Manufacturing Industry — [Joan Walley in the Chair]

– in Westminster Hall at 2:30 pm on 2nd December 2009.

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Photo of John Pugh John Pugh Shadow Minister (Health), Shadow Minister (Treasury) 2:30 pm, 2nd December 2009

It is a pleasure to speak under your chairmanship, Ms Walley.

In a way, this is an odd subject for me to choose, because I am not an expert in the field of manufacturing industry and I hope to learn quite as much as I assert in the course of the debate, given the exalted company I am among, but I am driven by two motives. The first is to expiate a slight sense of guilt, because I have spent my entire life consumed with affairs such as philosophy, education and politics, but my father's career was almost entirely in manufacturing industry and he left me in no doubt from boyhood onwards that anything I did was entirely parasitic on the noble tradition of British manufacturing.

I am also driven by reflections on recent events. One event that struck me took place in my constituency. A sweet factory, which had existed for some time, closed down. It is not unusual for a seaside town to have something such as a sweet factory in the midst of it; the economies of seaside towns are quite mixed. The factory was profitable and was investing in new machinery. It was adding to the employment mix in Southport and had a good market for its goods-albeit with dental complications for some consumers of them. I was not especially fond of the product, but I did visit the factory and I had no reason to think that it would not be there for many years.

However, the factory was bought and closed down by a private equity firm. In fact, it was the same private equity firm that took over Halfords and the AA. The land was sold for housing, some of which has started to be built but none has so far been sold, due to the recession. The machinery was sold off to Slovakia-I presume that people are making Chewits out there as we speak. On one hand there was a loss of livelihood and, clearly, of employment, but on the other hand there was a profit for the investors in the private equity company. Some would be very affluent individual investors and some would be organisations such as banks and pension funds. That is, in a sense, how the market works.

Another event that triggered me to apply for the debate was something that I came across in a news broadcast. It was the story of Kemble Pianos-the last big piano manufacturer in the UK making standard, not specialist, pianos-which is being moved by Yamaha to Asia. We have to look at that and ask what has happened to the British piano industry, which at one stage was a major manufacturing industry. Clearly, the home market is not as good as it ought to be. The export market has slumped to some extent. We can blame a range of causes, including the rise of digital keyboards and the lack of decent music teaching in schools. However, the effect of the end of piano production in the UK must be a massively increased carbon footprint for pianos.

Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

The hon. Gentleman is correct. We are talking about a short-term gain for a long-term loss. We have seen production at the sweet factory taken overseas and the closure of the piano factory, yet the pound is now weaker and the euro has strengthened, so the people who made a quick buck ought to be reinvesting in manufacturing in the UK, as the economy is absolutely ripe for that. Does the hon. Gentleman agree?

Photo of John Pugh John Pugh Shadow Minister (Health), Shadow Minister (Treasury)

I do agree, but oh that it were so. I reflected on the enormous transport cost of moving a piano anywhere, let alone across the oceans, and just thought that it was not particularly in the world's or the UK's interest. If we add to that the general fact that Britain's slow emergence from recession is due in part to our difficulty in exporting our way out of recession and in part to our overdependence on financial services and a perceived and deteriorating imbalance in the economy, we have to say that it is an issue for Government in one sense or another.

The Government have a genuine interest in the shape and balance of the economy and the impact of such economic trends. To depend exclusively on the service sector, and particularly the financial sector, is an economic weakness for the country as a whole. It is a weakness in the same sense that dependence on tea was a weakness for Sri Lanka. When that commodity failed, the whole economy failed too. In part, we are in an analogous situation at the moment. Unlike Sri Lanka, which is one of the few places where tea can be grown, we have to accept that financial services can go to other places and, in certain circumstances, will do precisely that.

Since the turn of the century, manufacturing jobs have dropped by 16.6 per cent. in the UK, which I think is the lead drop in Europe. As a result, the balance of payments has worsened because manufacturing still makes up 48 per cent. of our exports, although it makes up only 12 per cent. of the economy. I do not think that anybody would disagree fundamentally with that analysis, but people often respond to it with plain resignation, as if it was simply a state of affairs that we must put up with. The reasons for that are partly ideological and partly historical.

One ideological reason that is strongly promulgated at the moment is that such economic fallout is almost inevitable, and not even a Government can buck the markets. Coupled with that is the belief that an unfettered market delivers, in some sense, the optimum outcome. I have heard arguments that it is acceptable for people to lose their jobs in Southport so that private equity firms can make money and invest somewhere else, because if that happens it will be the most efficient financial outcome so, at the end of the day, it is probably the best outcome for everybody. I see that as treating free trade almost as an article of faith.

I call that ideological because, speaking as a philosopher for a moment, I cannot see that either of those tenets-that people cannot buck the markets and that markets always produce the optimum outcome-can be conclusively verified or for that matter falsified. It is certainly the case that Governments are not particularly or universally good at bringing about the economic effects that they wish for on behalf of their citizens.

That brings me to the historical argument, and a different reason for a sense of resignation. Inscribed on the British psyche are memories of bad manufacturing policy, subsidising companies with a poor research and investment history, useless management, poor labour relations and sometimes no real market. One can think of examples from the past, such as DeLorean and British Leyland, as well as the expression "lame duck", and unsuccessful and politically motivated economic intervention.

Photo of Tom Watson Tom Watson Member, Labour Party National Executive Committee

I am enjoying the hon. Gentleman's contribution. Does he think that there is a great untold story in this recession? The reason why unemployment is not higher is that, unlike in previous recessions, management and trade unions, through partnership working, have negotiated short-time working, pay freezes or, in many cases, even temporary pay cuts. That is a tribute to management leadership and to modern trade unionism, which have both played their part in trying to help us get through the recession.

Photo of John Pugh John Pugh Shadow Minister (Health), Shadow Minister (Treasury)

It is a tribute to modern trade unionism. No doubt when the Conservative spokesman makes his speech he will credit that to previous Conservative leaders who have contributed to modernising-

Photo of Mark Prisk Mark Prisk Shadow Minister (Business, Innovation and Skills)

The hon. Gentleman takes the words out of my mouth. To concur with the remarks that have been made and to make this intervention appropriate, I shall say that if both sides of a company collaborate-and there have been good signs of that in the past year-it is good for British industry and it is to be welcomed. Clearly, it is nice to know that a strong, effective framework was put in place in years past, but I applaud a good attitude on both sides, and I hope that the hon. Gentleman does too.

Photo of John Pugh John Pugh Shadow Minister (Health), Shadow Minister (Treasury)

Indeed, I do.

I was going on to say that this is not a knock-down, all-purpose argument against any kind of intervention by Government. Looking back at history, we always forget the effective Japanese subsidy strategy and product dumping. If we have national interest foremost in our minds, in a sense, the Japanese did it right and we did it wrong. They caused the demise of decent British industries, which could and perhaps, with proper Government nurture, should have survived. I am thinking in particular of Triumph Motorcycles. I do not know how many people know about Triumph motorbikes or motorbikes in general, but they are still considered an aspect of British engineering excellence, unfortunately no longer mass-produced but popular on the second-hand market. We draw our lessons selectively and partially.

Photo of David Taylor David Taylor Labour, North West Leicestershire

May I remind the hon. Gentleman that there has been a renaissance? Not to previous volumes, I acknowledge. The company is owned by a rich constituent of mine, who manufactures not in my constituency but near the town of Hinckley in west Leicestershire. Triumph is slowly on its way back. The hon. Gentleman should not forget that it is possible to have a Lazarus-type return from the grave.

Photo of John Pugh John Pugh Shadow Minister (Health), Shadow Minister (Treasury)

It is a small triumph for Triumph, and I am pleased by it.

Looking at the history or accepting the ideology, we might conclude that saving British manufacturing is as futile as trying to repopulate the jungles with pandas. We cannot stop a trend once it is in place. Government could concentrate on what some people call, and I have learned to call, the horizontal approach, regarding the task of Government as simply creating the environment in which industry may, if it can, thrive. A range of things-all of which I am sure that everyone in the room applauds-is done under that heading, such as encouraging enterprise. One of my earliest activities in the House was to work on the Enterprise Act 2002. Other things include encouraging competitiveness, good regulation, fighting protectionism, providing the right fiscal stimulus for research and development and investment, encouraging cross-industry collaboration-the Government have done a great deal of that recently, in particular in the motor industry-trying to boost skills through industry sector councils and the like, and encouraging science and the development thereof.

No one is against such activity, which is the widely accepted consensus on where we need to be. However, more strategic intervention is questioned, which is partly the reason why some politicians, who can be found on all Benches, question why we need a DTI, a BERR or a BIS, and have called for their disbandment or elimination. Some people propose getting rid of regional development agencies, because they regard them as not fit for purpose, not doing the job or whatever, or as poor pickers of winners in the economic stakes. There is a bar-room view that any firm in need of a state leg-up is ipso facto non-viable and should not get any help, or that anyone who was good at successful intervention in business would not be in a development agency but would be in business intervening and making money for themselves. I pass such views on as the observations they are.

People ask if the European Union does not have a point in inhibiting-if not prohibiting-state aid. Frankly, in this country we are rather good at applying the state aid rules in a ferocious and sometimes rather procrustean way. We could look at the facts about manufacturing at the moment and say, "In any case, hasn't British manufacturing, buoyed by the falling value of the pound, emerged from the recession leaner and fitter?" Indeed, that is true. Manufacturing is not a disaster story. However, although the sector is leaner and fitter, it is also smaller and continues to be so.

Photo of David Taylor David Taylor Labour, North West Leicestershire

Although I agree that the sector may be leaner and fitter, in some cases that owes nothing to the British banking system. The east midlands is the region of the country with the highest proportion of manufacturing jobs, and car components are part of that. One particular firm looked to its long-term bankers to see it through a difficult period, during which it had gone down from five, to four to three-day weeks, but could continue to trade. Reply was there none. In the end, the firm had to turn to its Indian owners in Mumbai, who saw it through and did a magnificent job in that respect. Foreign ownership is not necessarily always a bad thing and a precursor to an outsourcing of jobs, is it?

Photo of John Pugh John Pugh Shadow Minister (Health), Shadow Minister (Treasury)

I certainly agree with the general point that the banks have not really done their part in resuscitating British industry or keeping it going through the dark days of recession. I am not unkind enough to read it out, but I received an e-mail from someone in manufacturing industry saying that Government schemes have not done a lot more either, and that credit insurance schemes and the like did not really have the teeth that the Government credited them with having.

Photo of Andrew Miller Andrew Miller Chair, Regulatory Reform Committee, Chair, Regulatory Reform Committee

I counsel the hon. Gentleman not to confuse the number of people employed in manufacturing with the output of manufacturing. We are still the sixth biggest manufacturing economy in the world, and that must not be forgotten.

Photo of John Pugh John Pugh Shadow Minister (Health), Shadow Minister (Treasury)

That is a typically perceptive point from the hon. Gentleman, and one that I had considered enlarging upon, but he must acknowledge that if one claims that industry is just as vibrant but employs fewer people, one would expect to see a big increase in productivity gain across British industry, but I do not think that is there.

Photo of Tom Watson Tom Watson Member, Labour Party National Executive Committee

There is another thing we need to guard against when looking at jobs. We must accept that in the bad old days of the early 1980s manufacturing jobs would have included the security guard employed on the gate, the lady in the canteen and the cleaner in the factory. Those jobs have now been outsourced. They are totally dependent on the manufacturing economy but are now technically service sector jobs, so we must be careful when talking about employment figures.

Photo of John Pugh John Pugh Shadow Minister (Health), Shadow Minister (Treasury)

That subtlety had eluded me and justifies my opening remark that I will learn as much from the debate as I assert, so I thank the hon. Gentleman.

If Members will bear with me, I want to argue that the Government must do more strategically, meaning that they must do more in the way of having an industrial policy. After all, there must be some explanation why our manufacturing industry has shrunk faster than in other nations, which have all faced the same threat from the Chinas and Indias of the world, and why we may currently be making smaller inroads in the new export markets, such as China. I do not want to argue that the Government must do that, but they are inescapably bound to play a strategic role and cannot avoid doing so. It is inescapable. They must do that either skilfully, or in a ham-fisted fashion.

There are three reasons. The first is that the Government are the sole provider of public infrastructure, which can make a vast contribution to prosperity. Consider the multi-billion pound contribution the Government are currently doomed to make to Crossrail, partly to serve the financial services industry. Consider the protracted delays in projects of a similar ilk in the industrial north and midlands-Members from the north and the midlands present will appreciate that point. I could cite the Olive Mount chord in Liverpool as an example of a small engineering project that, had it been in any other city, would long since have been completed, and I dare say that other Members could cite similar instances from their constituencies.

When dealing with the current public deficit, we should consider the dangers of dramatic and ill-planned reductions in capital spending where that spending actually engineers development and economic growth. Some people believe it does not do that, but there is good empirical evidence to indicate that is exactly what it customarily does.

One has to tie in our poor manufacturing performance-or our relatively poor manufacturing performance, as there are also success stories-with our very poor record on public infrastructure when compared with other European nations. I am not sure where we are in the European league table, but we are certainly far lower than we ought to be. That is the first reason why the Government are doomed to play a strategic role and they just need to play it smarter.

Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

One of the other issues we have failed to address is that our counterparts in France, Germany and even Wales have put in a short-time working subsidy to ensure that manufacturing jobs have not been lost, and that is a decision the Government should have taken. It is still not too late-we have seen France and Germany expand support for manufacturing. Does the hon. Gentleman agree that a way forward would be a short-time working subsidy, rather than Crossrail?

Photo of John Pugh John Pugh Shadow Minister (Health), Shadow Minister (Treasury)

There are difficulties with having an open market in Europe and not having each individual nation subsidising its own industries as it wishes, which would be antithetical to the whole spirit of having a free and open market. However, mechanisms are in use abroad that are well worth inspection by our Government because there are circumstances in which they appear to work.

The second reason why the Government are inescapably part of the strategic plan and cannot but have a strategic economic policy is that they control most of the levers of education and training. That again goes beyond the boost to nanotechnology and bioscience, and events within the golden triangle of Cambridge, Oxford and London. We need a wider range of skills and a wider application of skills to employ people who will not end up as research scientists but who are, none the less, capable of doing a skilled and satisfactory job.

Let me relate an anecdote. I recently attended my local tech college for the opening of a new drama studio by Alexei Sayle. I was delighted to see so many lively youngsters, all of whom could see themselves on "The X Factor". What slightly worried me was that the same college, excellent though it is, had a very strong reputation for teaching basic apprenticeship skills such as plumbing. I see nothing wrong with people who do one thing also doing another. However, I see something wrong in structuring education for children in such a way that their skills cannot easily be employed in a reliable way in the employment market. To some extent, Government initiatives in education have encouraged quantity rather than quality achievement, but I will not go into that now.

Thirdly, and most importantly, the Government are the principal provider of financial resources to the banks, and they have a right to know where the money is going-how much is going to small and medium-sized enterprises and to manufacturing in the UK, and how far credit lines are being tightened as the banks seek to recapitalise. They have every right to know such information, and they just need to assert themselves to get it from the banks. We are asking not for information about individual contracts with individual manufacturing firms, but for the gross trends to be plotted, analysed and identified and for the banks to be held to account for what they are doing. By and large, we own them, and it is our money that they are using.

Transparency is what it is all about, and a manufacturer, I am sure, would say that they would settle in part for that. However, transparency is not a direction; it falls short of that. Some people have put the case against transparency, but knowing how much the major banks are lending to the manufacturing cause, the SMEs and so on is information that we have the right to know.

The case against direction is also weakening. We have had the spectacle of lame ducks in the City being rescued, but we have decided that lame ducks in the midlands and in manufacturing industry should not to be. We may have done that with a degree of grudging approval because it is necessary, but fundamentally it is being done for economically strategic reasons. My point is simple; there is a major strategic reason for having a sustainable mixed economy. It is what is needed to pull ourselves out of recession. Despite the fact that we are all free marketers, we acknowledge that there is a strategic importance to the defence industry and the agricultural sector. We accept a level of Government intervention in both areas; it is pretty well normal. There is a strategic need for a balanced economy. That should mean, in addition to all the points that I have made so far, having a hard look at the overweening influence of the retail sector, in particular of the big supermarkets, on manufacturing, because it now controls the production chain in ways that make it difficult for large manufacturers to make a decent return on investment. I understand that the Conservative party has recently spoken about breaking up the big supermarkets, and that is something all parties should seriously consider.

Careful listeners will have picked up a northern bias in my remarks, for which I do not repent in the least. It is not only me; the manufacturing industry says that, for too long, the City and manufacturing industry have travelled different roads. Now might be a good time to reflect on where each sector is going, because the Government have a role to play as a marriage broker that influences the banks-perhaps even creating new banking facilities such as an infrastructure bank-penalises short-termism in investment and that ensures, I repeat, transparency.

I am genuinely comforted-even though few people are-by the remarks of Lord Mandelson, who seems to embrace and accept an aspect of strategic economic planning. If he is a convert to my way of thinking, I just hope that the conversion is not too late. I press upon Members the need for a balanced economy for the United Kingdom that involves, for some time to come, a good manufacturing sector.

Photo of Andrew Miller Andrew Miller Chair, Regulatory Reform Committee, Chair, Regulatory Reform Committee 2:55 pm, 2nd December 2009

It is a pleasure to follow Dr. Pugh and I congratulate him on choosing this subject for debate. As all hon. Members will know, my constituency is dominated by significant manufacturing enterprises, many of which have been incredibly successful despite the recession. I shall concentrate my remarks first on Vauxhall, partly on Shell, then on downstream chemicals and finally on small and medium-sized enterprises. I will illustrate by way of example when I agree or disagree with the hon. Gentleman.

To put down one little marker, I wish to remind the hon. Gentleman that it was his party's economics spokesman, Dr. Cable, who argued against the Government having involvement in what turned out to be the Vauxhall rescue, and a very successful rescue it has been. That came about as a result of an extraordinary partnership, and my hon. Friend Mr. Watson was absolutely right: it was a classic illustration of how new trade unionism-working with the Government, the management and the regional development agency-has transformed what looked like a desperate situation into one of stunning success.

Not only do we now have a commitment to the volume of vehicles that we believe is necessary to maintain job security in the medium term, but it puts us into a very competitive position from which we can launch a bid for next generation vehicles being manufactured in the UK. That really must be a goal that all parties represented in this Chamber acknowledge as worth while. We should not shy away from the fact that action has been the result of close working.

Although some fairly sharp words have been spoken on the subject during the past year, I heard Tony Woodley, general secretary of Unite, who happens to be one of my constituents, praise the role of Lord Mandelson. I also saw the same general secretary with his arm around the Vauxhall chairman, Bill Parfitt-a great man-talking about how the strategy, working together and partnership have been crucial in recovering the situation and turning it to one of UK advantage. We must not forget that. Twenty years ago, that company was in serious trouble. Let us not kid ourselves.

The transformation from the brink of failure to the high quality and high productivity that exist on the site has come about through partnership-not top-down solutions or one-way streets, but close partnership that has involved people being committed to training to the nth degree, achieving skills that have never been known in that industry and the acceptance of technologies never thought of.

Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

My hon. Friend has made absolutely the case for the car industry. Does he not feel a little embarrassed, as I do, that Ministers ride around in Japanese cars involving not one British product or British job? Is it not time to go for the new Astra and ensure a commitment to British manufacturing?

Photo of Andrew Miller Andrew Miller Chair, Regulatory Reform Committee, Chair, Regulatory Reform Committee

I agree totally. I would ditch the fleet of Priuses, and I would ditch the Leader of the Opposition's Lexus as well. A Vauxhall Astra with a 1.9 diesel engine is far greener than the Lexus. I am absolutely with my hon. Friend on that point.

Photo of Tom Watson Tom Watson Member, Labour Party National Executive Committee

I am grateful to my hon. Friend for allowing me to mention the fact that I am the only Minister in history to argue with the head of the Government car service for a smaller car rather than a larger one. I wanted one made in Britain. Would my hon. Friend like to hear from Members on both Front Benches a commitment that, should they ever find themselves in government, they would be driven in a British-assembled, not an overseas, car? That is an important point: procurement policies in the public sector can further help British manufacturing.

Today, the Home Secretary announced a policing White Paper. His central message was that we can make savings through procurement, but what we need is the transparency that Dr. Pugh discussed. We need to know how much police authorities are paying for their vehicles so that we can be certain that they are not just buying BMWs because the chief constable fancies one.

Photo of Andrew Miller Andrew Miller Chair, Regulatory Reform Committee, Chair, Regulatory Reform Committee

I could not agree more with my hon. Friend. One would think he would have argued for a larger car, but he took the honourable route, and I congratulate him on that. I would like to hear Members on all three Front Benches give the commitment that he seeks.

Several hon. Members:

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Photo of Nigel Dodds Nigel Dodds Shadow Spokesperson (Business, Enterprise and Regulatory Reform), Without portfolio, Shadow Spokesperson (Justice), Shadow DUP Spokesperson (Without Portfolio)

I am grateful to the hon. Gentleman for giving way in this interesting and excellent debate. As Northern Ireland's Finance Minister, I was driven around recently in a Skoda, of all things. I was keen that we should move to UK-manufactured vehicles for Ministers-not only here in Westminster but in the regions.

The hon. Gentleman mentioned partnership, new trade unionism and so on. Will he join me in paying tribute to the work force of Bombardier Shorts in Belfast, the biggest manufacturer in Northern Ireland? They have a fantastic relationship with the management there and have done tremendous work to promote and benefit the company, and to make it what it is now: one of the best sections of Bombardier in the world.

Photo of Andrew Miller Andrew Miller Chair, Regulatory Reform Committee, Chair, Regulatory Reform Committee

I agree totally. I go back way before the hon. Gentleman to my dear old friend Harry Cavan, who, sadly, died a few years ago, and whom the hon. Gentleman might recall. He was famous for being vice-president of FIFA as well as a great trade unionist. Harry and I often talked about those issues. It is critical to a renaissance of manufacturing in our country that we carry on such partnership work.

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

My current car is a Rover '75. It is aging but not quite of scrappage age yet. My wife, a councillor, drives it most of the time. Each weekend when I go home, the most effective way to get around is to hire a car. The car that I am most often given is a Vectra. It is an excellent vehicle. The point that needs underlining is that this is about not ownership of the companies, which is nearly all foreign, but the fact that the cars are made in this country. They are made in this country because we are one of the world leaders in automated technology. That point needs to be underlined far more often.

Photo of Andrew Miller Andrew Miller Chair, Regulatory Reform Committee, Chair, Regulatory Reform Committee

I do not want to be pedantic, but I remind the hon. Gentleman that his Vectra is almost certainly German-built if it was manufactured after 2007. However, that is neither here nor there, and I take his point. That is two Front Benchers down; perhaps the other two will come in and agree on it.

Training, as I have said, has been a critical part of the Government support that put us into a position to bid for the new Astra, which is just coming on-stream. I think that £8.7 million came into that package in the partnership between central Government and the RDA. The RDA has played a crucial role in keeping the mood music right, not only in the relationship with the company and central Government, but in keeping the network of suppliers supported in the way that was necessary during what was a critical time. I question whether we would have achieved the success we have had without the RDA's involvement.

Some serious issues are involved, and the hon. Member for Southport referred to the example of his piano. One thing we must realise is just how cheap it is to ship things around the world. A container ship full of cars is now moved around the world for the cost of six Filipino salaries and the bunker fuel necessary to move the ship. It is very cheap to move cars around. They are now global commodities and if we are to succeed in the world that is facing us, we must get a leading edge. For example, we must pitch in for the next generation vehicles, working towards electric vehicles and vehicles powered by fuel cells. I know that my hon. Friend the Minister understands that. Unless we mark out a clear pathway towards those goals, in 20 years we will not have a vehicle industry.

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)

Of course my hon. Friend is completely right, and that work is exactly what the Government are doing with the low-carbon region in the north-east and what has been done with Nissan. For the benefit of the debate, let me say that the last time we had a debate on this subject my hon. Friend Mr. Hoyle intervened on me and I explained that my ministerial car was a Vauxhall Vectra. I have now changed my car, and following my hon. Friend's words of just a moment ago, it is perhaps a good thing that it is now a Toyota Avensis, which was assembled, of course, in the UK.

Photo of Andrew Miller Andrew Miller Chair, Regulatory Reform Committee, Chair, Regulatory Reform Committee

A Toyota Avensis is perfectly acceptable, but we must remember how complex the global car market is and how, in the last 15 years, the pressure on UK manufacturers has been intense because of the globalisation of the industry.

The hon. Member for Southport is right to talk about short-termism; that has been an endemic failure of the British economy. The Prime Minister, when he was Chancellor, set in train events that have started to deal with short-termism, but it is still an underlying problem and I will refer to it briefly in a moment in the context of the banking industry.

I want to make a final comment about Vauxhall. I agree with the hon. Member for Southport about infrastructure; we need to work hard to put ourselves in a competitive situation by getting the infrastructure right. The General Motors plants in mainland Europe make inter-plant transfers entirely by railway. We cannot do that in the UK. Sadly, when the previous Government privatised the railway system, no pressure was put on the rail freight system to create the type of rolling stock necessary to keep the pressure off the motorways. As a consequence, all the inter-plant transfers made in the UK and between the UK and Germany, Belgium and so on are all made by road. That is absurd in this day and age. We ought to have that freight back on the railways.

If my hon. Friend the Minister could lean on his colleagues in the Department for Transport, my plea would be for them to look carefully at the rail lines that go from south of the Mersey and link with the west coast main line, and to examine the freight opportunities that could alleviate the pressure on the northern end of the M6. That is not the subject of the debate, Ms Whalley, but I am sure that you will appreciate from your constituency standpoint the importance of those remarks.

Things have changed dramatically in other industries, too. Massive global enterprises-for example, Shell-are up for sale. Royal Dutch Shell, an Anglo-Dutch company, is up for sale. The preferred bidder is a company called Essar, an Indian conglomerate, which believes that it can transform the manufacturing capacity of the Stanlow refinery and make it a profit centre. That remains to be seen. There are also enormous pressures on the downstream sector.

One result of the recession was that the first companies in the petrochemical sector to take a hit were closely allied to the motor industry. For example, Cabot Carbon went because the demand for tyres fell-carbon black is an essential component in the manufacture of tyres. We will not recover such industries. To replace them, we will have to go for the high-added-value, high-tech end of the market, rather than those basic downstream chemical companies.

Photo of Eric Joyce Eric Joyce Labour, Falkirk

A large automotive company in my constituency builds vehicles. It largely Scottish-owned and its Scottish chief executive is Mr. Robertson. ADL, formerly Alexander Dennis Ltd, builds buses. We heard earlier of hybrid vehicles, many of which are built abroad, but ADL's primary product for the future is the hybrid bus. It could replace buses of the sort that run in London, which are made by the same company.

Does my hon. Friend agree that the Government could do a great deal to encourage buyers? Councils and local authorities throughout the country use buses and might seriously consider investing in hybrid vehicles. Although in the first instance they will be more expensive and may appear an unattractive proposition, they will be much more attractive in the long run.

Photo of Andrew Miller Andrew Miller Chair, Regulatory Reform Committee, Chair, Regulatory Reform Committee

My hon. Friend is absolutely right. We have seen examples of work being done on hybrid vehicles and alternative transport in the north and in Scotland, down south in Ricardo's, and in the M25 ring where the Formula 1 market is so strong. Work is continuing with KERS-the kinetic energy recovery system-which worked so well for McLaren, but we need to transfer that technology to vehicles such as London buses. There are huge UK successes, and we must ensure that the Government support them through development and into manufacture.

My final comments will be about small and medium-sized enterprises. The real pressure in my constituency has been on SMEs. There have been problems with the banks, and some of them have promised that they will try to do better. My hon. Friend the Minister needs to use his influence and put pressure on the banking industry-Regional Ministers should do so at regional level-to ensure that small supply chain companies do not lose out. This is a critical part of the equation.

The other day, I visited a company in my constituency that is suffering as a result of the banking crisis; dozens of SMEs that have not approached me are likely to be in a similar situation. However, it is not all doom and gloom, and there are some very successful SMEs. I visited a pharmaceutical business in Neston a couple of weeks ago. Pro-Lab Diagnostics is extraordinarily successful and produces infection testing kits for virtually every NHS trust in the country. Such companies need nurturing, because they are the future of the SME sector, which consists of small specialist companies that have grown from brilliant ideas and been turned into manufacturing operations. It is critical that the Minister's Department is seen to be supporting such companies, but so should the banking sector.

It is not all doom and gloom. There are some great success stories and we should be proud of them. All of us-Government and Opposition Members-must give our maximum support to manufacturing to ensure that it is around for our children's benefit.

Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley 3:14 pm, 2nd December 2009

It is good to see you in the Chair, Ms Walley. It is a pleasure to speak in such an important debate, and I congratulate Dr. Pugh on securing it.

The debate could not have been better timed, as we see that manufacturing continues to struggle. There seems to be a renaissance in government, as the Government now realise that manufacturing is important. If nothing else, the recession should have told us one thing: service industries and finance are important, but in the end it is manufacturing that keeps our head above water.

The reason why we have not come out of the recession as quickly as other countries is that we do not have the manufacturing base. France, Germany and Italy have invested in manufacturing, and so have other countries around the world, because everybody else has recognised the importance of manufacturing. I hope that we have recognised that failure, although I say that not only about this Government, but even more about the previous Government, who dismantled manufacturing-indeed, they made an art of closing manufacturing. All of us here can agree that manufacturing is important, that it is back on the agenda and that it is something that we will build for the future.

In Chorley-great constituency that it is-we are lucky to have Alan Jones as chairman of the local strategic partnership. He is a manufacturer; he owns a company called Porter Lancastrian. He bought a huge site for his company, but he did not say, "This is mine and nobody else's." He has encouraged small businesses to come on to the site to develop manufacturing. It is important that we have an entrepreneur who is willing to help others through difficult times and to share problems. I am pleased that we have somebody who is committed to manufacturing in the way in which we have seen in Chorley.

My hon. Friend Andrew Miller rightly mentioned the importance of the car industry, but this is about more than the car industry-it is about vehicle manufacturing. The coach, bus, truck and car industries are all important. Britain's last big truck manufacturer is Leyland Trucks-that brand name is known all around the world-and we cannot afford to turn our backs on it in its hour of need. It has been a successful company, and it is part of the American company PACCAR, but it is important that we make sure that truck manufacturing continues in this country. Leyland has developed a hybrid truck. It has also developed the idea that when someone buys a truck, the company will put on the body and complete the truck to the customer's requirements, so that the customer does not have to take the truck from A to B to have the bits put on. Leyland is forward thinking. It recognises that the environment and global warming are significant, which is why the hybrid truck that it is developing is so important for the future and for global needs.

It was right for the Government to invest in the car scrappage scheme, which has made a real difference to manufacturing. Although the scheme has helped a lot of overseas manufacturers-that is the price-it is keeping people in jobs in servicing, in sales and in the showrooms. However, we are nearing the end of the scheme. At the Labour party conference, we said that we were committed to putting further money into the scheme, and I am pleased to see that that has happened. However, we are on a countdown, and it is worth putting in more money to make sure that we do not leave a void and undermine the success that we have seen by ensuring that production continues. It is important for UK production that the scheme stays in place, and I hope that the Minister will reflect on that plea.

Cars, trucks and buses rely on components, so we have to invest in that sector, too. The odd thing in relation to Leyland Trucks is that we build the trucks, but we do not build the cabs, which come all the way across from France to go on a truck at Leyland-that is silly. We should be telling the Minister that now is the time to put in the investment to attract component manufacturers back. If those cabs were built in the UK, that would make a real difference. We should be attracting these things back from France because the time is right. People moved away when the pound was strong and the euro was weak, but things have now reversed, so it is time for the UK to take advantage of that. This is about making sure that manufacturing is in all parts of the UK. We should be working even harder than we have done so far.

We talk about research and development, and it is important. We talk about its role in the success of Dyson, but that company does not manufacture in the UK-Malaysia was the answer. Dyson might have been the darling of the Conservative conference, but the bottom line is that I do not want darlings who take manufacturing abroad-I want people to manufacture in the UK. We have given tax breaks and supported R and D, but we want the manufacturing to be carried out in this country. It is important that that happens, and we have to strengthen the manufacturing base using R and D.

Photo of John Pugh John Pugh Shadow Minister (Health), Shadow Minister (Treasury)

I note the importance of the scrappage scheme, but the hon. Gentleman must see that that was only ever really a temporary expedient. None the less, it opens up a new avenue for British industry that the Government need to take very seriously-the remanufacturing industry. The more scrappage there is, the more metal there is that can be used for other purposes and reprocessing. Surely there is a case for making the UK a leader in remanufacturing as well as manufacturing.

Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

Absolutely. We know that the car scrappage scheme will run out, because 10 years is 10 years-there is no way around that. Of course recycling is important and it is not right to send materials all the way to China only for them to come back as a finished product. We ought to develop manufacturing in the UK using that recycling. It would also clean up the environment by ensuring that CO2 emissions were reduced, which is why it is so important.

Photo of Tom Watson Tom Watson Member, Labour Party National Executive Committee

My hon. Friend makes a very important point about the strength of the pound. However, there is a wider point that I realise might be difficult for both Front-Bench teams to deal with. Manufacturers worry about exchange rate volatility. Many of the big manufacturers-Toyota and others-argue that the solution would be to join the euro. Mr. Dyson, the darling of the Tory conference, is on record as saying that we should join the euro, because our country's position was a factor in his decision to move jobs abroad.

Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

I am not a great fan of joining the euro-I had better spell that out at the beginning. What I would say to my hon. Friend is that I have not heard Toyota in the last 18 months shouting too loudly about joining the euro. In fact, it has gone very quiet about that. He is absolutely right that we see major companies using a dollar premium in order to project where they will be. Regardless of whether there is a euro, pound or dollar premium, that will always continue for major industry.

Of course, it is right that we still have leaders. I talk about leaders-aerospace with BAE and Shorts-and we must not lose sight of where we are a world leader. We are in danger of turning our backs because we feel embarrassed. We should never be embarrassed about our manufacturing. We have got to continue to invest, whether in military or commercial manufacturing. The fact is that technology transfer will come from military aircraft to develop jobs, quite rightly, in the commercial world. We have got to take advantage of that.

BAE is important. We ought not to allow Woodford, Samlesbury or Warton-any of those sites-to close. Aerospace matters, just like transport matters. It was a bad and silly mistake for the Government to buy Japanese trains-Hitachi express trains. Would it not have been better to develop trains in the UK? People say, "What is the advantage?" I will tell hon. Members what the advantage is: it would not be short-term gain for a little bit of financial expenditure, but the fact that we could build trains for the future. We could export trains, because they would be the trains required around Europe and throughout the world. The fact is that if we do not build them, we cannot export them. A bad mistake was made, and we must learn from such mistakes when it comes to procurement. We can have great times by getting things right.

I hope that the Minister has taken on board what all hon. Members have said, because it is important that we all stand together for the future of UK jobs. I believe that the time is now right to call for a national job summit. It is important that we have a national job summit with the trade unions, industry bosses and the Government getting together and asking what we need to be best placed as we come out of the recession. That is what we, as a Government, should be doing. I hope that we will have a national job summit that brings the best together for the future.

The Government have an excellent record on investing in apprentices, but that investment must not lead to something like the youth opportunities programme under the Conservatives. This must be a real apprenticeship scheme with real jobs at the end of it, and that is why we must invest in manufacturing. That is why I say to the Minister that it is not too late to put in a short-time working subsidy. Such a working subsidy would make a real difference by keeping people employed in their working area-in their environ. We could retrain people and subsidise that retraining, rather leaving people to go on to a dole queue, because I see no benefit in subsidising somebody at a jobcentre who will be retrained only six months later, although they already have the skills. That is absolute nonsense. I hope that we can recognise what such a subsidy has done for France, Germany and, more particularly, for Wales, where it has made a real difference to their manufacturing. We can do this-we must do this-so I appeal to the Minister for a national job summit and short-time working subsidy so that we ensure that we have a strong manufacturing base for the future.

Of course, we still have great names in pharmaceuticals, and we have Rolls-Royce. I say to the likes of Rolls-Royce, "You claim to be a British company; prove your pedigree and your credentials." Of course it has sites around the world, but we see more and more transfer overseas. It is a retrograde step for Rolls-Royce to say on the one hand, "We are British," but on the other hand to be investing abroad.

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

Rolls-Royce is an extremely important employer in my constituency, as it does all the work at the Royal Navy training establishment, Vulcan, which is a reactor testing site. Vulcan is being decommissioned and Rolls-Royce has decided to maintain all the work force and base its civil nuclear industry there, on the sensible grounds that the human resource is most important thing that it has. The human resource lives there, so it is moving the office to the people, rather than the other way round. That is a very forward-looking decision, and I hope the hon. Gentleman will congratulate the company on that.

Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

I do congratulate the company on that. It is a sensible business decision to stand by loyal employees who have helped make the company. I will, however, give the hon. Gentleman an example of where the company did fail the people. Rolls-Royce Energy, which produces engines to move gas around, had a plant in America and a plant in Liverpool. Guess which one it closed? The one in Liverpool. That is what I say about Rolls-Royce. Of course, R and D has been moved to Germany, as has the European end of the deep maintenance of engines. I think that all that should be done in the UK. The company might say that its approach gives a financial gain to shareholders, but there are times when shareholders ought to look a little bit further than the 12-month dividend and towards a long-term future in the UK.

Photo of Mark Prisk Mark Prisk Shadow Minister (Business, Innovation and Skills)

I understand the point the hon. Gentleman is making. However, I read that Rolls-Royce executives gave the following reason for the move to Germany:

"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."

Is not the hon. Gentleman disappointed with his own Government?

Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

I am sorry that the hon. Gentleman believes what he has just read. If we are truthful, the German question was about money. It was about how much of a carrot was being dangled in front of Rolls-Royce, and the carrot just happened to be bigger in Germany than it was in the UK, because otherwise the choice would have been the UK. I say to the company that short-term gain is long-term loss to the UK. Unfortunately, it went for the bigger carrot at that time.

That is the problem with global companies. They have no responsibility, or no morals about the people who made that company great. It was this Government and this party, along with others, that made sure that Rolls-Royce existed and it ought to remember that. When it went bankrupt, it was a British Government who bailed it out, yet now it goes for the bigger carrot. We can all pick different reasons. The company has also invested heavily in Singapore. In fact, Singapore and the UK are the only places that can build a complete new Trent engine. It cannot be built in Germany, but it can in Derby. Singapore and Derby are the only places where the company can build those big engines. What does that say about education, work skills and manufacturing? As I said, we can all cite different reasons but, unfortunately, the truth is that firms go with whoever dangles the biggest carrot, which is a retrograde step.

I hope that Rolls-Royce will remember that when it says it is British, it means it is British. Rolls-Royce is the second biggest jet engine company in the world and has a fantastic name. I am proud of British manufacturing. I hope that we ensure that this country continues to manufacture-but greater and bigger-and that it invests in the new ships that are required. We ought to be building a manufacturing future in this country.

Photo of John Thurso John Thurso Shadow Secretary of State for Business, Innovation and Skills, Liberal Democrat Spokesperson (Business, Innovation and Skills) 3:29 pm, 2nd December 2009

It is a great pleasure to appear under your chairmanship, Ms Walley.

I congratulate my hon. Friend Dr. Pugh on securing the debate. I shall come back to his remarks in a moment, but first I must say that it is always a great pleasure to follow Mr. Hoyle. I vividly recall his debate in this Chamber on 9 June, when many of the same points were made. He mentioned at the beginning of his interesting speech his constituent's willingness to collaborate and to welcome others on to his site. He might be interested to read a recent CBI publication about the shape of business in 2020-a think-tank work aimed at showing how business will change. One of the most interesting points in it is that business will become collaborative: rather than having, as now, a big blob that deals at arm's length with all the little blobs, there will be a cross over, and some financing will come from the bigger commissioning companies through the suppliers. What the hon. Gentleman said is early evidence of that.

I also congratulate Andrew Miller on his remarks. I am most grateful to him for the compliment that he paid me in suggesting that I may one day have the power to make a decision about a ministerial car-a decision I look forward to eagerly. More important, his remarks on small and medium-sized enterprises were apposite and good.

Photo of Andrew Miller Andrew Miller Chair, Regulatory Reform Committee, Chair, Regulatory Reform Committee

The hon. Gentleman will always be welcome to join our party.

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

Ah, it is the festive season, when one knows there are invitations one must decline.

Mr. Watson made some important points about the relationships in modern industry, including the fact that unions have radically changed in the past 20 years and approach most of their dealings in a highly constructive manner. He would probably agree with me that management has also changed-it is a jolly good thing that it has-and is far less confrontational, understanding the importance of people, and the need to work in partnership.

To return to the remarks of my hon. Friend the Member for Southport, I thank him for raising this important debate. Those of us who are keen on manufacturing and think that it is important to this country are right to keep turning up at debates-it is often the same people who turn up-to make that argument. My hon. Friend spoke about the need for Government to act on a more strategic level, and I agree completely. To a certain extent, to be fair to the First Secretary of State, it is true that he has a strategy, which has seven drivers-I am sure that the Minister will talk more about that-but it seems to me that we should consider the fundamental role of Government and how it touches on all business, including manufacturing.

The need for regulation is obvious: we must have sensible regulation and a level playing field. We must have fair taxation, and the direction of travel must be set out clearly. The aspect of Government's role that is not often picked up, although several hon. Members did mention it today, is what I call the common infrastructure-the infrastructure of roads, rail, sewers and utilities. That can in some instances be provided by the private sector, but it is really down to Government to ensure that provision. I hugely regret the fact that, as the hon. Member for Ellesmere Port and Neston said, we have not used the opportunity to increase rail freight; we have neglected that aspect of infrastructure. I hope that all future Governments will consider rail and what can be done to move goods by rail.

I think that my hon. Friend was just a touch pessimistic, because I think that manufacturing is at heart a good-news story-or should be. It is a very British characteristic to talk about doom and gloom and to say that it is all mucky people in overalls and nothing gets done. Nothing could be further from the truth. We are the leaders in many areas of manufacturing industry and technology. In my part of the world we have world-leading companies in the civil nuclear field and marine and tidal energy. We have fantastic facilities for subsea-Aberdeen is the subsea capital of the world and just outside Wick, Subsea 7 has an important base. Believe it or not, we also have the leading European manufacturer of nail varnish in Invergordon, which, interestingly, has seen a great improvement in its trading conditions this year. All the supplies that were coming from China and took six weeks to deliver by sea have lost out, because that company can deliver in three days from Invergordon. In managing stock and cash flow, it is more important to be able to order in three days and know that there will be a delivery than have a six-week lead time. That is important and makes one think about some of the received wisdoms, which are not necessarily true.

This country has the sixth largest manufacturing industry in the world, accounting for just over £150 billion in 2008. Depending on whose figures we believe, manufacturing employs between 2.7 million and 3 million people. It is absolutely right to say that there has been growth in real terms, but in relative terms, there has been a decline, particularly in the number of people employed, down from more than 4 million a decade ago. Part of that is because industry has become more productive: there have been huge productivity gains throughout much of manufacturing industry. Part of it, I am sure, as the hon. Member for West Bromwich, East said, is because outsourcing and the definitions therefore becoming narrower. However, part of it is because there has been a decline-a decline that I would like to see reversed.

I would also like to see the world-leading industries that we have maximised. At the Society of Motor Manufacturers and Traders dinner last week, I sat next to a gentleman who started a company making electric trucks. I am sure that many other hon. Members will remember his name, but it escapes me at the moment. The interesting thing he told me was that he had developed the prototype in the UK but, having done all the work, he was going manufacture in the US, because that was where he had found a market and where he had been given the grants to go. That is where the Government should be looking-the reasons why that is happening and why great British innovation is not being captured here to become great British enterprise.

There are three drivers for the future: finance, innovation and skills. In the couple of minutes left to me, I shall touch briefly on each. First, the banking crisis has shown us clearly that we should not, and cannot, depend on financial services to be the bedrock of our industry. We need proper, mixed and sustainable industry, of which manufacturing will be a critical part. Secondly, we have learnt that capital is a scarce resource, and if it is being consumed in never-ending circle of speculation in the City, it is not available for investment. What we need is investment in commerce and industry. The third lesson that we have learnt is that the days of large debt for everything are over. We need more equity at every level. There is a whole debate on that subject, so I will leave it at that and move on.

On innovation, we have superb R and D in this country, whether it is on the work bench or in the universities, or the guy working down the bottom of the garden in his shed. What we do not do nearly so successfully is convert that innovation into small and medium-sized businesses. That is partly about finance, but partly about ensuring that the right skills are there. We need to support R and D and innovation, and we need to do more about moving companies from that early stage to the next one.

Yesterday, here in the House of Commons, I attended an event for the Engineering and Technology Board being renamed Engineering UK. The people there told me things that I think I already knew to a certain extent. They claimed that manufacturing is responsible for 55 per cent. of British exports-my hon. Friend the Member for Southport said it is 46 per cent., but whichever it is, it is still a very big number. What struck me, however, was their estimate that by 2017, we will need 587,000 more engineers-roughly 80,000 a year-whereas, on the other side of the equation, we are losing 30 per cent. of our further education lecturers, who are retiring and are not being replaced, and we have a 17 per cent. drop in the number of students. There are tremendous opportunities-for example, the green economy is estimated to be worth something like £3 trillion in the world as a whole. The UK is well placed to have a slice of that, but I believe that, unless we take proactive decisions-on financial support, for example-to encourage people into engineering and technology, we will simply not have the well trained people who will be the bedrock and raw material of our future progress. That is the single biggest challenge that we face.

I am, and always like to be, optimistic. We have great people and skills in this country. We also have, as I have briefly outlined, some great challenges. We need a secure manufacturing base, and, in my view, we need it more than we need a financial services industry. The sooner we get that, the better.

Photo of Mark Prisk Mark Prisk Shadow Minister (Business, Innovation and Skills) 3:40 pm, 2nd December 2009

May I share in the congratulations to Dr. Pugh, who secured this debate? He gave a very thoughtful analysis-he always does, but this one was particularly thoughtful. Although his father may not necessarily support his vocation, I am sure that he would have been very proud of the hon. Gentleman's helpful analysis of the manufacturing sector's needs and challenges.

As we have heard, British manufacturing has faced a turbulent time in the past year: investment has been cut, production is down and productivity has weakened in a number of sectors. Moreover, more than 280,000 people in manufacturing have lost their jobs in the past year alone. The problem, however, did not start just 12 months ago. Since 1997, 10 per cent. of manufacturing businesses have closed and more than 1.5 million manufacturing jobs have been lost. There has been some frustration among leading industrial businesses about the current Government's policies.

I believe, as most participants in this debate have said, that manufacturing has a future in the UK. It represents more than 12 per cent. of our gross domestic product and produces more than half of our exports, so it helps us pay our way in the world. This country also remains, as we have heard, the sixth largest manufacturing nation. I totally endorse the arguments about partnership between employers and employees. That is a good sign that we should all encourage.

It is clear, however, that we must not now believe that we can return to the period before the recession and simply rely on financial services alone. I think that we have all learnt that lesson. For my party, that means putting manufacturing back at the heart of the economy. It is time we made more, and it is time we exported more. I also want us to be willing to be more challenging to make this country more competitive. For some time, Germany has been the leading European exporter of high-tech goods and services. It is time that that changed. That is why we took a decision at our conference-we had been mulling it over for a period-to set ourselves the goal, should we be elected to office, of setting a target for this country to overtake Germany and become Europe's leading exporter of high-tech products. Rather than being third or second under whichever party has been in office in the past, we should now aim to be first. To fulfil that goal, we need a clear, long-term strategy based on increased investment, technological innovation and raising our skills base. Those changes are going to be vital if we are to ensure that manufacturing can turn from recession to a sustained recovery.

Let me begin by talking about finance. Several hon. Members have mentioned the importance of access to finance. Despite the claims of the leading banks, I think that there remains a gap between their rhetoric and the reality for many firms, especially smaller businesses in industrial supply chains. As the hon. Member for Southport rightly pointed out, the current Government's response with a number of schemes has failed to overcome the problem for many of those firms. We have argued that the schemes are too complex, too many and too narrow. Time and again, businesses tell me that they are too small for one and too large for another. The £1 billion portion of the automotive assistance programme, for example, was announced on 27 January 2009 and, as we head towards Christmas, only one company has been offered any money to date. Indeed, there are now reports that that company, Jaguar Land Rover, may have actually decided to decline that money, because it can get better terms elsewhere. Perhaps the Minister will confirm whether that is true in his response.

Photo of Tom Watson Tom Watson Member, Labour Party National Executive Committee

I am grateful to the hon. Gentleman for giving way, but does he not think that a company's being able to secure finance external to the state is a good thing and that we should congratulate Jaguar Land Rover on being in a position to do that? It means that the Government's limited resources can be invested in other strategically important sectors.

Photo of Mark Prisk Mark Prisk Shadow Minister (Business, Innovation and Skills)

I am always delighted to see businesses secure finance, but why have the French and German Governments been able to deliver that money while our own Government have failed to deliver to even one company? That is my point. During a recession, it would have been far better to have a single national loan guarantee scheme-we and others have argued for that-worth £50 billion, which would provide the opportunity to underpin bank lending, for whatever size of viable firm in whatever sector. As we move towards recovery, other problems with the schemes emerge. We have learnt that the top-up credit insurance scheme has failed. The capital for enterprise fund has so far-11 months on-helped seven companies, and I gather from business that there is a concern that the future of the enterprise finance guarantee scheme is uncertain. We know that the scheme is due to finish in March, but what happens then? Perhaps the Minister can tell us what exactly is planned for the scheme after March. Industry needs to know.

As John Thurso rightly pointed out, long-term debt finance is not the only issue; equity is crucial. That is why I happily welcomed the principles that underscore the national innovation investment fund, with which the Government are now moving forward, and why we have worked with the stock exchange and others to establish a new environmental opportunities index so that we can make London the global centre for green technology, which in turn helps manufacturers as well.

That leads me to the broader question of how we encourage technological innovation. We can all see that manufacturing is changing, and a critical issue is how the globalisation of production-especially of components -changes the nature of what is and what is not British, and changes how we ensure that industrial policy is effective. For small manufacturers, the challenge of accessing global value chains in emerging high value markets is a problem, and I think that the Government can help in that area. Conservative Members agree with the emphasis on strengthening the supply chains in the automotive sector, which has recently been proposed by the new automotive innovation and growth team. That is a good idea, and we want to collaborate to ensure that it happens.

Skills have been mentioned already, and they are important because they concern the longer term. The Government have taken many initiatives, but, despite the flurry of activity, we have seen the decline of real apprenticeships based in the workplace. That is why the Conservatives, if elected, intend to provide £775 million to expand workplace apprenticeships significantly. They would apply to all ages and assist companies in helping their staff adapt and change for the future. In practice, we would be able to create an extra 100,000 apprenticeships in any one year. As part of that, and crucial to the supply chain we mentioned earlier, we want to ensure that we can help small companies, and will therefore provide a £2,000 bonus for every workplace apprenticeship that a small business creates. To help clusters of such firms, which often say to me, "How do we then manage those apprenticeships?", we will provide an additional £5 million so that they can create their own group training associations. All those steps are practical and will make a real difference.

Photo of Andrew Miller Andrew Miller Chair, Regulatory Reform Committee, Chair, Regulatory Reform Committee

A number of apprenticeships were established as part of the contract for building my further education college, but unfortunately local Conservatives argued against that because they regarded it as an interference in the market. The hon. Gentleman must stop local Conservatives doing that.

Photo of Mark Prisk Mark Prisk Shadow Minister (Business, Innovation and Skills)

I am not going to get into a debate with the hon. Gentleman about what does or does not happen locally. I do not have the background. I have set out clearly where we intend to go nationally, and that is the direction we will follow.

The past year has been traumatic for many manufacturers. We have seen thousands of jobs and hundreds of good firms lost, but British industry can pull through. I started my business at the bottom of the previous recession, and I have learned that firms that come through this period will emerge-the phrase was used earlier-leaner and stronger. The Conservatives want to help. We want to improve industry's ability to access the finance it needs, to create the best environment for turning bright ideas into profitable ventures, and to provide industry with the skilled work force it requires to adapt and grow. Those are the Conservative plans for the future; let us now hear from the Government how they intend to unpick the mess that they have created.

Photo of Tom Watson Tom Watson Member, Labour Party National Executive Committee

We have heard a characteristically partisan contribution from Mr. Prisk in what has been a great debate. One thing that he did not commit himself to-in the unlikely event of becoming a Minister-was being driven in a British-assembled car. There are British-assembled Minis in the fleet. Would he like to commit to that now?

Photo of Mark Prisk Mark Prisk Shadow Minister (Business, Innovation and Skills)

I am glad that Mr. Watson is keen for me to take office when in government, and I certainly look forward to the day when I do. I am visiting Aston Martin, Mini and Jaguar Land Rover in the next couple of days-[Interruption.] The hon. Gentleman is tempting me. All I will say-if I can keep in order-is that the broader and serious point about Government procurement is right. If I am elected-I welcome the hon. Gentleman's support for such an event-and if I have a Front-Bench role on such issues, I will talk to the Government car service to see whether we can change the approach in future.

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)

We now know that the hon. Gentleman has an image of himself in an Aston Martin. Perhaps he is thinking of a position in the security services, rather than a position as Minister. I had better move on before you stop me, Ms Walley.

I congratulate the hon. Member for Southport on securing the debate and on his thoughtful-might I say Socratic?-contribution. He laid out his arguments in a dialogue, rather than in the standard partisan fashion that we have heard in other parts of the debate. It was a very thoughtful contribution.

The hon. Gentleman admitted, very honestly, that he had had to do research to acquaint himself more deeply with the particular subject. The only thing that I would say to him is that he might have missed some of the more recent developments in Government to do with the industrial activism that he called for in his contribution. We have to find a happy medium between the free marketeers on the one hand-we are not all marketeers now-given the damage that going too far in that direction has done to our manufacturing economy, and, on the other hand, the kind of command economy that we do not want, which would simply produce all left shoes from the same factory. If he looks at the "New Industry, New Jobs" White Paper and the skills strategy, which the Government recently issued, he will see that the philosophical approach to manufacturing industry that he advocated is quite central to Government thinking.

My hon. Friend Andrew Miller made an extremely informed contribution to the debate, as ever. He displayed his deep understanding of industry, particularly the motor industry, and also called on the Government to maintain pressure on the banking sector. The Government are still doing a lot to ensure that that sector comes up to the mark. He said that it is not all doom and gloom, and I think that he is right. Confidence is important at this point in the economic cycle. We should have confidence; there are signs that we are moving in the right direction and there is certainly a bright future for British manufacturing.

When we last debated the subject, my hon. Friend Mr. Hoyle slapped a preservation notice on me because I was in a British car. Thanks to his efforts, I am still here. I thank him for that. He was right to point out the renaissance in Government of the idea of industrial activism and of a positive manufacturing strategy. He made some powerful points about Rolls-Royce, the obligations of companies and the need to take the longer view. We are learning that lesson in Government. The rush to divest ourselves of assets in the '80s and '90s may have left the Government without the levers that they need to be able to pursue the industrial activism that we have been discussing. We rue that selling of the family silver, as a former Conservative Prime Minister once put it. I note my hon. Friend's call for a national jobs summit, and his call for a jobs subsidy; he made such a call last time, too. I cannot currently guarantee that, but I heard his observations.

John Thurso made an extremely perceptive and thoughtful contribution. He has a great deal of business experience. He made perceptive observations about world-leading British manufacturing, the importance of the green economy and the importance of the sort of proactive decisions that have to be taken-the sort that we have taken through our skills strategy. If he looks at the skills strategy, he will find that he is able to support the development of the new technician class, which the Government seek to develop through that strategy.

I should like to refer to the other hon. Members who contributed to the debate, including my hon. Friend Mr. Joyce. My hon. Friend Mr. Watson, informed us of some of the reasons why, statistically, we should not be so pessimistic about jobs in manufacturing. Some of the jobs that have been outsourced might previously have been counted as manufacturing jobs, but although they were important, they were, in fact, ancillary to the direct activity of manufacturing.

I should give the hon. Member for Hertford and Stortford credit for recognising the importance of apprenticeships, which his party left to wither on the vine, so that they were almost at the point of extinction by 1997. Rather than apprenticeships declining, as he suggested, they have been rescued by the Government. Only 75,000 apprenticeships were in place in 1997, and two thirds of them were not even completed. The completion rate for apprenticeships was a third. There are now three times that many apprenticeships, and there is a two-thirds completion rate. On top of that, we have also invested very heavily in skills training in the workplace through policies such as unionlearn, which the hon. Gentleman's party vigorously opposed, and Train to Gain. I think that he wants to abolish Train to Gain to fund his party's policies, so he is not talking about any new investment in skills.

Photo of Mark Prisk Mark Prisk Shadow Minister (Business, Innovation and Skills)

On the automotive assistance programme and the £1 billion, how come only one company, at most, has received any money?

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)

The automotive assistance programme has been in contact with more than two thirds of the eligible companies, and there is still a potential pipeline of projects worth £2 billion. The hon. Gentleman should not rush to judge us on that matter. He also asked about the enterprise finance guarantee scheme. There is a £1.3 billion facility in place. As of 20 November, more than 1,100 businesses from the manufacturing sector have been offered loans totalling nearly £144 million. Much as he tempts me, I will not oblige him by making up any policy on the hoof.

In recent times, manufacturing has been hit by the global recession. We all know from our constituencies-many constituency examples were given during the debate-of the impact that that has had. The Government are acutely aware of the difficulties that the sector has faced and have taken a very activist approach in this recession, as hon. Members have said. That is why the level of unemployment in the UK is much lower in this recession, which has been lengthy, than it was in the recessions in the 1990s and 1980s. That is not a coincidence. The Government's attitude is in marked contrast to the Conservative Government's philosophy in previous recessions. There is also a marked contrast with our competitors; they are now beginning to come out of recession, as we will, but unemployment is much lower in our economy than in competitor countries.

Our job in Government is not just to look at the short term, but to think of the long term, and that is what we have been doing. There are huge opportunities for the manufacturing sector in this second industrial revolution. There are opportunities in the new technologies, including carbon technologies, nuclear, wind and wave technologies, and carbon capture and storage, all of which will have a profound impact on how we generate our energy in the future.

As I mentioned earlier, our industrial policy, which covers those new industry jobs, is exactly the kind of activist policy that the hon. Member for Southport called for. Our key industries need a national capability, and support from Government, so that they can take advantage of those opportunities. We need to look ahead at the opportunities that will be presented by the new economy.