Industrial Strategy: North-East of England

Chi Onwurah Excerpts

Wednesday 5th June 2019 Westminster Hall

[Chi Onwurah (Newcastle upon Tyne Central) (Lab)]

It is a real pleasure and honour to serve under your chairmanship, Mr Betts. I congratulate my constituency neighbour, my hon. Friend the Member for North Tyneside (Mary Glindon), on securing this important and timely debate. The industrial strategy in the north-east does not receive the attention it deserves, so I am grateful to her for bringing this debate to Westminster Hall and for making such a passionate and comprehensive opening speech. She combined in-depth knowledge of her constituency and region with real lived experience. In that, she was joined by my hon. Friends the Members for Washington and Sunderland West (Mrs Hodgson), for Sedgefield (Phil Wilson), for Blaydon (Liz Twist) and for Stockton North (Alex Cunningham), who all grew up and have lived in the region, and spoke with such knowledge. It is a pity that that knowledge is not reflected by the presence of Government Members from north-east constituencies, but Labour Members have done well and have spoken with in-depth knowledge about our region.

Like other hon. Members, I will talk a little about the past. We are very proud of our industrial heritage. I grew up in Newcastle in the shadow of industrial greats such as Armstrong, Stephenson and Parsons—that, by the way, is Rachel Parsons, the world’s first female naval engineer, who inspired me to become an engineer. I always like to remind colleagues from across the UK that the north-east literally drove the first industrial revolution. There might be some debate about where the first ticket office was—you were wise not to rule on that, Mr Betts, but perhaps we can have a parliamentary inquiry on that important subject—but there is no debate about who invented the railways. George Stephenson built the locomotive in my constituency, and our region mined and built many of the industrial riches that flowed from the first industrial revolution.

Today, as we have heard, manufacturing makes up approximately 15% of the north-east economy, and we have more than 63,000 specialist workers in our successful advanced manufacturing sector. We have a 126,000-strong workforce in wider manufacturing, and an average of 51,000 science, technology, engineering and mathematics students come through our universities every year. We are in the top five UK regions for advanced manufacturing. We have world-class universities and growing strengths in science, digital, energy, healthcare and business.

Years of deindustrialisation, and chronic underinvestment in infrastructure and education, have left the north-east with significant economic challenges. No one who lived in the region in the 1980s can forget what forced deindustrialisation did to our region, the economic livelihoods that were lost and the talent and potential that was lost with them. The financialisation of our economy that followed centred on London and the south and meant that thousands of manufacturing jobs in the north-east were lost. As leading economist Mariana Mazzucato has argued, the “two faces” of financialisation are at the heart of capitalism’s fundamental failure. The first is that the financial sector has stopped resourcing the real economy. Instead of investing in companies that produce stuff, finance is financing finance. The second is how financialisation changes the motors behind economic activity, giving investors with short-term interests more control over firms. That disproportionately affects the north-east—a region that still takes pride in making and building things. Its legacy is low productivity and low pay.

As we heard from many of my hon. Friends, Brexit adds more uncertainty. The north-east exports more than it imports, as my hon. Friends the Members for Sedgefield, for Washington and Sunderland West, and for Blaydon highlighted, and more than half of that goes to the European Union. No matter what deal there is, there will be negative economic consequences for our region. A no-deal Brexit would be absolutely catastrophic. I ask the Minister to rule that out personally.

As my hon. Friends emphasised, the north-east received almost £0.5 billion in European structural investment funding in the period 2014 to 2020. As my hon. Friend the Member for Sedgefield said, projections for the next seven years suggest that we would have received up to £1 billion in EU funding, but the Government’s paltry stronger towns fund repackages existing money to the tune of £1 billion for all UK regions. As my hon. Friends said, we have no details about the supposed shared prosperity fund. Labour has committed to matching European Union regional development funding for at least the next decade, so will the Minister take this opportunity to commit to tackling regional inequality by guaranteeing the continuation of the current and projected future levels of regional funding?

At the heart of tackling the challenges that our great region faces needs to be a strong, positive industrial strategy capable of building and rebuilding the economy to meet the needs of the future. Until very recently, the Government were incapable of saying “industrial” and “strategy” in the same sentence, so their acknowledgment of the need for local industrial strategies is a step forward. Unfortunately, we have no evidence that the Government’s industrial strategy is anywhere near sufficient for the north-east’s needs. Their industrial strategy is sectoral, favours sectors that are already well organised and can push to the front of the queue, and focuses on what I, as an engineer, would call “sexy science”. Last year, Sheffield Hallam University researchers found that the Government’s industrial strategy pledges would impact only 10% of our manufacturing base and only 1% of the whole economy.

The north-east’s five universities make a huge contribution to our economy—they contribute £750 million directly, and £1 billion more through other industries—yet the golden triangle of London-Cambridge-Oxford attracts the lion’s share of research funding—more than £17 billion, compared with only £600 million for the north-east—despite the north-east’s many research-intensive universities, such as Newcastle University. Cambridge, with a population of just over a quarter of a million, has as many private research and development jobs as the whole of the north. Does the Minister agree that innovation should deliver high-skilled jobs across our country, and how will he ensure that local industrial strategies from our local enterprise partnerships and the North of Tyne Mayor have the resources that they need to deliver high-skilled and high-productivity jobs?

Labour’s “innovation nation” mission would raise R&D to 3% of GDP, and would democratise science and technology, so that they benefit the whole country, as well as the whole region. It would also be certain to benefit the north-east’s growing tech industry. We need to maintain our current centres of excellence, but we must ensure that every region can benefit from innovation and growth. That is why we are committed to putting technology and innovation at the heart of the lowest-paid and least productive sectors. My hon. Friends the Members for Blaydon, and for Stockton North, mentioned the importance of retail. We are committed to creating a retail catapult, which will support the 3 million people who work in retail across the UK, making it the UK’s largest private sector employer.

Much of our additional R&D spend would be drawn on by our industrial strategy missions, such as investing in carbon capture and storage, which my hon. Friend the Member for Stockton North also mentioned, as part of our commitment to decarbonise our economy by 2050 and to deliver hundreds of thousands of green jobs in the process. The Government’s refusal to commit to funding a carbon capture and storage facility on Teesside is another example of their unwillingness to invest in the green technologies of the future.

The regional disparity and unique issues that the north-east faces are the reason that we need the £250 billion national investment bank—a network of regional development banks—to which Labour is committed. That would properly put regional needs first and restore regional decision making. Labour’s national education service will address some of the challenges highlighted by my hon. Friends, by delivering education, free at the point of demand, from cradle to grave, and ensuring that we have the skills that our regional businesses need.

As my hon. Friends also highlighted, improving infrastructure is critical to raising productivity. Under the Tories, infrastructure spending in the north-east is five times lower than in London, which is why Labour’s £250 billion national transformation fund would invest in our transport and digital infrastructure. We have already committed to a £1.4 billion investment in north-east transport, which would renew rolling stock on the Metro and build a Crossrail for the north. Would the Minister like to do the same?

Labour would also establish a new materials and metals catapult centre on Teesside—that is supported by UK Steel, the Federation of Small Businesses and the Confederation of British Industry—to help secure the future of UK steel by encouraging innovation in the materials industry. Will the Minister secure the future of UK steel with a commitment to support it?

As we have heard, the north-east is a fantastic region that offers a quality of life that is second to none, with sun, surf, castles, coasts, rolling landscapes, history—including the Romans—excellent local produce and excellent industry. We need a real industrial strategy to support the north-east, realise its potential and deliver an economy that ensures prosperity for everyone across our region. Labour’s industrial strategy is positive, practical and visionary enough to know the future that we want, while focusing on addressing our present challenges in productivity, skills and wages. Will the Minister commit to doing the same?

--- Later in debate ---

[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.

[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.