Industry (Government Support)

Rachel Reeves Excerpts

Wednesday 16th June 2010 Commons Chamber

[Vince Cable]

That was starting to morph from an intervention into a speech. It did not require a great genius to see the fallacies in the bubble economy that was being created, and I was one of many people who saw the problem. However, the hon. Gentleman is getting to the issue of my position, which was also raised from the Opposition Front Bench, so let me deal with the question of cuts, the timing and what the sensible response is. The motion refers to a

“critical moment in the…cycle,”

and talks about recovery being fragile, and it is fragile. There are risks in both directions. If there are rapid cuts in public spending, they of course run the risk of having an impact on growth; we all understand that, but there is the risk on the other side that if we did nothing or delayed taking action, there would be a serious crisis of confidence in the economy because of the sovereign risk crisis that is rolling around Europe.

I was specifically challenged to say why I had changed my mind on the subject, and I will tell the hon. Gentleman when I changed my mind. Before I entered this Government, I spoke at some length to some of the key decision makers in the UK, including the head of the Treasury, and we also had advice from the Governor of the Bank of England. Their advice was unequivocal: in the circumstances that we entered, we had absolutely no alternative but to act decisively and quickly. I always made it clear in opposition that we had to act rationally. We had to take account of growth on the one hand and sovereign risk on the other. Those factors had to be balanced. We have balanced them, and we came to the decision that early action was essential in the light of the circumstances that exist. That was objectively based on the evidence in the economy.

[Rachel Reeves (Leeds West) (Lab)]

The right hon. Gentleman also met the permanent secretary at the Treasury and the Governor of the Bank of England before the election, so I am still not clear how his mind was changed between the election campaign and when he became the Secretary of State. Can he clarify what it was between those dates that made him change his mind?

[Vince Cable]

I do not know whether the hon. Lady was reading the newspapers when she was campaigning for election to this House, but there was a major sovereign debt crisis emerging in Europe. [Hon. Members: “Oh, come on!”] Well, I am sorry, but the gasps from Opposition Members suggest how utterly and completely out of touch they are with the realities of financial markets. We are talking about a very serious crisis, and the Government had to respond to it, as other Governments are doing now.

I congratulate the Opposition spokesman on being honest enough to acknowledge, in a rare departure from tradition, that he had been forward in accepting the need for cuts. Those on the Benches behind him who are so anxious about early cuts need to be aware—the Institute for Fiscal Studies pointed this out—that the previous Government were already engaged in a fiscal tightening of £23 billion for this financial year. We are now being accused of making cuts in the current circumstances, but the previous Government were planning that too.

That was on the record, and it was not just a theoretical abstraction; rather, many of us saw it happening. It happened in the Department for Business, Innovation and Skills, which the right hon. Member for Wolverhampton South East was responsible for. Lord Mandelson was the first Minister to put his Department forward for early cuts, which was why, in the run-up to the election, I attended a meeting of further education college lecturers in my constituency, 70 of whom were going to be made redundant. The reason for that was that those early cuts, introduced by the right hon. Gentleman, were working their way through to the front line of teaching. I then went to one of the leading science laboratories in my constituency, where 40 members of staff were being made redundant because of cuts made by the right hon. Gentleman and Lord Mandelson this financial year, so please let us not have any more of this pious nonsense about early cuts.

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[Margot James (Stourbridge) (Con)]

I must congratulate my hon. Friend the Member for Bracknell (Dr Lee) on his excellent maiden speech, with which I agreed in every respect. I also congratulate the hon. Member for Bolton West (Julie Hilling) on her excellent maiden speech, which was entertaining as well as informative.

I am grateful for the opportunity to contribute to this important debate on support for industry, but we cannot debate support for industry in a vacuum. I do not want to dwell on the past, but none the less we want to learn from it. A lot of the Opposition’s schemes for supporting business when they were in office had a rather half-hearted effect, at best. Many of the schemes, such as the capital enterprise fund, were only subscribed to by 50%. The trade credit insurance fund, which had an original budget of £5 billion, only had a take-up of less than £20 million. Apprenticeships have been hard to fill. A lot of the problems with these schemes are caused by low awareness among industry, eligibility criteria that are far too complex and rule out far too many worthy applicants, and a bureaucracy that small enterprises simply cannot cut through.

[Rachel Reeves]

I thank the hon. Lady for giving way. I am surprised by what she says about apprenticeships, because in my constituency of Leeds West, the number of apprenticeships has gone up from 70 to 210 in the last decade. At Leeds college of building, 400 people started on apprenticeship programmes supported by businesses this year—more than they have ever had before. I am very surprised that she says that people are not taking up places.

[Margot James]

There is a big problem with apprenticeships for a lot of people in my constituency. The college funds NVQ level 2 and 3 training programmes and more and more students are trying to stay in college because they simply cannot get the apprenticeships outside as the employers are too hard up to provide them.

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[Kwasi Kwarteng (Spelthorne) (Con)]

This is the first time I have had the privilege of speaking while you are in the Chair, Mr Deputy Speaker, so I congratulate you on your appointment.

We are in a bit of a déjà vu situation. Labour Members cry about Tory cuts, yet they forget why the cuts have to take place. They are suffering from collective amnesia and forgetting that for the last 13 years they ran this country and the Government on the proposition that they had abolished boom and bust. The former Prime Minister, when he was Chancellor, openly boasted about that. There was a feeling that money would pour in—that there was an inexhaustible pot of gold to be drawn from. It reminded me of Aladdin, who rubbed the lamp and the genie appeared. Labour seemed to think that the genie would appear, they would ask for money and, magically, it would arrive.

[Rachel Reeves]

Does the hon. Gentleman remember that the financial crisis happened across the whole world? Does he believe that the Labour Government are responsible for the budget deficits in all those countries?

[Kwasi Kwarteng]

I remember that very well, but I would point out that, in the five years before the crisis that the hon. Lady speaks of, we were running completely needless deficits. We did not have to run those deficits; we did so because of the concerted attempt by the then Chancellor to expand the state and to keep spending money.

[Rachel Reeves]

Can the hon. Gentleman give us an example of when the Conservative party opposed our spending plans?

[Kwasi Kwarteng]

During the 2005 election, we were—[Interruption]. If I may continue.

The general Aladdin’s lamp approach was shown to be absurd. As the then Government kept rubbing the lamp and the genie came out, they asked for money, but the genie suddenly became rather less giving. At one point, the genie—in form of the right hon. Member for Birmingham, Hodge Hill (Mr Byrne)—wrote a letter and said, “There is no money. We have run out of money.” The reason why we have done so is simply that we were spending too much.

I have a Methodist background. My mother is a Methodist lay preacher, and she would tell the Sunday school, which I attended, about the seven fat years and the seven lean years. Those hon. Members who know the Old Testament will remember that Joseph had a dream in which he dreamt of seven fat cows and then the seven lean cows. [Interruption.] This is not very complicated; it is quite simple actually, so please bear with me. I know that Labour Members have concentration problems sometimes. I am sorry—it was a long time ago. The pharaoh had the dream and he spoke to Joseph. [Interruption.] This is very important and interesting. He asked, “What does this mean?” and Joseph said very simply, “You will have seven fat years and seven lean years.” The whole point is that we are meant to save money in the fat years, so that we can spend it in the lean years. The Labour Government comprehensively failed to do that. They thought that the fat years would run indefinitely. They thought that they had abolished boom and bust.

The point of telling that simple story is to show comprehensively the reason for the cuts mentioned by the hon. Gentleman—I forget his constituency. [Hon. Members: “Sedgefield.”] I apologise; I was perhaps confusing him with another Member for Sedgefield. The hon. Member for Sedgefield (Phil Wilson) referred to them as Tory cuts, but the simple story of Labour’s failure to rein in Government spending in the boom is why we must make these cuts. They are not coming out of the blue or from savageness.

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[Kwasi Kwarteng]

I am fully aware of those facts. The figures show that the ratio of our debt to GDP is 12%. That is higher than any other country in the west. [Interruption.] I am sorry; I stand corrected. The deficit-to-GDP ratio is the highest of any other country in western Europe and, indeed, in the western developed world.

[Rachel Reeves]

I am sorry to correct the hon. Gentleman again. He is right to correct himself—the deficit, not the debt, ratio is 12%—but is he aware that the deficit figure in Greece stands at 14%? Greece is, I believe, in the western world. Is he also aware that we went into the crisis with the second lowest debt-to-GDP ratio in the G7?

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[Matthew Hancock]

I agree with my hon. Friend.

[Rachel Reeves]

rose—

[Matthew Hancock]

It would be a delight to give way to the hon. Lady, who has made so many fascinating interventions this afternoon.

[Rachel Reeves]

The hon. Gentleman has quoted a fascinating statistic, but does it not fly in the face of what those on his Front Bench have been saying about how, because nobody wants to buy our debt—that is what one of his colleagues said earlier—we have to make cuts immediately? If interest rates are going down, surely there are lots of people who want to buy our debt.

[Matthew Hancock]

Interest rates are going down in the market because people can see a Government who are taking action and getting to grips with our problems, who have already made in-year cuts and who will finally put this country back on the path to fiscal sanity. That is exactly why interest rates are going down, which is a commendation on the action that the Government have taken so far.

The point that I will rest on is this. Across this country, businesses are paying interest rates that are in some cases extremely high. They need to borrow in order to invest for the future and get the private sector recovery that even some Labour Members talk about. The single best measure to do that is to have low interest rates and a stable economy, with confidence in the future. That is exactly what this Government’s programme is delivering, and I commend them on that. I strongly support the amendment to the motion, and I look forward to voting for it later.

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[Rachel Reeves (Leeds West) (Lab)]

I welcome you to your position in the Chair today, Mr. Deputy Speaker. It is a pleasure to speak in the debate after so many excellent speeches, not least from the hon. Member for West Suffolk (Matthew Hancock). Ten years ago, he and I started work on the same day at the Bank of England. We had many good debates there and I am sure that they will continue in the House.

It is also a pleasure to follow the maiden speeches of so many Members: the hon. Member for Bracknell (Dr Lee), and my hon. Friends the Members for Bolton West (Julie Hilling), for North West Durham (Pat Glass), for Middlesbrough South and East Cleveland (Tom Blenkinsop), for Wansbeck (Ian Lavery), and for Barnsley East (Michael Dugher). I know that my hon. Friend the Member for Barnsley East shares my concerns about the future of Yorkshire Forward, our RDA.

We have heard lots of stories from Members on the Government Benches about the waste of RDAs. I can only tell them what Phil Thompson, managing director of Resource Print Solutions in my constituency, says. His business, like many in all our constituencies, was hit hard by the recession, but he got through it because of a grant from Yorkshire Forward, which enabled him to buy new machinery and equipment and to keep jobs in-house that he had previously had to contract out. During the recession, he did not lay off a single worker. Because of the support from Yorkshire Forward and changes to shift patterns, he managed to keep people in work. The company is now growing again as we recover from the recession. What Phil’s business needs now and what the British economy needs now is economic growth.

[Mr Hayes]

The hon. Lady is already a distinguished and articulate advocate of her cause—I note it from her many interventions in the debate. In an effort to be helpful on RDAs, may I recommend to her the National Audit Office report and the report that preceded it from the Public Accounts Committee, which make it absolutely clear that in many instances the RDAs are cost-ineffective and insensitive to the very local circumstances that she champions?

[Rachel Reeves]

I thank the hon. Gentleman for that intervention. I think that we can tell from the debate today that different Members, representing different areas of Britain, have different views about their RDAs. I plead with the Minister. Labour Members representing Yorkshire, the north-east and the west midlands have spoken with huge passion about their RDAs. They have related the stories that they hear day in, day out from businesses and the people they represent. Let us keep our RDAs and let them continue to do the work that they are doing in our regions. That is all that I ask.

[Matthew Hancock]

Given what the hon. Lady has just said, does she support the Government policy on RDAs, which is to allow local people to decide whether local economic partnerships should cover the region or a smaller area?

[Mr Deputy Speaker (Mr Hoyle)]

Order. Only one Member can be on their feet at any one time. Please allow the Member to finish before rising again.

[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.

[Several hon. Members]

rose—

[Rachel Reeves]

I shall give way once I have finished citing these examples. Some £3.2 million that would have supported the roll-out of broadband and £2.5 million that would have helped people at risk of redundancy to get back to work are to be cut. I could continue on this, but I shall give way.

[Harriett Baldwin]

I seek clarification, because cuts were announced by the previous Government and I want to find out whether the cuts that the hon. Lady is describing were announced by them.

[Rachel Reeves]

The hon. Lady makes an important intervention, because cuts were already proposed. The hon. Member for West Suffolk asked whether Labour had any plans to reduce Government spending. I can tell him that it had, and this is one example of them. But this is in response to the—

[Several hon. Members]

rose—

[Rachel Reeves]

Sorry, as I am still on my feet—

[Mr Deputy Speaker]

Order. Hon. Members can, by all means, seek to intervene, but if the Member does not give way, they just have to leave it there. We cannot have two Members on their feet at the same time.

[Rachel Reeves]

Thank you, Mr Deputy Speaker. This Government—the party of the hon. Member for West Worcestershire (Harriett Baldwin)—have called for £293 million of cuts from the regional development agencies. Yorkshire Forward was asked to make £44 million of cuts. It was written to and asked to come back with those cuts within two weeks—it had two weeks to determine cuts that will affect 24,000 businesses in my region. These are not Labour cuts; they are Conservative cuts.

I ask the Secretary of State for Business, Innovation and Skills to give my constituents some commitment and some hope and certainty that the work that Yorkshire Forward does to support innovation, manufacturing, jobs and skills will continue. I urge the Government not to destroy the support for jobs and growth that the Labour Government put in place. Without Yorkshire Forward, we would not have brought clean coal to our region and the 1,000 jobs that that means in South Yorkshire. Without Yorkshire Forward, we would not have negotiated a deal with Siemens and GE to bring offshore wind, with thousands of much-needed jobs, to Hull, Grimsby and Scunthorpe.

[Nick de Bois]

What I am hearing today is that growth depends entirely on regional development agencies. We have to liberate businesses from the heavy hand of regulation and taxation that the Opposition imposed under the last Government. That is the way to growth. It is not entirely dependent on the regional development agencies to which the Opposition seem to be so wedded.

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[Rachel Reeves]

The reason that I talk so passionately today about regional development agencies is that they are what the Government intend to cut.

The regional development agencies do not create jobs. I recognise that, and I believe that all Labour Members recognise it. Siemens and GE will bring those jobs, but they could bring the jobs to anywhere in Europe and anywhere in the world. It is the work of the regional development agencies with businesses, on skills and with people in my region that means that those jobs are coming to Yorkshire. That is why I and other Members on this side of the House speak with such passion about the work that the regional development agencies do.

[Matthew Hancock]

Does the hon. Lady agree that there is a short-term populism that pushes us towards more Government intervention? What we need is a thriving and effective private enterprise to lift our economies up and through to better times—not my words but those of Tony Blair.

[Rachel Reeves]

I thank the hon. Gentleman for that intervention. I hope that I have made it clear that I support the private sector’s coming to our region and bringing jobs with it. However, that requires a Government on the side of our communities and of businesses. That means encouraging jobs to come to this country when they could go to any other country in the world. If we were in Germany or China, we would be urging jobs to come to those countries. If we want a level playing field, we need a Government who support industry.

In Yorkshire, we look to Government for support—to honour the commitments on high-speed rail and on Sheffield Forgemasters. They are key to Yorkshire’s future and good for the British economy, too. Yorkshire Forward and regional development agencies have fought our corner in a way that Whitehall simply cannot. The support is critical and it is good for all of Britain. The short-term hatchet job pursued by the Government risks the recovery and will put Britain in the slow lane of the global economy, making reducing the deficit harder because there will be higher unemployment and tax revenues will be weaker. Growth is the essential ingredient that is missing from the Government’s strategy.

Now is the time for some more ambition. In the wake of the recession, we can build a fairer, stronger and more diverse economy, built on skills and high-end manufacturing, if the Government put in place the policies—

[Mr Deputy Speaker]

Order.