Trade, Exports, Innovation and Productivity

Rebecca Pow Excerpts

Wednesday 13th January 2016 Commons Chamber

[Mr Bailey]

I certainly do agree with my hon. Friend. The Government’s original optimistic projections were based on totally unrealistic assessments of their ability to invest and export.

In the limited time available to me, I would like to mention some areas that the Government should look at in order to improve productivity. The three areas that are crucial to productivity are investment, skills and infrastructure. On investment, despite the Government’s best efforts to encourage banks to lend to small businesses, there is still a problem. Even projects such as Project Merlin have failed to address the scale of the needs of small businesses. The Government also need to look at the wider issue. We have heard a lot in this debate about long-termism. We have a financial services market that is geared to short-termism rather than to backing industry. When my own Committee looked into the Kay proposals for changing that situation, we detected no enthusiasm on the part of the Government to adopt them. One thing the Government could do to change this culture is to look at our financial services industry.

It is ironic that a Government wedded to a free-market capitalist economic model have had to resort to asking a communist state-interventionist country to provide the necessary investment for our energy infrastructure. On business support, we heard earlier about the closure of the Business Growth Service, which had been of enormous benefit to small businesses. Its closure is not only a great loss to small businesses; it also sends the wrong signal about the Government’s support and appreciation of them.

On the tax regime, I have heard a lot about corporation tax. Yes, it is part of the mix that is necessary to attract foreign direct investment, but in order to encourage investment by companies that are already here, we need to do something about business tax. We have an absurd position in this country wherein we offer tax breaks for capital investment but when a company invests in new capital, it finds that its business rates promptly go up as a result. There is obvious incoherence and inconsistency, and they are a major deterrent to the investment that is needed to drive up our productivity performance.

On skills, I recognise that the Government are anxious to promote apprenticeships. They are saying all the right things about boosting apprenticeships, but the reality is that in those areas where the shortage is greatest, such as engineering and manufacturing, and where there is the greatest dividend in terms of productivity and export potential, there is still an acute shortage in apprenticeship recruitment. That cannot be cured simply by putting apprentices on courses. It has to come from a change in culture in our education system that makes schools recognise the importance of getting young people into vocational education. That can be done by the Government ensuring that schools have to liaise with local businesses and have to measure where their students go in vocational training, as well measuring their exam results and university entrance. I say again that an incoherence in the Government’s performance is the cut in further education funding, as that is potentially the greatest provider of vocational education.

I am running out of time, so I will just quickly make a comment on infrastructure, which others have mentioned. Any regional economy will tell us that a lack of transport infrastructure is a major handicap for local businesses, and some 62% of businesses complain about this issue. Capital spending on infrastructure has been halved in the past five or six years, and that has to be addressed. The Government have not got this prioritised correctly.

Let me finish by saying that I have highlighted some of the issues we face, many of which need to be prioritised by Departments other than the Department for Business, Innovation and Skills. The cuts in BIS are a clear indication that this Government do not recognise the importance of an industrial strategy, and of having a Department that has the capacity to lead it and to make other Departments work towards the business priorities that are necessary and that are outlined by BIS.

[Rebecca Pow (Taunton Deane) (Con)]

I must take issue with the hon. Gentleman, as my constituency has recently had a massive infrastructure investment in its roads and railway stations. That is paving the way for a new strategic employment site, which will open up the opportunity for thousands of jobs, all of which is helping the economy and our productivity. I am sorry but I disagree with very much of what he is saying.

[Mr Bailey]

The hon. Lady is quite at liberty to do so. I welcome the investment in Taunton, but I would welcome that investment even more if we could have it in the black country, which is the heart of British manufacturing.

Let me conclude by saying that we need a strong Department for Business, Innovation and Skills, we need an industrial policy and we need other Departments signed up to the priorities that will ultimately deliver on our exports and on our productivity, and that will get the tax revenues, which will enable those Departments to invest in their particular priorities. That is not happening at the moment.

--- Later in debate ---

[Roger Mullin]

One alternative would be to base the centre in Dundee. That would solve the hon. Gentleman’s problem.

In addition to university research, there is business research. The need to encourage business investment has been mentioned, particularly in manufacturing, where we have fallen behind. I mentioned earlier the UK spend on research and development at 1.7% of GDP. We all know our manufacturing sector faces some real challenges. North Korea’s manufacturing sector is doing pretty well by comparison with many countries in the world. Its GDP spend is 4%. [Hon. Members: “North Korea?”] Sorry, South Korea.

[Rebecca Pow]

I am interested in what the hon. Gentleman is saying. The Government are offering many budgets and grants and I will highlight one, which is the agri-tech budget. That is seedcorn money for linking agricultural projects with business. In my constituency, for example, we have a wonderful clothmaker, Fox Brothers, which has received money to do research with the local agricultural college to come up with the right wool on the right sheep to produce beautiful clothes. That will help business, and perhaps the Scottish might learn from it, as I know they also have a lot of sheep.

[Roger Mullin]

I thank the hon. Lady for that.

I am not denying—nobody could accuse me of doing so—that the UK Government have been spending on research and development. My argument is that given the future challenges that we face, we are potentially lagging behind nations that will be our major competitors in the future. I am not denying what the hon. Lady says.

Earlier I gave the Minister an incomplete quote from the Medical Research Council on the problem of moving from grants to loans. The full quote is:

“Converting grants to loans may mean that existing schemes such as the Biomedical Catalyst—which has been well received in the sector, supporting 180 business-led research projects and leveraging over £100 million in private match-funding over the course of three years—may not continue in their existing form.”

We have real challenges that need to be faced.

[Huw Merriman (Bexhill and Battle) (Con)]

This being a debate on productivity, may I be innovative by delivering my output in less than the 10 minutes you, Madam Deputy Speaker, have given me?

I congratulate the SNP on the choice of debate. I have learned much—for example, from the hon. Member for Livingston (Hannah Bardell), that the overdraft was created in Scotland. That could be the death knell of a thousand jokes referring to the frugal habits of the Scottish people.

I am disappointed, however, by the motion’s negativity about the UK’s trade and export performance. Between 2009 and 2012, the UK’s exports increased by 23%, despite the global recession making it a horrible time for world trade. These results have been delivered through the Government targeting exports to new growth markets such as China, Brazil, Russia and India, where the British kitemark for quality is recognised and revered. The Prime Minister and other Ministers have made export trips across the globe with businesses from UK plc. That shows the commitment of this Government to trade and exports across the globe. I welcome the ambitious target from my Government of doubling the UK’s exports to £1 trillion by 2020. This will require an extra 100,000 companies to be exporting by 2020.

This having been a five-hour debate, I will avoid repetition by referring to what we have done in my constituency to advance a new product that we hope will be the poster child of exciting new export growth. Within these shores, we produce one of the great liquor exports—a drink that puts colour in the cheeks and rings on fingers, and is toasted across the world. I refer of course to English sparkling wine. The English sparkling wine industry is growing rapidly, making £78 million in 2014 and £100 million in 2015. There are now 470 registered vineyards in England and Wales. In 2014, we produced 6.3 million bottles of sparkling wine—an increase of 42% on the previous year.

Plans are currently in place to register the name “Sussex” as a kitemark brand to compete with champagne across the world. In blind tastings we are beating the great champagne houses at their own game. We would not find the French Government hosting an export reception in Spain and pouring cava, but that is what the UK has previously done in its embassies across the world. I am pleased that under this Government that attitude has changed. Our Government and our embassies are now promoting English sparkling wine as well as other food and drink produce from across the UK.

By reducing corporation tax, setting a permanent investment allowance and providing a research and development tax credit scheme, this Government are allowing businesses such as the wine sector to invest, innovate, export, and grow.

[Rebecca Pow]

Might my hon. Friend make reference to the Great British food unit that the Department for Environment, Food and Rural Affairs is setting up and our long-term plan for promoting British food abroad? That has already made great strides, with chicken legs going to China and pigs’ trotters following, and I have to mention cider from Taunton Deane. There is so much scope to what he is discussing, and perhaps he could include a bit more of it.

[Huw Merriman]

I thank my hon. Friend for placing that point on the record. I am very happy to be the market trader for every single constituency food and drink product, but perhaps I should move on because time does not allow.

I welcome any debate that allows the House to consider how we can make UK plc more productive. I also welcome the Minister’s recognition that UK productivity needs to be enhanced. I take the firm view that a Government who recognise that more has to be done will be a Government who deliver on that front. The UK’s productivity is—to coin an unfortunate phrase, currently, in my vocabulary—our Achilles heel. I welcome the Business Secretary’s launch of a productivity plan to correct this. While the UK’s productivity rate means that it takes a UK worker five hours to produce what a German worker could deliver in four hours, it is also fair to reflect that the UK’s growing employment numbers could be seen to distort productivity rates. As productivity is the measure of production output over input of employees, it is no surprise that the creation of 2 million additional jobs in the UK in the past five years has rendered our productivity lower than that of France, which has produced a lower number of new jobs in the same period than the region of Yorkshire. The key is to upskill these new jobs to become more high skilled and more productive, and this will occur over time.

As a member of the Transport Committee, I would like to focus on the role that capital investment in transport can play in increasing the UK’s productivity. The £60 billion of capital investment dedicated this term to road and rail investment has the ability to improve productivity by enhancing connectivity and bringing workers and businesses closer to their workplace and marketplace. In this respect, it is essential that we look to these projects not just for their transport benefits but for the regeneration that they can bring. In my community, my right hon. Friend the Member for Hastings and Rye (Amber Rudd) and I have been campaigning to deliver high-speed rail from London to Hastings and Bexhill. On that route, it takes two hours to travel from London, while the similar distance to Milton Keynes from the capital can be covered in just over 30 minutes.