The Economy

Part of Council Tax Rebate – in the House of Commons at 6:11 pm on 31st March 2009.

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Photo of Richard Burden Richard Burden Chair, West Midlands Regional Select Committee 6:11 pm, 31st March 2009

Time is short and I hope that the House will forgive me if I am a little parochial. I want to say a few words about the impact of the economic downturn on my region, the west midlands. The newly formed West Midlands Regional Committee is currently conducting an inquiry on that, and we hope to present a report before long. However, with the Budget approaching and given the severity of the economic downturn in our region, some key issues will not wait, and practical action can and needs to be taken. I want to illustrate that with examples from the region as a whole and, in some cases, my part of Birmingham.

The West Midlands Regional Observatory noted that the fall in output in the west midlands is worse than the UK average and the worst of any UK region. It has experienced the sharpest job losses of any region in the past quarter and has the second highest unemployment rate of any UK region. The decline has been especially sharp in manufacturing—20 per cent. of manufacturing firms expect to reduce their work force this quarter. That is not to say that the service sector has not also been hit—the equivalent figure is 11 per cent.

However, manufacturing has long been the bedrock of the west midlands economy and its centre is the automotive industry, with approximately 1,800 companies, 115,000 employees and gross value added of about £5 billion in 2006. Yet the manufacturing redundancy rate stands at 22.8 employees per thousand in the last quarter of last year, and there were more than 5,500 redundancies in the last quarter in 2008 in the automotive industry. In the region, redundancies between November 2008 and January 2009 were up 265 per cent. on the previous year.

I make those comments not to spread gloom or depression—some parts of the regional economy are holding up well. However, I want to emphasise that the west midlands is not only suffering from a severe economic downturn, but that damage is in danger of being done to the foundations of the regional economy. If we lose those foundations now, we will not be in a position to respond when the upturn comes. We could lose not only strategically significant companies, but the skill base that they maintain, and that will not easily return.

Action is important to ensure that the west midlands gets a fair deal. I welcome the automotive package that Lord Mandelson announced on 27 January and I am pleased that my hon. Friend the Economic Secretary and Under-Secretary of State for Business, Enterprise and Regulatory Reform is here. He has done some great work in ensuring that applications under the scheme will be processed as quickly as possible. I cannot emphasise enough that we must ensure that help gets to where it is needed quickly.

We need to move quickly on matters that the Government are considering—I welcome the consideration, but decisions and action are required. We need to introduce a scrappage scheme in the automotive industry. There are different views on that, but the evidence from Germany shows that it has a positive effect on stimulating demand, and I hope that there is good news about that in the Budget.

I want to take up a point that Dr. Cable made and emphasise that a key part of ensuring that firms in the automotive industry and other parts of manufacturing can trade effectively is getting the trade credit insurance industry working again. It is not working, and that does tremendous damage.

We need to ensure that the strategic firms on which so many other firms depend get loans and loan guarantees quickly, not because they need bail-outs but because they need support to realise their potential. Other local Members of Parliament and I are therefore joining local papers, such as the Birmingham Mail, the Birmingham Post, the Coventry Evening Telegraph and others, to say that we must stand by Jaguar Land Rover.

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