CHECK AGAINST DELIVERY
This is my first speech as Business Secretary to a union annual
conference. Thank you, warmly for the invitation.
About ten months ago, I was invited to speak to the TUC
Congress in Manchester. But, much to my regret, that invitation
was later withdrawn.
Perhaps, the TUC’s invitation came too soon after the election
and feelings among some union leaders were still too raw. I never
knew that Bob Crow and Mark Serwotka were such sensitive souls.
Whatever the history, I’m really glad I’m here today. And I’m
grateful to Mary Turner, Paul Kenny, and your Executive for giving
me the opportunity to speak to you today.
I want a mature, productive relationship with trade unions.
Of course, there are differences between us. And may continue be.
I know you have strong feelings about our approach to public
spending. There always are differences between the trade union
movement and the government of the day. As far as I recall, the
Blair/Brown period was hardly a love-in with trade unions.
Despite the differences, we also have many things we can discuss
and advance. My main aim today is to identify some of that common ground.
Recovery and the Plan for
Make no mistake, the agenda is extremely challenging. I know
Governments always blame their predecessors. But we truly
inherited an awful mess when taking office.
Long-term weaknesses were exposed. Our banking system had
virtually collapsed and was – is – unfit for purpose: failing to
support the real economy. Manufacturing had been neglected and
hollowed out. The public finances involve large unsustainable
deficits. The private finances of many households were
unsustainably burdened by debt. The economy – having contracted by
around six per cent – was still in catatonic shock.
Those problems were not caused by trade unions, or by the workers
they represent. In fact, trade unions like yours did a lot to help
the private sector through the recession by negotiating realistic
deals to restrain pay, vary shift patterns and work flexibly. You
saved many jobs as a result. Employment fell during the recession,
but that fall was a lot less than it might have been.
Since taking office we have not flinched from taking the
difficult decisions to stop the rot. A recovery has begun. I do
not fool myself into believing that recovery will be swift. It
will be a long haul to rebalance the economy – towards investment,
towards exports, towards manufacturing – given the severity of our
problems and the loss of output we experienced.
It will take a sustained effort through this Parliament and
beyond to correct the economy’s weaknesses and put us on a long
term path to growth.
Like it or not, fiscal policy has to remain tight for the
forseeable outlook. We have to work other levers to stimulate
private investment and business’ capacity to generate jobs. This
involves creating the right regulatory and policy framework to
encourage trade, investment and enterprise.
Let me explain what this may mean for manufacturing, which you
have debated this morning.
Like you, we appreciate that manufacturing is key to our future
development. We will not rebalance the economy and spread
prosperity more equitably around the country unless manufacturing thrives.
Previous Governments of different parties failed to appreciate
the significance of manufacturing. They were lulled into believing
that growth could be delivered indefinitely by the service sector,
especially financial services. The idea that ‘Britain doesn’t make
things any more’ is widely believed – wrongly.
Despite its neglect, the UK remains an important manufacturing
country. It accounts for 55 per cent of our total exports. Thanks
in part to the depreciation of the pound, manufacturing has led
the way of the recession.
We have to be realistic. We cannot unwind the last three decades
or more – though there are some encouraging signs of supply chains
returning in the motor vehicle industry for example. And we
cannot, and should not, depend on currency movements to underpin
future manufacturing growth. Our goal is to ensure the UK becomes
Europe’s leading exporter of high value goods and services. We
have therefore taken a range of measures to back the real economy
in the longer term.
For example, we have ring-fenced the science budget. This signals
the importance we attach to this expenditure and to the support it
provides to industrial innovation. And my Department is launching
a series of Technology Innovation Centres, starting with Advanced
Manufacturing, to support the technologies of the future.
Improved skills are vital to our manufacturing success and to our
ability to adapt to the rise of China, India and other
manufacturing competitors. We are therefore investing an extra
£180million to deliver at least 250,000 more apprenticeships over
the next four years than was previously planned.
The skills agenda is very much a trade union agenda. We are
therefore continuing to support Union Learn and the efforts of the
GMB and other trade unions to promote lifelong learning at the
workplace. I regard this type of union activity as especially
helpful, and I want it to continue. We are committed to spending
over £21 million this year on it.
The first round of the Regional Growth Fund bidding concentrated
in particular on financial support for high tech manufacturing,
particularly in the motor vehicle industry. The next round will
provide more. I welcome trade union participation on the advisory panel.
Much of manufacturing also stands to gain as we move towards a
low carbon economy. I know trade unions very much appreciate the
potential from greening the economy. Last month, I established
detailed plans to establish a Green Investment Bank an institution
which will help finance the development of the country’s green
infrastructure. Initially, the bank will have a capitalization of
£3 billion pounds, and it could mobilise an extra fifteen billion
pounds of private investment.
Rebalancing the Economy / The Regions
The GMB is a union with a strong regional focus. Like you, we
want to disperse growth more evenly around the country. Too much
growth, wealth and prosperity is concentrated in one part of the
country, the South-East. It has been for a long time.
Previous attempts to redress that chronic imbalance have not
narrowed the gap. We are therefore developing a new approach to
local development through the establishment of Local Enterprise
Partnerships. These will radically reshape the way business and
the government interact at the local level. They will free the way
for a bottom-up approach to local development, which the RDAs
never managed to achieve.
I know some RDAs were well regarded in the union movement and
undoubtedly did some sensible and worthwhile things – but, in
truth, they failed to deliver the necessary buy-in from employers,
local authorities and other economic players. They behaved as the
regional arms of central government.
RDAs did have a role in encouraging inward investment to the
regions. This activity will now be undertaken by UK Trade and
Investment. In the past trade unions have met potential investors
and helped convince them to come to this country. Your involvement
has helped dispel misconceptions about the flexibility of UK
workforces and the attitudes of trade unions towards new ways of
working. I want to ensure that trade unions continue to play a
role with UKTI in selling the benefits of locating in this
country. I have therefore opened discussions with the TUC to see
how union involvement in this activity can be enhanced.
Ownership and Workplace Regulation
The rebalancing of the economy requires more private investment
creating real jobs. That will ideally involve a partnership
between enlightened forward-looking companies and a committed
workforce. In the best firms this happens – and I see in action
the many companies where it does. Workers in these companies are
treated well and regard themselves as partners, as a valuable
resource. But by the same token there are poor employers, and in
extreme cases, exploitation.
I last occupied my present office a third of a century ago when I
worked for John Smith when he was Secretary of State in the
Callaghan government. We tried to put through legislation on
worker participation, following the Bullock report on the
German model. That is long forgotten. But the underlying
philosophy is carried forward on employee owned companies, like
John Lewis and Arup, in social enterprises, coops and mutual. I
want to encourage these developments and we are looking at
legislation to strengthen the ‘third sector’ of employers.
But most employment will be in competitive private enterprise
where we rely on regulation to preserve a proper balance between
the interests of companies, their employees and their customers.
Modern shareholder capitalism, as experience it in the UK, has
considerable strengths as a system, but also weaknesses. One is a
tendency to what is called ‘short-termism’: a pre-occupation with
short-term, often quarterly, profitably and shareholder value at
the expense of long-term growth. It says something when private
equity investors are considered to be long-term – because they
plan over five years. Long-term institutional investors who manage
pension funds, for example – seem to be eclipsed by those solely
interested in the short term – and managers have those short-term
goals embedded in their incentives. I am determined to change this
Second, we are seeing too many company takeovers which reduce or
destroy value and are driven by the fat fees earned by the lawyers
and banks who facilitate them. I have made it clear – post Cadbury
– that there have to be changes and I am pleased to see the
Takeover Panel has come up with modest but useful changes to
reduce unnecessary takeovers.
And third, there is executive pay. Top pay has escalated to
ridiculous levels, particularly in the banking system but also
more generally. High levels of pay and the underlying
differentials within companies often are unrelated to management
performance. Rewards for failure abound. And the inflated salaries
and bonuses are in turn translated into top pay in the public
sector. I am currently looking at practical measures to address
this problem: more transparency; more effective control by
shareholders over remuneration; tighter regulation of bonuses in
Just as government needs to intervene to curb the excesses on the
side of the owners or management we also need to look at workplace
regulation to establish whether it is proportionate and fit for purpose.
In the past, Governments have though they could change attitudes
and cultures by regulation and diktat.
Our approach to workplace regulation, and indeed other
regulation, is very different. We want regulation when it is
necessary. I am at the receiving end of an endless barrage of
complaints from business – especially small business – saying that
employment legislation is stopping them taking on more staff
because of the hassle involved. Too much time is taken up with
form filling, target monitoring and box ticking. This bureaucracy
is a headache and a diversion to managers and workers alike. For
small companies which do not have compliance and HR departments to
sort these things out, there is a major problem. That is why I
have introduced a moratorium on new regulations for firms under 10
employees, and start-ups.
The Government has also issued a Red Tape Challenge to obtain the
public’s views on thinning out the dense thicket of current regulation.
We have also embarked on specific initiatives to review certain
aspects of employment law. For example, we know that too many
disputes are going employment tribunals, and tribunals are taking
too long to process them. Tribunal reform is needed to encourage
more conciliated settlements and the earlier resolution of
problems. Both employees and employers can benefit from change in
this area. Recourse to legal action should truly be a last resort.
We want to the first Government in history to reduce the overall
burden of regulation, rather than increase it. However, we will
regulate and introduce new rights where there is a clear case for
Last month, we announced proposals for a new system of flexible
parental leave and an extended right to request flexible working.
These changes are necessary on social grounds to reflect the
modern family life. But they also serve solid economic purposes.
By extending an individual’s ability to combine work and family
life, fewer people will drop out of the labour market, losing
their skills and prospects in the process. Also, research suggests
the employers experience better workplace relations where flexible
working occurs. Good businesses are already flexible and we want
this to be the norm.
Whilst I am talking about workplaces, I should also mention the
state of industrial relations, which is very much in the news.
Later this month, we may very well witness a day of industrial
action across significant parts of the public sector. The usual
suspects will call for general strikes and widespread disruption.
This will excite the usual media comments about ‘a summer’ or ‘an
autumn’ of discontent. And another group of usual suspects will
exploit the situation to call for the tightening of strike law.
We are undoubtedly entering into a difficult period. Cool heads
will be required all round. Despite occasional blips, I know that
strike levels remain historically low, especially in the private
sector. In fact, until March this year the number of days lost
through strikes was lower than at any time since 1931. And of
course the right to strike is a fundamental principle. On that
basis, and assuming this pattern continues, the case for changing
strike law is not a compelling one.
However, should the position change, and should strikes impose
serious damage to our economic and social fabric, the pressure on
us to act will ratchet up. That is something which both you, and
certainly I, would wish to avoid.
Conference, I have tried to sketch out my agenda. There is much
to discuss and develop. I want trade unions to contribute to that process.
There are many examples where this is already happening. I meet
Brendan Barber most months. I have also presented out Plan for
Growth to a senior TUC delegation. Other BIS Ministers have
similar patterns of engagement. For example, our review of
advanced manufacturing directly involves union experts in the
field. BIS is by no means an exception here.
The Government is committed to further engagement with trade
unions. We genuinely want your input. This is not a Government
which simply listens to employers, though they are an important
voice. We do not treat their views as ‘gospel’. We want to
consider evidence from all sides.
I know that feelings are running high in trade unions, as the
demonstration on March 26 th showed.
But, despite our differences, we have much in common. We share
many policy aims. We face the same economic challenges. Let’s
address them together. I believe this is what ordinary union
members what their unions to do.
Notes to editors:
BIS's online newsroom contains the latest press notices,
speeches, as well as video and images for download. It also
features an up to date list of BIS press office contacts. See http://www.bis.gov.uk/newsroom
for more information.
BIS Press Office