Economy (North-East)

David Miliband Excerpts

Tuesday 13th November 2012 Westminster Hall

[David Miliband (South Shields) (Lab)]

I know that I speak for all my colleagues when I say that we are delighted to serve under your chairmanship, Mr Hollobone. I am sure that there will be excellent behaviour from all of us. There is no regional Minister any more and, sadly, as yet no Minister from a north-east constituency in the Government, but we welcome the Minister today.

There are two subjects that I feel passionately about, but I will restrain myself and not talk about those today. First, I do not expect the Minister to announce that she is changing the misguided decision to abolish the regional development agency, splitting the region in half. In fact, it would not be sensible to do so, having gone through two years of reorganisation. I hope that my party learns the lesson that unnecessary reorganisation on the not-invented-here principle is not a good basis for policy.

The second thing that I am not going to talk about is the not misguided but masochistic economic policy that the Government are imposing. The contrast between President Obama’s growth path since May 2010 and our own is striking. Equally, it is a bit much to expect the Minister to contradict the Chancellor of the Exchequer in one of her early outings.

It is ironic that I was accused on BBC Newcastle radio today of coming to Parliament just to take part in a talking shop. I asked what was the point of Parliament if not for talking. Hopefully, there will be some practical outcomes from today’s discussion, and at least some greater understanding.

I am sure that I speak for all hon. Members when I say that we regard the north-east economy as an asset for the UK, not as a problem for the UK. The north-east has a consistent trade surplus that is higher than the UK average, faster growth in exports than the UK average, and we have some great companies, from cars to chemicals. We also have world-class universities. Equally, we do not shy away from highlighting some big problems: income per head and education are lower and unemployment and non-employment are higher. Those are the long-term problems, and there are short-term problems too: construction is flat and business confidence is fragile. I was sent the Lloyds purchasing managers index data for the fourth quarter, showing that it is dipping in that quarter. There are cyclical as well as structural problems.

I do not hide my own interest. I want to look at practical issues. The test of this debate, for me, is whether it makes a difference in South Shields to the unemployed youngster seeking work, the small business seeking finance and the shopkeeper seeking renewal of the town centre. In the 10 or 12 minutes that are available to me, I want to highlight five issues that I think successful regions around the world put at the heart of their economic policy. I want to make some specific points. First, there is not a successful region or city in the world that is not connected to the rest of its nation and the rest of the world. One in seven jobs in the north-east depend on foreign investment, never mind British investment. That puts issues such as transport high up the agenda. Some of my colleagues will speak about transport, especially rail and road. As the Member in whose constituency a large part of the Port of Tyne sits, I know that ports are important. The Port of Tyne need its freight capacity strengthening.

On transport, the figure provided by the Institute for Public Policy Research and the Civil Engineering Contractors Association is striking. I am delighted by the Crossrail investment in London—£2,750 per head being spent on Londoners and their transport—but in the north-east the figure is not £1,000, £500 or £50, but £5 per head. I am not saying that the Minister needs to say that that figure should be £2,750, but honestly, £5 per head is not consistent with our needs. We are not asking to be funded on the same level as the capital city, but we do think that that is a problem.

Colleagues will talk about airports. Newcastle airport provides 7,500 jobs and deals with 4.3 million passengers. For anyone watching, we have airport capacity and we can increase that without much argument. A transatlantic route for the north-east would be welcome. People say that a revenue-neutral tweak in air passenger duty would make a difference, relieving congestion in southern airports.

I want to make a different point, which I do not think will be raised elsewhere. We have five great universities with a large number of fantastic foreign students, and historically those students have created businesses in the north-east. Every university vice-chancellor will tell the Minister that the Government’s policy on student visas is barmy. We are keeping out of the country people who want to learn from and contribute to it. We are reducing the number of students who come here from abroad and we are preventing them from staying here to work, not to claim benefits. I am glad to see, from the honesty in the Minister’s face, that she recognises my point. For the record, I will not claim that she has nodded in agreement, but she certainly nodded in recognition of the point. Hon. Members should not take it from me. My reading of Home Office’s own study—I should like the Minister to confirm this in her response—is that the immigration cap for foreign students will cost the British economy £2.4 billion a year. This self-defeating policy has nothing to do with tackling illegal immigration and it is injurious, not just to the so-called golden triangle of the south-east, but to our region.

Secondly, successful regions around the world make the most of their global links and develop their local assets. Every city and region has its own history. We have great traditions. In my constituency, those traditions include shipbuilding and mining, although shipbuilding is almost reduced to a nugatory level. Other hon. Members will talk about that. I want to make a point about how we build on our manufacturing history in respect of energy policy, which is no longer the responsibility of the Minister’s Department, although I am sure that she will say that there is close co-operation with the Department of Energy and Climate Change.

The energy revolution is potentially transformative for the north-east, and although it does not just include renewables, they will play a significant part. We have strength from Narec in Blyth, right through the Port of Tyne in South Shields, down to Teesside. The north-east chamber of commerce estimates that that could be worth 40,000 jobs and £6 billion in the next 20 years. However, Government energy policy is a complete mess: it is a pushmi-pullyu or hokey cokey. The Minister of State, Department of Energy and Climate Change, the hon. Member for South Holland and The Deepings (Mr Hayes) says one thing and the Secretary of State contradicts him.

It is obvious that long-term investment by business needs long-term clarity and certainty from Government. There is fast reaction to clarity from Government. In October 2010, the Government set out an offshore wind strategy and Siemens and others responded quickly with investment, but now they are halting that investment because they do not know what the Government’s game is. The Energy Bill is coming up, so for goodness’ sake let us make it a model of how countries can, on a bipartisan basis, set long-term strategy for business to invest.

People are saying, “Oh well, we have been in recession. We may be going into a triple-dip recession. We can’t afford to go green.” That argument is nonsense. The argument should be that now is precisely the time to go green, but we cannot do so if the private sector does not know what the public sector is doing and if one bit of the public sector does not know what another bit is doing.

Thirdly, people should stop complaining about public spending draining the private economy—the so-called crowding out of private investment. Government policy so far has been framed on the idea that the more public spending there is, the less private spending there is. That is nonsense: we need only think about Britain’s strength in pharmaceuticals. The integrated purchasing power of the national health service is one reason why Britain has a strong pharmaceuticals industry; one has fed off the other.

I think that all hon. Members agree: no one says that there will be as much public money around as there used to be. We argue about the speed of reduction. What we spend needs to have maximum economic impact. It is not just a social policy, but an economic one. I want to make two points in that regard. One is about the benighted regional growth funds. Honestly, it is one thing to cut the funding by two thirds, from the old regional development agencies to the regional growth fund, but on the figures I have—I would like the Minister to confirm this—of the £1.4 billion announced in rounds 1 and 2 of the regional growth fund, the amount that has left the Department’s bank account is £60 million. Not £600 million—nearly half the total figure—but £60 million has reached the companies that won the competition. Thirty companies that won in rounds 1 and 2 have subsequently pulled out because of the delays in Government decision making. Can we have some clarity and determination to get this thing sorted out? We will reach the next election with winners in round 3 still without their money—I do not want to give the Government political advice, but it is deeply worrying for our economy if we cannot get allocated money out of the Department for Business, Innovation and Skills.

Secondly, connected to that, public decisions have a big private benefit. My hon. Friend the Member for Sedgefield (Phil Wilson) did an extraordinary job in bringing people together for the Hitachi contract to build 600 or 700 carriages in Newton Aycliffe. That was a massive decision by a Japanese company and a massive vote of confidence in the people of Newton Aycliffe, but we must ensure that the supply chain feeds that investment, and that will not happen by the elixir of market forces alone—there is work to be done. In the same way, Nissan is a massive employer in the north-east, but MPs in Sunderland and elsewhere would say that an important part of the benefit comes from the supply chain, and we must get that right for the Hitachi investment as well.

The fourth area, which I feel strongly about, is that successful regions around the world do not allow significant sections of the population to fall behind the rest. They especially do not allow a large group of young long-term unemployed to become a drain on their own livelihood and on the wider economy. The economic inequality of unemployment is a massive issue for the future of our country. The figures are extraordinary: 270,000 young people have not been in work for more than 18 months, with a further 180,000 not in work for more than six months—450,000 youngsters unemployed for more than six months. In my constituency alone the claimant count is 380 and throughout the north-east it is 12,000, and that count underestimates by 35% the number of those who are not in employment, education or training. If I may explain to the Minister, 35% of 18 to 25-year- olds do not claim the benefits to which they are entitled—they are unemployed and not in education or training, but they do not claim the benefits, so the claimant count underestimates the total.

[Helen Goodman (Bishop Auckland) (Lab)]

Is my right hon. Friend aware that the number of young people who have been unemployed for more than 12 months has risen by 750% in the past year alone?

[David Miliband]

I was not aware of that figure from my hon. Friend’s constituency, but it speaks to the point that I am asking the Minister to address. The Minister’s own party leader has said on behalf of the Government that he wants to abolish long-term youth unemployment. That is excellent, but people who say that they want to abolish long-term youth unemployment have a responsibility to put in place the policies to do so, not least because young people who hear that message from the Government will feel a double betrayal—it is one thing to be long-term unemployed; it is another to be told that the Government will help them out of it, but then do not do so.

I beg the Minister not to read out a script from the Department for Work and Pensions that tells me that 150,000 people are getting a wage subsidy. I promise the hon. Lady that they are not. First, the 150,000 is for a three-year programme; secondly, the level is set at £2,500, which has never in history produced the kind of reaction needed among employers. When the right hon. and learned Member for Rushcliffe (Mr Clarke) tried that in 1995 or 1996, he got a 3% take-up rate on a scheme of the same size, so I beg the Minister not to tell me that the Government will achieve that mass take-up of wage subsidies: they will not. I urge her not to tell me that apprenticeships are the answer: we know that less than 40% of apprenticeships are going to the under-25s, because 60% are jobs for adults relabelled as apprenticeships.

I urge the Minister not to tell me that work experience will make up for the lack of a guaranteed job at the end of nine, 12 or 18 months of unemployment. Although we welcome what the previous Employment Minister told us—that I think 35% of those who had had work experience got a job—he killed the future jobs programme on the grounds that only 50% of people coming out of it were getting a job. We welcome the effect of work experience, but let us not kid ourselves that it is the answer. The Under-Secretary can take away a serious message: certainly in my constituency, and more widely throughout the north-east, we want the power and the funds in our own hands, to suit the welfare-to-work programme to our own needs. The hon. Lady has an honourable history of talking about localism, and this area of welfare policy is a classic. The labour market in my constituency is completely different from the labour market in her constituency, and we cannot rely on a national sausage machine of welfare-to-work programmes. We need local flexibility to tackle the existing problems, especially for young people. The issue is economic, not social.

Finally, I think that all 20 of us in the Chamber agree that the future of our economy in the north-east, and of the British economy, is in innovation. I want to raise one issue about innovation, which is finance and how the financial services sector in Britain needs to be a spur for domestic industry and not only a global blood supply for financial services around the world. It is good that we are the global capital for financial services and I welcome the fact that the City of London is the blood supply for global financial services, but I want it to be the blood supply for the north-east’s businesses that want to invest and innovate. There is a problem.

The British Chambers of Commerce now agree that a British investment bank is the way forward, and it has suggested some interesting ideas. We should be thinking about not one, national, statist investment bank that is the whole answer to all our problems, but about how investment coalitions can be brought together—public and private sectors—at the local and regional levels. The experience of the regional growth fund shows the dangers of expecting one national institution to process the information; we need local engagement in finance for industry. As the banking sector shakes out, we have a big job to do to underpin regulation—we do not want to risk another financial crisis—but we cannot afford to strangle the flow of investment from financial services into businesses. That is the danger that I see at the moment.

I will have got my breath back from my run from the tube by the time I finish, but I will do so on the following note. What is interesting, if we look at the statistics, is that 640 businesses have been created in South Tyneside in the past year. That is quite a striking statistic. A figure I received yesterday is that 1,000 more people are self-employed than was the case two years ago. The sad thing is that that is in spite of Government policy, not because of it.

In the end we cannot mandate job creation and we cannot legislate for businesses to start up or for people to become self-employed, but we can support them. In the five areas that I have set out, we are not looking for handouts; we are looking for support. We are not asking the Minister to contradict the Chancellor’s spending envelope—I do not expect her to do that—but I do expect her to take on board practical, common-sense, innovative ideas that are necessary and that are brought forward with a passion. The Prime Minister last night talked about rebalancing the British economy, but one aspect of rebalancing, which unfortunately he did not talk about, is rebalancing so we get a better regional balance in the country. That is not a new issue—we have had issues of regional imbalance for a long time—but rebalancing the British economy has to mean strengthening the north-east and the northern economies. The interesting point is that such a rebalancing of the British economy can go hand in hand with a transition that is going on in the north-east economy at the moment. We lost our economy in the 1980s, we began rebuilding it in the 2000s and we need to complete the transition now, but if we are going to do so we need the help of Government and not the hindrance.

[Several hon. Members]

rose—

--- Later in debate ---

[Phil Wilson (Sedgefield) (Lab)]

I, too, thank my right hon. Friend the Member for South Shields (David Miliband) for securing this debate. In the short time that I have, I want to discuss the lessons that can be learned from the Hitachi deal and the investment that is coming to my constituency. It is the biggest private sector investment in the north-east since Nissan. It will create a £60 million to £80 million factory and 720 jobs, and will produce the Intercity Express Programme. We must remember that the deal was an initiative by the Labour Government, and not this Government. The campaign that we pulled together and that the coalition used showed the north-east at its best, with everyone coming together to ensure that the deal went ahead.

My right hon. Friend said that the Government have a masochistic approach to economics, which is correct. The other problem is the mantra that says, “Public sector bad, private sector good.” What the Hitachi project proved was that when the public and private sectors come together, they can achieve great things. I say to the hon. Member for Redcar (Ian Swales) that One North East played a great part in bringing Hitachi to the region. The factory is closer to Teesside than it is to Newcastle. I hope that in the not too distant future Teesport will be used to export trains to the rest of Europe.

The other lesson for me is the fact that we are part of Europe, which is one of the reasons that Hitachi came to the UK. It came not just because of the Intercity Express Programme, but because we are part of a market of 300 million-plus people.

[David Miliband]

It is 500 million.

[Phil Wilson]

I stand corrected. It is a market of not just 60 million in our own country, but 500 million people. On the back of the Intercity Express Programme, Hitachi will bid for work in other countries. It is looking for work in Germany and elsewhere in Europe, so that we will not just deal with trains in our own country but become an exporter of trains.