Financial Assistance to Industry
(9 months, 1 week ago)
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The Chair
It may help if I clarify from the Chair that what we are debating in this Committee—for up to 90 minutes, as Members will be aware—is the content of the motion in the name of Ms Ghani, which is listed on the Future Business section of the Order Paper. The House itself will be asked to pass the motion without debate after the text has been reported from this Committee later today.
The Minister for Industry and Economic Security (Ms Nusrat Ghani)
I beg to move,
That the Committee has considered the motion, That this House authorises the Secretary of State to undertake to pay, and to pay by way of financial assistance under section 8 of the Industrial Development Act 1982, a grant or grants exceeding £30 million and up to a total of £75 million to BMW to support the production of electric Minis at Plant Oxford.
It is an honour and a privilege to do this under your chairmanship, Mr Pritchard.
The UK’s automotive sector is a global success story, contributing £14 billion to the UK economy annually, with some of the highest productivity levels among the major European automotive-producing nations. The sector currently employs 182,000 people in manufacturing, with an estimated 780,000 jobs supported by the sector in the wider economy. Major global companies such as Jaguar Land Rover, Nissan, Toyota and BMW have a significant manufacturing presence in the UK.
On 11 September 2023, BMW announced a £600 million investment in its Oxford plant for the production of two new electric Mini models, to start in 2026. BMW requested £75 million of funding from His Majesty’s Government via the exceptional regional growth fund to support that £600 million investment. It is that Government funding that we are debating now.
The exciting decision by BMW to invest in the future of the UK’s automotive sector is a prime example of how industry and Government are working together to meet new challenges. BMW’s investment in new tooling and machinery, and in re-training and upskilling of employees, will create and safeguard jobs in its Oxford and Swindon facilities and in the wider supply chain.
This support to BMW builds on our existing winning formula, which has delivered significant investment success. I am confident that BMW’s decision is among the first of many such investments that will drive the future of the sector in the UK. This Government will continue to work towards maintaining the competitive environment necessary to stimulate growth and productivity in the sector and ensure that the UK continues to be one of the most competitive locations in the world for automotive manufacturing. I commend the motion to the Committee.
Sarah Jones (Croydon Central) (Lab)
It is a pleasure to serve under your chairmanship, Mr Pritchard.
The Minister has laid out the case for this legislation clearly, for which I thank her. As she says, Britain boasts a world-leading automotive sector, which supports hundreds of thousands of jobs across the country and contributes billions to the economy. We are proud to host a whole ecosystem of major international players: JLR, Nissan, Toyota and of course BMW, whose manufacture of BMW Minis in Oxford has become an iconic institution, supporting thousands of highly skilled, highly paid jobs, with more than 100 years of history in the area.
It is vital to communities, to our economy and to our global leadership position in the green transition that the UK retains and develops our automotive manufacturing capabilities. For those reasons, while Labour has major concerns about the Government’s overall approach to this issue, we will not reject the measure under consideration today.
The motion would, as the Minister has mentioned, authorise the Secretary of State to pay a grant of up to £75 million to BMW to support the transition of its Oxford plant to the manufacture of electric Minis. The grant would be paid under section 8 of the Industrial Development Act 1982, which provides for financial assistance to be given to businesses outside the assisted areas, of which Oxford is not one.
We accept that significant changes are needed to adapt the plant to EV production, such as capital investment, as the Minister says, in new tooling, new machinery and new skills for workers at the plant. The case has been reviewed by the Industrial Development Advisory Board, which has supported the proposal, and the report by the Competition and Markets Authority’s subsidy advice unit accepts that the Government have made an adequate case that the project would not have been undertaken in a similar form, manner and timeframe without the subsidy.
As such, and given the strategic importance of supporting electric vehicle manufacturing in the UK, Labour is not opposing the motion. We do have some concerns that it would be helpful for the Minister to address, not least because this is a substantial amount of money that we are handing over. First, while we are pleased that the Industrial Development Advisory Board has reviewed and supported the proposal, it is slightly unclear what that body’s role and function is. If we look on the Government website, the only documentation this body has published in the last three years has been a statement on its membership, as far as we can see.
Can the Government explain what the IDAB is doing, and will they republish its report on this grant or the minutes of the decision it came to? There is advice on the website that people can make a freedom of information request to get information, but perhaps the Minister can save us having to do that and see whether we can get the information from that body.
Secondly, the report by the Competition and Markets Authority’s subsidy advice unit concluded that, while it is absolutely right that overall the positives outweigh the negatives,
“in our view the Assessment would be strengthened if it followed the Statutory Guidance more closely in explaining the relevant market failures and providing supporting evidence. The Assessment has not clearly demonstrated the existence of positive and negative externalities constituting market failures that require government intervention.”
The unit does accept that the subsidy will not be used to finance something that would have been financed anyway if the subsidy had not been there, but it asks some questions and it would be helpful if the Minister could perhaps answer them.
Thirdly, the Government have said that the grant will be subject to performance on employment key performance indicators. Will the Government make public the details of those KPIs, or at least explain a bit more about what they are and against what timeframe BMW’s success or failure will be judged? More specifics on those three areas would be very helpful.
It is important to note briefly the wider context of this discussion. The reality is that this deal was a near miss. The money from Government came after BMW had publicly announced its plans to relocate production to China, bringing us to the brink of what would have been an historic loss for British manufacturing capacity. We on the Opposition side think that getting ahead of those kinds of crisis situation, by having a strategic industrial strategy to help businesses to invest in this county and deliver the economic growth we all want to see, would be a more stable and longer-lasting approach and, in the end, would help the automotive industry much more.
Ms Ghani
I thank the hon. Lady for her contribution to this debate. As she says, we are discussing a large sum of money—although of course the larger sum is the £600 million overall investment, which is key to ensuring those supply chains continue and that we remain the most stellar place to come in and invest in the auto sector.
Beyond that £600 million, the largest sum is the settlement we received from the Treasury in the last Budget but one for the advanced manufacturing plan, under which £2 billion will be allocated to the automotive sector. We have a fantastic automotive sector here in the UK, and the commitment made by this particular company, like so many others, speaks of their huge confidence not only in their workers, but in the supply chain.
This investment comes on the back of some fantastic successes to date, including the Tata Group’s £4 billion investment in a new gigafactory, which will be one of the largest in Europe, Nissan and Envision delivering up to £2 billion of new investment in Sunderland, with two new electric models, and Ford’s £380 million investment to manufacture electric drive units. I am pleased that the hon. Lady has made clear that the Opposition are not objecting to, but welcoming, the support being provided.
I turn now to a couple of points the hon. Lady raised, starting with the Competition and Markets Authority’s report. Those reports are published and we respond to them. We submitted our assessment to the CMA, as is our legal obligation, and the CMA did not recommend any adjustment to the grant award. We have reviewed its recommendations thoroughly and updated our internal documentation accordingly. We are satisfied that the award meets the subsidy control principles, and that is supported by the evidence.
On the issue of support for the company, the grant was assessed and tested in accordance with the Government’s Green Book appraisal guidance, which provides a framework for ensuring that due diligence is done. That included a rigorous assessment of the minimum Government intervention needed to swing the investment decision in favour of the UK and scrutiny by the Industrial Development Advisory Board. Those initiatives and frameworks are independent, to ensure that decisions receive due diligence. On top of that, there was third party due diligence by KPMG.
This Committee is meeting today because we are providing substantial support of up to £75 million, but we must not forget that the overall package is £600 million. I confirm that the Government will continue to support the automotive sector by giving businesses the confidence to invest and innovate in the UK. This grant is just another example of that.
Question put and agreed to.