Economic Prosperity and Employment

Lord Shipley Excerpts

Thursday 18th July 2013 Lords Chamber

[Lord Shipley]

My Lords, I thank the noble Lord, Lord Haskel, for enabling me to say that I count myself as a progressive capitalist. I understand the importance of profit and the private sector to drive growth and tax revenues and the central role of government to intervene in market failure and to prevent abuses of capitalism when it consumes excessive wealth rather than creating it. It is for the public sector to provide leadership in infrastructure, education and training, public research and particularly leadership in business and innovation, identifying and helping to finance growth areas that will increase our competitiveness.

It is, of course, a fundamental task of government to redistribute wealth to reduce social and regional inequalities, otherwise capitalism cannot be progressive. I therefore support the concept of the enabling state. Are the present Government enabling? We have low interest rates, competitive tax rates, an increasing emphasis on science and technical subjects in education, significant investment in infrastructure and increasing access to finance. The Government have, among other things, supported innovation, seen the creation of 1 million private sector jobs and made major investment in roads and railways. There is the Green Investment Bank, the business bank and improved access to superfast broadband. This is all happening as we pursue the rebalancing of the economy away from an overreliance on London and financial services. In this respect the Regional Growth Fund, which is now worth £3.2 billion, is helping to drive that change, so, yes, I think that the present Government are an enabling Government.

There are three areas to which I wish to draw your Lordships’ attention and to which I hope my noble friend the Minister will respond. The first is skills. Employers in manufacturing, processing and engineering have problems recruiting right across the UK. It is a sad reflection of all the money that successive Governments have put into skills that we still have major skills gaps in our economy. Local growth funds may well provide an answer as they can require skills providers to be locally accountable for failures to meet demand, and much better forward planning should result. The concept of local growth funds is drawn from the report by the noble Lord, Lord Heseltine, No Stone Unturned.

Secondly, the Government are doing well on apprenticeships but we need to do much more. Fifteen per cent of our under-24s are unemployed but only 5% of graduates are unemployed. As the noble Lord, Lord Bradshaw, pointed out, we need more high-quality apprenticeships in the right high-level skills. Rightly, we compare ourselves with Germany, where there is much greater structural coherence between the private and public sectors in creating apprenticeships that turn into sustainable jobs. The Higher Apprenticeship Fund is an important contributor but we need to learn much faster from the German experience than we have done.

The third thing that I would like my noble friend the Minister to respond to relates to public procurement policy in the construction sector. We seem to be developing a procurement system between national and local government that favours big national construction companies at the expense of mid-sized regional ones. This is potentially damaging to regional growth. Building firms working up and down the country have recently bid for a place on a national procurement panel for the Priority School Building Programme. While 12 firms have been selected for the north panel and 12 for the south, nine of the firms selected are on both panels. We talk a lot about a lack of competition in the banking and audit sectors, but are we heading in the same direction in the construction sector with the big nine? It is impossible for medium-sized firms to qualify for a place on these procurement panels. Even as a joint venture with a combined annual turnover of £250 million, they are still ineligible even though they may have done excellent and relevant work in the past. Since all these firms ask for is the right to compete and to tender, it is hard to see what public interest is being served in preventing them doing so. There are serious implications for the prospects of regional firms because they will lose the opportunity to grow bigger and generate more jobs and wealth in their local areas.

Then there is the Scape framework used for procurement by some local authorities, housing associations, some parts of the NHS, some police authorities and universities. This framework requires contractors to have an annual turnover of more than £500 million to be eligible to carry out jobs starting even as low as £2 million. Very few mid-sized regional contractors can meet this turnover requirement but they could carry out the work just as well. There is a requirement to take into account local supply chains and subcontractors because they are supposed to be used by national contractors, but it seems that this is frequently not the case. That is an erosion of job opportunities for local people, often in areas of high unemployment.

Then there is the question of the reinvestment of profits. Ten of the contractors on the northern panel that I referred to are headquartered in the south. Do the surpluses made on the projects undertaken in the north of England get reinvested in the place where the work was done, or do they get siphoned off to spend elsewhere? We need to know. The Government accept the need to boost the regions but I ask the Minister to look very closely at regional procurement so that local people can get jobs, skills can be maintained and enhanced in all regions and cash surpluses can be reinvested locally to train the workforce of the future.