Economy: North-East England

Lord Popat Excerpts

Thursday 31st January 2013 Lords Chamber

[Lord Popat]

My Lords, I pay tribute to my noble friend Lord Bates for securing this important debate and to all noble Lords who spoke today about the importance of, and the need to support and encourage, a strong north-east economy. I also pay tribute to my noble friend for his long-standing contribution to the economy and education of the north-east.

No one is under any illusions about the scale of the wider economic challenges we face. However, we are determined to tackle the long-standing local economic issues in the north-east, including historically high unemployment.

In recent years, traditional industries have given way to new knowledge-led enterprises, based on innovation, entrepreneurship and international competitiveness. Today, the region is leading the way in sectors from healthcare to life sciences, petrochemicals to low carbon technologies, while still keeping a strong base in such fields as motor vehicles and steel.

People in the north-east are responding to the real challenges of their economy. Whether that response is in the established industries in sectors such as the automotive, subsea, process and pharmaceutical industries, in the developing sectors in aerospace, software and the digital economy, or in the newer low-carbon manufacturing or printable electronics, private sector industries are leading the northern economy.

The north-east is a key part of the national economy; it accounted for over 3% of the UK’s GVA in 2011, worth more than £40 billion per year. It is important for all of us that it is successful and prosperous. As my noble friend said, record export levels tell the story of the north-east’s success—more than £14 billion in the year to end of September, up 6.7% on the previous 12 months. This strong performance means, as my noble friend rightly pointed out, that it is the only English region that exported more than it imports, with the exception of Newcastle’s football team, which imported five French players only last week.

The Government’s local growth policies aim to help all parts of the country achieve their economic potential. The Government are making every effort to support local growth through a variety of mechanisms for local areas, including the creation of 39 business-led local enterprise partnerships. Both the North East LEP and Tees Valley LEP, with strong business leadership, are already having an impact on their local economies.

With the new opportunities for local leadership that I outlined earlier, we are providing significant financial support to local economies, and I will summarise four of these key programmes. The £2.4 billion regional growth fund is helping to rebalance the economy by supporting those areas and communities currently dependent on the public sector. In total, £280 million has been offered to projects across the north-east. Both North East and Tees Valley LEPs made successful bids to round 3.

Secondly, we are investing the £730 million Growing Places Fund to unblock stalled local infrastructure projects and stimulate further private sector investment. The North East LEP has received more than £25 million and Tees Valley LEP more than £8.5 million from the fund to help unblock infrastructure in the north- east. Close to £1 billion from the European Regional Development Fund was allocated to the north of England in the current EU finance round.

Areas outside the greater south-east are also benefiting from our commitments to provide funding for high-quality transport infrastructure, superfast broadband, the Green Investment Bank, apprenticeships and support for science. We welcome the involvement and engagement by the private sector in setting the economic priorities for infrastructure so clearly. We will work with both LEPs to be clear about priorities, but it is pleasing to note that both the CBI and NECC have been positive about the funding that has already been approved for developments on the A1.

Thirdly, the North East LEP and Tees Valley LEP were two of the first LEPs to be awarded enterprise zones which, through a combination of fiscal incentives and reduced planning requirements, will generate both businesses and jobs. The Tees Valley Enterprise Zone is expected to lead to the creation of 3,000 jobs and 166 businesses. The North East Enterprise Zone has already created about 320 new jobs, with many more to follow.

Finally, we want powerful, innovative cities able to shape their economic destinies, boost entire regions and get the national economy growing. The Newcastle City Deal alone aims to create around 13,000 jobs and secure £1 billion of investment over the next 25 years as a result of new financial powers. This is alongside an additional 8,000 potential jobs in the marine and offshore sector and 500 new apprenticeships in Newcastle. The noble Lord, Lord Sawyer, has already welcomed the City Deal initiatives. The second wave is aimed at the next 14 largest cities. Sunderland City Council, working with the North East LEP, and the Tees Valley LEP have both submitted proposals.

Many noble Lords mentioned youth unemployment. The recent unemployment figures do offer some welcome news. Our £1 billion Youth Contract significantly ramps up the support available for young people right from the beginning of an unemployment benefit claim. We are also creating 500,000 extra work experience and training opportunities, a guaranteed careers interview and more intensive support for jobseekers. For those young people still unemployed after nine months, the Work Programme will help them redouble their efforts to find work and to stay in it when they succeed. Apprenticeships are providing a record number of opportunities for individuals and employers. The year 2010-11 showed a record 455,200 apprenticeship starts. Final data for the year show that there were 34,550 apprenticeship starts in the north-east, a rise of 86.6%. The Government are actively encouraging the young unemployed to go into apprenticeships and build a career.

A wide range of points have been made by noble Lords and I shall endeavour to respond to as many as I can, but failing that, I am happy to write. My time is limited so I shall cover a few of the issues that were raised. I have sought to explain in my remarks that the Government are doing everything they can to create a business environment that will give companies the confidence to invest and grow. We are making a significant investment in the north-east. My noble friend Lord Bates has reconfirmed that, as did the noble Lord, Lord Sawyer.

However, it is not just for the Government to take action. It is vital that the public and the private sectors work together to grow the economy in the north-east. This is already happening with BIS Local and UKTI working alongside the private sector-led local enterprise partnerships as well as in partnership with local chambers of commerce. Such collaboration ensures that businesses have a seat at the table and their voice is heard. It is key to achieving economic regeneration and sustainable growth in the north-east and elsewhere. Success will require hard work, the ability to harness innovation, the winning of new business opportunities and effective support from Government.

The north-east is already home to Nissan, which is producing a third of all UK vehicles from its Sunderland plant and is growing its supply chain. We have seen investment by Vantec in Sunderland and Air Products in Tees Valley, both in their enterprise zones. To build on these successes is the reason we are going all-out to create a business environment that will give companies the confidence to invest and grow, and it is why local communities are being freed from central control so they can determine their own economic future in the north-east. The economic outlook for the north-east is good, but we have to do all we can to make it better.

I shall cover briefly some of the points raised by the noble Lord, Lord Sawyer, on the subjects of youth unemployment and apprenticeships. A real transformation is taking place across the whole country that also holds true for north-east England. The north-east was very reliant on public sector employment, but that is now changing. Now it relies more on the private sector. The noble Lord, Lord Beecham, mentioned that the rate of unemployment in the north-east is around 9.1% compared with 7.8% across the country, but that is changing fast with all the new initiatives that we have put together. I am sure that the future for the north-east is good and that it will get better.

The noble Lord, Lord Shipley, said that there are fewer jobs in the private sector and more in the public sector, but again I am pleased to say that that is changing quickly. The Funding for Lending scheme is very much at an early stage but we are seeing some examples of its success. Given time, I am sure that it will play an important role. The noble Lord also talked about implementing the reforms set out in the report of my noble friend Lord Heseltine, No Stone Unturned. A number of recommendations are being implemented. In fact the Chancellor announced in his Autumn Statement that some of my noble friend’s recommendations are already in place.

I turn to the inward migration of students. Education is the third or fourth largest export earner. Lately we have not been doing very well in terms of the numbers coming to the United Kingdom, but that is solely because we have become more strict on students who come here and then sign up to bogus university courses. Obviously, however, genuine educational institutions and universities are open to overseas students. I think that the onus is on universities in the north-east to market themselves and welcome students, especially from the BRIC countries.

The noble Lord, Lord Shipley, talked about the UKTI and inward investment. UKTI is very proactive. It is now led by somebody who was a chief executive in the private sector. The job of UKTI is to help our exports but also to encourage inward investment, and I am glad to say that UKTI is quite active in the north-east anyway.

My noble friend Lord Patten mentioned broadband, which is something that we are now implementing and working on. He also mentioned high unemployment, which we are addressing in the north-east. I can tell my noble friend that the level of unemployment today is much less than it was in the late 1980s and early 1990s in north-east England. So there is a marked improvement. Credit goes to a number of different agencies, working hard and supported by the Government.

I now turn to the comments made by the noble Lord, Lord Beecham, about the north-east. I know that the noble Lord is passionate about the north-east, as are the noble Lords, Lord Shipley and Lord Sawyer, and my noble friend Lord Bates. Despite their different political ideologies, they all have love and affection for the north-east, and work hard for the region in which they have been involved for so many years.

I think that I have covered most of the areas that the noble Lords have mentioned in their speeches. One that was mentioned in particular was the regional development agency, which we have scrapped. However, four different organisations—the regional growth fund, the Growing Places Fund, City and Guilds and enterprise zones—have replaced that one organisation. Perhaps the regional development agency did particularly well in the north-east but, overall, we knew at the time when we scrapped it that it was not value for money for taxpayers. Some areas did not perform that well, while others did. I think we will come with better schemes to encourage enterprise and inward investment and to support businesses.

SMEs were also mentioned. In fact, in your Lordships’ House we set up a cross-party committee to see what we could do to help SMEs to export more. I do not want to prejudge the outcome of the report, which will be published at the end of February, and I am sure that we will debate that report.

I hope that I have dealt with all the issues raised, and I thank noble Lords for giving me the privilege of responding to this debate, which has turned out to be very interesting because there has been a lot of agreement among all the speakers on the subject.

House adjourned at 6.42 pm.