Industry (Government Support)

Adrian Bailey Excerpts

Wednesday 16th June 2010 Commons Chamber

[Mr McFadden]

My hon. Friend makes a good point. Sometimes a bit of investment from the public sector can lever in significant extra investment from the private sector.

I want to turn to the criticisms of the approach that I have set out that have been made by the Secretary of State and the Prime Minister in recent weeks. They have made specific accusations, saying that the projects were agreed in a hurry and were politically motivated. Indeed, the Prime Minister repeated that allegation a short time ago at Prime Minister’s questions, when he spoke of fiddled grants for political reasons. Last week, he alleged that we had spent tens of billions of pounds on industrial support. I have to say that it is no wonder that he is sharpening his public spending axe if that is his grasp of the amount of money that we were spending on industrial support.

Let me deal head-on with the accusation about rushed and politically motivated largesse. These projects were not agreed in a hurry. We negotiated for months with the car companies, with the wind turbine suppliers and with Sheffield Forgemasters. All those projects were subject to careful scrutiny by officials and to the usual value-for-money criteria used in decisions of this kind. In the last Parliament, time after time, I stood at the Dispatch Box opposite and was criticised by some of those who are now Ministers sitting in front of me—not for going too quickly on industrial aid or for being rash about it, but for dragging my feet.

In a report published as long ago as July 2009, the Business, Innovation and Skills Committee, which was chaired at the time by the hon. Member for Mid Worcestershire (Peter Luff), who is now an Under-Secretary of State for Defence and a ministerial colleague of the Business Secretary, said that it was

“profoundly disappointed that to date not one single penny has been advanced through the scheme”—

the automotive assistance scheme—and added:

“We hope that this will change rapidly.”

That is the same scheme that has funded Ford and General Motors, so let us have fewer accusations that there was a huge rush in the run-up to the election to spend money profligately.

[Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)]

My right hon. Friend quoted what I intended to say. I was a member of the Committee that produced that report, and when I represented it in a debate on local radio, I repeated the accusations that appeared in our report.

[Mr McFadden]

I am pleased to hear from my hon. Friend and I wish him well in his new role as the new Chairman of that Committee.

--- Later in debate ---

[Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)]

I welcome the right hon. Gentleman to his new post. I know that he is committed to industry and manufacturing, even if that did not come out fully in his presentation today. I also thank him for his kind note on my election as Chair of the Business, Innovation and Skills Committee, and I look forward to his coming to our Committee and to talking to him about his future plans for industry and manufacturing.

As a long-standing member of the Business, Innovation and Skills Committee, and as a Member of Parliament representing a constituency with an economy that is heavily manufacturing-based, and which is adjacent to the constituency of the now shadow spokesperson, my right hon. Friend the Member for Wolverhampton South East (Mr McFadden), I had many discussions with local manufacturers in the depths of the recession. Yes, they wanted our public finances cleared up, but the Secretary of State did not mention two other things that came through loud and clear: first, they wanted the level of demand in the economy to be sustained, as they depended on that to sell their products; and secondly, they wanted a range of individual schemes designed and tailored to support weaknesses within the industry, to preserve their future.

[Mark Tami]

Does my hon. Friend agree that a lot of those manufacturers, and especially the smaller ones, feared a double dip more than anything else? They just about survived this recession, but if it happened again, tens of thousands of businesses would go bust?

--- Later in debate ---

[Mr Bailey]

I agree completely. Many companies made the point vigorously that if they went down now, future tax revenues would be lost, and the prospect of us going into a deeper and further recession would be much greater. The previous Government’s short-term measures to sustain local manufacturing were therefore essential.

I looked at what the coalition document says about the coalition Government’s commitment to manufacturing. I was disappointed to find that the only reference to manufacturing was in the section on business:

“Our aim is to create the most competitive corporate tax regime in the G20, while protecting manufacturing industries.”

Although that is laudable and welcome, it is hardly the most robust commitment to sustaining our manufacturing industries. The previous Government’s measures to sustain demand and provide selective support, such as the car scrappage scheme, contributed to the current deficit, which, we are told, it is essential to eliminate if our manufacturing industry is to survive. However, the fact is that without incurring that debt our manufacturing industry would not have survived and would be in a far weaker position.

The title of the debate on the Order Paper is “Government Support for Industry”. The first thing the Secretary of State could do to support industry would be to say to the Chancellor of the Exchequer and the Prime Minister, “Stop making apocalyptic utterances about the state of our public finances.” I am happy to say that the report of the Office for Budget Responsibility on Monday demonstrated that our public finances were very much as reported by the former Chancellor of the Exchequer, and in no way conform to the current Chancellor of the Exchequer’s scaremongering portrayals. That is a serious matter, as it not only has implications for investment in industry and the public services, but for the public climate, which might be very damaging to our industries. Literally millions of public sector workers feel that they could be affected by decisions about investment in our public services. As a result, they are likely to decide to save rather than spend, which will reduce demand and potentially precipitate that double-dip recession.

[Dr Thérèse Coffey (Suffolk Coastal) (Con)]

I understand the passion felt by the hon. Gentleman on behalf of public sector workers in particular, and I think that it is shared across the House. Does he not recognise, however, that the debt interest payments that we shall soon be making will affect every worker, and every non-worker, in the country?

[Mr Bailey]

I am committed to public sector workers, but I am equally committed to those in the private sector. My point is that unless we sustain our private sector in manufacturing industry, it will be far more difficult to pay off our debt in the long term. We need to sustain our base. That, I think, is a better strategic position, and it is the position taken by the last Government.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

On Monday I visited a firm in my constituency which employs 25 people and has a turnover of about £1 million. It largely contracts its work from the public sector. Does the hon. Gentleman agree that the cuts agenda will affect not only the public sector, but the private sector as well?

--- Later in debate ---

[Mr Bailey]

Yes. The days when the economy could be divided between the public and the private sector are long gone. Engagement between them is subtle, sophisticated and often mutually supportive. The livelihoods of millions of workers in the private sector could be affected by decisions about public investment, but public utterances fail to take that into account.

Let me say something about individual schemes. Although it would obviously be unreasonable to expect the Secretary of State to present a comprehensive plan for support for manufacturing industry, I should have liked to hear a greater indication of the priorities that he would identify in his new role. The fact that the Government have begun by calling into question a range of initiatives taken by the last Government to support strategic industries does not augur well for the future. The argument that some of the grant and loan guarantees provided through either the automotive assistance programme or the strategy investment fund were in some way politically motivated prior to the election is a canard.

Before the election I was a member of the Business, Innovation and Skills Committee, which was chaired by a Conservative and which operated on an entirely cross-party and consensual basis. It criticised the then Minister, my right hon. Friend the Member for Wolverhampton South East, for taking too long to implement some of the loans and grants under that scheme. I debated publicly with the Minister at the time and was vigorous in my criticism of him, and I shall be vigorous in my criticism of the current Secretary of State for trying to imply that there was anything political in that process. In my view, the delays were due to an exaggerated consideration of due diligence and other complicating factors.

There are two helpful things that the Secretary of State could do. First, he could ensure that his colleagues do not damage demand, public confidence and industry by their public utterances. Secondly, he could resolve not to call loans and grants into question and create doubt and uncertainty in areas where they have been allocated by implying that they are there for a political purpose, because that would inevitably lead local people to believe that they are likely to be withdrawn following the change of Government. It would be playing political football not only with the livelihoods of individuals but with the strategic significance of the companies involved, particularly Sheffield Forgemasters.

I am running out of time, but let me make one more point. There was considerable debate about the regional development agencies. Yes, it is fair to say that there were some patchy performances, and yes, in the new climate there will be reductions. However, I hope that when the Minister winds up the debate, he will give a commitment that if RDA functions are to go to local deliverers, the funds that they are currently scheduled to receive will go with them.

--- Later in debate ---

[Mr Willetts]

I have very little time.

Many Labour Members referred particularly to regional issues, and I have to say to them that of course we understand the concern about regional imbalances in our economy. In fact, another measure that deteriorated over the past 10 years has been the gap in GDP between different regions of our economy. If we are to tackle the problem of regional imbalances, we have to look objectively at the performance of regional development agencies. The report from the National Audit Office, published in March this year, made it clear that the NAO was

“unable to conclude that the regional wealth benefits actually generated”

by RDAs

“were as much as they could and should have been, and are therefore value for money.”

The report went on to refer to “weaknesses”, which

“in many cases, undermined the RDAs’ ability to make decisions and set priorities to maximise regional economic wealth”.

It concluded that RDAs were simply not doing the job they were supposed to do. That is why Government Members believe that RDA boundaries do not reflect functional economic areas; we wish to enable local enterprise partnerships to reflect better the natural economic geography of the areas that they serve. We are committed to replacing RDAs with local enterprise partnerships and we will invite local groups of councils and business leaders to come together to consider how they wish to form local enterprise partnerships.

[Mr Bailey]

rose—

[Mr Willetts]

I will give way to the Chairman of the Select Committee.

[Mr Bailey]

Will the right hon. Gentleman answer the query I posed in my contribution and tell us whether the money hitherto allocated to RDAs will follow through to the local economic partnerships?

[Mr Willetts]

We do believe that there are efficiencies to be made because of the very high overhead costs of RDAs. Government Members are committed to saving public money, and I have to say that one way in which we will do so is by saving money in the overhead costs of RDAs as we move to the new arrangements—and we make no apology for that.

We also believe that some roles currently carried out by RDAs can be scrapped to save money—regional spatial strategies, for example. We simply do not need them—full stop. There are other roles, including inward investment, that we believe should be led nationally and can be carried out elsewhere. We heard powerful examples from several of my hon. Friends of how individual RDAs were spending money around the world on regional offices; this type of function is better done at the national level. We believe that some RDA roles in sector leadership and taking responsibility for business support and innovation can also best be done nationally. That is the approach that we will take.

Our challenge is to rebalance the economy, to rebalance it in favour of manufacturing, to rebalance it in favour of investment and to rebalance it regionally as well. That is part of the inheritance that we take on from the previous Government.