Economic Growth and Employment

David Mowat Excerpts

Wednesday 23rd November 2011 Commons Chamber

[Roberta Blackman-Woods]

My hon. Friend has made an excellent point. It is interesting to note that before the general election, in my region at least, the Liberal Democrats were apparently in favour of regional development agencies.

[David Mowat (Warrington South) (Con)]

Will the hon. Lady give way?

[Roberta Blackman-Woods]

I am sorry; I am running out of time.

We know that the RDA helped to invest in a new generation of advanced technologies with expanding markets around the world, which greatly helped growth in the north-east. Through industry, Government and university collaborations, a number of sectors were identified in which growth should be prioritised, including the processing and chemical industries, automotive and advanced manufacturing, and printable electronics. Those sectors, critically, were underpinned by centres of excellence supported by the regional development agency.

Did the incoming Government seek to build on that? No. What they did instead was get rid of One North East, although it had extensive support from businesses and the community in the north-east, and what we have in its place is the regional growth fund, about which I shall say more in a moment. The loss of the regional development agency led to a loss of expertise in regard to the sectors that needed to be developed in the north-east, and a loss of what was necessary to support that development. In great contrast, the regional growth fund not only has less money but is not strategic at all. I am very pleased that a number of north-east companies have benefited from the RGF, although the Secretary of State must address the fact that getting the money through to the companies is taking a long time.

--- Later in debate ---

[Mr Gordon Marsden (Blackpool South) (Lab)]

I thank all those who have participated in today’s debate. On this side, we heard sparkling presentations from my hon. Friends the Members for Ochil and South Perthshire (Gordon Banks), for Ellesmere Port and Neston (Andrew Miller), for Mitcham and Morden (Siobhain McDonagh) and for City of Durham (Roberta Blackman-Woods). We heard interesting contributions from Members on the other side of the House, too, including a speech from the hon. Member for Solihull (Lorely Burt), who appears to give our five-point plan two out of five, and a particularly stimulating speech from the hon. Member for Bedford (Richard Fuller)—I do not think, however, that it will put him on the Secretary of State’s Christmas card list.

It is clear that for businesses, councils and communities across England, this has been a wasted and frustrated year for growth in England’s regions under the Department’s watch. It has been a wasted and frustrated year for the entrepreneurs and communities who have found their ability to grow and innovate stifled through the Department’s inability to present a coherent framework for growth or to stand up for their interests against other Government Departments. In all three key areas that are vital to growth—supporting the local enterprise partnerships, making the regional growth fund work properly and securing regeneration funding from Europe—the Department has been weighed in the balance and found wanting. Time and again, the Department has failed to be the Department for growth.

As long ago as last September, the Minister of State, the hon. Member for Hertford and Stortford (Mr Prisk), felt the need to write to the Secretary of State to warn of the icebergs ahead. He listed the organisations that were anxious about the way the LEPs were being set up and the failure to make them more sufficiently business-orientated and he ended by warning that

“the danger is that the CBI and others become detached from this policy heralding likely failure in large parts of England”.

Who can forget that the Secretary of State himself famously described the process as Maoist and chaotic, while the former CBI director general, Richard Lambert, simply confined himself to saying that it was a shambles?

That should come as no surprise given that in June 2010 the Secretary of State went to the Northwest RDA, praised the work that it and other agencies had done and gave them assurances, only to have to confirm their abolition two weeks later after he lost the argument with the Chancellor, who wanted them axed. It was an early example of the loss of authority and dismemberment of decision making that his Department has endured ever since. BIS Ministers allowed a decade’s worth of expertise and local know-how to be lost almost overnight. Experienced RDA staff were let go before the LEPs were up and running and at the very time when they could have provided crucial assistance.

No wonder that even the Government’s growth tsar, Lord Heseltine, who heads up the regional growth fund, has come out and said that their hasty abolition of RDAs was a mistake. Not the least of the errors was the fact that this swept away all the informal architecture and channels of connection between business, further education, higher education and small employers that had been built up to boost growth in the English regions. We saw the cost of their hasty abolition when Pfizer announced the closure of its Sandwich plant in February. The South East England Development Agency had previously been able to act swiftly with a task force to help those affected to find jobs, but this time the Government failed to use that RDA even though it still had some people in post who could have given advice.

[David Mowat]

Will the hon. Gentleman give way?

[Mr Marsden]

No, I will not because there is not time.

The Government failed to put Sandwich in the initial list of enterprise zones or to approve any of Kent’s first-round RGF bids. We saw the same pattern of help being denied initially and then an enterprise zone being hastily cobbled together when disaster struck at Derby with Bombardier and with BAE at Warton and Samlesbury. The Department is behind the curve and out of touch with events on the ground.

Back in February, the Labour Front-Bench team made six proposals to support LEPs, such as giving them first refusal on assets, providing them with start-up funding, giving them powers over skills funding, allowing them to form larger groups for infrastructure projects and giving them a central role in the delivery of funding from the European regional development fund. The Government’s response, however, was to block them from receiving assets or even acquiring them by deferred payment. It was only the broad support across a whole host of business organisations for our direction of travel that pushed the Government into a climbdown over their proposed fire sale of RDA assets.

The Government have given only limited seedcorn funding to LEPs—about £6 million for 40. That remains inadequate and the future of LEPs, especially for those without enterprise zones as growth vehicles, remains fragile. The Government have also failed to address other key measures that would empower LEPs and give them the tools to do their job—despite repeated calls for the LEPs to be given more powers. As has been warned by the Federation of Small Businesses and, more recently, Centre for Cities in its report, the Government need to get a grip of underperforming LEPs before it is too late. There are real fears that entrepreneurs and local businesses in LEPs will simply walk away if they simply become talking shops—as the Forum of Private Business has warned in its briefing today.

We have always argued on principle that money intended for the regions should remain in the regions. That is the stark contrast between our real localism and the Government’s sham localism. They preach localism but when they had the chance to give LEPs additional powers in the Localism Bill they funked it. As growth in the economy has flatlined, the Department for Business, Innovation and Skills has become progressively enfeebled as it has lost turf battles to the Department for Communities and Local Government and the Treasury.

The Department for Business, Innovation and Skills still protests that the regional growth fund will save the day but, as my hon. Friend the shadow Secretary of State has so forensically detailed, there is no more fitting emblem for its failures than the regional growth fund. Right from the start, the Department’s grasp on the fund has been feeble and flawed. In rounds one and two it was hopelessly oversubscribed, but the only response of the Minister of State was “That’s life”. Well, he should tell that to the consortia and to businesses. He should tell it to those who have had to wait an age for the cheque in the post. No wonder Andrew Neil said so memorably on “Daily Politics” to the Secretary of State for Environment, Food and Rural Affairs, “The £1.4 billion fund has so far disbursed £5.8 million. Why is your Government so useless?” How many people does the Department have working on round two? The answer that was dragged out of them through parliamentary questions was that there are only 11 full-time staff working on the fund. We can do the maths ourselves. How long will it take 11 people to work through the 119 successful bids to the second round?

Small and medium-sized enterprises, which are a key element in growth across the regions, find themselves short-changed and unrepresented on a number of the boards. They are frozen out by the Government’s thresholds of £1 million minimum on RGF funding and £5 million on the business growth fund. No wonder there is such frustration. What is more, the growth fund seems to have hardly any regional input. All the decisions are being micro-managed by Whitehall civil servants. There is no regional consultation or input and no sign that local offices will play a meaningful role in the process. With the propriety of some of their decisions called into account, the Government have pulled down the shutters on the detailed parliamentary questions that we have tabled about the process and the conflicts of interests on the advisory panel. That is not surprising, as BIS presides over a scheme into which it does not put a penny. Despite proclaiming, as he has done again today, the number of jobs that will be created, the Secretary of State has admitted that they are merely going on their own estimates.

Despite the money that the Department for Transport has put into the growth fund, the fund has failed to look at new public transport projects or build on the importance of travel-to-work areas. The Government have abandoned the active industrial policy that, in our last years in office, we pursued, and that led to the successful carbon strategy pursued by One North East. Ministers from the Department for Business, Innovation and Skills should have done everything in their power to unlock the European funding that did so much good and boosted jobs and growth across the regions, but in this, as in other areas, they have been sidelined.

Why have the Government produced the Growing Places fund like a rabbit out of a hat? Is it because even the Chancellor and the Secretary of State for Communities and Local Government have given up on the Department for Business, Innovation and Skills? Once again, there will be no BIS input in the process—only tanks on its lawn from the Secretary of State for Communities and Local Government.

England’s regions are full of people with ambitions and ideas about how to bring growth to their area, but the indecision and powerlessness shown by the BIS ministerial team has short-changed them and failed to rebalance our economy or provide a plan for growth. They have failed to stand up for the needs of local businesses, whether it is small towns in Kent or former industrial areas in the north-east. They have gone too far, too fast, in scrapping the regional development agencies and their collaborative structures, and become mangled in lost turf wars with CLG and the Treasury. They are like a rabbit caught in the headlights, petrified of the markets, but there are positive things that could be done for the fight. Roosevelt famously said that there is nothing to fear but “fear itself”, and Lincoln said that when the

“occasion is piled high with difficulty…we must rise high with the occasion. As our case is new, so we must think anew, and act anew.”

The Opposition understand that, which is we have a five-point plan for growth. We understand that young people across England’s regions are crying out for the opportunities that our national insurance changes will provide by enabling us to build affordable homes and reduce VAT to 5% on repairs. We understand the need for an industrial strategy, and we understand the need for new ideas, and then, by thinking anew and acting anew, we will save our country.