Hundreds of jobs are axed by Ford, and we're letting them get away with it

Our current industrial strategy is allowing the company to undermine public trust.

Over 1,400 families are still in shock. Ford’s decision to close plants in Southampton and Dagenham left workers blindsided after almost a century of UK production. At a time of recession, there is a deep concern for the economic wellbeing and material welfare of these workers, as well as many more subcontractors and suppliers. These quality jobs will no longer be available for young Brits. Another nail in the coffin for British manufacturing. The makers are marching straight out of the country.

We are told that it’s inevitable. Of course Ford is now focusing its operations in Turkey. In a brave new world of global competition, this is how we operate. Automobile companies are as cold and sharp as the steel they manufacture; ready to cut and shift production at a moment’s notice. Sympathy is unaffordable. Responsibility and relationship to people and place is naïve. If we want to win the economic war, workers may be collateral damage. The bottom line dictates the show.

But this narrative has masked the deeper failings of Ford and of government. In a meeting earlier this week in Westminster, a little-attended parliamentary debate revealed what is really happening. MPs of all sides dismissed Ford’s behaviour as “shoddy” and “grubby”. The failings of the government’s industrial strategy began to be exposed, and the consequences for the British taxpayer revealed. Three key questions strike to the heart of the problem.

First, why were ministers kept in the dark about Ford’s decision? The business secretary Vince Cable is on record saying he knew nothing about the company's decision to close the plant until just a few days before it was announced. Despite the fact that ministers had 12 meetings with Ford since taking office, Michael Fallon MP said there was “no opportunity to discuss (closures) as we would have liked.”

MPs at a local level went further, claiming they were actively misled by Ford. Alan Whitehead, MP for Southampton Test, said he had received “cast iron” guarantees that local production would continue. Jon Cruddas, MP for Dagenham, said workers were “blindsided” by the decision. Chris Huhne, MP for Eastleigh, called for the minutes of all meetings with Ford to be published from 2008, questioning whether the company gave false impressions of growth to benefit from cheap government loans. John Denham, MP for Southampton Itchen, said that the last communication he had with John Fleming - now head of global manufacturing at Ford - was an email saying that they were planning to increase operations in Southampton.

“Reputations are hard won and easily lost,” says Denham, “I’m sorry to say it will be a long time before MPs will be able to sit down with Ford representatives at the other side of the table and believe they will keep their word.”

Ford insisted they didn’t make their final decision until 19 October – less than a week before ministers were informed - but that doesn’t explain previous assurances.

Second question. Why are British taxpayers supporting Ford’s new line of vehicles outside of the UK? This summer, the European Investment Bank (EIB) gave Ford a cheap £80m loan to develop a new line of transit vans, previously assembled in the UK, in Kocaeli. We part fund the EIB, and our chancellor George Osborne sits on its board. Conservatives themselves were raising concerns about this, including the MP for Romsey and Southampton North, Caroline Nokes:

“Ford globally made $2.2bn profit last year. Why does it need cheap loans to subsidise it to export jobs from the UK to outside the EU?”

Of course Turkey has lower production costs, and its labour costs are one third of those here. But it’s one thing to say it’s cheaper to do business abroad, and quite another to expect British taxpayers to pay for it.

The problems don’t end there. Just a few days before Ford’s announcement, the British people gave some £10m to the company to help it develop a new series of diesel engines here in the UK. This money was awarded by the Regional Growth Fund (RGF), which is chaired by none other than Michael Heseltine – the man recently charged for producing a report for the government on growth. So why didn’t we make this grant contingent on Ford maintaining the rest of its operations here in the UK?

“There is no sense of engagement across the board” says Denham, who called on both the EIB and the RGF to be subject to review. Another MP added, “Ministers have shown themselves to be incapable… you can’t rebalance growth by tossing a few grants here and there.”

And a final bonus question. Given the pain, why aren’t workers going out on strike? Employees are desperately unhappy, but union members say many don’t speak out because they have been given generous pay offs, which include an extra £20,000 “bonus” for not going on strike. When it comes to a definite chance of a pay off verses a small chance of saving your job, most workers are understandably putting their families first. This is obviously less helpful for all those subcontractors on site, who aren’t receiving any redundancy package from Ford.

Ford are keen to emphasise that they are pursuing voluntary redundancies and relocating workers wherever possible. Workers in Dangenham can take some comfort that a new diesel engine is being developed there, but in general Ford say that they are suffering from over capacity.

Nobody disputes that Britain has to adapt to a changing world. But the way Ford is operating now is not good for business. The company has undermined public trust, and our current industrial strategy has let them get away with it. Ford could improve its brand by celebrating production here in Britain. European consumers would be more likely to buy from a company known for providing good jobs, worker representation and apprenticeships here in Europe. Initiatives like this wouldn’t just be good for business, it might also give those struggling workers and their families another chance.

Ford will be closing plants in Southampton and Dagenham next year. Photograph: Getty Images

Rowenna Davis is Labour PPC for Southampton Itchen and a councillor for Peckham

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Q&A: What are tax credits and how do they work?

All you need to know about the government's plan to cut tax credits.

What are tax credits?

Tax credits are payments made regularly by the state into bank accounts to support families with children, or those who are in low-paid jobs. There are two types of tax credit: the working tax credit and the child tax credit.

What are they for?

To redistribute income to those less able to get by, or to provide for their children, on what they earn.

Are they similar to tax relief?

No. They don’t have much to do with tax. They’re more of a welfare thing. You don’t need to be a taxpayer to receive tax credits. It’s just that, unlike other benefits, they are based on the tax year and paid via the tax office.

Who is eligible?

Anyone aged over 16 (for child tax credits) and over 25 (for working tax credits) who normally lives in the UK can apply for them, depending on their income, the hours they work, whether they have a disability, and whether they pay for childcare.

What are their circumstances?

The more you earn, the less you are likely to receive. Single claimants must work at least 16 hours a week. Let’s take a full-time worker: if you work at least 30 hours a week, you are generally eligible for working tax credits if you earn less than £13,253 a year (if you’re single and don’t have children), or less than £18,023 (jointly as part of a couple without children but working at least 30 hours a week).

And for families?

A family with children and an income below about £32,200 can claim child tax credit. It used to be that the more children you have, the more you are eligible to receive – but George Osborne in his most recent Budget has limited child tax credit to two children.

How much money do you receive?

Again, this depends on your circumstances. The basic payment for a single claimant, or a joint claim by a couple, of working tax credits is £1,940 for the tax year. You can then receive extra, depending on your circumstances. For example, single parents can receive up to an additional £2,010, on top of the basic £1,940 payment; people who work more than 30 hours a week can receive up to an extra £810; and disabled workers up to £2,970. The average award of tax credit is £6,340 per year. Child tax credit claimants get £545 per year as a flat payment, plus £2,780 per child.

How many people claim tax credits?

About 4.5m people – the vast majority of these people (around 4m) have children.

How much does it cost the taxpayer?

The estimation is that they will cost the government £30bn in April 2015/16. That’s around 14 per cent of the £220bn welfare budget, which the Tories have pledged to cut by £12bn.

Who introduced this system?

New Labour. Gordon Brown, when he was Chancellor, developed tax credits in his first term. The system as we know it was established in April 2003.

Why did they do this?

To lift working people out of poverty, and to remove the disincentives to work believed to have been inculcated by welfare. The tax credit system made it more attractive for people depending on benefits to work, and gave those in low-paid jobs a helping hand.

Did it work?

Yes. Tax credits’ biggest achievement was lifting a record number of children out of poverty since the war. The proportion of children living below the poverty line fell from 35 per cent in 1998/9 to 19 per cent in 2012/13.

So what’s the problem?

Well, it’s a bit of a weird system in that it lets companies pay wages that are too low to live on without the state supplementing them. Many also criticise tax credits for allowing the minimum wage – also brought in by New Labour – to stagnate (ie. not keep up with the rate of inflation). David Cameron has called the system of taxing low earners and then handing them some money back via tax credits a “ridiculous merry-go-round”.

Then it’s a good thing to scrap them?

It would be fine if all those low earners and families struggling to get by would be given support in place of tax credits – a living wage, for example.

And that’s why the Tories are introducing a living wage...

That’s what they call it. But it’s not. The Chancellor announced in his most recent Budget a new minimum wage of £7.20 an hour for over-25s, rising to £9 by 2020. He called this the “national living wage” – it’s not, because the current living wage (which is calculated by the Living Wage Foundation, and currently non-compulsory) is already £9.15 in London and £7.85 in the rest of the country.

Will people be better off?

No. Quite the reverse. The IFS has said this slightly higher national minimum wage will not compensate working families who will be subjected to tax credit cuts; it is arithmetically impossible. The IFS director, Paul Johnson, commented: “Unequivocally, tax credit recipients in work will be made worse off by the measures in the Budget on average.” It has been calculated that 3.2m low-paid workers will have their pay packets cut by an average of £1,350 a year.

Could the government change its policy to avoid this?

The Prime Minister and his frontbenchers have been pretty stubborn about pushing on with the plan. In spite of criticism from all angles – the IFS, campaigners, Labour, The Sun – Cameron has ruled out a review of the policy in the Autumn Statement, which is on 25 November. But there is an alternative. The chair of parliament’s Work & Pensions Select Committee and Labour MP Frank Field has proposed what he calls a “cost neutral” tweak to the tax credit cuts.

How would this alternative work?

Currently, if your income is less than £6,420, you will receive the maximum amount of tax credits. That threshold is called the gross income threshold. Field wants to introduce a second gross income threshold of £13,100 (what you earn if you work 35 hours a week on minimum wage). Those earning a salary between those two thresholds would have their tax credits reduced at a slower rate on whatever they earn above £6,420 up to £13,100. The percentage of what you earn above the basic threshold that is deducted from your tax credits is called the taper rate, and it is currently at 41 per cent. In contrast to this plan, the Tories want to halve the income threshold to £3,850 a year and increase the taper rate to 48 per cent once you hit that threshold, which basically means you lose more tax credits, faster, the more you earn.

When will the tax credit cuts come in?

They will be imposed from April next year, barring a u-turn.

Anoosh Chakelian is deputy web editor at the New Statesman.