Economic Development (North-East)

Lord Beamish Excerpts

Tuesday 15th February 2011 Commons Chamber

[Mr Nicholas Brown (Newcastle upon Tyne East) (Lab)]

Now is an appropriate time to sound a warning about the changes that are being made to economic development structures in north-east England. The extent to which the coalition Government intend to abandon the Labour Government’s approach to these issues is now clear, as is the outline of their successor strategy, such as it is. It is my contention that the coalition approach is fundamentally wrong on both counts.

The economic development issues facing north-east England are not typical of those facing the United Kingdom as a whole. Of course our region is not sheltered from national and international economic trends. Regional economic development in the north-east is dominated not so much by our unique industrial history as by our transition from it. No region has done more to help itself, and there was a broad consensus in the region on the economic development strategy until the last election.

I had the honour and privilege of being Minister for the North East in the Labour Government. I tried to do the job in a less partisan, party political way, certainly less so than my other ministerial job. My objective was to drive up the prosperity of the region by broadening and diversifying its employment base, with an emphasis on the private sector. That strategy was right for the north-east. It is not for the state to pick private sector winners and losers, but it is for the state to respond at regional level to private sector-led initiatives and to work closely with the private sector in bringing promising projects to fruition.

Our region is essentially two conurbations and a rural hinterland. We make up 4% of the United Kingdom’s population. The single regional structure of the Government Office and, in particular, the development agency worked well for us.

[Mr Kevan Jones (North Durham) (Lab)]

Does my right hon. Friend agree that the unique thing about the north-east is that there has been support going back many years not just from councils and the public sector, but from the private sector, the TUC and other sectors recognising the need for the region to speak with one voice?

[Mr Brown]

My hon. Friend is absolutely right. One of the great things about economic development in our region is that it has proceeded with consensus, with buy-in right across the region sector by sector, including the public, private and voluntary sectors. We have understood the need to stick together, to talk to each other and to speak coherently on the issues. The fact that we did so is one of the great successes of our region.

Through the single approach that we took, we were able to avoid the poverty of ambition and the attendant dangers of parochialism. Working relationships across agencies and between the private and public sector were good, and there was a general feeling in the region that we were getting somewhere.

On Teesside, the issues relating to Corus and the process industry have features in common. The way forward has to be private sector-led. The private sector needs dialogue with national Government through the regional development agency. It is not reasonable to ask local government, even neighbouring local authorities acting in concert, to deal with issues of this scale. The same is true for the economic development potential of the underused industrial sites at the east end of the Tees valley.

In our region, there was general enthusiasm for the carbon reduction strategy, and for applying our traditional industrial and manufacturing skills to the challenges of combating climate change. There is excitement about the development of the electric car at Nissan. The region is also host to other electric vehicle manufacturers. The Clipper offshore wind factory at the Walker technology park is the only such factory in the UK so far. The potential for the development of printable electronics at Thorn, the innovative photovoltaic products of Romag glass, and the strong case made by Rio Tinto at BIyth and the mutually compatible bid from Tees Valley to be part of a carbon capture and storage pilot, all show how deep and widespread the region’s enthusiasm for this approach goes. We are, as the hon. Member for Hexham (Guy Opperman) pointed out recently to the House, host to the United Kingdom’s green pub of the year, the outstanding Battlestead’s hotel at Wark.

--- Later in debate ---

[Mr Brown]

It is true that the new Government seem to find difficulty in making decisions and giving clear-cut answers. As Minister for the North East, I met representatives of Hitachi in Downing street and worked closely with my hon. Friend to ensure that the programme was understood right at the heart of the Government. We engaged as fully as we could with the Government office of the region, the development agency and the Department involved, and did everything we could to bring those private sector arrangements to fruition on Hitachi’s preferred site—it was of the company’s choosing, not the Government’s. Getting that programme would be a tremendous win for his constituency, and I urge Ministers to do everything they can to bring this to a conclusion and to bring the Hitachi programme to the north-east. The company has chosen the site, not the politicians, although if my hon. Friend and I were choosing, we would have chosen the same one.

Small and medium-sized enterprises are reliant on their supply chains. When those are public sector supply chains, SMEs will be hit by public expenditure constraints. SMEs are particularly significant to the north-east labour market. The arrangements for the public sector to work with them are being reduced dramatically, and their chances of making successful bids to the regional growth fund are practically non-existent, because the fund will not entertain bids of less than £1 million.

There is now no coherent interface with the private sector in the region. The Government closed its regional office, and the subsequent announcement that the Department for Business, Innovation and Skills will open six new departmental offices for the 10 English planning regions to deal with administration is truly pathetic. No doubt the office covering the north-east will be somewhere in Yorkshire.

[Mr Kevan Jones]

Does my right hon. Friend agree that the way in which the Government are dealing with European structural funds is an absolute scandal? Some £160 million is sitting there, ready for investment in the north-east, but because of the withdrawal from the region of match funding, it looks as though we might lose it?

[Mr Brown]

My hon. Friend is right that we cannot get the match funding, but, worse than that, we cannot start any new projects because of the constraints that the coalition Government have placed on what is left of the development agency. The RDA still has an unallocated sum—I think about £80 million or £90 million—but it is not allowed to spend it on anything new. As time goes on, that is something of a constraint.

My contention is that private sector economic development should be private sector led. It is ironic that I, as a former Labour Minister, advocate the structures that the CBI believes have served the north-east well, and that a Conservative-led Government are arguing that what is left of those functions should be led by local authorities.

Economic development in the north-east now has the wrong departmental lead. The Department for Business, Innovation and Skills should lead, but in fact the Department for Communities and Local Government is leading. The local enterprise partnerships look as if they will be staffed by the wrong people—the correct skill set is professional economic development officers, as employed by One North East, not local government officers. Local enterprise partnership boards have the wrong executive lead. What is needed is representatives of private sector business, not local councillors. The geographical areas covered by LEPs are wrong: there should be one agency for the region, not multiple agencies duplicating effort and overlapping. Multiple agencies could also be too small to be effective.

--- Later in debate ---

[Mr Kevan Jones (North Durham) (Lab)]

I congratulate my right hon. Friend the Member for Newcastle upon Tyne East (Mr Brown) on securing this debate. I would like to concentrate on one private sector that is vital to the north-east economy, namely the tourism sector. It is worth £4 billion annually to the region and it accounts for some 5% of regional employment with 64,000 jobs.

I would like to congratulate One North East on its work on tourism, which provided a significant regional focus. I am sorry but the right hon. Member for Berwick-upon-Tweed (Sir Alan Beith) was wrong, as the delivery of tourism was devolved to local areas of Northumberland, Durham, Teesside and Tyneside, which worked very effectively. It galvanised the north-east’s ability to promote its image not just regionally, but nationally and internationally.

The Passionate People, Passionate Places campaign was pioneered by One North East. I want to record my thanks to Stacy Hall, director of tourism at One North East, and also to someone who is very much a private sector individual—Geoff Hodgson, who chaired the North East Tourism Advisory Board and who has been one of the biggest critics of what the Government are doing to tourism in the region.

Over the past few years there has been growth in the tourism sector, which has become confident and able to promote the north-east to potential visitors not just internally but externally. All that, however, has been cast aside by the simple fact that One North East can no longer spend any money on promotion and marketing. The fantastic support given by the Passionate People, Passionate Places campaign to businesses both large and small, such as the Beamish museum in my constituency and even small bed-and-breakfast establishments in the constituency of the right hon. Member for Berwick-upon-Tweed, has been removed and has not been replaced. That has placed our region at a disadvantage in comparison with other regions which can continue to promote themselves at our expense.

I do not accept the suggestion that the north-east did not promote itself well, and nor do most people in the tourism sector to whom I have spoken. I also see no hope in what has replaced it. There is no money there. The local enterprise partnership will prove to be a mere talking shop with no real money to conduct the regional marketing campaigns that we need. I am not talking merely about competing for tourism with other parts of the United Kingdom; I am talking about international opportunities. For example, when the Emirates airline launched its successful flights from Newcastle to Dubai, One North East was able to work with it and other partners throughout the world to promote the north-east. No single LEP will be able to do that, and the opportunity will not be replaced. Businesses in the north-east and the tourism sector are already suffering as a result of the short-sighted decision to stop One North East promoting the region as a whole.

The ability of local government to become involved in tourism has also been affected. In August last year, the Prime Minister made a speech in which he promoted the tourism industry and spoke of its importance to the economy of the United Kingdom. He said,

“Tourism is a local industry.”

He said that it counted on the support of local people and could not be directed from Whitehall, and I entirely agree with him. As my right hon. Friend the Member for Newcastle upon Tyne East pointed out, the north-east is a good example of a region in which elements have come together to promote it effectively.

Tourism is not a sector that we can dismiss. It provides jobs in not just large but small enterprises. The Prime Minister said that it was a “vital part” of rebalancing the economy of the north-east, but he also said something very ironic. He said that

“Local authorities must be allowed to invest”

in

“their own communities.”

Meanwhile, his Secretary of State for Communities and Local Government was changing the formula funding for local authorities so that it was based on foreign occupancy per night, which lost the north-east some £5.9 million in local authority grant—and guess who gained? London boroughs gained £60 million. Now Durham county council, which is so proud of its great attractions—such as the Beamish museum in my constituency, Durham cathedral and the beautiful countryside in the constituency of my hon. Friend the Member for Bishop Auckland (Helen Goodman), to name but a few—is being asked to accept a 40% cut over the next four years. The idea that local authorities will step in to meet the shortfall is absolute nonsense.

[Roberta Blackman-Woods (City of Durham) (Lab)]

Does my hon. Friend agree that the severity of the cuts in the council’s budget are threatening even important facilities such as our tourist information centre, which, like those in other cities, is critical to increasing tourism?

[Mr Jones]

Well, it is a double whammy for those areas because not only has the money gone that was devolved to them from One North East, and which was spent very effectively in Northumberland, County Durham, Teesside and Tyne and Wear, but local authorities are now also struggling to afford to fund important things like tourist information centres. It is an absolute scandal for the tourism offer for a world heritage site such as Durham not to be well packaged.

It seems that this Government just do not get it. The Minister has never been to the north-east, for example, even though the right hon. Member for Berwick-upon-Tweed and I asked him to visit a few months ago. They just do not get it. By way of example, I cite the idea that regionalism is bad, whether it be the regional office or One North East, and that other sectors will somehow meet the funding challenge, when in fact they will not.

I ask the Minister and the Government to listen not only to politicians, but to the people in the region who know. They are not necessarily elected officials. They might be people like Geoff Hodgson, who has a highly successful business career in the publican sector, and who knows something about what the private sector in the region needs. The Minister should listen to people like him.

[Grahame M. Morris]

Does my hon. Friend share my concern about the coalition Government’s decision to suspend grants for business investment, which I understand brought £112 million into our region and supported 25,000 private sector jobs?

--- Later in debate ---

[Mr Jones]

Exactly, and a lot of those grants, which a lot of businesses in the tourism sector need, are actually quite small. The idea that they will benefit from any of the money from the regional growth fund is absolute nonsense. The advantage of One North East devolving money to the regional tourism boards was that they could react locally by giving small amounts of money that those types of businesses needed.

The Minister recently told me and the right hon. Member for Berwick-upon-Tweed that we should leave it all to VisitBritain and VisitEngland. I am sorry, but my response to that is, “Forget it.” I used to serve on the north-east tourism board, and my mystery shopper activity every month when I was down in London was to go to VisitBritain’s tourist information office on the Strand to see what promotional material it had on areas other than London and the south-east. It had absolutely nothing. Its approach is London-centric and south-east-centric, and if anyone thinks the north-east of England gets a fair deal in promotional terms out of VisitBritain, they can forget it.

The Government must rethink their strategy. They must listen to the people in the know, who have done a very good job, and pay tribute to them for their work over a number of years in promoting both the north-east and jobs in what is a vital sector.