Department for Business, Innovation and Skills (Performance)

Jim Shannon Excerpts

Wednesday 2nd February 2011 Commons Chamber

[Simon Kirby]

I agree with my hon. Friend. One of the sad things about unemployment is the youth unemployment element, which is particularly prevalent in my constituency. It is, frankly, a disgrace.

[Jim Shannon (Strangford) (DUP)]

Will the hon. Gentleman give way?

[Simon Kirby]

I will not, because I do not have much time left.

There is much more to do, and the times we live in are very difficult, but, taken together, the Government’s measures will create the right conditions for business to thrive, compete and create sustainable economic growth and employment. The coalition Government are doing a good job, getting us out of the mess left by the previous Labour Government—decisive action by a decisive Government. I, for one, applaud the progress made by the Government and wholeheartedly disagree with this very mean and inconsiderate motion.

--- Later in debate ---

[Mr McFadden]

My hon. Friend is right. The sad fact is that whereas we wanted to support General Motors in its plans for restructuring in Europe, by the time the current Government got round to making a decision on that, Vauxhall had decided to go away and sort out its own financing.

Let me turn to some of the issues that have arisen since the election. We could trade quotes from Sir Richard Lambert all day, so let us be candid about what he said last week. He said that he agreed with the Government on the deficit reduction strategy, but he thought that there was no wider vision for the economy and there was a danger that the Department was turning into a “talking shop”. That is a fair summary of Sir Richard Lambert’s speech.

[Jim Shannon]

Will the right hon. Gentleman give way?

[Mr McFadden]

I will not give way because I want to make progress.

What business wants is for the Department to be winning battles in Whitehall. That, sadly, has not been happening. The Department and the Government talk about rebalancing the economy. By that we mean rebalancing away from an excessive dependence on financial services and from excessive dependence on certain parts of the country. How, then, can the Government justify in their first Budget cutting some £2.8 billion in investment allowances to manufacturing industry? The corporation tax cut, which has been mentioned, adds up to a benefit of £2.7 billion. In other words, what has happened is that manufacturing industry is paying for a tax cut for the rest of the economy.

The Secretary of State referred to the decline in manufacturing as a proportion of output and of employment. What he did not mention was the fact that we were going through the biggest wave of globalisation in world economic history. He takes an entirely national view, when there was profound change going on in constituencies such as mine and other black country constituencies in manufacturing during that period.

The programme of grants for business investment has been responsible in the past six years for some £400 million of grants to small and medium-sized mostly manufacturing businesses. Fewer than one in five of the grants is more than £1 million. Those grants have supported some 1,800 projects, secured almost £4 billion in investment, and helped to secure almost 80,000 jobs. How on earth does abolishing that programme fit in with rhetoric about trying to rebalance the economy?

Further, those grants are specifically geared to the assisted areas—areas that need help most, such as my own in the west midlands. We met people from the Black Country local enterprise partnership a few days ago. I pay tribute to the business people in that area who have worked so hard to pull together the Black Country LEP. I reflect a fear and a concern, which I suspect are shared elsewhere. Despite the commitment of the business people, will they get the support that they need from the regional growth fund? That fund is grossly oversubscribed. If business has put in the effort but Government do not back those bids and projects, business will rightly feel let down, and my constituents will rightly feel let down by the prospectus that has been offered.

On trade and immigration, the Minister for Universities and Science is in his place. How does he feel that the soft power that is gained from the UK as a wonderful location to study will be affected by the new proposals on restricting the right to work of people who come here to study? How does that help us to sell Britain abroad as an attractive location for investment?

The truth is that business is concerned about the difference between commentary and delivery that we see in the current Department. That is the difference between opposition and government. The Secretary of State, having lost the battles over LEPs, where the Department for Communities and Local Government appears to be running the show, and over immigration policy, has been left to bet the farm on the banking commission. It is not even fully within his control. Business will want to see less commentary and more delivery in future.

--- Later in debate ---

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

I am sure that the Minister is aware of the great success story of the North East of England Process Industry Cluster: it made £1 billion, gross value added, in six years with just £3 million of public support. It was set up by One North East, the local regional development agency, and has an ongoing portfolio of 62 projects worth £8 million. One particular project, the Tenergis project, which is worth $5 billion, could rejuvenate the local economy and, in turn, attract further world-scale investment.

Chemicals contribute to more than 30% of the nation’s industrial economy, and the sector attracts some of the chemical and process industry’s world leaders. Teesside’s process industry contributes about £10 billion to the north-east’s economy—almost a third of regional GDP—but has seen a series of job cuts and plant closure announcements in recent months, despite having grown in the past five years.

What has that sector seen from the Department since May? The Government have put much emphasis on export-led growth—pretty much a statement of the bleeding obvious. A friendly voice from the Government Benches will no doubt state that manufacturing growth in general has increased amidst a sea of GDP decline, but such statements will not be followed with the caveat that the majority of that growth is in inventory spending, meaning the restocking of raw materials for production. It is a restocking at a time when raw material and commodity prices are at a real high, inflating the costs per measure of materials purchased. I fear that that will be demonstrated in the second and third quarters of this year as domestic demand unfortunately wanes, especially if domestic interest rates are raised. That is combined with the VAT increase, the increased national insurance contributions, wage cuts, fuel costs and the fact that although the world function is based on the retail prices index, the Government function is based on the consumer prices index. We are looking for a domestic multiplier here.

Any policy that is reliant on export-led growth ignores reality as the EU’s internal problems continue and Asian markets become increasingly protectionist and insular in their dissemination of vital raw materials. NEPIC’s vision in its industrial plan is to seek out other clusters like itself and send its industrialists there to win the crucial research and development contracts that will hugely benefit our economy. Getting £l billion in six years from £3 million is good business in anyone’s book. It is a clear example of how public investment can and does attract private investment, both domestic and from abroad.

As well as the scrapping of One North East, the body that helped set up and support NEPIC, we have now seen the abrupt end to the emergency package devised for Teesside in the wake of steel job losses. It targeted jobs growth in the chemicals sector as an alternative to steel jobs. That 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 member companies.

Now we hear that a long-standing and successful job-creation fund, which over 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, has been—under its own name of regional selective assistance—responsible in the north-east for pumping £112 million into poorer parts of the region and for helping to create 25,000 jobs.

[Jim Shannon]

Does the hon. Gentleman agree that we need to foster opportunities for young people, especially when unemployment among young people has reached 951,000, the highest it has ever been? One in four people between 16 and 25 years old are out of work, and there is a need to create opportunity for young people.

[Tom Blenkinsop]

I wholeheartedly agree. Indeed, the grants for business investment scheme helped deal with that problem.

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 and the most recent round of Labour Government. Despite differences on economic policy, all those Administrations recognised the value of regional selective assistance. It was a genuine central-local partnership, handled by the Department for Trade and Industry and then by Department for Business, Innovation and Skills’ offices in London, but its decisions were guided by a regional evaluation board made up of regional businessmen and women. A measure of its success was its crucial role in bringing Nissan to the north-east in the 1970s. More recently, it helped Teesside to secure jobs in the offshore engineering sector and underpinned the decision to rebuild the SABIC Wilton site catalytic kraken, currently the single-most important plant on the Wilton site.

What is worse, and what puts us at even more of a disadvantage, is that the scheme will close only in England; Scotland and Wales will keep it and be able therefore to compete directly with the north-east for a position of advantage. It is tragic that the scheme will go, because it will only put more pressure on the hopelessly oversubscribed and underfunded regional growth fund, which seems to be the Government’s sole contribution to regional economic growth. The RGF, which has about £300 million to allocate, has already had bids from throughout the region, from Berwick in the north to Boulby in the south, topping £3 billion.

The Government cannot keep relying on a weak pound or ignore industry’s need for direct investment in research and development and for partnership with them. I asked the Secretary of State where his influence on the feted local enterprise partnerships is in the Localism Bill. Why has he handed the European regional development fund over to the Secretary of State for Communities and Local Government?

Does the Business Secretary not acknowledge that the Office for Budget Responsibility told him explicitly that unemployment would increase as a result of his policies? Only 3% of people who have achieved work since the recession have gained full-time work. Could he not have reformed RDAs rather than destroy them, or at least asked industrialists in the north-east what they thought? Does he not find it bizarre that more money will be spent on post offices than on the entire English RGF? Why is he allowing long-term timber deals between biomass generation plants and the Forestry Commission to be undermined by Ministers in the Department for Environment, Food and Rural Affairs, who want to sell off cash-crop forests?

The Department for Business, Innovation and Skills and its Secretary of State are summed up by his magical mystery tour last year of the beam mill at Tata’s Redcar plant, which is part of the long products division, not of Teesside Cast Products, the actual plant in question. His party and his Government promised that they would not stand by while steel jobs were lost. In fact, they did more than that. At Forgemasters in Sheffield, a site where I was the union official, Labour put pen to paper when money was requested to help industry. The Secretary of State’s Government ripped it up.

When my right hon. Friend the Member for Wolverhampton South East (Mr McFadden), the Business Minister in the previous Labour Government, contacted the former chief executive officer of Corus Europe, Kirby Adams, a personal friend of the Prime Minister and much mentioned in the leaders’ television debates, he literally put the phone down on a Labour Minister offering help.

The Secretary of State has metaphorically put the phone down on Teesside’s manufacturing, cutting almost one third of the funds set aside for the Tees valley industrial aid package. Standing idly by? No, I could not accuse him of that. Turning his back on Teesside? Yes, I could certainly say that. It was again evident when he was dictated to by his colleagues in DCLG, the Treasury and the Departments of Energy and Climate Change and for Environment, Food and Rural Affairs.

The Secretary of State’s colleagues at DECC refer to high-energy manufacturing as sunset industries. Why on earth is he allowing a rammed-through consultation on carbon price support and energy market reform with no impact assessment on energy-intensive industry in either case? Why does the consultation have a short time scale? He says he wants to take away regulation. That is utter nonsense: he is allowing far more complex and damaging regulation through that programme; and he is attacking workers, particularly those in the steel industry, who kept their patience over two and a half years when they had more than a few good reasons to take industrial action. I know, because I led them alongside colleagues, but we restrained ourselves to ensure that we had an industry in Teesside and an industry for this country.