[Christopher Fraser in the Chair] — Manufacturing and Employment

– in Westminster Hall at 12:00 am on 9th June 2009.

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Motion made, and Question proposed, That the sitting be now adjourned.—(Mr. McAvoy.)

Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley 9:30 am, 9th June 2009

It is good to see that you are the Chairman of the day, Mr. Fraser, and may I add that I am disappointed that you will be retiring?

We are pleased to be having this important debate. Manufacturing is important to our economy and to the UK, and Governments past and present have not given it their true support in the way that I would have liked. There is support, but we must recognise the importance of manufacturing. I should like to talk about what is being done in the automotive sector. We can see the importance of the subject by the fact that so many Members from all sides of the House have taken the trouble to turn up at 9.30 am—I say that for the benefit of those outside who perhaps do not realise that politicians start that little bit earlier than they see on television.

The debate is about what is happening and some of the big issues. Only yesterday, we had the devastating news of LDV vans when only a fortnight ago we thought that there was great hope for the company. There was talk of a Malaysian company and the Government giving £5 million to tide it over, and we thought that everything was in place to ensure that LDV manufacturing in the UK could continue. Unfortunately, what we thought was in place fell apart because of the banks, which did not put the money in.

We have potentially lost 850 jobs in LDV, and probably 4,000 from the supply chain for LDV. The situation has an impact not only on Birmingham, but on other parts of the country in that supply chain. All the parts for LDV vans go through Multipart, which is a huge logistics supply chain company based in Chorley. It is an excellent company and it has the contract for LDV vans. There is a knock-on effect for each constituency. Team Leyland International is also based in Chorley. It is the original exporter and continues to export LDV vans—the company gets LDV vans into places such as Nepal for the British Army. The effect is much greater than people see in the headlines of a newspaper or regional programme. We must consider the depth of the impact that the LDV vans situation will have on the economy and on people's livelihoods and jobs.

I would have thought that it is now time for the Government to step in and rescue LDV vans. It seems pretty obscene to me that we can see the Mercedes-Benz badge on police van after police van parked outside in the square. That is a shame and a tragedy. Do we think that we will see a British-built van in Germany? Not on your nelly! We will also not see them in Italy, France or Spain. Why do we see that here? What playing field do those countries play on that we do not? We should be ensuring that the police want to buy British to support British taxpayers and British jobs. The same goes for the ambulance service, which uses Renault or Mercedes vehicles, and the Highways Agency, which uses Mitsubishi vehicles, which are not even built in Europe.

There is something seriously wrong, is there not? Our procurement is a nonsense. On the one hand, we spend millions saying how good British industry is and, "Come and buy from us," yet at the same time, our Government do not back our jobs. What is going wrong? Why spend millions promoting British manufacturing and then not buy the products? The best advert for British products is to be seen using them. What car will the Minister ride home in tonight? Is it British built? Has it got a British component? I have not checked, but I suspect that it is a Prius or a Honda.

Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

May I say congratulations and well done? The Minister needs a preservation order on him! He must be listed! He is fairly unique in the House. At least there is a conscience at work.

The fact is that most of the Minister's colleagues—I hope that he will spread the word—use the Toyota Prius. There is nothing wrong with the Prius, except that it does not involve British jobs or components, and it is shipped all the way here, so it has a bigger carbon footprint than the Minister's car, which comes from down the road.

I am not anti-Toyota, which has a plant in the UK—far from it—but I say this to Ministers: they should ride round in a British-built Aventis. Otherwise, let us have the big conversation and ask Toyota, "Why aren't you building hybrid cars in the UK?" Manufacturing in the UK is very important to us. Australia, with 16 million people, can say, "Build here and we'll buy your vehicles; don't build here and we won't." We should be following that example. There are 60 million people in this country and we are one of the biggest car-owning countries in the world. We should lean on Toyota—and Honda—and say, "Do the right thing and build those cars here."

Photo of Peter Luff Peter Luff Chair, Business and Enterprise Committee, Chair, Business and Enterprise Committee

The hon. Gentleman is a very distinguished member of the Select Committee on Business and Enterprise, which I have the privilege to chair. The theme that he is pursuing is familiar—he has pursued it with Ministers on many occasions and may he continue to do so.

May I encourage the hon. Gentleman to go a bit deeper? Is he aware that the French and German Governments have acted much more decisively than the British Government to support the component supply industry in those markets? It is not just the Toyota and Nissan badges that matter; the stuff that goes into those cars also matters. Our component industry is generally strong, but at present it is threatened, and more decisive action is being taken elsewhere to support component industries.

Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

How could I disagree with the Chairman of our Committee? He is a great man, and I accept the knowledge that he displays. Supporting and creating jobs in the supply chain is an important factor. However, we do not want to end up with a kit factory. We have to go deeper. We should be drilling down to find out where we can create jobs.

Photo of Bob Spink Bob Spink Independent, Castle Point

I am delighted that the hon. Gentleman has brought this subject to the House. He has the vast majority of British people on his side, but they, like us, know that European competition rules are the problem. In procurement, the British Government must follow European rules, which they seem to do to the letter. Other countries in Europe do not do so to quite the same extent. That is one of the problems.

Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

I cannot disagree. This country is unique in its gold-plating—it is absolutely gold-plated all the way through. As I said, we are on a different playing field from the rest of Europe. Toyota vehicles are produced in Japan, where European competition rules do not apply. Ministers ought to question their own judgment and have the guts to stand up for British industry—the Minister is rightly standing up for British industry and Ellesmere Port by using a Vauxhall. We want to see more backbone and Ministers saying, "I don't want a car that's been shipped round the world with a bigger carbon footprint. I want one that's built in the UK. What's good for France is good for the UK." That is the kind of motivation that we want.

Photo of David Taylor David Taylor Labour, North West Leicestershire

I would be cautious about focusing entirely on Toyota. It has a plant in south Derbyshire that employs many people in my constituency, and it has a good reputation as an employer. Surprisingly, the highest proportion of manufacturing jobs as a proportion of the economy is not in the great west midlands or the north-west, but in the east midlands, where 15 per cent. of our GDP is linked to manufacturing—Toyota is a part of that.

Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

I do not disagree. My hon. Friend listens carefully, so he will have heard that I am asking Toyota to consider building in the UK as it did for Australia. I was also saying that Ministers should be buying the Toyota Aventis, which is built in the east midlands. It is an excellent car—it is good on economy and good for the environment. Buying cars that are built in the UK is surely better for the jobs that my hon. Friend wants to create and support in his constituency and the east midlands region. We should buy the cars that are built here rather than the cars that are built in Japan with no British parts and involving no British jobs, which are shipped around the world and which are not good for the environment. That is what I am saying.

Photo of David Taylor David Taylor Labour, North West Leicestershire

The car components industry, which feeds Toyota and others, is a significant employer in North-West Leicestershire. About 20 per cent. of 18 to 24-year-olds were employed in manufacturing in 1997. That figure has more than halved over the past 10 years, and a generation of young people who feel frozen out of the job market are now showing an interest in the politics of the far right. That is one of the lessons that we learned last Thursday.

Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

I cannot disagree. There is a big question for all parties when people are driven to the fringes in voting. I will not go into that political issue, but I agree that it involves jobs. We must tune in to people and ensure that they have opportunities. They must not be frozen out, or frustration will result. I agree totally.

We have touched on the importance of LDV vans. It is not too late. Yes, people are being made redundant as we speak, but there is a mothballed factory for which there is still hope and opportunity, because it has invested heavily in electric vehicles. Some LDV vans are being trialled by a leading supermarket. LDV is a world leader. If it were in France or Germany, would those countries allow it to close? No. They would put in investment to drive it forward, because the future is in electric vehicles. We should be investing to save the company. That is where we should start.

It is bad news. Household names such as Jaguar and Vauxhall, which I thank the Minister for mentioning, as well as other, smaller manufacturing companies are facing an uncertain future. There is good news out there—the market is experiencing a bit of an upturn—but the credit crunch is beginning to ripple far beyond the financial sector, where it started, and is having a devastating effect on manufacturing. It has exposed our overdependence on financial services and highlighted the need to restructure our economy for the future. We need a vibrant manufacturing base. It is essential for the prosperity of the UK economy. We must not make the same mistakes that were made in the past.

Manufacturing matters, not only to the 3 million people that it employs directly but to the further 2.4 million employed indirectly in supply chains and related services, as Peter Luff rightly said. We must look after the components sector and protect it better. Manufacturing helps the wider economy. Many of our towns, cities and communities rely on it as their main economic driver, and 50 per cent. of our exports come from the manufacturing sector.

These are difficult times for manufacturing. The pressure of operating in an ever-increasing global economy has been compounded by the global recession. Most notably, the automotive sector has been severely affected since 1997. More than 1 million manufacturing jobs have disappeared, and that trend is due to continue to the end of the year.

Photo of Bob Spink Bob Spink Independent, Castle Point

I am sure that the hon. Gentleman will agree that small and medium-sized enterprises are a most important sector within manufacturing. They generate sustainable jobs and new enterprises. The problem for SMEs is that regulations affect them disproportionately, because they do not have the resources that big companies have to deal with them. I welcome the Government's procurement plan—they are leading us out of recession—but it is not available in small bites that SMEs can access. The Government need to target their procurement at SMEs as well as big companies.

Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

The hon. Gentleman is absolutely correct. Procurement contracts could be broken down into smaller pieces, which would allow SMEs to bid for them. That is why we should have a procurement Minister, not just in defence but across all Departments, to ensure that everybody is aware of procurement contracts and that people are helped to win them rather than being omitted because they are too small or do not have the capability. It is about encouragement, help and support. The appointment of a procurement Minister could make a difference for UK jobs.

Photo of Peter Luff Peter Luff Chair, Business and Enterprise Committee, Chair, Business and Enterprise Committee

The hon. Gentleman is being generous in giving way. I am sure that he would not want to leave the House with the impression that manufacturing in this country is anything other than thriving in many respects. We have world-class technology in many sectors, including aerospace, automobiles, pharmaceuticals and so on. We are the sixth-largest manufacturing nation in the world. Yes, the sector faces problems at present, and it is wonderful that he is highlighting them, but equally, this is a fantastic opportunity for what remains a successful manufacturing base in this country.

Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

I do not disagree. As I go on, I will mention some of the benefits. The hon. Gentleman is anticipating what I am going to say. I am talking about the downside, but I also want to talk about the pluses. We should build on what we do best.

Recently, the Engineering Employers Federation raised its job loss forecast for 2009 to 188,000. If those jobs are lost, skills will be gone for ever as workers struggle to re-enter the labour market. We must face up to that problem as well.

When we talk about the automotive industry, people often think exclusively of cars. However, I am keen to highlight the needs of all vehicle manufacturers, particularly Leyland Trucks, which employs many of my constituents. It is a world leader and the last major truck manufacturer in the UK. It meets the environmental targets that we expect of major truck manufacturing. It makes the trucks that we want on our roads. It needs support. The company has invested heavily in meeting environmental needs and reducing emissions from its trucks, but it is struggling. It is still building trucks, but it has had to reduce its work force significantly, and staff are working on reduced hours. Now is the time for the Government to step in. The Government can do a lot, perhaps through a short-time working subsidy to ensure that Leyland Trucks retains its skilled labour and can compete when the market improves. We do not want the company to wither on the vine.

It comes back around. Who has been given the contract for our new Army trucks? Has it been given to Leyland Trucks? No, it has gone to MAN, in Germany. A lot of promises were made. MAN said, "We own ERF in Cheshire now, so we'll bid for the Army contract." What has MAN done? It has closed ERF. I understand that ERF now has a little garage based in Stafford. That is its footprint. The vehicles will be built in Germany and shipped over. It is that sort of nonsense that we must overcome. It is no different from Army uniforms being made in China and shipped back here. That is not about European competition; it is about bad judgment.

Leyland Trucks is important, and we could do much more for it. We have given tax advantages to the car industry—I will mention more about that—but we need to do something for manufacturers of vans and larger vehicles to help them through the recession. Why are we not giving tax breaks up front and incentives to sell trucks? Fleet buyers will always be there. Royal Mail will be there for ever and a day. No one will ever make money on Royal Mail, but they can make money on small buyers—the people who drive one, two, three or four wagons. Those are the people who matter. Helping the manufacturers would help them, because new vehicles would give them better efficiency, but it would also keep jobs and skills in place. That is what we need to support. Will my hon. Friend the Minister consider it? We have done a good job on the car scrappage scheme, but we need to do something for trucks that will bring benefit. I hope that he will take that on board. Leyland Trucks is important.

During the economic downturn, we have witnessed a 60 per cent. fall in production, which highlights the huge impact of the financial crisis on our vehicle manufacturing sector. We accept that we cannot compete on price and stoop to allowing lower-skilled jobs to move to low-paid economies, but it is worrying that highly skilled and well-paid jobs are now going abroad at a similar rate. We need urgently to reassess our policy if we want manufacturing to survive. We need to end our passive manufacturing policy and the notion that factory closures do not matter. They matter, particularly to those who lose out and are forced to enter low-paid work as a result of closures.

We cannot afford to let manufacturing wither away. Now more than ever, the Government must prioritise support and invest in our manufacturing base to meet today's challenges and ensure that we are best placed to grasp the opportunities of tomorrow. The Government document, "Building Britain's future: new industry, new jobs", offers a platform for doing so. It points to an encouraging shift in industrial policy.

Coupled with that, Government initiatives such as the car scrappage scheme are having an impact and helping to kick-start demand in the automotive sector. That is welcome, but it is aimed mainly at small cars. We need encouragement to buy family cars. Families need bigger cars. People cannot tow a caravan with a Nissan Micra, or fit three kids, two adults and a dog inside. We build good family cars, such as the Toyota Aventis. The powertrain of the Mondeo, including the engine and the gearbox, comes from the UK. Incentives to sell more of those vehicles would be a big bonus, because Ford employs thousands of people in the UK.

The car scrappage scheme could be extended. We do not want to fall off a cliff at the end of the 12 months. We must manage the end of the scheme and give other incentives. We must be imaginative in coming up with ideas. I welcome the scrappage scheme, which is working well and making things better. However, my challenge to the Minister is that we can do more.

Photo of David Taylor David Taylor Labour, North West Leicestershire

Does my hon. Friend share the caution of many environmental and economic campaigners over the scrappage scheme? Six of every seven cars bought in this country are imported, which will restrict the impact of the scheme on the UK economy. Could the scheme be given a new direction at the end of the period that the Chancellor has put in place?

Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

That is a worry. However, other jobs are created on the back of the scheme, for example in the dealer network and the supply chain for spares. The problem is that the Mondeo is classed as an imported vehicle, even though the powertrain, and therefore most of the car, is produced through UK manufacturing. It is easy to state a figure for vehicles that come from abroad, but, as I have said, there is a difference between a Mondeo and a Prius. The Mondeo's powertrain comes from the UK, whereas the Prius contains nothing from the UK. We must get that balance right. If there is a way to support British car manufacturing, I am happy to look at it. However, we come back to the point about European rules. We can do more, but we should not forget that many cars from abroad have content from the UK, and many do not.

The absence of a comprehensive cross-governmental manufacturing strategy puts at risk our ability to meet today's demands and to enable future growth. We need a jobs summit that brings together the Government and all social partners to set out a strategy. A clear direction for UK manufacturing that centres on investment, infrastructure and the work force must be agreed. There should be regional job summits where the Secretary of State brings regional manufacturers together and listens to what they say. Those manufacturers must work together to ensure that they have a future. They must state their needs and what they want to see from Government, rather than be told what is good for them, which we are very good at. The challenge is to listen to them and to work together. It is important that there is a clear direction centred on investment.

The Government, business and trade unions must work together if manufacturing is to survive. The unions must play a role in the growth of this country, as they are the best lobbyers for procurement contracts. They led the lobbying on behalf of BAE Systems on the Typhoon, the joint strike fighter and submarines. They do a great job of ensuring that UK jobs survive. We want to see a new practice of working together and do not want to return to the problems of the '70s. New social partnerships are being built in which the unions work hand in hand with companies for the betterment of UK manufacturing.

Who would have thought that Lord Digby Jones would be seen hand in hand with Unite leaders, marching for jobs? Who would have thought it? The bastion of self-enterprise—[Interruption.] I did say "bastion"—the last bastion. Many may wish to think differently of Digby, but I know that his parents were married. He has become a champion of British jobs and of working with the trade unions. Nobody would have dreamt of seeing a march for jobs in Birmingham with Digby and Unite trade union leaders at the front. I welcome that and look forward to his application card coming through. That demonstrates the change we have seen and suggests what will happen in future.

A new approach to manufacturing is needed. We must not abandon the view that the market has the answers. It does not have all of them, but it has some. Although we do not like to use the word, we have seen intervention in the banking and car industries. It does not have to be a dirty word that we turn our noses up at. Intervention is important and the market matters—we must bring the two things together. If we do not, within 20 years, countries like China and India will make everything we use. Our European counterparts recognise that they cannot have a successful economy without a robust manufacturing base and have acted quickly to defend it. The UK, too, must adopt a more active industrial policy and should not be afraid to intervene to support and protect jobs, and to incentivise investment where appropriate. The state should step in to provide the necessary support for manufacturing companies. It is not acceptable to stand by and watch skilled jobs and companies such as LDV go to the wall.

We must look at new ways of working that are used in Europe and the United States. Many problems in the automotive industry are shared. In the global market, we must explore and work together where possible, for example to invest in the production of more environmentally friendly vehicles, to which the Government are committed. It is right to have long-term policies on investing in greener vehicles, but we must not miss out on the short-term policies that are needed.

I congratulate the Government on working with Jaguar Land Rover. It is important that such major companies continue and there can be no excuses if they do not. The Government were right to intervene to tackle the financial crisis and should not hesitate in acting to support other jobs. Such action benefits business, workers, the economy and the taxpayer.

The Government could adopt a number of measures to help manufacturing contend better with the downturn. More direct support is needed to protect jobs. One option is a time-limited wage subsidy targeted at keeping viable businesses open. Short-time working and temporary lay-offs are now a reality. In some cases, they are a stepping-stone to redundancy. For example, workers at Leyland Trucks are being forced to accept short-time working because of the downturn in the orders for vehicles. Each week, more businesses are forced to do the same. Such companies and their workers deserve our support.

A time-limited wage subsidy scheme should be introduced with sufficient safeguards to ensure that only firms directly affected by the recession qualify and to avoid dead weight. It could bring significant benefits such as employers avoiding immediate redundancies and retaining essential staff and skills. If linked to training, it could be a long-term work force investment. Surely it makes more sense to invest in people in the work force, rather than in the jobcentre. Rather than subsidising people to be unemployed, we should subsidise them to keep their jobs.

Photo of Bob Spink Bob Spink Independent, Castle Point

Does the hon. Gentleman agree that to build for the future of the manufacturing sector, there must be more genuine, traditional, workplace apprenticeships? Will he congratulate the Government on developing more apprenticeships and press them to develop more traditional, work-based, manufacturing apprenticeships? That is the future.

Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

I am happy to join in that praise for the Government's action on what I call traditional, real apprenticeships. I cannot thank the Government enough. Apprenticeships are part of what we need for the future, but are no good if we allow the companies to disappear. We must ensure that the companies are there so that we can provide the long-term jobs that apprentices and the country require.

The TUC estimates that at a cost of about £1.2 billion, we could save 600,000 workers each year through a short-time working subsidy. We have found billions to bail out the bankers, so we can do the same for hard-working people in manufacturing. The banks are now paying that money back, and we should reinvest it in manufacturing so that we benefit even more in the longer term. A short-time working subsidy would be a quick and effective way of targeting support at the struggling employers providing financial support to employees across the UK. Europe has already recognised the benefits of such schemes, which have been introduced in Germany, France, Spain, the Netherlands and Italy. Closer to home, the Welsh Assembly has introduced a wage subsidy called ProAct, which took only two months to become operational at the beginning of the year and is now benefiting many businesses and workers across Wales—we can learn something from a small country such as Wales.

The proposal to introduce a short-time working subsidy is supported by business leaders such as the Federation of Small Businesses, and organisations such as Corus, JCB and many others. The trade unions also fully support it. As I have said, it is better to pay to keep people in work than to pay them to attend a jobcentre. What are we otherwise going to do with them? Will we train them to do the jobs for which they already have the skills? That is what we seem to do. It makes sense to provide that support, because it helps people to keep their dignity and their ability to pay the mortgage and it stops family break-ups. That alone would bring a major benefit to the Government. It must be a priority to keep viable businesses open and to protect jobs if we are to come out of the recession in a stronger position. If we fail to do so, there is a danger that we could lose many much-needed skills.

I want to discuss workers' rights. The Government have rightly made progress on introducing family-friendly policies, but those policies benefit people only if they have jobs, so we need to make those things work together. We have not been so bold in other areas, and the UK has a poor record, in comparison with other European countries, on protecting workers who face redundancy. It is worrying that General Motors Europe has admitted that it is easier to sack British workers because of the flexible labour market. Increasingly, when multinationals consider downsizing and shedding jobs, they see British workers as the easy option. We need to reconsider these matters, as it is scandalous that UK workers are among the cheapest to sack. We need a level playing field, and I urge the Government to act to give British workers the same protection as their European counterparts. This is not about favours; it is about fairness.

Linked to all that, we need further incentives to support companies that invest in our manufacturing sector. We could do that by giving better tax incentives or by demanding the repayment of grants, so that we would help them on one hand, but they would have to pay back with penalties. We would have to include penalties because some people want to come in, make a quick buck and disappear. Companies must decide which is the best option for them: is it to repay the advantage they have had in order to move quickly somewhere offshore?

We need to send the message that Britain is the best place to invest, and we can do that. We have the best skills and the best work force, and we make the best products in the world. We are world leaders in areas such as pharmaceuticals and aerospace, and we have a great skills base in the north-west, particularly in Lancashire. There are no better skills than those we have in aerospace in Lancashire. When we look at BAE Systems and at what flies out of there, we see that those skills and the research and development that go into that manufacturing base are second to none. The Americans look at us with envy, and rightly so, as we are building the best aircraft in the world.

I would like all that skill, knowledge and know-how to be linked with technology transfer, as that is where we miss out. We invest in military aircraft that are the best in the world, but we need a spin-off from that investment to create jobs in the civil sector. People always ask, what good is the military? It is good when it protects us, but I want to be able to say that it goes much further than that. I want to say, "Look at what we've created by transfer to the automotive industry and other industries such as shipbuilding, with submarines." There must be skills that we can transfer across to our other UK manufacturing bases. We have put in the research, development and investment, but we do not hear about technology transfer. When a space shuttle is put into space, we hear about the spin-offs and other jobs being created through that investment. We need to do the same and to recognise what we could gain from such major investment. I repeat that we are still the world leader in pharmaceuticals. We need to go forward with that kind of blue chip company, and we need to send the message that Britain is the best place to invest and do business.

Warm words from the Government in support of manufacturing are commendable, but they need to be matched by direct action. The Government have rightly embarked on record investment in our schools, hospitals and transport infrastructure, but that investment must be matched by a policy that prioritises British manufacturing, thus protecting British jobs. We invest in our railways, but we have trains that are built in Japan and other rolling stock that is built in Spain. Why is that continuing? Does the Minister think that Japan or Spain would let us export trains to them? The answer is no, they would not. When we are making all that investment with taxpayers' money, we must consider how to use it to help British jobs. We have missed a trick which we must not miss in the future. The Government spend more than £120 billion a year on buying manufactured goods, so the introduction of such measures would make a real difference to our manufacturing sector. For a start, why should not all the vehicles used by the Government and the public sector be made in Britain? What about Building Schools for the Future and Sure Start children's centres? Why should the desks and chairs that our children use in the classroom not be made in Britain? I could go on and on about how much more we could do. As I have said, British uniforms could be made in Chorley. Public infrastructure projects such as Crossrail and the 2012 Olympics should always prioritise in favour of British companies and British jobs, and should make sure that the steelwork, materials and everything else are from the UK.

We also need to invest more in skills and training if we are to reinvigorate the manufacturing sector. The Leitch report highlighted the importance of investing in skills and workers. The planned investment initiatives will go only so far, and we need to go further if we wish to remain at the cutting edge of manufacturing. We need to address this issue urgently, as it cannot be right that companies such as Rolls Royce have to recruit from abroad to fill the skills gap. We ought to recognise that problem immediately and put it right. I welcome the increasing number of apprenticeships and I commend the work of companies such as BAE Systems, which has invested significant resources in such apprenticeship schemes and in the company's future. One has only to look at its graduate and apprenticeship scheme in Barrow, which has benefited more than 600 people. About 13 per cent. of its Submarine Solutions work force has come through that scheme, proving that investment quickly brings rewards.

Train to Gain is also making a difference, but we must go further. We need to be bold and radical in offering training and development opportunities for those who are already in work to upskill and give them the diversity to meet the change in demand for skills. However, the Government cannot do that alone. Employers need to work together on that, but there should be greater incentives, particularly for small and medium-sized companies to invest in their work forces.

We will face challenges in future, but we must not shy away from them. Our manufacturing is something that I can be proud of, that Britain should be proud of, and that the rest of the world is very envious of. We are one of the leading exporters of high-technology products, and our productivity has risen by half since 1997, thereby outpacing Germany and France. The key test is whether we make the necessary investment to build on those achievements or whether we stand by and let our manufacturing industry deteriorate further. We cannot afford to do that. We have been through the painful measures and difficulties of the 1980s, and I know the impact that they had in Lancashire at that time and the problems that we faced. We have come through all that, and we must never return to it by doing nothing. This is not a political point: doing nothing would have taken us from recession into a depression, and that is why we were right to invest. We must not shy away from investment, although there will be critics. Fruit is now beginning to appear on the tree and it will not be long before we can pick it, so it benefits the Government. We must acknowledge when they get things right, and we should not be ashamed of what we have done. I repeat that doing nothing is not the way forward, and that we would have been in a depression if we had done nothing.

The weakness of the economy is dependent on the financial sector, as I said earlier. With a strong manufacturing base, we can secure continued economic growth and stability and help to support workers and return our economy to a position of even greater strength. I hope that we can expand on the measures that we have taken, and that they can grow. However, it is not all doom and gloom—there is good news. I have a company called Porter Lancastrian in my area. People might ask who they are: they produce bar products, but the brewing industry is suffering and pub closures are coming. However, Porter Lancastrian diversified, and now produces waterproof television screens for the fanciest hotels around the world, so that when people sit in the bath or have a shower, they can watch television. Waterproof televisions are going a bomb and they came out of Chorley. That is fantastic news—I do not think that MPs have claimed them on their expenses yet.

It is important to have initiatives to deal with these issues. Such initiatives should be about diversifying and creating new jobs. That is what we are good at in the UK. Providing a bit of help and support and bringing people together can make a real difference. I am pleased that we have been allowed to have today's debate. It will help to inform policy development and implementation, and the vision set out in the "New Industry, New Jobs" document. That document is important and manufacturing is important. Thank you, Mr. Fraser, for your patience. I also thank other hon. Members for turning up.

Several hon. Members:

rose—

Photo of Christopher Fraser Christopher Fraser Conservative, South West Norfolk

I remind hon. Members that I intend to commence the wind-ups at 10.30 am and that there are at least two Members who would like to speak.

Photo of David Drew David Drew Labour, Stroud 10:10 am, 9th June 2009

I note the desire of my hon. Friend Tony Lloyd to speak and congratulate my hon. Friend Mr. Hoyle, who put the case admirably. I am delighted to speak under your chairmanship, Mr. Fraser.

I shall concentrate on the key issue of the wage contribution, subsidy or whatever we want to call it. It might surprise people to know that Stroud is a manufacturing centre. Many people think that it is an area of agriculture, green hills and tourism. In fact, a disproportionate number of people—more than the national average and certainly the highest number in Gloucestershire—work in manufacturing, particularly engineering.

Our firms are mainly automotive or in the automotive chain—although some are aerospace—and they are experiencing some difficulties at the moment. The aerospace sector has, of course, lagged behind other sectors in terms of the recession, but, nevertheless, it faces some difficulties. I have been to all my major firms—Renishaws, Delphi, SKF, Lister-Petters and a smaller company called Deutz. In addition, I am in Cologne next week to try to fight to retain 30 jobs, which I think we can do if the parent company allows its subsidiary in Dursley to go it alone and work with Lister-Petters, which was the original company. That would provide an answer, and it is my duty to work towards such a solution. It is not all bad news: an ABB plant in my constituency is doing very well, because it is based in the water and power industries. The way in which ABB locks into those industries means that it is doing relatively well.

On wage subsidy and wage contribution, I must compliment the Government. Two of the firms that I have mentioned—Delphi and Renishaws—have laid off a large number of people. For Renishaws, that is unheralded. That company is a state-of-the-art probe manufacturer under the chairmanship of Sir David McMurtry, who is one of the stars of Britain and British industry. However, between December and January, Renishaws hit a wall because of what happened to demand for machine tools, of which probes are a key element. As well as the lay-offs, people have "volunteered" to go on short-time working to keep their jobs. However, accordingly, they will take the pain of the loss of money and the sacrifice that comes with that.

I went to see both Dephi and Renishaws early in the new year when they hit these problems. We agreed collectively that when people are on short-time working, their time can be used meaningfully to boost their skill level and that we should ensure that people can do the training that they would love to do but that they are normally too busy to contemplate. I pay due regard to a number of Government agencies that have been key to those discussions, such as the South West of England Development Agency, the Learning and Skills Council, Jobcentre Plus, Gloucestershire First—our local development agency—and Gloucestershire Training Group Limited, which will undertake the training provision. As my hon. Friend the Member for Chorley has said, the trade union, Unite, has also been crucial in encouraging its members to go along with the training.

Using Train to Gain, we have put training packages in place so that slack time can be taken up and that people can be usefully employed. There are two reasons why we have done that. First, as I have said, it is important for people to build up their skill level. Secondly, when we get out of recession, we have to be absolutely tooled-up, skilled-up and personed-up, because otherwise our competitors in Europe will take the work. The two firms that I am talking about are Renishaws and Delphi. Delphi has a huge order book going forward, but, of course, no one is taking up those orders at the moment. Renishaws is much more of a just-in-time business, but, again, it will be back because it is the world's leading manufacturer of highly skilled probes. We have a future; those firms have a future; however, we have got to get to that future.

As my hon. Friend the Member for Chorley has said, I commend the paper produced jointly by the Federation of Small Businesses and the TUC. I shall not discuss that document in detail, because I know that my hon. Friend the Member for Manchester, Central wants to speak. However, it is a very pertinent paper, which also has the benefit of being short, and it makes the point that such training schemes mean that firms are keeping people on their books. Of course, firms have the means to do so, because employment schemes involve a levy on companies, so that money is available to allow companies to keep people on the books while the state pays them in times of downturn. I am not suggesting that we go along all the way with that, because it is rather quaint to pay people to lie on the beach for three months at a time. I would much rather people were working and being trained when they are not working, so that they are appropriately skilled for when they come back.

As my hon. Friend the Member for Chorley has said, if we consider Wales, such schemes are not unique in our country. The Minister might have an interesting point of view on this because, under the ProAct strategy, such schemes are taking place in Wales, where people are being paid wage contributions to undertake training. Wales has led the way on that and the rest of the United Kingdom must follow.

Of course, smaller companies can already pay a training subsidy under Train to Gain. Again, that is nothing new. During the 1970s, to which people sometimes hark back, there was a temporary employment subsidy. Such schemes are nothing new; we have done it before and we must do it again. Why? Well, the alternative is to lay people off, which will cost. I know that there is a cost associated with such training schemes—the figure of £1.2 billion has been bandied around, which is the figure in the FSB and TUC paper—but it is not an absolute cost because people would go on to jobseeker's allowance and draw down all sorts of other benefits. Therefore, I would like the Government to cost such schemes. I know that I am arguing with my hon. Friend on this, but I would, at least initially, limit such schemes to the automotive industry, and then see how long the recession lasts. This is a short-term measure. We are not talking about it being indefinite because, of course, we hope that the recession will not be indefinite. It is a short-term measure, but, nevertheless, we need to take it.

I have some specific questions for my hon. Friend the Minister. I am eternally grateful for the Delphi-Renishaws package being put together, but the ghost in the room—if I can put it that way—that has not been dealt with is the need for a wage contribution. The Delphi-Renishaws scheme is taking place on a per person basis, and one issue is the upfront costs of the awarding body. Those costs should be removed or at least scaled down, because there will potentially be—we would like to see this—at least 300, 400 or perhaps even more workers undertaking the upskilling to get national vocational qualification levels that they have not previously managed to achieve.

Secondly, there is the question of what happens when someone drops out of the scheme. At present, the full cost is borne by the company. As that is something that companies in difficulty always worry about, we hope that there will be some flexibility so that the company does not have to bear the full cost of people leaving, for whatever reason, whether it is another job, family illness or so on.

Thirdly, apprentices are key to the scheme. Both companies have committed themselves to taking apprentices this year and next year, because they feel that that is the future. At present, the use of European social funding for those under 18 is not allowed, so we wish to have flexibility to include under-18s.

Finally, setting up such schemes is expensive; it requires a big budget. We want some clarity that they can continue in the future, because, whatever we do to begin with, we will want to roll it out. I would like other firms to join in and follow that model, which is exciting, innovative and absolutely right. Those are my specific questions.

In conclusion, I think that what we are trying to do in my constituency is absolutely right, but we do not want to be hung up on or hamstrung by the question of whether a wage contribution will be paid. There is a matter of justice: if the state is asking people to use their time and money to undertake such a scheme, the least it can do is make a contribution as they do so. We will get a benefit, as our firms will be even more competitive when they come out of the recession.

I hope that my hon. Friend the Minister hears my earnest pleas. I am grateful to the Government for putting enormous resources into supporting employment. I know that the scheme is a pioneer project, a pilot—it is pushing forward the boundaries—but, as I have said, the problem is not new. If we can crack this, other parts of the country and other companies can learn from us, but we need clarity about whether a wage contribution for the automotive industry is a possibility, albeit for a short period of time, because it would help everybody. We will push on with our plans regardless, but we really need that back-up.

Photo of Tony Lloyd Tony Lloyd Chair, Parliamentary Labour Party 10:22 am, 9th June 2009

In the little time that is available, I wish to make several brief points. I congratulate my hon. Friend Mr. Hoyle, who, as ever, has picked up issues that really matter to our constituents.

My hon. Friend probably agrees that we need to draw a careful distinction between saying that the Government ought to be active in their policy on employment and encouraging the industrial and manufacturing base, which can involve the proper use of Government procurement to ensure that British firms are advantaged, and saying that we ought to move to some kind of economic protectionism. I am not a natural free-marketer, but, nevertheless, we are a trading economy. My hon. Friend gave examples of British companies that successfully manufacture all over the world—those companies do not necessarily assemble cars in the end, but they manufacture the parts that go into them. We cannot take part in a process that involves cutting off our nose to spite our face, which would happen if we got the balance wrong. There is nothing inconsistent about adopting the kind of policies that are adopted by some of our European neighbours to support home industries. We do not have to cross the boundary into the wrong kind of protectionism.

Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

I totally agree. This is about using the same rules as our European counterparts. In the case of Japan, does my hon. Friend think that a Japanese Minister would ride around in a British-built car? The answer is no, because the Japanese Government have a policy that ensures that that does not happen. The rules should be the same for all of us.

Photo of Tony Lloyd Tony Lloyd Chair, Parliamentary Labour Party

We all agree with that. We want the rules to be used judiciously and carefully to the advantage of our employment and manufacturing base.

The Government must look at the role of Government procurement. I do not say that unkindly, but procurement over the years by all Governments has perhaps not shown Britain at its best. The civil service has not always known best how to work in partnership with manufacturing. That might seem like a plea for manufacturers. It is sometimes said that we have feather-bedded manufacturers in the past. We have allowed poor management to get away with an approach that allows them to become lazy and not as cutting edge as they ought to be. The Government ought to be using their purchasing power to promote the dynamic cutting edge. They should ensure that those who provide goods and services to them are at the forefront of global manufacturing.

I give the example—it is an important one—of BAE Systems. There is no doubt that in the past it got away with ridiculous prices, ridiculously slow delivery times and so on. The overly cosy relationship with previous Governments was not in the interests of BAE Systems or our employment and manufacturing base. Such things are now changing. There is a much tougher view in the Ministry of Defence and the Department for Business, Enterprise and Regulatory Reform about the procurement process, but we need to refine it to ensure that there is value for money and that the Government play a part in driving an industrial policy that leads to success.

I support my hon. Friends the Members for Chorley and for Stroud (Mr. Drew) in their plea for a proper look at a judicious use of employment subsidies in parts of industry. The Government rightly recognised that the importance of the banking system was not in whether individual banks succeeded or otherwise but in the fact that if the system had collapsed, knock-on effects would have spread throughout the whole of the UK's services and manufacturing economy. What the Government did was high risk but absolutely right, which is now being proven.

The argument for support for LDV, for example, is similar. The issue concerns not only LDV, but the supply chain that it is involved in and the importance of maintaining that whole infrastructure within our industry. We need to take a strategic view in respect of critical manufacturing firms and ensure that we offer support at this particularly difficult time. Conditions are likely to be difficult for manufacturing for some time to come, so I support the plea made by those who have already spoken.

The future will not be with the large manufacturers of the past but with small and medium-sized enterprises—those little firms that are highly innovative but often feel that they are not supported. I wish to make several points about them. First, while I agree with the arguments about traditional apprenticeships, we have to understand the position of the traditional apprentice in the modern world. A small firm on its own cannot devise a proper apprenticeship structure. There has to be a well-defined structure and access to further education. As I have said to Mr. Prisk, further education is fundamental, and any attack on it would be massively damaging to our manufacturing base. There has to be proper partnership between our education institutions, if we are to offer upskilling to the people who work in our economy.

We should bear in mind that this is not just about apprenticeships but about the reskilling of those who are in work and who already have good skills. My hon. Friend the Member for Stroud discussed labour subsidy. The reality is that people with skills who drift out of jobs usually do not come back, and we could lose that skills base in the future.

My final point is about the banking system. Historically, our banking system has seen itself as a great success, but it has always failed this country in the particular area of early innovators—those who do high-technology, quality research and who want to move into production. We are spectacularly bad in dealing with that gap, and many highly qualified, highly competent people leave these shores, often for America and the rest of Europe, to produce their products, because our banking system fails to take a risk at that risky stage of investment, which, nevertheless, is fundamental if we are to see a transition from idea to manufacture.

A firm in my constituency, Liberalto Engines, is currently suffering from that gap. Everyone says that its idea is great and that it will have all the backing that it needs, if it can get its idea into production. The idea is good, and the company knows that the product will work, but moving into prototype and demonstrating production capacity is, of course, risky. The company may fail, but the whole point of the banking system is to take risks and get a price for those risks. At the moment, however, the banking system is not doing that. That is one thing that the Government could do to ensure that we have a future in respect of the small, highly innovative, advanced technologies that we need.

We have some world-beating industries in this country. I visited a firm in my constituency last week called SSR. It is a training company that works with the media industries, which have produced bands such as the Happy Mondays, New Order and all the other great Manchester bands of the past. It trains people and gives them the skills of the future. There is a blurring of the distinction between services and manufacturing in that area, but those are the industries of the future. Those industries are massively high-tech and massively important for our future, and they are there now. They are successful and they will weather this economic storm and provide us with high-quality employment for the future. The future is good, but it needs a little bit of assistance from the Government now.

R

When the Government buys foreign it sends a clear message the UK Government does not care about UK manufacturing. They can give tax breaks to the Non-Doms who bleed Britain dry but not to manufacturers. We are Europe's weakling. Thank you, Gordy for selling British Energy to EDF. I'm sure it's good for France and French jobs.

Submitted by Robert Battersby

Photo of John Thurso John Thurso Shadow Secretary of State for Business, Innovation and Skills, Liberal Democrat Spokesperson (Business, Innovation and Skills) 10:30 am, 9th June 2009

May I say what a pleasure it is to serve under your chairmanship, Mr. Fraser? May I also congratulate Mr. Hoyle on securing this debate and on the excellent way in which he set out the issues, which I will come to in a moment? I also congratulate the hon. Members for Stroud (Mr. Drew) and for Manchester, Central (Tony Lloyd) on their contributions.

I shall pick up on a couple of points made by the hon. Member for Manchester, Central. First, he made a good point about Government procurement, which is important. Of course, the Office of Government Commerce exists precisely to have an overview of procurement within Government. At the moment, the OGC is largely focused on short-term economic gain in the procurement process, but it is wholly right and reasonable that it should also have a duty to consider its impact in the wider British economy and, as far as it is reasonable, to be helpful to our regions in the way in which it goes about its business.

The hon. Gentleman also mentioned further education and, in doing so, put his finger on something important, namely the way in which further education supplies potential skills to industry, particularly SMEs. Coming, as I do, from a background in the hotel and catering industry, one of the biggest difficulties faced by employers over many years has been finding short courses that are relevant for their staff, rather than those designed by the lecturers, with all good intent, that do not deliver the skills that are wanted in the industry. It is important for people to get skills from further education establishments that are fit for purpose in SMEs.

The hon. Member for Chorley underlined the importance of manufacturing. Although I will mention some of the bad things, I want to start by underlining, as he did, its importance to the economy and the success that it has enjoyed. The hon. Gentleman talked about the banks, which I will mention, too, because they are an important part of the mix, and about the success of the aerospace industry. I am sure that one of the firms at the back of his mind is Rolls-Royce. It is fascinating that Rolls-Royce, in my part of the world, is actively looking at marine renewable technology in Pentland firth. We have a real prospect, within a short time, of a number of companies using Rolls-Royce-manufactured kit to produce gigawatts of electricity consistently from a great national resource. We need that kind of technology transfer, and we need more innovation and research and development in that area.

Manufacturing has been in a fairly steady state of decline for a great number of years. I agree with the hon. Gentleman that Governments of both parties have not given it the attention that it deserves. It has dropped from 23.3 per cent. of gross value added within the economy in 1997 to 12.6 per cent. in 2007. This is partly due to the rapid growth of other parts of the economy, particularly the service sector. In real terms, manufacturing over that same decade has grown from £150.2 billion to £157.7 billion. The recession has clearly hit manufacturing output severely: in quarter 1 of 2009, it was down by some 13.1 per cent. over the year. That has obviously had a devastating impact on employment. The trend in jobs in manufacturing has clearly been declining. In 1998, the figure was more than 4 million, but last year it was around 2.6 million, so obviously it has reduced. But that masks part of the good news, which is that industry has been increasing productivity. The productivity of UK industry has been one part of the success story.

Manufacturing industry is having a torrid time at the moment. I want to look briefly at the current causes of that, which are pretty obvious. At the back of it all is the credit crunch, which has caused the recession. On the banks—bank lending and regulation—it is clear that our banking system was insufficiently regulated, particularly with regard to the separation between retail and investment banking. The result of that was a risk in the system that was simply unpriced. The banking crisis has thrown up a deeper-seated problem. With the few friends that I have left in the City, I have to be careful exactly what I say about this, but it seems that we have a structural and cultural problem, which is that the City has been seen as the place to go to make money. The way that the City has operated, with ever more complex financial products chasing each other round and being traded almost for the sake of being traded, means that our financial services industry has been inefficient in its primary task of providing capital for industry.

There is an opportunity in this current crisis to reshape the way in which our financial services industry serves industry generally. Rather than its making complex trades in complex products that turn out to be understood by nobody and of value to very few, we need to get back to the simple task of providing capital for industry to invest for the future. The City needs to go back to being the servant of commerce and stop trying to be the master of speculation. The other effect is that that industry has taken our best brains. Many of our best human resources have gone into financial services, rather than into industry. That culture carries across into the spirit of creating entrepreneurs. Indeed, when I said that I was going into the hotel industry, I saw a brief flash of pained expression in my mother's face because I had not chosen to go to university or take up a profession—although she rapidly reversed her view after I was successful. There is a view in Britain that it is better to go to university or a profession rather than into engineering or manufacturing, or to be an entrepreneur. We really need to tackle that as well.

We need to develop skills, but, as I have said, skills must be appropriate and further and higher education must reflect the needs of industry. We also need management skills. I recently chaired a symposium of the banks in my part of the world to try to connect small companies with their bankers and deal with some of the problems. The interesting thing that the bankers said was, "For goodness' sake, please can we have real-time, proper management information?" The number of SMEs that cannot produce such information is extraordinary.

We need to focus on research and development and investment and we must get across those good ideas that we have produced. We need a method by which we can invest in entrepreneurs. In my part of the world, small bits of money are invested directly in small companies—not granted—by the North Highland Regeneration Fund, which is helping to take small entrepreneurs to the next step. The hon. Member for Manchester, Central put his finger on a point that we need to address.

Looking to the future, I believe that there is a real opportunity. The recession has been devastating, and of that there is no doubt. Unemployment is up, and many companies are barely holding on. I shall not refer to green shoots, but I hope that we are seeing the bottom. Our job must be to create out of that adversity the opportunity to structure the economy for the future.

Photo of Mark Prisk Mark Prisk Shadow Minister (Business, Enterprise and Regulatory Reform) 10:40 am, 9th June 2009

I welcome you to the Chair, Mr. Fraser. This is the first occasion on which you have chaired a debate in which I have participated, and it is good to see you in your place.

I welcome the Minister to his place on this first occasion in his new role. He is the seventh or eighth Minister whom I have shadowed in the past few years. It is good to see him in his place, and I hope that he will last a little longer than some of his predecessors.

Mr. Hoyle has a long and distinguished track record in raising important issues concerning manufacturing. He speaks with great passion and verve, and rightly so. He raised a matter that other hon. Members also raised—the role of procurement. The debate has been useful and timely, and I commend all hon. Members who have contributed to it, including Mr. Drew, my hon. Friend Peter Luff and Tony Lloyd, who was right to consider the way in which procurement can be used without going down the path of protectionism. I share that sentiment.

As all the contributors to the debate said, manufacturing matters. It represents 13 per cent. of our gross domestic product, and generates more than half of our exports. It helps us to pay our way around the world. As my hon. Friend the Member for Mid-Worcestershire said, last year we were still the sixth-largest manufacturer in the world. We can and should take pride in the quality and strengths of the businesses and the work force in this country. We should not be unduly negative, cautious, careful and aware of the threats and problems, and we should not write manufacturing off.

Clearly, the sector has had problems. One million jobs have been lost during the past dozen years or so, even before the current recession. Since 1997, 10 per cent. of manufacturing businesses have closed. I hear from business and industry about a continuing and rising sense of frustration at the Government's policies as key investments go elsewhere. For example, last year Rolls-Royce chose to locate a new testing facility in Germany, not in Derby. It told me that that was largely because of its frustration at the Government's lack of support. One of its directors said:

"The Germans value manufacturing. There is better productivity and they have a better education system. Government" here

"has chosen not to be competitive. Britain has caused this industry to export its capabilities"

Despite talk from Ministers, it is clear that industry is unimpressed by the Government's inaction.

It has been clear since the fall of Lehman Brothers last September and the collapse of world markets last autumn that urgent action has been needed, particularly in introducing working capital into businesses, so last November my party—the Conservatives—set out a plan for a single, national loan guarantee scheme worth £50 billion for all viable businesses, whatever their size and sector. It was easy to access, clear, and simple to understand, and it would underpin conventional bank lending. That is also why we are committed to cutting the main corporation tax rate from 28p to 25p by simplifying the tax system. We want to reverse the Chancellor's policy of raising the small company corporation tax rate from 20p to 22p. In that way, we can directly help manufacturers, large and small, to invest with confidence for the future. As several hon. Members said, we also need to consider skills in the sector. We are committed to cutting payroll costs for the smallest employers for at least six months. That is the sort of practical action that industry wants, and it is what my party intends to provide.

All of us in politics must be clear about how manufacturing is changing, as the hon. Member for Manchester, Central pointed out. First, we must recognise how globalisation has led to international fragmentation of production. The production of components and parts is spread increasingly not throughout countries, but throughout continents. That creates opportunities and threats. On one hand, global sourcing gives our manufacturers the chance to cut costs and to be competitive. On the other, British firms have no choice but to be globally competitive in their specialisation simply to survive.

The Government can help small manufacturers in the challenge of accessing global value chains—we debated that earlier—especially in emerging high-growth markets. To be fair, they recognise that need, particularly in areas such as India and China, but it is not clear whether their policies are working. Perhaps the Minister will tell us what progress is being made to help small manufacturers in emerging markets.

The second challenge for public policy is the increasing importance of intangible assets, such as design, branding and software, and it is important to consider carefully how they can be encouraged. It may seem counter-intuitive that such intangibles should matter to manufacturers, but the difference between a key manufacturer and its competitor often lies in its know-how and creativity. Fortunately, we have great strengths in design, whether in computer games or luxury car brands. We should have confidence in our belief that we can build on those strengths. A crucial issue—it would be helpful if the Minister responded to this—is the Government's progress in protecting our intellectual property. Leading manufacturers cite intellectual property's critical role in their ability to maintain their position. Perhaps the Minister will tell us what the Government have done about that during the past six months.

Perhaps a more pressing question that many manufacturers raise with me is the growing gap between schemes that the Government have announced and the money that businesses have received. There seems to be a gulf between Ministers' rhetoric and the reality in the business world. Instead of our plan for a single loan guarantee scheme, Ministers have launched a plethora of schemes, but have failed to make them work. We have the working capital scheme, the enterprise finance guarantee scheme, the capital for enterprise fund, the transition loan fund, the European Investment Bank's supported loan scheme for growing firms, the EIB-backed automotive industry loan scheme, and the £1 billion non-EIB-backed automotive loan scheme. All have different rules and criteria. They have different forms and require different business data. The result is confusion for businesses, and failure to deliver in Whitehall.

The capital for enterprise fund, for example, is worth £75 million for expanding firms. It was launched in November, and we were told that it would invest from January, but in June reports from the Government suggested that nothing had been invested. Perhaps the Minister will confirm whether any business has received money and, if not, why not.

The automotive assistance programme comprises two elements: a £1.3 billion loan guarantee from the European Investment Bank, and a £1 billion additional loan guarantee to help the car industry to develop low-carbon technologies. The programme was announced in January, when the French and German Governments had already delivered money to their car makers. Since then, Ministers have dithered and delayed in working out schemes and negotiating with companies. In February, The Birmingham Post, frustrated by the lack of progress, wrote an open and critical letter to the noble Lord Mandelson asking when Ministers would act. February went, and March came and went, but in April Ministers proudly announced a loan of £340 million for Jaguar Land Rover and a £370 million loan for Nissan. That was good news, but on 6 May it became clear that the talks with Tata were slipping and struggling, and in danger of collapse. So here we are, five months on, and it is still unclear exactly what has happened to the money. Will the Minister tell us whether a British company has received funds under that programme? The German Government have delivered, and the French and Italian Governments have delivered. Why under our Government are British manufacturers the last to receive the help that they have been promised?

The Prime Minister likes to talk about providing real help, and I suspect that he needs it at the moment, but he and his ministerial colleagues need to realise that talk is cheap. At the moment, their record is one of press releases, not practical action. It is a tale of dither and delay, of bold promises and then timid deeds. I have no doubt that Ministers wish to help, but my fear is that the gap between their rhetoric and the reality for businesses is one through which hundreds of manufacturers and thousands of workers could yet be lost.

Photo of Kevin Brennan Kevin Brennan Minister of State (Department for Children, Schools and Families) (also Department for Business, Innovation and Skills), Minister of State (Department for Business, Innovation and Skills) (Further Education, Skills, Apprenticeships and Consumer Affairs) (also Department for Children, Schools and Families), Parliamentary Secretary (Cabinet Office) (Third Sector) 10:50 am, 9th June 2009

It is a pleasure to serve for the first time under your chairmanship, Mr. Fraser; I welcome you to that role. I thank Mr. Prisk for his generosity in wishing me a long period in post. I am not sure that that is officially his party's policy, but I thank him in any case.

I congratulate my hon. Friend Mr. Hoyle on securing this timely and important debate on manufacturing and employment. In the very short time that I have been in post, I have already learned that he is very active in this field. He raised a number of issues, which I shall come to in my remarks, including wage subsidies and whether it is too easy to get rid of workers in the United Kingdom.

I also congratulate my hon. Friend Mr. Drew on his contribution. He gave examples of successful manufacturers in his constituency, including Renishaw and Delphi, and talked, importantly, about the help that Train to Gain has been able to offer those companies during the current economic downturn. He asked a series of specific questions. I shall have to write to him about those; I have put that on the record to ensure that it happens.

I also congratulate my hon. Friend Tony Lloyd, who made the important points that his city would not exist as we know it if it had not been for free trade, and that in supporting British manufacturing we need to ensure that we note the importance of international trade. He made very good points about procurement and about further education and apprenticeships.

This has been an important and interesting debate. The Government are deeply conscious of the importance of the manufacturing sector to all our constituencies and to the country as a whole. After all, it is what catapulted this country on to the world stage in the first place. Long before globalisation was a term in common usage, Britain was regarded as the workshop of the world, exporting more than half its iron, coal and cotton cloth. The constituency of my hon. Friend the Member for Chorley played a vital role in the cotton industry as part of that.

Of course, times have changed and manufacturing is changing with the times, shifting its base towards more and more high-tech manufacturing. Companies are developing in exciting new areas such as fuel cells, plastic electronics and Bluetooth technology. Traditional sectors have reinvented themselves through information and communications technology, software and new technologies such as robotics and materials. Nevertheless, our capability in advanced engineering remains world class.

Despite the changes in manufacturing industry, it remains in some ways the unsung hero of the British economy. The statistics only partially indicate the significance of the manufacturing industry to our economy. However, as John Thurso said, we remain a major manufacturer in world terms. We are the sixth-largest manufacturer in terms of value. At the end of 2008, the manufacturing industries in this country employed close to 3 million people and accounted for 12.6 per cent. or £157.7 billion of our national output. In addition, as my hon. Friend the Member for Chorley said, manufacturing is responsible for 75 per cent. of our business research and development. Even taking account of the global economic downturn, productivity in manufacturing has been growing at a rapid rate in the UK; it has grown by more than 50 per cent. since 1997. As the hon. Member for Caithness, Sutherland and Easter Ross pointed out, that is growth in real terms, albeit at a time when other sectors of the economy have been growing more rapidly because of the changes that we have seen in the structure of our economy.

However, we are here today because of the points that my hon. Friend the Member for Chorley made about the way in which manufacturing, along with other sectors, is suffering in the global recession. The latest data show that manufacturing output has fallen for 13 months in a row. That is also happening in other countries, but as he pointed out, that is no consolation to the hard-working men and women in our communities who have jobs in manufacturing and who are affected by those changes. Nor is it any consolation to those who have had to switch to short-time working or who have had to lose their jobs as a result of the economic downturn.

In many of the communities affected, memories are still fresh of the 1980s and '90s. Then, when there was a downturn and manufacturing was suffering, there was a very different response—some would say no response—from the Government. It was an approach not of trying to be fair to those communities, but of simply being laissez-faire in their attitude towards the economic downturn and towards manufacturing at that time. That has changed.

Photo of Mark Prisk Mark Prisk Shadow Minister (Business, Enterprise and Regulatory Reform)

On that point, can the Minister tell me how many British companies have actually received funds under the automotive assistance package?

Photo of Kevin Brennan Kevin Brennan Minister of State (Department for Children, Schools and Families) (also Department for Business, Innovation and Skills), Minister of State (Department for Business, Innovation and Skills) (Further Education, Skills, Apprenticeships and Consumer Affairs) (also Department for Children, Schools and Families), Parliamentary Secretary (Cabinet Office) (Third Sector)

I cannot at this point. I will write to the hon. Gentleman later, if he will allow me, given that I have been in post for just a few hours. I will write to him when I have the opportunity. However, I will make the point that at least the present Government are putting forward real help for industry in a way that was not the philosophy when his party was last in power.

Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

Much has been made of our not helping and supporting the automotive industry. I can tell hon. Members that the Select Committee on Business and Enterprise, of which I am a member, has recently taken evidence from Jaguar Land Rover and other car companies and the components sector, which welcome the initiatives, help and support that Jaguar Land Rover has been given by the Government. I must reassure hon. Members that Jaguar Land Rover is very pleased and wishes to continue with the help and support that the Government have given it.

Photo of Kevin Brennan Kevin Brennan Minister of State (Department for Children, Schools and Families) (also Department for Business, Innovation and Skills), Minister of State (Department for Business, Innovation and Skills) (Further Education, Skills, Apprenticeships and Consumer Affairs) (also Department for Children, Schools and Families), Parliamentary Secretary (Cabinet Office) (Third Sector)

I am grateful to my hon. Friend for his intervention, which was, as ever, very helpful, fair and reasonable. In the short time left, I shall try to address the point that I think he wanted to get to in the debate, which is his debate, after all. I am referring to wage subsidies. That is something that the Government have carefully and extensively examined. There are two reasons why currently the Government have not decided to proceed with the idea. First, there is the question whether such schemes can be effective and would be value for money. Secondly, there is the experience of that idea in the past. My hon. Friend the Member for Stroud mentioned the 1970s, when wage subsidies were in place. The question is whether what happened represented value for money or whether firms took the subsidy and did what they would have done anyway.

That said, the Government do understand the anxiety and difficulty faced by people who find themselves out of pocket on shorter working weeks, so we are ensuring that there is support for them. We have expanded the Train to Gain scheme. Hon. Members acknowledged that during the debate. That is the Government's flagship skills service that supports employers of all sizes and in all sectors to improve their employees' skills. From January of this year, struggling small and medium-sized enterprises have been able to access increased training provision to help them to emerge stronger in the upturn. That includes bite-size qualifications in business-critical areas and more funding for second qualifications. In the meantime, individuals and families on tax credits will see an automatic increase in the money that they receive, to compensate for the loss of income. In March, for example, 355,000 families were receiving on average £35 a week more support through tax credits.

Where there are significant redundancies in the manufacturing sector, the rapid response service is working to move people quickly into new jobs, preventing them from becoming detached from the labour market. We have doubled the funding for the service already and will double it again. As we are particularly concerned to help the long-term unemployed, we are also making available 75,000 further education training places for Jobcentre Plus referrals after six months' unemployment, taking on board the important points that hon. Members made about further education.

I would like to go on and outline how we are preparing for the upturn, which we hope is coming—many hon. Members referred to that—but I fear that time will not allow me to do so. Our challenge now is to ensure that our manufacturing sector is ready to lead the industrial revolution of tomorrow, just as this country led the industrial revolution of the past.