Manufacturing Grants (Newark)
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7:33 pm

Photo of Ms Patricia Hewitt

Ms Patricia Hewitt (Minister of State, Department of Trade and Industry; Leicester West, Labour)

I echo the congratulations offered by my hon. Friend the Member for Newark (Mrs. Jones) to my hon. Friend the Minister for Competitiveness and his wife on the happy news of the birth of their baby son.

I also congratulate my hon. Friend on securing the debate and on raising so movingly the real issues and difficulties facing her constituents in Newark. I myself have an east Midlands seat; I understand only too well the impact of closures such as those she described—especially in the textiles and engineering industries, which in the past have been the staple source of employment for our east midlands constituents. I certainly reassure her and, I hope, her constituents that the Government understand their needs and concerns. We seek to put into place the effective support measures that will enable towns such as Newark and their surrounding areas to move from the sectors of the economy that have been in decline, at least in employment terms, into those, such as the food manufacturing industry that she described, that are growing fast.

My hon. Friend asked about objective 1 and objective 2 status, and the availability or otherwise of regional selective assistance. The difficulty that we face is that under European Union state aid law—it is, rightly, pretty rigorous on such matters—RSA can be granted only within tiers 1 and 2 of the assisted areas. Our revised proposals for the new assisted areas map were published in April, and following a public consultation, they are now being discussed with the European Commission. However, the Commission must approve our proposals before we can pay any RSA under the new map to any applicant companies.

Our revised proposals for the new assisted areas map include Elkesley ward—I hope that I have pronounced that correctly—in my hon. Friend's constituency. The proposals were drawn up within the very tight constraints that, as she recognised, are set by the Commission. The result of those constraints is that we have not been able to include many of the areas that we would have liked to include.

The other difficulty with the terms for drawing up the assisted areas map is that they do not provide a flexible instrument for responding to sudden changes in economic circumstances. As I understand it, at the point when the criteria for drawing up the map had to be fulfilled, the registered unemployment rate in the Newark travel-to-work area was 2.9 per cent., compared with a regional average of 3.6 per cent. and a UK rate of 4 per cent. Therefore the recent problems, the disruptions and the economic shock waves that my hon. Friend described have not been, and could not have been, taken into account in drawing up the map.

Instead, the systems of support are designed to deal with long-standing problems such as those faced in the east midlands coalfield. The new map, when approved by the Commission, will remain in place until the end of 2006 regardless of the changes that take place in the meantime. The frustrating fact is that we cannot include every area, and it is always particularly difficult for the urban areas that are next door to the areas that receive RSA to attract inward investment. I well understand the disappointment that my hon. Friend expressed on behalf of her constituents.

We recognise the need for a more flexible approach that can respond to sudden economic shocks and difficulties. My right hon. Friend the Secretary of State for Trade and Industry announced last July that he was introducing a new funding package worth £45 million over three years for a new discretionary enterprise grant scheme. That scheme targets small and medium-sized enterprises that could grow in the assisted areas, tiers 1 and 2, and in the new enterprise grant areas, tier 3.

As my hon. Friend will know, just over 20 per cent. of her constituency is eligible for the enterprise grant scheme. It is an important initiative to help areas of special need, and I am delighted that businesses in the east midlands have responded well to its introduction. Since the start of the year, when the scheme officially opened, we have received 34 applications for enterprise grants in the east midlands, seeking grants totalling £1.2 million.

I know that my hon. Friend would like us to extend the availability of the enterprise grant scheme to the whole of Newark. It is certainly the Government's intention—she will understand that I cannot make any promises—that we, together with regional partners, will consider the coverage of the enterprise grant areas to ensure that they meet regional and local needs.

That is not all that we are doing to ensure that new jobs are created, new businesses start up and inward investment continues to come into this country, which remains the No. 1 destination for inward investment into the European Union. There are specific sources of support, such as the highly successful SMART scheme, which helps companies to prototype new, often high-tech, developments. That support is available throughout England and is not confined as is regional selective assistance.

I must end, as I began, by thanking my hon. Friend and congratulating her on drawing to the attention of the House an extremely important issue, and in particular, the concerns and difficulties facing her constituents as a result of recent factory closures and job losses. I can assure her that we in the Department of Trade and Industry are doing everything that we can to ensure that new businesses start up, existing businesses grow and more jobs are created.

My right hon. Friend the Secretary of State for Education and Employment is doing his part to ensure that workers, such as those in the textiles industry, who are made redundant and who will probably not be re-employed in the same industry, are none the less rapidly offered the opportunity to seek the new skills that will enable them to move into the new jobs that are being created.

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