North-West Economy

Mark Prisk Excerpts

Tuesday 20th July 2010 Westminster Hall

[David Mowat (Warrington South) (Con)]

I congratulate the right hon. Member for Salford and Eccles (Hazel Blears) on securing this important debate and on her speech, the first half of which I pretty much agreed with.

It is important to put the size of the north-west economy into context. I shall talk about the regional development agency, but even in its heyday—before the cuts imposed about a year ago by Lord Mandelson, which were greater than this year’s cuts—regional aid for the north-west amounted to 0.2% of our economy, which is worth about £120 billion. We have 7 million people in the north-west, which is a bigger population than most EU countries have, and it is extremely important to understand that Government aid is not what will build the world-class businesses that we need.

I believe that the RDAs did much that was good, but it is important that all Members here today remember what the Office for Budget Responsibility forecast for our economy in the lifetime of this Parliament. In broad terms, it said the north-west should aim to create 200,000 private sector jobs at the same time as cuts take place and we will lose something like 70,000 public sector jobs. That means that each Member in this Chamber will need 3,000 new private sector jobs in his or her constituency. We should all be thinking about how that can happen.

If we want to fight homelessness, deprivation and unemployment, the creation of those jobs is vital. They will be created only if we become—or continue to be, as in some industries—a world-class economy. There are areas where the north-west is world class—they include defence, advanced manufacturing and nuclear—but we have to build on those. Principally, it is not about Building Schools for the Future. I have lost BSF schools in my constituency; that was a great disappointment to me and it will hurt the construction industry. In the end, however, the generation of a world-class economy in the north-west will depend on innovation and how we proceed.

The principal question for me is whether the supply side of our economy, particularly in the north-west, will enable those 3,000 jobs to be created in each of our constituencies. The supply side is vital, and three factors are important. The first is infrastructure, and I agree with what was said about the Mersey Gateway, which is important to the north-west. The next factor is regulation, and the coalition Government have made a strong start by getting rid of some of the regulations stopping our world-class businesses from developing.

The third factor is skills development. I have a real concern that our country is not positioned where it needs to be. It is not a particularly political point, but over the past 25 years our universities have failed to generate the applied scientists and engineers who will be needed to develop the businesses the right hon. Lady spoke about. Twenty-five years ago, when 8% of people went to university, we produced 20,000 engineers a year. We still produce 20,000 engineers a year, but out of five times as many graduates. To put that into context, France produces 50% more engineers than we do—I shall not even bother giving statistics for countries such as India or China.

That our higher education establishments have failed to produce the skills in applied science and engineering that will be needed to create a world-class economy in the north-west is close to being a scandal. A number of people should hang their heads in shame, because they have perpetuated something of a con. Many talented young people are leaving university unable to play a part in the industries of the future. In the nuclear industry, for example, the companies that will build our nuclear stations will be German and French. A recent Cogent Systems report said that we have a lack of key workers in chemical, geotechnical, mechanical and production engineering. Most ridiculous of all, National Grid is hiring engineers in—wait for it—Zimbabwe, to make the changes to our transmission and power engineering systems across the grid. Shell hires engineers in Russia. Those are opportunities that young people in our constituencies should be taking up, but they are not able to do so. If we are serious about rebalancing our economy away from the City, the financial services and oil and gas—frankly, we have had a free pass on oil and gas for a couple of decades—we cannot continue to fail in skills development. I shall be interested to hear the Minister’s response on that point.

Let me turn now to my concerns about the RDA. I know that the White Paper is still to come, but the proposals are centralising. I agree with the right hon. Lady’s comment that the regional fund represents a major reduction in budget from what the RDAs had in the past. The fact that it will be administered directly from London is a centralising measure. Notwithstanding how the local enterprise partnerships develop, ours could be the only major economy in the OECD that has no sub-regional intervention. I hope that that will not be the case, and that the Minister can give me some reassurance about that. It is hard to believe that the French, Germans, Americans and Canadians have got it wrong. It is not fair to have a Northern Ireland Office, a Scotland Office, a Wales Office and a Government office for London with economic intervention powers while the English regions are left outside.

[The Minister of State, Department for Business, Innovation and Skills (Mr Mark Prisk)]

I would not normally intervene because I know that Back Benchers want to have their say, but I must clarify that point. The regional growth fund is an entirely distinct element from how we develop local enterprise partnerships. The funding for one is not the funding for all. I will explain later how we intend to develop those partnerships.

[David Mowat]

The second point on which I seek clarification is how the partnerships are to be funded. Business people believe that they will be funded by the councils that make up the partnerships.

Another concern—a slightly more subtle one—is that our industrial regional policy is biased towards small and medium-sized enterprises rather than structural winners, such as nuclear power, defence and advanced manufacturing. If the regional fund is administered rather like the “Dragon’s Den” TV programme is run, it is hard to see how that can result in the emergence of organisations such as Daresbury and the Atlantic gateway infrastructure programme. It seems to me that there is a risk that the types of project that go forward will be related to SMEs. We need SMEs because they drive the economy, but they also feed off structural winners and world-class businesses, such as BAE Systems and AstraZeneca, and if those businesses are not growing and generating jobs, it will be tough. It also seems to me that there is a risk of the national insurance contributions holiday, which is a great policy, also being biased towards smaller companies, as is the procurement policy.

I have three questions for the Minister. First, can we do more on skills? There is a critical weakness that could result in the 200,000 private sector jobs in the north-west that the OBR forecast will be needed not being achieved, which would be a tragedy. Secondly, are the RDA proposals centralising and do they risk the English regions being left outside any formal structures? Thirdly, is there not a danger that our policy is orientated more towards SMEs than towards picking structural winners?

--- Later in debate ---

[Andrew Miller (Ellesmere Port and Neston) (Lab)]

It is important to follow on from the comments of the hon. Member for Wirral West (Esther McVey). The enthusiasm with which she has spoken, endorsing the enthusiasm of my right hon. Friend the Member for Salford and Eccles (Hazel Blears), typifies the region. It is successful. We are not on a downward slide to nowhere; we are moving in the right direction. Ensuring that we continue in the right direction is key to what happens next. I do not want to be drawn into the rights, wrongs and merits of the case for the regional development agency; I want to ensure that whatever we do continues the momentum in the right direction.

One vehicle, for example, has been incredibly successful. The hon. Member for Warrington South (David Mowat) appropriately mentioned Daresbury. He will know what an interesting battle Labour Members had inside our own fraternity, with the last Prime Minister but one, about investment in Daresbury. The science community chose to invest Project Diamond elsewhere. One result of that debate was the sensible decision to create the Northwest Science Council, which has acted as a sounding board for some of the best ideas evolving. Some of the issues mentioned by colleagues from various parties owe their genesis to the work done by the science council and its prodding and poking.

Whatever happens within the RDA structure, I would like an equivalent body to bring together high-level scientists from the important clusters represented in the region, in order to ensure that we maintain the momentum necessary to be world class in the fields in which we have high-level skills. I pose that challenge to the Minister. I am not hung up one way or the other on any particular structure, but we must recognise that bringing together the science community has been beneficial. The hon. Member for Warrington South will know that the Daresbury site does not do obscure, blue-sky research—I say this as somebody who used to run an X-ray laboratory a long time ago, when I did a proper job—but is a dynamic and growing science base that reaches into new areas that were never thought of when it was a single-purpose laboratory. The consequence of our battle some years ago has been incredibly positive, and we need to keep that momentum going.

We have also had some interesting successes in other areas. A few years ago, it was presumed that the vehicle industry would continue to shrink; in fact, the opposite has happened. There has been growth in output in the region in not just finished products, but components—from very high end, such as Bentley in the south of the region, through the spectrum of vehicles. The success of General Motors has, of course, been important to my constituents. General Motors was presumed to be sliding into oblivion a while back, and we are now pleased that it does not need the loan guarantee that Lord Mandelson offered it just before the election. The argument between me and the Government has therefore become academic. That is very positive news.

It is now key to consider whether we can get the Ampera into Ellesmere Port—some colleagues saw that vehicle in New Palace Yard a while back—because it is a really exciting, next-generation vehicle that is the right platform to move us forward. The Ampera produces only 40 grams of carbon per kilometre, and is the right step forward. I hope that no one in this Chamber would argue against having the Ampera in Ellesmere Port, so what I want is a commitment from the Government. I am not asking for their money; I am asking for their commitment to working their socks off with us to ensure that no stone is left unturned in guaranteeing that we get that project in Ellesmere Port.

[Mr Prisk]

That is a very specific question, to which my answer is yes, absolutely. I have met the senior management in the UK and internationally. Ellesmere Port has an outstanding opportunity in this regard, and my ministerial colleagues and I are determined to do everything we possibly can. I am grateful to the hon. Gentleman for his determined advocacy for an extremely important part of this country’s industrial base.

[Andrew Miller]

I am grateful for the Minister’s comments. I will open the negotiations on getting good value for money for Government car fleets. The Ampera is a very comfortable car to drive, as one or two hon. Members here have discovered.

Other sectors within our region do not get talked about. We have the premier veterinary school at Liverpool university, part of which is at Leahurst in my constituency. There is a fantastic partnership between the university sector and the private sector, from which there has been a huge amount of investment. We must not forget the importance of that veterinary school in the context of zoonosis and other areas of science that will be increasingly important. That crossover between the public and private sectors is critical to the future of our university structures. We need to consider how we can evolve public sector jobs at the heart of such areas of research, and create the kind of successful spin-outs we have seen in research parks in other university communities across the country and elsewhere. How can we create the equivalent of St John’s, Cambridge in and around our north-west university clusters?

Some of our universities are doing particularly well. I began my speech with the subject of the Science Council, which has led to greater collaboration between north-west universities. That has been encouraged by colleagues from all parts of the House. For example, in the other place, Lord Oulton Wade, among others, and I have tried to pull together the universities and get the vice-chancellors to think collectively as a region. That has had an effect, so let us not kill the golden goose.

I shall make one final point, which is not intended to be negative. Will the Minister inform his colleagues in the relevant Departments that practices are going on within the public sector that leave a lot to be desired? Within NHS Wirral, there is a disguised attempt to get rid of numbers, or reduce head-count. That organisation is saying to people, “We don’t make redundancies.” However, they are doing so. A constituent of mine from Neston was told unequivocally that the service she provides is no longer required. She has 36 years’ experience as a nurse—not all in the same employment, but she does have a lot of experience—and we need to maintain such skills. However, instead of offering her a suitable alternative job elsewhere within the NHS that is within a reasonable travel-to-work area, the employer has come up with a clerical job that involves working permanent nights. Given her length of service, my constituent is obviously reasonably mature and, of course, all the case law indicates that that is not a reasonable job offer.

Such disguised attempts to reduce head-count cannot be tolerated, and I hope the Minister will pass that message on. I said in writing to the chief executive of NHS Wirral that I would raise that matter, because it is an outrage that people with such experience should be treated in such a manner. That is my only negative comment. We have to face the reality of pressures on public sector jobs, but any action that is taken must be taken in a humane and civilised manner, and in conformity with the law of the land.

--- Later in debate ---

[The Minister of State, Department for Business, Innovation and Skills (Mr Mark Prisk)]

I begin by congratulating the right hon. Member for Salford and Eccles (Hazel Blears) not only on securing the debate but on setting a constructive and positive tone on what is a complex issue. I think we all share the view that the north-west is a part of the country with a tremendous future and a great industrial past; the question is, how do we enhance and develop that? The debate has been not only constructive but thoughtful, and I shall do my best in the nine minutes I have to canter through some of the questions, so bear with me.

Like much of the country, the north-west has suffered from the recession, but we are beginning to see early signs of improvement. How do we help to shape and enable a prosperous economy that will be different from what we have known in the past? One of our opening statements was that we as a Government passionately believe in the need to ensure that—

[Graham Jones (Hyndburn) (Lab)]

I am concerned about the context of this debate, which the hon. Member for Wirral West (Esther McVey) touched on. Our region has many disadvantaged communities—in fact, one of the highest proportions in the country. Will the Minister specifically address the disadvantaged areas? His priority tends to be the west of the region, where the nuclear and defence industries are located, rather than the deprived areas. What will he do about those?

--- Later in debate ---

[Mr Prisk]

I am only 60 seconds into my speech, so I shall do my best in the remaining eight minutes to get to the part of the region about which the hon. Gentleman is concerned.

We understand the need to rebalance the economy away from an over-reliance on financial services and one part of the United Kingdom. Therefore, instead of the approach we have seen in the last dozen years or so, we need to support the renewal of the industrial base and to encourage investment and innovation, about which several hon. Members rightly spoke. Some of those sectors have been talked about: advanced manufacturing, which the north-west is well supplied with, such as plastic electronics and robotics; the digital and creative sectors, to which the right hon. Member for Salford and Eccles referred; and, as several hon. Members mentioned, green technology, which needs to be developed.

[Hazel Blears]

If the green industries are so important, which I believe they are, why are the Government abandoning the green investment bank?

[Mr Prisk]

The right hon. Lady is wrong. We believe passionately in ensuring that we have an investment bank with financial expertise that can deal with green technologies. We will set that out in our papers on growth and finance, in which we will examine access to credit, which is crucial to small businesses that use conventional technologies, as well to those that use the new technologies. I know the right hon. Lady is keen to get answers, but if she can wait a few more days she will get the answers to her questions.

The north-west is well placed to benefit from our approach, involving long-term investment, a proper fiscal environment and, as several hon. Members have said, a reduction in the burden of regulation on small and medium-sized enterprises. The hon. Member for Ellesmere Port and Neston (Andrew Miller) was absolutely right to highlight the role of Daresbury and of excellent centres of innovation such as Ellesmere Port. I wish the media would look at industry with clearer eyes. They tend to see it as some sort of smoke-stacked centre, but it has moved on a long way, and Ellesmere Port is an excellent example of how we can progress our industrial base.

In the time I have left, I turn to the heart of our debate: the shape of our local and regional economies. As several hon. Members have pointed out, for many years there has been an evident gap between the greater south-east and the rest of the country, which has rightly generated discussion among politicians, economists and business men and women.

[Simon Danczuk (Rochdale) (Lab)]

Will the Minister give way?

[Mr Prisk]

With respect, I will not give way because the hon. Gentleman has not spoken in the debate and I need to answer the questions asked.

In 1999 the previous Government established the RDAs, which were expressly tasked with a clear goal: to close the north-south gap. Unfortunately, the evidence shows that that has not been achieved. Let me take the north-west as a simple example: between 1990 and 1999, when the RDAs were established, annual growth in the north-west averaged 1.7%, but in the greater south-east it was 2.3%, a gap of 0.6%. Between 2000 and 2008—the latest period for which figures are available—growth averaged 1.5% in the north-west and 2.1% in the greater south-east; again, a gap of 0.6%. Despite spending £3.7 billion over the past decade, the North west RDA failed to make a difference in closing the gap between its economy and that of the greater south-east.

Understandably, hon. Members may well talk about individual projects that they feel have merit, but we have to look at the overall impact over a decade.

[Simon Danczuk]

rose—

[Mr Prisk]

I give way to the hon. Gentleman.

[Simon Danczuk]

On Friday I visited Kingsway business park in my Rochdale constituency. It is one of the largest business parks in the region, if not the country, and a good thing about it is that it is creating jobs—many businesses are starting to locate there. One of the attractions is that businesses receive a relocation grant of about 20% of their costs, which has attracted businesses from all over the country. However, this week we were told that that grant would no longer apply. Why is that? What effect will that have on job creation not just in Rochdale but in the north-west as a whole?

[Mr Prisk]

That is a long intervention, which is a shame because it has prevented me from tackling the broader question. The individual case cited by the hon. Gentleman is a classic example of the danger of the debate: we can all find an individual project that might have merit. The question is whether the gap has closed in 11 years, after spending £3.7 billion. The answer, sadly, is no, which is why we need change.

In answer to questions from those Members who spoke in the debate, I shall set out the key changes that we want to achieve. We need to forge effective partnerships between local business and civic leaders in our communities—and yes, that will mean formal, legal entities. We want greater democratic accountability in what will be vital forums in deciding local economic priorities. The partnerships must be equal between business and civic leaders, because that will help them better understand the needs of local people. In response to the question about universities, I see universities, too, as having an important role in those partnerships.

As several Members said, local economic development needs to be based on real economic areas. Sadly, the boundaries of many RDAs often relate more to the administrative priorities of Whitehall or Brussels than to the actual needs of local areas. I very much welcome what the right hon. Member for Salford and Eccles said about city regions and the various benefits and challenges. Clearly, they are not relevant in every part of England; nevertheless, they are an important dynamic to understand. We must ensure that the boundaries of the economic area that the partnership is seeking to enhance relate to the real economy of today. We need to reform the system by replacing RDAs if we are genuinely to strengthen the local economies of this and other areas.

Our objective is simple: to encourage strong local leadership and to promote economic growth, based on institutions that match the economic reality on the ground and that have the freedom, and therefore the diversity capability, to make a real impact.

I also welcome what the right hon. Member for Salford and Eccles said about the pilots. I am not familiar with the details that she gave, but I would be happy to have a look at them. Total Place has considerable merit as an approach to examining some of the underlying questions.

[Graham Jones]

Will the Minister give way?

[Mr Prisk]

I will not because I have less than a minute left.

In drawing my thoughts to a brief conclusion, I apologise to hon. Members for having been unable to address all their questions. In my book, the north-west is an area with a genuine can-do spirit, as my hon. Friend the Member for Wirral West (Esther McVey) and others mentioned. We in government must therefore understand and enable that, rather than directing and tinkering. We need to ensure that businesses can prosper and grow, which means, yes, creating a new economic landscape. For a few weeks, the level of clarity and certainty might not be perfect, but we will set out our further plans over the coming weeks, and we look forward to dealing with the various requests appropriately and thoroughly.