Regional Growth Fund

Tom Blenkinsop Excerpts

Tuesday 1st November 2011 Westminster Hall

[Angela Smith]

I would welcome recognition by the Government that we need far more than what is on offer on the table. We need proper decentralisation of the decision-making processes, more transparency, and a more efficient way of delivering funds to companies. The chances of such funds delivering significant economic growth are about as good as the chances of Huddersfield football club getting a promotion to the championship next year.

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

My hon. Friend is making a valid case. Opposition Members do welcome the regional growth fund, but I will welcome it even more when it actually arrives, as so far only eight businesses have received any funds. Our concerns are reiterated by the EEF, the manufacturers’ association, which is cited in The Northern Echo today. It wants to ensure that

“the funding promised flows through directly to the projects concerned as a matter of urgency.”

Is the current speed at which cash is going to businesses urgent or slow?

[Angela Smith]

My hon. Friend is right. It is not only slow; there is inertia at the heart of the Government’s approach to investment in our economy. That is all down to the Chancellor of the Exchequer, who said this morning, when asked by the BBC, that this is a difficult journey for the UK economy, but that we are determined to complete it, so that we have jobs and growth—only warm words, once again. He will not admit that he has got it wrong, or that he needs a plan B, and that is at the heart of the problem we are facing.

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[Angela Smith]

That is precisely the point. That underlines the fact that the Government are cutting too far and too fast. Their policies risk producing a double-dip recession.

[Tom Blenkinsop]

Another interesting statistic came out today: the purchasing managers index for manufacturing output slumped to 47.4%, below the 50% figure, which is an early indicator of a downturn in manufacturing. That is a scary statistic for us all to take on board.

[Angela Smith]

I completely agree with my hon. Friend. I repeat that we need an economy that looks at the long term, and not just short-term profits. We need to invest in innovation. We need a co-ordinated, well-funded regional growth strategy, not the disparate, unco-ordinated approach that represents too little, too late, from a Government who have fallen asleep at the wheel and lost their way as far as economic growth is concerned.

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[Esther McVey (Wirral West) (Con)]

I congratulate the hon. Member for Penistone and Stocksbridge (Angela Smith) on bringing this timely debate to Westminster Hall. However, having listened to what has gone on, I think that we need to put the debate in context, so here goes. We have to look at the time when the coalition Government took office. We had the biggest deficit ever in peacetime history. We were paying £120 million in interest per day. Labour did too little, too late, and left us with a busted flush. The UK economy has grown by 0.5% in the third quarter of 2011, according to the Office for National Statistics.

[Tom Blenkinsop]

If, as the hon. Lady says, the economy was in such a bad situation when the coalition Government came to power, why did the Chancellor of the Exchequer predicate the deficit reduction plan on 3% growth? To date in 2011, we have growth of less than 1%, which has led to extra borrowing of £46 billion plus.

[Esther McVey]

No, the hon. Gentleman will find that his party left the economy in so bad a situation that we not only had to say, “You will live within your means and spend what you have,” but we had to provide a growth structure so that we could rebalance the economy.

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[Esther McVey]

Not yet. Let me proceed to put the debate in context. Hon. Members talked about the regional development agencies. I will talk favourably about the Northwest Development Agency because the staff there are superb. I have worked with many of them and have a lot of time for them. However, let me give the statistics. From 1990 to 1999, annual growth was 1.7% in the north-west and 2.3% in the south-east—a gap of 0.6%. Between 2000 and 2008, average growth was 1.5% in the north-west and 2.1% in the south-east. We kept that gap of 0.6%, despite spending £3.7 billion over a decade.

[Tom Blenkinsop]

Will the hon. Lady give way?

[Esther McVey]

No, I will not. Therefore, we now have to ask how we will spend money better, how we will live within our means and how we will rebalance the economy. I talk as someone who had her own business for the last 14 years. I have set businesses up and sold them. I also set up the biggest business network for women in the north-west, involving more than 9,000 business ladies. I therefore like to see myself not only as a business woman, but as a pragmatist who knows that we can spend only what we have. That is what the coalition Government were facing.

I hope that I have set the debate in context. The regional growth fund was set up to create a fairer and more balanced economy, in which we are not so dependent on a narrow range of economic sectors and in which new business and economic opportunities are evenly shared across the regions and across industries. That is what we set out to achieve.

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[Eric Ollerenshaw (Lancaster and Fleetwood) (Con)]

It is nice to follow the hon. Member for Rochdale (Simon Danczuk). The regional growth fund must have got something right if there are majority of northern MPs here because the majority of the money has gone to the north, and that, in a sense, is where I want to start. First, however, I congratulate the hon. Member for Sheffield Stockbridge and Penistone (Angela Smith) on getting this debate and on the fight she has put up for her area.

I want to talk about the background of the north-south divide, which Opposition Members seem to forget. The division between the north and the south has been recognised by the Government and by Government Members from the north, but it is not clear whether the previous Government recognised it. In December 1999, former Prime Minister Tony Blair said the north-south divide was as myth and

“an over-simplistic explanation of the problems that regional economies face”.

One wonders where the problems did begin. To be fair, he told The Journal in Newcastle four months later that

“the North South divide exists, and I never said it doesn’t.”

Labour then set up regional development agencies in every region. Even at the time, some Labour Members criticised the fact that London had a regional development agency. At this point, I should declare an interest, having been a member of that RDA. I should tell the hon. Member for Stockbridge and Penistone that I never saw a great deal of transparency in the way that agency dealt with things, but perhaps that was because I was its minority Tory member.

I thought the point of RDAs was to deal with the north-south divide. However, my hon. Friend the Member for Wirral West (Esther McVey) has spoken about the relative decline of the north over the past 13 years. I want to give some figures to illustrate that. The latest figures I have for gross value added in the north—for what the north added to the national wealth—show that between 1995 and 2008, which is before the coalition Government took office, and with 100 being the average, the north-east saw a decline from 82.9 to 78.2, the north-west saw a decline from 90.2 to 86.4 and Yorkshire and the Humber saw a decline from 89 to 82.9.

If we go beneath that to the sub-region and look at my area, we see that Lancashire had a GVA of 88.7 in 1995, but that went down to 78.7 in the figures for 2008. That is a 10 point drop. What was the RDA doing if that was happening?

[Tom Blenkinsop]

What are the actual or nominal figures? What is this 82% of?

[Eric Ollerenshaw]

I am talking about a national average of 100 from 1995 to 2008. The hon. Gentleman’s area declined even further.

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[Angela Smith]

rose—

[Tom Blenkinsop]

rose—

[Eric Ollerenshaw]

I shall give way first to the hon. Lady, and then to the hon. Member for Middlesbrough South and East Cleveland (Tom Blenkinsop).

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[Eric Ollerenshaw]

There are a couple of things to say. My hon. Friend the Member for Wirral West has explained the economic circumstances, and I do not need to go through that again. However, as my hon. Friend the Member for Nuneaton (Mr Jones) keeps pointing out, the bureaucratic cost of the regional development agencies was something like £300 million, before any money got to any business through any due diligence process. We got rid of that, and what I regard as the success in round 2 is the fact that the companies in question are way beyond the normal areas, in Burnley, Wigan and as far as Carlisle and Cumbria—and I hope that my own part of Lancaster is part of that. That is a recognition of where success lies, and what we have learned from the mistakes of the regional development agencies.

[ Mrs Linda Riordan in the Chair]

[Tom Blenkinsop]

The hon. Gentleman is very generous with his time, and although we disagree, he is obviously fighting hard for his local patch. The only point I will make is about the regional growth fund and its significance in the north-south divide. I will go back to the nominal figures for how much was put into the north-east, for example. More, nominally, was going into the north-east. If the regional growth fund is such a great regional pot of cash, why is it less than the money that the Government are spending on mutualising the Post Office?

[Eric Ollerenshaw]

Yet again, because of the circumstance that we were left with by the previous Government. It seems we must go on repeating those figures. I think everyone understands—and that the hon. Gentleman knows it. I was not going to go into this—other hon. Members have mentioned it—but it is not just the regional growth fund that is relevant. There is also the national insurance contribution holiday for new start-ups, and the Localism Bill. Many Government Members believe that the Bill will equip local authorities to do a great deal more for themselves, and get through the sub-regional bureaucracy, which we have abolished, and do something for their areas. They are far more in the picture as to what is successful.

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[The Minister of State, Department for Business, Innovation and Skills (Mr Mark Prisk)]

I congratulate the hon. Member for Penistone and Stocksbridge (Angela Smith) on securing this debate. She will not be surprised to hear that I accept neither her analysis nor her arguments. One of the points that has come from the many excellent contributions, to which I will respond if I can in my reply, is the issue of confidence. The official Opposition will want to raise issues because good scrutiny is part of Parliament, but they should remember that confidence is important for business. Labour needs to be careful not to talk down the economy. I absolutely agree with balanced scrutiny, but point-scoring does not help our constituents, and we should bear that in mind.

The Government believe that if we are to have a sustained recovery, we need a resilient economy—an economy that is balanced between public and private, and between industries. My hon. Friend the Member for Nuneaton (Mr Jones) made a good point when he mentioned the significant drop in employment in manufacturing during the 13 years of Labour Government.

We are also well aware that we need an economy that is balanced across the whole country, which is why we have set out a comprehensive approach to local growth to replace the old RDA system. My hon. Friend the Member for Lancaster and Fleetwood (Eric Ollerenshaw) was absolutely spot on: whatever individual cases may be made about specific projects, the sad reality is that after £16 billion and 10 years of an RDA system that was expressly established to close the gap between north and south, the gap got bigger. A responsible Government cannot ignore that simple fact.

Our strategy incorporates a range of elements, including the regional growth fund. It includes the local enterprise partnerships. The 38 in place cover 99% of the English economy. Local business and civic leaders set what they believe are the right priorities for their local area. We also have 24 enterprise zones, which will accelerate growth in key areas. In Yorkshire and Humber, the area of which the hon. Member for Penistone and Stocksbridge is a part, we see three specific enterprise zones—one in the Sheffield city region, one in the Leeds city region and one in the Hull and Humber area. With those programmes, we have ensured that where we are able to, given the difficult circumstances that we have inherited, we have put money into key infrastructure. For example, we have pressed on with the controversial high-speed rail investment, which is very important for the midlands and Birmingham and the whole north-east.

[Tom Blenkinsop]

rose—

[Mr Prisk]

If the hon. Gentleman will allow me to get on to the regional growth fund, I will let him come in at that stage.

The regional growth fund complements our other growth policies. Worth up to £1.4 billion of public money, it has two crucial objectives: to unlock the private sector investment to enable key projects to proceed, and to support areas that are especially dependent on the public sector, to enable them to have more balanced and resilient economies in the future.

We have had two popular bidding rounds, and the results of the second were announced yesterday. I am sorry that the Labour party is upset that not everyone won. Well, that is life. The reality is that it is a competitive fund, and it seems peculiar that Labour does not understand that rather obvious principle.

Let us look at round 1, which was the subject of Labour’s criticisms. We invited bids up to 21 January this year. We received 464 bids, the total value of which would have been something like £2.78 billion. In April, we were able to confirm the 50 conditional allocations, totalling in the region of £450 million of public money. Importantly, that £450 million of taxpayers’ money was offered up in the knowledge that having looked at those schemes, we could lever in investment from the private sector of £2.5 billion—a balance of five to one. I am pleased to confirm to the Chamber that more than half of the successful projects that we identified in April are already under way. When complete, the schemes in round 1 are expected to create or safeguard 27,000 direct jobs, or a further 100,000 indirect jobs. There are very good quotes from General Motors about how it that is already under way with the Vivaro van project in Luton. We have also heard about Bridon in Tyneside and Bentley in the north-west. My hon. Friend the Member for Wirral West (Esther McVey) mentioned Stobart, and up in Teesside, the restart project is under way.

What worries me about this debate—Opposition Members seem or choose not to understand this—is that the whole point about the programme is that the regional growth fund is designed to unlock private sector investment and lever it into schemes, and as anyone who has been in business knows, that means that payments made by Government will often come in the latter stages of development.

[Tom Blenkinsop]

Labour Members fully understand that public-led investment attracts private-led investment. Will the Minister confirm how many RGF projects have European regional development fund match funding, and whether the Treasury is retaining those ERDF funds from the regions?

[Mr Prisk]

There is a very small proportion of funds related to ERDF in round 1, and even fewer in round 2. My point, which the Opposition do not want to accept, is that when the public sector seeks to invest money, it is doing so to unlock the private sector investment. If we do not get that private sector investment, there will be a problem. The Opposition seem to believe that everything that we do should be measured solely and entirely by how much Government spend. Have they not learned from 13 years that it is how we spend the money that is important?