I am delighted to have secured a debate on the future of the new economy in the north-west and to be joined by so many colleagues from both sides of the House. We will no doubt have a lively and interesting debate on an issue that is incredibly important for us and for our constituents, as well as for businesses, employers and employees in our areas.
We all know in our hearts that the new economy will be very different from the economy that we have seen over the past 20 or 30 years; it will certainly not be built simply on financial services or run in the south-east, with the engine of growth located in one particular part of the country. If it is to be successful, it will have to be driven by the regions, which have tremendous skill, expertise, depth of knowledge and creativity, as well as the ability to expand into new areas in which this country will have to be competitive if we are to continue to ensure that our people have the opportunities and skills that they desperately need. Nowhere is that truer than in the north-west, where we already have a fantastic base on which to build.
I want to concentrate on a number of issues, including digital media and the creative industries, about which my region has a great story to tell and which have a great future; the importance of green jobs, in particular some of the advanced manufacturing jobs; the emerging areas in the biosciences and the importance of research and development in building on innovation in our universities; and, finally, the construction industry, which is not always seen as a new industry, but is increasingly adapting to new innovations and construction techniques, which will give the north-west a significant competitive edge.
The creative industries are inevitably closest to my heart because of the establishment in Salford of MediaCityUK, which has emerged like a phoenix from the ground over the past couple of years. Anybody who visits Salford Quays cannot fail to be impressed by not only the buildings but the whole sense that a new city-a new metropolis-is being created in what was the Salford docks. It is difficult to believe that we now employ more people on Salford Quays than we did at the height of the docks' success in the 1940s and 1950s. This is a tremendous success story, and when the current phase of development is completed, we should have 15,500 new jobs and £500 million of investment. That includes £450 million of private sector investment, which will have been levered as a result of the excellent work done by all the agencies involved. The current private-to-public investment ratio is about 4.5:1 so this is a big success story, and it is down to the work of the urban regeneration company, the city council and-I will say something about this later-the Northwest Regional Development Agency, whose work in recent years all of us have great cause to be thankful for.
In Manchester, we also have the Sharp project, which works with cutting-edge digital and creative media and provides jobs particularly for young people in the emerging industries around video games. I was disappointed that the Government decided in the Budget to take away the allowances and incentives for the video games industry. Just a few months ago, Salford received £1 million to pump-prime development of some of the tremendous emerging technology involved in video games, and it is a retrograde step to take that allowance away.
Digital and creative media currently account for 7.3% of GDP in the north-west. I absolutely believe that they are a growing sector and one in which we need to continue to invest. I make no apology for saying that I will bang on about MediaCityUK to every Minister I can because, in this instance, I do not really care where the investment comes from, as long as it keeps coming into Salford and helps my community.
The second area we need to concentrate on is advanced manufacturing, and I have no doubt that many of my colleagues will talk more about it. We are incredibly proud of the aerospace industry in the north-west, and we jeopardise at our peril the extensive high-level skills that have been developed in the industry over many years. The industry accounts for 12.9% of our GDP, giving the lie to the claim that manufacturing no longer really exists in this country.
I am grateful to my right hon. Friend for securing the debate and I am glad that she specifically mentioned manufacturing, which is still of huge importance to constituencies such as mine. Does she agree that one of the biggest concerns among manufacturers-certainly those I speak to-is what they perceive to be the Government's lack of understanding about the relationship between the public and private sectors? Manufacturers in my constituency have clients across the world, but a key part of their business is supplying the public sector. The Government are ruthlessly cutting public sector procurement in the Budget, and manufacturers will be unable to drive the country out of recession and back into growth if they do not have the necessary support and stimulus from the Government.
My hon. Friend makes an extremely important point. The Government's choice to take an extra £40 billion out of the economy-over and above what the Labour Government would have taken out to reduce the deficit-runs the severe danger of tipping us back into recession. All the independent forecasters say that the north-west is recovering, but that that recovery is tentative, and they do not expect to see full growth until 2013.
Advanced manufacturing jobs are also essential to the green agenda, but I am increasingly worried that, although we talk the talk about new green jobs to draw in investment, some of the action that is taken is almost in opposition to the need to invest in green jobs. At the end of last week, a report published by Innovas and commissioned by the Manchester Commission for the New Economy looked specifically at growth in green sectors. It said:
"Greater Manchester is a leader in the UK in carbon capture and storage technology, additional energy sources such as biofuels and contaminated land remediation. It is also strong in alternative fuels...and above average in wind energy, low carbon building technologies and energy management...Greater Manchester has the potential to be a world leader in low carbon building technologies".
However, we have heard only this week of massive cuts in the funding to the green investment bank and in the proposed seedcorn funding to make sure that new jobs can be developed, particularly in manufacturing.
The final area that I want to mention is the biosciences. They are not new to Greater Manchester, but the rate of growth in the numbers of people working in research and development and in exploiting some of the technology that is increasingly coming from our universities is very encouraging, and I have no doubt that colleagues with more experience than me will make a contribution on the issue.
To attract all that investment and to keep doing so well, the north-west must have the right climate, and I emphasise to the Minister and other colleagues the importance of the city region. A consultation has been going on for the past couple of months-indeed, I think that it closed on Friday-about whether to confirm the statutory nature of the country's first city region, which comprises the 10 local authorities in Greater Manchester. That is not just about moving governance around or about process; at its best, it should be about the devolution of planning skills, housing and transport from Whitehall to the city regions so that they can provide the right climate to draw in investment. There is no point addressing the skills gap if we do not have a decent housing offer, and there is no point trying to draw in investment if the planning system cannot get that investment on the ground and working as quickly as possible.
Despite their different political persuasions, the authorities in Greater Manchester have sat down and been very mature about agreeing-the Government will perhaps not like this phrase-to pool their sovereignty and work for the interests of the people of Greater Manchester, which is vital. On transport, for example, the chamber of commerce says that connectivity with the northern rail hub, the super-port at Liverpool and Manchester airport, which my colleagues will no doubt talk about, is key to our future prosperity.
I congratulate my right hon. Friend on securing this important debate. She will be aware of the importance of the proposed new Mersey Gateway, which the Labour Government committed themselves to before the election, but which the current Conservative Government have postponed, pending a review. How crucial is that to the north-west region, both as an important link for Cheshire and Merseyside, and more widely? That needs to be considered along with the rail links that my right hon. Friend mentioned. All the innovations and new industries will come about only if the infrastructure is established.
My hon. Friend is right and has championed those ideas for a long time. The proposals are important because, without the infrastructure it will not be possible to draw in the investment that will provide jobs and prosperity, enabling Merseyside, Greater Manchester, Cheshire and the northern part of the region to prosper, and giving them proper connections. That is fundamental to what we are trying to achieve. If we can get support for the city region, it could be a model for other city regions in the future. I urge the Government to proceed with that.
Even when there is devolution of housing, transport and planning, the issue of skills continues to be a challenge, as it has been for many years. There is a big skills gap between young people's qualifications and abilities and some of the new jobs on offer. Unless we close the gap there will continue to be generations of people without work. The north-west has the highest percentage of neighbourhoods-more than 20%-in the most deprived 10% in the country. We have more out-of-work benefit claimants than any other region: nearly 700,000 people are out of work and in receipt of Department for Work and Pensions benefits. That is about one in six of England's workless population. We have 375,000 people who have been claiming out-of-work benefits for two years or more, with 308,000 of them claiming for incapacity. In addition, 9.3% of our working age population is in receipt of incapacity-related benefit. That is not just a waste for the economy but a waste of lives-of opportunities and life chances for many people.
One thing that we should do to ensure that the economy prospers is tackle the deep generational structural worklessness in some communities. I commend the pilots that are happening in Greater Manchester on connecting people to opportunity. They are a new way of doing business and have been designed and championed by Chris Marsh, who works for the urban regeneration company in Salford. He has been commissioned on behalf of all 10 authorities to consider how to drill down into the families where there is generational worklessness. The early results are extremely encouraging. He has adopted a system called Total Place in which all the agencies-health, police, regeneration, education and employment services-are brought together. Budgets are pooled, the same targets are agreed and there is the same evaluation. That means more efficiency; things are not done 10 times. Everyone is targeting the families with the most problems. It makes absolute common sense. The total public sector budget in Greater Manchester, across all the agencies, is £22 billion. No one can tell me that we cannot get some efficiencies and savings, but also better results, by bringing together such public sector resources under the Total Place scheme. The pilots, which are getting people back to work because every agency is involved in targeting the relevant families, are a huge success.
I want to ask some pointed questions about how we are to work in the future. The Northwest Regional Development Agency has been a success story by anyone's measure. It is probably second to none in the way it has levered investment into the region. There has been great confusion about where the new Government want to go in relation to RDAs. The Business Secretary appeared to change his mind three times in the space of just one speech. I think that we now know that the Government intend to abolish RDAs, and many of us are very concerned about that, but we are not sure what is likely to take their place. Local authorities have been asked to consider setting up local employment partnerships with business. We are not sure at what level that will be, or how many clusters of local authorities will be involved. Will they follow the economic footprint, which is a matter of practical common sense, or will they be artificial structures that will not, in my view, work?
I wonder whether my right hon. Friend agrees with me that one of the most worrying things about the present situation in relation to the Northwest Regional Development Agency is the effect on the many relationships that have been built up around it. I have been going around my constituency talking to representatives of big business and smaller business-I was at Unilever yesterday. Local economic partnerships may be two years down the line, and that leaves a hiatus. Those relationships and the work that was being done are falling by the wayside.
My hon. Friend is right. In her relatively short time in the House she has made a tremendous contribution to highlighting those issues. She understands that in many cases business works on the basis of relationships, and that some long-established relationships are in danger of fracturing and disappearing in the interim. We need to get on with whatever is going to be done, and make sure that it is properly established.
It is important, too, as we proceed with the local economic partnerships, that when investment is drawn in local people should have the opportunity to get the jobs that are on offer. I urge the Minister to talk to his colleagues in the Department for Education. For those of us who were lucky enough to get Building Schools for the Future programmes in our constituencies-many of us did not, and are rightly angry about it-I want the contracts for those major public building projects to include apprenticeships and construction job opportunities for local people. My hon. Friend Jonathan Reynolds is right to say that 40 per cent. of the construction sector's business depends on public sector projects. Many BSF programmes would have employed bricklayers, joiners and plasterers and those jobs are now lost to our economy.
I congratulate my right hon. Friend on the fact that her constituency has BSF programme funding. My constituency, of course, has missed the opportunity. We are talking about job creation. Does my right hon. Friend agree that it would have been an excellent opportunity for apprenticeships? In my constituency 25,000 weeks of apprenticeship would have been created, and many jobs, on which we are now missing out.
My hon. Friend is right. The decision has completely wasted an opportunity to create for her constituency's young people access to high-quality training, proper qualifications, and work experience on the job in a building environment. This country needs those skills, so the decision is particularly short-sighted.
I congratulate my right hon. Friend on securing this important debate. Two schools in my constituency were in line for BSF wave 1, starting this year. Sefton council spent more than £1 million in preparation for BSF, and that will now be wasted.
I am also concerned about the review of other major projects in the north-west, besides BSF, such as transport and infrastructure projects-and the effect on the construction industry and the trades that depend on it for work. At a time of fragile recovery, as my right hon. Friend mentioned, that is very important. I would encourage the Government, and hope that she would too, to make the relevant decisions quickly so that further damage is not done to firms that have no other work and will end up unable to take up the slack if projects are approved.
My hon. Friend makes an important point about certainty. Hon. Members will all know that uncertainty is often more damaging to businesses than knowing what is to happen, which at least means they can plan. I disagree with the Government's decision to take an extra £40 billion out of the economy at such a time. That decision was a matter of choice. The implications that my hon. Friend has outlined are very important.
May we have a bit of balance in this? Labour Members are talking of their areas, and I wish to talk about my constituency of Weaver Vale, which is a Cheshire constituency. The previous Government cancelled Mid Cheshire college's new campus, an investment of £30 million. The college invested a considerable amount of money in the project, including £2 million in architects' and consultants' fees, and all the other stuff that has to go with such jobs, but the right hon. Lady's Government cancelled it 18 months ago.
My children go to a state comprehensive school, but it has 30-year-old portakabins where the windows do not shut and the doors do not close. That, however, is in Cheshire, not Greater Manchester, Merseyside or the other conurbations that have been invested in over the past 13 years. Some areas of the north-west are regarded as prosperous and leafy, but they received no money from the Labour Government during the past 13 years.
I think, Mr Chope, that we conduct ourselves slightly differently in Westminster Hall. The hon. Gentleman needs to speak to his predecessor. It is clearly important that all children and young people have the opportunity to learn in a good environment with state-of-the art information technology, and many of my colleagues here today were looking forward to their children having that possibility. The Tory Government have denied that opportunity to many thousands of children across the region.
I have some specific questions for the Minister and then I shall sit down as I know that many other Members wish to speak and I do not want to dominate the debate. The first is about the local economic partnerships. What are they, and what is their legal status? If they are to channel investment, particularly European funds and the new regional growth fund, they will need some status rather than being a loose amalgam of people who come together on an occasional basis.
Will the partnerships be funded? I understand that £300 million has already been cut from RDAs nationally this year. The original RDA budgets were £2.2 billion a year over the next two years, a total of £4.4 billion. The regional growth fund announced by the coalition Government is only £1 billion over two years. That is a massive cut in the funding available to support inward investment. This year, the Northwest Regional Development Agency has suffered a cut of £52 million, which leaves it a budget this year of £235 million, a cut of almost 20%.
At what level will the local economic partnerships operate? It may be at a city region level, or an economic travel-to-work area. However, as my hon. Friend Alison McGovern said, many of the relationships are at a north-west level. What will be the mechanism for ensuring that, without the RDA, we have something that has a north-west oversight of the economy?
How can we deal with issues that cross local boundaries? In business, many do, including supply chains for manufacturing, which affect businesses across the region. Who will be responsible for innovation, business support, inward investment and access to finance such as venture capital funds? I doubt whether the local economic partnerships will be responsible for that. Will it be national organisations or perhaps the Department for Business, Innovation and Skills? How can we ensure that the key job of supporting innovation and the new jobs in the economy is carried out? At the moment, business, universities and even politicians operate at the north-west level, and we need information about how things are to go forward.
The north-west economy has been doing well, despite the difficulties and the worldwide global recession of the past couple of years. We have been narrowing the employment gap with the rest of the country faster than anywhere else. Business survival rates are better than those for the greater south-east and better than for London. Export growth is 12.2%, which is higher than the average for England.
The north-west economy is a success story. However, the independent forecasting panel has said that the recovery is fragile and that, although we have tentatively emerged from the recession, recovery will remain weak until 2013. At this moment, it is essential that our region receives the support that it deserves. There is a huge amount at stake for our constituencies and our communities.
We are pretty confident in the north-west that we can continue to thrive, but we need a Government committed to supporting that investment and growth. I do not believe that we have that kind of Government. I genuinely believe that the big decisions made in the last couple of months will put us back rather than take us forward. The public-sector cuts coming in the autumn, with a predicted 600,000 job losses, will have a devastating effect not only on our communities and our families but on our economy.
I believe that the cuts that we face are too deep and too fast, and that they will do a great deal of long-term damage. I hope that we in the north-west are strong enough to weather the storm, that we do not suffer the problems that concern me, and that we do not live to regret those decisions made now that will affect us in the long term.
I congratulate Hazel Blears on securing this important debate and on her speech, the first half of which I pretty much agreed with.
It is important to put the size of the north-west economy into context. I shall talk about the regional development agency, but even in its heyday-before the cuts imposed about a year ago by Lord Mandelson, which were greater than this year's cuts-regional aid for the north-west amounted to 0.2% of our economy, which is worth about £120 billion. We have 7 million people in the north-west, which is a bigger population than most EU countries have, and it is extremely important to understand that Government aid is not what will build the world-class businesses that we need.
I believe that the RDAs did much that was good, but it is important that all Members here today remember what the Office for Budget Responsibility forecast for our economy in the lifetime of this Parliament. In broad terms, it said the north-west should aim to create 200,000 private sector jobs at the same time as cuts take place and we will lose something like 70,000 public sector jobs. That means that each Member in this Chamber will need 3,000 new private sector jobs in his or her constituency. We should all be thinking about how that can happen.
If we want to fight homelessness, deprivation and unemployment, the creation of those jobs is vital. They will be created only if we become-or continue to be, as in some industries-a world-class economy. There are areas where the north-west is world class-they include defence, advanced manufacturing and nuclear-but we have to build on those. Principally, it is not about Building Schools for the Future. I have lost BSF schools in my constituency; that was a great disappointment to me and it will hurt the construction industry. In the end, however, the generation of a world-class economy in the north-west will depend on innovation and how we proceed.
The principal question for me is whether the supply side of our economy, particularly in the north-west, will enable those 3,000 jobs to be created in each of our constituencies. The supply side is vital, and three factors are important. The first is infrastructure, and I agree with what was said about the Mersey Gateway, which is important to the north-west. The next factor is regulation, and the coalition Government have made a strong start by getting rid of some of the regulations stopping our world-class businesses from developing.
The third factor is skills development. I have a real concern that our country is not positioned where it needs to be. It is not a particularly political point, but over the past 25 years our universities have failed to generate the applied scientists and engineers who will be needed to develop the businesses the right hon. Lady spoke about. Twenty-five years ago, when 8% of people went to university, we produced 20,000 engineers a year. We still produce 20,000 engineers a year, but out of five times as many graduates. To put that into context, France produces 50% more engineers than we do-I shall not even bother giving statistics for countries such as India or China.
That our higher education establishments have failed to produce the skills in applied science and engineering that will be needed to create a world-class economy in the north-west is close to being a scandal. A number of people should hang their heads in shame, because they have perpetuated something of a con. Many talented young people are leaving university unable to play a part in the industries of the future. In the nuclear industry, for example, the companies that will build our nuclear stations will be German and French. A recent Cogent Systems report said that we have a lack of key workers in chemical, geotechnical, mechanical and production engineering. Most ridiculous of all, National Grid is hiring engineers in-wait for it-Zimbabwe, to make the changes to our transmission and power engineering systems across the grid. Shell hires engineers in Russia. Those are opportunities that young people in our constituencies should be taking up, but they are not able to do so. If we are serious about rebalancing our economy away from the City, the financial services and oil and gas-frankly, we have had a free pass on oil and gas for a couple of decades-we cannot continue to fail in skills development. I shall be interested to hear the Minister's response on that point.
Let me turn now to my concerns about the RDA. I know that the White Paper is still to come, but the proposals are centralising. I agree with the right hon. Lady's comment that the regional fund represents a major reduction in budget from what the RDAs had in the past. The fact that it will be administered directly from London is a centralising measure. Notwithstanding how the local enterprise partnerships develop, ours could be the only major economy in the OECD that has no sub-regional intervention. I hope that that will not be the case, and that the Minister can give me some reassurance about that. It is hard to believe that the French, Germans, Americans and Canadians have got it wrong. It is not fair to have a Northern Ireland Office, a Scotland Office, a Wales Office and a Government office for London with economic intervention powers while the English regions are left outside.
I would not normally intervene because I know that Back Benchers want to have their say, but I must clarify that point. The regional growth fund is an entirely distinct element from how we develop local enterprise partnerships. The funding for one is not the funding for all. I will explain later how we intend to develop those partnerships.
The second point on which I seek clarification is how the partnerships are to be funded. Business people believe that they will be funded by the councils that make up the partnerships.
Another concern-a slightly more subtle one-is that our industrial regional policy is biased towards small and medium-sized enterprises rather than structural winners, such as nuclear power, defence and advanced manufacturing. If the regional fund is administered rather like the "Dragon's Den" TV programme is run, it is hard to see how that can result in the emergence of organisations such as Daresbury and the Atlantic gateway infrastructure programme. It seems to me that there is a risk that the types of project that go forward will be related to SMEs. We need SMEs because they drive the economy, but they also feed off structural winners and world-class businesses, such as BAE Systems and AstraZeneca, and if those businesses are not growing and generating jobs, it will be tough. It also seems to me that there is a risk of the national insurance contributions holiday, which is a great policy, also being biased towards smaller companies, as is the procurement policy.
I have three questions for the Minister. First, can we do more on skills? There is a critical weakness that could result in the 200,000 private sector jobs in the north-west that the OBR forecast will be needed not being achieved, which would be a tragedy. Secondly, are the RDA proposals centralising and do they risk the English regions being left outside any formal structures? Thirdly, is there not a danger that our policy is orientated more towards SMEs than towards picking structural winners?
There is a real regional imbalance in this country. Whatever criteria or measures we use, almost every region in the country outside London and the south-east has inferior wealth and health, which is a national disgrace and a waste of resources. We have an extremely congested south-east, with space elsewhere in both the economy and the transport system. I congratulate my right hon. Friend Hazel Blears on bringing this important subject to the Chamber this morning. I agree with her on almost everything, apart from what she said about the regional development agency, which I will come back to.
I also enjoyed the speech of David Mowat. He made some extremely good points, but I have some questions for him to reflect on. They are rhetorical questions rather than arguments and relate to the fact that the relationship between capital, training and the economy is rather more complicated than just training a lot more engineers and scientists-although I agree we need to do more of that. After the second world war, where were most of the world's scientists and engineers based? In the Soviet Union, which was an economic basket case. Where were there almost no trained scientists and engineers? In Japan, which saw huge growth. I make that point simply to stress that the issue is complicated.
Most Opposition Members have been asking what we will do without the regional development agency, but I think we will do rather better than we have been doing. The important thing is to ensure that money gets to where it is necessary to support business, but the regional development agencies have been a burden and a barrier to getting money into the right places. From their very inception, they have made life more difficult in the north-west. Let me explain why. It was my Government who created them, so this is not a party political point. When they were set up, money was transferred from the rest of the country into London and the south-east, where there had not previously been a development agency. That was a mistake. This is slightly unfair, but if we add up the administrative costs of all the RDAs over their lifetime, we find that they come to more than £6 billion, which is more than the Conservative Government's first round of cuts. Is that money well spent? I do not think so.
Let us look at the number of jobs created. At the end of March, just before the general election, a National Audit Office report on all the RDAs was published which stated that the RDAs had claimed that, over a five-year period, they had created 413,000 jobs. However, an independent audit of that claim said that the figure was actually 375,000 jobs, and if the jobs that would have been created anyway without the intervention of the RDAs were taken out, it was only 178,000 jobs. The NAO recommended changing the system. I wrote to the chairman of Northwest RDA, Robert Hough, after the NAO report was published asking if he would change the statistics, so that they told us what was really happening. He replied:
"It would be inappropriate to adjust any of the information previously published."
I thought that that was a bizarre reply, even though Robert Hough is a good man, whom I have worked with on many occasions. The cost of those jobs is £60,000 per job, according to the NAO. Those are terrible figures. I say to my hon. Friends: think about it. What matters is that we get money into the right places, not that we have a body that, when it was formed, centralised the grant-giving process away from local authorities.
The NAO report says that the measure of the RDAs' activities is whether there is gross value added because of their work. However, what the report says about GVA is its most devastating aspect. The conclusion in paragraph 16 is worth reading out:
"We are unable to conclude that the regional wealth benefits actually generated were as much as they could and should have been, and are therefore value for money. Weaknesses which, in many cases, undermined the RDAs' ability to make decisions and set priorities to maximise regional economic wealth do not support such a positive conclusion. These weaknesses included poor project economic analysis and appraisal, pervasive optimism bias, and weak evaluation. In particular, most RDAs were unaware, until 2009, of the types of projects which yielded the best and most enduring benefits."
That is a devastating analysis. We in the north-west have experienced those perverse policies, which have not put money into the sectors that are the major players in the region-the sectors that would generate the most jobs and support the economy most effectively. I look forward to analysing this issue and I will be as critical as I can be if money is not put in, but I will not defend the indefensible in the structure of the RDAs.
I accept that a lot of wealth-indeed, the vast majority-will be created by having a more fertile and active private sector. On the other hand, when we look at some of the causes of the current regional imbalances, I do not think that we can get away from looking at the Government's structural and spatial expenditure. Looking at transport in particular-I have spent a long time on the Transport Committee-we see some of the reasons why wealth in the north-west and the other English regions is not as great as it should be. Of all the spending blocks, the money spent on transport in the south-east of England has increased per head of population relative to every other region in the country. One can go over spending under the Labour Government, but that was happening before-this is not a party political point. More money is spent on education and health in London than in other English regions, but the gap in expenditure between London and the other English regions has not been increasing as it has been in the transport sector.
When we look at the detailed projects, we can see why that has happened. The public-private partnership for the tube in London was very expensive. Crossrail, too, is hugely expensive and is certainly of no benefit to the north-west. The costs of those projects add up to in excess of £30 billion-worth of expenditure, yet we are not getting investment in the rail system of the north of England, which has railway schedules that would have embarrassed Gladstone, because trains now travel more slowly between stations in the north of England than they did in the 1880s. That is a measure of the imbalance between the south-east and the other English regions. I know that we will have cuts, but only when we examine the major spending blocks and change them will we make a fundamental difference.
The Treasury, which inspired the Barker and Eddington reports, has come to almost exactly the wrong conclusions in those reports. The Barker report says, "Well, there's a lot of people in the south-east of England, so we'll build a lot more homes there and spend £20 billion on infrastructure," when we need that expenditure in the north-west of England. The Eddington report said, "Well, we've got a transport structure and, effectively, we will invest where the transport system is now." Those are the most reactionary conclusions that one could come to. If this Government or any other want to do something about the original regional imbalances that I talked about, they must adopt positive investment policies that do not carry on subsidising congestion-as the policies advocated in the Barker and Eddington reports do-but instead help the economies of the regions, spread out the jobs and wealth, and improve people's health by doing so. I therefore hope that the Minister will reject a lot of the conclusions in Barker and Eddington.
I will finish with two very small points. First, there are other major projects that have gone to the south-east of England. One of them is the Olympics. I have always thought that the only part of the United Kingdom that should not have the Olympics is London, because one of the benefits of having the Olympics is that the city that holds the games effectively receives an incredible amount of advertising-it can show what it can do as a city. If anything, London is the capital of the world already; it is a great world city. It did not need the Olympics.
There is a little known and little publicised report by a professor in Nottingham, Professor Blake, which explained that the Olympic games in London would cost the regions between £4 billion and £5 billion in economic costs, because money would be dragged into the south-east. Certainly some things will be bought from the regions, such as steel from steelworks in Bolton, which will help, but essentially the net flow will be a cost to the regions of about £4 billion. Furthermore, Professor Blake wrote his report during a time of economic boom. The Minister may not have heard of that report, but I would be grateful if he wrote to me about the update on it.
My final point is in response to my right hon. Friend's comment about city regions. I have long been a strong supporter of city regions. I think that today's boundaries are, in many cases, left over not from 1972 or 1971 but from mediaeval England. The boundaries of many of our areas need changing. Working together to relate to the real political economy is what having a city region is all about. I just hope that we do not leave the electorate out of the system. It should not be merely a bureaucratic relationship between local authorities. People must still have the right to vote for the people who can influence their transport network.
Once again, I offer my congratulations to my right hon. Friend on securing this important debate.
I am delighted to be able to speak in this debate, which has been very constructive so far as people come to it with various ideas and views. It is true that we are all passionate about the north-west, and I know that the Government are too; it is a dynamic and thriving part of the country. It is also a powerhouse not just locally but for the whole country, and it is now viewed as one of the most vibrant parts of Europe.
Hazel Blears talked about manufacturing. The north-west is the UK's second biggest vehicle manufacturing area, it accounts for nearly a quarter of British chemical output, and it is key to the aerospace industry. We have also talked about the creative industries. The media industry in the north-west is growing at twice the speed of that in any other region of Europe, with 31,000 businesses linked to the creative sector. In Liverpool, we have Sony Computer Entertainment Europe and Granada, one of the leading commercial television production and distribution companies. We also now have the introduction of MediaCityUK in Salford. The nuclear industry is worth £3 billion annually, and pharmaceuticals and biomanufacturing are pivotal industries employing 200,000 people. The region is also Britain's biggest financial and professional services centre outside London.
Our area is dynamic and diverse. There is a lot that we can do, but I am concerned about the glue that will keep it all together. The region is diverse not just in what it does but in terrain and geography. How will we keep it together, looking forward to local economic partnerships? What will happen to the regional development agency? Do we need a strategic overview partner, of any size, to ensure that momentum is maintained? We know that the region is doing well, but on the other hand, life expectancy there is lower than in the UK as a whole, weekly earnings are below average and the number of jobseeker's allowance claimants is above average. We have some of the worst unemployment statistics in the country, and more disadvantaged areas than any other region. We have done a lot, but we must continue to do a lot to address the incongruities from which the region suffers. The north-west is strong and united, but we must prioritise it to keep it going forward. My hon. Friend David Mowat spoke eloquently about the need for education and skills, and plans for next-generation access.
The north-west is a main contributor to the economy in the field of transport manufacture, highlighting the need for continuing success in the sector. The region also had the lowest average daily motor vehicle use on the roads in 2008. We must keep it that way by increasing access to public transport. We need better rail links, and not only to the south-east and London. I am particularly keen on the development of the trans-Pennine rail link and links across the north-west, which are vital to our growth and could use and capitalise on features such as our super-ports. Infrastructure in our area is key.
More investment is also needed in high-speed broadband and next-generation access, especially in rural areas. In Wirral West, almost 55% of households are considered deprived in terms of access to broadband. That applies to many other areas in the north-west as well. Our Government have pledged to do more to link us all up and get faster broadband access. In Liverpool, a smart grid project is being considered that will bring together the private sector to connect socio-economically deprived areas, assess their energy use and make savings.
The north-west has the potential to be the European leader in renewable energy and the low-carbon industry. We have more sites devoted to creating energy from renewable sources than anywhere else in the UK, which gives us the capacity to generate the second largest amount of energy. We must see whether we can be first.
We have great potential to develop wind and nuclear power as well as continuing to focus on wave power. In Liverpool bay, various private industries are combining to consider next-generation wind turbines. We as a Government also need to consider where we can facilitate private industry and enterprise to gain a terrific return that would regenerate areas, provide work and draw money into the UK economy as a whole. Importantly, over the past few years the north-west has been the most successful UK region outside the south-east in attracting foreign direct investment projects. We have attracted some 511 projects between 2007 and 2010, and the equivalent of 7,000 new jobs have been created in the past year alone through 179 FDI projects.
Greater enterprise brings better job prospects and more employment to the north-west. That is particularly important for the young, as we have the most unemployment and the greatest number of young people not in education, training or work. It is key for young people to know that they have a future and that investment is coming into their area. There is a great drain of youth to the south and south-east, and I for one would like to keep some of those young people in the north-west.
The north-west is responsible for 20% of UK manufacture of chemicals, chemical products and man-made fibres. The sector is growing significantly, and we must ensure that it continues to do so. We need an investment strategy for the area. We cannot work in isolation; we must look outward, not inward. Although we know that we will be moving forward with city regions and local economic partnerships, how will those bodies work together for the greater good of the north-west? We are considering significant investment infrastructure that will cross sub-regional boundaries. How can we work as a whole to raise the region from its current plateau? We are vibrant and doing well, but how can we continue to do well, so that we can be a significant engine of employment and growth for the whole UK?
It is important to follow on from the comments of Esther McVey. The enthusiasm with which she has spoken, endorsing the enthusiasm of my right hon. Friend Hazel Blears, typifies the region. It is successful. We are not on a downward slide to nowhere; we are moving in the right direction. Ensuring that we continue in the right direction is key to what happens next. I do not want to be drawn into the rights, wrongs and merits of the case for the regional development agency; I want to ensure that whatever we do continues the momentum in the right direction.
One vehicle, for example, has been incredibly successful. David Mowat appropriately mentioned Daresbury. He will know what an interesting battle Labour Members had inside our own fraternity, with the last Prime Minister but one, about investment in Daresbury. The science community chose to invest Project Diamond elsewhere. One result of that debate was the sensible decision to create the Northwest Science Council, which has acted as a sounding board for some of the best ideas evolving. Some of the issues mentioned by colleagues from various parties owe their genesis to the work done by the science council and its prodding and poking.
Whatever happens within the RDA structure, I would like an equivalent body to bring together high-level scientists from the important clusters represented in the region, in order to ensure that we maintain the momentum necessary to be world class in the fields in which we have high-level skills. I pose that challenge to the Minister. I am not hung up one way or the other on any particular structure, but we must recognise that bringing together the science community has been beneficial. The hon. Member for Warrington South will know that the Daresbury site does not do obscure, blue-sky research-I say this as somebody who used to run an X-ray laboratory a long time ago, when I did a proper job-but is a dynamic and growing science base that reaches into new areas that were never thought of when it was a single-purpose laboratory. The consequence of our battle some years ago has been incredibly positive, and we need to keep that momentum going.
We have also had some interesting successes in other areas. A few years ago, it was presumed that the vehicle industry would continue to shrink; in fact, the opposite has happened. There has been growth in output in the region in not just finished products, but components-from very high end, such as Bentley in the south of the region, through the spectrum of vehicles. The success of General Motors has, of course, been important to my constituents. General Motors was presumed to be sliding into oblivion a while back, and we are now pleased that it does not need the loan guarantee that Lord Mandelson offered it just before the election. The argument between me and the Government has therefore become academic. That is very positive news.
It is now key to consider whether we can get the Ampera into Ellesmere Port-some colleagues saw that vehicle in New Palace Yard a while back-because it is a really exciting, next-generation vehicle that is the right platform to move us forward. The Ampera produces only 40 grams of carbon per kilometre, and is the right step forward. I hope that no one in this Chamber would argue against having the Ampera in Ellesmere Port, so what I want is a commitment from the Government. I am not asking for their money; I am asking for their commitment to working their socks off with us to ensure that no stone is left unturned in guaranteeing that we get that project in Ellesmere Port.
That is a very specific question, to which my answer is yes, absolutely. I have met the senior management in the UK and internationally. Ellesmere Port has an outstanding opportunity in this regard, and my ministerial colleagues and I are determined to do everything we possibly can. I am grateful to the hon. Gentleman for his determined advocacy for an extremely important part of this country's industrial base.
I am grateful for the Minister's comments. I will open the negotiations on getting good value for money for Government car fleets. The Ampera is a very comfortable car to drive, as one or two hon. Members here have discovered.
Other sectors within our region do not get talked about. We have the premier veterinary school at Liverpool university, part of which is at Leahurst in my constituency. There is a fantastic partnership between the university sector and the private sector, from which there has been a huge amount of investment. We must not forget the importance of that veterinary school in the context of zoonosis and other areas of science that will be increasingly important. That crossover between the public and private sectors is critical to the future of our university structures. We need to consider how we can evolve public sector jobs at the heart of such areas of research, and create the kind of successful spin-outs we have seen in research parks in other university communities across the country and elsewhere. How can we create the equivalent of St John's, Cambridge in and around our north-west university clusters?
Some of our universities are doing particularly well. I began my speech with the subject of the Science Council, which has led to greater collaboration between north-west universities. That has been encouraged by colleagues from all parts of the House. For example, in the other place, Lord Oulton Wade, among others, and I have tried to pull together the universities and get the vice-chancellors to think collectively as a region. That has had an effect, so let us not kill the golden goose.
I shall make one final point, which is not intended to be negative. Will the Minister inform his colleagues in the relevant Departments that practices are going on within the public sector that leave a lot to be desired? Within NHS Wirral, there is a disguised attempt to get rid of numbers, or reduce head-count. That organisation is saying to people, "We don't make redundancies." However, they are doing so. A constituent of mine from Neston was told unequivocally that the service she provides is no longer required. She has 36 years' experience as a nurse-not all in the same employment, but she does have a lot of experience-and we need to maintain such skills. However, instead of offering her a suitable alternative job elsewhere within the NHS that is within a reasonable travel-to-work area, the employer has come up with a clerical job that involves working permanent nights. Given her length of service, my constituent is obviously reasonably mature and, of course, all the case law indicates that that is not a reasonable job offer.
Such disguised attempts to reduce head-count cannot be tolerated, and I hope the Minister will pass that message on. I said in writing to the chief executive of NHS Wirral that I would raise that matter, because it is an outrage that people with such experience should be treated in such a manner. That is my only negative comment. We have to face the reality of pressures on public sector jobs, but any action that is taken must be taken in a humane and civilised manner, and in conformity with the law of the land.
As we have heard from all those who have contributed today, we have much to be proud of in the north-west. We are already Europe's 12th largest regional economy and we have a larger economy than many European Union countries. We are home to more than 250,000 businesses and we consistently outperform in attracting inward investment to the UK. We are a world leader in nuclear energy, home to Europe's largest bio-manufacturing region, the largest centre of chemicals production and the No. 1 exporter of pharmaceutical products. We have Europe's second-largest media hub, and the UK's largest financial and professional services centre outside London. We are also the UK's largest aerospace and defence manufacturing region and one of the largest motor manufacturers.
However, the north-west has not been immune to the recent recession. Britain has had the longest and deepest recession on record and the longest recession in the G20, with six consecutive quarters of negative growth. We are seeing the effect of the recession across the region, and we need to ensure that we play our part in securing our nation's future economic and financial success. Our biggest challenge is overcoming the fiscal inheritance of the new coalition Government. Failure to bring the deficit under control will only lead in one direction-higher interest rates and higher taxes. Such a situation will suffocate growth, strangle wealth creation and stifle people's hopes of a better future.
I wonder whether the 1980s and early 1990s passed the hon. Gentleman by? I was not the MP for West Lancashire at that time but, in places such as Skelmersdale, the real unemployment rate was 50%. We are in a difficult worldwide recession and we have lots to do. That goes for all parties. You have your position and we have ours. I believe you are putting families and the needy-
The hon. Lady must remember that there was increased employment, growth and general prosperity by 1997, because of the action taken before then.
Taking urgent action is unavoidable and I am delighted that the Government have acted decisively to bring the deficit under control. The Government's swift action has meant that we can be optimistic about the future of our region's economy. There are two important drivers of economic growth in the north-west: first, the Government's national action with respect to the country's economy as a whole; secondly, the action we take locally as Members of Parliament to involve our local councillors and business communities in boosting our local economies.
I represent a constituency on the very edge of the north-west, and we have important economic ties to neighbouring regions, especially north Wales, so for me the idea of a unified north-western economy is rather abstract. For example, few would argue that Chester's economic future is more closely related to the economy of Carlisle than to that of Connah's Quay in north Wales. However, those external relationships have not been fully recognised, and the opportunities offered by our neighbours have not been fully followed up and secured.
The rigid regional attitude might even have proved to be a psychological barrier to growth in areas such as Chester on the edge of the north-west. That is why I am particularly pleased that the Government are replacing the remote Northwest Regional Development Agency with the more local, accountable and relevant local enterprise partnerships. This is not only my view, but the view taken by Cheshire West and Chester council, which, along with Cheshire East and Warrington borough council, has decided to pursue the aim of having a Cheshire and Warrington LEP. A recent statement from the Cheshire and Warrington Enterprise Commission shows that it is not only the elected politicians who support the idea of an LEP. It said:
"A new Local Enterprise Partnership (LEP) in Cheshire & Warrington could transform the local economy, bringing significant benefits for businesses and residents. We should grasp this opportunity with both hands. In the longer term this will enable us to deliver our ambitious growth targets and really put Cheshire & Warrington on the map."
I congratulate my right hon. Friend Hazel Blears on securing the debate. Clearly, no matter is more important for us than how we seek to invest in our region. That is evidenced partly by the passion with which all Members who have contributed to the debate spoke about their region, and partly by the number of Members who have attended.
My right hon. Friend did an excellent job of pointing to the need to keep supporting the development of prosperity in the north-west and attracting inward investment to the area. She was absolutely right to identify key sectors where growth is possible and desirable. She mentioned, in particular, digital media and the need to invest in green jobs and to try to improve advanced manufacturing. I know from personal experience how Manchester and Salford have been transformed in recent years.
All Members are right to be concerned about how that programme of transformation will be continued without an agency such as the RDA, along with its public and private partners, acting as a real champion for the region. Several hon. Friends made interesting points on how RDAs have brought together the public and private sectors. My hon. Friend Jonathan Reynolds referred to how the agencies had brought about substantial job creation. Government Members, too, recognised the important role that RDAs had played.
Does my hon. Friend agree that one of the lessons that need to be learned from the Government's handling of the abolition of the development agencies is the need to listen to business leaders and leaders in both the private and public sector about what is right for the region, rather than just coming up with their own solutions and imposing them from the centre?
My hon. Friend makes an excellent point, and I will shortly address how the abolition of the RDAs is being handled. In response to comments made by my hon. Friend Graham Stringer, I do not think that we are framing the discussion around the retention of a particular structure, but we have to question whether LEPs will be capable of taking on the roles previously performed by RDAs.
It is also worth asking whether the Government have a democratic mandate for abolishing the RDAs, because the Liberal Democrats stood on a platform of keeping them in areas where they were deemed to be successful. Indeed, the coalition agreement, on page 10, states:
"We will support the creation of Local Enterprise Partnerships-joint local authority-business bodies brought forward by local authorities themselves to promote local economic development-to replace Regional Development Agencies (RDAs). These may take the form of the existing RDAs in areas where they are popular."
However, that does not seem to be happening in practice. We have been told that all the RDAs are going, but no legislation is yet in place for that to happen and we expect a White Paper on the matter to be produced only in the autumn.
The issue is about creating a structure that will deliver regional economic investment and growth. We know that the Northwest Regional Development Agency returns about £5.20 of economic benefit for every £1 spent, and in terms of foreign direct investment the programme delivers £30 for every £1 spent. That is a substantial record that will have to be met by any new structure.
I have several questions for the Minister and would appreciate specific answers to them. How will the economy of the north-west be affected by the removal of current funding streams from the RDA, such as the European regional development fund, and the absence of an effective system for disbursing funds and managing the bidding process? That is particularly important, as we currently need investment in green businesses. The RDAs have been successful in bringing together venture capital funds through European money and money from the private sector to create substantial funds.
How will businesses supported by the RDA cope with the reduction in funding when the £1 billion regional growth fund replaces the RDA budget of £1.5 billion a year over two years? That was an excellent question asked by my right hon. Friend the Member for Salford and Eccles. There are other questions on the advisability of moving key functions from the RDA to the Department for Business, Innovation and Skills, such as responsibility for inward investment and for fostering innovation. Surely there is a need to go the other way and to devolve those functions to local areas and enable them, particularly regions, to set their own priorities.
Several Members referred to the development of a regional skills strategy. That, as the Minister will know, was a function undertaken by RDAs. Without that, how will we know what the skills shortages are at a regional level, how they are to be addressed and what partnerships will need to be developed locally to deliver them? We know that local businesses need to work with education suppliers to increase the number of apprenticeships and to get more employers on board, and we know that universities are critical to the development of regional skills. However, it is necessary to have an overview at regional level, as Esther McVey noted in an excellent point. How will universities interact at a regional level without a body to encourage them to do so?
Does my hon. Friend agree with me that, with the Government office for the north-west also under threat, there are concerns about the partnerships not only with businesses, but with the voluntary sector, which has been so well supported by that body?
My hon. Friend makes an important point. The key question concerns the partnerships already in place and delivering at the regional level. How is what they are doing to be continued, and developed, by the new structure? We do not know the answer to that question.
The regional bodies are also working to address the number of NEETs-those not in education, employment or training-and to encourage all local education providers to come together and continue improving aspirations. Again, it is simply not clear how LEPs will achieve that.
We suggest that now might be the wrong point at which to get rid of RDAs, when we are not clear how LEPs will take on their functions. The degree to which the Government are centralising the RDA tasks is also not clear. I am not sure that that is a sensible way forward either.
I begin by congratulating Hazel Blears not only on securing the debate but on setting a constructive and positive tone on what is a complex issue. I think we all share the view that the north-west is a part of the country with a tremendous future and a great industrial past; the question is, how do we enhance and develop that? The debate has been not only constructive but thoughtful, and I shall do my best in the nine minutes I have to canter through some of the questions, so bear with me.
Like much of the country, the north-west has suffered from the recession, but we are beginning to see early signs of improvement. How do we help to shape and enable a prosperous economy that will be different from what we have known in the past? One of our opening statements was that we as a Government passionately believe in the need to ensure that-
I am concerned about the context of this debate, which Esther McVey touched on. Our region has many disadvantaged communities-in fact, one of the highest proportions in the country. Will the Minister specifically address the disadvantaged areas? His priority tends to be the west of the region, where the nuclear and defence industries are located, rather than the deprived areas. What will he do about those?
I am only 60 seconds into my speech, so I shall do my best in the remaining eight minutes to get to the part of the region about which the hon. Gentleman is concerned.
We understand the need to rebalance the economy away from an over-reliance on financial services and one part of the United Kingdom. Therefore, instead of the approach we have seen in the last dozen years or so, we need to support the renewal of the industrial base and to encourage investment and innovation, about which several hon. Members rightly spoke. Some of those sectors have been talked about: advanced manufacturing, which the north-west is well supplied with, such as plastic electronics and robotics; the digital and creative sectors, to which the right hon. Member for Salford and Eccles referred; and, as several hon. Members mentioned, green technology, which needs to be developed.
The right hon. Lady is wrong. We believe passionately in ensuring that we have an investment bank with financial expertise that can deal with green technologies. We will set that out in our papers on growth and finance, in which we will examine access to credit, which is crucial to small businesses that use conventional technologies, as well to those that use the new technologies. I know the right hon. Lady is keen to get answers, but if she can wait a few more days she will get the answers to her questions.
The north-west is well placed to benefit from our approach, involving long-term investment, a proper fiscal environment and, as several hon. Members have said, a reduction in the burden of regulation on small and medium-sized enterprises. Andrew Miller was absolutely right to highlight the role of Daresbury and of excellent centres of innovation such as Ellesmere Port. I wish the media would look at industry with clearer eyes. They tend to see it as some sort of smoke-stacked centre, but it has moved on a long way, and Ellesmere Port is an excellent example of how we can progress our industrial base.
In the time I have left, I turn to the heart of our debate: the shape of our local and regional economies. As several hon. Members have pointed out, for many years there has been an evident gap between the greater south-east and the rest of the country, which has rightly generated discussion among politicians, economists and business men and women.
With respect, I will not give way because the hon. Gentleman has not spoken in the debate and I need to answer the questions asked.
In 1999 the previous Government established the RDAs, which were expressly tasked with a clear goal: to close the north-south gap. Unfortunately, the evidence shows that that has not been achieved. Let me take the north-west as a simple example: between 1990 and 1999, when the RDAs were established, annual growth in the north-west averaged 1.7%, but in the greater south-east it was 2.3%, a gap of 0.6%. Between 2000 and 2008-the latest period for which figures are available-growth averaged 1.5% in the north-west and 2.1% in the greater south-east; again, a gap of 0.6%. Despite spending £3.7 billion over the past decade, the North west RDA failed to make a difference in closing the gap between its economy and that of the greater south-east.
Understandably, hon. Members may well talk about individual projects that they feel have merit, but we have to look at the overall impact over a decade.
On Friday I visited Kingsway business park in my Rochdale constituency. It is one of the largest business parks in the region, if not the country, and a good thing about it is that it is creating jobs-many businesses are starting to locate there. One of the attractions is that businesses receive a relocation grant of about 20% of their costs, which has attracted businesses from all over the country. However, this week we were told that that grant would no longer apply. Why is that? What effect will that have on job creation not just in Rochdale but in the north-west as a whole?
That is a long intervention, which is a shame because it has prevented me from tackling the broader question. The individual case cited by the hon. Gentleman is a classic example of the danger of the debate: we can all find an individual project that might have merit. The question is whether the gap has closed in 11 years, after spending £3.7 billion. The answer, sadly, is no, which is why we need change.
In answer to questions from those Members who spoke in the debate, I shall set out the key changes that we want to achieve. We need to forge effective partnerships between local business and civic leaders in our communities-and yes, that will mean formal, legal entities. We want greater democratic accountability in what will be vital forums in deciding local economic priorities. The partnerships must be equal between business and civic leaders, because that will help them better understand the needs of local people. In response to the question about universities, I see universities, too, as having an important role in those partnerships.
As several Members said, local economic development needs to be based on real economic areas. Sadly, the boundaries of many RDAs often relate more to the administrative priorities of Whitehall or Brussels than to the actual needs of local areas. I very much welcome what the right hon. Member for Salford and Eccles said about city regions and the various benefits and challenges. Clearly, they are not relevant in every part of England; nevertheless, they are an important dynamic to understand. We must ensure that the boundaries of the economic area that the partnership is seeking to enhance relate to the real economy of today. We need to reform the system by replacing RDAs if we are genuinely to strengthen the local economies of this and other areas.
Our objective is simple: to encourage strong local leadership and to promote economic growth, based on institutions that match the economic reality on the ground and that have the freedom, and therefore the diversity capability, to make a real impact.
I also welcome what the right hon. Member for Salford and Eccles said about the pilots. I am not familiar with the details that she gave, but I would be happy to have a look at them. Total Place has considerable merit as an approach to examining some of the underlying questions.
I will not because I have less than a minute left.
In drawing my thoughts to a brief conclusion, I apologise to hon. Members for having been unable to address all their questions. In my book, the north-west is an area with a genuine can-do spirit, as my hon. Friend Esther McVey and others mentioned. We in government must therefore understand and enable that, rather than directing and tinkering. We need to ensure that businesses can prosper and grow, which means, yes, creating a new economic landscape. For a few weeks, the level of clarity and certainty might not be perfect, but we will set out our further plans over the coming weeks, and we look forward to dealing with the various requests appropriately and thoroughly.