Industry (Government Support)

Vince Cable Excerpts

Wednesday 16th June 2010 Commons Chamber

[The Secretary of State for Business, Innovation and Skills (Vince Cable)]

I beg to move an amendment, to leave out from “power” to the end of the Question and add:

“welcomes the Government’s £150 million investment in a further 50,000 apprenticeships and their £50 million to support the college building programme that was in chaos under the last Government; further welcomes the extra 10,000 university places on offer for 2010-11; notes with concern the wasteful, ineffective policies pursued by the last Government regarding industrial support, and commends the Government’s plans for local enterprise partnerships that will deliver better value for money and support long-term growth objectives; recognises the need for a review of all projects approved since 1 January 2010 to evaluate their worth to the economy and taxpayer; welcomes Government support for entrepreneurs by reducing bureaucracy and increasing flexibility for both employees and employers; and believes the Government has made a strong early start in providing the conditions for long-term low-carbon economic growth and rebalancing the economy.”.

I have introduced many Opposition day debates and it is a pleasure to be able to respond to one. I know that hon. Members attend such debates for different reasons. Some come to make party points, and that is quite right—it is an Opposition day. Some come for constituency reasons, and I will have something to say later about some of the very specific projects that have been mentioned. I want to put those in context, so hon. Members need not feel that they have to intervene at any moment—

[Joan Walley (Stoke-on-Trent North) (Lab)]

Will the Secretary of State give way?

[Vince Cable]

Let me finish my introduction; I will come to specific projects later.

In relation to taxation, the right hon. Member for Wolverhampton South East (Mr McFadden) knows that I am not in a position to pre-empt the Budget, but if he reads the Chancellor’s speech to the CBI a few weeks ago, he will see that it fully acknowledges that not only do we wish to see lower rates of business tax overall, but we understand the importance of capital allowances in manufacturing.

In my days in opposition, I tried to engage constructively and find common ground, and we have approached today’s motion in that spirit. It includes some excellent statements, to which we are happy to subscribe. I shall start by working through some of those areas that appear to be common ground. The motion states that the

“Government has a crucial role to play in fostering economic growth and in creating a better-balanced economy”.

That is absolutely right, and we totally sign up to it—it is exactly what the Government are about—but it pre-empts the obvious question: why is the economy so unbalanced to start with, and who was running the Government who led it to be so unbalanced? By unbalanced, most of us mean that one sector, and one part of the financial services industry—the City and big banks—became too dominant, while the rest of the economy, including trade in goods and services, and in particular manufacturing, was allowed to decline relatively. That is the imbalance we are talking about.

It is worth putting that in context, however. My hon. Friend the Member for Burnley (Gordon Birtwistle) made this point from a local context a few moments ago. The share of manufacturing in the British economy shrank from just over 20% in 1997 to just under 12% in 2009. Of course, that is a historical trend, but I remember in the 1980s when people were concerned about deindustrialisation. It is worth noting that the rate of decline in manufacturing over the past decade was three times as fast as it was in the 1980s. Manufacturing employment during the period of the Labour Government, when this imbalance grew, fell by 1.7 million—that is the population of Leeds, Sheffield and Glasgow combined. That demonstrates the decline in manufacturing. Furthermore, the number of manufacturing companies fell by 12% over that period. That was the imbalance created when the right hon. Member for Wolverhampton South East and his colleagues were in government.

[Mr MacShane]

I welcome the Secretary of State to his job, and he will recall that I reviewed his memoirs very positively, which added considerably to sales. He is right about the decline, but the same decline is reflected in America, Spain, France and Italy. However, one part of manufacturing as important as the rest is steel, which is an industry that I represent in Rotherham. May I bring steel industry employers and workers to talk with him? Steel requires a complex matrix to do with energy, electricity prices and trade. We had a very good relationship with the right hon. Gentleman’s predecessors, and I ask him whether, at his own convenience—there is no great hurry—I and some steel people could meet him to talk about these issues.

[Vince Cable]

That was a very constructive intervention, and I would be delighted to meet the right hon. Gentleman’s constituents. I met steelworkers before the election—indeed, I went to Redcar, which is now represented by a Liberal Democrat, and met the Corus workers there—and I would be very happy to meet any steelworkers whom the right hon. Gentleman wishes to bring.

[Joan Walley]

I congratulate the right hon. Gentleman on his new post. My intervention, along with that of my hon. Friend the Member for Stoke-on-Trent South (Robert Flello), is made in the spirit of trying to find a constructive way forward. In his speech, will the Secretary of State take account of the existence of heartland areas that have been over-reliant on manufacturing? One such area is Stoke-on-Trent, where we have large inequalities and where we need to do all that we can for manufacturing. Someone in his Department needs to be answerable purely for the ceramics area. We are desperate to meet with him to ensure that we can go forward with the regional development funding, irrespective of who administers it, in partnership with the Government in order to get what Stoke-on-Trent needs.

--- Later in debate ---

[Vince Cable]

I would be very happy to meet the hon. Lady and her colleagues. Her colleague the hon. Member for Stoke-on-Trent South (Robert Flello) spoke up a few moments ago on behalf of the black country—

[Joan Walley]

Stoke-on-Trent.

[Vince Cable]

Indeed. It is part of a conglomeration, but he spoke up for Stoke-on-Trent in particular. I met the chamber of commerce from that area; it came up with some excellent ideas, and I would be happy to meet it and the hon. Lady again. Clearly, this part of the country is deprived and needs special attention, and I am happy to give it.

I return to the question of how the imbalances arose. Of course, there is a trend, but it was aggravated by bad policy. I shall remind Labour Members, not all of whom were here during the period, of some of the big developments that occurred and which produced this excessive decline in manufacturing and the excessive dependence on the banking sector. Five or six years ago, I and other colleagues were warning from the Opposition Benches about the bubble that was developing in the property market, the reckless bank lending that was fuelling it and the instability that it was going to create. We were dismissed at the time as scaremongers, but of course the bubble did burst, with the disastrous consequences that we are now paying for.

Going further back in time—probably to before the right hon. Member for Wolverhampton South East was a Member of the House—a very important report was commissioned by the former Prime Minister, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown). The Cruickshank report set out graphically how the British banking industry simultaneously was pursuing short-term profits while being dependent on a Government guarantee, and was also severely damaging British small-scale business because of the lending practices being adopted. At the time, we urged the Government to act on that report, but nothing was ever done.

[John Woodcock (Barrow and Furness) (Lab/Co-op)]

The right hon. Gentleman talks about the past, but does he agree with the chief executive of the Cumbria chamber of commerce who said it would take the region back to the economic dark ages if we were to scrap the Northwest Regional Development Agency?

[Vince Cable]

I am happy to come to RDAs shortly. We have a view on them, and I have been asked specific questions by the right hon. Member for Wolverhampton South East about them. The hon. Gentleman will also have heard me speak specifically about the north-west at Business, Innovation and Skills questions a couple of weeks ago—but I shall return to that.

[Mr Michael McCann (East Kilbride, Strathaven and Lesmahagow) (Lab)]

The right hon. Gentleman said that, when on the Opposition Benches, he urged the Government to take action against the banks. What were his friends in the Conservative party asking for back then?

[Vince Cable]

The Chancellor of the Exchequer made a very good statement earlier, setting up the commission that will look at the structure of banking. Indeed, we are working together on improving the very poor performance of the banking sector in terms of credit to small and medium-sized lending. The record of the Labour party is terrible in that respect, and we will improve on it.

It is clear that the last Government had an industrial policy. I cede that point. We have to go back to the seminal moment when the former Prime Minister, the right hon. Member for Kirkcaldy and Cowdenbeath, made one of his famous factory visits—to the headquarters of Lehman Brothers in London—and announced:

“I would like to pay tribute to the contribution you and your company make to the prosperity of Britain”.

The consequences of that policy are with us today, in the costs of the collapse, the recession that followed and the enormous problems that we have inherited. That was the industrial policy; that was the imbalance of which hon. Members complain.

[Richard Burden (Birmingham, Northfield) (Lab)]

I welcome the activist approach towards banks that the Secretary of State is outlining. He will be aware that the House has debated the situation of former workers at Longbridge who are still waiting for money from a trust fund promised to them in 2005. At the moment, that seems to be being held up by an argument between Lloyds Banking Group and the Phoenix Four. Will he get involved to try to ensure that they finally receive the money that they deserve and which they were promised so long ago?

[Vince Cable]

I was in Birmingham last week, and people affected by that problem have approached me—indeed, the city council also raised the matter with me—and I have asked for it to be investigated. It is a complex legal problem, but clearly it needs looking at.

I shall proceed to the second statement in the motion with which we agree. The Labour spokesman was explicit, forthcoming and realistic about cuts. The motion reads:

“That this House notes the need for a clear deficit reduction plan”.

It is now going to get one, because on Monday we launched the Office for Budget Responsibility. We now have believable and independent growth numbers on which to construct a budget strategy, and next week the Budget will spell that out in more detail.

[Toby Perkins (Chesterfield) (Lab)]

The Secretary of State will know that he is viewed, in his own party at least, as an economic Nostradamus. Does he seriously expect us to believe that the Office for Budget Responsibility report told him something of which, even with that huge brain of his, he was previously unaware? Most serious financial journalists are saying that the report showed that the previous Government’s forecasts were accurate, so is he seriously telling the House that it led him to a policy so totally different from the one he had been campaigning on for all those months?

[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.

[Mr Hanson]

Whatever may or may not be the case with regard to early cuts, one decision that the previous Government did make was on contracts signed between 1 January and the election involving Vauxhall at Ellesmere Port, Airbus, Sheffield Forgemasters and many others. Will the right hon. Gentleman tell the House when he is going to decide whether those grants can proceed, in order to end the blight on those industries?

[Vince Cable]

If I get fewer interventions, I will be able to get to that point shortly. I am trying to develop the argument and respond to the perfectly valid points that the Labour spokesman made.

[Andrew George (St Ives) (LD)]

Will my right hon. Friend give way?

[Vince Cable]

Okay; once more.

[Andrew George]

I am grateful to my right hon. Friend. I appreciate that he is concerned about interventions, but given that he is saying that his response has been rational, as I believe it has been, he will be aware that my part of the world—Cornwall—is the poorest region in the UK. By the Government’s own admission, it receives less than the Government say it deserves in health funding and for many other public services. The Government rightly propose to abolish the RDAs, but what impact will that have on the poorest regions in the UK, if match money is not available for the convergence programme, for example, and those regions—the most impoverished and the most in need of investment—carry a disproportionate burden of the cuts?

[Vince Cable]

I am heartily relieved that my hon. Friend did not ask me an awkward question about the retail ombudsman, but he is right about Cornwall: it has special problems. As it happens, it has not been well served by the RDA. The South West of England Regional Development Agency covered areas such as Bristol and more prosperous parts of the country, which received an undue share of its attention. In the new structure, which I shall describe shortly, his county, and its county council and businesses, will be in a much better position to advance their cause.

[Mr George Mudie (Leeds East) (Lab)]

Will the right hon. Gentleman give way?

[Vince Cable]

I have taken a lot of interventions. I am always generous, but may I come back to the hon. Gentleman?

I want to pursue the issue of cuts. I have dealt with the issue of immediate cuts; however, the question is where they were going to lead. I know that we have gone quite far in the modernisation of the House, but we have not got as far as PowerPoint projections, so I am a bit limited in what I can show. However, the right hon. Member for Wolverhampton South East will be familiar with the work that the IFS did before the election showing where cuts were going to appear in different Departments, had the Labour party been returned to power. I have here one of its charts, which shows what would have happened to the Department that I now lead. It shows a projection of cuts in the order of £4.4 billion, or 20%. That is what the right hon. Gentleman and his colleagues were planning.

[Mr McFadden]

indicated dissent.

[Hon. Members]

You were.

[Vince Cable]

Indeed they were, although I do not think that the right hon. Gentleman can quite make up his mind whether to apologise or deny.

The IFS is an independent body—it has nothing to do with the Government—and I am talking about what it anticipated. It would be useful to contrast the scale of the cuts that the right hon. Gentleman and Lord Mandelson and his friends were planning to make in their area of government with what we have already done. In the first week of office we had to find cuts, and we found £830 million—we got £200 million back in recycled money and we have made a cut of £630 million. That is a large sum of money, but it is about an eighth of what we know a Labour Government would have taken out of my Department’s spending. [Interruption.] We can quibble about the number, but very large cuts were being planned by the Labour Government, had they been returned to office. Let us be clear about that.

It would be useful to know what Labour was planning to do. The right hon. Gentleman objects to cuts in RDAs and cuts in industrial support, and he objects to the fact that student numbers are not rising by as much as he wanted, but where are the cuts going to come from? All from the science budget? All from FE colleges? I do not know. Perhaps he is too embarrassed to stand up and tell his colleagues on the Benches behind him what he was planning to do, but I would like to know, because we are in the middle of a very difficult spending exercise. I would like his advice, so perhaps I can set up a private meeting with him and Lord Mandelson, so that they can tell me what they were going to do. I would find that instructive.

[Mr Mudie]

Many of us have admired the right hon. Gentleman’s pragmatism and judgment over the years, yet we remember what he said during the election campaign about the danger of clearing the structural deficit within the lifetime of this Parliament, which is a policy of his coalition partners. The Office for Budget Responsibility has now indicated that the structural deficit is much worse, yet the Chancellor is sticking to the same timetable. If the Secretary of State worried about that approach during the election, will he share with the House his worries about the deeper and worse situation that we now face, and the effect that it will have in pushing us back into another recession and increasing unemployment steeply?

[Vince Cable]

Of course there are dangers, and I spelled out earlier the twin dangers that we have to balance very carefully. Lest the hon. Gentleman imagine that I have suddenly developed an enthusiasm for strict public sector discipline, I suggest that he read the pamphlet that I wrote the best part of a year ago, in which I made the case for dealing with the structural deficit rapidly and in a radical way. That is entirely compatible with the strategy that we are now adopting.

[Geraint Davies (Swansea West) (Lab/Co-op)]

Will the right hon. Gentleman give way?

[Vince Cable]

May I just finish this point?

It is clear that the Opposition’s response in the motion to the budget cuts and to the issue of imbalance is really not very serious. Let us examine a couple of other fragments from it. It talks about the “business-led recovery” that they seem to want. I wonder how many people are aware that 21,000 new regulations affecting British companies were introduced in the past 10 years—that is six per working day. How on earth were the previous Government hoping to achieve a business-led recovery when businesses were being prevented from growing? A survey published today by Infotec shows that one in 10 British entrepreneurs were contemplating leaving the country for tax and regulatory reasons. That is the legacy that we now have to address.

The motion also states that the previous Government were

“laying the foundations for the UK to be globally competitive”.

During their period in office, the competitiveness league tables—which are generally accepted—showed that this country fell from seventh to 13th. So that is what they meant by laying the foundations for us to be competitive.

Let me now turn to the vital industrial decisions about which several Labour Members are quite rightly exercised. A significant number of projects were signed up to before the election. Some were good; some were questionable. Many of them raised issues regarding value for money, affordability and other factors. Quite rightly and prudently, we are carrying out due diligence on those projects; we are working our way through them.

I can make one announcement today, however. It is right and proper that we should examine the decisions taken by the previous Government since 1 January, to ensure that they offer good value for money and are in line with the Government’s priorities. That is entirely legitimate. This need for re-examination is something that the automotive industry, in particular, understands and accepts. Equally, however, it has urged us to reach our decisions quickly, given the time that has already elapsed in considering the loan guarantee projects.

The Prime Minister confirmed this week that the Government’s support for the Nissan electric vehicle and associated battery plants would go ahead, and I am today able to announce that the Government have confirmed that a loan guarantee of £360 million will be offered to Ford, and one of £270 million to General Motors Vauxhall. This confirmation is, of course, subject to appropriate pre-conditions for our support being met, and to final decisions by the companies. We understand that GM is considering its next steps in the light of progress in obtaining funding from Germany, and I believe that it might not wish to proceed with our offer. However, the offer has been made and it is now confirmed. That is all I can say today. Decisions will be announced shortly on other specific projects.

[Ian Mearns (Gateshead) (Lab)]

The Secretary of State mentioned the due diligence being conducted on particular projects. The Prime Minister has referred to Lord Mandelson going round the country with a massive cheque book, handing out hundreds of millions of pounds, two thirds of which he said went into Labour marginal constituencies. Will the due diligence also involve taking a close look at where that money is being spent, particularly where those Labour marginal seats are now held by members of the coalition parties?

[Vince Cable]

Yes, indeed; we are looking at all the projects in a completely practical way. As I said, some of them are good, and some of them are not. It is as simple as that.

[Mark Tami]

The Government are obviously fond of reviews. We are about to have a defence review, which will involve the 400M military transport aircraft project. That will have an important effect on all wing production in the UK. How long does the right hon. Gentleman’s Department think that review will take? Clearly, those companies could make the choice to site the work elsewhere, which would have a dramatic impact on the work force in this country.

[Vince Cable]

That was not part of this exercise. The A400M is clearly a very important project, and we are looking at it using the same kind of criteria—value for money, affordability—and decisions will be made on that, but it was not part of this review.

[Andrew Miller (Ellesmere Port and Neston) (Lab)]

I, too, have received the news from General Motors that it might choose not to proceed, because of the current situation. However, if GM is to succeed as a business—as the Prime Minister said he wanted it to—it is important that we should have confirmation from the Government here and now that they will be ready to come back to the table and talk to the company, especially in relation to the next-generation vehicles such as the Ampera.

[Vince Cable]

Of course we are happy to talk to the company any time, and my door is open, but if the hon. Gentleman is saying “Can we have more money?”—

[Andrew Miller]

I did not say that.

[Vince Cable]

Well, the hon. Gentleman said that he wanted to support a new-generation project—

[Andrew Miller]

Oh, come on!

[Vince Cable]

The hon. Gentleman is showing some indignation. I am so used to hon. Members asking for more money, and I am sorry if I have underestimated him—[Interruption.] Okay, if it is simply a question of encouraging a valuable new project, I would be delighted to do that, and I hope that he will arrange an appointment.

[Andrew Miller]

The company is to make a statement in three quarters of an hour. Will the Secretary of State retain his current position and confirm that, should General Motors want that loan guarantee, it will remain open to the company to pursue it?

--- Later in debate ---

[Vince Cable]

I cannot negotiate across the debating Chamber on the basis of announcements that are being made outside this place. It would be ridiculous to ask me to do so. I am, however, happy to keep in close contact with that project and with the people involved. It is clearly an important one, and we have confirmed today that we were willing to support the continuation of the loan. That is all I can say, but I am happy to talk to the hon. Gentleman and others about how we can take this forward constructively.

[Gavin Shuker (Luton South) (Lab/Co-op)]

Will the Secretary of State give way?

[Vince Cable]

I have taken an enormous number of interventions; I will take one from the hon. Gentleman later.

Before I leave the car industry, I must point out that these projects were part of an assistance scheme for the industry, and I think that the Opposition Front-Bench spokesman would acknowledge that they were time limited. Other projects have already made applications, which are being properly considered, but we cannot have a situation in which the car industry, or any other, assumes that it can come to the Government for money, just because it has an interesting project.

It is worth underlining the point that, in large parts of the British car industry, brilliant companies have got through the recession without Government support. My first visit as a Minister was to the Bentley factory in Crewe—[Laughter.] Hon. Members might laugh, but that factory provides thousands of highly skilled jobs and a high-quality product. It is a subsidiary of BMW. It was very badly hit by the recession—it lost half its output—but it kept going. The management took a big pay cut, and the workers joined them, accepting that they had joint responsibility for the company. The company survived; it is now flourishing—it has some of the most sophisticated technology in Britain—and it did all that without a Government guarantee.

[Lorely Burt]

Land Rover, in my constituency, is another brilliant example of a company that has weathered the economic storm. It is now surging forward, and it is investing in research and development. I welcome the decision on GM and Ford, and we should all be concerned about having a level playing field in relation to the UK economy and those in other parts of the world. Can we use R and D investment and capital investment in advanced manufacturing plants such as these to provide at least a level playing field in relation to other countries, and to secure investment for the United Kingdom?

[Vince Cable]

I know that my colleague takes a close interest in these matters. She has represented the interests of Solihull and the factory extremely well over the past few years. I am very happy to talk about her proposal, but I want to emphasise the fact that the automotive assistance scheme does not have a permanently open door. Applications have been made, and they will be dealt with on their merits.

I was giving examples of car companies that have flourished and coped with the recession without coming for Government support. Before I went to visit Bentley, I went to another factory, Cosworth—one of several Formula 1 manufacturers in this country, using very high technology. It was flourishing, providing highly skilled manufacturing employment and was not dependent on Government support, like many others. It is not just the specialist producers either, as mass producers—Honda, for example—are also relevant. Honda took a big hit during the recession and the work force accepted part-time working and cuts in pay in order to keep the company together. They did so, and the company did not come forward asking for specific Government assistance. That will now be the pattern.

We have made it very clear—I made it clear in a speech—that we are willing to do what we can to support growth in the British economy, and we will do it by helping build up competences, skills, research and development and so forth, but we are not in the business of handing out money to individual companies. Quite apart from the merits of the proposal, there is an issue of affordability in the financial climate in which we now operate.

Let me start to conclude by clarifying some things that we want to do. We believe, like the right hon. Member for Wolverhampton South East, that the Government have a role. I do not believe in laissez-faire. The Government have a role; there are many market failures; there is, of course, an important role for Government in this field. It has to be cost-effective, however, and it has to be affordable. Let me summarise some of the things we are starting to do, having been in office for only a month.

The first element is skills. One of the first decisions made by the Government when they came into power was to fund 50,000 apprenticeships. That compares with the 200,000 built up under the last Government over 10 years.

[Mr David Lammy (Tottenham) (Lab)]

It was 250,000.

[Vince Cable]

I am sorry, 250,000. We introduced 50,000 within three weeks. There is a very strong commitment—[Interruption.] We have introduced the funding to support those apprenticeships, which is now being taken up through the National Apprenticeship Service.

[Mr Lammy]

Will the right hon. Gentleman give way?

[Vince Cable]

Let me finish the point. A very rapid move was taken to introduce high-quality apprenticeships —exactly the kind of thing that manufacturing industry requires—from a low base, which we have inherited.

[Mr Lammy]

Will the right hon. Gentleman acknowledge that there is a big difference between suggesting that we need 50,000 apprenticeships and actually finding the businesses to come forward and offer them?

[Vince Cable]

The money has been made available; that is the key point. We know from the National Apprenticeship Service that there is a great deal of interest in this programme and those places will be taken. It is a big advance on the level we inherited. Let me emphasise that, unlike the previous Government, we do not believe that we can fund these things out of thin air. We have funded it by changing our priorities. We have made a decision to cut back on the Train to Gain programme in order to fund these additional apprenticeships. That was based on priorities and on a critical review by the National Audit Office of how the Train to Gain programme operated under the last Government. We discovered that a quarter of all training places would have been funded by the companies anyway, that the programme was paying for the accreditation of skills where those skills already existed and that it was paying for expensive middlemen rather than establishing direct links between businesses and colleges. We now have not just more apprenticeships, but a better mechanism.

Secondly, we want to support further education colleges, which are the basis for post-16 education and training among those who do not go to university. One of the Government’s initial steps was to create a £50 million capital fund, more details of which will be announced tomorrow by the Minister of State, Department for Business, Innovation and Skills, my hon. Friend the Member for South Holland and The Deepings (Mr Hayes). It is worth remembering the Labour Government’s record in respect of FE capital—

[Kevin Brennan (Cardiff West) (Lab)]

Huge investment.

[Vince Cable]

The hon. Gentleman says huge investment. I do not know what Department he served in, but the responsible Minister had to make a profound apology to the House for the complete catastrophe created by the Learning and Skills Council when it invited colleges to come forward with capital works projects. Bids were put in and then approvals followed for 10 times the value of the money available, so that many of those projects had to be cancelled. Colleges across the country are now living with the legacy costs of that. We are now putting in place a firm programme, properly costed, which will deliver serious capital investment to the FE sector.

I was asked what would happen to the regional development agencies. It is very clear from the coalition agreement that RDAs will be replaced by local enterprise partnerships. The right hon. Member for Wolverhampton South East asked perfectly valid questions about how that transition will be managed and how the enterprises and local councils will work together. My colleague, the Minister of State, Department for Business, Innovation and Skills, my hon. Friend the Member for Hertford and Stortford (Mr Prisk), will come forward in due course with proposals explaining how that will happen.

Lest we fall into the idea of believing that all RDAs made a remarkable contribution to the British economy, it is worth reflecting on some of the comments made by the Public Accounts Committee and then the National Audit Office. What we learned from that analysis is that the RDAs absorbed something like £10.6 billion in their lifetime. They did create some employment, that is for sure—at £60,000 per job. That was the cost—much more than twice the average wage, and at a time when there was a labour shortage in the economy and people were coming in from overseas. I repeat that £60,000 was being paid through the RDAs into creating employment. I do not deny that many of their activities were useful, but equally many were not. At Prime Minister’s Questions, the Prime Minister detailed some of the more absurd excesses, and I could have added a few more—the £50,000 party for the South West of England RDA in Center Parcs, champagne receptions in Cannes and many others. Some serious work was done, but it was very costly, raising very serious questions of cost-effectiveness. We now want to create a structure that reflects the real interest of enterprise and local councils.

[Phil Wilson (Sedgefield) (Lab)]

For clarification, the right hon. Gentleman is saying that the regional development agencies are going, so does that mean One NorthEast will be abolished?

[Vince Cable]

Well, it will certainly change. We are leaving it to local people to decide. This is a very original concept for Labour Members, who are used to everything being centrally driven. We believe that very often the best initiatives come from the bottom rather than the top—I know the hon. Gentleman may distrust that, but we do not know what is going to come out of the north-east consultation. It may be—

[Phil Wilson]

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[Mr McFadden]

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[Vince Cable]

Let me finish my point. The north-east councils and local businesses might prefer a structure like the one they already have—it is for them to decide—and there will be a process by which any proposals can be evaluated. In other parts of the country, a different route will be chosen. As I have said, the Minister of State will set out in due course how that transition will be managed.

[Mr McFadden]

I genuinely seek clarification because I am confused by what the Secretary of State is saying. A few minutes ago, he said that the RDAs would be replaced, yet in response to my hon. Friend the Member for Sedgefield (Phil Wilson), he seemed to say that it was a kind of maybe rather than a certainty. This is a really important issue to get clear. Is it true that all RDAs will be replaced, or could that be affected by the consultation that the right hon. Gentleman talks about? To take the example of One NorthEast, if it were the view of business and local authorities—I would like to hear how that will be determined—to retain that RDA, would the Government accept that? It is important to clarify this matter.

[Vince Cable]

For the avoidance of all doubt, they will be replaced, but the structures that emerge could have a regional scope if that is what local people want. That is the answer. The process will be set out in due course. All that needs to be said for the moment in clarifying our position is that the RDAs will be replaced. They did not give consistently good value for money. We need another approach, another structure, and partnerships of local business and councils. That is what this Government will now put in place.

[Phil Wilson]

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[Vince Cable]

I will move on. [Interruption.] The hon. Gentleman appears to be grumbling from a sedentary position. If he feels passionately about the particular structure that operates in his area, there will be plenty of opportunity for him to talk to his local councils and his local businesses. This has to be enterprise-led, not bureaucrat-led or politician-led; it is an enterprise-led initiative. He has to get together with those people and come up with constructive initiatives for his own area.

[Andrew Percy (Brigg and Goole) (Con)]

As someone who represents a constituency in Yorkshire and Humber, may I welcome the moves to abolish the RDAs, which in my area have been driven by the interests of West Yorkshire at the expense of East Yorkshire and north Lincolnshire? As we move towards whatever replaces them, will the Secretary of State confirm that local, sub-regional identities and economies will be respected, and that local people will have a real input?

[Vince Cable]

That is exactly the point. In parts of the country, the sub-regional approach may be more sensible, and we want to create a framework in which that will happen.

[Several hon. Members]

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[Vince Cable]

I will take one more intervention, from the right hon. Member for Tottenham (Mr Lammy), and then conclude.

[Mr Lammy]

This is sounding a bit like an episode of Bird and Fortune. Will the Secretary of State confirm that the RDAs will be replaced, but local people can determine to replace them with what they had before?

[Vince Cable]

The right hon. Gentleman misunderstands completely. [Hon. Members: “Oh.”] He is confusing two different things: one is function, and the other is geography. They are different things. The RDAs will not continue, under any definition of our policy as it emerges through consultation—they will not perform the same range of functions as they do currently. If local people wish it, they might have a regional form, and that will emerge in due course. I think that enough has been said about the matter. I know that the right hon. Gentleman has struggled to take it in, but I think that where we are heading is abundantly clear.

[John Hemming (Birmingham, Yardley) (LD)]

To explain the point to the Opposition, geography varies around the country. The west midlands has a number of city regions, and it would be positive development if each had a local enterprise partnership. We do not know whether Coventry is in or out of greater Birmingham, but we want a city regional basis. The north-east, however, might like a regional approach. My right hon. Friend will agree that the Opposition do not understand the concept of geography and boundaries, and believe in enforcing the same rules across the country, rather than leaving such matters to local people.

[Vince Cable]

That is absolutely right. The basic problem—and the reason that it is taking some time to explain the matter to the Opposition—is that the Opposition believe that the status quo must be protected because they invented it. There will, however, be fundamental changes.

[Catherine McKinnell (Newcastle upon Tyne North) (Lab)]

Will the Secretary of State give way?

[Vince Cable]

I have taken enough interventions.

To conclude as I started, we need private sector-led growth to offset the very difficult cuts that will have to be made in the public sector to restore financial sanity. Some initiatives will require direct Government intervention, but many will not. For example, we are committed to removing the burden of regulation, which mushroomed to alarming proportions. One key step that must happen, and that failed miserably under the previous Government, is to ensure an adequate supply of credit for small and medium-sized businesses. We must have a tax system that is friendly to business, that encourages companies to come here and that is simple. Most fundamentally, however, business wants the Government to clear up the mess in the public finances, as all the business associations make absolutely clear. I do not know how many of the business associations the right hon. Member for Tottenham has talked to, but, with regard to his comments about a business recovery, the business associations make it absolutely clear that they cannot develop business in Britain unless the mess in the public finances is sorted out. They need confidence, certainty and an assurance that the cost of capital will not escalate because of the crisis in finance. That is the priority, that is what we are working on, and that is how the recovery will take place.

[Several hon. Members]

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