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UK Manufacturing

Prevention and Suppression of Terrorism – in the House of Commons at 3:11 pm on 9th July 2009.

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Photo of Pat McFadden Pat McFadden Minister of State (Department for Business, Innovation and Skills), Member, Labour Party National Executive Committee 3:30 pm, 9th July 2009

I beg to move,

That this House
has considered the matter of UK manufacturing.

The business of making things—manufacturing—matters to every Member of this House: it has been a defining part of our economy for hundreds of years; it has contributed to our reputation across the world; and it is a significant part of our economic strength.

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Photo of Pat McFadden Pat McFadden Minister of State (Department for Business, Innovation and Skills), Member, Labour Party National Executive Committee

Not for the moment, as I am only one sentence into my speech.

Since the time of the industrial revolution when we were dubbed "the workshop of the world", manufacturing has helped the UK to punch above its weight, and one of my principal points today is to counter the impression that we are not still a country that excels at making things; we most certainly are, but where once we led the way as producers of iron, coal and cotton, we are now blazing a trail in new areas such as robotics, software, new technology and advanced manufacturing.

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Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

I thank my right hon. Friend for giving way. I want to be as supportive as possible, but I have to quibble with his suggestion that we are still a manufacturing nation. We have a gigantic trade deficit in manufactures, contributing to a very substantial balance of trade deficit which is ongoing, in contrast to Germany, for instance, which has a massive surplus as it has looked after its manufacturing better than us. I hope my right hon. Friend will accept that.

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Photo of Pat McFadden Pat McFadden Minister of State (Department for Business, Innovation and Skills), Member, Labour Party National Executive Committee

I do not accept the assertion that we are not a manufacturing nation. We are the sixth largest manufacturer in the world, and I believe that manufacturing is a critically important part of our economy. I see the pride, passion and commitment of UK manufacturing in my own constituency week in, week out. When the Prime Minister visited Wolverhampton last Friday, my hon. Friends the Members for Wolverhampton, South-West (Rob Marris), for Wolverhampton, North-East (Mr. Purchase) and I were able to introduce him to many local manufacturers such as Goodrich in aerospace and Nuclear Engineering Services Ltd in my constituency, where people have built up excellent manufacturing industries employing hundreds of other people and making excellent products.

Manufacturing is still a critical part of our economy, employing 3 million people directly, with more in supplies and associated services, and contributing £150 billion to the UK economy.

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Photo of Michael Weir Michael Weir Shadow Spokesperson (Trade and Industry), Shadow Spokesperson (Environment, Food and Rural Affairs)

The Minister is talking about the new industries in manufacturing, which is very good, but he seemed to dismiss the older ones. However, there is an opportunity for many such industries—shipbuilding and metal beating, for example—in that their products can be used for the new green industries, particularly for offshore wind, for instance. So will the Minister not dismiss them so lightly?

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Photo of Pat McFadden Pat McFadden Minister of State (Department for Business, Innovation and Skills), Member, Labour Party National Executive Committee

I did not dismiss the old industries; I reject that assertion. I believe that traditional manufacturing and the newer industries can combine to contribute to our manufacturing strengths, so I am certainly not dismissing any manufacturing industries.

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Photo of Nigel Evans Nigel Evans Conservative, Ribble Valley

We are now going to have more nuclear power stations, which I greatly welcome. Does the Minister agree, however, that we have waited too long to make that decision, and that a lot of the skills we need to manufacture our own nuclear plants— [Interruption.] No, I will accept part of the responsibility, but this Government have been in power for a long time—since 1997. Does the Minister agree that if we had been more diligent and made the decision earlier, we would not have to import as much as we will have to simply to be able to construct our new nuclear build?

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Photo of Pat McFadden Pat McFadden Minister of State (Department for Business, Innovation and Skills), Member, Labour Party National Executive Committee

I am prepared to be open-minded and to accept criticism of Government policy from many quarters, but I will not accept criticism from the Conservative party about being late to the game on the new generation of nuclear power stations. The hon. Gentleman's party has changed its position on that issue more times than a Highland dancer in the middle of the most active reel. I hope that the Conservatives now accept the need to move forward in that regard.

I was explaining the importance of manufacturing to the UK economy; as I said, it contributes some £150 billion to the economy, accounts for half of Britain's exports and is responsible for 75 per cent. of our business research and development.

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Photo of Fraser Kemp Fraser Kemp Labour, Houghton and Washington East

Does the Minister think that an excellent example of how traditional industries can modernise for the future can be found in the motor industry and the investment in low-carbon cars that has been considered. Nissan, in my constituency, is one organisation that is looking closely at producing the next generation of low-carbon cars, and a decision is expected on that shortly. Does he think that that is another way of developing our manufacturing base? May I also quickly correct something he said? He said that 3 million people are employed in manufacturing, but I suspect that the real figure is 200 more than that, because 200 extra staff have been taken on by Nissan as a result of the success of this Government's scrappage scheme.

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Photo of Pat McFadden Pat McFadden Minister of State (Department for Business, Innovation and Skills), Member, Labour Party National Executive Committee

I am happy to be corrected by my hon. Friend, who anticipates what I am coming on to say about the importance of the low-carbon economy in our manufacturing future. He rightly stresses that, and the Government are actively working with Nissan and other manufacturers on that agenda.

This country has excellence and world leadership in some manufacturing sectors—for example, aerospace. We have the second biggest aerospace industry in the world, with more than 100,000 people directly employed in the manufacture of aircraft systems, engines and equipment. We are fortunate to have world-class companies, such as Rolls-Royce, based here in the UK. It is a world leader in the production of aero engines and provides a prime example of the kind of innovative and forward-looking manufacturing that is certainly part of our economic future.

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Several hon. Members:

rose —

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Photo of Pat McFadden Pat McFadden Minister of State (Department for Business, Innovation and Skills), Member, Labour Party National Executive Committee

Many colleagues wish to intervene today. I will try to be generous, but I am keen to make progress.

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Photo of Robert Smith Robert Smith Shadow Deputy Leader of the House of Commons, Opposition Whip (Commons)

While praising excellent industries, I hope that the Minister also recognises just what a world leader this country is in subsea engineering—that has come on the back of the oil and gas industry in the North sea. To that end, now that energy is the responsibility of a separate Department, does his Department still have an interest in promoting the business side of the oil and gas industry and all the service industries that go with it?

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Photo of Pat McFadden Pat McFadden Minister of State (Department for Business, Innovation and Skills), Member, Labour Party National Executive Committee

My Department works very closely with the Department of Energy and Climate Change on these issues, and we will jointly be publishing a low-carbon manufacturing strategy in the not-too-distant future. We have worked on that co-operatively.

It is important to remember that our manufacturing base also helps us to attract significant inward investment. The UK is the world's second most popular destination for foreign inward investment. Investment projects in advanced manufacturing have increased this year by 18 per cent, so even in the midst of a downturn inward investment in manufacturing is a UK success story, and we must not forget it.

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Photo of Rob Marris Rob Marris Labour, Wolverhampton South West

A golden thread running through manufacturing is the importance of investment in capital equipment, and capital allowances are one of the tax regimes to encourage that. Is my right hon. Friend as astounded as I am that the policy of those on the Conservative Front Bench, as announced by Mr. Hoban on 12 May, is to cut capital allowances by £3.7 billion a year?

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Photo of Pat McFadden Pat McFadden Minister of State (Department for Business, Innovation and Skills), Member, Labour Party National Executive Committee

That kind of policy is the last thing that our manufacturing industries need, particularly in the midst of a downturn when we hope that hard-pressed industries are able to take investment decisions in order to prepare for the upturn when it comes. The Conservative party has come up with a policy that would strike at the heart of those investment decisions, and that is the very opposite of the support that manufacturing industry needs.

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Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

I agree entirely with my right hon. Friend about the importance of manufacturing and preparing for the upturn when it comes. Will he and the Secretary of State do everything possible to sustain the General Motors van plant in Luton—the best van plant in Europe, which produces the best vans in Europe and, I would argue, has the best work force in Europe? It is vital for our future.

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Photo of Pat McFadden Pat McFadden Minister of State (Department for Business, Innovation and Skills), Member, Labour Party National Executive Committee

The importance that we attach to that plant was evidenced recently by the visit of my right hon. Friend the Secretary of State. We are doing everything we can to ensure that General Motors continues with its manufacturing base here.

We have manufacturing excellence in this country. I have mentioned one or two sectors, and there are others, such as plastic electronics and bluetooth technology—things that we use every day that are made here in the UK and are an important part of our manufacturing future. Of course, we must also acknowledge that, amid those strengths and our strong position overall, manufacturing has had a tough time during the recession. Some companies have gone, including some well known names, and people have lost their jobs. We understand the pain that that causes for individual families and communities. We are determined to ensure that those affected get a second chance to retrain and reskill, and to start again. That stands in stark contrast to what happened in previous recessions, when people in manufacturing sectors and others lost their jobs and were left with little more than a giro cheque to keep body and soul together. They certainly did not get the active help that they needed to have a second chance.

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Photo of David Drew David Drew Labour, Stroud

We still have the ongoing debate about whether wage compensation is a realistic approach. It was depressing to hear that even the Proact proposal in Wales has yet to take off. In other parts of Europe, many of our competitor companies have employees on short-time working paid for by the state to keep them in employment. Are the Government still actively considering that as a way to keep our people in employment?

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Photo of Pat McFadden Pat McFadden Minister of State (Department for Business, Innovation and Skills), Member, Labour Party National Executive Committee

Let us consider the European comparisons. We are not alone in our manufacturing industries being affected by the recession. There has been a decline in trade in goods across the world. In the year to April, manufacturing output declined in this country by 13 per cent. In the US, the figure was 14.6 per cent., in France it was almost 20 per cent., in Germany it was 24 per cent. and in Japan it was more than 30 per cent. The effect has been felt around the world, and it has often been greater in other countries than here in the UK.

No Government can say that they can stop an economic recession having an impact, but we will do everything we can to ensure that the recession is as short and as shallow as possible. I shall tell the House about some of the measures that we are taking to support manufacturing through the recession.

During the past year, the Manufacturing Advisory Service, which does an excellent job, has helped nearly 8,000 manufacturing companies to improve their efficiency and effectiveness, improving gross value added by some £120 million and, in many cases, helping to generate new sales. The vehicle scrappage scheme, which my hon. Friend Mr. Kemp mentioned, has had a serious impact, with 94,000 orders for new vehicles.

As my hon. Friend the Member for Wolverhampton, South-West mentioned, we also have a £50,000 investment allowance, meaning that the 95 per cent. of businesses that invest less than that sum a year are able to write those investments off, giving them the confidence to make the investment that our manufacturing industry needs.

We must do more to prepare for the upturn, and that is why we have brought together the former Department for Business, Enterprise and Regulatory Reform and the Department for Innovation, University and Skills in the Department for Business, Innovation and Skills. That will help to prepare the country for the economic upturn and ensure that we put the support in place where it will have most value. We will certainly not stand by and watch the recession take its course, as we were advised to a few months ago by the Opposition. We believe that we have an active part to play and that that philosophy of industrial activism that was once the vogue on the Opposition Benches, before being abandoned, is still important.

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Photo of David Anderson David Anderson Labour, Blaydon

Is not our record in direct contrast to that of the Opposition, who actively closed coal mines, actively closed shipyards and actively destroyed the steel industry in this country?

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Photo of Pat McFadden Pat McFadden Minister of State (Department for Business, Innovation and Skills), Member, Labour Party National Executive Committee

My hon. Friend makes a good point. We cannot insulate the country from closures—I do not pretend that we can—but we do what we can to avoid them and to give help where they take place.

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Photo of Ian Cawsey Ian Cawsey Labour, Brigg and Goole

Although I welcome the measures that the Government have put in place to keep the manufacturing sector together, it is also important that we retain certain core manufacturing industries, such as the steel industry in north Lincolnshire and my constituency. A fortnight ago, Corus said that 500 jobs were to go there and this morning it announced that another 366 will go. Active intervention—the report from the Federation of Small Businesses and the TUC talks about wage subsidy, which was mentioned by my hon. Friend Mr. Drew—is needed to keep such businesses at the capacity that they are at now so that when the upturn comes we still have steel in Britain.

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Photo of Pat McFadden Pat McFadden Minister of State (Department for Business, Innovation and Skills), Member, Labour Party National Executive Committee

I have been in active contact with Corus in recent weeks. My sympathies go out to my hon. Friend's constituents who are affected by job losses, and those of other hon. Members. Corus has told me that the critical issue it faces is demand for the product that it makes. Half that product goes into construction, so the best thing that we can do is to try to ensure that there is demand for the product that is made. We have brought forward spending for social housing, for additional investment in schools and hospitals and for initiatives such as the car scrappage scheme so that there is demand for the steel that is made. In the long term, that will be more effective in supporting the steel industry than any short-term wage scheme. I must stress that.

Let me talk about our industrial policy, as published in "New Industry, New Jobs", and some of the support and initiatives available from the Government. We have set aside £750 million for a strategic investment fund. About a third of that will go to low-carbon initiatives, because we understand that how we build and heat our homes, produce our energy and transport ourselves will all change profoundly in the years to come.

As a Government, we take the view that we want British industry to be in the best possible place to take advantage of those opportunities. We are working with colleagues from the Department of Energy and Climate Change on a low-carbon industrial strategy to ensure that as we come out of the downturn we back the best of British industry in initiatives such as wind and wave power and low-carbon vehicles, as well as others, and that we take advantage of the opportunities represented by the low-carbon economy. As the G8 meets and discusses these things, it is of course a challenge to respond to climate change, but it is also an industrial opportunity. This Government are determined to ensure that British industry has the help and support it needs to take advantage of that.

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Photo of Adam Afriyie Adam Afriyie Shadow Minister (Science and Innovation)

The Minister is talking about industrial activism and support as regards climate change. That is all to be welcomed, of course, but how much of that £750 million has seen the light of day? How much has been spent or invested so far, when it was announced months ago?

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Photo of Pat McFadden Pat McFadden Minister of State (Department for Business, Innovation and Skills), Member, Labour Party National Executive Committee

It was announced in the Budget and plans will be brought forward over the coming months. The hon. Gentleman is critical of spending; I point out to him that his party is determined to cut spending by an extra £5 billion this year. I do not see what hope that would give to manufacturing industry, which needs support to invest in some of the opportunities that I have mentioned. I could say the same about training. We believe it is important that our workers have the skills to take part in modern manufacturing, which is why we will put £1 billion into Train to Gain next year. That is money that the hon. Gentleman's party, as recently as Monday, pledged in this House to abolish. The Opposition have pledged to cut spending on training, and they are committed to cutting support for spending overall. That is not what our manufacturing industries need.

What those industries need is co-ordinated support and help from the Government, directly where it makes a difference. They also need the Government to be a smart customer, because we are a major purchaser of many goods and services right across the economy. In the past, Governments may not have looked so actively at their role as a customer, but we are determined to do that in the future.

A critical part of our manufacturing strategy is that we take advantage of the opportunities presented by the change to a low-carbon economy, whether that involves new nuclear capacity, low-carbon vehicles, or wind and wave power. That is what we intend to do, through the strategic investment fund and other initiatives.

This debate is critical to our economy. Manufacturing is a hugely important sector, and we are a country that makes things. We are the sixth biggest manufacturing economy in the world, and we will continue to be a major manufacturing economy in the future.

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Several hon. Members:

rose —

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Photo of Sylvia Heal Sylvia Heal Deputy Speaker

Order. I inform the House that Mr. Speaker had imposed a time limit of eight minutes on Back-Bench contributions, but that additional Members have since expressed a desire to contribute to the debate. I am therefore reducing the time limit on Back-Bench contributions to six minutes.

I call Mr. John Penrose.

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Photo of John Penrose John Penrose Shadow Minister (Business, Innovation and Skills) 3:51 pm, 9th July 2009

Thank you, Madam Deputy Speaker, and I shall try to keep my comments as brief as possible to allow plenty of time for other colleagues to make a contribution.

I shall start on a momentary happy note by saying that the Opposition have one fundamental point of agreement with the Minister. We agree that manufacturing is clearly vital for this country's long-term economic future. It has been for many years, and must be in future, a core part of this country's economy and employment. My party would like to see it grow and prosper at a far higher rate than it has in the past.

The Minister was right to point out that manufacturing still accounts for 13 per cent. of our GDP—a substantially smaller proportion than it used to be, but still very material. He was also right to point out that we are sixth in the world rankings on manufacturing. There are plenty of industries in which we can be proud of our standing: he mentioned aerospace, and I completely agree with him.

I am afraid, however, that the situation is not quite as rosy as the Minister tried to paint it. The sad fact is that for many decades the experience here has been of long-term decline in manufacturing, relative to other countries. That has been going on under Governments of all stripes, not just this one, for many decades.

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Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

Does the hon. Gentleman accept that one factor that has had a crucial effect on our manufacturing sector for a long time has been the overvaluation of sterling, relative to the currencies of other significant developed nations? The countries that have attended to their exchange rate and made sure that it is kept in line—such as Germany, for example—have prospered rather better than we have.

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Photo of John Penrose John Penrose Shadow Minister (Business, Innovation and Skills)

I should love to agree, but I am afraid that I cannot. I am a free marketeer, and so believe that the market is rather better at choosing appropriate exchange rates for most countries than politicians are—certainly, it is better than politicians in this place. In addition, Germany's experience with the level of the deutschmark and now the euro has not been altogether happy in many periods of its history. I am not sure that it is a good example, although I accept the underlying point that I think the hon. Gentleman is making, which is that many countries' currencies have been overvalued or undervalued for periods. That clearly creates stresses and strains in the world economy.

To illustrate how long our relative decline has been going on, it is instructive to look at the rate of job losses in our manufacturing sector. Because of various comments from the other side of the House, I shall make one comparison—and I shall limit myself to this—between the Labour and Conservative records. Under the previous Conservative Administration, 137,000 manufacturing jobs were lost each year. However, I am afraid that the rate has accelerated under the current Labour Government, and that the number of manufacturing jobs lost each year is now 152,000. Clearly, we are still making mistakes and we still face a fundamental underlying problem.

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Photo of Nia Griffith Nia Griffith Labour, Llanelli

Can the hon. Gentleman tell us how many manufacturing jobs have been created under the Government?

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Photo of John Penrose John Penrose Shadow Minister (Business, Innovation and Skills)

I do not have a clue, but I am sure that either the hon. Lady or somebody with the appropriate note from the Labour Whips is itching to tell us and will doubtless leap to their feet at some point during the debate.

It is instructive to consider why there has been a long-term decline. Some factors are the fault of Governments and politicians, but others are part of the global economy. It is instructive to realise that, because in the face of the economic winds of change other countries may have dealt with the pressures better than us. We have already heard about Germany, although I did not agree with the precise example.

The most important factor is globalisation. Many countries have become part of the global economy and, because they have a particular advantage in low wage rates, have made huge strides in trading their way upwards and out of poverty. I am sure everybody in the Chamber agrees with that and welcomes it, but the unfortunate and painful downside for the UK has been long-term pressure on internationally traded goods, particularly those that are manufactured in this country. That has been a major factor in the erosion of Britain's relative competitive position in manufacturing.

That has not been happening only over the past 10 years, although there has been a strong impact on the Government's performance. In the 1980s and '90s, before the so-called BRIC countries—Brazil, Russia, India and China—emerged and became part of the world economy, we were all talking about the Asian tigers, who were doing exactly the same thing. It has been going on for many years, and it is up to us to address the issue rather more effectively than we have been.

Some of the problems are self-inflicted, however. In the old days, there was appalling labour market rigidity and industrial strife. Thankfully, that problem has been substantially reduced; it has not gone completely, but it is more a problem of history than of today. The UK has a good record in research-led innovation—scientific innovation from our universities—but unfortunately we are not as good as many other countries, particularly America, in converting theoretical science into practical manufactured products that can be sold abroad. In many cases, other countries are better at taking on such ideas and investing in them. I do not say that we are awful at it, but we could do better.

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Photo of Pat McFadden Pat McFadden Minister of State (Department for Business, Innovation and Skills), Member, Labour Party National Executive Committee

I agree that there has traditionally been difficulty in bringing great ideas from the laboratory to the market. That is why, as part of "Building Britain's Future" we have announced an innovation fund, to be shared between Government and levered-in private sector funding, to do precisely what the hon. Gentleman is talking about. I hope he welcomes that initiative.

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Photo of John Penrose John Penrose Shadow Minister (Business, Innovation and Skills)

I am delighted to have been able to give the Minister the opportunity to make that explanation. I am sure we all wish the initiative well, although we obviously need to make sure that it delivers what it promises. I am sure that all hon. Members would agree about the principle that it is trying to achieve.

We must deal with some other external problems, one of which, particularly at a time of recession, is the threat of a resurgent force of protectionism. As the Minister rightly said, we are facing one of the worst recessions in living memory, and it has hit manufacturing and construction particularly badly. There is danger at this point in the economic cycle, because there are always temptations for the voices of protectionism in countries all round the world to try to re-raise barriers, either tariff or non-tariff. Clearly, that would affect the UK's ability to export. These days, manufacturing is overwhelmingly a global industry and a global business in many sectors. Protectionism is an arrow aimed at the heart of our manufacturing sector if we cannot fend off those siren voices and ensure that the forces of protectionism are held at bay.

Given that scenario, why are other countries doing better than us in maintaining their manufacturing sectors and making them prosperous? What should we be doing? My party has come up with a series of ideas, and I propose to summarise them, but I shall not go on for too long because I am conscious that other Members want to contribute.

First and most importantly, we need a simpler tax regime, and lower taxes wherever possible. Half of one of our tax ideas was mentioned by Rob Marris, who spoke about our plans for capital allowances. He neglected to mention what we would do with the money; I am sure that that was merely an unintentional oversight, and I am happy to help him out. The aim, of course, is to reduce corporation tax and the cost of employing staff, particularly for smaller companies. Our ideas on that, which are already a matter of public record, are to cut corporation tax and payroll taxes for small firms, to defer small firms' VAT bills, to introduce measures such as small business rate relief, and to make the latter mandatory.

Those ideas are all simple and straightforward, and will help small firms in many sectors, particularly manufacturing, to prosper. They make life simpler, and they mean that firms do not have to check with their accountants before making an investment decision. The measures allow firms to focus on customers, rather than on tax implications, and firms will therefore be much more likely to remain competitive.

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Photo of Rob Marris Rob Marris Labour, Wolverhampton South West

I quite agree with the hon. Gentleman: we cannot compete with India and China. We need capital investment. He is right that Conservative party policy is to cut corporation tax from 28 per cent. to 25 per cent. for larger companies; that is where the £3.7 billion comes from. The countervailing measure to make the policy cost-neutral is to take £3.7 billion away from capital allowances. I just put it to him that manufacturing industry disproportionately relies on capital allowances. We want capital investment, and we have to have it, because we cannot compete on wages with India and China.

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Photo of John Penrose John Penrose Shadow Minister (Business, Innovation and Skills)

I take the hon. Gentleman's point, but it is also true to say that in the past 10 years, this country's tax code has become incredibly baroque, long and involved. I think that it is one of the longest in the developed world. It is now incredibly difficult to enact any measures, other than simplification measures, that will have a practical effect on investment decisions, because people cannot understand the tax code, which is supposed to encourage them to do one thing or the other. Simplicity is far more important, as a way of getting people to focus on customers.

I am conscious of the time, so I shall move on and talk about skills improvements. I think that there is a degree of agreement across the parties on the aim and importance of improving skills throughout the economy, although I suspect that we would disagree on how the Government are going about that. I should like to correct one point made, doubtless unintentionally, about the Conservative party's policies on Train to Gain. The Minister for Business, Innovation and Skills said that we plan to reform Train to Gain, but he did not say how we planned to spend the money thus freed up. Just to make sure that he understands, I point out that our policy is not a cut, but a redistribution of the money so that it is used in a way that we hope is rather more productive. Some £775 million will go to reform Train to Gain. That will create 100,000 extra apprenticeship places, fully fund 77,000 existing places that are currently only partly funded, create a £2,000-per-job bonus for new apprentices in small and medium-sized enterprises and boost group training associations. That is not a cut; it is, we believe, a better way of spending the existing money.

Other factors that are vital for manufacturing are simplifying and speeding up the planning process. It is extremely difficult for anybody who wants to build a new factory in this country to find a site and battle their way through the thickets of our planning law, and in that regard it is difficult for us to compete with many other countries. That puts off many potential investors. The system needs to be simplified and made quicker.

Equally, we have a problem in our energy sector. Many manufacturers—particularly those at the heavier end of manufacturing, who inevitably use a great deal of energy—have come to me and, I am sure, many other Members present in the Chamber, and said, "Look, the problem with Britain's energy prices is not only that they can be high, but that they are particularly volatile." Volatility makes planning extremely difficult, and is particularly difficult to cope with for those in heavy industries; it therefore needs to be dealt with.

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Photo of Michael Weir Michael Weir Shadow Spokesperson (Trade and Industry), Shadow Spokesperson (Environment, Food and Rural Affairs)

I agree with the hon. Gentleman about energy prices. Is there not also a problem with the type of contracts that some energy companies impose on high-end users? They demand large sums up front because of the effects of the recession, in which so many companies have gone to the wall.

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Photo of John Penrose John Penrose Shadow Minister (Business, Innovation and Skills)

The effects are many. The hon. Gentleman has picked up one, and it is a major factor. It is extremely difficult in some cases to take out forward contracts that might allow a firm to hedge its exposure. There are a number of things that can be done, but the problem with them is that none works as well as in other countries.

Finally—here we are in agreement with the Minister—there are great opportunities for this country in green manufacturing and creating a low-carbon economy. There is a degree of overlap between the two parties, largely because we would argue that our party introduced a series of ideas, which the Government swiped and are claiming as their own. Whatever the provenance of the ideas, measures such as smart meters, feed-in tariffs, encouraging renewable energy sources such as biogas and marine energy and, as the Minister mentioned, encouraging low-carbon buildings, transport and commerce by retrofitting energy efficiency measures to existing stock, and in our case proposing a high-speed rail route throughout the country, will stimulate locally produced and locally manufactured products that stand a chance of putting Britain in the forefront of some of the most important and exciting new industry areas in future.

There is much that can be done. Other countries are doing these things better than we are. I have set out the Conservative party's recipe for coming back up the order of merit internationally, and I commend it to the House.

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Photo of Richard Burden Richard Burden Chair, West Midlands Regional Select Committee 4:06 pm, 9th July 2009

I welcome a great deal of what my right hon. Friend the Minister for Business, Innovation and Skills said in introducing the debate. If John Penrose will forgive me, I do not think I will be using his recipes in relation to manufacturing.

Those of us who come from the west midlands know how badly the manufacturing sector is being hit by the current economic downturn. The West Midlands Committee is conducting an inquiry and will report in the near future, so I shall not prefigure that. In the short time available, I shall make a few comments about the automotive sector, both because my constituency includes Longbridge and as Chair of the all-party motor group.

I shall not go over the issues about MG Rover that were discussed this week and will be spoken about again in great detail, save to say that, with all the accusations and counter-accusations that have been flying around over the past few days, I hope nobody loses sight of the fact that the important people in the debate are the 6,000 workers who lost their jobs, and their families, the communities that rely on them, and the suppliers to that plant. I hope that when he winds up the debate, my right hon. Friend will confirm that it is the Government's intention to publish the inquiry report into MG Rover as soon as possible, and that after four years of waiting those employees will be able to get the money that is their due from the trust fund that has been set up.

On broader automotive issues, I welcome the fact that the signs coming out of the introduction of the scrappage scheme are positive. Perhaps there are lessons that we can learn from that for the future. Will my right hon. Friend bear in mind what my hon. Friend Mr. Drew said about short-time working subsidies, which still have a role to play? We need to look at those more seriously. I welcome the automotive assistance programme that was published in February, but like others I want to underline the fact that that programme is not yet working quickly enough. That must be addressed.

For companies of strategic significance in the west midlands economy, it is particularly important that things move more speedily in order to attract the necessary investment. One example is Jaguar Land Rover, where the issue is loan guarantees on commercial rates. That must be brought to a conclusion as soon as possible so that that company can realise its undoubted potential.

That brings me to the main issue that I want to cover today—risk. Assessing, managing and taking risk is at the heart of any business. Businesses cannot operate without risk. That is clear from the example of the automotive industry, where there is a risk every time millions of pounds are invested in developing a new product, research and development and so on. It was even clearer this week when motor sport industry representatives came to Parliament to talk about its potential—some hon. Members might have seen the industry's exhibitions. It is involved in a range of areas—from green technologies to defence equipment—that go well beyond motorsport, and at the root of that involvement is the industry's ability and willingness to take risk.

At a time of economic downturn, there is a greater consensus about the need for the Government to intervene to nurture manufacturing. That is what the automotive assistance programme is all about, but, if we are to do so when bank credit is difficult to obtain, we must start taking responsible risks. The problem is that the machinery of government—for all the right reasons of looking after taxpayers' money and so on—can end up being too risk-averse, and the resultant delays can get in the way of what we want to do.

When bank credit dries up, the Government rightly say, "We need to ensure that the European Investment Bank can put money in," but the European Investment Bank then looks for guarantees. It looks to the Government to back up those guarantees with their own loan guarantees, so the Government go back to the company to try to secure the guarantees that the firm could not provide in the first place. The danger is that we get into that big circle and we do not get very far.

We, as politicians, must learn some lessons from that, because we often create that state of mind. When someone takes a risk, sometimes things will be successful and sometimes things will be unsuccessful, but when something is unsuccessful we politicians have a habit of immediately looking for heads to roll and for somebody to blame and of saying, "You should never have taken that risk in the first place." We had an example of that earlier this week, when Mr. Clarke went back to the MG Rover story and said that, in 2005, at that crucial time, it was absolutely wrong for the Government to invest—to risk—£6 million to try to save 6,000 jobs. Interestingly, the Tories supported the measure at the time, but they attack it now. Political amnesia is an interesting thing. The point is that it was justifiable to risk that money to save those jobs. It was the right thing to do, but it did not achieve the right result. We need to learn some lessons from that, but I certainly hope that they do not lead us to say, "Never take the risk", or to just play the blame game.

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Photo of John Thurso John Thurso Shadow Secretary of State for Business, Innovation and Skills, Liberal Democrat Spokesperson (Business, Innovation and Skills) 4:12 pm, 9th July 2009

May I begin by reiterating the written apology that I have made to you, Mr. Speaker, and through you, to the House? I may have to leave a few minutes before the end of the debate, although our timing is such that I hope to be able to stay for the full debate.

There is no doubt that UK manufacturing has been going through a particularly difficult time and has been deeply affected by the current crisis. We should not underestimate that. Indeed, we have heard about examples of those difficulties from Richard Burden and Mr. Cawsey, who mentioned Corus. Office for National Statistics figures show that the drop in output has been worse than anticipated. Many companies are struggling, and that struggle flows through to lay-offs and redundancies. I do not for one moment underestimate those difficulties, but in the short time available to me I should like to turn to the future and to the opportunities that it presents.

It would be wrong to fall into the trap that many people fall into of regarding British manufacturing as somehow old-fashioned, outdated, ineffective, rooted in the past and of no consequence to the future. Far from it; in manufacturing, the high-tech and advanced engineering sectors, in particular, and many others are world-leading and world-beating. We should not only support them now, but nurture them into the future. As the Minister said when he gave his figures, we still have the sixth-largest manufacturing industry in the world, comprising 12.6 per cent. of the economy, by the gross value added—GVA—measure, and 3 million employees. That is important by anybody's reckoning.

Certain sectors, including the steel and automotive industries, have suffered grievously, but the quality and strength of many others, such as the high-tech and advanced engineering sectors, remain a success story that we must support. I should like to touch on two examples of such opportunities. First, the Pentland firth, which is close to my home in the north, has a tidal resource that it is estimated could deliver up to 31 GW of energy. Given current technology, that is probably a tad optimistic, but a yield of 10 to 15 GW is highly realistic.

The technology is developing rapidly. Three years ago, I was told that in aviation terms it was at the Wright brothers stage, and a couple of weeks ago I was told that it had advanced to the Spitfire stage; in a few years' time, we hope to be in the jet age. The Crown Estate has a licensing process and British-designed, British-made turbines, leading the world, will be the first in productive service. Companies such as Rolls- Royce, Atlantis and International Power are all involved. We have the opportunity to be the first in the world and to centre the industry in this country, with jobs in the UK—including a few, I hope, in Caithness.

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Photo of Alan Reid Alan Reid Shadow Minister (Northern Ireland), Shadow Minister (Scotland)

My hon. Friend is right that the renewable energy industry gives a great opportunity for British manufacturing, particularly in remote locations. Will he join me in welcoming the investment made in Campbeltown by Welcon? It has the potential to create a few hundred jobs in the manufacture of wind turbine towers for the offshore wind generation industry.

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Photo of John Thurso John Thurso Shadow Secretary of State for Business, Innovation and Skills, Liberal Democrat Spokesperson (Business, Innovation and Skills)

I am happy to welcome that development in Campbeltown.

The danger is that other countries will see what we are doing and latch on to the technology. How often in the past has British innovation become somebody else's production? We must not lose the opportunity; the threat is that things will go elsewhere. I make a plea to the Government, and I am meeting Ministers at the Department of Energy and Climate Change to put this point: the Government should play the co-ordinating role that will make sure that at this early stage the bits are joined up so that the opportunity is realised.

The second opportunity on which I want to touch has already been mentioned by the hon. Member for Birmingham, Northfield; it relates to the motor sport industry. I had a fascinating meeting with the industry's representatives and I love what it is doing. There is such quality and breadth in its engineering. Everybody thinks that it is just to do with Formula 1, but it is not—it is about advanced gearboxes for articulated lorries which will reduce the amount of fuel used, about electric transmission, about the aerospace and defence industries and about £6 billion of exports. The motor sport industry, too, needs to be supported.

If there is to be support, we need three things. First, we need a clear strategy. That is not about picking winners and losers but about identifying strengths and opportunities and making sure that they are supported. The Government have made a good start and I hope to see more of the same. The second point is about skills. In the next three years, we will be approximately 5,000 jobs short in advanced areas such as nuclear technology, the advanced automotive industry and many other activities. We need to find a way of getting the skilled engineers that we need.

The third issue is finance. The current crisis in the City should be regarded as an opportunity. This is a time when we can redirect our finance, which can stop being the purview of the masters of speculation, and when the City can once again become the servant of commerce and industry. That means less debt and more equity. We need to find ways in which we can get more equity to absorb more risk into British manufacturing industry.

There is no doubt that British manufacturing is suffering today, but it is a success story to be nurtured and taken forward. As I said, it will offer a real prospect for sustainable growth once the recession is over. We should not lose sight of that opportunity.

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Photo of Adrian Bailey Adrian Bailey Labour, West Bromwich West 4:19 pm, 9th July 2009

I represent a traditional manufacturing constituency; even today, well over 20 per cent. of the work force are employed in manufacturing and construction—the two sectors that have been hit hardest by the recession.

In my regular conversations with the managers of small and medium-sized companies in my constituency, the Government's general approach is recognised as being appropriate. When I speak to those people, the first thing they tell me is that the important thing is to sustain demand. Without that demand for the goods and products that they produce, all the schemes are not worth much. The Government's commitment to bringing forward public spending and to sustaining demand is therefore crucial in terms of the thrust of the policies that are necessary to sustain manufacturing and make for a recovery. These people are not instinctively supportive of Government intervention and Government spending, but they argue, time and again, that if we do not have the general policies in place to sustain our manufacturing base, when the tide turns and the economy grows we will not have the industrial capacity to secure the jobs and the profits to pay into taxes to pay off the public spending that we are incurring now.

The overarching policy is right, but some pillars are working well and others are not. First, on the balance sheet, I will mention those that are working well. After a slow start, the enterprise finance guarantee scheme is undoubtedly playing an important part in the survival of manufacturing SMEs. The flexibility on tax offered by Her Majesty's Revenue and Customs is an enormous help to a large number of small companies. The scrappage scheme, which was mentioned by my hon. Friend Richard Burden, appears to be playing its part in sustaining demand in the motor industry and, in turn, the steel industry. The prompt payment initiative is also very welcome.

However, other pillars are not working so well. I want to concentrate particularly on credit insurance. My hon. Friend the Member for Birmingham, Northfield went on at some length about risk. That is nowhere better reflected than in the support that the credit insurance industry gives to the construction and automotive supply chain, which in general does not get much support. Rachel Eades, a representative of Accelerate, the motor industry supply body, says:

"The majority of our clients have all been hit with either or both a reduction in cover and in many cases—and it seems to be growing—the complete withdrawal of insurance cover for vehicle manufacturers and tier one suppliers."

That is hitting companies in my constituency, and in the rest of the black country, particularly hard. They know that there are opportunities to promote and sustain their sales but cannot get the credit insurance necessary to do so. It does not help that even when they can get it, the premiums have gone up and their overheads are that much greater. In many areas of the motor supply industry, credit insurance has been withdrawn altogether. The Government initiative announced in April to top it up is therefore irrelevant, because one cannot top up something that does not exist. This is a big issue that is hampering the ability of small companies in the black country to sustain their viability. I hope that the Government will look at it again.

The other big handicap in the Government proposals is that they relate only to domestic companies. Our Government representatives are internationally promoting a global fiscal stimulus, with construction in European countries designed to stimulate the European and wider world economy, but companies in my constituency that would be capable of using the competitive pound to sell and to enhance their profitability and potential work force in those markets cannot do so because no export credit guarantee insurance is available.

I know that the Government are consulting on that, and I hope that the Minister will ensure that that consultation reaches a speedy and productive conclusion. Otherwise, there will be companies in the black country that are unable to support the Government's overall initiatives to promote world growth, and particularly the element of that growth that will help much-needed small and medium-sized enterprises in areas such as the black country.

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Photo of Nigel Evans Nigel Evans Conservative, Ribble Valley 4:25 pm, 9th July 2009

It is apposite that we have the opportunity to debate UK manufacturing industries at this moment, during a deep recession. Somebody spoke earlier about political amnesia, but one thing is for certain: people are not going to forgot the hurt that has been felt during this recession.

My hon. Friend John Penrose, the shadow Minister, spoke about the need to make absolutely certain that we do not resort to protectionism—a view with which I agree heartily. The last thing we want is a wall built around the European Union as some sort of protectionist device. Even if we were to build a wall around it, I suspect that we would put the contract out to tender and the Chinese would win it. We know that they are pretty good at building great walls, but it would be of no benefit whatever to us. We really do believe in free trade.

Before I move on to the impact of manufacturing and its importance to us, I wish to make a brief point about trade missions and exhibitions, which I feel are vital. I am a co-chairman of the all-party export group, and I believe that the attempt to save a bit of money by cutting trade missions and exhibitions throughout the world has been rather foolish in the long term.

Frankly, I thought that we made a grave mistake when we got rid of the royal yacht and did not replace it with anything. We could have had a new yacht, manufactured in Britain, as a showpiece throughout the world on which to exhibit goods made in the UK, supported by our trade ambassador, Prince Andrew. We did not, and at the same time we cut the number of missions and exhibitions we support throughout the world. Other countries are not doing likewise. Our so-called European friends are also our competitors, and they are getting out there in the world and promoting the goods that they manufacture. I do not blame them for that; I blame us for not matching them.

We have taken the same attitude towards our embassies, high commissions and consulates throughout the world. We are cutting and closing missions right, left and centre and bringing the flag down. We might think that that is associated with our colonial past, but it has nothing to do with that and everything to do with our trading future. The Chinese are also our competitors in manufacturing, and they are doubling or trebling missions. I hope that the Minister will look again at our attitude to trade missions and exhibitions throughout the world.

It was asked earlier how many manufacturing jobs have been created recently. The only figure that I have compares the number of people employed in manufacturing in 1997, when we left office, with today. In 1997 it was 4.53 million, and today it is 2.7 million. There has been a huge reduction. Manufacturing is still important to the UK, and it is not simply at the hands of this Government that it has reduced. It has happened over successive generations. However, we have to realise that there is a problem and that we cannot base the future of this country simply on the service sector.

It is absolutely right that we have to invest in research and development. We talk about innovation, which we are pretty good at, but we have to be pretty good at production as well. We have to build on the fact that we are good at innovation and research and development. Some of us managed to see the Lightning, the electric sports car that will hopefully be built in the midlands, in the House a few weeks ago. It has had a lot of research and development here, and it will be manufactured here as well. It will do 198 miles before it needs to be recharged. That is the future, but we must not turn our back on the car industry of the past in the midlands and other parts of the country, which is suffering greatly.

We support the car scrappage scheme, which works in France and Germany. I think that the Government made the right decision—we will have to monitor the scheme to ascertain whether it needs to be extended when the time comes, rather than turning our back on it.

BAE Systems operates in my constituency, where we have a superb plant. As I am sure the Minister knows, it employs 4,500 in the Samlesbury plant in my constituency, and 7,000 in the Warton plant, which is not far away. Thanks to the company's putting so much investment into the two plants in the north-west, many other jobs have been created in small enterprises. Frankly, many people could not name those small companies, some of them are based in lock-ups, and would not even know what they were doing, but the existence of BAE means their existence. It would therefore be short-termist of any political party that takes over in 2010 or earlier and is trying to save public funds to cut defence expenditure and procurement. We need to ensure that our troops have the equipment that they need to protect the country and that there is sufficient investment in future in projects such as the Lightning, and in the joint strike fighter and other aircraft.

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Photo of Nia Griffith Nia Griffith Labour, Llanelli 4:31 pm, 9th July 2009

I am glad that we have the opportunity to discuss such an important subject. I welcome, as well as the Minister, his new colleague from Wales, the Under-Secretary of State for Business, Innovation and Skills, my hon. Friend Ian Lucas. I know that he will be very helpful in providing additional assistance to manufacturing.

It is easy, when faced with the press, to focus only on the negative. I should like briefly to make a couple of positive points about my constituency. We are pleased to welcome the company Thales, which will provide approximately 80 jobs by the autumn in manufacturing an impressive vehicle, for which is there is much demand nationally. That is a great story. We also have the Proact scheme, which is working well with our local college, Coleg Sir Gâr, and helping 12 local companies to use time productively. If those companies cannot sell as many products, and therefore cannot do as much manufacturing, they can at least upskill the workers.

We should not only improve workers' skills for an upturn in the economy, but invest in infrastructure. As the Minister explained, and as my hon. Friend Mr. Bailey said, programmes for schools and hospitals help steel and other manufacturing industries, which are supplying all the good construction work, but we must also examine the infrastructure that we need for our industry. We are lucky in my constituency to have rail and the M4, which means that we have excellent manufacturing sites within a few minutes of road and rail.

We should look at manufacturing throughout the UK, especially in areas such as south-west Wales where every job is valued. We should not simply focus on one or two areas, where perhaps there is a greater concentration. We need the investment as much as anywhere else.

I want to consider the more complex issue of investment in our sewerage infrastructure. It is easy to understand how money for schools and hospitals is channelled—it goes via the Welsh Assembly and county councils; we know what we are doing. However, we have recently had a consultation about water pricing, which arose because of the need for water companies throughout the UK to examine investment in the infrastructure. That has affected manufacturing industry in my area because the lack of investment in sewerage means that we have a planning restriction on expanding our factories. The water companies have to raise the money from individual domestic users and there is great variation throughout the country. For example, in south-west England, a huge effort is made to keep the beaches clean and that has a knock-on effect on the domestic price. We need to consider how we right that infrastructure to ensure that no area is disadvantaged and in a position whereby it cannot build factories because the necessary investment has not been made in bringing sewerage up to the required standard. That burden should not fall only on the domestic consumer.

I should also like to bring to the Minister's attention the matter of energy prices. We know that worldwide oil prices have been on the G8 agenda. The high-energy industries are represented in my area by Corus, and I should like to remind the Minister that the town of Llanelli is nicknamed "Tinopolis", because Corus produces tinplate there. That product is very much in demand at the moment, and we are "lucky" that there is still a strong market for tins and cans for food and drink. However, we feel that we are perched perilously on a knife-edge, and that every cost increase makes an enormous difference to our ability to compete across the world. We need to provide companies with certainty and stability and to help them to plan for their energy costs. That is undoubtedly a great worry for them when they are trying to do their long-term planning. I stress to the Minister the absolute urgency involved in getting that right, and in getting guarantees not only on immediate pricing but in relation to our investment in providing for future energy supplies so that we can become less reliant on imports.

In that context, I reiterate that we cannot discount the importance of coal. Much as we might like to reach a point at which we did not have to use a single carbon product, that is not the reality, given that about 70 per cent. of our electricity currently comes from carbon products. We need to think carefully about whether we would not be better off making a considerable investment in coal rather than importing oil. Clean coal technology is a key part of that question. If we could get ahead in that game and produce the necessary materials and technology, we could sell them to the world rather than allowing others to overtake us. We have an ideal opportunity to lead the world in that area.

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Photo of Nicholas Winterton Nicholas Winterton Conservative, Macclesfield 4:37 pm, 9th July 2009

Manufacturing industry has always been my prime priority. Press articles this week entitled "Economy stuck in stagnation" and "Manufacturing output slump" make for depressing reading. The disappointing news is that the United Kingdom economy did not exit recession in the second quarter, as had previously been predicted; instead, it is now stagnating, according to the gross domestic product estimates produced by the National Institute of Economic and Social Research. That is the reality. Last month, the institute estimated flat output growth in the second quarter and downward revisions to industrial production have stunted GDP forecasts.

I agree with the Minister, however, that we are one of the great world leaders in advanced manufacturing. We have some of the greatest companies in the world. They operate from the United Kingdom but they are global players with huge strengths in new technology and in innovation.

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Photo of Nigel Evans Nigel Evans Conservative, Ribble Valley

My hon. Friend has listed some of the problems; does he agree with me that if Sir Alan Sugar is the answer, we had better look again at the question?

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Photo of Nicholas Winterton Nicholas Winterton Conservative, Macclesfield

Inevitably, I share my hon. Friend's view on Mr. Alan Sugar—or should I now call him Lord Sugar? Perhaps not yet.

Will the Minister ensure that the Government do not place additional burdens—such as an increase in national insurance, Government-generated energy price rises, fuel tax and regulation—on manufacturing industry? These are all important factors. When will he reverse the crippling £16 billion cost—that is an official estimate—of constantly changing regulations, and the £7 billion of new taxes introduced a year by his Government? When will he recognise that manufacturing industry is one of the only sources of sustainable, non-inflationary economic growth—a phrase that I have used over many years—and the key to getting out of this damaging recession? I put this to the Minister as a challenge: if the future of this country is to be built on modern manufacturing strength, when will the present Government start to encourage, and not de-incentivise, our industry and manufacturing?

Despite receiving unprecedented valuable bail-outs from the taxpayer—from the HM Treasury—the banks et. al. are all providing little or no meaningful assistance to hard-pressed manufacturing via the necessary increase in lending. I am sure that the Minister will agree. The plight of small to medium-sized businesses is very serious, since the commercial banks still refuse to lend to struggling businesses, which are, after all, the powerhouse of a modern economy.

I know that individual businesses in my Macclesfield constituency are finding it extremely difficult to secure the affordable credit that is so vital for their present survival. Sadly, I have to report to the Minister that the situation in the constituency, as witnessed by the Macclesfield chamber of commerce, continues to deteriorate. That situation, as my hon. Friend Mr. Evans would confirm, is repeated throughout the north-west.

Autac, a company in my constituency that manufactures cables and connectors for heavy-goods vehicles and fork-lift trucks, is just about coping with the downturn, but is having to produce very small orders at short notice in order to survive. The management believe there has been major de-stocking and that customers are now keeping minimum stocks. The company has been particularly hit by the drop in demand for commercial vehicle parts and commercial vehicles, while vehicles as a whole have featured strongly in this debate.

The Macclesfield chamber of commerce is seeing the usual reduction in spend by businesses on training and marketing—very dangerous for the future—with several manufacturers also having had to reduce R and D spend, which is also critical for the future. Several are concerned about the change in rules on tax relief, for example, and are waiting while HMRC investigates claimed costs.

Locally, as in many parts of the world, there is concern over PAYE, business rates and employment legislation; and the pension protection levy is also an issue. The printing industry in my constituency has been particularly hard hit—initially by competition from China and increasing material costs, which has now been exacerbated by the fall in demand for marketing and printed material. A local firm, for instance—this is not untypical—has had dramatically to reduce its work force and, what is more, renegotiate terms and conditions with the remainder of its staff. Large vacant premises are becoming a major issue due to the lack of demand for such property, while current business rates, as the Minister knows, are a very serious problem indeed.

The final major point made to me by the local chamber of commerce was that it is suffering from increasing demand for its services with a lack of any Government support. I have to report to the Minister—I say it with some regret—that the Macclesfield chamber of commerce has failed to secure a contract with the Northwest Regional Development Agency, which has once again gone to a large commercial provider, despite the fact that the chamber of commerce is so closely in touch with industry in the area. I hope that the Minister will pay some attention to this matter and make some inquiries into it.

Let me tell the Minister that I feel passionately about manufacturing industry. Over all my years in the House, I have been an advocate of manufacturing industry because of the role it plays in the economy of any successful country. Will the Minister please take the burdens off industry and not add to them; will he understand what industry is about? The fact is that businesses need money at this time, so why cannot the Minister and the Government do more to encourage the banks to provide the liquid capital and the resources that industry so desperately needs to survive until the economy turns up? We rely on the Government to take very positive steps.

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Photo of David Drew David Drew Labour, Stroud 4:43 pm, 9th July 2009

The Minister will have heard my earlier intervention and my continuing plea, together with those of my hon. Friends the Members for Birmingham, Northfield (Richard Burden) and for Chorley (Mr. Hoyle), for wage compensation. I shall say no more about that now as I want to move on to more positive things, for which I thank the Government, but the Government need to recognise that the pleas will not go away.

In January this year, I approached a number of people in Gloucestershire to seek help with problems I faced at that time. Two major companies in my constituency, Delphi and Renishaw, were laying off some members of their work force and putting others on short-time working. Following an initial meeting with Business Link's south-west skills service, we were able to fasten a partnership together, and I am extremely proud of the way in which we have worked.

At that stage, the skills service was considering whether Train to Gain could be used to deliver business improvement techniques, in accordance with national vocational qualifications level 2, to those who would be on short-time working. The aim was to ensure that we used rather than wasted the time that those good people sadly had on their hands, and that if and when the recession ended they would be ready to go out and compete with their European and other rivals.

We had a number of meetings with a huge number of partners. We met representatives of the South West regional development agency, and I thank Ann O'Driscoll for helping us with the paper that she prepared. We also met representatives of the Learning and Skills Council, Jobcentre Plus, Gloucestershire Training Group—the key vehicle for the training to take place—the Government Office for the South-West, Gloucestershire First and Business Link itself. As a result, we have been able to develop very effective training packages. I thank the Government for the resources that they are potentially investing, and the way they have followed up the work of those organisations.

We have offered support to both Delphi and Renishaw, and are about to launch the training packages for real. At first we envisaged quite a small number of positions, but the number rose to 1,100. It is likely to stabilise at about 450, but because the scheme is voluntary, the door is open for others to "upskill" themselves so that they can take advantage of what the Government have offered. We believe that this is a model that could be adopted in other areas. It is the south-west's equivalent of Proact. As I said to my right hon. Friend the Minister, it is disappointing that Proact seems not to have taken off as effectively as it might have.

I am immensely proud of what has been done in my constituency. When people think of Stroud, they tend to think of rolling green hills, the creative industries and tourism, but in fact it is still a major manufacturing centre, which is why I have been so keen to ensure that we keep as many people as possible in employment.

Now that the scheme is up and running, it is important to ensure that it develops. I want to make a number of points about it. I do not expect my right hon. Friend to respond to them all now, but I hope that in due course I can meet him with some of the representatives. Alternatively, he might choose to write to me.

First, some employers fear that they will have to pay if people do not complete the course, which is to be supervised by Ofsted. It must be made clear that neither those who train nor the employers who allow them to train will be penalised. We must underwrite the cost. Secondly, the awarding bodies—the qualifications academies—must recognise that if they charged individually the cost could become onerous, and that they should drop their price for the collective numbers involved. Thirdly, given that Train to Gain is capped, I hope that my right hon. Friend will tell us how we can allay people's fears and reassure them that the funds will be there for both adults and young apprentices if we choose to expand the scheme, as I hope we will.

As I have said, the scheme is innovative, and it shows the Government working at their best. I hope that the compensation and contribution arrangements will still operate, but if this scheme works, it will be something of which everyone should be proud.

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Photo of David Anderson David Anderson Labour, Blaydon 4:50 pm, 9th July 2009

I did not think I would agree with much of what the Conservative Front-Bench spokesman said, but I did agree with the comment that we should not pretend that everything in the garden is rosy. That would be a disgrace, and very unfair to the people who have lost their jobs, the companies that are struggling and the communities that are under pressure.

We are certainly impacted on by the worldwide recession, but we are also impacted on by decisions taken by Governments in the past. I want to talk first about decisions taken in the 1980s in the industry I worked in—coal mining—and the effect they had not just on the people working in it, but on those working across the whole of manufacturing industry.

In the 1980s, the main way we supported underground coal mine roadways was by putting in arch girders. Arch girders cost £108 a set, and they were used for every yard we moved. In 186 pits, we were moving thousands of yards a week. By the early 1990s, however, there were hardly any pits left, and the impact on the steel industry of the fall in demand for that one piece of equipment was massive. The manufacturing base was therefore impacted on as a result of direct Government intervention, but the impact was not felt only in the nationalised industries. Companies such as Huwood in my constituency, which made conveyor belts, went to the wall; companies such as Gullick Dobson and Dowty, which were making hydraulic supports, were no longer needed; and companies such as Anderson Boyes in Motherwell, which made cutting-edge shearers and coal cutters in this country, have now disappeared or are owned by German companies. That is a clear example of the failure of the market to deliver.

We are now seeing what is happening as a result of our Government having come into office in the 1990s. We have seen the introduction of the regional development agencies; in my part of the world, that has played a major role in supporting manufacturing industry. Sadly, however, the Leader of the Opposition says the regional paraphernalia, as he has described it, is one of the things that he has in his sights in the so-called attack on the quango state. If that happens, that will have a major impact on support for manufacturing industry in the north-east of England.

The regional development agency in the north-east has set up a manufacturing advisory service, which has played a major role in assisting more than 250 companies, helping them to save almost £4 million in the last two years alone. It has also helped to cut CO2 emissions by almost 26,000 tonnes in the same period. The Government, the regional development agency and manufacturers have between them set up the New and Renewable Energy Centre in Blyth, which supports the development of electric vehicles by Smith vehicles—part of Tanfield—near Consett. It also supports Nissan in developing electric cars; my hon. Friend Mr. Kemp mentioned that. A new technology centre in the Sedgefield constituency has helped in the development of plastic electronics; that is another example of us tapping into the skills of the people of the north-east, supported by this Government agency that the Conservative party would do away with. A centre for innovation has been developed, too, where we will take forward cutting-edge technology on Teesside to develop biotechnology, making energy from waste and mass.

The traditional skills are still there, too, to be deployed and developed for the use of this nation, as has happened in the north-east of England for centuries. When the Minister began his comments, he spoke about the long history of manufacturing in this country, and there was some chatter about that. In my part of the world, we received a charter from Queen Elizabeth I to develop the first industrial-scale coal mining expeditions anywhere in the world, and in the early 1700s we set up the first industrial-level ironworks, and we still want work today. We are ready, we are willing and we are very, very able to build the new high-speed trains that are at present up for discussion. If the Minister really wants to do us a favour today, he should go to see the Secretary of State for Transport and tell him to give the contract for the trains to the Tyne Valley yard, which just happens to be in my constituency.

There is more to come for the future. There are real opportunities, if we grasp them between us. This is not a job that the Government alone can take on; there is also a role for the private sector. There is so much potential in the coal reserves off the north-east of England. The new methods of accessing coal, including underground gasification of coal, could transform the way coal is used to power the energy of the world. There is more coal under the North sea off the north-east of England than the whole world burns in a year, and we are leaving it there to rot. Joint work between the Government and the private sector is needed in order to access it.

Another development has also come to a standstill: carbon capture and storage. There is much debate in the industry about what to do. What infrastructure should we build? Should we build the equivalent of a B road or a motorway? If we build it too small, will it be fit for purpose for the future? If we build it too large and things do not work out, will we have we wasted money? The truth is that while we are talking nothing is happening, but it needs to.

We are entering a world where turbines that are 140 metres high with blades 55 metres long—the total sweep is 110 metres, which is more than the length of Wembley's football pitch—are being built off Aberdeen. That is the sort of technology that we are getting into and that is the sort of thing that we want to see off the north-east coast of our country. We can achieve that, but if we are to deliver it, the private sector and the Government will need to step up to the plate. One of the biggest things we are going to be worrying about is the shortage of copper to provide the energy and the cabling from the sea to the shore. We have to get our act together on that. Again, it is down to us to work with the private sector to ensure that that happens. John Penrose spoke about being a free marketeer, but I am sorry to say that the free market has failed this country and without total Government intervention it will do so again.

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Photo of Pat McFadden Pat McFadden Minister of State (Department for Business, Innovation and Skills), Member, Labour Party National Executive Committee 4:55 pm, 9th July 2009

This short debate has shown the passion that exists in this House for manufacturing. Of course this has been a changing story for our nation and we no longer have as many large manufacturing plants with thousands of employees as we did some decades ago. However, in that story of change we must not be too quick to ascribe a story of failure and decline.

One of the themes to emerge from this debate is the impact of the recession on manufacturing. My hon. Friend Mr. Anderson rightly said that it would be remiss of us not to acknowledge that, given the people who have lost their jobs and the companies that have gone to the wall. We do acknowledge that, but I wish to say something about the scale of the impact and to repeat the figures that I used in my opening comments. In the year to April, manufacturing output in the UK declined by 13 per cent., which compares with 14.6 per cent. in the United States, 19.9 per cent. in France, 24.3 per cent. in Germany and more than 30 per cent. in Japan. There has been an effect and companies have gone to the wall, but the United Kingdom has not been hit disproportionately hard compared with other countries—some countries have done worse.

A second theme was shown in the agreement across the House on the importance of the transition to a low-carbon economy for our manufacturing future. The hon. Members for Weston-super-Mare (John Penrose) and for Caithness, Sutherland and Easter Ross (John Thurso), and my hon. Friend Nia Griffith commented on that. It is right that carbon capture should be considered as part of that. This country has to make the most of the transition to a low-carbon economy. Hon. Members have also stressed that we need to equip our workers with the skills to take part in the low-carbon economy, and it is important to create opportunities, as well as to know that the demand exists. To that end, we have the Train to Gain programme, we have 12,000 new apprenticeships this year and we have 300,000 more higher education students than we had when we came into office. Ensuring that our country has the skills to take part is crucial, and not only for economic reasons. If we do not ensure that, there will be a great sense of exclusion from the economy of the future, and we must guard against that.

The third theme of the debate was demand, which was raised specifically by my hon. Friend Mr. Bailey. He rightly said that the Government made a choice as the recession hit to do what they could to stimulate demand, be that through construction, other capital projects, the car scrappage scheme or action in other areas. We have done what we could to stimulate demand. I accept that we must continue to work on the schemes that we have announced to ensure that they are effective. We have been active on some of the specific problems that have been mentioned, for example in respect of discussions between Corus and EDF Energy about energy prices.

The final theme of this debate that I wish to mention is local pride. That can be seen in the companies mentioned by hon. Members from across the House. Manufacturing gives shape and identity to our constituencies, and what goes for our constituencies also goes for our country. That is why manufacturing is such a crucial part of our economic future.

Question put and agreed to.

Resolved,

That this House has considered the matter of UK manufacturing.

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