Industrial Policy and Manufacturing

Adrian Bailey Excerpts

Thursday 22nd November 2012 Commons Chamber

[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.

--- Later in debate ---

[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]

Will my hon. Friend give way?

[Mr Bailey]

I will, but briefly, because my hon. Friend the Member for Corby (Andrew Sawford) is going to make his maiden speech.

[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.

[Mr Bailey]

I think I know what the hon. Gentleman means, but he has not reflected that. Manufacturing did not halve under the previous Government. As a proportion of the economy it may have done so, but it actually grew. That has been acknowledged in the Government’s policy.

[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.