Economy (North-East)

Helen Goodman 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.

--- Later in debate ---

[Helen Goodman (Bishop Auckland) (Lab)]

It is a pleasure to see you in the Chair, Mr Hollobone. I congratulate my right hon. Friend the Member for South Shields (David Miliband) on securing the debate. It is extremely timely because a review of the north-east economy is being carried out; it is being led by the noble Lord Adonis. The northern group of Labour MPs is keen to engage constructively with that review, and we have today published evidence for the review, setting out our perspective.

I know that the Minister is extremely interested in the aims of economic development and that she understands the importance of well-being. That implies an approach that gives investment in human capital, place making and a concern for the distribution of success a significant role alongside the infrastructure, science and investment that my hon. Friends have spoken about.

As hon. Members have said, the north-east is home to some world-beating industries. Consequently, it is the only region in the UK with a continuing export surplus. To grow and develop, it needs a region-wide approach; concentration on those clusters where research and development can be translated into innovation; skills and retraining for adults and young people so that those losing their jobs in the public sector can take advantage of the opportunities that require a different skill set in the private sector; a fair share of the Government’s infrastructure spend; and spending on housing and place making.

But what have this Government delivered? They have delivered massive cuts. The scale of the cuts in the north-east is huge—£2.8 billion and 7% of our gross output. That is three times the level of the cuts in the south-east. New analysis undertaken for us by Oxford Economics shows the knock-on effect to the private sector of a further £l billion loss in output. That totals a 10% drop in the size of the regional economy. That is why the shops in our high streets are closing and why construction firms are closing because they are not doing work on public sector buildings. The Chancellor of the Exchequer has taken more than £1,000 from every man, woman and child in the region. If the International Monetary Fund is right, the second-round effect is even greater at £3.5 billion. That would mean a staggering 17% fall in the size of the regional economy.

I mention that not to be negative, but to point out to the Minister that we can have the most marvellous supply-side strategy in the world, but if the plug has been pulled out, we will see a small number of centres of excellence in a sea of deprivation, and the overriding objective of raising the quality of life and improving standards for our region will be lost. It is absolutely clear from the economic modelling that trickle-down does not work. Without a change in policy, Oxford Economics projects total job losses of 68,000, with job creation of 46,000, meaning that even ten years hence, we will have a 20,000 deficit in the number of jobs in our region. It imperative that the Minister goes back to the Treasury and points out the importance of a proper public spending settlement on 5 December.

--- Later in debate ---

[Jo Swinson]

I hope the hon. Gentleman will appreciate that I face a challenge in responding to the debate as it is, and giving way to him would just reduce my ability to respond to the points made by him and his hon. Friends.

No one is under any illusions about the scale of the wider economic challenges we face, but the Government have taken the tough decisions needed to tackle the deficit, and we are working hard to make sure that effective action is taken in our economies, not only internationally, but locally.

Far from being all doom and gloom, however, the debate has also been positive, in that it has focused on the real asset the north-east economy is to the wider UK economy. Many of the stories we have heard today are a real sign that a transformation is under way in the north-east and that many businesses are thriving. Members have touched on the fact that various sectors are moving away from the manufacturing of the past, important though that still is to the north-east; there is now a wide range of sectors, including health care, life sciences, petrochemicals and low-carbon technologies, although the area still has a strong base in things such as motor vehicles and steel. There is also a positive story to tell on export levels in the north-east, which increased to £14 billion in the year to June, up 7.8% on the previous 12 months. Indeed, the north-east is the only English region with a significant positive trade balance. We therefore have fantastic assets in the north-east.

The right hon. Gentleman started with the theme of connectedness, and I quite agree about the importance of infrastructure. I represent a constituency in the west of Scotland, so I recognise the importance of rail infrastructure. I also recognise the important points he made about our connectedness internationally, in terms of the movement of human resources between different countries. Students play an important part in our universities, and many of them, delighted to experience living in the UK, may continue in highly skilled jobs, if they get one after graduating. It is important to recognise that there is no cap on student numbers; while the Government are committed to reducing net migration, we recognise the important role that workers and students can play across countries. On immigration, I would gently tell the right hon. Gentleman that it was his colleague, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), who made a point, as Prime Minister, of speaking about protecting British jobs for British workers, so perhaps the attitude in the Labour party could sometimes be changed to reflect a more positive approach towards the benefits that immigration can be bring to the economy.

The right hon. Member for South Shields also touched on the importance of long-term investment in energy policy. I wholeheartedly agree that clarity and certainty are vital; the Government recognise that the private sector will need about £110 billion of investment, and we are committed to making sure, through the energy Bill, that that certainty is provided. My right hon. Friend the Secretary of State for Energy and Climate Change will obviously lead that work, and I appreciate that the Opposition will want to work constructively on a cross-party basis. As the right hon. Gentleman said, these decisions will ultimately span decades, so it is important that one Government do not make a decision that might be changed after a subsequent election if a different colour of Government are elected.

The right hon. Gentleman talked about public spending crowding out private spending and about the false choice that is often presented to us. We can have a debate about that, and I appreciate that there are differences in our parties’ approaches to the cuts that are needed, or otherwise, to tackle the deficit. I did not come into politics to make cuts, and I do not think anybody enjoys making them, but I recognise that tough fiscal discipline is important to make sure that we have the historically low interest rates needed for economic recovery.

[Helen Goodman]

Will the Minister give way?

[Jo Swinson]

I have a lot to get through if I am to answer as many points as possible, so I hope the hon. Lady will understand why I want to continue.

The right hon. Gentleman is absolutely right that the partnership between the private and public sectors is important. That is why we are developing an industrial strategy to make sure that businesses, investors and the public can have more clarity about the long-term direction. We are planning for the long term, but initially focusing on five areas: sectors, technologies, skills, access to finance and procurement. The hon. Member for Newcastle upon Tyne North (Catherine McKinnell) mentioned the Heseltine review, which has made 89 recommendations, to which the Government will respond in due course. However, the industrial strategy and the approach the Government are taking go with grain of the overall approach in the Heseltine review.

The regional growth fund has been able to invest a significant amount as part of the partnership between the private and public sectors. It has invested £2.4 billion, of which £280 million has been offered to projects across the north-east. There was some criticism of the speed with which the money has gone out, but it is obviously important that the Government do due diligence, and I think people would recognise that. It is also important to note that certainty of public funding sometimes means that a project can go ahead once the funding has been allocated, even if the funding does not come until a later phase of the project. In addition, there is the Growing Places fund, which will help to unblock stalled local infrastructure projects. North East LEP has received £25 million from it, and Tees Valley has received £8.5 million. It is also important to remember that, in the north of England, £1 billion of European regional development funds were awarded in the most recent finance round.

The right hon. Gentleman and others raised the important issue of youth unemployment, and we all share the absolute desire to make sure that a generation is not left behind. We know the long-term scarring effect that unemployment has when young people are unemployed. I know the right hon. Gentleman has been in discussions with my right hon. Friend the Deputy Prime Minister, and I know the work he has been doing on the issue. He makes various critiques of the Government’s approach in the youth contract, but it is important to recognise that, for example, enabling young people to take up work experience placements without losing access to benefits, as happened under the previous Labour Government, means that people can get out of the trap of not having experience and therefore not being able to get job, but not being able to get the experience because they would lose their benefits. That is an important part of the youth contract. Although the right hon. Gentleman is rather dismissive of wage subsidies, they will deliver private sector, lasting jobs, in contrast to the schemes that were in place under the Labour Government.

Of course, not all apprenticeships are for young people, but 51% of them were last year, and they are an important part of the solution to youth unemployment. We are not complacent, and we recognise that there is a lot more to be done. Overall youth unemployment figures are coming down, which is good news, but we are absolutely committed to keeping a very close eye on the issue.

The right hon. Gentleman’s fifth point was about finance for innovation. The Technology Strategy Board, and particularly the new network of Catapults—technology and innovation centres—are a really important part of how we can develop technologies for the future and grow our economy.

A wide range of points were made by other Members; I will not get to them all now, but I have made a note of them, and I will endeavour to write to Members about them. I would, however, like to mention the city deals, which my hon. Friend the Member for Stockton South (James Wharton) referred to. Obviously, the Newcastle city deal is excellent news for the city, and it will unlock £1 billion of extra investment and create 13,000 jobs; indeed, wave 2 could have benefits for other parts of the north-east.

I welcome the comments by the hon. Member for Blyth Valley (Mr Campbell) about the fantastic innovation going on at Narec. I appreciate he is unhappy with the 14 hectares of enterprise zone, but he has campaigned hard to get the enterprise zone, and I am glad that he at least acknowledged that the Treasury listened and granted the request.

The hon. Member for Hartlepool (Mr Wright) talked about how we can make sure we get engineering skills, and the employee-owner pilots, which are putting funds in the hands of local employers to work out how best to get the skills they need, are an important part of that. I also welcomed the hon. Gentleman’s comments about girls studying science. That is important, and the Inspiring the Future project, which I would encourage Members to become involved in, will help to build on the links between businesses and schools, and indeed the experience that Members of Parliament may be able to bring to schools.

I appreciate that I will not be able to get round to the rest of the points that have been made, but I welcome hon. Members’ contributions.