North-West Economy

David Mowat Excerpts

Tuesday 20th July 2010 Westminster Hall

[David Mowat (Warrington South) (Con)]

I congratulate the right hon. Member for Salford and Eccles (Hazel Blears) on securing this important debate and on her speech, the first half of which I pretty much agreed with.

It is important to put the size of the north-west economy into context. I shall talk about the regional development agency, but even in its heyday—before the cuts imposed about a year ago by Lord Mandelson, which were greater than this year’s cuts—regional aid for the north-west amounted to 0.2% of our economy, which is worth about £120 billion. We have 7 million people in the north-west, which is a bigger population than most EU countries have, and it is extremely important to understand that Government aid is not what will build the world-class businesses that we need.

I believe that the RDAs did much that was good, but it is important that all Members here today remember what the Office for Budget Responsibility forecast for our economy in the lifetime of this Parliament. In broad terms, it said the north-west should aim to create 200,000 private sector jobs at the same time as cuts take place and we will lose something like 70,000 public sector jobs. That means that each Member in this Chamber will need 3,000 new private sector jobs in his or her constituency. We should all be thinking about how that can happen.

If we want to fight homelessness, deprivation and unemployment, the creation of those jobs is vital. They will be created only if we become—or continue to be, as in some industries—a world-class economy. There are areas where the north-west is world class—they include defence, advanced manufacturing and nuclear—but we have to build on those. Principally, it is not about Building Schools for the Future. I have lost BSF schools in my constituency; that was a great disappointment to me and it will hurt the construction industry. In the end, however, the generation of a world-class economy in the north-west will depend on innovation and how we proceed.

The principal question for me is whether the supply side of our economy, particularly in the north-west, will enable those 3,000 jobs to be created in each of our constituencies. The supply side is vital, and three factors are important. The first is infrastructure, and I agree with what was said about the Mersey Gateway, which is important to the north-west. The next factor is regulation, and the coalition Government have made a strong start by getting rid of some of the regulations stopping our world-class businesses from developing.

The third factor is skills development. I have a real concern that our country is not positioned where it needs to be. It is not a particularly political point, but over the past 25 years our universities have failed to generate the applied scientists and engineers who will be needed to develop the businesses the right hon. Lady spoke about. Twenty-five years ago, when 8% of people went to university, we produced 20,000 engineers a year. We still produce 20,000 engineers a year, but out of five times as many graduates. To put that into context, France produces 50% more engineers than we do—I shall not even bother giving statistics for countries such as India or China.

That our higher education establishments have failed to produce the skills in applied science and engineering that will be needed to create a world-class economy in the north-west is close to being a scandal. A number of people should hang their heads in shame, because they have perpetuated something of a con. Many talented young people are leaving university unable to play a part in the industries of the future. In the nuclear industry, for example, the companies that will build our nuclear stations will be German and French. A recent Cogent Systems report said that we have a lack of key workers in chemical, geotechnical, mechanical and production engineering. Most ridiculous of all, National Grid is hiring engineers in—wait for it—Zimbabwe, to make the changes to our transmission and power engineering systems across the grid. Shell hires engineers in Russia. Those are opportunities that young people in our constituencies should be taking up, but they are not able to do so. If we are serious about rebalancing our economy away from the City, the financial services and oil and gas—frankly, we have had a free pass on oil and gas for a couple of decades—we cannot continue to fail in skills development. I shall be interested to hear the Minister’s response on that point.

Let me turn now to my concerns about the RDA. I know that the White Paper is still to come, but the proposals are centralising. I agree with the right hon. Lady’s comment that the regional fund represents a major reduction in budget from what the RDAs had in the past. The fact that it will be administered directly from London is a centralising measure. Notwithstanding how the local enterprise partnerships develop, ours could be the only major economy in the OECD that has no sub-regional intervention. I hope that that will not be the case, and that the Minister can give me some reassurance about that. It is hard to believe that the French, Germans, Americans and Canadians have got it wrong. It is not fair to have a Northern Ireland Office, a Scotland Office, a Wales Office and a Government office for London with economic intervention powers while the English regions are left outside.

[The Minister of State, Department for Business, Innovation and Skills (Mr Mark Prisk)]

I would not normally intervene because I know that Back Benchers want to have their say, but I must clarify that point. The regional growth fund is an entirely distinct element from how we develop local enterprise partnerships. The funding for one is not the funding for all. I will explain later how we intend to develop those partnerships.

[David Mowat]

The second point on which I seek clarification is how the partnerships are to be funded. Business people believe that they will be funded by the councils that make up the partnerships.

Another concern—a slightly more subtle one—is that our industrial regional policy is biased towards small and medium-sized enterprises rather than structural winners, such as nuclear power, defence and advanced manufacturing. If the regional fund is administered rather like the “Dragon’s Den” TV programme is run, it is hard to see how that can result in the emergence of organisations such as Daresbury and the Atlantic gateway infrastructure programme. It seems to me that there is a risk that the types of project that go forward will be related to SMEs. We need SMEs because they drive the economy, but they also feed off structural winners and world-class businesses, such as BAE Systems and AstraZeneca, and if those businesses are not growing and generating jobs, it will be tough. It also seems to me that there is a risk of the national insurance contributions holiday, which is a great policy, also being biased towards smaller companies, as is the procurement policy.

I have three questions for the Minister. First, can we do more on skills? There is a critical weakness that could result in the 200,000 private sector jobs in the north-west that the OBR forecast will be needed not being achieved, which would be a tragedy. Secondly, are the RDA proposals centralising and do they risk the English regions being left outside any formal structures? Thirdly, is there not a danger that our policy is orientated more towards SMEs than towards picking structural winners?

[Mr Christopher Chope (in the Chair)]

Before calling the next speaker, let me say that I intend to call the Opposition spokesman and the Minister at 10.40. I hope that Members will time their remarks so that everyone can get in.