Nortel Networks, Paignton

Opposition Day – in the House of Commons at 9:51 pm on 25 April 2001.

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Motion made, and Question proposed, That this House do now adjourn—[Mr. Mike Hall.]

Photo of Adrian Sanders Adrian Sanders Opposition Whip (Commons), Shadow Spokesperson (Communities and Local Government), Shadow Spokesperson (Environment, Food and Rural Affairs) 10:11, 25 April 2001

Thank you, Mr. Speaker, for giving me the opportunity to raise an important issue for my constituents and people in neighbouring constituencies.

I shall begin by plotting some of the history of my constituency, which like all seaside resorts in this country, and certainly the big important ones, developed during the Victorian era, very much as a result of the railways. Much of the infrastructure in such communities has not been renewed, although it has been repaired, and perhaps, in some cases, updated. Tourism has had to cope with a number of competitive changes. The most significant was the development of the jet engine, which brought the package holiday in the Mediterranean and other parts of the world much closer for the domestic tourist. Other changes include the growth of farm and inner-city tourism, often through nationally funded developments of museums, galleries and other attractions. There has been little investment in tourism over the past 50 years, and each seaside resort, my own in particular, has sought to diversify its economy.

One of the main motives for diversification is the fact that many seaside resorts have become unemployment black spots, with rates above the national average. Torbay has been lucky, in that in the 1960s Standard Telephones and Cables built a plant that was taken over, in the 1980s by ITT, and in the 1990s by Nortel, which later changed its name to Nortel Networks. Up to 5,000 people have been employed on that site, engaged in what was the very basics of the electronics industry, and has now become the modern-day fibre-optic industry. It became the largest private sector employer in the area covered by the Government office of the south-west. Last year, for the first time, manufacturing overtook tourism in its contribution to our local economy.

When I say that 75 per cent. of all internet traffic in north America is carried on equipment made by people in my constituency, and that firms such as Sifam, better known today as JDS Uniphase, are located there, the House will realise that the area has become the centre for the fibre-optic industry in Europe.

Last Christmas, we were in the unprecedented position of having job vacancies in hotels and catering over the Christmas break. Then, in February, came the bombshell that 700 short-term contract employees would no longer be required; in March, we learned that a further 700 redundancies were required on site. Today, the news is that JDS Uniphase, formerly Sifam, is going to lay off people in the fibre-optic industry in Torquay and Plymouth. Those devastating bombshells, together with foot and mouth, have highlighted the underlying fragility of the economy in south Devon. For years our dependence on one industry, tourism, was effectively shifting to dependence on one employer.

However, I must tell the Minister for Small Business and E-Commerce, the House and people outside that it is not all doom and gloom. Torbay is in a magnificent, attractive environment and we have good schools and a skilled labour force. We even have a climate that is kinder than that in the rest of the country because we are on the gulf stream and surrounded by hills. In fact, we have all the factors necessary for those wishing to relocate or start a modern business everything is there for inward investors.

However two major factors are missing, which go back more than 100 years. Our strength was founded on tourism because of transport links using trains, and the investment in infrastructure. If I tell the Minister that no new hotels have been built in my constituency for more than 50 years, and contrast that with Mediterranean resorts, she will see the difference between the two areas. Most of our parks were constructed by the Victorians, as were our gardens and beach facilities. We have tried to develop a business park but, unfortunately and ironically, that was turned down because of poor transport links.

The previous Government de-trunked the A380, so responsibility for it now rests with the local authorities. Yet a bypass on that road has been talked about since 1957. One can travel from the north of Scotland all the way down to Newton Abbot on either a three-lane motorway or a two-lane dual carriageway, but then one has to crawl in and out of the Torbay conurbation, which is the second largest conurbation in Devon and Cornwall and the fourth largest conurbation in the south-west region, south of Bristol

Our rail links are vulnerable to coastal erosion at the seaside and flooding at the junction at Exeter. We have precious few through-train services from Torbay to other parts of the country Fifty years ago, there were several trains an hour to different locations around the country, which carried holiday visitors during the summer months, but today their journey has to be planned with almost military precision to meet connections from one end of the country to the other.

We also suffer from poor air links. There is no link between the south-west and Heathrow. The other week, I met a pharmaceutical company which is looking to site its European headquarters somewhere in the United Kingdom. It wants that site to be within an hour and a half of Heathrow because an executive flying long-haul from Japan does not want to travel far when he arrives. A Nortel Networks executive flying in from Canada wishing to fly to the south-west arrives at Heathrow, transfers to Gatwick, then has to get down to the south-west. The last part of the journey is often along the A380 crawler single-lane road.

May I thank the Minister, who has met me and given me some extremely helpful ideas? Indeed, she followed that up with a letter. However, we need to look at five factors. In an economy in a small constituency like Torbay, which is based on a small labour market, the effect of 1,400 redundancies is severe. We have a declining tourism industry, and also the worries caused by foot and mouth. That has a big impact on the amount of money that is circulating in the economy. We are, unfortunately, on the periphery of the United Kingdom, and that tends not to be recognised by government.

First, we need emergency assistance for all the businesses that are affected by foot and mouth. There is a fear that businesses that are deemed not to be rural might not qualify, but whatever is available to rural areas should be available to seaside resorts, given the way in which their businesses are being affected too.

Secondly, we need to consider council funding, which seems to lag behind that in other areas. There have been overspends on personal social services year after year, which is common among seaside resorts. They are magnets, and people move into them Perhaps the census will catch up, but it is the local authority's estimate that there are several thousand people resident within the council area who are not accounted for in terms of government grants. I emphasise the need for a revision of the standard spending assessment. If it were possible, I should also like a revision of our qualification for any form of assistance from government to ensure that we are not missing out on anything to which we may be entitled.

Thirdly, I would like a commitment to improve our transport links, and a recognition that we cannot do that ourselves. We are already suffering because insufficient money is made available to our local authority and other Government agencies. That limits our ability to do the big things that need to be done to improve transport links.

Fourthly, I would like to see the area become a priority for inward investment within the Government office of the south-west. The Minister helpfully suggested that she would pass on our plight to Invest. UK, and I hope that that has taken place. That should be backed up by our becoming a priority area within the Government office of the south-west for inward investment and regional development agency support.

Finally, I would like a sympathetic response from government agencies, and especially from the planning arm of the Government office of the south-west, when any proposals come from my area seeking to diversify our economy. A proposed business park was turned down three years ago by the planning office in Bristol because it said that we did not have the necessary transport links. If the project had gone ahead, it could have taken up some of the slack caused by the redundancies that have recently been announced. I know that the council is working on a revised and perhaps smaller business park, and there needs to be as much assistance as possible with that.

I am aware that Government cannot wave a magic wand in a global economy. I am well aware that decisions taken in other parts of the world can have an impact on our constituencies. However, we can surely have an expectation that when we have a problem, it will be recognised by Government, and that they will do all in their power to assist the area to get itself out of the problems in which it may find itself.

Even if the Government cannot wave a magic wand and say, "Yes, you can have a road here tomorrow," they could give a green light and say, for example, "We shall consider re-trunking the A380." It would help us to attract the inward investment that we desperately need if the inward investor knew that the infrastructure would be improved in future.

I look forward to the Minister's reply.

Photo of Patricia Hewitt Patricia Hewitt Minister of State, Department of Trade and Industry 10:24, 25 April 2001

I begin by congratulating the hon. Member for Torbay (Mr. Sanders) on his tenacity in securing the debate, on the vivid picture that he has painted of his constituency, and on the way in which it has moved from dependence on tourism to becoming one of the world's centres for high technology in manufacturing. The hon. Gentleman has set out the difficulties that he and his constituents are now facing, given the global downturn, including the temporary but painful downturn in telecommunications and other parts of high-technology sectors. As the hon. Gentleman mentioned, he and I have met and discussed and also corresponded on the situation caused by the job losses at Nortel and, as we learned today, at JDS Uniphase as well. As I told him previously, we are already in touch with Nortel and we will continue to do everything that we can to assist his constituents and the wider community who are affected by the closures.

As a member of the rural taskforce, I heard again at our meeting this morning of the impact of foot and mouth disease on a wide range of businesses right across Devon and Cornwall. The hon. Gentleman's comments about the impact, particularly on tourism businesses, confirms what we heard from the regional development agency and other colleagues at the rural taskforce meeting this morning.

Like all my colleagues, I very much regret the job losses that are taking place in Torbay and other parts of the country in the telecommunications sector in the UK. The problem is not unique to Nortel, nor is it unique to the United Kingdom. Almost every major company in the telecommunications sector is experiencing substantial restructuring and job losses. That has been a marked feature of the past couple of months and is a direct result of the sharp downturn in the global telecommunications market, which is particularly pronounced in the United States, with the fall in stock market valuations.

Today, as the hon. Gentleman said, there was a further announcement of site closures and job losses by JDS Uniphase in the UK, including the job losses at the company's Sifam operation in Torquay and the additional job losses at the two plants in Plymouth. Already, the Employment Service has been in touch with that company to offer advice and assistance, and the company is consulting with the work force on how the cuts will be achieved.

We have been closely in touch with Nortel Networks and the hon. Gentleman has met some of the company's representatives. They are clear that the job losses being suffered in Torbay and south Devon are due to the downturn in the American economy. However, even with those job losses, painful though they have been, Nortel remains a very important and successful employer in the wider Torbay area. Even after the earlier round of job losses, employment in the company as a whole stands at more than 4,000—twice the level in 1998. The reflects the strong growth that the company enjoyed in the intervening period.

I can confirm to the hon. Gentleman that all the local agencies—the Employment Service, the Benefits Agency, the RDA and the Government office of the south west—have been working closely with Nortel and the local authority to establish exactly what help is needed and to ensure that it is delivered. On 1 February we granted major redundancy status, which means that the employees affected by redundancy have immediate access to Government job search and training programmes. We have extended that help and that status to cover all subsequent redundancies at Nortel in Paignton.

Devon Training for Skills bid on behalf of local partners for rapid response funding, and that funding of almost £200,000 was approved by the Department for Education and Employment on 3 April. Former employees of Nortel are already benefiting. They are getting help in various forms, including further IT training to help them move into other parts of the labour market. That help will continue to be available to people for up to 12 months after they have been made redundant.

It is important to stress that the skills of the hon. Gentleman's constituents will be in high demand by other local employers. I understand that Nortel held a jobs fair on 5 March at which local employers, the Employment Service and the Benefits Agency offered help back into work, and that more such events will be held if there is demand for them.

When we met last month, the hon. Gentleman suggested that the skills of those employees, which is such a precious competitive asset, could provide an opportunity for potential inward investment into the UK. I assure him that the regional development agency has already been working closely with Nortel as part of what could be called its after-care programme for inward investors. Invest.UK is always in touch with inward investors wherever it can market existing facilities and skills within the United Kingdom. I have also specifically asked Invest.UK and the communication and information industries directorate within my Department to meet him to discuss Nortel and the wider aspects of marketing the attractions of Torbay, including both the climate to which he referred and the skills of the work force. I understand that a date is being fixed with some urgency for that meeting.

It is difficult at this stage to assess with any certainty the effect that the job losses will have on the wider economy in either the short or longer term. I understand that the Employment Service has received locally a total of 285 new claims for jobseeker's allowance from ex-Nortel employees, which compares with the loss of about 1,400 jobs. That may indicate that many other people have already found alternative employment locally or elsewhere.

Photo of Adrian Sanders Adrian Sanders Opposition Whip (Commons), Shadow Spokesperson (Communities and Local Government), Shadow Spokesperson (Environment, Food and Rural Affairs)

I think that the Minister will find that the reason for that figure is that a number of employees are now working shorter hours, so they are not going to the jobcentre to sign on. Although such people have not lost a whole job, the change means that less money is circulating in the local economy. If employees do not work full time, there is a longer-term impact, even if the number of employees remains fairly high on site.

Photo of Patricia Hewitt Patricia Hewitt Minister of State, Department of Trade and Industry

The hon. Gentleman makes an interesting point. I understand from the company that although it offered short-time working as a way of managing the reduction in head count that it needed without losing valued expertise completely, a number of staff opted for the voluntary severance package rather than for such work. I am not sure about the extent to which shorter-time working affected the total number of people who would be seeking other work.

I understand that employment at Nortel grew rapidly after 1998—I have referred to the figures—and that that accounted in part for strains in other sectors of the local labour market. The hon. Gentleman referred to unfilled vacancies in the tourism sector last Christmas, so it may be that people who have taken redundancy or who find themselves with no alternative but to do so will be fairly rapidly absorbed into high-tech manufacturing with other employers or into other sectors in the region.

Let me make a slightly more general point. The Torbay area has access to a range of programmes to help the local economy and, in particular, to improve skills and employability. They include the new European objective 2 programme in the south-west, which is worth some £108 million in European grant money over seven years. They also include objective 3, the new deal and our new DTI enterprise grant for businesses. As the hon. Gentleman will know, Torbay is one of the South West regional development agency's five priority areas for regeneration. The agency has already agreed to invest more than £500,000 towards the development by Midas Construction of more than 6,000 sq m of factory units at Long road, Paignton. It is also working with Torbay council on regeneration proposals for Torbay's waterfront.

The hon. Gentleman mentioned at the end of his speech a number of specific factors that needed attention as part of the wider regeneration of the local economy. In particular, he mentioned transport. In relation to the A380, my understanding is that a bypass was not proposed in Devon county council's local transport plan, so it was not possible to consider funding for the project, of which I know that he is long standing supporter. I believe that the joint study that was commissioned by Devon county council and Torbay council concluded that a bypass could be delivered only in the medium term of 2006 onwards. However, I believe that the hon. Gentleman has arranged to meet my right hon. Friend the Minister for Transport. I am sure that he will find him helpful in considering the way in which an effective transport structure strategy can be established with the help of the county council and, I hope, the regional development agency.

The first of the hon. Gentleman's five points dealt with support for businesses affected by foot and mouth disease. My right hon. Friend the Minister for the Environment, who chairs the rural taskforce, has already announced a substantial package of Government support for a range of businesses in different sectors that have been affected by foot and mouth disease The majority are not agricultural.

We have significantly extended the small firms loan guarantee scheme. Although it is too early to predict its impact, inquiries about it are running at six times the normal rate. It will not help every business, but I hope that it will be useful to some that have been disastrously hit by the disease.

We have introduced a package of more generous rate relief for rateable values of up to £12,000. My right hon. Friend the Chief Secretary to the Treasury told me this morning that the Inland Revenue and Customs and Excise have already deferred £28 million of due payments on income tax and VAT. That proves that the Treasury agencies are fulfilling my right hon. Friend's pledge that businesses that genuinely struggle with cash flow because of the disease will receive sympathetic support from Customs and Excise and the Inland Revenue.

The hon. Gentleman asked whether the current population of the area was genuinely reflected in the calculation for standard spending assessment. That is a matter for my right hon. and hon. Friends at the Department of the Environment, Transport and the Regions, and I am sure that he will take it up directly with them.

I have dealt with inward investment, which the hon. Gentleman mentioned. He also referred to the business park. That is exactly the sort of investment that the regional development agency, the county council and other local partners can make. He rightly stressed that it needs the benefit not only of potential skilled workers—the area has them—but good transport links.

I reassure the hon. Gentleman that we greatly value Nortel as a major inward investor in the United Kingdom. I have no doubt that it will remain committed to the area for many years and that its current activities do not reflect a weakened commitment to the United Kingdom or Paignton. They are simply the inevitable but painful result of a global downturn in the sector.

I also assure the hon. Gentleman that we will continue to do all that we can with the local agencies to ensure that the individuals who are affected by redundancy receive all possible help to get new jobs quickly. We shall continue to support the area to carry on creating the conditions for sustained economic and social success.

Photo of Michael Martin Michael Martin Speaker of the House of Commons

Order. Before I adjourn the House, it may be helpful if I tell the hon. Gentleman that I have enjoyed many holidays in Torbay, which is a very friendly place.

Question put and agreed to.

Adjourned accordingly at twenty-one minutes to Eleven o'clock.