................................................................................ ON THE RECORD RECORDED FROM TRANSMISSION BBC-1 DATE: 29.05.94 ................................................................................ JOHN HUMPHRYS: Good afternoon. On the Record has commissioned a special poll which shows who's ahead in the Labour Party leadership stakes. I'll be talking to Robin Cook about that contest AND to both him and Paddy Ashdown about the one for the European Parliament. That's after the news read by Moira Stuart. NEWS HUMPHRYS: On Thursday week we vote in the European elections, and then when that's all over another election campaign begins. We shan't all be able to vote in that one, only about four million of us. It's for the leadership of the Labour Party of course. Strictly speaking because the contest has not yet begun, there are no candidates - a likely story. There are in reality at least five names in the frame, though whether they'll all be there in a fortnight remains to be seen. We'll be looking at them and revealing the details of a poll we've commissioned which for the first time tells us who is favoured by party members and MPs. I'll be talking live to one of the non-candidates Robin Cook about that and about the Euro-elections. I'll be talking to Paddy Ashdown, the leader of the Liberal Democrats about them too. But first the rough old world of an election campaign. Over the years the Labour Party and the Conservatives have both stood on their heads over Europe and in many minds there's some confusion still over who stands for what these days, but not when it comes to social policy. That's probably the clearest and the sharpest division of all. The government opted out of the Social Chapter of the Masstricht Treaty. Labour would opt in. Robin Cook is the Shadow Trade and Industry Secretary. Mr Cook, you're about to produce a document which is meant to make Britain more competitive, but what you haven't mentioned in the document, is that Labour government would go back in to the Social Chapter, go into the Social Chapter and that, surely, would undermine our competitiveness? ROBIN COOK: Not at all, quite the reverse. There are two reasons for being...attaching importance to the Social Chapter. One is the social ground. There is no point in being a prosperous economy, if you cannot, as part of that prosperity have security at work, have rights at work, a proper protection at work. And, that's the social case for the Social Chapter. But, there's also a very important industrial competitive argument for the Social Chapter and that is that if you want to have a high skilled workforce that can compete in tomorrow's world, then, it's got to be a motivated workforce. What the Conservatives have given us, after ten years of deregulating the labour market, is they've given us a workforce that's casual, that's poorly paid and, therefore, is badly motivated and slip down the skills league. And, the other countries of Europe haven't embraced the Social Chapter simply out of the goodness of their heart. They've done so because they know that helps to build a more skilled, more motivated workforce, a more efficient industry and, indeed, they are more efficient than we are. HUMPHRYS: But, it is possible to increase our competitiveness by holding down wages, holding down costs. COOK: No, that's a dead end. Oh, and I think Britain has got to totally reject the Conservative view that you can achieve competitiveness in the long run by driving down your wages. It's a dead end. The reason why it's a dead end is that there'll always be another country that'll do it more cheaply than ourselves. I mean, in China, they pay ten pence an hour. What are the Conservatives saying? We should start paying nine and half p per hour to be competitive with China? No, you can't compete on driving down wages. How you compete is you drive down unit cost by increasing investment, by increasing skills, by increasing research and development. That's how we should be building competitively. HUMPHRYS: You, you say it's a dead end. COOK: Mmm. HUMPHRYS: But, you've already acknowledged, in your document, that is a choice. Let me quote from the document. Britain faces an important choice between reaching for competitiveness through high skills, as you say and high job satisfaction. Or, settling for competitivess through low wages and low-tech production. So, we do have that choice. COOK: Yes, it's a choice but I point out in the very next sentence that if you take the choice of competitiveness through low wages that you are going to find that, in the long run, you cannot compete. The only way you can compete, in the long run, is by making sure you can match other nations on investment and on skills and you don't do that by going downmarket. But if I can look for a moment at the case of the Far Eastern countries, the newly industrialised countries, like Taiwan and Korea. Yes, at the moment, they are settling for lower wages than we have but they've got higher investment. They've got higher skills now than we have and if we want to compete with these countries over the next decade, we're not going to do it by trying to match their wage levels. We're only going to do it, if we match their investment levels. HUMPHRYS: And, we don't have the skills, at the moment. COOK: No. If you look at what's happened to skills in Britain, they have, unfortunately, declined under the Conservatives. We used to be thirteenth in the league table. We're now nineteenth. We're near bottom. If you look at what managers say about where they can find skilled labour, Britain comes way behind most of the other countries of Europe. Now, that's happened at the very time when this government has been taking away rights from the working force, encouraging the workforce to face lower wages, lower rights at work. And, of course, that means, at the end of the day, you end up with a less motivated workforce, a more casual workforce, a more part time workforce and a less skilled workforce. HUMPHRYS: So, what you're saying, quite clearly, is that if we can't go down the route the one choice of the low wage, low-tech econmony we've got to have this highly skilled workforce, in order to become competitive and you accept that, at the moment, we're not competitive. COOK: Oh, we're not competitive - yes. And, indeed, let's be fair to the Government, it, itself, has just recognised, after fifteen years of Conservative rule that we do have a problem with competitiveness. It produced a White Paper, which admitted the problem on Tuesday. Of course, it didn't have any solutions. HUMPHRYS: But, even though we're not competitive by your admission and by, as you say, by the Government's admission, what you want to do is load industry with all the costs of the Social Chapter. COOK: Oh, look, you talk about loading industry. Half the top hundred companies in Britain are going to be operating the Social Chapter at factories all over Europe. Now, I find it offensive that you could end up with a situation in which the workforce in some countries in Europe will end up with advantages of the Social Chapter. The workforce of Britain alone, employed by the same companies, will not have those rights under the Social Chapter. Now, I don't find that acceptable and I'm astonished that any British government should be prepared to find that acceptable. HUMPHPRYS: It's not a question of finding it acceptable, is it? Yes, Germany has the high cost of the Social Chapter. Germany also has - you said it yourself - a much more highly skilled workforce and is, therefore, because it has that highly skilled workforce more competitive than we are. COOK: But, the two things go hand in hand. The point I'm making is that you can't achieve a motivated, committed skilled workforce, if you are constantly driving down their rights and also driving down their wages. There's another point here, too. The Social Chapter, actually, is mainly about participation, consultation with the workforce. The Social Chapter is about involving the workforce in the future of the company. Now, in the industries of the future, they're going to be of technology, they're going to be of skills. The companies that do best in the future will be those companies that make best use of the skills, the knowledge, the initiative of the workforce. That actually is why all the companies on the Continent are, actually, enthusiastic about the Social Chapter, are doing it anyway. Because they want to tap the skills initiative of the workforce. If, instead, you adopt the muddle that the Conservatives are trying to impose on Britain of a top-down hierarchical company, which doesn't have that participation and consultation, you'll lose out in competition, based on knowledge and skill. HUMPHRYS: But, you're pushing aside the costs involved in entering the Social Chapter. All the costs that go with that. COOK: What? John... HUMPHRYS: ...at the same time that you're telling industry.. COOK: John HUMPHRYS: ...they've gotta pay to train the workforce. COOK: The point I'm making to you, John, is that the Social Chapter is an important part of getting competitive. Now, you're talking about costs. I should be astonished, John, if you could name for me one major company in Britain that's trading internationally with large amounts of volumes of Exports, which would have the slightest difficulty in adopting the Social Chapter at extra cost. Can I give you one particular case? HUMPHRYS: By all means. COOK: There's Nissan. Now, the Conservatives keep telling us that not having the Social Chapter is very important for inward investment. The Managing Director of Nissan has said he would not have the slightest difficulty of meeting the terms of the Social Chapter. They already surpass the terms of the Social Chapter and, actually, that would be true, if you went round most of the major manufacturing bodies. HUMPHRYS: But, we're not talking just about the major manufacturing companies. We're not talking just about the Nissans. We're talking about all those companies that are finding it difficult, precisely because they don't have skills, at the moment, to make themselves competitive. And, they're the people who are going to have to put their hands in their pockets. COOK: Oh they are the people who perhaps have to be encouraged in order to put their hands in their pockets to invest in those skills. So long as.. HUMPHRYS: But at the same time as they're going to have to meet all these costs of the Social Chapter. COOK: Hang on, hang on, so long as they're encouraged to regard labour as something that is flexible in the sense you can easily dismiss it and you can easily hire it, they're not going to have that incentive to invest in the skills. As for the cost of the Social Chapter, I mean I'm not quite clear what you mean - the costs. I mean there is nothing in the Social Chapter actually about a minimum wage, there's nothing in the Social Chapter about hours, these are issues that have been discussed but they don't arise in the Social Chapter. HUMPHRYS: Well there are lots of things that do arise in the Social Chapter or the Social Charter whichever you prefer. There is a forty eight hour maximum working week, there are new rules on conditions of employment, there are restrictions on part-time work, there are new rights for part-time workers, fathers' paternity leave; just one small, relatively small thing, but it's all adding costs - add it all up. COOK: Those are coming out of some of the social legislation of Europe, they do not directly arise in the case of the Social Chapter, but let's.. HUMPHRYS: But you'd approve of it? COOK: Yes indeed. Let's take the forty-eight
hours which you referred to, now our position is quite clear: if people want to work over forty-eight hours and willingly work over forty-eight hours then of course they should be free to continue to do so and indeed are free to do so under the Working Times Directive. What we are saying though at the same time is if somebody does not want to be made to work over forty-eight hours then they shouldn't be forced to work over forty-eight hours. Now that seems to me a very important right, and I also have to say - if I can just finish the point because it's a very important point - working long hours is not efficient; all the studies that have been done of it show that if you make people work long hours you end up with worst productivity and a higher risk of accidents. HUMPHRYS: But many manufacturers, many companies find that flexible working - if you like - part-time working is terribly efficient, they would have huge extra costs loaded onto them under the provisions of the Social Chapter. COOK: Well I'm in favour of a flexible workforce, I want to see a flexible workforce, I want the kind of flexible workforce that comes from people who are skilled and adaptable and are therefore flexible. I'm not interested in a flexible workforce in a sense that its easy to hire and easy to fire because that's not going to build competitiveness. HUMPHRYS: But there are costs involved - for a company that at the moment has a large workforce of part-time workers and has very few obligations to them suddenly under the provisions of the Social Chapter they would find themselves with enormous obligations to them. COOK: I should be very surprised John if there are any major companies succeeding in a very competitive international workplace purely on the basis of part-time employees. HUMPHRYS: But there you go again, talking about major companies succeeding when.. COOK: You're competitiveness. HUMPHRYS: And don't small companies come into this equation? COOK: Oh small companies do but I.. where you'll find most of the part-time work now is not actually in the manufacturing industry which is exporting... HUMPHRYS: Serivce industries... COOK: You find it in service industries. Now I want to put a point back to you, you're talking about the extra costs. You know there are very substantial extra costs to the state of the kind of labour market that this Conservative government has created. We have, yes, seen a growth in part-time jobs, we've seen a collapse in the number of full-time jobs and that's left us with more people who are unemployed - that's a cost to the state. You were talking earlier about hours worked, you know there are..half the people in Europe working over forty-eight hours are in Britain, half of them. I mean Britain is very much out of line on this. Now, if you could even reduce a proportion of those working over forty-eight hours you could make major inroads in unemployment. HUMPHRYS: But you're still not addressing this central question which was that going into the Social Chapter is going to involve industry in extra costs - considerable extra costs. Ask them and they will tell you, you know that, they are very opposed to it. COOK: I've had a number of discussions with them and I've asked them "tell me these extra costs", "show me these extra costs" and I have to tell you John nobody has demonstrated to me the additional costs that would cause a burden on our manufacturing industry which trades internationally. On the other hand, what I can show, what I've just done, what the rest of the countries of Europe have done is demonstrate that if you do invest properly in your workforce, if you have a commitment to your workforce, if in return you've got a motivation in your workforce, if you build a skilled workforce you are more competitive. That's why..no let me finish. HUMPHRYS: Go on. COOK: That is why Germany has cheaper units costs than we have even with the Social Chapter, that's why Germany has a four billion pound surplus in trade with Britain, we don't have the Social Chapter, they do, but they're more competitive. HUMPHRYS: Alright, don't ask the CBI, don't ask the Institute of Directors, ask Jacques Delors, the high level of non wage labour costs is prejudicial to employment, in other words prejudicial to competition because a competitive country is one with higher level of unemployment. Jacques Delors believes that, Jacques Delors accepts that. COOK: With greatest respect John, you're not going to tell me that Jacques Delors is opposed to the Social Chapter... HUMPHRYS: No I'm not, that isn't the point I'm making, of course not, of course not - he's the father of the Social Chapter if you like but.. COOK: Thank you very much, thank you very much. Jacques Delors would welcome Britain signing up to the Social Chapter.. HUMPHRYS: Well of course he would because he recognises, as do many other European leaders, that Britain signing up to the Social Chapter would reduce Britain's competitiveness - it's in their interest. COOK: No I wouldn't accept that for one moment. That is not the reason Jacques Delors is putting forward it, he's putting it forward for two grounds. First of all because he does believe genuinely that people who work are people who should have rights, and secondly because he has seen in France, he has seen in Germany how that kind of partnership between workforce and management results in a longer term view and greater efficiency in industry. HUMPHRYS: But he recognises that there are huge extra costs involved. Now it may be that he says those costs are in the end necessary, they must be borne, but he doesn't dismiss the idea and he recognises that those costs are to use his own words "prejudicial to employment". COOK: I think that there are some..there's a case for looking at some of the non wage costs in order to encourage employers to take on more staff, and that's why Labour has actually said..no, if I can finish.. HUMPHRYS: I was going to ask you which.... COOK: Right, I'll give you an example. Labour has actually said "we would take one per cent of National Insurance Contributions for those employers who hire somebody from the long-term unemplolyed, that would reduce the costs of unemployment, it would give somebody a job and it would make sure that the employer was helped to meet the costs of that extra employment. Now that's the kind of non wage costs that we should be looking at and looking at imaginatively, but we shouldn't be doing it at the expense of the rights of the people that work, or indeed at the expense of encouraging management to get into serious dialogue and serious partnerships... HUMPHRYS: And what would you look at within the Social Chapter and say "no we don't like that bit", I mean are you taking an a la carte approach to it? COOK: No I'm not, I think the Social Chapter is a very fair statement of aspiration and a very reasonable case for how we get into a well paid, well skilled and highly competitive industries in future. HUMPHRYS: And you'd buy the whole package? COOK: Yes. Let's just deal with buying the package. Yes, we'd buy the package. I don't think there's a case for opting out of the package or any part of the package. What the government has done with this opt-out is not actually protect Britain, what it's done is shut out Britain from the discussions that are now going on in Europe as to where they're go under the Social Chapter; and I think that if we want to be part of Europe and if we want to have the benefits of being in Europe we shouldn't allow ourselves to be shut out, we should be in there. HUMPHRYS: So you'd buy the whole package and you'd buy it immediately so that on day one of a Labour government the industry would know we've got to meet these extra costs, we haven't yet become competitive. COOK: Hang on. You keep talking about those extra costs. HUMPHRYS: Yeah. COOK: You've not demonstrated to me what the extra costs are. HUMPHRYS: Well, I read you a list earlier. I told you that Jacques Delors himself accepts that there are extra costs. COOK: But this doesn't arise under the Social Chapter. The Social Chapter says nothing about hours, it says nothing about a minimum wage. The Social Chapter sets out very important and very valuable guidelines about how industry should behave in relation to its workforce, and what rights that workforce should have. And, I believe, that Yes, we should buy that. We should buy it, not just on social grounds, we should buy it on the grounds of efficiency as well. HUMPHRYS: Your document, the document that's coming out, I think, Thursday of this week? COOK: Correct. HUMPHRYS: It contains a hundred and one different sorts of suggestions. It doesn't tell us where the money's going to come from for all those. COOK: Well, the document is about making industry efficient and it, therefore, starts from an entirely different perspective from this government. It starts from the perspective that the task is to drive down unit costs, not drive down wages, and you do that by raising investment, by raising RND, by making sure that we boost technology. Now, you talk about money - yes, it'll take money to invest HUMPHRYS: Right. COOK: - but not public money. HUMPHRYS: No public money? COOK: The big paradox of the British economy is that we've got the biggest financial centre in Europe, the City of London. We have the poorest record on investment in industry in Europe. Now, the task for government is to make sure you bridge that gap, and if you make sure that you've removed the barriers to investment, that you've provided encouragement to investment. But, there's no reason whatsoever why that investment should be taxpayers' money. There's private money there and that money should be going to British industry not into buying property abroad. HUMPHRYS: The key factor is, as you say, ready access to high quality Education. For instance, that takes money. Have you asked Gordon Brown whether he'll give it to you? COOK: Oh there's no question that the Labour Party would want to have high quality education. I don't think Gordon Brown would differ from one .... HUMPHRYS: Well, he said no commitments. COOK: Yes, but we have also been preparing our own document on education, we're preparing a document on training. One of the things that we do say about training is that companies must be prepared to invest a proportion of their turnover in training. After all it's their workforce. They should be investing in it. They shouldn't be expecting the state to come along and do it. Also can I just pick up this point, because I think it very important that we get this clear. The investment gap in Britain is not an investment gap of public money going in. It's an investment gap of private money, and the basis of the gap is that if you look at what happens to the profits of industry. Now over in Germany, in Japan, most of the profits get ploughed back ... HUMPHRYS: Very different systems. In Germany it's largely.... COOK: Maybe, yes indeed, very different systems, but the net result is that twice as much of the profit is ploughed back in investment. In Britain twice as much goes out in dividends. Now what we're saying is that companies must take a longer term view, the City must take a longer term view. HUMPHRYS: You're going to make them do that? COOK: Well, what you can do is, you could give them the protection to do it. I'll tell you why they pay out the high dividends. They pay out the high dividends because they're terrified if they don't pay out the high dividends then they get taken over in the City and they get asset stripped. HUMPHRYS: They pay out the high dividends because their shareholders want them to pay out the high dividends. COOK: That's right, because the financial institutions will sell the shares off. HUMPHRYS: Shareholders are often perfectly happy for takeovers, because it increases their capital value. COOK: Yes, it increase the capital value for those who are the shareholders at the expense of the company. HUMPHRYS; And so you are going to intervene in such a way that the companies are no longer able to do what they think is best for their customers? COOK: On the contrary, I'm saying precisely the reverse John. What we're saying is that you do need a government that's prepared to intervene to give those companies protection against takeovers, so they can then do what they know is right, which is to invest in the company - and can I just finish this point? It's very important that we don't run away with the notion that there is here a long-term difference between the shareholders and the company. In the long run if these companies invest the shares will be worth more. The return to the owners will be better. That's why despite the lower dividends in Japan and Germany the shareholders do better. HUMPHRYS: So you've increased the investment in private companies, but you've still got this problem where you have an educational system for instance that isn't good enough - by your own admission
- I mean it's a constant charge against the government. That's going to cost money. Where's it going to come from. You have no commitments to increase public spending? COOK: What we have said is that we want to make sure that every sixteen and seventeen-year-old has a place in full time education or in full time training, or a workplace. HUMHHRYS: Very expensive. COOK: It may cost some money at first. I mean I don't actually accept your view that it's necessarily going to be very expensive, but it may cost some money at first, but I do have to tell you there is nothing more expensive than doing without education. If you think investing in education is expensive, try doing without it, and that's what we're doing at present. HUMPHRYS: Now, do you reckon that you will be in Number Ten, making these decisions yourself. Are you going to apply for the job? COOK: I believe that there will be a Labour Prime Minister in Number Ten. HUMPHRYS: Is it going to be you? COOK: I believe only with a Labour Prime Minister are we actually going to achieve both the regeneration of Britain's economy and the healing of those social divisions, and whoever the Labour Prime Minister is in Number Ten I shall be very happy to work in the team that is delivering those polices. HUMPHRYS: Ah - work in the team. So you don't expect to be leading that team do you? COOK: Oh, I will making an announcement when the time comes. At the moment the important thing for the Labour Party is to fight these European elections, and if I can just end on this note - I think the most important legacy we learnt from John Smith was the importance of working together as a team. I think it's very important that throughout these elections we continue that legacy and we remember what he taught us and pull together as a team. HUMPHRYS: But you're not ruling yourself out clearly, at this stage? COOK: No, I think that can wait 'till another interview John. HUMPHRYS: Robin Cook, thank you very much indeed. COOK: Thank you. ...oooOooo...