Industry (Government Support)

Mark Tami Excerpts

Wednesday 16th June 2010 Commons Chamber

[Mr McFadden]

I absolutely agree. That sounds like exactly the kind of project where Government, through the RDA, and business can come together for the benefit of the local area.

Our concern is that the new Government do not understand the role of Government in fostering new industries or may even be ideologically opposed to it, believing, as the Secretary of State has said, that

“one of the most important jobs of Government...is actually to get out of the way”.

Getting out of the way would have done us little good when we were trying to get Nissan to build its battery plant and LEAF electric car in the north-east. It would not have helped us when were extending a loan guarantee to Ford to make the next generation of low-carbon diesel engines here in the UK. It would not have helped us when we were trying to support world-class aerospace at Airbus and Rolls-Royce. It would not have assisted in our ambition for the UK to move into the world premier league in the nuclear supply chain through the loan for Sheffield Forgemasters. Nor would it have done any good when we were trying to attract manufacturers of the next generation of off-shore wind turbines to make their products here in Britain.

[Mark Tami (Alyn and Deeside) (Lab)]

Is not Airbus a perfect example not only of how hundreds of millions of pounds have secured and created thousands of jobs, but of the fact that that money is repayable, and has been repaid, and that royalties are paid on every aircraft sold, which means that this is also a very sound investment for the Government?

[Mr McFadden]

My hon. Friend makes a good point. A lot of industrial support is in the form of loans or loan guarantees. The depiction that the new Government have attempted to create of the indiscriminate giving of grants that were not in the public interest is absolutely not true.

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[Mr McFadden]

The proposals we made on the tax to which the hon. Gentleman refers would have kicked in next year. If I were him, I would not be so cocky about tax just a week before his Chancellor comes to the Dispatch Box to tell us his tax proposals.

To return to my specific questions, will the new Government go ahead with the port development competition that was so pivotal in attracting offshore wind suppliers to the United Kingdom? Will the new Government stand by the support to Airbus and Rolls-Royce, which was mentioned by my hon. Friends? The Government have already caused damaging uncertainty by placing a question mark over those projects. If they abandon them, all their words about manufacturing and rebalancing the economy will rightly be seen as worthless.

[Mark Tami]

Will my right hon. Friend give way?

[Mr McFadden]

No—I have already given way to my hon. Friend and I want to make progress.

Support for industry is not just about specific interventions, but about having the right measures in place to foster investment and innovation, and I want to ask the Secretary of State where we stand on some of the key measures in that area, such as capital allowances, which the Government provide to encourage investment in new plant and machinery. The allowances are vital to manufacturing companies, particularly when we want them to be moving to lower carbon production. For those reasons, we doubled investment allowances in our last Budget, which meant that the new allowance—of £100,000—covers some 99% of capital investments made by companies every year.

The new Government, however, are pledged to cut those allowances to pay for their planned cut in corporation tax, a move described by the Engineering Employers Federation as “a disaster”. It has said that if those plans went ahead:

“Any business would have to think twice about investing in the UK.”

Before the election, the Chancellor said that that plan would involve the removal of allowances amounting to £3.5 billion, which would otherwise support manufacturing. Can the Secretary of State confirm that it remains the Government’s policy to cut investment allowances for manufacturing industry?

Another issue is supporting research and development. We are all agreed that we want research and development, and the manufacturing associated with it, to take place here in the UK. For that reason, the previous Government introduced the idea of a patent box—a corporation tax rate of just 10% on future profits made from patents. When we announced that policy, Andrew Witty, chief executive of GlaxoSmithKline said:

“The patent box is exactly the sort of active, long-term and creative support that we need from the government to ensure that the UK remains an attractive place for highly skilled sectors such as pharmaceuticals.”

When the Secretary of State was asked about that a couple of weeks ago, he did not answer, but I want to give him another chance to do so today. If the new Government believe so much in a lower rate of corporation tax, will he now tell the House whether they support that proposal for an extra-low corporation tax rate for that part of the economy engaged in research and development here in the UK?

On innovation, can the Secretary of State tell us where we stand on the Hauser report and Labour’s plans for innovation centres to help the crossover of ideas between academia and industry?

Let me say a word about the regional development agencies. These were introduced by the Labour Government a decade ago because we had seen the success of the Scottish and Welsh development agencies. They have, for the most part, performed well, with independent evaluation showing that for every £1 spent, regional economies benefited on average by £4.50. I know that the Secretary of State agrees that every part of the country should share in future economic growth. Before the election, he said that

“efficiency has become the new politically correct word for sacking people and cutting services”.

But one of his first acts, together with other Departments, was to take £300 million out of the RDAs, so I know that he will not claim that that was about efficiency. Will he admit that that will have a real impact, with business support cut, projects cancelled and delayed, and—as my hon. Friend the Member for Stoke-on-Trent South (Robert Flello) said, less private investment levered in to those projects?

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[Vince Cable]

Yes, indeed; we are looking at all the projects in a completely practical way. As I said, some of them are good, and some of them are not. It is as simple as that.

[Mark Tami]

The Government are obviously fond of reviews. We are about to have a defence review, which will involve the 400M military transport aircraft project. That will have an important effect on all wing production in the UK. How long does the right hon. Gentleman’s Department think that review will take? Clearly, those companies could make the choice to site the work elsewhere, which would have a dramatic impact on the work force in this country.

[Vince Cable]

That was not part of this exercise. The A400M is clearly a very important project, and we are looking at it using the same kind of criteria—value for money, affordability—and decisions will be made on that, but it was not part of this review.

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[Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)]

I welcome the right hon. Gentleman to his new post. I know that he is committed to industry and manufacturing, even if that did not come out fully in his presentation today. I also thank him for his kind note on my election as Chair of the Business, Innovation and Skills Committee, and I look forward to his coming to our Committee and to talking to him about his future plans for industry and manufacturing.

As a long-standing member of the Business, Innovation and Skills Committee, and as a Member of Parliament representing a constituency with an economy that is heavily manufacturing-based, and which is adjacent to the constituency of the now shadow spokesperson, my right hon. Friend the Member for Wolverhampton South East (Mr McFadden), I had many discussions with local manufacturers in the depths of the recession. Yes, they wanted our public finances cleared up, but the Secretary of State did not mention two other things that came through loud and clear: first, they wanted the level of demand in the economy to be sustained, as they depended on that to sell their products; and secondly, they wanted a range of individual schemes designed and tailored to support weaknesses within the industry, to preserve their future.

[Mark Tami]

Does my hon. Friend agree that a lot of those manufacturers, and especially the smaller ones, feared a double dip more than anything else? They just about survived this recession, but if it happened again, tens of thousands of businesses would go bust?