Industry (Government Support)

Debate between Tony Baldry and Pat McFadden

Wednesday 16th June 2010 Commons Chamber

[Mr McFadden]

No—I have already given way to my hon. Friend and I want to make progress.

Support for industry is not just about specific interventions, but about having the right measures in place to foster investment and innovation, and I want to ask the Secretary of State where we stand on some of the key measures in that area, such as capital allowances, which the Government provide to encourage investment in new plant and machinery. The allowances are vital to manufacturing companies, particularly when we want them to be moving to lower carbon production. For those reasons, we doubled investment allowances in our last Budget, which meant that the new allowance—of £100,000—covers some 99% of capital investments made by companies every year.

The new Government, however, are pledged to cut those allowances to pay for their planned cut in corporation tax, a move described by the Engineering Employers Federation as “a disaster”. It has said that if those plans went ahead:

“Any business would have to think twice about investing in the UK.”

Before the election, the Chancellor said that that plan would involve the removal of allowances amounting to £3.5 billion, which would otherwise support manufacturing. Can the Secretary of State confirm that it remains the Government’s policy to cut investment allowances for manufacturing industry?

Another issue is supporting research and development. We are all agreed that we want research and development, and the manufacturing associated with it, to take place here in the UK. For that reason, the previous Government introduced the idea of a patent box—a corporation tax rate of just 10% on future profits made from patents. When we announced that policy, Andrew Witty, chief executive of GlaxoSmithKline said:

“The patent box is exactly the sort of active, long-term and creative support that we need from the government to ensure that the UK remains an attractive place for highly skilled sectors such as pharmaceuticals.”

When the Secretary of State was asked about that a couple of weeks ago, he did not answer, but I want to give him another chance to do so today. If the new Government believe so much in a lower rate of corporation tax, will he now tell the House whether they support that proposal for an extra-low corporation tax rate for that part of the economy engaged in research and development here in the UK?

On innovation, can the Secretary of State tell us where we stand on the Hauser report and Labour’s plans for innovation centres to help the crossover of ideas between academia and industry?

Let me say a word about the regional development agencies. These were introduced by the Labour Government a decade ago because we had seen the success of the Scottish and Welsh development agencies. They have, for the most part, performed well, with independent evaluation showing that for every £1 spent, regional economies benefited on average by £4.50. I know that the Secretary of State agrees that every part of the country should share in future economic growth. Before the election, he said that

“efficiency has become the new politically correct word for sacking people and cutting services”.

But one of his first acts, together with other Departments, was to take £300 million out of the RDAs, so I know that he will not claim that that was about efficiency. Will he admit that that will have a real impact, with business support cut, projects cancelled and delayed, and—as my hon. Friend the Member for Stoke-on-Trent South (Robert Flello) said, less private investment levered in to those projects?

[Tony Baldry (Banbury) (Con)]

Earlier, the right hon. Gentleman accepted the need to control the budget deficit. Is there any area in which he thinks public spending should be reduced? Can he share just one such area with the House?

[Mr McFadden]

The previous Government set out many proposals, including some £900 million over the next few years in the expenditure of the Department in which I was a Minister. We also said that we would save billions more than that on public sector pay and pensions, and we set out many other proposals. I do not stand here as someone who says that there should never be cuts. My point today is that cuts must be made in a way that supports a strategy for growth, not in a way that militates against it. That is why I raised the issue of industrial support and regional development.

Apart from the Budget, what about the future of the RDAs themselves? Government policy on this is in a total mess. We have had statements that they will be abolished, that they will be replaced, and that their replacements will both be different and look the same. Can the Secretary of State tell the House today exactly what the position is and how he is going to make a judgment on this? He talks of business and local authorities deciding in particular regions. How will that be done? Will it be one vote per council or one vote per business? Will it need a 55% majority? If it will be up to the region, how will he make the judgment on this important issue?