Industrial Strategy: North-East of England

(Limited Text - Ministerial Extracts only)

Wednesday 5th June 2019 Westminster Hall

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Andrew Stephenson)]

It is a pleasure to serve under your chairmanship, Mr Betts. I congratulate the hon. Member for North Tyneside (Mary Glindon) on securing the debate. I thank hon. Members, who have given very considered and generally good-natured speeches.

I will now start to get controversial. My father was born in Shildon, County Durham, which is of course the home of the railways, and I still have family living in Wylam, Northumberland, which is the birthplace of George Stephenson, the father of the railways. He did much of his pioneering work in Killingworth, in the constituency of the hon. Member for North Tyneside. I am delighted that his work was mentioned by the hon. Member for Sedgefield (Phil Wilson), but I will not pass judgment on where the first ticket office was. Sadly, even though I am Andrew George Stephenson and my family descend from that part of the world, I cannot claim to be a descendant of the great man, because George Stephenson had only one son, Robert, who had no children. If we look far back enough, though, who knows?

My father’s first job in the north-east was for British Rail in Shildon, before he moved permanently to Manchester, where he worked in the aerospace sector for Avro, the famed manufacturer of the Lancaster and Vulcan bombers. I know that the pride my family felt at working in vital industries across the north-east of England is still deeply felt by people in the region today.

Our industrial strategy is about ensuring that that heritage of excellence is translated into future success and prosperity. We want to grow productivity and prosperity across all parts of the country, so that whenever young people decide to leave a place such as Shildon for opportunities elsewhere in the country, they do it through choice and not because they feel forced out by a lack of chances closer to home.

As we have heard, the north-east has a proud tradition of innovation, creativity and technical skills. We know that from the histories of railways, mining, shipbuilding and electronics, as well as from today’s leading businesses in the region, such as the cutting-edge offshore energy companies that have moved into the region’s old shipbuilding areas and one of the world’s most productive automotive clusters, based around Nissan. The industrial strategy is about taking that existing strength and blending it with the future-facing technologies and skills that emerge from our knowledge-intensive centres, such as those at Newcastle’s £350 million Helix site, Sunderland’s Software City or Durham’s NETPark.

The industrial strategy focuses on strengthening the foundations of productivity: skilled people, thriving places, ideas, innovation and support for the business environment. The industrial strategy is also about taking on the grand challenges of clean growth, the future of mobility, our ageing society, and artificial intelligence and data. Those are society-changing opportunities and industries of the future in which the UK can build on its strengths and truly lead the world.

Since the publication of the industrial strategy, we have made significant progress across the country. We have committed to the biggest ever increase in R&D, an extra £7 billion by 2021-22, which includes the £1.7 billion that we have already allocated to innovative programmes to support industries and researchers through the first two waves of the industrial strategy challenge fund.

The first wave of the strength in places fund, which supports industrial strategy with a place-based approach to research and innovation, has awarded seedcorn support to two north-east projects to enable them to develop full bids this year: the Centre of Excellence for Sustainable Advanced Manufacturing, led by the University of Sunderland; and the north-east cluster for healthy ageing and independent living, led by Newcastle University. In the neighbouring Tees Valley, strength in places support has been awarded to a project to establish the UK hydrogen corridor, which aims to reduce carbon usage dramatically by producing, using and storing hydrogen energy.

[Alex Cunningham]

Any investment in the north-east is great news, in particular if it encourages innovation, but does the Minister also recognise that we need to support our existing industries? British Steel is a particularly important one at this time. As I asked in my remarks, will he update us on his understanding of the progress being made in that area?

[Andrew Stephenson]

Certainly. I am grateful to the hon. Gentleman for raising the issue of British Steel. Since I was appointed, it has probably been the one thing that has taken up more of my time than anything else. The one point of contention in what he said was his suggestion that the Government were standing on the sidelines as British Steel went into liquidation, waiting for the receiver to act.

The hon. Gentleman was in the main Chamber when I answered an urgent question by saying that no stone was being left unturned. At that point, I think that the Department was up to 87 meetings about British Steel. The £120 million bridging loan that we extended to the company earlier in the year showed the Secretary of State’s willingness to think innovatively and to act with regard to British Steel. We considered all sorts of proposals made by the company but, unfortunately, none of them proved compliant with state aid rules—we took legal opinion on that—so the company went into liquidation.

The Government acted immediately by providing the liquidator with an indemnity for the cost of keeping the site running, so that the blast furnaces could be kept running and we would end up with British Steel in the best possible situation to be sold as a going concern. The very next day after the Secretary of State made his statement to the House about the unfortunate news of the liquidation, he and I went up to Scunthorpe to meet trade union representatives and other people on the site to discuss how to work together to ensure that it could be sold as a going concern. I remain hopeful that that will be the case, and I will continue to leave no stone unturned, working with the trade unions, the workers and others on site to ensure that it is sold as a going concern.

[Alex Cunningham]

I might have been a little unkind to the Minister—that is a hell of a lot of meetings—but talking does not get us far when real funding is needed. If this integrated part of the steel industry cannot be sold as a going concern, just as we nationalised the banks, will the Minister consider nationalising part of the steel industry, even on a temporary basis, to ensure that we do not lose this critical foundation industry?

[Andrew Stephenson]

I think that I am correct in saying that the Secretary of State has not ruled that option out. However, the thing to bear in mind about nationalisation is that, even if British Steel were nationalised, the same state aid rules apply: the company has to be run on a commercial basis in order to be compliant with those rules. Therefore, nationalisation is not a simple solution; it might be the solution, but it is not an easy option.

Lots of steel companies in the UK and across Europe are doing great work, and I hope that we can find an experienced company in the sector that wants to invest in British Steel. If we look at the steel sector pipeline—orders and infrastructure projects across the UK, such as Hinkley Point, High Speed 2 and various other big projects—there is sizeable domestic demand for products made by British Steel. I think that the company has a strong future. I am therefore very hopeful that over the coming weeks and months we will find a good buyer who will want to invest in the site and, most importantly, its workers who have such skills and knowledge of the industry, to ensure the future of steelmaking in that part of this country.

[Chi Onwurah]

I thank the Minister for responding to questions about the key strategic asset of British Steel and of that capability. He cited state aid rules as a crucial concern in providing the right level of financial and other support. Does he agree that different countries interpret state aid rules in different ways? Other countries within the European Union have been, shall we say, far more innovative, creative and supportive with their strategic industrial capacities, despite the same state aid rules environment. Will he commit to publishing parts of the legal advice on the possible infringement of state aid, so that we can see whether there is a way to provide British Steel with the support it requires within the European Union and, indeed, World Trade Organisation state aid rules, which other countries do manage to achieve?

[Andrew Stephenson]

The shadow Minister makes a valid point about the interpretation of state aid rules. The challenge of the rules in relation to the steel sector is that they are particularly rigid. A lot of the global overcapacity was created by illegal subsidies around the world for domestic steel producers.

We received legal advice from within the Department and, on the Secretary of State’s instruction, we sought a second opinion, because we wanted to ensure that there was definitely nothing more that we could do. The accounting officer’s advice has, I believe, been laid in the Libraries of both Houses, so it is available to all hon. Members who wish to see it. I hope that it sets out how the Government looked at the issue in a detailed way.

The reason I mentioned the 87 meetings is that we were meeting morning, evening and night about it, in order to find a way through. The Secretary of State, whom I have the pleasure of working with and serving under, has a real commitment to the north-east. Originally, he is from that part of the world, and he really wants the British Steel site to remain a going concern. Through the number of meetings he has had, the £120 million bridging facility provided to the industry and other things, he clearly demonstrates a commitment to finding a way through, but it has to be legal and compliant with both UK domestic law and EU law. I look forward to continuing to work with him, hon. Members in all parts of the House, trade unions and others to ensure a future for British Steel.

Returning to research and development spending, we have committed record investment in UK infrastructure: £37 billion has been committed through the national productivity investment fund, including £2.5 billion for the transforming cities fund to improve transport, £5.5 billion for the housing infrastructure fund and £740 million for digital infrastructure. That infrastructure investment has been of direct relevance to the north-east of England. In March, the Government announced that £10 million from the first tranche of the transforming cities fund will be allocated to the north-east, and £35.9 million of housing infrastructure funding has been allocated to the region.

Aside from that national work, all places will produce local industrial strategies, setting out how the quest for prosperity will come to life in our cities, towns and rural areas. The first local industrial strategy was published on 16 May in the west midlands. I was delighted to join local councillors and others in Coventry to launch that strategy. The north-east and the Tees Valley areas are both in the second wave of places to produce their own local industrial strategies in collaboration with Government. In the area of the hon. Member for North Tyneside, that work is led by the North East local enterprise partnership, which has a strong history of evidence-based delivery and is well placed to develop a powerful and distinctive local industrial strategy for the region. So far, a number of critical local drivers have been identified to improve productivity in the north-east: from the need to grow small businesses and to improve start-up rates, to improving the skills base of the local workforce.

The north-east boasts a cutting-edge technological and knowledge economy, based on its four leading universities and its fast-growing digital and tech sectors. On the doorstep are tremendous opportunities in east coast offshore energy, as well as deep expertise in advanced manufacturing. I am particularly interested in the contribution that the area could make to the ageing society grand challenge, which was cited by the hon. Member for Washington and Sunderland West (Mrs Hodgson). The north-east is home to the £40 million National Innovation Centre for Ageing, which reflects Newcastle University’s longstanding leadership in that field. There is a powerful story to tell about how the north-east, with its large rural area and expertise of the transition away from heavy industry, is ideally placed to lead the response to this national and global challenge.

The north-east local industrial strategy will be empowered by the recent North of Tyne devolution deal, which covers three north-east authorities: Newcastle, Northumberland and the home authority of the hon. Member for North Tyneside. I congratulate the three councils on their successful pursuit of devolution, and Jamie Driscoll on his recent election as the first North of Tyne Mayor. The Government have a strong track record of working with the elected mayors, including Ben Houchen in Tees Valley. Alongside specific powers such as control over the adult education budget, the deal includes a total investment fund of £600 million over 30 years, to be used by the area to pursue its local growth goals. Local estimates are that the investment will generate £1.1 billion for the local economy and create 10,000 new jobs.

The north-east local industrial strategy will build on a strong track record of investment in the wider North East local enterprise partnership area. Over the three rounds of the local growth fund, £379.6 million will be invested in the North East LEP area. That includes £1 million for the Ignite centre for engineering and innovation in North Tyneside. I look forward to visiting the north-east and Tees Valley—shortly I will visit the Centre for Process Innovation, which has bases in both areas. That centre has a strong record of collaboration with Government, including a £38 million grant from UK Research and Innovation to establish a national biologics industry innovation centre in Darlington.

[Alex Cunningham]

I am sure we will welcome the Minister when he comes to the Tees Valley. Will he bring some good news on carbon capture, use and storage?

[Andrew Stephenson]

I am very keen to see the UK move forward with carbon capture, use and storage. The hon. Gentleman will be aware of the report by the Committee on Climate Change, which suggested that we could move towards a target of net zero in the same cost envelope as our current target. It says that carbon capture and storage has to be part of the mix. That will accelerate what the Government are doing in this area. I will certainly pass on remarks from today’s debate to the Minister for Energy and Climate Change, as I am sure she will want to focus on this area. When I am in the region, I will be keen to see some of the work in the renewables sector, and I will also pay close attention to carbon capture, use and storage now that the hon. Gentleman has raised it.

I will visit the CPI’s Redcar centre to discuss its achievements and ambitions and the development of the industrial strategy. I look forward to attending the northern powerhouse SME roadshow in June, to discuss investment opportunities and links to the industrial strategy across the whole of the north. Through local partnerships with Government and the impact of national investments, we expect the north-east and Tees Valley to play a full part in the industrial strategy agenda.

I was pleased to hear a number of hon. Members support various Highways England projects in the region, including Silverlink and improvements to the A19. I take on board the point made by the hon. Member for North Tyneside about power lines; she has raised that point on numerous occasions and has met my ministerial colleague about this issue, who wrote to Ofgem about it, and we are looking at possible ways forward. I am sure we will continue to push the point, and I assure her that her remarks today have not gone unnoticed.

Members rightly raised the importance of the east coast main line. At the Cabinet meeting in Newcastle in July 2018, a £780 million investment in the east coast main line was announced, which hopefully will mean faster journey times and more frequent services. That builds on the £337 million that was announced to upgrade local transport through a new fleet on the Tyne and Wear metro.

I strongly agree with the comments by the hon. Member for Washington and Sunderland West about the importance of Nissan and its huge strength in battery technology. I agree that the company is incredibly well placed to benefit from schemes such as the Government’s £246 million Faraday battery challenge, which is supporting the development of new battery technology in a market that will be worth £5 billion to the UK by 2025.

As the Minister responsible for the automotive sector, I recognise that the sector will go through more change in the next 10 years than it has in the last 100. We need to work closely with car manufacturers based in the UK to help them with that transition and to ensure that they decide this is the best country in the world in which to invest in new, cleaner modes of transport.

[Chi Onwurah]

The Minister speaks about the importance of battery technology, and Nissan’s strength in particular, but does he recognise that while the five-year fund supports investment in battery technology, it does not support investment in battery manufacturing? In this country we need a battery manufacturing base, so that batteries are not simply imported. Will he speak to that? I also hope he will not forget to respond to the concerns about a replacement for European regional development and structural investment funds.

[Andrew Stephenson]

The shadow Minister is correct; that is one of the reasons why we have the industrial strategy challenge fund. I mentioned my being in Coventry to launch the west midlands local industrial strategy, which was the first to be launched. On that day, I was delighted to visit the UK Battery Industrialisation Centre and to announce a further £28 million for that facility, which will be about production. It will take technologies being developed in places such as the Advanced Propulsion Centre and see how to produce batteries here in the UK. Some existing companies that have already done incredible work, such as Nissan, have the potential to bid for some of the Government funds that are already available, as well as future funds. That is fundamental because of the number of petrol engines we produce in the UK: to keep the UK as an automotive hub, we need to ensure that companies across the board invest in battery technology and production in the UK.

Questions have been asked about the £675 million high streets fund, the £1.6 billion stronger towns fund and the UK shared prosperity fund. More details of all those funds will be published in due course. They show the Government’s commitment to addressing the challenges raised by Members today. We need to invest more in renewable technologies, as was raised by several Members. The offshore wind sector deal is a great example of that. The Government’s commitment to the sector is underlined by the £92 billion of public and private investment in renewables since 2010. We have just finished an 18-day coal-free run in our power supply.

Lots has been done, but there is lots more to do, and lots of great ideas have been suggested today. I look forward to working with all Members who spoke in the debate and to visiting their constituencies and some of the projects they talked about.