Economic Growth and Employment

Debate between Nadhim Zahawi and Chuka Umunna

Wednesday 23rd November 2011 Commons Chamber

[Mr Umunna]

I agree with my hon. Friend. We all know what is holding back business in taking on workers: the forecast economic projections for this country. That is the real problem. What has been the centrepiece of the Business Secretary’s alternative offer? How will he turn things around? The answer is the regional growth fund. The aim of the fund is to unlock private sector investment, support areas that are dependent on the public sector and help them become more balanced economies. Good. We take no issue with those objectives. We want that money to get to business and to create the jobs that will support growth, yet the scheme has been managed shambolically. It has been an utter fiasco. The fund is a third of the size of the moneys distributed through the regional development agencies, which have been scrapped without effective replacement, so it has been hugely over-subscribed, which demonstrates businesses’ craving for capital. Of the 956 bids received, only 50 were successful in the first round and 119 in the second round. There have been many more losers than winners. It is difficult for the losers, but what of the winners?

Of course, due diligence is needed to ensure the proper use of public funds. The permanent secretary at the Department for Business, Innovation and Skills told the Business, Innovation and Skills Committee that due diligence on successful bids tends to take between two and six weeks, and that until it is complete the successful bidder is not given its money. Yet, clearly, very few successful bidders have received what was promised, because it has taken so long for due diligence to be completed.

I have written to the Secretary of State and tabled parliamentary questions, and in fact the Minister of State, the hon. Member for Hertford and Stortford, who has continually chuntered from a sedentary position today, provided the answers. I tabled those questions to get the answers, to get the facts and to get to the bottom of the delays and mess.

On Monday I received answers to those parliamentary questions, indicating that 30 weeks—30 weeks—after the original announcement just nine of the 50 first-round winners have completed due diligence. When I asked why due diligence has taken so long, I was told:

“It is for successful bidders to initiate due diligence upon receipt of a conditional offer letter from the Department.”—[Official Report, 21 November 2011; Vol. 536, c. 154W.]

Usually, the Government blame us for all the mistakes; now, it seems that they are seeking to pass on blame to the very businesses that they claim to want to help—and the bidder has to pay for the due diligence cost, too.

As it happens, I met—[Interruption.] Ministers shake their heads—

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

Will the hon. Gentleman give way?

[Mr Umunna]

I will in a moment.

Last week I met one of the first-round bidders, who told me that on learning of their successful bid in April they immediately sought to progress due diligence but, despite chasing the Secretary of State’s Department, received no further documentation for four months. When they got it, they immediately responded but, again, heard nothing for another three months—until around the time that my right hon. Friend the Leader of the Opposition raised the issue of the regional growth fund at Prime Minister’s questions. I am sure that the timing was totally coincidental.

Even now, formal due diligence is not complete, and the matter is due to go to the permanent secretary’s committee for approval on 2 December.

--- Later in debate ---

[Mr Umunna]

My hon. Friend is right, and when the Chartered Institute of Personnel and Development looked at the economic effects of the proposal to increase the service requirement from one to two years, the chief economist, Dr John Philpott, said that

“any positive effect on hiring is likely to be offset by a corresponding increase in the rate of dismissals. Increasing the qualifying period for obtaining unfair dismissal rights thus runs the risk of reinforcing a hire and fire culture in UK workplaces. Although the policy change will undoubtedly be welcomed by the de-regulation lobby, it isn’t the way to boost growth and jobs.”

[Nadhim Zahawi]

The hon. Gentleman is now quoting selectively. Will he tell us what the Federation of Small Businesses, which he quoted earlier, or the chambers of commerce think of that policy?

[Mr Umunna]

First, I am not quoting selectively. If the hon. Gentleman would like to go and inspect the CIPD press release, he will see that what I have said is the case.

[Nadhim Zahawi]

What did the FSB say?

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. The hon. Gentleman has had his intervention, and he should please wait for the answer. We do not need comments from the side.

[Mr Umunna]

There we have a Government Member hungry to fire, as opposed to hire, workers.

[Nadhim Zahawi]

Withdraw.

[Mr Umunna]

I withdraw that comment.

The hon. Gentleman asked whether business organisations were in favour of increasing the unfair dismissal service requirement from one to two years. That policy may sound good on the face of it, but what will happen—I say this as a former employment lawyer—is that we will simply end up with more employees making spurious discrimination claims, because there is no service requirement for them. When we put that to businesses, they take quite a different point of view of the policy.