[Christopher Fraser in the Chair] — Manufacturing and Employment

Part of the debate – in Westminster Hall at 10:40 am on 9th June 2009.

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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.