Economy: Government Policies

Lord Bates Excerpts

Thursday 24th March 2011 Lords Chamber

[Lord Bates]

My Lords, I join the noble Lord, Lord McKenzie, in paying tribute to my noble friend Lord Lawson for securing this debate. I also pay tribute to him for its title, which emphasises enterprise and the need for rebalance. I will come back to that in my remarks, particularly focusing on the north-east of England, which is where I am from and where I am for.

I also want to pay tribute to the excellent maiden speeches, particularly that of my noble friend Lady Stedman-Scott. Through Tomorrow’s People and its operation in Newcastle, she has made a profound difference to the lives of many people in the north-east. Tomorrow’s People takes some of the hardest-to-reach young unemployed people and puts them on a course. That gives them confidence, inspires them and builds their self-worth. It manages to get employment or training posts for 70 per cent of these young people. My noble friend is certainly someone who makes things happen.

The noble Lord, Lord Sugar, said that the test for being able to speak on these matters was being able to demonstrate that you run something. Having set up three businesses and currently being involved in two others, I probably just shave past the “Sugar test”. But, given the impact which my noble friend Lady Stedman-Scott has made on transforming the lives of so many in our inner cities, I am more interested in struggling a little closer towards a “Stedman-Scott test” of whether we are making a worthwhile contribution to society.

I want to focus on the north-east of England because to me it represents an excellent case study of the need for rebalancing the economy. The Centre for Economics and Business Research has shown that, over nearly 11 years of the previous Government, the public sector as a share of the north-east regional economy rose from 48.6 per cent to 63.9 per cent. This increase has gathered pace over the past two to three years and, if left unchecked, it is on a trajectory heading towards 70 per cent and perhaps even beyond. The claim is not that the north-east of England’s public sector is too large but that its private sector is too small. That is the reason for the imbalance and why we need to focus on growth.

The previous Government placed great emphasis on two things, one of which was the regional development agency One North East. Much was said in the debate last night lamenting its passing, as if the economy will stutter to a halt the minute it closes down. Yet, after 11 years of operation during which the agency received funding of £2.7 billion, the gap between the north-east and the rest of the country has widened: it was 83 per cent of the national average in 1998 and 78 per cent in 2010.

Moreover, during the recent recession, some in the north-east of England noted that the recession hit London, the banking sector and financial services, but that the north-east would mercifully be spared because a large section of the local economy revolves around the public sector and manufacturing—which I will come back to shortly—but that was actually not the case. The economy of the north-east contracted faster and more sharply, by 6.1 per cent, between 2008 and 2009 whereas London—at the epicentre of the shock, if you like—contracted by only 4.41 per cent.

My point here is that there is something fundamentally wrong with the understanding and the approach taken by the previous Government. We have seen a massive reduction in the number of manufacturing jobs in the north-east. Between 1997 and 2009, the reduction in employment in the manufacturing sector amounted to 95,000 jobs, and 56 per cent of those jobs were in the advanced manufacturing sector. That is important if we bear in mind that we need to do two things to get the economy of the north-east back on its feet and moving forward strongly.

First, we need to create an enterprise culture that is less concerned with state intervention and believing that organisations, strategies and structures will somehow deliver growth. Growth is delivered by businessmen taking risks; that is what creates wealth. Essentially, the Government can create the conditions for growth, but they cannot create the jobs. It was laughable when Ministers used to come up to the north-east and talk about agencies that had actually created so many jobs. I never came across an agency that created any jobs, but I did come across some that had destroyed a few. Businesspeople and entrepreneurs create wealth and jobs, and they are to be encouraged.

The second thing is the importance of manufacturing, which was what the Budget yesterday was all about. It talked about creating enterprise zones that will focus on manufacturing. It talked about the green investment bank that will invest in manufacturing. It talked about reducing regulation, which is important to manufacturing. It also talked about increasing apprenticeships and the new university technical colleges. All of these things are exactly what the economy in the north-east needs.

That is not to say for a moment that the Government have no duty to intervene in order to speed the economy of the north-east on its way. That is why they have announced significant investments in centres of excellence for renewable energy in Blyth and the Centre for Process Innovation on Teesside, and why they have invested £350 million in the Tyne and Wear metro and so on. The Government are taking an innovative approach while recognising that it is limited.

I shall close with this: a year ago almost to the day, the Labour Cabinet arrived in my home town of Durham in full gung-ho general election mode with a plan to announce a massive new trains order with Agility Trains for the north-east. Unfortunately, that happened to coincide with news of the closure of the Corus TCP plant and the loss of 3,000 jobs. The decision was that the good news of the trains order would be lost in the bad news of the steel plant closure and therefore the announcement was pulled. It is with great pride that I can say that over the past two weeks, the Corus TCP plant has actually been reopened by a new investor who is creating jobs, and that the Agility Trains order, stopped on that occasion, has been given the go-ahead. That is what this Government are doing for the north-east and I am proud of them.