Regional Development (North-East)

Ian C. Lucas Excerpts

Tuesday 22nd March 2011 Westminster Hall

[Tom Blenkinsop]

The hon. Gentleman is a strong advocate for Stockton South and a worthy adversary indeed. He is right: Teesside has a fantastic industrial economy and many new projects have opened up across the region, in his own patch as well as my own. However, those jobs will be created over a certain time period. Many of those were to have been announced before the general election, but for a number of reasons the announcement was halted until after the election was called. It would be false to say that One NorthEast did not have a prime role in bringing those businesses to our region. As a former union official in the steel industry, I know how much One NorthEast has worked with both Governments in trying to get Sahaviriya Steel Industries into the region. What I am trying to say is that a list of failings was produced but there was never an equitable list of positives and negatives when we were assessing RDAs.

We strongly require support for the emergence of a range of different financial sources for infrastructure development, including the green bank, and a greater localised and decentralised source of capital explicitly held for manufacturing entrepreneurship. That will allow risk-takers to take those industrial strides around the existing capital and skills inherent in the cultural demographics of our region. I hope that, unlike the Secretary of State for Energy and Climate Change, the Minister will consider a manufacturing green bank that works with the agencies to deliver the technology and product design that will give us green technologies—working and operating out of Edinburgh, the Secretary of State’s preferred location—rather than holding debates on “green” ISAs or other financial products that simply have the term “green” before them. That green finance must be aimed at manufacturing and not solely at financial high-street products if the Government’s own agglomeration policy is to be pursued for manufacturing.

However, I understand where the Government are coming from on industry. Agglomeration is fine, but industrialised clustering works even better, as we have seen in Germany and the Netherlands, when industry has its own access to funding to implement its own decisions, or when financiers are educated in industry and are located nearby, as documented in yesterday’s Financial Times. However, that connection between finance and industry is still vague and I very much doubt that Ministers at DECC and the Treasury are concerned about it at present, as both Departments appear to have a more obvious preoccupation with carbon floor pricing than with industrial finance. Carbon floor pricing, which I will discuss later, is perhaps the most important issue for Teesside.

I also challenge the Government’s huge assumptions about another topic that I will discuss later: export-led growth. It is obvious to any man and woman in the street that all Governments at any point in time want export-led growth. A healthy balance of trade is integral to a modern industrialised economy. However, we have to be vigilant about the economic mood music emanating from Asia at present.

Enterprise zones—an issue particular to my area—are the Thatcherite reprise of this Government. The enterprise zones policy is not wholly bad, but previous examples have shown that they are best used in certain sectors such as retail and finance. Our financial capitals are established overwhelmingly in London, although Leeds has developed in that regard in recent years. A previous example of enterprise zone growth in the north-east is evident at Gateshead’s Metro centre. However, what we do best on Teesside is not best suited to enterprise zones, and they ignore the broader view of industrialists in the port and chemical sectors.

I also want to look at particular areas in my constituency, such as our local high streets in Middlesbrough, Guisborough and East Cleveland.

[Ian Lucas (Wrexham) (Lab)]

I promise not to intervene often, as many Members are here for this debate. My hon. Friend mentioned my home town of Gateshead, and the Metro centre, which was viewed as a tremendous success in the 1980s, when it was initiated. However, did not the Metro centre have a profoundly negative effect on Gateshead town centre? That is the real danger that exists with any introduction of enterprise zones. They might assist a very small geographical area, but they might also create what is almost a wasteland outside their boundaries.

[Tom Blenkinsop]

I thank my hon. Friend for his intervention and I have to agree with him. Obviously, there are benefits from enterprise zones. They bring a certain percentage of business in, but they also displace existing business. I will go into that issue in more detail later.

What can we do for small and medium-sized businesses and the self-employed? I have already talked to the Minister about that, and I believe my comments were received very positively. Ultimately, however, the direction of the north-east must be viewed from the perspective of the north-east. Until our region has more command of its economic destiny, it will continually have to bid against other English regions and Scotland and Wales for attention and investment.

Economic development in the north-east is a subject of deep concern to my constituents and the people of the wider region. Indeed, it should also be of concern to all the people of the UK, because without shared growth our country can never travel the road to prosperity. In the coalition agreement last year, the Prime Minister and the Deputy Prime Minister said:

“We both want to build a new economy from the rubble of the old. We will support sustainable growth and enterprise, balanced across all regions and all industries”.

That was and is an admirable pursuit, but my constituents are not seeing words being translated into action. In contrast, despite the north-east having the highest proportion of workers in the public sector of any English region, the Conservative-led Government have vague plans for growth in the north-east’s private sector, while simultaneously attacking its public sector base and the businesses—small and medium-sized, as well as self-employed—that thrive as a result of that public spending. The Prime Minister and the Deputy Prime Minister may have likened the economy under the last Government to “rubble”, but the last Government understood the regions and gave real teeth to regional development.

For example, the north-east regional development agency—One NorthEast—was one of those rarest of things: a public body with almost unanimous support that attracted praise from public and private sectors alike. However, a subtle criticism I have of the agency is that the region should have capitalised on the opportunity that it provided to take strides on its own. With a regional assembly that is democratically legitimate, our region would certainly be in a stronger position to attract business as well as to retain it, rather than witnessing what we are seeing in some areas: a partial and gradual leakage of industry from our region.

Praise for One NorthEast is well deserved. An independent report by PricewaterhouseCoopers showed that regional development agencies return £4.50 to regional gross value added for every £1 spent, if allowance is made for the expected persistence of economic benefits. Furthermore, the National Audit Office’s independent performance assessment concluded that One NorthEast was performing strongly. So why has it been abolished, especially after the Business Secretary said that the regions could decide what best suits their area? The only answer can be that the Conservative-led Government’s business policy is dictated from an informed position, but one that looks from London. It is a policy that will work, but not for all, and is ultimately submerged in an ideological fervour. It is formed not by regional or local opinion but Whitehall dogma. However, I reiterate that I do not believe that Ministers are stupid or ignorant of economics; they are simply applying a view that does not have a kernel within my region, and which does not redistribute wealth.

One NorthEast is the body that helped to set up and support the North East of England Process Industry Cluster, which made £1 billion gross value added in six years with just £3 million of public support. However, in addition to the scrapping of One NorthEast, we have now seen the abrupt end to the emergency package devised for Teesside in the wake of steel job losses. That fund targeted jobs growth in the chemicals sector, particularly in the growth area of agri-chemicals, as an alternative to lost steel jobs. Obviously, we have had the excellent news of the investment by SSI at Teesside Cast Products. However, that emergency jobs scheme has been axed, even though it is still allocating work and has £18 million in uncommitted funds that could have been used to support and enhance the objectives of NEPIC members’ companies.

Now we hear that a long-standing and successful job creation fund, which in the past decade has helped to create many hundreds of thousands of jobs in areas such as the north-east, is to be axed by stealth. That fund—the grants for business investment scheme, under the name regional selective assistance—has been responsible in the north-east for pumping £112 million into poorer parts of the region, helping to create 25,000 jobs. In various forms and under successive Governments, the scheme has been in place since the late 1960s. It survived the Heath years, the 1970s Labour Governments and even the Thatcher and Major years, as well as the following Blair and Brown Governments. Despite differences of economic policy, all those Administrations recognised the value of regional selective assistance. Throughout that whole post-second world war period, that element of consensual “Butskellism” remained and only now has it been totally dismantled.

The Chancellor has announced the creation of at least 10 enterprise zones across Britain, in a scaled-down revival of Margaret Thatcher’s flagship urban renewal programme of the 1980s. The Chancellor hopes that those zones, which will offer simpler planning rules and corporate tax breaks, will accelerate development in areas that already have high growth potential. They will not simply be created in areas of physical decline. However, sceptics believe that they could be ineffective and that the appeal of the tax breaks will be limited by the fact that only £100 million of Government subsidy will be available, spread over four years.

The Chancellor’s announcement is part of a wave of initiatives to be unveiled by Ministers before the Budget tomorrow, all of which are intended to prove that the Government have a coherent strategy for growth. He will announce at least 10 zones, which are expected to be chosen by Ministers on the basis of submissions by councils and business leaders. To address fears that this is a top-down initiative that might sideline town halls and local enterprise partnerships, the Chancellor will say that local authorities will be able to keep all of the business rates that they raise in the new zones.

However, retention of the business rates will almost certainly benefit a number of London and south-east areas. In fact, the special interest group of municipal authorities, or SIGOMA, analysis of 2009-10 settlement-based grants showed that the top 10 councils to benefit are Westminster, City of London, Surrey, Hertfordshire, Hillingdon, Hampshire, Camden, West Sussex, Kent and Essex. The London boroughs of Westminster, Hammersmith and Fulham, Kensington and Chelsea, and the City of London will gain £1.6 billion in total in local spending, whereas the north-east, north-west and Yorkshire will lose out by £760 million in total.

The Chancellor insists that the coalition’s initiative will shift growth from London and the south-east to other regions, and he says that it contrasts with what he claims was Labour’s attempt to micro-manage the economy. He told his party’s spring conference in Cardiff:

“Our approach is different: tax breaks and less bureaucracy, not quangos and more regulation.”

--- Later in debate ---

[Guy Opperman (Hexham) (Con)]

I congratulate the hon. Gentleman on securing the debate, because it is a very helpful process. I have listened for 23 minutes now, and there is a great deal of criticism of what is being tried by the Government but no alternative being put forward. I look forward with great interest to hearing what the alternative will be—

[Ian Lucas]

Labour.

[Guy Opperman]

The hon. Gentleman says that, but someone has to pay back the £120 million-a-day debt. Speaking as the son of manufacturers who have been in the industry for many years, what the hon. Member for Middlesbrough South and East Cleveland (Tom Blenkinsop) describes is not necessarily how my family have found it.

--- Later in debate ---

[Ian Lucas (Wrexham) (Lab)]

It is a pleasure to address colleagues under your chairmanship, Mr Leigh, for the first time, I believe. I congratulate my hon. Friend the Member for Middlesbrough South and East Cleveland (Tom Blenkinsop) on securing this debate, and hon. Members on their interesting contributions. I wish we had more time, because I am sure that more could be added to the debate. I shall not deal with each of the speeches now but will refer to them in my comments.

It is imperative that the north-east has a strong voice in Parliament. The new generation of MPs who came into Parliament in the last general election are a powerful group who have contributed hugely to the voice of that region being heard in Parliament, and I am sure that they will continue to do that. That is enormously important when we know that regional assemblies have gone away for a while and that the Government’s focus is on local government.

The north-east is a powerful region. I was born there, and I am proud of the fact that I come from there. It has a distinct identity within England, and Ministers have to understand that. The voices that we have heard included that of my hon. Friend the Member for Newcastle upon Tyne North (Catherine McKinnell), who spoke about Newcastle airport. She told us how important its development has been to the region and how it has introduced so many more tourists to the area. People are able to see what a beautiful region it is and what a superb place it is to invest in.

We heard from my hon. Friend the Member for Middlesbrough South and East Cleveland about the varied industries in the north-east, from the chemicals sector, which is long established on Teesside, through, of course, to coal, steel and shipbuilding, which, I am afraid is long gone. The demise of those industries under the previous Conservative Government largely forged my identity in politics. The concern of Opposition Members is that the policies that are being pursued by this Government are a rerun of policies in the 1980s. We profoundly disagreed with what happened and think that it is a mistake to repeat it.

The hon. Member for Wrexham—I am sorry, the hon. Member for Hexham (Guy Opperman)—made some succinct comments about the deficit. Labour Members accept that it needs to be reduced, but we remember that 3.5 million people were unemployed in the United Kingdom under the previous Conservative Government, as opposed to the 2.5 million who are unemployed now. All those people received benefits that were paid from taxpayers’ money, and largely funded by the benefits the Conservatives received from the North sea oil revenues that were available at the time. That waste and spending of public money will be repeated if this Government continue with their policies, which will create a lack of confidence in the economy and business community, and less demand in the economy, less consumption by people and a smaller market. All that will lead to increased unemployment, increased burdens on the state and the type of long-standing depression that we had in the ’80s and again in the ’90s, when unemployment reached 3.5 million again.

Fortunately, the north-east has developed its economy since the 1980s. There has been development in the constituency of my right hon. Friend the Member for Newcastle upon Tyne East (Mr Brown) at the Clipper site, which is a magnificent site on the banks of the Tyne, and development of the low-carbon industry in the north-east with companies such as Romag, which brings so much benefit and forward thinking to industry.

I should mention at this juncture the appalling decision by the Government to bring forward the review on feed-in tariffs, which is hugely damaging for companies such as Romag. The Government purport to know something about business, but that review will result in a lack of long-term stability for decision making. Business complains so much about that. The Government are changing a successful scheme, bringing forward a review, creating instability and creating difficulties for successful businesses that are benefiting not from state support but from direct investment, often from outside the UK. The whole industry would welcome the Government’s looking at that again.

It is important that we accept that regional development agencies are no more. I have attended several debates, and know about the success of One NorthEast. The hon. Member for Redcar (Ian Swales) recognised it in an interesting speech. However, we are moving on. The Government, as they are entitled to, are talking about local enterprise partnerships now, and we need to ensure that they work for the benefit of the north-east region. We need to address what I consider to be some of the failings of LEPs.

The first failing is the lack of resources. LEPs cannot sensibly contribute to driving the region forward if they do not have the resources to set up and develop businesses in their area. It is important that the partnerships should have resources. Of course they need to work with other LEPs in the region, but it is interesting that the Government themselves are showing a lack of confidence in LEPs; for example, on the hugely important issue of broadband. The authority that will contract for the provision of broadband services in the north-east and other areas of England will not be the LEP but the local authorities in individual regions. Having so many contracting bodies trying to formulate an infrastructure for a communications industry will be complex and difficult, and relying on delivery by individual local authorities which may or may not decide to take forward applications to develop broadband services in their area is a big mistake. LEPs, which cover larger areas and which more closely involve business than some local authorities do, should have a role in formulating a policy to take that forward.

The instruments that need to be used by LEPs must be made available to them by the Government. That must include, to some extent, financing, and it must also include the ability at least to be involved in securing funding.

We have heard references to the regional growth fund. There is general agreement in this room that there should be a rebalancing of the economy. The irony of the regional growth fund is that it is not regional at all. Its approach is entirely centralising. It is based not on localities but on a small group of people in a centralised area making decisions for areas about which they know little. That is the tragedy of the operation of the regional growth fund.

We all know that the fund is too small. The number of bids that have been made to it do not correspond in any way to the money that was available through RDAs, and we all know, as the hon. Member for Redcar pointed out, that the limits on the application of money by the regional growth fund are such that many of the grants and support that were given to small businesses in the regions will no longer be available to them. That is an urgent issue that needs to be addressed by the Government.

The other urgent issue that needs to be addressed is the lack of investment by banks and regional bodies in business and industry. We heard a massive amount about that from the Government when they were in opposition—day in, day out—but it has largely disappeared from their public pronouncements. I regret that the only thing that this Government have done as far as investment in business is concerned is to extend Labour’s successful enterprise finance guarantee scheme, which was a strong support for business and industry at a time when it was difficult to secure investment and keep businesses going.

[Mrs Sharon Hodgson (Washington and Sunderland West) (Lab)]

Will my hon. Friend give way?

[Ian Lucas]

I have only a minute left, so I cannot give way.

I remember being criticised by the Minister when I sat where he is sitting now, and I shall criticise him now, although he and I get along very well. I do not recall his criticising me for spending too much money at the time. I remember his criticising me for not getting money out more quickly in support of the car industry. I do not remember the Conservatives or the Liberal Democrats opposing the introduction of the car scrappage scheme, and I do not remember their opposing any of the support that brought fundamental investment to the UK and benefited regions such as the north-east. Only now do we hear their constant mantra. The Government’s problem is that they will not reduce the deficit. They are damaging the economy in the same way as they did in the north-east in the 1980s and again in the 1990s. I hope and pray that they do not make the same mistake again.