Industrial Strategy

Kelvin Hopkins Excerpts

Wednesday 18th April 2018 Commons Chamber

[Greg Clark]

The hon. Gentleman knows Teesside very well. One of the things he would welcome is that in recent years the long-standing disparity, going back decades, between constituencies like his and others in the country has narrowed. There is a real sense of progress and achievement on Teesside that I experience every time I go up there; I was up there a couple of weeks ago. However, he is absolutely right that we need to continue that progress. We need to reflect on the fact that, as I said, many of the industries, skills and attributes that are in demand across the world now—marine engineering, for example—are abundant in areas like Teesside. We must capitalise on that, and we have a massive opportunity to do so. The industrial strategy, as he knows—our friends and colleagues on Teesside contributed very fully to it—has, for the first time in an industrial strategy, a real, very clear attachment to the importance of recognising the contributions of different places. This came out very strongly through the consultation, so he is absolutely right.

[Kelvin Hopkins (Luton North) (Ind)]

We have just seen a hostile takeover of GKN. Some of my constituents work at a GKN plant in Luton. Does this not look like a return to the kind of cowboy capitalism we have seen in the past, where hostile takeovers lead to asset-stripping that will make short-term profit, rather than being about the long-term interests of the economy and our manufacturing sector?

[Greg Clark]

The hon. Gentleman knows that I have a quasi-judicial role to exercise in response to certain takeovers, so I cannot comment on that particular case. I would say, however, that in technologies such as automotive and aerospace, there is a high degree of interest and, indeed, optimism about the future capabilities of companies right across those sectors and their supply chains. I mentioned marine engineering; aerospace and automotive are also examples of areas of British strength. The industrial strategy commits to build on that. My intention in implementing the industrial strategy is that our current strengths will be extended.

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[Kelvin Hopkins (Luton North) (Ind)]

I am very pleased to speak in this important debate, Mr Deputy Speaker, and to see that an industrial strategy for the country is at last back on the political agenda, although I have to say, without being unkind to the Tories, that we need a Labour Government prepared to make the right kind of interventions to make sure that it works.

The truth is that Britain has suffered from a long and disastrous period of deindustrialisation, which accelerated from the late 1970s and has left the country in a perilous economic state. We import too much, make too little and have suffered from a growing and now gigantic trade deficit primarily with the rest of the EU, and with Germany in particular. The industry that we have left is good—much of it is, anyway—and it has to be good to survive, but even then, our productivity levels are often too low and investment has been too little.

I am delighted that Peugeot has just announced plans to manufacture a new van at the Vauxhall plant in Luton, and we have to hope that this is a first swallow in a new industrial spring. I have put the case to motor manufacturing representatives that the recent depreciation of sterling relative to the euro should provide a sound basis for expanding supply chains in the UK manufacturing sector. That is true for other sectors, too. I was pleased that the head of Peugeot suggested just such an intervention at the time of the takeover of General Motors Europe, which included Vauxhall.

However, let me get back to the general case that Britain’s manufacturing base has been seriously eroded in the last decades and that we need desperately to rebuild the sector on all fronts. We have lost out massively in trade, and in manufacturing trade in particular. The figures are stark, and I shall quote just a few to make my point. The UK current account deficit in 2016 was £111.3 billion, or 5.8% of GDP. We in the UK are paying out to other nations the net figure of nearly £2,000 per person every year. The goods trade deficit in 2017 was even larger, at £138 billion. The UK’s overall trade deficit was £33.7 billion, but was a staggering £80 billion just with the EU. That was balanced only partially by our trade surplus of £39 billion with non-EU countries. At the core of this problem is the loss of much of our manufacturing capacity.

In 2017, the UK’s manufacturing trade deficit totalled £98 billion, £79 billion of which was with the EU and some £19 billion or so with the rest of the world. That disastrous yawning chasm in trade contrasts markedly with the performance of another major European economy—namely, Germany. In 2014, Germany had a current account surplus of $280 billion, contrasting with Britain’s current account deficit of $152 billion. We import four times more motor vehicle products from Germany than we export to it, which is just a simple illustration of the grotesque imbalance between our two countries.

Britain’s balance of payments deficit has been getting dramatically worse in recent years. In the crisis year of 2008, the deficit was £55 billion, but it rose to £113.6 billion in 2017. That is simply not sustainable and has to be addressed by Government action. A re-creation of our historical industrial strength has to be the key factor in rebuilding our economy for long-term sustainable prosperity. Central to that strategy must be a benign macroeconomic environment, and an essential component of that must be an appropriate parity for sterling—an exchange rate that helps our domestic manufacturers and restrains manufactured imports. We must not price our goods out of foreign markets, above all the EU.

Britain’s economy has been dogged by sterling overvaluation for many decades, and it has chronically damaged our competitiveness. Devaluations and depreciations have relieved the economic straitjacket from time to time—in 1931, 1949, 1965 and, most significantly, after the disastrous collapse of the exchange rate mechanism in 1992. A big depreciation after the 2008 crisis saved the UK from complete catastrophe, but the pound-euro exchange rate crept up again in 2016, causing more economic damage. The post-referendum depreciation has helped our manufacturers, but the balance of trade is still in dire straits.

Britain’s primary exchange rate problem is with the euro—not just sterling’s overvaluation but the serious undervaluation of the euro. In my view the euro is, in reality, the Deutschmark in disguise—a Deutschmark with weaker economies bolted on to it, holding down its value and giving Germany an unjustified competitive advantage both against other eurozone economies and against Britain. Britain’s uncompetitive exchange rate has been our economic Achilles heel for a very long time. An appropriate exchange rate, sustained for the long term, is vital for a new industrial strategy to be successful and for a revival of Britain’s greatly diminished manufacturing sector. It is an essential component of many modern industrial strategies, but not a sufficient condition for success.

Finally, I suggest to Ministers and the Secretary of State, who is not in his place, that we need to re-establish Neddy—the National Economic Development Council—in which I was personally involved when I worked at the TUC in the 1970s. The disastrous collapse of industry took place after Labour’s Government. It was in 1979 to 1983 that we saw a fifth of manufacturing disappear—a crime for which the Tories must always bear their guilt. Neddy brought together Government representatives, business representatives, employers and trade unions in a forum for manufacturing, ensuring that its vital interests were advanced to the benefit of the country and the future prosperity of all its people. Neddy should be reinvented and recreated, but it should be made much stronger.

[Several hon. Members rose—]

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[Martin Vickers (Cleethorpes) (Con)]

It is a pleasure to take part in this important debate. The industrial strategy is an important document that contains crucial objectives relating to skills and young people. The importance of the skills agenda is particularly demonstrated in my own area, where the offshore renewables sector is playing a major role in the area’s economic expansion. Indeed, the Government have referred to the Humber estuary as the “energy estuary”. We have a number of important training facilities, such as the CATCH facility in Stallingborough, which was set up as a joint operation funded by the Government, local authorities and industry. The Secretary of State himself has visited the Grimsby Institute, where he launched a previous skills initiative. Leaving the European Union provides us with many opportunities, but we need to invest in research and development, and we also desperately need to invest in our infrastructure. I am pleased to say that the Government have taken that matter particularly seriously.

A crucial element in the document is regional growth, and I know that the Secretary of State is particularly committed to that. He has visited the Grimsby-Cleethorpes area on a number of occasions, and I know that he is familiar with the problems and the opportunities that exist there. He will, I am sure, have taken note of the importance of the seafood processing industry in the area, as well as the offshore renewables sector and the chemicals, ports and logistics industries. We also have two of the country’s six oil refineries. Cleethorpes, being the jewel in the crown of the east coast, is very important for tourism. I can see that you are eager to visit it yourself, Mr Deputy Speaker. You would be most welcome, and you would enjoy the best fish and chips in the country.

I am sure that Ministers would be disappointed if I did not mention page 226 of the document, which refers to the Greater Grimsby town deal. In fairness to Governments of both colours, there has been much investment in our cities and city regions over the past 20 years, but that has emphasised the relative decline of some of our smaller towns in the provinces, particularly our coastal communities. To combat that, the local authority, the local enterprise partnership and, crucially, local industry have come together to create the Greater Grimsby project board, which has put forward several important proposals encompassing a town deal that would boost the area tremendously, reducing the differential between our cities and towns. The Prime Minister herself has referred to “left behind” towns, and our coastal communities sadly fall into that category.

As I mentioned, the project board is led by the private sector, but it includes the local enterprise partnership and local authorities. We have put detailed proposals to the Government, and they are grinding their way through the various Departments, but the Department for Business, Energy and Industrial Strategy is primarily responsible for town deals. Our most recent meeting was with Lord Henley, who has now taken over day-to-day responsibility for the strategy, and I urge the Minister to give us some indication of when we can expect a decision on the deal. At that meeting, it was suggested that we might get a decision by June or July. I suspect that the Minister will not want to give a definite date today, but I urge him to push things forward as quickly as possible.

The industrial strategy clearly presents huge opportunities for areas such as northern Lincolnshire. The shadow Secretary of State, in fairness to her, did acknowledge that even a future Labour Government would not go about picking winners, but it was rather depressing to hear the hon. Member for Luton North (Kelvin Hopkins) turning the clock back to the days of the Neddy—I think there were even “Little Neddies”—with prices and income falls and the winters of discontent. All that could come again if, sadly, the Labour party comes to power.

[Kelvin Hopkins]

I remember the 1970s very well, but it was between 1979 and 1983 that we saw a collapse. We had a Tory Government who were determined to introduce the new free market world, which saw British industry almost disappear.

[Martin Vickers]

The hon. Gentleman may or may not be correct in his analysis, but the reason why we had a Conservative Government in 1979 was the collapse of the economy during the late 1970s. There had to be a big shakeout and an acknowledgement of the failed policies of the ’60s and ’70s, so he should reflect on the fact that this industrial strategy is about the future and how we can become a global trading nation in the post-Brexit economy.

In conclusion, I hope the Minister will acknowledge my point about the town deal, which is the main point of my contribution.