Industry (Government Support)

Nadhim Zahawi Excerpts

Wednesday 16th June 2010 Commons Chamber

[Nadhim Zahawi (Stratford-on-Avon) (Con)]

I congratulate the hon. Member for North West Durham (Pat Glass) on her passionate speech about her constituency, and I am pleased to hear how attracted she is to the big society—she is always welcome on the Conservative Benches.

We all know that we are in times of deep economic hardship, but we are now heading in the right direction. A key reason is that we have already begun to fix the wrongs, and our first focus has been on balancing the books. For anyone in any doubt about whether this is the right strategy, I need only point to the commendations that my right hon. Friend the Chancellor received at the G20 summit in South Korea for his efforts in this area. However, although we have made an important start, there are of course many things that we need to do, and for me the importance of business cannot be underestimated. From my experience at YouGov, and from talking to businesses in Stratford, small or large, I know that there are three main areas that people want us to focus on: getting rid of bureaucracy and red tape, simplifying the tax system and giving small and medium-sized businesses tax incentives and easier access to funding. All those areas must be addressed, and I shall endeavour to discuss them today.

It is no coincidence that after 13 years of a Labour Government, business in this country feels bogged down by bureaucracy. I am delighted that one of the first things that we have done is introduce a one-in, one-out policy on regulation. That will change the culture of Whitehall and help those stuck in red tape to free themselves and get on with their business. Next, we need to focus our efforts on the need for a simpler and fairer tax system for business. It is not in our country’s interest for businesses to waste time and resources on decoding the hugely complicated tax system. Someone running a small business is the chief executive officer, the salesperson, the receptionist and the accountant, so the more time they spend on bureaucracy, the less they spend on building up their business.

The abolition of the employer’s contribution to national insurance must be commended. It is an excellent policy, and there are already businesses in my constituency, such as GreenMech, DCS Europe and the brilliant Purity Brewing, applauding this initiative. Even Lord Digby Jones, the previous Government’s adviser, warned against that anti-jobs policy in the other place.

One of the most difficult areas to address is the funding available to SMEs. The previous Government made steps in the right direction, but they did not work. The RDAs have clearly not worked, and they have wasted an enormous amount of taxpayers’ money on bureaucracy. Banks want to lend only when the sun is shining. The previous Administration failed to fix the roof during those times, and it was SMEs that paid a heavy price. However, I am pleased that we have already pledged to ensure that a flow of credit is available to viable SMEs, both by considering a national loans guarantee scheme and by the use of net lending targets for banks. In the future, we must continue to do more to help in that area.

I want to address another matter that is key to strengthening our business sector in this country. We must ensure that our employees of the future are equipped with the skills that can help them and their employers succeed. I for one always looked at the skill and expertise of a potential candidate, rather than just their university education. That is why I am such a strong believer in apprenticeships and the skills that they offer. In a previous life, I did a lot of work with a fantastic charity called Edge, and I applaud the Government’s focus on apprenticeships.

Making things and selling things to the world are going to be vital for our future. That is why we need to support engineering, whether it be mechanical, civil or software engineering. Engineering needs to be seen as an aspirational qualification again. We need only look at Germany, a nation proud of its engineers, to see what can be achieved. For me, we must focus on specific areas of business, in order to create a niche for ourselves as a nation.

[Mr Tom Watson (West Bromwich East) (Lab)]

I am grateful to the hon. Gentleman for giving way—I believe that this might be his first run at active combat in the Chamber, so he is welcome. He talked about software engineering, and his party made a commitment in the election to a tax relief system for the games industry, which is important in the sub-region that he represents. Does he still support that?

[Nadhim Zahawi]

It is important that we look at whatever area we can support, but at the same time—

[Mr Watson]

What do you think?

[Nadhim Zahawi]

I am going to answer the hon. Gentleman. At the same time, we have to remember that we are currently borrowing £500 million, and we have to cut our cloth accordingly.

We must focus on specific areas of business to create our niche. If we look at Britain in relation to our Chinese and Indian counterparts, we see that we can never hope to compete with them on production cost or quantity. That is why we must focus on intellectual property and innovations. We need only look at Formula 1 to see what talent we already have in innovation here in the United Kingdom. As politicians, we need to focus our energy on the recommendations of inventors such as Sir James Dyson. Sadly, however, we are tending to lose our best people to other nations where innovation is better funded. For example, Jonathan Ive, the designer of the iPod—such an iconic brand of our era—is British, but he works for a great American company. We must learn from the USA. Silicon valley is the home of US tech start-ups precisely because of the environment created there by the US Government and because of the support that start-ups receive. We should learn from that and create our own opportunity zones here in the United Kingdom.

I applaud the approach taken so far by the coalition Government, and it is important that we continue to do all we can to encourage growth in the private sector, so that we can continue to create jobs that are sustainable. That will be an important move away from the previous Government, whose policies led to an unsustainable and unrealistic bloating of the public sector. Our future lies in business and, for me, specifically in innovation. What we do now will affect the course of our business future, and I am confident that, with the coalition Government in place, we will succeed.

Let me end by saying that I support the amendment tabled in the name of the Prime Minister and colleagues.

[Several hon. Members]

rose—

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[Rachel Reeves]

Thank you, Mr Deputy Speaker. I am sorry for my enthusiasm.

I welcome the clarification from the hon. Member for West Suffolk that regions will be able to make their own decisions, but that was not my understanding of what the Secretary of State for Business, Innovation and Skills said earlier. [Interruption.] If he did say that, I think that everyone on the Opposition Benches would welcome that. If our regions will be able to make the decisions about our regional development agencies and their future, I welcome that. I am grateful for that clarification, but that was not my understanding of what the Business Secretary said in his statement.

I know that Conservative Members will disagree with this, but I am sorry to say that we do not hear enough from them about growth. They cite the G20 advice about reducing deficits while consistently forgetting about or ignoring the advice in the G20 communiqué for

“credible, growth-friendly measures, to deliver fiscal sustainability”.

That omission on growth is worrying from the perspective of industry and jobs—the subject of today’s debate—because the greatest risk we face is that of a double-dip recession, with the job losses, business failures and higher budget deficits that that would bring.

On Monday, the Chancellor dismissed the possibility of a second recession, but businesses in my constituency are less certain that we are out of the woods. Key to the recovery and to bringing down the budget deficit—we hear a lot about that from Conservative Members—are growth and having a regionally strong and diverse economy. That will not happen by chance; it depends on a strategic Government policy supporting industry in all our regions.

[Nadhim Zahawi]

What does the hon. Lady think about scrapping the national insurance hike for employers? A lot of employers in my constituency will say that the really harmful thing to do to growth is to add to the cost of employing people, thus reducing the net income of a business. What does she think about that?

[Rachel Reeves]

I thank the hon. Gentleman for that intervention. What he describes perhaps comes up less in my constituency than in some others, because average earnings in my constituency are £16,000 a year and the national insurance increase proposed by the previous Labour Government was to apply only to wages of more than £20,000 a year. So that was less of a concern in my constituency.

Britain is the sixth largest manufacturer in the world. If one believed some of the statements made by those on the Government Benches, one would think that the UK did not have a manufacturing industry at all—that is not the case. People in Yorkshire have huge pride in our industrial past. From wool to coal and steel, and to retail and finance, our industries have enriched the region—more than that, jobs and industry in Leeds and Yorkshire have helped to power the UK economy.

The true test of this Government’s strategy and their woolly words about local economic partnerships will be whether they can give local people and businesses a true sense of control over their economic future. That is what Yorkshire Forward and other RDAs have been doing; they have been promoting enterprise and driving economic growth across Britain.

We now know—I am reading what I wrote before the intervention by the hon. Member for West Suffolk—that the RDAs are to be scrapped. Or are they? That wind-down has already started in Yorkshire. The Yorkshire Evening Post today revealed that the proposed cuts to Yorkshire Forward mean that no fewer than 109 projects will see their support slashed and that that will affect 24,160 separate companies our region. Some £1 million that would have been used to help small and medium-sized enterprises to access finance is to be cut. Some £1.4 million that would have helped businesses and universities with research and development is to be cut. Some £2.4 million that would have been spent on Tower Works in Leeds to support the digital and creative industries in my city is to be scrapped.

--- Later in debate ---

[Claire Perry (Devizes) (Con)]

Thank you, Mr Deputy Speaker, for your tutorial on how to be a good parliamentarian. I fear that many of us will let you down before we have learned to do our jobs properly.

I came into this debate to listen, not to speak, but I have found myself compelled to get up and speak on what I think is an incredibly important matter. I apologise for being in and out of the Chamber. I have had a huge visit from the 3rd Regiment Royal Military Police, who I then took for tea. They were marking the maiden speeches out of 10. I am not going to say who did well, but they were quite impressed by some speeches on both sides of the House.

I felt compelled to speak because I have a business background. I went to that bastion of capitalism, Harvard business school, but that was 20 years ago and I have been somewhat cleansed since then. I have had many years of working in consultancy, finance and running my own small business. Then I lived in the countryside and raised my children. On my campaign, I had a reputation for speaking from notes on the back of a fag packet. As this is a no-smoking zone, I have had an upgrade and am speaking from scribbles on the back of some very nice House of Commons paper.

I want to make a couple of specific points and to say why I felt compelled to get up and speak. I am really worried, because I do not think that Opposition Members understand the fundamental reason why we are here today or how Government should support business. We hear lots about micro-interventions and RDAs. Everybody knows that if one visits one’s RDA one will find that they have wonderful and often overlapping agendas with many other parts of the public and private sectors, but they are not lean, honed, efficient and joined-up mechanisms. In many cases, they are the worst bastions of the unaccountable and unelected public sector. They might, in many cases, be doing good work, and that is why they might well have a role to play in many places, as the hon. Member for Sedgefield (Phil Wilson) suggested, but they are not the best way in which to spend precious pounds of taxpayers’ money. However, the Opposition appear to think that that is the right thing to do.

The Opposition also think that micromanaging the economy is the right thing to do. Let me just reference a couple of the myriad schemes that were put in place to support business during the recession. The £10 billion working capital guarantee scheme was designed to underwrite portfolios of loans held by banks, which is such an important part of unlocking the crunched credit system, but it made only £2 billion-worth of guarantees in the time that it was operational. It lent only 20% of its capacity, which suggests that it was not doing what business needed.

Then we had the £75 million capital for enterprise fund, which was designed to do what we would all like to do—get high-tech, high-grade start-ups off the ground—but it lent only half of that money in the time that it was operational. That again suggests that there was a disconnect between what the then Government wanted to do and what business really needed.

[Nadhim Zahawi]

Does my hon. Friend agree that the real problem with these quangos is accountability? A very good local charity in my constituency was the beneficiary of some money from Advantage West Midlands, and it was very grateful for that money. When it asked, “How would you like us to report on our achievement?” the RDA said, “Oh, just write a report; it doesn’t really matter.” So there is no real accountability. Will she expand on that point and on how the coalition’s policy will bring to local people the accountability that will make the difference in terms of efficiency of delivery?

[Claire Perry]

I thank my hon. Friend for that important intervention. The whole issue of accountability and transparency in the public sector is key. One phrase that I love to say is that sunlight is the best disinfectant, and that can be applied to the spending of central Government, local authorities or these unelected, unaccountable quangos, which in many cases are not even consolidated into departmental accounts. It is very easy to pay for junkets to the south of France if one knows that nobody is looking at the books. He raises an incredibly important point on an issue that we have pledged to improve with a far more rigorous and accessible system of transparency in public spending, which I wholeheartedly support.

Let me return briefly to the other schemes that were meant to make such a difference. Do hon. Members remember the £2.3 billion automotive assistance programme—the former Government’s flagship scheme that was going to support the entire vehicle manufacturing system and supply chain? It made only three offers of loan guarantee schemes and only two companies decided to go ahead with them.

Then we had the other enormous underpinning of the British export industry—the £5 billion trade credit insurance scheme, which sought to underwrite firms doing the incredibly valuable job of earning pounds by exporting. Well, it underwrote 109 policies. That sounds reasonable, but they were worth £18.5 million. That sort of micro-meddling and initiative-itis bedevilled the former Government, and as a business person, I feel they do not get what British business needs. But we do.

British business needs three things. First, it needs transport and broadband infrastructure. If my memory serves me right, Labour Members only recently started to get to grips with the concept of high-speed rail, which will do so much to rebalance economic growth across the regions.

As for broadband infrastructure, in rural Britain we are extremely deficient in what will give us a living and working countryside. Instead of grinding through additional taxes, more changes and a digital switchover fee, the Government have a plan to get the broadband network in place. That is incredibly important.

Secondly, British business needs a decent low-taxation environment. On corporate competitiveness, we have gone from 10th in the world to 26th over the last 10 years. We can all give examples from our constituencies of companies that have left the country to move to more benign taxation environments. I am talking just about the headline rate, not the taxation complexity to which my hon. Friend the Member for Stratford-on-Avon (Nadhim Zahawi) referred earlier. Have Members seen the size of our tax code list? The list reaches my waist and I am 6 feet 1 inch. It is a lot of paper and we have developed a whole industry employing lots of people to interpret tax codes for small businesses. The Conservatives’ aspiration is to have the lowest tax rate in the G20 and that is what British business needs.

Thirdly, we need to get regulation out of the way. My hon. Friend the Member for West Suffolk (Matthew Hancock) described the health and safety madness that bedevils businesses of all sizes. Indeed, we have gone from fourth in the world for business regulation benignness to 86th over the last 10 years. We have become a country where people have to wade through acres of red tape to do what they need to do every day.

Over the last 13 years, Labour Members did not get, and still do not get, what British business needs. We are the party that will deliver our promises, which is why I am pleased to speak in support of the amendment for which I shall vote tonight.

[Chi Onwurah (Newcastle upon Tyne Central) (Lab)]

As my right hon. Friend the Member for Wolverhampton South East (Mr McFadden) said at the beginning of the debate, we stand on the brink of a new industrial revolution.

Let me declare two interests. Newcastle was at the leading edge of the first, high-carbon industrial revolution, so we have an interest in seeing a resurgence of industry and manufacturing. As an engineer, I too want to see manufacturing and industrial resurgence. But it is not my interests that lead me. There are five global challenges that require a new industrial response.

First, population and economic growth across the world are stoking demand. Secondly, the global financial crisis has made it extremely important that we grow other sectors. Thirdly, climate change is making many of our ways of building and manufacturing things inefficient. Fourthly, the population of the western world is ageing. That is a good thing; it is good that people are living longer, but it requires different markets and goods— for example, more automotive goods. Finally, globalisation means global markets and global industries.

On the Opposition Benches, we believe that we need to grow our way out of the global financial crisis. The challenges I have enumerated give us many opportunities for growth in the UK, in the north-east in particular; for example, in renewable energies such as wind power, which is why the previous Government invested in NaREC—the New and Renewable Energy Centre—a world-class testing facility for wind turbines in Blyth. Sustainable transport provides another opportunity for growth, which is why the previous Government invested in it by giving grants to enable Nissan to build the electric car facility in the constituency of my hon. Friend the Member for Washington and Sunderland West (Mrs Hodgson).

Some months ago, I visited Newcastle university’s electrical engineering department, where I saw the world-leading research into electric motors that is taking place as a result of the previous Government’s increased funding for research and development. Another example relates to ageing with dignity, as promoted by the centre for ageing and vitality in Newcastle.

We stand at the brink of enormous industrial change and the potential for enormous industry growth. The Government have two possible responses. They can leave things to the market, get out of the way—such a well-loved phrase—and let the existing capital and goods markets figure everything out, or they can put in place the economic and active industrial policies that will support industry. The Government seem to have decided to do the former; or having listened to the words of the Secretary of State for Business, Innovation and Skills, I would say that they have decided to do the former while professing to do the latter. I want to say why that is not in this country’s or even the coalition Government’s interests.

As I have said, I am engineer by profession. I also spent three years getting an MBA to hone my business and management skills. I have worked in France, the US, Nigeria and the UK, as well as travelling extensively for my work. I have seen many different combinations of private and public sector involvement, including the raw entrepreneurship of Lagos street markets. Having listened to Conservative Members expressing their contempt for all regulation, including that on health and safety, I now understand that that is the kind of market economy that they want to bring to this country. I have also worked in the highly regulated labour markets of Germany. I have helped to build small businesses, to grow medium-sized ones and to expand multinationals. I have also helped to set up the framework for the public sector regulation of the telecommunications industry. So I know from bitter experience just how difficult it is to create the virtuous cycle of investment, innovation and job creation.

Let me tell hon. Members what I have found that works. The role of the private sector is crucial—it mobilises investment, creates jobs, innovates and takes risks—but the public sector is equally important. The right regulatory environment gives investors the confidence to invest and helps smaller companies to compete on a level playing field. By providing grants and incentives for innovation and investment and using the public sector procurement process intelligently, the public sector can help emergent industries to flourish. By directing funds to build the right infrastructure, the public sector helps ideas to become businesses. Conservative Members are right: the public sector does not create jobs, but it can provide the soil and fertiliser to enable them to grow. So we need active individuals, partnered by industrial activism. A proactive partnership between the public and private sectors is essential if the UK is to take a leading role in the world’s low-carbon future.

[Nadhim Zahawi]

I am pleased to see a fellow engineer on the Opposition Benches. I recall the hon. Lady not wishing to be here for the election of the Speaker and wanting to go back to play bingo in Newcastle. Is she proposing that the Government give further subsidies to the bingo industry in her constituency?

[Chi Onwurah]

I would thank the hon. Gentleman for his intervention if I could understand the line that he is drawing between bingo and the huge questions that we face. I support the bingo industry—I support all service industries—but he may not have followed today’s debate, which is about Government support for industry, particularly manufacturing and engineering industries. I would appreciate being able to stick to that subject for the rest of my contribution.

Labour’s industrial activism means that there are appropriate grants to support industry across the country. Under Labour, the regional development agency One NorthEast was able to take strategic regional decisions and support new technologies and the complex supply chains necessary to make them successful. I share the utter confusion of my hon. Friend the Member for Sedgefield (Phil Wilson) about Government policy with regard to the RDAs, which are to be abolished but allowed to re-grow in some form that is not entirely clear. That uncertainty is damaging jobs and industry in Newcastle and across the north-east, and I urge the coalition to provide clarity and send signals that a regional strategic decision-making authority will continue to exist.