John Cridland, Director General, Confederation of British Industry HARDtalk


John Cridland, Director General, Confederation of British Industry

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the issue. It is now time for HARDtalk.

:00:10.:00:13.

Growth figures this week confirmed that two years after one of the

:00:13.:00:17.

worst recessions in history, the British economy is flatlining. The

:00:17.:00:22.

government says there is no alternative to radical surgery. The

:00:22.:00:29.

opposition says the patient was dying on the operation table. Our

:00:29.:00:33.

guest is part of a company representing the private sector

:00:33.:00:43.
:00:43.:01:06.

employers. Can they deliver jobs, John Cridland, welcome to HARDtalk.

:01:06.:01:11.

Thank you. The government says there is no alternative to a huge

:01:11.:01:15.

public sector spending cuts. That the Budget was the balance, the

:01:15.:01:19.

debt as it passed the cut. But do they need to look again?

:01:19.:01:24.

government is absolutely right. The only way to get the private sector

:01:24.:01:27.

growing is for international money markets to have absolute confidence

:01:27.:01:33.

that all of the places they can invest in around the world, the UK

:01:33.:01:41.

is a good bet. On this, business and government are at one. And yet

:01:41.:01:46.

if the cuts produce such slow growth, to quote you at Moody's,

:01:46.:01:51.

they rate the UK at AAA, however slower growth combined with a

:01:51.:01:54.

weaker-than-expected consolidation efforts could cause them to we

:01:54.:01:59.

consider? It is not the cuts that are producing slow growth. The cuts

:01:59.:02:04.

in UK public spending have only just begun to have a full effect.

:02:04.:02:09.

The reality is that slow growth goes back to the pain and damage we

:02:09.:02:14.

suffered in the crisis in 2009. The debt for that recession, everybody

:02:14.:02:19.

knew it was going to be a very slow and very bumpy recovery. You say

:02:19.:02:23.

everybody knew but there are still revisions and repeated revisions on

:02:23.:02:31.

the growth forecast. 2.3% in June last year, 2.1% in of November last

:02:31.:02:36.

year, 1.7% in March this year and now, an average independent

:02:36.:02:42.

forecast has the UK growing at 1.3% in 2011. He say everybody knew but

:02:42.:02:45.

actually what people thought they knew and what they know now, it is

:02:45.:02:50.

getting worse by the day? I have a friend who has a boat and when he

:02:50.:02:54.

heads out in the morning for a day's sailing, he has to hope and

:02:54.:02:59.

expectation of where he will get two. But it depends on the wind and

:02:59.:03:02.

that can change quickly. Those head wins are slowing down the UK

:03:02.:03:06.

economy and I accept what you are saying. We had more head winds than

:03:06.:03:10.

we anticipated and they are tough. Why are they worst that -- worse

:03:10.:03:20.
:03:20.:03:22.

for the UK than other economies? There is too 0.5% growth in the US

:03:22.:03:27.

40,011, 2.5% growth, why is the UK recovery so easily blown off where

:03:27.:03:34.

others are not? If you look at the European Union as a whole, the

:03:34.:03:39.

growth will be 1.5% for some time to come. Germany, in particular, is

:03:39.:03:43.

the great stand out. To answer your question, Germany provides some of

:03:43.:03:48.

the answers because it is exporting. They are getting out there and

:03:48.:03:52.

hoovering global demand. They are parts of the world that are growing

:03:53.:03:57.

strongly. This is a story in two hearts. The old economies of the

:03:57.:04:01.

world, the mature economies of the Western hemisphere, are finding it

:04:01.:04:05.

tough. Sorry, is Germany not a mature economy? Yes but it stands

:04:05.:04:10.

out as a feeder. The real growth opportunities are in East Asia, in

:04:10.:04:13.

the emerging economies and Germany has being more successful than

:04:13.:04:18.

Britain in taking those export opportunities. Why is that? Because

:04:18.:04:22.

for too long, the strength of the pound in the run-up to the crisis,

:04:22.:04:26.

we had a decade with the strength of the pound made it quite

:04:26.:04:30.

difficult for Britain to export in those economies. We got used to

:04:30.:04:34.

selling ourselves in the home market. For the European Union

:04:34.:04:38.

market. Now, there is not enough growth there. Some in Germany but

:04:38.:04:43.

not enough in the West -- the rest of the EU. We have to learn the

:04:43.:04:47.

habit of exporting in far flung parts of the world. To look at

:04:47.:04:53.

other examples, you say Germany is the stand-out, but to look at other

:04:53.:04:59.

examples. Our closest ally and neighbour, the US, the US Treasury

:04:59.:05:03.

says there are people who would like to make deep cuts that would

:05:03.:05:07.

undermine the recovery. He says, that is not the responsible way to

:05:07.:05:11.

do it. That point endorsed by Ben Bernanke who told the Senate

:05:11.:05:14.

Banking Commission earlier this month in the very near turned the

:05:14.:05:18.

recovery is still rather fragile. Sharp and excessive cuts in the

:05:18.:05:22.

very short-term would be potentially damaging to that. So

:05:22.:05:27.

they are making the link between the level at which you cut and the

:05:27.:05:31.

speed up the to grow. America is in a different place to ask because

:05:31.:05:36.

America still has the world reserve currency. Even given the level of

:05:36.:05:41.

concern there is about possible debt default in the US as we speak,

:05:41.:05:46.

the reality is, American dollars are much stronger in the world than

:05:46.:05:50.

other currencies. They are not likely to see the flight of capital

:05:50.:05:56.

that comes from international money markets saying we do not trust the

:05:56.:05:59.

government in this particular country, in this case Britain, to

:05:59.:06:03.

look after public finances. But it is a Germany is a special case, the

:06:03.:06:07.

US is a special case, let's go to France. They are putting in place

:06:07.:06:11.

spending cuts that are only about one third as big as ours. Their

:06:11.:06:15.

growth is better. I am questioning this connection between spending

:06:15.:06:20.

cuts and growth because I think there is an issue here where the

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extent to which spending cuts will take a percentage of the growth

:06:24.:06:28.

rate, that is something for the future. The reason we are suffering

:06:28.:06:33.

on growth today, and the answer to your question, we do they be hit in

:06:33.:06:37.

this recession than most other European main competitors, France

:06:37.:06:41.

and Germany, because of our greater dependence on financial services

:06:41.:06:46.

growth. The reason why it -- we are still find it hard to take our fair

:06:46.:06:50.

share of that export opportunity is because our financial services

:06:50.:06:54.

market, one about big exporters, is still relatively challenged it in

:06:54.:06:57.

international markets. Tackling that head-on, you were talking

:06:57.:07:01.

about taking advantage of rebalancing the economy, but the

:07:01.:07:04.

figures for the last quarter out this week are disappointed on that

:07:05.:07:09.

score for the UK as well. For sterling is no, it ought to be

:07:09.:07:14.

making exports competitive. But manufacturing is down yet again. --

:07:14.:07:19.

sterling is low. The decrease in the past quarter. This is where we

:07:19.:07:23.

come to the special factors that the Office for National Statistics

:07:23.:07:32.

talk about. They, the statisticians, told us that growth would have been

:07:32.:07:40.

0.7 rather than 0.2. If it hadn't been for things like the Japanese

:07:40.:07:44.

tsunami. That argument about special factors has been derided in

:07:44.:07:54.

many quarters and quite apart from biggest -- be distracted us, too

:07:54.:07:58.

cold, too hot and the rest of it, if you look ahead to the next

:07:58.:08:04.

quarter, it will not exactly be sure of head wins when you

:08:04.:08:07.

mentioned the American problem and the problems of the eurozone and

:08:07.:08:12.

the public sector cuts coming down the line. There are going to be

:08:12.:08:17.

special factors and even greater dimension, probably. Indeed. And I

:08:17.:08:20.

am not hiding behind special practice. But do not underestimate

:08:20.:08:24.

the effect of the tsunami because it had a much bigger effect on the

:08:24.:08:31.

modern economy when so many companies were depending on. Lots

:08:31.:08:34.

of people slow down production because they could not get

:08:34.:08:38.

components and parts they needed. Looking forward, I talked about

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head winds first. I think they are really pretty strong in the UK

:08:42.:08:47.

economy. We have the dollar and the US debt crisis, we have the

:08:47.:08:51.

eurozone, we have concerns about overheating in those emerging

:08:51.:08:55.

economies where the opportunities lie. Ask me which of the ones I am

:08:55.:09:00.

most bothered about, I still think the biggest problem for us is the

:09:00.:09:06.

eurozone because the talent we all have if German growth slows down,

:09:06.:09:13.

Germany catches a cold, we also do. -- the challenge. Do you accept the

:09:13.:09:19.

growth forecast of 1.7% in the UK, it will not hit that for 2011?

:09:19.:09:24.

not in the UK will grow at 1.7% this year. We are already halfway

:09:24.:09:28.

through end I do not think we will hit back. It will be some way below

:09:28.:09:34.

that. What about the point about the Shadow Chancellor, he says

:09:34.:09:38.

slower growth, high employment, the policy is making a vicious circle

:09:39.:09:44.

with borrowing already said to be �46 billion higher. His point is

:09:44.:09:47.

that the policies of the government will actually make growth forecast

:09:47.:09:53.

worse. If I am concerned with the private sector. We need to take the

:09:53.:09:58.

unpleasant medicine in the public sector. At the same time, what we

:09:58.:10:02.

are demanding of government is we support them on the necessary but

:10:02.:10:05.

painful cuts but they have to deliver a strategy for growth in

:10:05.:10:09.

the private sector. Where I differ from the Labour Party is I do not

:10:09.:10:14.

think we deliver growth in the private sector by more public

:10:14.:10:19.

spending. You deliberate by liberating the private sector.

:10:19.:10:22.

Public sector doing less and the private sector doing more. Let's

:10:22.:10:26.

look at some other suggestions that there is analysts have suggested

:10:26.:10:33.

for dealing with that growth in the private sector. There is a camp

:10:33.:10:37.

which says austerity is too tough and killing growth. What you could

:10:37.:10:43.

do on physical policy is take out, this is coming from John Walker are

:10:43.:10:47.

from the Federation of Small Businesses, take out VAT on

:10:47.:10:52.

construction and tourism. Bring it down to 5%. Would that kind of

:10:52.:10:59.

targeted tax cut hold? I would look more at targeted action on National

:10:59.:11:04.

Insurance to try to get people into work. National Insurance being an

:11:04.:11:09.

employment tax? A tax on jobs. Let's be realistic about this.

:11:09.:11:13.

Whether he is proposing VAT or I am looking at national insurance, the

:11:13.:11:19.

government does not have very much money. The cupboard is empty and we

:11:19.:11:22.

do not help ourselves by going back to government with a wish-list that

:11:22.:11:26.

cost a large amount of money. We will have to be very targeted in

:11:26.:11:30.

the future. So the National Insurance, that is one that is

:11:30.:11:36.

endorsed by the London mayor as well. What he suggests he's cutting

:11:36.:11:42.

be 50% rate of tax on high air in comes. Yes or no? It is an

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interesting study been done by the Chancellor to see whether the

:11:46.:11:50.

British higher rate tax of 50p brings in as much money as it used

:11:50.:11:54.

to at 40p. That will answer the question. If a high tax rate is

:11:54.:11:57.

bringing in no more money than it would have been at its old rate,

:11:58.:12:02.

then it is not achieving any purpose. And his point, that it

:12:02.:12:06.

discourages business, but it on to that -- bedded entrepreneurs want

:12:06.:12:11.

to make money it will not cover the country, they have pretty high tax

:12:11.:12:18.

rates at the upper end? Yes but they struggle with employment

:12:18.:12:21.

creation and they struggle with attracting new businesses and

:12:21.:12:25.

investment from outside of their shores. We have got the most open

:12:25.:12:29.

economy in Europe. We have one of the most open economies in the

:12:29.:12:35.

world. That generally works to the benefit of the British citizens.

:12:35.:12:39.

What we have to know international economies is people have choices.

:12:39.:12:43.

Not just market traders in the City, engineers and other high-value

:12:43.:12:47.

individuals, situs, they do not have to come to our engineering

:12:47.:12:54.

companies and our universities. -- cities. What we see at the moment

:12:54.:13:04.
:13:04.:13:06.

is that 50p rate is putting them Higher-rate taxpayers in the

:13:06.:13:11.

economy one to pay their fair share of fiscal austerity but the measure

:13:11.:13:19.

may be pernicious. Your predecessor Richard Lambert used his outgoing

:13:19.:13:23.

speech in January to criticise the Government. He said, it is not

:13:23.:13:33.
:13:33.:13:34.

enough just to slam on the spending breaks. 400,000 jobs are to the

:13:34.:13:41.

public sector. He says what is needed is growth in the private

:13:41.:13:47.

sector that will offset this impact. Do you think the Government is

:13:47.:13:55.

guilty of imagining that jobs will disappear by magic? We created 0.5

:13:55.:14:03.

million jobs in the last period. We have created these in the private

:14:03.:14:09.

sector. In each of the last 20 years apart from the two years we

:14:09.:14:17.

were in recession we have created many private sector jobs every year.

:14:17.:14:22.

Britain has a good track record of creating jobs. It has kept

:14:22.:14:25.

unemployment lower then it should have been for the depth of the

:14:25.:14:31.

recession. Most of us thought it would hit 3 million. In your view

:14:31.:14:36.

the private sector at can soak up those employees that are falling

:14:36.:14:45.

out of the private sector? Are they the same employees? The complaint

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is that the new employees in the private sector are coming from

:14:50.:14:59.

outside the UK. A very exciting opportunity for the Government to

:14:59.:15:02.

help the private sector make sure when they want to recruit someone

:15:02.:15:07.

there is someone in the UK with the right skills base. We will have to

:15:07.:15:14.

go abroad for talent if we do not have the right skills in the UK. I

:15:14.:15:18.

cannot say that every month we are creating enough private sector jobs

:15:18.:15:26.

every -- for those losing their jobs in the public sector but I

:15:26.:15:32.

want a labour market that can provide our own labour. We should

:15:32.:15:39.

just be employing a small number of highly skilled people - university

:15:39.:15:45.

professors and scientists. Science and technology, that is something

:15:45.:15:54.

we need to look at. The skills problems in these countries -- this

:15:54.:15:59.

country. Nearly half of employers are saying they already have

:15:59.:16:07.

difficulty employing people who have skills in science, technology

:16:07.:16:17.

and mass. -- mathematics. Most young people in school do not want

:16:17.:16:20.

to do science, technology, engineering and mathematics. Those

:16:20.:16:25.

that due to those degrees do not always go into the productive part

:16:25.:16:35.

of the economy. They take jobs outside of the industry. They

:16:35.:16:41.

sometimes take jobs in the finance industry. We're facing a problem at

:16:41.:16:48.

the old apprenticeship level. I was with a company the other day that

:16:48.:16:57.

had 200 engineers. There were almost all aged over 55. When that

:16:58.:17:02.

generation retires we will struggle with the skills base. And strut or

:17:03.:17:08.

even sooner if you listen to academics involved -- struggle.

:17:08.:17:13.

They say, how can we deal with these problems when tuition fees

:17:13.:17:22.

are trebling for many people and education subsidies have been cut.

:17:22.:17:26.

One expert says, we are one of the many countries in the world that is

:17:26.:17:36.
:17:36.:17:37.

not increasing investment in science and technology. I think

:17:37.:17:41.

businesses will sponsor students and they will sponsor students when

:17:41.:17:46.

they are taking courses that business find most variable. We

:17:46.:17:55.

will see it in the Science and Engineering. I am an historian

:17:55.:18:03.

services tough for me. I think we need to spend money on science

:18:03.:18:09.

because that is the way to get growth moving. You only need to go

:18:09.:18:19.
:18:19.:18:21.

to China and to be reminded that they Iran hundreds of thousands of

:18:21.:18:31.
:18:31.:18:33.

people that are coming out qualified with these degrees.

:18:33.:18:41.

must not let those sectors be starved of key staff. That is a

:18:41.:18:51.
:18:51.:18:51.

specific area of the labour market but let's look at other things. I

:18:51.:18:55.

want to quote from the Director General of the Institute of

:18:55.:19:02.

needs to be in a relentless drive to repeal of laws and regulations

:19:02.:19:12.

and remove the hand of government from wealth-creation. To endorse

:19:12.:19:22.
:19:22.:19:25.

that? I think that language is a bit dramatic. Its ambitions are

:19:25.:19:33.

commendable and its actions have not proved good. To give government

:19:33.:19:41.

so am -- some credit I think it is committed to one in, one out. Every

:19:41.:19:50.

lake -- regulation they put in they have to take one out. What about

:19:50.:19:58.

strike laws? You are famously dependent on the viewpoint of the

:19:58.:20:05.

Observer, committed to pressing for a tightening on laws in which

:20:05.:20:10.

unions can take strike action. Does that have a direct bearing on

:20:10.:20:16.

employment growth? 80% of the workforce are in the private sector

:20:16.:20:25.

where union membership is very low. 14% across the private sector. It

:20:25.:20:32.

is a story about disruption for ci ciking it harder to get

:20:32.:20:42.
:20:42.:20:42.

goods and services to the market. I do not think the public should be

:20:42.:20:47.

messed around in monopoly services like transport or education by

:20:47.:20:51.

unions bringing people out on strike without a very clear

:20:51.:20:55.

demonstration that they have the support of the majority of the

:20:55.:21:00.

people they are asking to down tools. We say that a strike ballot

:21:01.:21:06.

should require 40% of those eligible to vote to vote in favour

:21:06.:21:13.

of the proposition. The leader of the union movement's says the UK

:21:13.:21:22.

has some of the toughest legislation on at the right to

:21:22.:21:32.
:21:32.:21:32.

strike. The UK has one of the lowest totals of days lost due to

:21:33.:21:39.

industrial action because of industrial action. In the UK the

:21:39.:21:44.

public are vulnerable to being messed around in monopoly services.

:21:44.:21:52.

Some of the strikes in London have only had 20% of those eligible to

:21:52.:22:01.

vote voting in favour. I think that the right of citizens not to be

:22:01.:22:07.

messed around is very important. will quote you a lawyer. They have

:22:07.:22:14.

done at an analysis of global industrial action. He says,

:22:14.:22:24.
:22:24.:22:27.

legislation which favours employees have reduced - has reduced

:22:27.:22:34.

industrial action in some countries, the best way is to reach a

:22:34.:22:39.

compromise and negotiate. These things are best sorted out around

:22:39.:22:47.

the negotiation table. I do not want to leave an impression that we

:22:47.:22:55.

want to wave a big stick against the unions. For most businesses

:22:55.:23:00.

unions are not an issue. But if a public sector is to be slimmed down

:23:00.:23:05.

according to what we can afford, we cannot afford to allow unions to

:23:05.:23:15.
:23:15.:23:18.

stand in the way of legitimate reform. As you pointed out, and a

:23:18.:23:28.
:23:28.:23:30.

government. They want us to believe, it is the private sector that is

:23:30.:23:39.

important in economic growth. According to some we're seeing the

:23:39.:23:46.

beginnings of a real growth in manufacturing. Two years ago our

:23:46.:23:51.

automotive sector was suffering because people were not buying cars.

:23:51.:23:55.

Now we're producing cars that taking a bigger share of the market.

:23:55.:24:02.

There are huge opportunities in low-carbon. We will have

:24:02.:24:06.

manufacturing increasingly decay agonising in years ahead because it

:24:06.:24:11.

is the right thing to do. The companies that will grow up the

:24:11.:24:19.

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