Industrial Policy and Manufacturing

Debate between Huw Irranca-Davies and Adrian Bailey

Thursday 22nd November 2012 Commons Chamber

[Huw Irranca-Davies]

Will my hon. Friend give way?

[Mr Bailey]

I will, but briefly, because my hon. Friend the Member for Corby (Andrew Sawford) is going to make his maiden speech.

[Huw Irranca-Davies]

My hon. Friend is right that Government decisions shape industrial strategy. I hope he might have some thoughts on where we go on carbon capture and storage as part of the strategy. It was with great regret that we found out this week that there is uncertainty over future funding and a drawing down of European funds because the Treasury was unable to provide guaranteed funding. Does he hope that CCS will be part of the industrial strategy in phase 2, which will come up next spring?

[Mr Bailey]

My hon. Friend tempts me with an issue that is worthy of a separate debate, but broadly I agree, and I will make some allusions to the green economy later.

The problem is basically that although the Minister outlines the impact of different Government policies on the economy, the Department, in its delivery in those different areas, does not necessarily seem to be signed up to the same economic and industrial priorities. For a start, on the fiscal strategy, our ability to eliminate the deficit depends crucially on our ability to generate investment in economic growth, yet at the same time the Chancellor’s strategy has effectively squeezed consumer spending and failed to recognise that in many areas public spending and private engagement with it are crucial to economic performance. That, coupled with various apocalyptic utterances about the state of the British economy, has generated a feeling of insecurity and uncertainty that has had a knock-on effect on consumers’ confidence to spend money and the willingness of businesses to invest. I hear that many businesses are currently sitting on piles of cash, but they will not invest it because they fear that the investment would not pay off. Similarly, with such uncertainty, banks are less likely to lend because they obviously sense a higher risk in doing so than they would if there was greater confidence in the economy.

Also, the Government’s tax policies have concentrated on reducing corporation tax. All the messages I get from manufacturing—I know that the hon. Member for Burnley (Gordon Birtwistle) has strong views on this—indicate that money to generate investment would be much better focused on research and development and capital allowances than on corporation tax. Much more needs to be done to assess the relative impact of reductions in corporation tax, rather than investment in R and D and capital allowances, and where future Government policy on that should go. Given the number of foreign businesses that have invested in this country and seem to have paid very little corporation tax, I wonder how relevant the reduction in corporation tax set out in the Chancellor’s first Budget was in attracting foreign investment. I need only repeat the comments the chair of my local enterprise partnership made this week: he said improving capital allowances would be a quicker and more effective step than creating a business bank. I do not decry the long-term significance of a business bank, but right now we need some shorter-term policies that can have a more immediate impact.