As noted
above, £250 million from the Strategic Investment Fund
announced in Budget 09 was allocated to low carbon investments.
This, in itself, is a sign of the growing priority of the green
economy among Ministers. However, this £250 million
must be spent on green businesses and sectors with high job growth
and export potential, in order to maximise its value to the economy
and wider society. Anyone seeking to access money from this funding
stream must be able to demonstrate how it will be used to develop
high skill, high value jobs in the environmental sector.
5.1 A number of factors might make products
more export friendly. Cost is obviously a factor, but cost is
not necessarily the same as low price. People might buy a white
T-shirt on the basis of its low price, but that rule does not
apply to people who buy an Italian suit. Similarly, for those
buying a new car, design will be important. Quality will be a
factor, as will safety, performance and comfort. As stated above,
emissions will increasingly be a factor as well, both because
lower emissions cars are cheaper (for example, in terms of fuel
consumption and vehicle excise duty) and because consumers are
increasingly environmentally conscious.
5.2 From a trade union perspective, the
best way to increase the export potential of UK products is to
build a highly skilled and adaptable workforce, to ensure the
quality of our manufactured products; to recruit or train excellent
managers, to get the best out of those workforces; and to invest
in design, research and development, to ensure that our products
are at the cutting edge of both performance and environmental
5.3 Of course, we need Ministers to bat
for Britain, business leaders (and trade union leaders) to champion
British companies, and Government support, through Foreign and
Commonwealth Office and BERR Officials (including UKTI officials)
to be at the top of their game.
5.4 We must also continue to invest in science,
which is vital if industry is to reach its full potential. The
TUC warmly welcomed the Prime Minister's pledge, in his Romanes
Lecture at Oxford University on 27 February, that "we
will not allow science to become a victim of the recession but,
rather, focus on developing it as a key element of our path to
5.5 "New Industry, New Jobs" states:
"We require a skills system that not only responds to demand
but is also able to anticipate future growth in the economy in
areas such as low carbon or bioscience, or in those driven by
broader demographic change such as the care, hospitality and leisure
On this basis, the skills recommendations in the report quite
rightly build on recent commitments by Government to develop a
strategic skills strategy closely tied to an active industrial
strategy, which is very welcome.
5.6 It is especially welcome that the significant
potential for procurement and associated levers to underpin a
strategic skills strategy is fully acknowledged in the report.
It states that it will be important to ensure that "public
procurement, regulators and regulatory frameworks all make a full
contribution to raising skills levels".
The TUC has welcomed new government guidance on skills and procurement
published last month, but we are pressing for this new approach
to be rolled out as quickly as possible. For example, the new
requirement on successful bidders for public construction contracts
to provide training and apprenticeship opportunities should be
extended to other major areas (such as large IT contracts in the
public sector) as rapidly as possible.
5.7 There are some tensions on skills policy
arising from the twin demands of supporting the unemployed to
re-enter the labour market whilst also enabling individuals to
acquire the necessary sustainable skills to build a skills base
for new growth areas. For example, the Budget announced that the
Government will be allocating "over £260 million
of new money" to help young people get training and work
experience in sectors where there is likely to be strong jobs
growth over the longer-term. For this approach to succeed, it
is imperative that these young people are given genuine opportunities
to achieve the necessary skills over the longer-term to achieve
sustainable employment in new growth areas and are not simply
dragooned into undertaking short pre-employment training courses,
as so often happened in previous recessions.
5.8 It is also important that major skills
programmes, such as Apprenticeships and Train to Gain, are planned
and delivered in the context of the new industrial activism, so
that young people and adults can be confident that work-based
training is equipping them for future industrial change. Government
plans for the implementation of the forthcoming Right to Request
Time to Train must also ensure that individuals can be empowered
to access training that will enable them to achieve sustainable
skills, especially where their employer is not supportive of this.
5.9 The report highlights that later this
year the Government will be publishing a Higher Education Framework
and an "active skills" paper further detailing how education
and skills policies will be supporting the new industrial activism.
The TUC will be engaging in discussions with Government on the
development of both these strategies.
5.10 "New Industry, New Jobs"
highlights two weaknesses in British innovation performance. The
first is that, although those businesses that do invest in innovation
do so successfully, both UK-based businesses and the Government
itself continue to invest less in R&D as a percentage of GDP
than other comparative economies. The second is that our excellence
in generating knowledge is not consistently translated into innovative
and commercially successful goods and services.
5.11 "New Industry, New Jobs"
goes on to state: "encouraging closer ties between the UK's
growing pool of scientific and engineering researchers and industry
and private investors is now key to ensuring that we are able
to benefit economically from groundbreaking science."
5.12 Meanwhile, the Department of Innovation,
Universities and Science has made clear the Government's commitment
to the science and research budget ring-fence. Research Councils
have been asked to develop plans over the next few months to refocus
their research programmes for 2010-11 into new priority areas
such as the green economy, life sciences, the digital economy,
high-value manufacturing systems and services and cultural and
5.13 The TUC welcomes this example of joined
up government between HM Treasury, DIUS and BERR. We further agree
that these are the correct priorities for UK industry, including
industries with export potential. We offer one small caveat, which
is that recognition of the value of pure science, ie "science
for science's sake", must continue.
5.14 The industrial spin-offs of the US
mission to put a man on the moon in the 1960s is well known. The
invention of the internet at CERN in Geneva is one more recent
example of how scientific endeavour has led to industrial outcomes
that could not have been predicted in advance. The UK's future
as an exporter will be greatly assisted by science, both pure
6.1 In conclusion, the TUC does not seek
an export led economic strategy, but we seek more exports, given
the UK's balance of trade deficit. We also see exports as one
sign of a healthy economy, so long as export policy is not being
pursued to the exclusion of internal demand or on the basis of
lower wages for manufacturing workers here in the United Kingdom.
6.2 However, exports are only one sign of
a healthy economy. The TUC urges the Select Committee to try to
promote a debate about the nature of the economy. For example,
how would we define a successful economy? What components would
be needed for an economy to be described as successful? In the
TUC's view, one key component would be the capacity to create
a large number of high skill, high value jobs, in strategic industrial
sectors. But other actors will have other priorities. At present,
Regional Development Agencies are charged with delivering regional
economic strategies, but there is no overarching national economic
strategy, setting out the Government's objectives and describing
a road map to achieve them.
6.3 Rather, the Government sets out different
economic measures and then uses them to describe the economy as
successful. For years, the economy was considered to be successful
because inflation was low and growth was steady. Those are certainly
important achievements, but are there other necessary factors
before we conclude that an economy is successful? With the benefit
of hindsight, many commentators now say that the UK economy was
unhealthy, because of its over-reliance on the financial services
sector and a housing bubble. So was it successful, but unhealthy?
And if an economy is successful but unhealthy, is it sustainable?
6.4 None of this is to criticise the Government,
but as we begin to look towards a post-recession economy, and
commentators argue about how the economy must differ from the
one that existed before the recession, a Government definition
of a successful economy, agreed by No 10, HM Treasury, BERR, DIUS,
DECC and other interested government departments, would be helpful.
Stakeholders, including businesses and trade unions, should be
invited to contribute to this definition, as well as the road
map setting out how we are to achieve it.
6.5 The TUC will not attempt a draft definition
here, but any definition must include jobs, in terms of both quality
and quantity, as well as commitments from companies to skills,
innovation and investment. A successful economy, in our view,
will also have a healthy trade balance, so world-class companies
must be in a position to export quality goods and services, as
well as meet demand from consumers at home. Unless Government
targets exports, and backs this commitment with policy support,
we may marginally increase exports in some sectors, but there
will be no step change in our performance.
6.6 The world economy is unbalanced. It
is not sustainable for countries such as China, Japan and Germany
to rely so much on exports, expecting other countries, most obviously
the United States but to a lesser extent the UK, to continue buying
their goods. Speaking to the Financial Times on 28 April
2009, Berthold Huber, the Head of IG Metall, Germany's biggest
trade union, said: "Germany was always an export nation but
the question is: to what extent. Over the past decade we have
neglected domestic consumption. Of course, Germany must remain
an export nation. But in the long term I think this kind of dependence
on exports in this extreme form is not sustainable."
6.7 It is, of course, beyond the power of
the Select Committee to change the balance of the world economy,
but the message must continue to be sent to government that pressure
to this end, through the G8 and G20, must continue.
1 May 2009
71 "Why Obama must mend a sick world economy",
Martin Wolf, Financial Times, 20 January 2009. Back
"Fixing Global Finance", Martin Wolf, 2009, p. 69. Back
Ibid, p. 76 Back
"Policy of containment", Ralph Atkins, Financial Times,
7 April 2009. Back
"Why G20 leaders will fail to deal with the big challenge",
Martin Wolf, Financial Times, 31 March 2009. Back
"UK Balance of Payments: the Pink Book", Office of National
Statistics, 2008 Edition. Back
"We need to makea it up to manufacturing", Ruther Sunderland,
"The Observer", 27 April 2008. Back
Lords Hansard, 31 March 2008, col. 719. Back
See www.sbac.co.uk/pages/36004275.asp Back
House of Lords Hansard, 19 January 2009, col. 1519. Back
House of Lords Hansard, 27 January 2009, col. 178 Back
"The Race to the Top: A Review of Government's Science and
Innovation Policies", Lord Sainsbury of Turville, October
2007, p. 8. Back
"New Industry, New Jobs: Building Britain's Future",
HM Government, April 2009, p. 28. Back
J Selwyn and B Leverett, "Emerging Markets in the Environmental
Industries Sector", UK CEED, 2006. Back
According to the Prime Minister, speaking at the Prince of Wales
May Day Business Summit in 2008. Back
"Wind turbine maker to axe 600 jobs", Fiona Harvey,
Environment Correspondent, Financial Times, 29 April 2009. Back
Romanes Lecture, Gordon Brown, Sheldonian Theatre, Oxford, 27 February
"New Industry, New Jobs: Building Britain's Future",
HM Government, p. 15 Back
"New Industry, New Jobs: Building Britain's Future",
HM Government, p. 16 Back
"New Industry, New Jobs: Building Britain's Future",
HM Government, April 2009, p. 14. Back
"Export reliance 'not sustainable' for Germany", Chris
Bryant, Financial Times, 28 April 2009. Back