Manufacturing

Pat McFadden Excerpts

Thursday 24th November 2011 Commons Chamber

[Mr Sheerman]

I would go 90% of the way with the hon. Gentleman, but I would not accept the word “collapse”, because we still have a vibrant, though much smaller, manufacturing sector in engineering and chemicals. The textiles, engineering and chemicals industries are still there, and have very high productivity, but the capability now is such that we turn out an enormous amount of worsted in a crinkly shed—not one of the magnificent old stone mills—that is working 24/7. I think we underrate the productivity of some of those industries.

I do not want to make Members suicidal, but let us compare the decline of the UK’s manufacturing sector with that of other countries before moving on to something more cheerful. In Great Britain around 8.8% of employment is in manufacturing. Some figures for 2008 indicate 9.8% for manufacturing and 80.8% for services. Things are very similar, if not worse, in the United States, where employment in 2009 was 8.9% in manufacturing and 83.4% in services. The decline of manufacturing in the UK has very much gone in parallel with the experience of the US. By comparison, Germany still has 18.5% in manufacturing and 73% in services, and China has 27.8% in manufacturing and 53% in services.

I want to draw the House’s attention to the UK’s balance of trade, particularly the trade deficit with Germany, which last year was £16.8 billion, and with China, which was £21.6 billion. Whatever is happening today, and despite the depressing interview with Chancellor Merkel last night, which persuaded me that we are on the precipice of a world recession, we must remember that Germany has been very fortunate and that the eurozone has been very kind to German manufacturers over this period. The renminbi, the Chinese currency, which the Chinese conveniently manipulate to give their manufacturing exports every possible advantage, has done the same for China.

I want to dwell on the future and what kind of society we want. It seems to me that we want a wealth-creating society that produces the goods and wealth that can then be shared. Some of us disagree about the levels of individual and corporate taxation, but we all agree that we have to produce the wealth in order to share it, whatever way we choose to do so. I am concerned that if we do not do something in the manufacturing sector we will not have very much to share.

What do we depend on? A core element at every level of activity is the fact that in every facet of human experience success depends on the quality of the people who do the job, their skills and commitment and their desire to do a good job. In the 10 years that I chaired the Education and Skills Committee, that came home time and again. The history of our country is one of clever and skilled people with ingenuity, determination and a hunger to do something. We have had an amazing crop of entrepreneurs. At the heart of our manufacturing problem is the fact that too many people in our country who go to university do not go into manufacturing. I remember walking across the hallowed lawns of Magdalen college with the master some years ago. I asked him whether any of his graduates went into manufacturing or public service. He replied, “Oh no, they all go into the City.” If we continue to make the City and banking the profession of choice, we will be in even more trouble than we are in at the moment.

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

My hon. Friend is drawing attention to the place of engineering in academic ambition. Does he welcome, as a corrective to the problem, the recently announced Queen Elizabeth prize for engineering, a £1 million prize overseen by the Royal Academy of Engineering, which is designed precisely to elevate the status of engineering, creativity and innovation for the next generation of young people?

[Mr Sheerman]

I agree absolutely, and was going to mention that. I was also going to mention the Aldridge Foundation and Rod Aldridge, who founded Capita. He puts a great deal of money into education and is absolutely obsessed with finding entrepreneurs and giving them a chance to become successful.

We must ensure that there is reward for the risk of being an entrepreneur. We have to be open about the fact that that is what we want to reward. No one on either side of the House should fail to realise that. I do not mind seeing entrepreneurs getting super salaries. I have a great deal of sympathy with some aspects of the 99% campaign, but I do not mind people earning a great deal of money and being rewarded if they are entrepreneurs who produce jobs and wealth. I am worried when people in pretty safe and comfortable jobs, who are never going to risk anything, get millions of pounds a year. That is what I do not like.

On skills and training, the STEM subjects are neglected in our country, and we need more young people to stay with science, technology, engineering and mathematics longer.

--- Later in debate ---

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

I have taken part in a number of debates on this matter over the years, including as a Minister in the previous Government and as an Opposition spokesman after the election. Such debates often follow a similar pattern. Labour Members talk about the great wave of industrial closures that happened in the 1980s. We had a flavour of that a minute or two ago. Government Members are tempted to say that manufacturing declined as a proportion of GDP under the Labour Government. It all gets a bit familiar. Whatever the rights and wrongs of those arguments, they are united by two things. First, they tend to look in the rear-view mirror. Secondly, they take little account of the huge wave of globalisation and the enormous technological advances of the past 20 years.

Nobody can underestimate the importance to every developed economy, including ours, of the opening up of China as the factory of the world. To try to pin that on any single Government is to miss the point. No country is immune from its effects. Whatever product one makes, the chances are that it takes fewer people to make it today than it would have taken 20 years ago. It takes fewer people and fewer person hours to make a car today than it did 20 years ago. It is therefore not surprising that the number of people employed in these activities has declined.

It is good that this debate is focused on the future of manufacturing. We should avoid the rear-view mirror stuff that sometimes characterises these debates if we can. Any honest debate about the future of manufacturing has to begin by acknowledging the power and reach of globalisation and the power of technology, rather than pressing the rewind button or taking us on a nostalgic tour of the past.

[Tony Cunningham]

There is a company in my constituency called New Balance, which is the only running shoe manufacturer in the United Kingdom. It sells its running shoes to China. It does that because of the quality of the product. Is that not the way to compete?

[Mr McFadden]

That is a good example. I know that my hon. Friend is a keen runner. In my more conscientious days, I have also done some running. New Balance is an excellent product. He shows that globalisation is a two-way street, not a one-way street.

The emphasis on the past that sometimes characterises these debates can lead to an over-pessimistic discussion about decline and loss. Let us be honest: we make less than we used to, as is clearly shown by the figures. However, I also believe that we make more than we think and more than we sometimes give ourselves credit for. The point made by my hon. Friend the Member for Workington (Tony Cunningham) shows that, and there are other examples. We still make about 1.5 million cars a year, most of them for export. We have heard news today that Toyota has again chosen the UK as the base for a new model, which I understand will create up to 1,500 jobs. We also have a hugely successful pharmaceutical industry with a strong balance of trade surplus.

Although we had a debate earlier about British aerospace that centred on the loss of jobs, that sector as a whole is strong and is an important earner for us. Only this week, Goodrich, a company in the constituency of my hon. Friend the Member for Wolverhampton North East (Emma Reynolds), won a contract to maintain landing gear systems for the United States air force. That company has already taken on 200 people this year, and it aims to keep hiring in the period to come.

[Valerie Vaz (Walsall South) (Lab)]

I thank my right hon. Friend for giving way and the hon. Member for Warwick and Leamington (Chris White) for securing the debate.

May I bring the House’s attention to another success story, which is in my constituency? Chamberlin and Hill has actually won contracts back from China for making castings for turbo-charged engines.

[Mr McFadden]

My hon. Friend makes a very good point. Chamberlin and Hill is a company that I know well and a fine example of what the Germans would call a mittelstand—a medium-sized company—that is doing very well. What is its slogan? It is “Difficult things, done well”, I think, and it does indeed do them extremely well.

As we heard a moment or two ago, we have all been delighted by the news that Jaguar Land Rover is to locate its new engine plant on the boundary of Wolverhampton in the constituency of the hon. Member for South Staffordshire (Gavin Williamson). That investment of more than £300 million will mean more than 1,700 new manufacturing jobs directly, but many more than that in the supply chain and indirectly in the wider economy. In a sense, Jaguar Land Rover is a microcosm of the story of globalisation. Its Indian owner, the Tata group, is investing heavily in new models that are being sold in a number of new markets, which are growing because there is a growing middle class keen to buy high-quality, prestige vehicles. That is also why it is hiring more workers in the constituency of the hon. Member for Solihull (Lorely Burt).

I use those few examples to illustrate that although there has been decline and closure over the years—in my constituency we saw more than our fair share, with the closures of Stewarts and Lloyds, Sankey’s and many others some years ago—the story of manufacturing in the UK is not always one of decline and loss. We need to believe more in what we still make, and resolve to value more the activity of making things. In a short debate such as this, there is not much time to discuss the detailed policy prescriptions that might make that happen, but I should like to mention a few things that we could do to support manufacturing more.

First, as I have said, we can challenge the culture of decline and loss. As a country, we should resolve to be the best place in the world for engineering. That might not mean that we are the biggest manufacturing economy in the world, but we should resolve to be the best place for it. That resolve should be shared by Government, our universities and our top companies, and it should fire the imagination of the next generation about the huge benefits that creativity, innovation and making things can bring.

As we heard a few minutes ago, one positive step in that direction is the Queen Elizabeth prize for engineering, which has just been announced and which the Royal Academy of Engineering will oversee. The Royal Academy is right to emphasise that the benefits of engineering go way beyond pure manufacturing and contribute far more than we think to our wider economy. I personally believe that the boundaries between a rigid manufacturing sector and services are becoming outdated. Rolls-Royce, for example, talks about “manu-services” and about earning as much from maintaining and servicing products as from just making and delivering them. We need to do something about the national resolve on manufacturing.

Secondly, we have to get tax policy right. I want to heed the advice of my neighbour, my hon. Friend the Member for West Bromwich West (Mr Bailey), not to be too partisan, but I say gently that I cannot see how cutting investment allowances helps the Government’s stated aim of rebalancing the economy, at a time when the life cycle of products is getting shorter. It is a £3 billion-a-year hit on manufacturing, to fund a corporation tax cut for banks and other businesses that do not always invest. It seems to me to run completely counter to Government rhetoric about supporting manufacturing. The Government should be making it easier for manufacturing companies to take investment decisions, not more expensive as that change to the tax system does.

Thirdly, we need an active industrial policy. We have become too defensive of the accusation that the Government should not pick winners. There is nothing wrong with a nation looking at the changes that are to come—be they for a low-carbon economy or a more digitally connected world—and resolving that the UK must have the capacity to make the most of them. The Government are a big market player. That should be a priority not only for the Department for Business, Innovation and Skills, but for the Ministry of Defence, the Department of Health, the Department for Education and many other Departments. All should think about their budgets and activities in terms of industry policy, but far too often, they do not do so. The Department for Business, Innovation and Skills should not be the only bit of the Government that thinks about business and industry—thinking about business must be done far more broadly across the board.

Finally, we ought to rethink our definition of making things. It is a touch old-fashioned in the digital age to think of making things only as making things that we can see or touch. Our country is a world leader in creative industries. The truth is that change has meant that people who might have become engineers or involved in manufacturing in the past are now making other things. Our TV formats are exported around the world; our football teams are watched around the world; the computer games that are developed and made in the UK are played around the world; and our musicians are listened to around the world. Everyone involved in those activities is also involved in making things, so our definitions have fallen behind the reality of the modern economy and what we as a nation are good at. Times have changed and creativity has been bent to new ends.

If we think about making things in that broader sense, we will throw into sharp relief the sense of loss and decline that can characterise such debates. My plea is therefore to think about making things in the broader sense. What we need in future is both belief and action to back that belief. If we have those, we can make many more things in that broader sense in times to come.