(12 years ago)
Commons ChamberRead Hansard Text Read Debate Ministerial Extracts
Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)
I beg to move,
That this House has considered the matter of industrial policy and UK manufacturing industries.
I thank the Backbench Business Committee for allocating time for today’s debate.
A debate on industrial policy, particularly with regard to manufacturing, is overdue. It is also extremely timely, given the recent publication of Lord Heseltine’s review, “No stone unturned in pursuit of growth” and a number of recent developments, including Ford’s announcement of the closure of its plants in Southampton and Dagenham, and what we saw earlier in the year with the Coryton oil refinery. It is also an opportunity to highlight some of the excellent work being undertaken by the all-party associate manufacturing group, of which I am an officer, along with the hon. Members for Warwick and Leamington (Chris White) and for Burnley (Gordon Birtwistle), my hon. Friend the Member for Huddersfield (Mr Sheerman) and several others. I know they will all make contributions today.
I believe that the UK has an incredibly important manufacturing sector—one that has huge potential, but one that needs a successful industrial strategy that would contain a number of elements and could carry widespread support across this House. One factor common to countries that have successful industrial polices is that the fundamentals of the strategies are widely shared. Businesses can invest for the long term, knowing that the rug will not be pulled from under them. Lord Heseltine makes that point on page 8 of his report, when he asks for the “maximum political consensus possible”. I would like the work of the all-party group, as well debates such as this, to become the basis of precisely that.
Let me say at the outset what a debate about industrial policy is not. It is not misty-eyed romanticism for a return to the 1970s. This is forward looking, not backward looking. I believe there is a case for a modern industrial strategy that allows for our manufacturing sector to be a driver of prosperity for many years ahead. When people from across the political spectrum, such as Lord Mandelson and Lord Heseltine, seem to be coming to a consensus behind this, too, there definitely appears to be some momentum building for it.
One part of Lord Heseltine’s report jumped out at me—not the lovely picture of Manchester town hall on the back cover, welcome though that is in any Government report, but paragraph 10 on page 5, where Lord Heseltine says:
“Whether we look at the well established mature economies such as the United States or the new thrusters of the BRICs, there is one clear message we overlook at our peril: the public and private sectors are interdependent. Only by working together and learning to understand each others’ strengths and capabilities will we succeed.”
I firmly agree, and I want to mention a number of areas where our industrial strategy should reflect that—in skills, investment, procurement and the image of manufacturing as well employer-employee relations.
The battle to attract and retain a skilled work force is a constant issue for industry. All major economies face it, and there is no magic bullet. However, the age profile of our skilled work force in the UK, which creeps ever upwards, should be of huge concern to us all. Every company I visit tells me that the skills pipeline does not work as it should. I believe we should be looking at two things here. First, we should be looking at ways to devolve skills funding more directly to business itself, and in exchange business should guarantee that they will provide the high-quality apprenticeships we all want to see.
Gordon Birtwistle (Burnley) (LD)
Does the hon. Gentleman agree that one of the biggest problems is the careers advice offered to young people in schools from the age of 12 onwards? The careers advice is normally given by teachers who have only ever been teachers and have no concept of industry outside school. Would it not be better if we had dedicated and qualified careers advisers in every secondary school in the country?
Jonathan Reynolds
The hon. Gentleman makes some good points. Careers advice is variable. As I understand it, we are moving away from face-to-face interactions and more towards website-based and telephone-based careers advice services. Whether that will have the effect we would want is probably a matter of concern to us all.
We need to make apprenticeships work for the long term. I know Government Members are always well armed with statistics on new apprenticeships, but I would say to the Minister that there is a quantity versus quality debate to be addressed here, and an issue to do with how many apprenticeships are effectively developing the skills of our next generation. This is an area where more needs to happen.
When I visit manufacturing businesses in my constituency, I am always struck by just how many skilled people started off at British Aerospace. Whether we meant it or not, it seems to me that in the past British Aerospace acted to all intents and purposes as an active industrial intervention, but with that role diminishing we do not have anything that really fills the gap.
As for investment, I am sure that nearly every Member in the Chamber could report the same conversation with local businesses about the banks’ lack of interest in what they do. Businesses say that funding halved overnight during the financial crisis, but that it was never that good beforehand. It seems that, as banks nationalised their business operations and their heads were turned by sectors of the economy that may have been more lucrative in the short term, they were no longer interested in the steady success of their manufacturing clients.
We must find a way of securing for our manufacturing businesses the investment that they need. It seems to me that there is a growing consensus on the need for a British investment bank, whether it is modelled on Germany’s KfW or on France’s Financial Stability Institute, and I am attracted by the idea of a regional or sectoral structure. The proposed green investment bank could form part of a wider strategic investment bank, with a remit to generate long-term returns based on investment in infrastructure and businesses across strategic sectors.
When it comes to procurement, I could simply use the word Bombardier, but there is plainly a view throughout industry that the United Kingdom’s current attitude to procurement represents a wasted opportunity for British business. Let me make it clear that I do not endorse protectionism. Some of the local firms in my constituency have been extremely successful in the export markets, particularly the aerospace businesses, and I think that talk of protectionism at home fails to recognise their achievements. A company delivering a contract here in the UK does not have to be British, but it should be possible to consider how we might be able to make procurement policy work for the UK economy in an intelligent way while still honouring our commitments to the single European market.
I was recently made aware of the problems of Manganese Bronze in Coventry, which could lead to the disappearance of iconic British cabs from the streets of London. The Mayor’s clean air strategy means that as many as 2,000 cabs may have to be replaced in December this year. With Manganese Bronze in administration, the market is now wide open for Mercedes vehicles manufactured in Germany. Surely there could have been a better way.
Another problem is the image of manufacturing. Modern manufacturing is clean and safe, but that does not seem to be widely understood. In fact, at a recent event held by the all-party group in Rochdale, some businesses reported struggling to convey the message that it was also well paid. I did not consider the problem to be particularly significant until I listened to the evidence that industry leaders gave to the group. If we are to try to increase the share of the economy that manufacturing represents, we will need to tackle that. I am not thinking of short-term rebranding or anything that smacks of a gimmick; I am thinking of a long-term campaign—similar to that requested by the hon. Member for Burnley—to get the message across to schools and make them understand what modern British industry is really like.
Finally, I want to say something about employer-employee relations and employment law in the UK. I have deliberately left that subject until the end of my speech, because I suspect that it is the one on which there will be the least consensus. Let me explain my view by giving an example from my constituency.
Kerry Foods, in Hyde, is the largest private sector employer in Tameside. It makes, among other things, Richmond and Walls sausages. Food manufacturing, incidentally, is a much undervalued part of British industry. A few years ago, Kerry needed to adopt the principles of lean manufacturing. It needed to be able to scale its production up and down much more quickly in order to remain competitive, and it therefore needed to consider moving from a five-days-a-week to a seven-days-a-week working pattern. That had big implications for the work force, who were strongly unionised, so Kerry decided to work with them and with Unite, the recognised trade union, to deliver it. In effect, Kerry told the union what it needed, and the union asked the work force to design a shift system that worked for them.
The staff knew that the company’s bottom line was staying profitable, and the company knew that there had to be something in it for the staff. They agreed on the new shift system and a 3.5% wage rise for two successive years, dropping to 2.5% in the third year. That is more than most of our constituents are getting at the moment. My constituents who work for the company have told me that they felt that the consultation process had been extremely sincere, inclusive and open to recommendations, and that input from the union had made it into the final proposals. Unite also sent its reps at Kerry Foods to “change at work” courses which would help them to understand the company’s objectives and deliver the agreement of the work force to the new system. I should add that the company pays for a full-time convenor at the site through facility time, in line with a great deal of best practice.
I gave that example in order to demonstrate that trade unions are not in themselves anti-competitive, and do not constitute a blockage to our economic prosperity. Given the right approach, they can make a very significant contribution to British industry. They should not be demonised. The Ford work forces in Dagenham and Southampton were given very little notification of the recent announcement, let alone a chance to serve as part of a solution to the problem. That was a missed opportunity.
Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)
It is the trade union involvement with Jaguar Land Rover that has done so much to secure investment in the west midlands in new models and the new i54 development and, to an extent, the new Vauxhall Motors development at Ellesmere Port. Perhaps they could serve as a model for industrial communication for the purpose of promoting investment.
Jonathan Reynolds
Those are powerful and timely examples, which illustrate the positive role that trade unions can play in an industrial strategy.
There are many other issues with which I could deal if I had time, including our relationship with Europe and the devolution of power and spending from Whitehall in the UK. I hope that other Members will refer to those. Let me end by saying how pleased I am that we are having this debate. I hope that it constitutes the beginning rather than the end of a conversation in the House about the future successful operation of the country’s industrial policy.
Chris White (Warwick and Leamington) (Con)
May I say how delighted I am to follow the hon. Member for Stalybridge and Hyde (Jonathan Reynolds) in this important debate? I must also thank the Backbench Business Committee for scheduling time for it. As co-chair of the all-party parliamentary group on manufacturing, along with the hon. Member for Huddersfield (Mr Sheerman), one of the most consistent messages I hear is that the UK needs to have a comprehensive industrial policy setting out the key economic objectives and the policies we need to achieve them. We need, as a country, to get back on a more sustainable path to growth, which means seeking to balance our books—specifically, by reducing our trade deficit—so that Britain can be more resilient against future shocks and thrives in a more competitive world. Any industrial policy needs to consider the full range of the UK’s economic strengths, from financial services to creative industries and renewable energy. However, the most effective way of achieving a more sustainable growth trajectory is to boost manufacturing and our industrial capacity.
Gordon Birtwistle
May I advise my hon. Friend that in 1997 manufacturing was responsible for 22% of our GDP and we had a £4.4 billion surplus on the balance of payments, whereas by 2008 that had reduced to 12% and we had a £42.6 billion deficit on the balance of payments? Does that not show that manufacturing and exports are vital to this country?
Chris White
I thank my hon. Friend for his intervention and I note the figures he uses. One target the Minister might like to consider in an industrial strategy is about 15% by 2015—that works in so many ways.
We cannot afford merely to dismiss a large part of our global economy. Emerging markets are focusing on production and industry already, but they will not focus on those things for ever. Soon they will seek to compete with the developing economies in highly lucrative services, as well as in research and development. Where will the UK go then? We need to compete in manufacturing, as well as in services and the creative economy, if we are to succeed in the years ahead. The narrower our economy becomes, the more unstable it will be. We need a broad-based economic strategy, and manufacturing can and must play a crucial role in delivering that.
Andrew Bingham (High Peak) (Con)
Does my hon. Friend agree that we must not forget the very small manufacturing companies in my constituency and elsewhere? This is not all about big factories; it is also about small niche manufacturers producing specialist goods in this country.
Chris White
I thank my hon. Friend for his intervention. As someone who worked for MG Rover, I had a great experience of the supply chain and some of the smaller businesses that supported it. They have a great part to play in our economic growth, certainly in terms of new jobs in this sector.
It seems clear from the statements that the Government have already made that they understand and appreciate the important role that manufacturing can play in supporting the UK economy. But I hope that the Minister will see these words turned into action, and I believe that means beginning the process of developing a formal UK industrial strategy for the next 10 years, at the very least. Countries such as Germany and Japan, where industrial policy is at the very heart of government, can perhaps operate without such a formal process. However, I believe that the UK would benefit from it, not only through the consultation, debate and consensus building that would be necessary in the formulation of such a document, but from having a document against which civil servants and politicians can be held accountable through regular reviews.
Parliament should be at the centre of the development of this industrial policy. We need a policy that can last beyond the lifetime of one Government, which means ensuring that we have policies that all parties support or broadly favour, so that we create the policy stability necessary for businesses to invest in the UK.
Guy Opperman (Hexham) (Con)
It is a year since we last debated manufacturing, on a Thursday late in November 2011. Does my hon. Friend agree that there is some evidence that actual change has taken place, particularly on local banking? That is now that much easier because of the Financial Services Bill, which we passed on 23 April. It means that the smaller businesses so favoured by my hon. Friend the Member for High Peak (Andrew Bingham) can much more ably be financed by local banks.
Chris White
I thank my hon. Friend for his intervention. It is fortuitous, and something I did not realise until he mentioned it, that a similar debate was held this time last year. I hope we have made more progress and that that will continue. One issue on which we have made progress is the business bank concept, about which I know that he spoke in that debate.
Huw Irranca-Davies (Ogmore) (Lab)
I welcome the hon. Gentleman’s remarks, many of which I agree with. May I point out to him that there is something we could do right now about industrial strategy? A year ago, we were bemoaning the fact that the large energy companies did not have the market certainty to invest in large infrastructure, which would have had a ripple effect on all the smaller suppliers across the UK. Three weeks ago, seven of the largest worldwide energy companies wrote to the Chancellor to say that they still do not have certainty. Will he urge the Government, as I do, to put that certainty in place? There will be a ripple effect of tens of thousands of jobs in this country once we know that we are heading to a decarbonised future.
Chris White
All I will say is that energy and how we deliver on an energy strategy must be part of any industrial policy.
One of the most pressing concerns for manufacturing is access to finance. At meetings of the all-party group and with constituents, bank lending is a theme we return to time and time again. We must consider closely how we will reform our banking system for the benefit of our manufacturers, which must be a key part of our industrial policy.
Skills are another area that the Government must consider and I welcome the work that has already been done, particularly on apprenticeships. They are giving more young people the chance to learn skills in some of our excellent educational facilities—not least Warwickshire college in my constituency. We need to do more to strengthen the whole curriculum, however, so that it supports our economy, particularly by supporting science, technology, engineering and maths—the STEM subjects —at primary and secondary schools. We also need to look at apprenticeships so that we have more of the higher level apprenticeships our country needs to compete with other rapidly upskilling economies.
Kelvin Hopkins (Luton North) (Lab)
The hon. Gentleman is talking about the importance of education and training. Is he not concerned that every year we have to import tens of thousands of qualified engineers from abroad because we cannot produce enough through our own educational system even for our diminished manufacturing sector?
Chris White
Yes, I share that concern. It is incumbent on the House and on partners with an interest in manufacturing and industry to spread the news and create a greater awareness of jobs in industry. It is a matter of attracting people to those jobs, and our education system has a great part to play in that. That brings us back to the question asked by my hon. Friend the Member for Burnley (Gordon Birtwistle).
The Government have also rightly focused on infrastructure, on which the UK needs to improve, and a comprehensive industrial policy would seek to address that problem. A modern industrial policy must work to increase investment, by providing the right incentives and ensuring that the allowances and tax breaks make the UK one of the most attractive places in the world to do business.
Of course, an industrial policy should also consider other areas such as research and development, energy, procurement and export support, but I believe that the most crucial thing is that we should act swiftly to work on building a new industrial policy. Sector strategies are useful, but the main obstacles to UK manufacturing are at a national level.
Chris White
If I may, I will continue.
A strong manufacturing ecosystem cannot depend on a few favoured industries but must see the whole of industry succeed. We have an historic opportunity over the next few years to develop consensus on a policy that our country desperately needs, working across political boundaries with business, trade unions and policy experts. I hope the Government will take the opportunity to do that, enabling manufacturing to be the engine of the UK economy once again and putting our country back on the path of sustainable and balanced long-term growth.
Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)
It is a pleasure to follow the hon. Member for Warwick and Leamington (Chris White) and my hon. Friend the Member for Stalybridge and Hyde (Jonathan Reynolds), who are members of the all-party group on manufacturing. I think it is indicative of the consensus that is emerging on industrial policy that I heard little that I disagree with.
I welcome the debate and the Government’s publication of an industrial strategy. Indeed, the Department for Business, Innovation and Skills has published any number of strategies so far, and I would find it difficult to disagree with any of the major points in them. The problem is not so much with the industrial strategy— I think that a consensus on that is emerging on the Back Benches—as with the priorities in the culture of the Government, which is not necessarily aligned with the Department’s priorities and the strategies.
I could not help but notice the comments made by the Secretary of State for Business, Innovation and Skills in September:
“The Government shapes the British economy with its decisions every day. It makes many decisions about skills and universities, on research, on technologies, and on infrastructure. Through what it buys, and how it goes about buying it, the regulations that exist, the markets it oversees, and tax policy. All of these send messages to the economy.”
Huw Irranca-Davies
My hon. Friend is right that Government decisions shape industrial strategy. I hope he might have some thoughts on where we go on carbon capture and storage as part of the strategy. It was with great regret that we found out this week that there is uncertainty over future funding and a drawing down of European funds because the Treasury was unable to provide guaranteed funding. Does he hope that CCS will be part of the industrial strategy in phase 2, which will come up next spring?
Mr Bailey
My hon. Friend tempts me with an issue that is worthy of a separate debate, but broadly I agree, and I will make some allusions to the green economy later.
The problem is basically that although the Minister outlines the impact of different Government policies on the economy, the Department, in its delivery in those different areas, does not necessarily seem to be signed up to the same economic and industrial priorities. For a start, on the fiscal strategy, our ability to eliminate the deficit depends crucially on our ability to generate investment in economic growth, yet at the same time the Chancellor’s strategy has effectively squeezed consumer spending and failed to recognise that in many areas public spending and private engagement with it are crucial to economic performance. That, coupled with various apocalyptic utterances about the state of the British economy, has generated a feeling of insecurity and uncertainty that has had a knock-on effect on consumers’ confidence to spend money and the willingness of businesses to invest. I hear that many businesses are currently sitting on piles of cash, but they will not invest it because they fear that the investment would not pay off. Similarly, with such uncertainty, banks are less likely to lend because they obviously sense a higher risk in doing so than they would if there was greater confidence in the economy.
Also, the Government’s tax policies have concentrated on reducing corporation tax. All the messages I get from manufacturing—I know that the hon. Member for Burnley (Gordon Birtwistle) has strong views on this—indicate that money to generate investment would be much better focused on research and development and capital allowances than on corporation tax. Much more needs to be done to assess the relative impact of reductions in corporation tax, rather than investment in R and D and capital allowances, and where future Government policy on that should go. Given the number of foreign businesses that have invested in this country and seem to have paid very little corporation tax, I wonder how relevant the reduction in corporation tax set out in the Chancellor’s first Budget was in attracting foreign investment. I need only repeat the comments the chair of my local enterprise partnership made this week: he said improving capital allowances would be a quicker and more effective step than creating a business bank. I do not decry the long-term significance of a business bank, but right now we need some shorter-term policies that can have a more immediate impact.
Guy Opperman
One such short-term policy that would have an impact is the liberalisation of small local community banking, as that would mean there would be lending directly to small and medium-sized businesses, which is what the hon. Gentleman would like. This Government are doing that, but the Opposition voted against it. Can he explain why?
Mr Bailey
The hon. Gentleman tempts me to address a much bigger debate about the appropriate ways of financing industry, but I am not going to do that. I have been involved in local organisations providing access to finance for small businesses, and I know that the perception of risk is crucial. It does not matter where the money might come from, because if the risk is considered too high any funds will only be available on very expensive terms.
On green issues, the decision on solar panels, the dispute that still exists at the heart of Government on the future of wind power and the delays in the implementation of the green deal make for uncertainty in an industry that needs certainty above all else, and the Government must resolve that. In the submissions I have received from bodies representing manufacturing industry, two measures have been highlighted, which I think the all-party group would also call for. First, any industrial strategy must have at its heart a degree of certainty. That requires building a cross-party consensus that will outlive any Government, so that business can invest for the long term. That is especially relevant for green industries. Secondly, there must be changes in the culture and structure of Government that will allow economic, and in particular manufacturing, priorities to be considered across Departments. That was touched on in Lord Heseltine’s recent report, and it has featured prominently in submissions from organisations representing manufacturing. If we are to convince industry that there is a future in investing in our manufacturing, there has to be general confidence that the Government recognise these priorities and that project economic growth must be a key priority for any Government.
Having an industrial strategy that highlights the most important measures and stimulates debate will go some way towards achieving what we want, but I have yet to be convinced that other Departments accept the logic of this argument. However, there is an emerging consensus in Parliament, especially on the Back Benches, and in industry that the two key issues of long-term certainty and having a driver within Government to prioritise economic growth are crucial. That fact, allied to an emerging public consensus that economic growth must be a priority, could provide the public opinion background to enable any Government to drive forward this agenda. There is therefore a challenge for both the Government and the Opposition to have such policies in place for the public to decide on at the next general election. That is crucial for the British economy and for the future welfare of everybody in this country.
Sir Gerald Howarth (Aldershot) (Con)
I am delighted to follow the hon. Member for West Bromwich West (Mr Bailey), for it was in 1984 that I made my maiden speech in the House as the newly arrived Member for Cannock and Burntwood on the subject of manufacturing in the west midlands, so I yield to no one in my enthusiasm for manufacturing industry.
It has been a mistake in this country that for the past 40 years there has been an over-reliance on financial services as the salvation of our prosperity. The bust of 2008 has blown that apart and revealed that there is a pressing need for the United Kingdom to have a much more diversified economy. As a former international banker, I like to tell people that I am now going straight—I am a politician. For some curious reason, they think that is rather funny.
The point has been made about the decline in manufacturing industry in Britain. Let us look at the figures. In the case of Germany, 20% of its output is now manufacturing. It has maintained its position, and of course it is benefiting from a thoroughly depressed exchange rate. Nevertheless, it has seen that manufacturing can contribute, whereas as my hon. Friend the Member for Burnley (Gordon Birtwistle) pointed out, in the United Kingdom manufacturing has declined from 18.4 % of our national output in 1997 to 10.8% last year. I hope that the Opposition will not constantly deride those on the Government Benches for the decline in manufacturing industry on our watch, as it pretty well halved on theirs. I hope we can attain a consensus on the need to do something for manufacturing. There is good reason why we should be confident.
Sir Gerald Howarth
It is important to make the point that the contribution of manufacturing to output halved. That is a figure that the public will understand as indicative of what was happening.
I want to be positive, because the United Kingdom has historic and current industrial manufacturing flair and capability. I single out just two companies—JCB, a brilliant private family company in Staffordshire, and Dyson, the inventor of the bagless vacuum cleaner. [Interruption.] Indeed, Hoover too, as my hon. Friend the Minister says. Formula 1 as well has been a stunning success for advanced United Kingdom manufacturing, as has aerospace, which I shall come to in a moment.
I remind the House that JCB employs 10,000 people worldwide, of whom 6,000 are employed in the United Kingdom. JCB’s revenues rose last year by 37% to £2.75 billion. Dyson sold eight out of 10 of its appliances abroad, with revenues of £770 million and profits of £206 million—a serious success story.
Jeremy Lefroy (Stafford) (Con)
I am glad my hon. Friend mentioned JCB in my county, Staffordshire. Does he agree that one of the reasons why such companies have been successful is that remaining in family hands over such a long period, they are able to take long-term investment decisions without necessarily looking to the needs of quarterly reports to the market?
Sir Gerald Howarth
My hon. Friend in my old county makes my point admirably for me. A common feature of both companies that I mentioned is that they both invest heavily in research and development, which the chief executive of Dyson, Max Conze, describes as “the key to success on the world stage”.
I want to concentrate on defence. BAE Systems and QinetiQ both have their headquarters in my constituency and I make no apology for being a strong supporter of Britain’s defence industry. According to Peter Rogers, who was last year president of ADS—the aerospace, defence and security trade body—the UK’s defence industry employed 110,000 people, of whom 25,000 were graduates and engineers, and supported a further 314,000 jobs. Turnover was £22 billion and export sales were just short of £10 billion—a fantastic record and a fantastic success story in manufacturing industry.
The United Kingdom is a world leader in both civil and military aerospace—as you, Mr Deputy Speaker, know better than almost anybody in this House apart from myself, Sir—with Rolls-Royce in advanced aero engineering and propulsion and Airbus providing the most advanced wing manufacturing in the world. On the military front we have Typhoon, with SELEX supplying the radar and MBDA the missile systems. We have a range of companies, from Rolls-Royce and BAE Systems, to EADS UK, Thales, Ultra, Chemring, Cobham, and Marshalls, to tiny bespoke hi-tech companies that should not be ignored given the fantastic contribution that they make to the cutting edge of technology. We need to maintain our leadership of that cutting edge, not only to win wars but to enable us to compete against newly emerging economies.
If I can single out one man for his contribution to this, it is Lord Drayson, who in 2005, when he was the Minister with responsibility for defence procurement, produced a fantastic paper called “Defence Industrial Strategy” in which he said:
“Well targeted investment in R&T is a critical enabler of our national defence capability; it strengthens innovation in our defence industry, produces more capable equipment for our Armed Forces and underpins our ability to operate with high technology allies like the US or France”.
I could not put it better myself.
Richard Fuller (Bedford) (Con)
I agree that the defence industry is an important part of the manufacturing base of our country. Will my hon. Friend contrast the previous Government and this Government in terms of the leadership provided by the Prime Minister? Under Labour, QinetiQ, which now headquarters in his constituency, closed down just outside my constituency with no support from the Government. Under this Government, our Prime Minister went to China and won a contract on behalf of the Aircraft Research Association, which is based in my constituency, thereby securing jobs and securing its future.
Sir Gerald Howarth
My hon. Friend anticipates a point that I was going to make, so let me do so now. I fully concur. I do not think that people in this country really appreciate the extraordinary lead that the Prime Minister has given in the promotion of defence exports. Having been the Minister responsible for defence exports, I can testify to his determination, vigour, enthusiasm and commitment. There is every prospect that that commitment will pay off, because he has seriously re-engaged the United Kingdom with the rest of the world in a way that the previous Prime Minister was wholly incapable of doing.
In respect of defence exports, we are increasingly being required to transfer our technology as well; indeed, that appears to be the only way in which we will be able to win these contracts. In looking at the technology, it is very important to understand the significance of defence research. I have QinetiQ in my constituency, but I also have Roke Manor in Hampshire, which produces fantastic defence research and has 400 engineers. In 2009, BAE Systems invested £833 million in defence research.
We have a good record, but I am afraid that the previous Government do not have such a good record. In 1990-91, at 2009-10 prices, real defence R and D expenditure was £3.8 billion, but in 2009-10 that figure declined to £1.7 billion. In other words, it declined from 11.6% of the defence budget to 4.4% of it. As Lord Drayson said in his 2006 document, “Defence Technology Strategy”, today’s equipment is the result of yesterday’s investment in research. He also said:
“Current threats emphasise that science and technology is fundamental to UK military capability.”
Maintaining a vibrant defence industrial base is not a throwback to a 1960s socialist planning concept, as it appears that some of my colleagues believe, but an essential ingredient in the defence of the realm and in contributing to the export-led economic recovery that the Prime Minister wants and which, as I said, he is leading.
I salute my hon. Friend the Member for Mid Worcestershire (Peter Luff) for his sterling endeavours to ensure that the case for supporting British technology was made within Government, but I fear that the right balance has not been struck. People need to understand the consequences of simply buying abroad. Initially we might get a good price and the kit that we want, but then next time we are told, “The price has gone up, so I’m sorry but you can’t have the same capability.” We then find ourselves on a very slippery slope where we cease to be major players in the world and cease to be able to command our own operational sovereignty. We are facing that issue with the joint strike fighter. There is ongoing argument over our access to the technology. I know that you, Mr Deputy Speaker, know a great deal about that. It is imperative that, as equity partners in the joint strike fighter programme, we have that operational sovereignty.
Seeking to grow the UK’s defence industrial base must not be an excuse for the military to over-specify its requirements or for the industry to inflate its prices. Competition clearly has a role to play in restraining such excess, as the hon. Member for Stalybridge and Hyde (Jonathan Reynolds) suggested. However, other nations, including an increasing number of emerging countries, are investing in military capability development and their demand for our products is likely to decline. That raises the inevitable question: from where will the United Kingdom derive its income in the future? I submit to the Minister that the answer has to be in upping our expenditure on defence research, for all the reasons that I have set out.
As a former Bank of England man and adviser to my right hon. Friend the Chancellor, I say to the Minister that the position of R and D tax credits needs to be looked at again. QinetiQ has pointed out to me that it is being seriously disadvantaged by the Treasury’s proposal to change R and D tax credits to make them above the line, which would remove the fiscal incentive for companies that focus mainly on research, rather than development, to locate their activity in the United Kingdom. Given the strength of feeling around the House this evening about the importance of our manufacturing industry, I hope that the Minister will take back to his friends in the Treasury the need to ensure that we incentivise industry and the Government to invest in our technology. That will be hugely important for the defence of Britain and for our defence industrial base.
Mr Deputy Speaker (Mr Nigel Evans)
I remind the House to observe the conventions of the maiden speech.
Andrew Sawford (Corby) (Lab/Co-op)
I am very proud to speak in the Chamber for the first time as the Member of Parliament for Corby. Locally, we know the constituency as Corby and east Northamptonshire, comprising as it does both Corby town itself and the surrounding villages, the four towns of Raunds, Irthlingborough, Thrapston and Oundle, and many villages across east Northamptonshire.
I will start by paying tribute to my predecessor. Louise Mensch served as Corby’s MP in her own unique style. She was proud to be a vocal woman MP, speaking up for women in public life. She played an important role on the Select Committee on Culture, Media and Sport, particularly on matters concerning the role of the media, in which she took a great interest. She championed the local media, such as in her debate earlier this year in which she praised our excellent local newspaper, the Corby Telegraph. She was also known as an advocate of social media. As I know already, combining family life with the demands of being an MP is challenging, but in my predecessor’s case there was also the matter of an ocean between those two parts of her life. I wish her and her family well in the future.
Louise had a tough act to follow. Her immediate predecessor, the Labour and Co-operative MP, Phil Hope, served for 13 years and was well known as a very hard-working local MP who was concerned with his constituents. He was instrumental in the opening of a new railway station in Corby, the opening of children’s centres across the area, major health service improvements and the building of new schools. He also served with distinction as a Minister.
Like Phil Hope, I am a co-operator, and I am proud to be a member of the Co-operative group of MPs, which this week has reached record numbers. The first ever Co-operative MP in the country was elected to represent my constituency, on its earlier boundaries, in 1918. The driving force behind Alf Waterson’s selection was the blastfurnacemen’s union in Corby. Although Northamptonshire had once been a stronghold of the Liberals, in the early 20th century, a more radical culture emerged from the chapels and the boot and shoe industry, in which past generations of my family were employed. Local co-operatives in towns across the constituency became a vital part of the local economy, and still feature strongly today. I believe that co-operative approaches, such as mutual housing and new energy co-ops, can play a big role in my constituency’s future.
The towns of Raunds and Irthlingborough are known for their co-operative heritage, and as boot and shoe towns. Raunds’s place in history is assured by the events of the Raunds strike of 1905, during which a party of boot operatives marched to London to demand fair wages. The Times reported:
“Their arrival was awaited in Parliament by a large number of people in Parliament Square, from where a deputation of ten proceeded into Parliament to meet with MPs. Afterwards, the men were admitted to the Strangers Gallery, and a slight disturbance was created.”
Although I urge no disturbance in the Strangers Gallery today, I assure the descendents of those Raunds marchers that I will continue their campaign for fair wages.
All those years ago the War Office agreed to the demands of Raunds workers and committed to a minimum rate of pay that people could live on. Today, I urge all parts of the public sector in Corby and east Northamptonshire, and the private sector, to consider the case for a living wage of £7.45 an hour. Too many people in my constituency are being squeezed by rising food and fuel prices, and by other factors such as the role of employment agencies in our local labour market. Too many people are on zero-hours contracts where no work is guaranteed. When they do work they are paid low wages with agencies taking a cut of their earnings, and sometimes workers are poorly treated. I am also concerned about the way in which some agencies have set up offices overseas to facilitate employment in my constituency; I want them to make a much more determined effort to ensure that local people are given employment opportunities. I have raised that point with my right hon. Friend the Leader of the Opposition, and I am grateful that he has listened and said that he will take action.
In these tough economic times, many people in my constituency are unable to find work at all. Independent studies show that Corby is the most difficult place in the country to be a young unemployed person looking for work. Corby is, and must be, a working town. It is particularly well known as a steel town. Corby provided the steel for Operation Pluto—the famous pipeline under the ocean—which provided the fuel for allied forces invading Normandy in world war two. My granddad was there on D-day as a Royal Marine commando, and my other granddad, who worked in farming, helped to feed that Army and the country. Both would later become Corby steelworkers.
Today Corby’s steel tubes can be found at the Olympic park, and seen on everything from the Wembley arch to the millennium wheel across the river from this House. Tata is still a major local employer and I support its call for a level playing field on energy prices—which it tells me are much cheaper in continental Europe—and, crucially, for investment in infrastructure to boost demand. These are key issues for manufacturing industry in the UK. I want to see more action to create jobs, such as a one-off tax on bankers’ bonuses to pay for a real jobs guarantee for young people, and to help our small firms with a one-year national insurance tax break if they take on extra workers. I will also work locally with businesses, councils, schools and colleges. Skills matching is a particular issue, helping people to gain the skills they need for the jobs that will be created.
I was struck by the experience of a local man I met recently. He had started his working life as an apprentice toolmaker, carrying out a high-quality apprenticeship and being mentored by an older toolmaker who was in his last few years before retirement. I want such experiences to be much more widely available to support our young people to develop great skills and careers in the manufacturing industries—the important subject of today’s debate.
Corby is very proud of its Scottish connections and has a large population of Scottish descent. The Highland gathering is a big event, as are the Burns suppers. Generations of Scots and other people coming to the town have blended with Northamptonshire people to create a distinctive, incredibly strong and proud community that it really is a privilege to represent. There has not always been such co-operation between the Scots and the English in my constituency. Today Fotheringhay is one of our many beautiful villages, but it has a more gory past as the place where Mary Queen of Scots was beheaded. I assure the House that today there is a more harmonious spirit and we believe that England and Scotland are definitely better together.
That spirit has enabled Corby to survive at times of great hardship. In the 1980s. 10,000 people were made redundant at the steelworks—my own dad was one of them—and that experience shaped my childhood. My dad went to Ruskin college to study, while my mum worked in a leather goods factory to pay the bills. My dad, who is here today, went on to become the Member of Parliament for Kettering from 1997 to 2005, and I am very proud to continue my family’s record of public service.
I look forward to raising other issues that matter a great deal to my constituents, such as the future of vital local services, including our schools, local policing and health services. I am particularly concerned about the threat of serious cuts to Kettering general hospital. It is where my own children were born, and it serves people across my constituency. I will do everything I can to protect our hospital services. I will speak up, too, for our more vulnerable residents: the families affected by cuts to special needs services; those who rely on disability benefit who feel unfairly treated by these Atos reviews; and the pensioners, who want to know that their MP is on their side.
Thank you for the warm welcome, Mr Deputy Speaker, from the staff of the House and MPs on both sides, and from my right hon. Friend the Opposition Chief Whip—[Laughter.] I intend to work hard here in Parliament and in my constituency for all the residents in all the towns and villages. I very much look forward to the honour of representing Corby and east Northamptonshire in the years ahead.
Eric Ollerenshaw (Lancaster and Fleetwood) (Con)
It is a pleasure to follow the new hon. Member for Corby (Andrew Sawford). Clearly, my two Saturdays in Corby did not turn out too well. I remember the rain in Thrapston. I offer him many congratulations. Obviously he is a man of strong views, and he puts them across clearly. I have known him before—briefly—in his professional life. He proves that he does his homework and research, and will make a great addition to the House. Unfortunately for Government Members, it looks like he will stay the course.
I congratulate the hon. Member for Stalybridge and Hyde (Jonathan Reynolds), as well as my hon. Friends the Members for Warwick and Leamington (Chris White) and for Burnley (Gordon Birtwistle), on getting this debate under way. I declare an interest in Stalybridge and Hyde—I spent my childhood at Hyde county grammar, and used to live in Dukinfield, which is in the constituency of the hon. Member for Stalybridge and Hyde. My sister still lives there and works at the company the hon. Gentleman mentioned. I am also grateful to the Backbench Business Committee for the debate.
We need to rebalance the economy in terms of the types of the businesses we have, but getting manufacturing and industrial policy right is critical in rebalancing the economy regionally. I am pleased the hon. Gentleman said we do not want to go back to the failed policies of the 1970s in trying to pick company winners—he agrees with Government Members on that. Surely the Government’s job will be to identify sectors where we already have a world lead, such as life sciences, higher manufacturing and aerospace, as well as sectors of high growth, such as the automotive industry.
As the hon. Member for Ogmore (Huw Irranca-Davies) pointed out, we need a strategy that resolves the country’s energy needs, which will give stability for investors on which to build an increased manufacturing base. We also need a positive climate for inward investment and business start-up.
The hon. Member for West Bromwich West (Mr Bailey) mentioned a competitive tax regime. I congratulate the Government on what they have done on corporation tax, which I believe is having an impact. We need a competitive tax regime, but we also need a regime under which tax is collected.
My hon. Friend the Member for Warwick and Leamington emphasised education policy and the reforms the Government are introducing to ensure that we have properly trained and qualified workers, which hon. Members on both sides say we need. When we meet local employers, they complain about their employees.
I agree with other hon. Members on apprenticeships. I congratulate the Government on what they have done—we have nearly half a million new apprenticeships. A couple of weeks ago, I visited a small manufacturing factory in my constituency—it is essentially small scale, as described by my hon. Friend the Member for High Peak (Andrew Bingham). A and G Precision and Sons Ltd has only 40 employees, but as my hon. Friend the Member for Aldershot (Sir Gerald Howarth) will be pleased to know, it supplies parts to BAE Systems for the Typhoon fighter. Only this year, it decided to make two work experience lads from the local school into full-time paid apprenticeships. I see the beginning of that welcome change throughout my constituency. The other part of that—my hon. Friend has just touched on it and it is one of my main points—is the encouragement of R and D, so that our companies remain at the cutting edge in their field.
My constituency benefits from having Lancaster university in it—one of the top 10 universities. The university has recently been made a centre of excellence for cyber-security, and has the potential to generate multi-billion pound business across the world. We need to build on that. In my constituency, ideas have been developed and transferred. For example, First Subsea Ltd took a design from the university and has now produced an engineering mechanism to pick up pipes and buoys from under the sea for the oil industry. It employs 45 people and has sales departments in all the major oil-producing parts of the world.
I have previously made this point, but we have missed a trick with local enterprise zones. I have never understood why we could not give every university the potential to have their own enterprise zone. The purpose of enterprise zones is to encourage start-ups. Where do start-ups start? Many of them at the high end start with universities. We also want enterprise zones where businesses, as they expand, eventually move off and pay their taxes like every other business.
Sir Gerald Howarth
My hon. Friend is making an important point. May I remind him that Surrey Satellite Technology, a fantastic world leader in satellite technology, was spun out of the university of Surrey? That reinforces his point about the role that universities can perform in advancing high technology.
Eric Ollerenshaw
I am grateful to my hon. Friend for that example.
When I make inquiries, I am told that the problem in defining and facilitating university enterprise zones lies apparently with the Treasury. The Under-Secretary of State for Skills, my hon. Friend the Member for West Suffolk (Matthew Hancock), is an expert in these areas and I am not. However, I am told that the Treasury rules are that it has to make a calculation about the taxes it would have received from companies that have not yet been set up in order to make a decision about whether to allow an enterprise zone to be created. How civil servants can calculate the tax of non-existent companies—or new companies that have not even been dreamed up—I am not quite clear, but to me there is something wrong with the system.
Our universities have pushed forward the science park idea—Cambridge is a notable example—and it is being pursued by Lancaster university to enable graduates with skills and ideas to stay in the local area. To underline my theme, we have to use this policy to rebalance the contribution to growth that the regions make. The council, under general powers of competence, has the power to vary business rates. The concept suggested by the university, the council and myself was to have an enterprise zone-lite. The local council could define the area of the science park and lower business rates. The problem then—going back to the Treasury rules—is that the local council would then have to calculate the difference between the full business rate and an estimate of what those companies, some of which might not have even been set up, might have to pay. That seems to defeat the whole object, but watch this space. We are still trying to pursue where we can go with this. It is key that policy is not only about what Government can do—I will say a little bit more about that—but about what local councils and local authorities can do, on their own volition, with the new powers that the Government are giving them. That policy, based around universities, is the key to top-level manufacturing and to growing the economy of the north and, in particular, my constituency.
Hon. Members have mentioned exports. Lots of companies in my constituency export. I have mentioned before a company in Fleetwood that exports 50 tonnes of whelks to Korea. Only the other week, I was called by someone from another company in Fleetwood. I do not know if this counts as manufacturing, but the gentleman there reconditions and patches up end-of-life heavy trucks. He has found that the market in developing countries is either for brand-new Chinese trucks or British Bedford ex-defence vehicles—probably the kind that my hon. Friend the Member for Aldershot secured the contract for many years ago. He says that the Chinese trucks do not last five minutes. I have no comment to make—I am not a truck expert—but he says that although they are glittering they do not survive very long.
The gentleman in question, then, has found a market in the developing world for reconditioned heavy vehicles, so why did he approach me? He wanted to know whether I had contacts with other countries that might want to get involved. Having been a member of the all-party group on Kurdistan, I mentioned Kurdistan. That taught me a lesson, because he came back and said, “We’re looking at Kurdistan”. Where was UK Trade & Investment? Through contacts in the all-party group, he contacted the consular staff, who were extremely helpful, and now he is on his way to selling reconditioned trucks to Kurdistan. Where was UKTI? Its role is pivotal. A small business that wants to be in the export market needs a simple lead.
Jeremy Lefroy
I welcome my hon. Friend’s comments about reconditioned British vehicles, which are much-sought-after all around the world, but does he agree that there is another problem, as experienced by a company in my constituency? Reconditioned UK Army vehicles, which cannot be described anymore as military vehicles, are banned from export to certain countries, yet similar German army vehicles are available in those places, because German companies face no such obstacles.
Eric Ollerenshaw
My hon. Friend clearly demonstrates his point about reconditioned vehicles. I do not want to prolong this debate, but clearly there is a market. Small businesses at—I would say “the coal face”, but we do not have one anymore—the end of manufacturing do not have time to make the phone calls and make the contacts. They need support. For that reason, I welcome some of the changes to UKTI. In particular, I welcome its approach to Members about getting these meetings going in their particular areas. That will, I hope, provide the contacts, so that no longer do I have to be called in to make the contacts myself. As I learnt, we should not assume that these small businesses are not looking at what is available on the global market. All they want is the assistance to get into that global market, and obviously we should do everything we can to address our concerns about manufacturing.
I supported the abolition of regional development agencies, although I should declare an interest, as a past member of the London Development Agency—why London needed an RDA I never understood, even though I sat on the board. I have, however, been a great supporter of local enterprise partnerships, and I take Lord Heseltine’s point about giving them greater support. I support LEPs because areas such as Lancaster and Fleetwood—at the north end of Lancashire—and surrounding constituencies, are dominated by Manchester and Liverpool. So despite serious concerns about the proposal for city regions and the dominance of those areas, which in my constituency resulted in little help from the RDA, I hope that we will get some help from the LEP.
Mr Deputy Speaker (Mr Nigel Evans)
Order. In order to accommodate everybody who wants to take part in this debate there will be a seven-minute limit on speeches.
Kelvin Hopkins (Luton North) (Lab)
May I first congratulate my new hon. Friend the Member for Corby (Andrew Sawford) on his absolutely splendid maiden speech? I have some connection with him in a sense, because I come from the east midlands, my grandfather worked in the boot and shoe industry, and at this moment I am wearing a pair of English leather shoes that were probably made in his constituency—and splendid shoes they are, too. It really was an excellent speech, and I am pleased that my hon. Friend’s father is here to hear it, because he was a very good personal friend and comrade in this place. I am delighted that my hon. Friend is following in his father’s footsteps and I welcome him to the House of Commons.
I want to mention Bedford trucks as well, because the hon. Member for Lancaster and Fleetwood (Eric Ollerenshaw) mentioned them. They were made just outside my constituency in Dunstable and are all over Pakistan—thousands of them can be seen there today. Many people think it was a great mistake to stop manufacturing the basic truck, which is so rugged and can work in any conditions—and no doubt is infinitely superior to the Chinese competition.
I want to talk about Britain’s experience of manufacturing. Britain has suffered from savage deindustrialisation, brought about by utterly misguided economic policies enacted over a long period. We have had many figures quoted to us today. We have only to look at, say, the comparable 2006 figures for Germany and Britain, to see that manufacturing comprised 12.4% of our economy in Britain and 23.2% of Germany’s economy—almost twice as much. Germany is indeed the economic powerhouse of Europe, and one can see why. During the period 2000 to 2010, the UK share of world trade fell by 28%, whereas Germany’s fell by a mere 3%. Why are our countries so different? Governments in Britain have made persistent attempts to sustain an overvalued exchange rate. This goes right back even to the 1931 crisis, which sadly destroyed the Labour Government, because they did not realise that they could come off the gold standard and devalue, which is what they should have done and what happened immediately after they lost office.
Then we had the 1949 devaluation—very sensible—and in 1967, again after resisting devaluation for a long time, we eventually devalued, following which the economy of course bounced a bit. But then in 1979 we had the Thatcher Government, who immediately introduced policies that saw a massive appreciation of the pound. In two years we saw a fifth of manufacturing industry disappear and unemployment rise to 3 million, simply because of the massive appreciation of the pound and the collapse in demand for manufacturing. Between ’82 and ’88, in the Nigel Lawson period, we saw a pretty savage depreciation of the pound—by some 35% from peak to trough—and a great recovery because of that depreciation.
Paul Farrelly (Newcastle-under-Lyme) (Lab)
One of the industries hardest hit has been ceramics. One of the things that we have wanted for years in the ceramics industry is accurate country-of-origin marking and an end to bogus back-stamping. If something says “Made in England”, it should be made in England. Other countries in Europe want that in the ceramics industry, but the UK has always stood in the way. Does my hon. Friend agree that it is time we had a more open mind to such measures to ensure accurate consumer information, to counter counterfeiting and to give our industries a fighting chance?
Kelvin Hopkins
I absolutely agree with my hon. Friend. Indeed, I have a wonderful set of Wedgwood china, which we use on special occasions, that no doubt comes from his constituency.
Then we had the 1990 to 1992 exchange rate mechanism disaster—again, an attempt to pinion our currency, in essence against the Deutschmark. We recovered from that after we devalued substantially—golden Wednesday—and the economy started to strengthen again. Indeed, if that economic strengthening had continued for three or four years longer, Labour might not have won the 1997 election, because we won on the basis of the terrible mistake made by the Conservative Government by going into the ERM. Those are key factors—the key factor, I think—in our economic weakness. But Germany kept its Deutschmark at a low parity for a prolonged period, and was allowed to do so because West Germany had to be, inevitably, the showcase for western capitalism against the east, and everything was done to ensure that Germany succeeded. It was permitted; it was allowed by the rest of the western world to keep its currency low as a necessary condition for economic success. Other factors, of course, were used to ensure that the Germans were successful, including a very strong interventionist industrial policy, which we forgot and left behind when we abandoned, for example, the National Economic Development Council, abolished by the Tory Government.
Mr Robert Buckland (South Swindon) (Con)
I am very interested in the hon. Gentleman’s remarks about Germany. Would he join me in congratulating the Germans on the important supply side reforms that they have made in recent years, to liberalise their economy and to make it the exporting success that it clearly is? Is that not a lesson for the United Kingdom?
Kelvin Hopkins
If the hon. Gentleman thinks that we can recover by taking supply side measures, he is gravely mistaken. It is the macro-economic measures that the Germans took that were the basis for their success. Supply side measures can no doubt help, but having a low parity for the currency and then ensuring that investment goes into manufacturing above all was the key to German success. The euro, of course, is an invention, essentially to pinion the Deutschmark within the euro at a relatively low parity compared with the countries that Germany exports to. If those countries outside Germany but inside the eurozone were permitted to recreate their own currencies and devalue, they would not be able to buy quite so many BMWs and Mercedes as they do at the moment, and that would affect Germany. One of the reasons Germany is so keen to keep the eurozone going is simply that Germans know very well that if the eurozone was disaggregated, or collapsed, depending on how one chooses to describe it, the Deutschmark would immediately appreciate and Germany would have much more serious difficulties.
We have had that constant problem with our exchange rate. Ours has always been high, and Governments have tried to keep it high. Germany’s has always been low and German Governments have made sure it stayed low. I have had a number of experiences, about which I have written in the past, and spoken on many occasions. In 1988 I went to a meeting of the Anglo-German Foundation and raised the question of the “balance of trade problem” with Germany. I was immediately told to shut up by a very angry representative of the then German Government. I thought I was just raising something that was obvious to everyone, but he was very upset that I even raised the issue. In 1988 the Institute for Public Policy Research produced a pamphlet, “The German Surplus,” which raised that issue. That too was suppressed. I tried to get extra copies; I was told there was none. I asked who wrote it; no one would tell me. Clearly, the Europhiles inside the organisation were suppressing that document because it would damage our relationships with the European Union, which we were moving towards.
Macro-economics is the core problem. We could do lots of other things as well, but the macro-economics must be right. We must ensure that our exchange rate is right, and the only way we are going to start to recover industrially—in manufacturing terms—is first to have a substantial depreciation and then to do other things to ensure we recover. If we do not do that, we are in for a very bleak time.
I have with me the fine document produced by the Library every month, “The Economic Indicators,” which I read avidly. Let us look at the trade balances—visible trade. In 2010, Germany had a trade surplus—converted by the Library into dollars, for comparison’s sake—of $204 billion, when the UK had a deficit of $151 billion. That is the difference between countries. They should be, in many other ways, very similar. They have got it right; we have got it wrong. The UK trade deficit with the EU27—essentially with Germany—in August, the last month recorded, was £4.9 billion in one month, up from £4.4 billion in July. So it is getting worse. Most of that is, of course, with the Germans. The UK trade deficit for 2011 tipped over the £100 billion mark—a staggering figure. No other country would be able to sustain that, and we must do something about it in time.
Only a much lower exchange rate will make it possible to increase exports and drive an economic, and specifically industrial, revival in the UK. Only then will we see unemployment come down and living standards start to rise again. We must do this; it is a necessary, vital condition for success, and if we do not do it, we have a bleak future before us.
Jeremy Lefroy (Stafford) (Con)
I refer Members to my entry in the Register of Members’ Financial Interests. I congratulate the hon. Member for Corby (Andrew Sawford) on his excellent maiden speech. I also congratulate the hon. Member for Stalybridge and Hyde (Jonathan Reynolds) and my hon. Friend the Member for Warwick and Leamington (Chris White) on securing this important debate.
I firmly believe that the United Kingdom needs a long-term industrial policy, but it must be rooted in growth. There is no point in focusing on economic sectors that will not create jobs and wealth for the UK in the future. We have fought shy of introducing an industrial policy in the UK for many years, because we believe that Governments should not be in the business of picking winners. It is true that a Government should not select one company over another, but we will be failing our country and future generations if we do not look ahead to see which economic sectors are likely to prosper and which are likely to fade away.
Suspicious as we have been about industrial policies, we have nevertheless had them over the years. In the midlands, in and around my constituency, I can see the positive results of at least three of them. Rolls-Royce aero-engine manufacturing was saved—perhaps fortuitously, and not as a result of a deliberate policy—by a Conservative Government intervention in 1971 after the company overreached itself with the development of the RB211 engine. Rolls-Royce employs tens of thousands of highly-skilled staff, contributes greatly to UK manufacturing exports—I entirely agree with the hon. Member for Luton North (Kelvin Hopkins) on the need for rebalancing—and is one of the best-known British products on earth.
Alstom, the largest private sector employer in my constituency, was assisted by a French Government intervention in 2003. Since then, it has consolidated its world-leading role in developing high-voltage direct current transmission as well as being the only remaining manufacturer of large transformers in the UK. It, too, makes a significant contribution to the UK balance of payments.
Jaguar Land Rover is investing heavily in south Staffordshire, as the hon. Member for West Bromwich West (Mr Bailey) said earlier. My hon. Friend the Member for South Staffordshire (Gavin Williamson) and other neighbouring MPs have worked hard to secure that investment, alongside the strong support of both Staffordshire county council and Wolverhampton city council. In recent years, the UK Government have made a determined effort to attract automotive investment, and this is one of the many fruits of their and the local councils’ efforts.
So industrial policy can work, but only that last one could be said to be the result of a determined effort by the UK to establish a proper policy that is consistent, long term and based on a competitive advantage. That is happening in the automotive industry. Another industry that needs a long-term policy is energy, in regard not only to the consumers of energy but to the manufacturers of the equipment used in the industry. Such manufacturers in my own constituency and many others across the country are world leaders.
What are the building blocks of a successful industrial policy that will stand our country in good stead for the 21st century? I shall make a few suggestions. First, we need a clear understanding of what we will concentrate on. The Netherlands, as so often, provides a good example, as has been set out in Lord Heseltine’s excellent report. The report sets out the nine top sectors in which it believes the Netherlands has a competitive advantage and on which it wishes to concentrate. They include agro-food, horticulture and water—all of which the Netherlands has a lot of—as well as manufacturing and service industries such as chemicals and logistics. The report identifies a “golden triangle” involving links between businesses, research institutions such as universities, and the Government.
Secondly, we need to ensure that we not only make the end products but control as much of the supply chain as possible. That is particularly the case in the aerospace and automotive industries, which are making efforts in that regard. The supply chain has been relatively hollow in those industries until recently. It has become clear that the UK’s manufacturing base has become increasingly reliant on imported components.
Thirdly, we have to ensure that our education and training system is more closely integrated with the needs of the sectors on which we are concentrating. It has been said in this Chamber more times than I can remember that we face a critical shortage of engineers. That is why, this week in Stafford, we are looking into forming a local engineering partnership between universities, colleges, schools and industry. Science and research are an easy target for cuts in both public and private sector budgets because the results are further down the road, whereas the benefits of the cost reduction are felt straight away. But that investment must be maintained. I welcome the Government’s action in protecting the science budget in cash terms in the last spending review, and I urge them to do the same and more in the next one.
Paul Farrelly
The hon. Gentleman is also a great friend of the ceramics industry in north Staffordshire. Does he agree that a laissez-faire approach often translates in government to a “faire rien” approach—doing nothing. I mentioned country-of-origin marking a few moments ago. A measure such as that, we agreed, is not protectionist, but it would afford some support to our industry and is much needed.
Jeremy Lefroy
I totally agree. I have supported country-of-origin marking for many years to ensure that people know that they are getting the best of British and not some foreign substitute or import. It is vital to maintain the quality of our products around the world.
An industrial policy must set out quite clearly how much we as a nation value research and back up warm words with action. Here, I mention research and development capital allowances. Capital allowances are vital for encouraging companies to invest the cash they have on their balance sheets—some £70 billion at the last count—into productive plant, equipment and other capital investments.
Finally, I turn to finance. It is naive to think that all good projects will attract commercial finance in the UK. If that were the case, we would be the home of many more of the largest companies in the world because the technologies were invented here. The first large computer was built on the work of people such as Alan Turing, and the plasma screen was invented in Malvern by what is now QinetiQ but was then the Royal Signals and Radar Establishment. Then there is the work on the human genome, which my hon. Friend the Member for Mid Norfolk (George Freeman) mentioned. We should have more of these large companies, but we lack them because the finance was not available.
That is why I think the Government’s business bank proposal is a good start, but it needs to be the source of long-term patient capital. Lord Heseltine’s reminder in his report of the work that the Industrial and Commercial Finance Corporation did after the war is welcome, and I urge the Government to consider his suggestion of providing more such long-term capital through the business bank.
In conclusion, an industrial policy is not a panacea, but it is a structure that provides the inventiveness and entrepreneurship of the people of the United Kingdom with the best possible chance to thrive in a competitive world.
Mr Geoffrey Robinson (Coventry North West) (Lab)
I congratulate my hon. Friend the Member for Stalybridge and Hyde (Jonathan Reynolds) and my parliamentary near neighbour the hon. Member for Warwick and Leamington (Chris White) on securing the debate. It was a good initiative of the all-party group on manufacturing to secure this debate about a year after we had the last one. This is a year in which we can see ever more clearly just how important manufacturing is to the country, but also how far we still have to go because of the relatively little progress we have made.
I do not want to interject any party political emphasis into anything I say. Indeed, I think that, on the whole, the debate has been remarkably clear of that. That shows one of the great advantages of having Backbench Business Committee debates. Although it is delightful to see the Minister and the shadow Minister in their places to respond to the debate—we can take advantage of that—I do not think it was ever intended that they would engage with each other in Dispatch Box altercations. On these occasions, Back Benchers can speak for their constituencies and for the whole country without the sort of pressures that inevitably arise on party political occasions.
Having said that, as far as the industrial strategy goes, I very much take to heart what my hon. Friend the Member for Luton North (Kelvin Hopkins) said in his brilliant tour d’horizon of post-war economic history, highlighting the great advantages that Germany has had. I do not think, however, that we should look wistfully or enviously at Germany’s position, as a period of prolonged devaluation or low-value exchange rate will not be available to us. Looking to the future, it might be less important to us than it was for Germany over long periods and still is within Europe. The one good thing is that we are outside the euro, but I do not think that long-term depreciation of sterling will ever be allowed, even with a floating exchange rate such as the one we have now.
From my experience both inside and outside the House, the basis for an industrial strategy comes back to the Government not only in respect of the provision of finance, but—and this is of equal importance—in respect of the intelligent and unobtrusive use of Government purchasing. Those two things go together. What the country desperately needs—this is agreed throughout the House—is a major infrastructure programme. However, it is proving extraordinarily difficult to get one under way. One of the two or three questions that I want to ask the Minister—I am sure that he will have time to deal with all of them—is this: what is the real stumbling block? Is it a lack of confidence outside, or is it a lack of Government confidence in the projects?
There is a lot of talk about a lack of confidence in the market at present—many Members have referred to it—and there is no doubt that it exists; but, as I have said many times, although the House is yet to be as seized of it as I am, the Government are showing a lack of confidence in British manufacturing, from the Treasury down through various other Departments. As was pointed out by the hon. Member for Stafford (Jeremy Lefroy), they are afraid to invest real money on a long-term basis. Unless we can get over this fear of failure, invest in the long term, and stick with projects despite the difficulties, we shall not succeed.
In that respect, the Government’s role is vital. An industrial strategy comes down to this. Government finance for infrastructure is desperately needed now, for economic and other reasons. What is holding it up? The process is stuck: the Minister knows that, and the Government know it. It would be helpful if the House could be told what we can do, or what anyone can do, to get these projects under way.
Some aspects of the second issue that I want to raise were dealt with by the hon. Member for Aldershot (Sir Gerald Howarth), who, as is recognised in the House and widely outside it, speaks with great authority about high-technology industries. Several sectors are involved, and I want to ask the Minister about one in particular. The Government took a bold initiative in becoming a partner and stakeholder in the joint strike fighter project. What I want to know is whether we are being given access to the software technology that is so vital to the process of landing on and taking off from British aircraft carriers.
I understand that the problem lies with Congress rather than with the President or the White House as such. I do not think that it is to do with the political side of things. However, I understand that there is still some reluctance in Congress. It seems that, having taken a risk and invested, I believe, $2 billion many years ago when that was real money, we are now being denied key access to points of software interface between landing and taking off involving aircraft carriers that are different from those that the Americans had. Can the Minister assure us categorically that the problems have now been solved and that we are being given access to what we vitally need?
Sir Gerald Howarth
Although the joint strike fighter aircraft was not part of my portfolio in the Ministry of Defence, I believe that Lockheed Martin’s argument was that it was still struggling with the technology itself. However, the hon. Gentleman has made an important point. It is imperative for the United Kingdom to be insistent in this regard. The United States is our closest ally. It has looked to us for political support, which we have given, and it needs to return that support.
Mr Robinson
I agree with every word that the hon. Gentleman has said. There are always problems with those crucial software interfaces, but this was not really that sort of problem. It was made clear by members of Congress, both in the Senate and in the House of Representatives, that they were unhappy about releasing the key elements that we needed, for various spurious, specious reasons. I hope that the Minister will be able to reassure us that the problem has been resolved.
As I said, public purchasing is vital, and I hope that the Minister will bring us up to date on it. We are looking for a new approach from the Government. I hope that it will not amount to an overtly “Buy British” campaign; indeed, I cannot conceive of its doing so, because that is not in the nature of the civil service. It would be counter-productive, and in any case it would not be allowed. As I said earlier, we must be intelligent and unobtrusive, which implies that we must have confidence in British companies.
One Department to which that applies particularly is the Department for Transport. There seems to be a tremendous anti-British bias within that Department, which was especially noticeable in regard to the Bombardier project. The Department said that the decision must be based strictly on price, fundability and the strength of the company. However, there are other factors, to which the Government’s new public purchasing policy should refer and which are allowed under the treaty of Rome. May we please have some indication of when we will see the policy, and some assurance that it will allow us at least as wide a margin of appreciation in assessing such projects as is taken by the French and, for that matter, the Germans? The Germans have a simple policy—German is best. So they buy German and they do not have to do any more. The French pretty much have a policy that says, “Buy French”, but nobody ever says it. We cannot find examples of that being said, even in writing, but the policy does exist. Will the Minister let us know when we will see the new public purchasing policy and what we might expect to see in it?
On the banks, what are the Government really doing to provide finance for small companies, a matter to which several hon. Members have referred? We know that the money is there, but the cost involved is huge and no real solution has yet been found by government. Why do we not do something with the Royal Bank of Scotland? We could turn it into a bank for industry and give a long time for its sale and the repayment of the money. I hope that the Minister will answer my questions when he winds up.
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. Four speakers are left, and the Front Benchers have to begin at 4.35 pm. So to share the time out I am going to give each speaker five minutes. If there are interventions, the time will come off the last speaker and they will end up with no time at all.
Graham Evans (Weaver Vale) (Con)
I start by congratulating my hon. Friends the Members for Warwick and Leamington (Chris White) and for Burnley (Gordon Birtwistle) and the hon. Member for Stalybridge and Hyde (Jonathan Reynolds) on securing this debate.
The manufacturing and industrial sectors have a vital part to play in developing the UK’s economy. They are also very important to me, as I spent more than 20 years working in the manufacturing industry. I started out working for BAE Systems at Woodford on airborne early-warning Nimrods in the 1980s. The chemical industry is of particular importance to my constituency, where Tata and INEOS Chlor are still major employers in Northwich and Runcorn. What have the Romans done for us? They started the chemical industry in Cheshire when they discovered salt deposits in Northwich. I am therefore very pleased that this issue has been chosen by the Backbench Business Committee for today’s debate.
I wish to address Britain’s historical relationship with manufacturing industry, where the industry sits now, and what we must do to ensure that our great tradition adapts and flourishes in a changing market. Manufacturing industry has seen a steep decline since 1997. The number of jobs in manufacturing halved between 1997 and 2009. The manufacturing industry accounted for 20% of the UK’s total economy and a gross value added of £186.6 billion in 1997. That plummeted to £139.5 billion by 2009, accounting for a mere 10.5% of the economy. The reduction was £3.5 billion per annum in real terms. Only since 2010 has there been an increase in the figures, but progress is limited and growth rates have been mixed this year.
Despite the decline, manufacturing has a vital role to play in our current economy, with 46% of the value of all exports in 2011 accounted for by manufactured goods. I represent a north-west constituency, so I am acutely aware that manufacturing industry directly benefits all the regions. Some 97% of manufacturing jobs are based outside London. We have been left with the appalling legacy that under the Labour Government only one in 10 of the jobs created were outside London and the south-east. For Britain to thrive we must redress that balance, and it is clear that manufacturing is part of the answer.
So what areas should we focus on? As some of my hon. Friends may recall, this is not the first time I have spoken in the Chamber on the subject of manufacturing. The hon. Member for Coventry North West (Mr Robinson), who is no longer in his place, alluded to the debate we held on 24 November last year. On that occasion, I set out some of the ways in which I believed the Government could proactively develop and promote the industry. I am, therefore, delighted to report that several of my suggestions have appeared, perhaps less by design than chance, as part of Department for Business, Innovation and Skills policy.
I made considerable reference to the Germans’ long-term support for manufacturing, which has given their industry real economic clout from far humbler beginnings after the second world war, when the country had been devastated. Germany’s recognition that manufacturing was the backbone of its economy has resulted in political infrastructures set up to nurture industry, especially the mittelstand—the small and medium-sized enterprises. Foremost among those tools stands KfW, the state-backed bank that ensures the mittelstand can access funding, even when the commercial banks are unwilling to lend. In 2010, KfW financed a record €28 billion for SMEs. The latest SME finance monitors show that in the UK over the past year 33% of businesses that applied for a loan were rejected. If the Government do not take up the mantle of supporting SMEs, we cannot expect any of our industries, and especially not manufacturing, to grow.
Hon. Members can imagine my delight when the Secretary of State for Business, Innovation and Skills announced the launch of the funding for lending scheme to encourage banks to invest; the enterprise capital funds and enterprise finance guarantees to help early-stage business to access capital; the £1.2 billion business finance partnership; and the £2.5 billion business growth fund.
I also spoke in the earlier debate on encouraging education and how to engage young people so that they think of manufacturing as a future career. I set out my concerns that part of the problem of youth unemployment is that many are simply not equipped with the skills or given the aspiration to engage in the manufacturing industry. Again, I am very pleased that the Government have made a long-term commitment to world-class skills.
It is clear that new technologies are emerging, particularly at the fantastic Sci-Tech Daresbury in my constituency. It is clear that many factors will contribute to the success or failure of the manufacturing industry and I am pleased that once more we are debating this important topic. The interest shown by so many colleagues on both sides of the House is heartening, but we all have a responsibility to ensure that “Made in Britain” is something that future generations can say with pride. I sincerely hope that we will tackle the challenges of manufacturing head on.
Mr Michael Meacher (Oldham West and Royton) (Lab)
I, like others in the Chamber, congratulate my hon. Friend the Member for Corby (Andrew Sawford) on his excellent, confident speech. I am sure that we will see a great deal more of him in the Chamber.
Today’s debate is about one of the most important and neglected areas in British politics: the abandonment of industrial policy under the embrace of neo-liberal capitalism has, in my view, been one of the most catastrophic errors of the past three decades. It has been a fundamental mistake to believe that the massive switch away from manufacturing to services, particularly financial services in the City of London, is a sustainable model for the British economy. The last time Britain had a current account surplus was in 1983, 29 years ago. In the last 55 years, Britain has had a surplus on its traded goods in only six years. By 2010, as my hon. Friend the Member for Luton North (Kelvin Hopkins) noted, the deficit in traded goods had reached a staggering level of £100 billion a year. The surplus on services, at £49 billion, could cover only half of that. This year, the deficit is likely to reach £110 billion or £115 billion, or 7% of our GDP.
A yawning and still increasing deficit of such magnitude cannot continue for long without our foreign creditors, like any bank manager, calling time. The only way to reverse this steady slide towards collapse is by addressing the real causes of decline via a major and sustained revitalisation of our manufacturing capacity. The need for that is unimpeachable. In 1950, our share of world trade was 25%. Today, it is 2.3%. That marks a catastrophic decline in our position as a world leader in manufacturing compared with just 60 years ago, which largely reflects three factors: our gross neglect of industry when other nations were fast recapitalising their manufacturing base; the disastrous assumption under deregulated capitalism that leaving it all to the market would best safeguard Britain’s interest; and the maintenance over most of the period of an over-high exchange rate, putting the City of London’s interest above that of the nation’s industrial base.
Clearly, it will be difficult to reverse that slide into economic weakness, but we have no alternative but to focus all our efforts on doing so. The first requirement is to stave off any further economic collapse by switching away from a self-defeating deficit-cutting strategy to a public sector-driven jobs and growth strategy. That should be funded by diverting a tranche of any future quantitative easing to direct investment in industrial development, by taxing the ultra-rich—that is, the thousand richest people in the UK who, according to The Sunday Times rich list, have increased their wealth in the past three years by no less than £155 billion—or, and this will no doubt be preferable to Government Members, by taking advantage of the lowest bank base rate for 300 years by borrowing the relatively small sum of £150 million to secure an investable fund of £30 billion, which could certainly kick-start the economy.
The real medium-term challenge, of course, is the realignment of the economy away from finance and in favour of manufacturing. It has been talked about regularly but very little has happened. First, as everyone knows, and as other Members have mentioned, there is a continuing shortage of skills, aggravated by a slippage of standards in science and technology education in schools and universities. Secondly, access to finance is a major problem. There is clearly a gap in the market for specialised banks focusing on small businesses, manufacturing services and green investment which needs to be met.
Thirdly, I believe that we have a national interest in preserving industries and companies that are integral to Britain’s economic survival. The disastrous consequences of leaving Britain’s key industries and strategic companies uninhibitedly exposed to foreign acquisition or private equity buy-outs and asset stripping, which no other advanced industrialised country would allow, are clearly a lesson that I hope has been learned. There are many other things that need to be done, and we need to do them.
Richard Graham (Gloucester) (Con)
It is a great privilege to contribute to the debate. I thank the three Members who secured it for bringing the matter to the House’s attention and congratulate them on doing so. I have time to touch on only a few details of this important and broad subject. I wish to start by highlighting the fact that, although manufacturing in this country halved over the 13 years of the previous Government, in my county of Gloucestershire we operate at almost double the country’s current economic output for manufacturing, at 20%, which is close to that of Germany. The important ingredient in that success is that we grow things in the part of the county that is rural, which is most of it, and make things in the part that is urban, which is predominantly the city of Gloucester and other leading towns, including Stroud—I know that my hon. Friend the Member for Stroud (Neil Carmichael) will follow me shortly.
The key to growing and making things is a belief that they are important productive activities that will generate jobs for our communities and wealth for the nation. Members are right that this debate should not be partisan, but it is unfortunately true to say that almost 6,000 jobs in the business sectors were lost in my constituency over the period of the previous Government, which is tragic. Many were lost in engineering, a sector in which Gloucester has for years led the country, most spectacularly, of course, with the introduction of the world’s first jet engine.
During that period, apprenticeships all but disappeared. There were champions on the other side of the House—the hon. Member for Hartlepool (Mr Wright) believed in apprenticeships, as he still does—but the fact of the matter is that the number of apprenticeships has increased significantly over the past two and a half years. That is typified in my constituency by Gloucestershire Engineering Training, a company that has quadrupled in size through the number of apprentices it trains in its new premises, which were opened earlier this year.
The first words I spoke in this House, before making my maiden speech, were about apprenticeships, and that was because they are absolutely critical to manufacturing industries. I am talking about manufacturing industries beyond purely engineering; this spreads across a wide variety of sectors. I made my maiden speech wearing a shirt that was made on the Cross in the centre of Gloucester, and every Wall’s ice cream Members eat was made in my constituency. Manufacturing is a broad activity. The fact that we have seen some 3,000 new apprentices start in Gloucester and more than 10,000 start in the county since May 2010 is a huge credit to the coalition Government, to my hon. Friend the Minister, who has responsibility for skills, and especially to his predecessor, my hon. Friend the Member for South Holland and The Deepings (Mr Hayes), who famously championed apprenticeships during his time in that role.
The question today is this: what is the role of Government? We have heard about the many ways the Government can contribute positively, perhaps above all in the commitment to rebalancing the economy away from finance, property and the public sector and towards making and growing things. The export drive that the Prime Minister has led has been rightly congratulated by a number of Members. I am pleased to play a small role as the Prime Minister’s trade envoy to Indonesia, a market of some 250 million people, and one where our trade figures can surely increase rapidly over the next couple of years, in line with targets agreed between the Prime Minister and the President of Indonesia, who was here only two weeks ago.
There are also important tax policies, of course, and I pay tribute to the Government for reducing corporation tax. Research and development credits are extremely important to manufacturers, too. The visible encouragement given by Government is important psychologically as well, and I pay tribute to the Prime Minister for visiting the country’s largest independent spectacles manufacturer, Norville, whose product I am wearing on my nose today. Other initiatives should also be mentioned, including the advanced manufacturing supply chain. The Queen Elizabeth engineering prize is an interesting example of how we can help champion innovation.
The Government have a significant opportunity to rebalance the economy by bringing UK manufacturing back home. Companies that went overseas for cheap labour or relaxed environmental laws have often found that their new location is not as cheap as they had imagined. I strongly echo the statement of the chairman of John Lewis, who said he saw an opportunity for a resurgence of products that are made in Britain. We want to see more of those products.
Neil Carmichael (Stroud) (Con)
It is a pleasure to speak in this debate, and to follow my hon. Friend the Member for Gloucester (Richard Graham), not least because he is absolutely right about the importance of manufacturing in Gloucestershire. One in every five jobs in my constituency is in manufacturing and engineering, so, unsurprisingly, I am constantly promoting manufacturing in Stroud.
I also pleased to follow the hon. Member for Corby (Andrew Sawford), too. I was struck to learn of his connection with Ruskin college, because Jim Callaghan used that institution as a launch pad for a great debate on education when he was Prime Minister, and rightly so, as we were concerned about the performance of our schools and colleges then, as we are still.
As Lord Heseltine notes in his report, we have a productivity gap. It takes us 10 hours to do the same thing it would take an American about eight hours to do. We must address that gap, and the Government are therefore right to focus on radical reforms of education, on STEM subjects—science, technology, engineering and maths—and on making sure our colleges are up to speed in responding to the needs of business.
As the Prime Minister has said, all Governments—including all Government Departments—need to think about economic growth. To reiterate Lord Heseltine’s point, we need a grand strategy to concentrate the mind on the needs of our industry and our businesses, in order to make sure we get that growth.
Infrastructure is crucial, and it has rightly frequently been mentioned in our debate. We are going to take three years to decide whether we want a new airport, whereas the Germans are building one in Berlin now. It may well be taking a little longer than usual, and it may well be costing them a little more money than they expected, but the point is that they are building one. We need to sweep away some of our planning restrictions and some of our reticence to make such big and bold decisions, because we need to make those decisions.
Let me give an example of why that is important. I recently went to Leipzig in eastern Germany. I had visited the city as a student almost 30 years ago, when it was an economic wasteland. It was a disaster zone; I could see that whichever way I looked. Now in Leipzig there is a huge factory making Porsche cars. They are great cars—they are so good that I cannot afford to buy one. The factory’s supply chain is very effective and tight, and it is supported by an infrastructure that enables that supply chain to work. I asked the managing director if he could produce a map of the factory’s supply chain for me, and he did so right away. It served to demonstrate the value of a good supply chain and the importance in that regard of good infrastructure. We must learn these lessons, and we must be bold enough to take the appropriate action.
It seems to me that Lord Heseltine was right about localism, to the extent that we need to make sure that local structures have the necessary capacity. I am very impressed with our local enterprise partnerships. They are the right approach and are certainly a lot better than regional development agencies, but we have to make sure that all of them are up to standard and know what they need to do. Before we give them a huge bucketful of money, they must demonstrate to us that they are capable of identifying the right firms and making sure that they understand the needs of those firms. That is about knowing the skills requirements, knowing the skills capacities available and matching the difference. I hope LEPs will start to do that.
I finish with an important appeal. We should not forget the value of our technology. Recognising the added value in our product is important. We must think forward, not backwards. We should not be manufacturing what we manufactured before. We should manufacture products that are needed now and will be needed in the future. That is where the technology matters.
Mr Iain Wright (Hartlepool) (Lab)
This has been an important, passionate and, dare I say it, industrious debate. I thank the Backbench Business Committee for choosing the topic, which is very much in the long-term economic interests of our country and I particularly thank my hon. Friend the Member for Stalybridge and Hyde (Jonathan Reynolds) and the hon. Member for Warwick and Leamington (Chris White) for the manner in which they advanced their arguments. I look forward to hearing the hon. Member for Burnley (Gordon Birtwistle).
I pay tribute to the excellent maiden speech that we heard today from my hon. Friend the Member for Corby (Andrew Sawford), as one by-election victor to another. I have known him for a very long time and he has always been passionate about manufacturing, industry and his local area. He was extremely gracious to his predecessor, as the whole House will have recognised. He mentioned his passion for co-operatives and co-operation. That is a necessary value in an industrial strategy. Industrial policy is often simplified or dismissed as picking winners, but it is fair to say that in my hon. Friend the people of Corby have definitely picked a winner.
I will be as quick as I can, because there is an awful lot to get through after such an important debate. It is clear from this afternoon that there is a welcome consensus about the need for an industrial strategy with manufacturing at its heart. We in the north-east know all about the importance of manufacturing. Both advanced and emerging nations are repositioning or developing their industrial and manufacturing capabilities—we have just heard from the hon. Member for Stroud (Neil Carmichael) about Leipzig—with the aim of enhancing comparative advantage for their key sectors and maximising opportunities for growth.
We should not blindly follow our competitors into the latest economic fashion. We cannot replicate off the shelf the German model, still less the Singapore model, but it is clear that in the 21st-century global economy, business and Governments are working together to ensure that potential is realised. We can exploit our values, our tradition and heritage and our current sectoral strengths to create a bespoke one-nation industrial strategy, helping all regions achieve their potential.
As the CBI stated only this month:
“Rebalancing the UK economy must consist of boosting our productive potential, which means reviving business investment and trade as key drivers of growth. The debate is no longer over whether the UK needs an industrial strategy, but about what form this should take.”
We would all agree with that. The message from today’s debate is clear: we need to see clear leadership on an industrial strategy. I therefore fully applaud what Lord Heseltine said in his review when he stated:
“The Government must have a clear blueprint for the future to support wealth creation. This approach should then be applied without exception across the whole of government.”
I support the TUC when it said:
“If we are to move forward, government, industry and unions must agree between them what a renaissance for manufacturing actually means. . . a strong manufacturing sector, across a variety of high skill, high value industries, is both achievable and desirable”.
The CBI said this month that we should
“adopt a shared vision . . . for the UK economy, with the government reporting back regularly on how this vision is being delivered”.
We would all agree.
We hear warm words from this Government. They often talk a good game, but their actions fail to match their rhetoric, and this country’s industrial potential suffers as a result. So I welcome the Secretary of State’s 16 speeches on the need for an industrial strategy; I just wish he would implement one. I fully support what the Prime Minister said in 2010 in his CBI conference speech—that the Government should be
“getting behind those industries where Britain already enjoys competitive advantage. All over the world governments are identifying dynamic sectors in their economy and working strategically to strengthen them”.
He said something similar only this week at the 2012 CBI conference:
“Government gets it…To have a proper industrial strategy to get behind the growth engines of the future.”
I fully agree. Yet in response to the speech the director general was forced to ask, “Where’s the beef?”
I welcome the honest appraisal by the Secretary of State in his leaked letter of February 2012 in which he said that the Government do not have
“a compelling vision of where the country is heading…and a clear and confident message about how we will earn our living in the future”.
However, I remain anxious that only last month Lord Heseltine felt the need to say in his report:
“The message I keep hearing is that the UK does not have a strategy for growth and wealth creation.”
Earlier this month, the CBI stated the position even more bluntly than that.
Mr Wright
No, if the hon. Gentleman will forgive me, because I have a lot to get through.
The CBI said that
“the current hands-off approach to growth is failing to provide the confidence necessary for businesses to compete for the biggest opportunities out there”.
Most concerning was the verdict of Sir John Parker, one of Britain’s pre-eminent industrialists as chairman of Anglo American and president of the Royal Academy of Engineering, when he said last month:
“It has been two years since this Government came to power but it still has not set out a vision for Britain’s industrial future. There has been no leadership from the top—and by that I mean David Cameron—which has given a signal to society that Britain values industrial activity.”
Mr Wright
No. I hope that the hon. Gentleman will forgive me, but I am keen to make progress.
Business is unconvinced that the Government’s warm words have materialised into firm leadership and tangible action. People want to see action and a sense of urgency, but they have not seen that. Will the Minister at least acknowledge this and outline his plans to do something about it?
George Freeman
I am extremely grateful; I will be very brief. This time last year, the Prime Minister announced the strategy for the life sciences, which was warmly welcomed across industry—not least by GlaxoSmithKline, which then announced a £500 million investment in advanced manufacturing in the north-west—and has been lauded internationally. Does the hon. Gentleman accept that at least in that sector the Prime Minister personally and this Government, including the Secretary of State, have set out exactly the leadership that he is asking for?
Mr Wright
The hon. Gentleman raises an important point about consensus. If we are to have an industrial strategy, we must ensure that it has a long-term strategic focus. Political and business cycles are not aligned—we often have a four or five-year cycle while businesses, certainly in the manufacturing industries, tend to have a 30-year or 40-year cycle—and it would be good to have as much consensus and policy certainty as possible. I hope that this debate has demonstrated that.
Manufacturers’ organisation the EEF has called for
“An industrial strategy”
that
“needs to endure beyond the latest political fad or any one political party. All our politicians need to recognise the value of having a clear vision, gearing the whole of government to delivering that vision, and setting clear accountability arrangements.”
I fully agree.
In certain sectors, there has been a degree of continuity of policy. The previous Labour Government set up the Automotive Council UK. The current Government have continued with that, and we have seen substantial investments in the automotive industry as a result. We fully recognise and welcome that approach. I have said to the Minister of State, Department for Business, Innovation and Skills, the right hon. Member for Sevenoaks (Michael Fallon), who is now in his place, that his formation of the Aerospace Growth Partnership is very welcome, and I would like a future Labour Government to pledge to continue to provide certainty for that key industrial sector. We have seen success in close relationships between Government and business in a number of sectors; the hon. Member for Mid Norfolk (George Freeman) mentioned life sciences. Will the Minister say whether the Government plan to replicate that across other key industrial sectors such as chemicals, the construction industry and pharmaceuticals?
There is concern about long-term policy certainty, which investors in manufacturing require. Energy policy has rightly been mentioned a lot in this debate. In the summer, the CBI said in its report on maximising the potential of green business that
“while business wants to keep up the pace, they are equally clear that the government’s current approach is missing the mark, with policy uncertainty, complexity and the lack of a holistic strategy damaging investment prospects.”
Will the Minister acknowledge that such policy reversals are damaging to business investment, especially for manufacturing? What is he going to do to make sure that he can put arrangements in place within Whitehall to minimise the policy reversals and procrastinations in decision making that are damaging to our long-term industrial prospects?
In the remaining time that I have, I will focus on two important points. The first is that the key to the implementation of a long-term industrial strategy must be an emphasis on business policy across Government; it must not reside just in the Department for Business, Innovation and Skills. Other Departments cannot wash their hands of growth.
As we have heard, energy policy has profound implications for our manufacturing base. The manner in which the carbon floor price is implemented will have significant repercussions on our industrial competitiveness. Our aviation and transport policies also have an impact on our competitiveness. Local government can be a driver of economic regeneration and development. The Ministry of Defence should be working closely with the Department for Business, Innovation and Skills to ensure that we have a defence industrial strategy. Of particular relevance to the Minister is the close link, which we have heard about today, between an industrial strategy, skills and what is being taught in schools. I recall that the hon. Member for Burnley made an intervention on careers advice. We must see clearer signs that there is proper co-ordination on business and industry across Whitehall. What is the Minister doing to implement the Heseltine recommendations on creating better co-ordination, accountability and commitment across Whitehall on wealth creation?
My second point relates to procurement. The Government intervene in the markets by buying things every single day, and yet Government procurement does not maximise Britain’s industrial capability or enhance the UK supply chain. What else will the Minister do to push for smarter procurement across Government to help British industry, and to encourage innovation and create jobs in this country?
We believe that there is a need for an intelligent industrial strategy. This debate has shown that our industrial and manufacturing sectors have huge potential in the 21st century, but that to flourish, they require active co-operation. The whole House seems to have supported that today. I hope that the Minister will pledge similar support.
The Parliamentary Under-Secretary of State for Skills (Matthew Hancock)
Debates in this House are often described by those who speak in them as important, but there is something important about today’s debate: on this subject, cross-party unity matters. There has been clear unity across all three parties that have been represented in this debate. Almost everybody stuck to that tone, until a brief period at the end. I will not push the point about who got us into this mess and I will not ask under which Government the number of private sector jobs in the west midlands fell, because it is important, for substantive reasons, that there is a cross-party approach to industrial strategy. This debate has shown the passion of Members and of the Associate Parliamentary Manufacturing Group.
Kelvin Hopkins
I agree with the Minister that there should be cross-party consensus, provided that that consensus is on the right side. If everybody is wrong, we will drive ourselves further into difficulty.
Matthew Hancock
That is a profound point about the need to avoid groupthink, with which I profoundly agree.
My hon. Friend the Member for Lancaster and Fleetwood (Eric Ollerenshaw) argued that we need to identify the best. He was passionate about enterprise and I heard his message. He will know that I am a huge supporter of enterprise zones.
I enjoyed listening to the historical debate between the hon. Members for Luton North (Kelvin Hopkins) and for Coventry North West (Mr Robinson), who are continuing their debate as I speak.
My hon. Friend the Member for Aldershot (Sir Gerald Howarth) asked a series of questions and brought his huge experience to bear, especially in relation to defence. The defence growth partnership is a BIS-led cross-Government partnership, which the Minister of State, Department for Business, Innovation and Skills, my right hon. Friend the Member for Sevenoaks (Michael Fallon), leads. On the specific point about R and D tax credits moving to above the line, the Treasury has consulted on that and is deciding on the detail. I am also grateful to my hon. Friend for helping me with the answer on the joint strike fighter, which I will come to in a moment.
Everybody in the House was struck by the fluent and impressive speech by the new hon. Member for Corby (Andrew Sawford). He described passionately his membership of the Co-operative party as well as the Labour party. My grandfather was part of the co-operative movement. The hon. Gentleman will no doubt want to contact my hon. Friend the Member for Hereford and South Herefordshire (Jesse Norman), who takes a lead on such issues among Government Members.
The hon. Member for Corby advanced the argument for the living wage powerfully. He spoke of the need to ensure that domestic British people have the skills to take the jobs that are available. Although more than 1 million private sector jobs have been created under this Government, we still have a huge amount of work to do. As Under-Secretary of State for Skills, my prime motivation is to ensure that British people have the skills and ability to do whatever it takes to get the growing number of jobs available. The hon. Member for Corby spoke with great passion, and all those present in the debate will have clocked that—well, let me put it like this: the attitude he showed to the Chief Whip on the Opposition Front Bench, and his ability to ingratiate himself with her, shows that he may not be on the Back Benches for long.
An industrial policy is central to achieving the goal of growth and enterprise, and there is broad consensus on that from the CBI to the TUC, as well as across the House. The reason for that is simple. Any Government in a mature economy has an industrial policy—as the hon. Member for West Bromwich West (Mr Bailey) and my hon. Friend the Member for Stafford (Jeremy Lefroy) argued, a Government cannot choose not to have one. We have an industrial strategy but the question is whether we have it by default or design.
My hon. Friend the Member for Stafford praised the Dutch system, from which we have much to learn. In my few weeks in this job I have recognised and warmly welcomed the constructive approach taken by the hon. Member for West Bromwich West to chairing the Business, Innovation and Skills Committee. He argued for a cross-departmental approach, and the growth committee on which I sit is an important part of that. He also argued for a cross-party approach, and not only do I agree with that, but I think hon. Members have demonstrated such an approach today. In particular, I pay tribute to the hon. Gentleman’s realism and ability to accept failures on the part of all past Governments. As he said, manufacturing halved as a percentage of GDP, and the passionate argument about that and the history around it was also put forward by the right hon. Member for Oldham West and Royton (Mr Meacher).
Crucially, an industrial strategy looks both at and across sectors, and we must ensure that we allow for the challenge of sectors that are yet to be dreamed of. Let me touch on four cross-cutting themes, as well as on sectors such as the automotive industry, life sciences and aerospace, in which we are pushing rapidly ahead with the publication of individual papers.
George Freeman
On the point about convergence, does the Minister agree that one of the most exciting things in life sciences is the way that medical, food and clean environmental technologies are beginning to merge? I recently visited a plant in Norfolk that converts agricultural waste into fuel for powering Lotuses made in Norfolk. That is a powerful illustration of convergence.
Matthew Hancock
Yes indeed, and across supply chains too. As my hon. Friend the Member for Stroud (Neil Carmichael) powerfully said, it is vital that we bring whole supply chains together when thinking about the sectoral approach. There is no one-size-fits-all approach. Some sectors will do well on their own; others need a long-term strategic partnership. My hon. Friend the Member for Warwick and Leamington (Chris White) called for a document that brings things together in each sector, and that is happening.
Huw Irranca-Davies
Briefly, and on a genuinely cross-party consensual basis, will the Minister update the House on the point raised by my hon. Friend the Member for Corby (Andrew Sawford) about energy-intensive industries such as Tata Steel? Those vital employers and big economic generators have a massive impact on the supply chain, but they consistently say that they do not have a strategy that deals with their energy costs as well as everything else.
Matthew Hancock
The Government have an energy-intensive industries approach, and an energy Bill will soon be published that I hope will provide some long-term certainty.
Let me return to the four cross-cutting areas. The first is finance, and my hon. Friend the Member for Weaver Vale (Graham Evans) spoke fluently about the funding for lending scheme that lowers the cost of funding. The hon. Member for Stalybridge and Hyde (Jonathan Reynolds) called for a business investment bank, which is happening, and the green investment bank is already operating and making loans.
Secondly, and close to my heart in the industrial strategy, are skills. The call went out for more employer focus on skills, and my hon. Friend the Member for Gloucester (Richard Graham) made a passionate case for apprenticeships. I strongly agree, and I urge all Members to engage with the employer ownership pilot that was published on Monday which is about looking ahead. For example, we know that with Crossrail, High Speed 2 and broadband, more tunnelling skills will be required in the future. We now have a pipeline for those tunnelling skills—a pipeline for pipelines.
As the hon. Member for Coventry North West discussed, the third thing we need is more intelligent procurement. This Government have a more intelligent approach to procurement, and I hope it will become more intelligent still. Crucially, our national infrastructure plan identifies 500 projects. Some £70 billion of future contracts have been planned and published across 13 different sectors. We are also trying to speed up procurement.
On technology, we have protected the science budget and are focusing on eight key technologies. Links to universities are vital. Catapult centres will accelerate that. My hon. Friend the Member for Aldershot spoke about Surrey satellites. That example should go out throughout the country. Turning links with universities into business reality is critical to our future success.
I commend the cross-party approach. I urge people to look at the fact that all three parties are coming together to promote the long-term industrial strategy we need, which I commend to the House.
Gordon Birtwistle (Burnley) (LD)
I congratulate my two colleagues—my hon. Friend the Member for Warwick and Leamington (Chris White) and the hon. Member for Stalybridge and Hyde (Jonathan Reynolds)—on securing the debate. I also congratulate the new hon. Member for Corby (Andrew Sawford) on his maiden speech. I remember doing mine two and half years ago. I hope he is as enthusiastic in two and a half years as I am now. It does not take long for the House to kick the strength out of people.
The right hon. Member for Oldham West and Royton (Mr Meacher) put the debate into perspective when he said that, in the past 60 years, we have gone from being the major supplier to the world to being a minor supplier. In 1958—nearly 60 years ago—I turned up on my first day as an apprentice engineer at a company in Accrington that employed 5,000 people to produce textile machinery that was sold around the world. It is no longer there, and has not been for many years. I have been involved in manufacturing almost throughout the period he described.
We can get growth going in numerous ways. The one thing the Chancellor can do in two weeks’ time is give 100% capital allowances for investment in capital, buildings and the like for the manufacturing sector. As I understand it, the major companies in this country, and companies from abroad who wish to invest, have £70 billion stashed in banks. One hundred per cent. capital allowances for just two years would boost investment and the money would be spent in the UK.
Another major problem is the supply chain—it is a problem in the automotive and aerospace industries. It needs to be resolved. To get rid of our balance of payments deficit, we need to increase exports by 15% and reduce imports by 15%. It does not sound like a big task to export 15% more and import 15% less. I have asked companies whether they are able to do so. The vast majority in the aerospace industry say, “Yes, we can. We’ve got order books for 25 years ahead, but we do not have a supply chain to feed our order book, so we are having to import. We would really like to manufacture in the UK so we have our own supply chain.” We need to resolve that, but we also need the staff to work in the supply chain—the young people to work in the supply chains of our top industries, such as the aerospace, automotive and chemical industries, are not coming through. The supply chain gap is a major problem.
We have a major skills gap. I visited Rolls-Royce in Derby only last week and asked to see its apprenticeships training programme. I was delighted to hear that it takes on 40 extra apprentices every year not for Rolls-Royce, but for the supply chain—companies that supply Rolls-Royce but that cannot afford to take on apprentices. Those small companies want high-class apprentices and to deliver the skills of the future, and Rolls-Royce takes them on at its own expense so that its supply chain is secure.
Hon. Members mentioned careers advice. I am horrified when I go to schools in my constituency and hear about the careers advice that is given to young people. Basically, it is nothing—no careers advice that is of any use is given. Some young people would be interested in going into manufacturing, but nobody advises them what it is about. It is high time that the Department for Education looked into careers advice in schools. We need young people who really know what manufacturing is about.
Motion lapsed (Standing Order No. 9(3)).