Manufacturing (East Midlands)

Jonathan Ashworth Excerpts

Tuesday 12th February 2013 Westminster Hall

[Jonathan Ashworth (Leicester South) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Hollobone. As an east midlands MP, I hope that you will later be eating a bag of Wotsits crisps made at the Leicester Walkers site.

I thank the hon. Member for Sherwood (Mr Spencer) for his success in securing the debate. He spoke well, and I learned something about Calverton of which I was not aware, although I will of course be checking it out later with my father-in-law, who was his geography teacher at school in Calverton only a few years ago.

I want to repeat some of the points made about the importance of manufacturing to the east midlands economy. Manufacturing makes up a greater part of the economy in the east midlands than in any other English region. According to figures I have seen, manufacturing gross value added was around £12.5 billion, or 15.8% of total regional GVA output—a higher proportion than any other region—compared with an average of 10.3% for the UK as a whole. Manufacturing employment in the region amounted to 265,000 or more than 13% of total employment—again, the highest proportion of any region, and it compares with a UK average of about 8.5%. Our manufacturing firms score highly on productivity, with many of our sectors outperforming national averages. We have already heard not only about many of the big ones, such as Toyota, Rolls-Royce, Bombardier, Caterpillar and Walkers, but about the many smaller manufacturers that make up our huge manufacturing base.

The hon. Gentleman talked about food and drink. In Leicester and Leicestershire, more than 11,000 people are employed in food manufacturing, so it is important for our region. As he said, some of the reasons our region does well is that we are central, our development in the past has been driven by coal in the north and ironstone in the south, and we have concentrations of grade 1 agricultural land. We do not have any major, dominant economic centre. I would, of course, argue that Leicester is the premier city in the region, not least because we have a former king of England there.

[Andy Sawford]

On the point of manufacturing, it is a shame for those of us who feel that Fotheringhay, the birthplace of Richard III, should be his final resting place, that my hon. Friend is manufacturing a case for Leicester.

With regard to the food and drink industry, does he recognise that, while there is a fine tradition in all parts of the region, including my constituency, in many ways Government policy has helped to shape some of the opportunities for manufacturing? For example, in the 1980s the enterprise zone helped to bring lots of food and drink companies to Corby. Will he support my case that we ought to have an enterprise zone today in Corby in east Northamptonshire, where, as he knows, there are high levels of youth unemployment?

[Jonathan Ashworth]

I thank my hon. Friend for a point he puts well. However, we in Leicester have fought off York and will certainly fight off his constituency when it comes to Richard III.

On balance, the lack of a major dominant conurbation is a strength for our region and its development opportunities, even if it does sometimes mean that we tend to lack a regional identity. That brings us one or two disadvantages that I will touch on in a few moments.

Although the debate has been conducted in a good cross-party spirit, there are problems in our economy, in the cities and former coalfield areas. Unemployment rates remain too high, and are much higher than they were at the 2010 election, even if they have come down a little in recent months. Youth unemployment rates are still too high. Let us be clear: we are seeing a huge squeeze on incomes and many changes to benefits, such as the bedroom tax and the council tax benefit changes. Regardless of the rights and wrongs of that debate, that will suck money out of the local economies of the east midlands. Household consumption will be depressed again.

In the past, Ministers have talked about wanting to rebalance the economy, and we would all agree with that. However, we would like more details about what that rebalancing means. I know that Ministers want to move away from an economy that is solely dependent on public investment and household consumption, towards one that is more in favour of export-led recovery.

[Chris Williamson]

Does my hon. Friend share my disappointment that, although the Prime Minister came with his whole Cabinet to Derby in March 2011 to make the point about the importance of rebalancing the economy towards manufacturing, three months later a decision was taken to appoint Siemens as a preferred bidder for the Thameslink rolling stock programme? Will he join me in calling on the Government and the Minister, even at this late stage, to think again about that decision? If they cannot reverse it, can they at least ensure that, whenever Government contracts are concerned, notwithstanding EU procurement rules and so on, they take appropriate steps to ensure that British manufacturing has a fair chance of winning them?

[Jonathan Ashworth]

I thank my hon. Friend; he is absolutely right. I want to pay tribute to the work that he has done on Bombardier. The Bombardier decision was tragic not only for Derby and Derbyshire, but for manufacturing in the east midlands. The whole supply chain was affected by it.

I agree that trade and increasing exports are an important part of the rebalancing of the economy that we want to see, and supporting our manufacturing base is vital to our exports. The regional growth fund is supposed to be part of driving that rebalancing, as my hon. Friend the Member for Nottingham South (Lilian Greenwood) mentioned, yet, consistently and sadly, the east midlands has lost out. In round 1, £450 million was allocated. The east midlands made up 13% of the bids and won just 4% of the successful awards. In round 2, £950 million was allocated. The east midlands made up 11% of the bids and was given just 8% of the awards. In round 3, over £1 billion was allocated to private sector projects. East midlands was allocated just £14 million, or 2%.

Frankly, that is not good enough. Given that manufacturing is so important to the east midlands region, and that it is the leading region in manufacturing, why are we not getting a fair deal on the regional growth fund bids? I would be grateful if the Minister said a word or two about that. It has been suggested in the media that the quality of our bids was not good enough. I do not accept that, given the strength of our manufacturing base. To be honest, it is a bit of an insult to our manufacturers.

Will the Minister outline some of the criteria by which those bids are judged? He will no doubt be aware of the National Audit Office report that has cast doubt on the objectivity of the criteria. The NAO argued that,

“a significant number of projects in the first two rounds performed relatively poorly on criteria such as the amount of additional employment supported and the ratio of economic benefits to public costs”.

Will the Minister shed some light on why the east midlands has done so badly? Some have suggested that the reason is that a lot of the bids have focused on the cities. The Department for Communities and Local Government has been keen to focus growth through the core cities initiative. For example, 47% of round 2 of the regional growth fund money went to core cities. Leicester, of course, went along with the great vision of the Secretary of State for Communities and Local Government and the Prime Minister. We went for the directly elected mayor model; not many places did. Although we are now in discussions about a core city deal, we were left out in the first round, although parts of Nottinghamshire and Derbyshire have been covered by a city deal. That has meant that the majority of the east midlands region has been left out. Perhaps that is another reason why we have not done so well at getting our fair share of regional growth fund money.

We no longer have a regional development agency, and I do not think that my party is arguing for its return. There may be such an argument, but everyone accepts that the development agencies have gone, and it is not our policy to argue for their return. Given that the east midlands region has 36 local authority districts, five county councils and four unitary authorities, that fragmentation leads to a lack of a consistent voice on such matters. I do not necessarily know the solution, but we should all be banging the drum as a group of east midlands MPs. We must think about what more we can do collectively to ensure that our region gets its fair share of bids.

I am conscious that I am taking a lot of time. I want to say a couple of things quickly about Leicester. It is a city with a strong manufacturing base and deep links, as everyone will know, with India, Bangladesh, east Africa and Pakistan. In Leicester, we have manufacturers exporting to those parts of the world. Asian food made in Leicester is exported to the middle east, Europe and India. When I meet exporters, they tell me of the difficulties of accessing export finance, especially for smaller volume exporters. When people raise UKTI issues with me, they talk about the fees involved in the overseas market introduction service. One matter is always being raised with me: given that cities such as Leicester have communities with deep cultural ties to parts of the world where we now want to export more, should the Department for Business, Innovation and Skills not be doing more to work with organisations such as Leicester’s Indo-British trade council and other groups to leverage the expertise of those communities?

Finally, I want to mention our higher education sector. De Montfort and Leicester universities do great work linking with local manufacturers. There are lots of great examples of how they are adding value to many firms and supporting our manufacturing base. Most of those projects, however, do not lead to any financial benefits to the universities. Given the importance of such projects to our economic future, will the Minister think about financial incentives to support the HE sector to link up more with manufacturers? I know that De Montfort university, having done a lot of projects in the past, is now thinking of scaling back, as such work is not in its financial interests.

Given that the HE sector is so important to our economy and exports—worth £15 billion nationally—will the Minister, who was brought in with great fanfare and was going to shake things up, deal with the crazy policy of the immigration cap on student numbers, which is doing huge damage to our economy? We need to support our HE sector at the moment.

--- Later in debate ---

[Mr Wright]

That is welcome, but we should not be complacent in any region. In my region of the north-east, the economy has an important export-led component, but we cannot be complacent in what is a fierce race, as the Prime Minister has said. We should be resolute in ensuring that the potential for exports is fulfilled as far as is possible, so that we can have an export-led recovery.

[Jonathan Ashworth]

I am grateful to my hon. Friend for giving way; I will be very quick. Does he agree that when senior Ministers, from the Prime Minister downwards, go to India and Turkey on trade missions, they should take representatives from some of the small and medium-sized manufacturers, and business people from cities such as Leicester, rather than the great and the good?

[Mr Wright]

I hope the Minister will respond to that excellent idea.

I also want to mention access to finance, which manufacturers tell me is still a problem across the country. I again quote the latest Derbyshire and Nottinghamshire chamber of commerce quarterly survey:

“There was a net 3% increase in the firms reporting deteriorating cash flow. The lack of access to working capital continues to be a problem for firms. DNCC welcomes the creation of a state-backed business bank but is concerned that this will take too long to be formed and must have the ability to provide loans directly to growing businesses”.

Will the Minister say what is happening with regard to that British business bank?

Finally, several hon. Members mentioned the regional growth fund, and the fact that the east midlands region is not reaching its potential in that regard. My hon. Friend the Member for Nottingham South said that the east midlands secured only 4% of all projects in rounds 1 and 2, and my hon. Friend the Member for Leicester South said that in round 3, firms in the region gained moneys for only five projects, totalling just £14 million—the lowest amount of any region in England. Will the Minister explain why? Does he think that manufacturing firms in the east midlands do not warrant such support? What will he do to redress the balance?

This debate has been important and positive. Manufacturing is important to the UK, and it is certainly important to the east midlands. We must ensure that it realises its potential, and I hope that the Minister will explain how we can do that.