Economic Regeneration (Glasgow)

William Bain Excerpts

Wednesday 16th February 2011 Westminster Hall

[Mr William Bain (Glasgow North East) (Lab)]

It is a pleasure to serve under your chairmanship again, Mr Gale, in this important debate on the Glasgow economy. I congratulate my hon. Friend the Member for Glasgow East (Margaret Curran) on securing the debate and on speaking with the experience of 12 years as a parliamentarian serving Glasgow, both in this House and the Scottish Parliament. She was also a champion for social justice when she was a Minister in a previous Scottish Executive.

It is clear that, prior to the global economic downturn in 2008, Glasgow was on the cusp of a real economic renaissance. Between 1998 and 2008, there were more Glaswegians in work than ever before, while 30,000 jobs were created in business services—a 60% increase—and more than 4,000 new jobs in the financial services sector. Glasgow experienced strong retail growth in that period, with 1,500 shops in the city centre, which even now generate £2.4 billion per year in retail sales turnover. Glasgow also extracts real economic benefit from tourism, as the hon. Member for East Dunbartonshire (Jo Swinson) has said. The current expansion in hotel capacity is key to attracting new events and to the hosting of a successful Commonwealth games in 2014.

Even in recent times, major companies have continued to invest in Glasgow’s biggest asset, its people, by announcing major recruitment programmes. In autumn 2010, Vertex, a provider of customer management outsourcing, announced plans to create 368 jobs, while 1,500 new jobs have been announced in the financial sector by Barclays, Santander, esure, Morgan Stanley and Odyssey Financial Technologies. There has also been a 75% increase in the leasing of office space in the city.

I would like to emphasise three points. First, investment in infrastructure is needed if Glasgow is to remain competitive in increasing its output in retail and business services. The particular priorities are upgrading Glasgow’s drainage and water catchment system to mitigate flood risks, and improving transport networks. There is an overwhelming case for constructing a high-speed rail network from London through the major English cities to Glasgow and Edinburgh at the earliest opportunity. That is worth £20 billion in economic benefits to both cities. The city council, the business community, the Scottish Council for Development and Industry, and Labour Members are concerned about the lack of momentum by the Department for Transport in initiating the necessary discussions with the Scottish Government on the planning and financial issues involved in the construction of high-speed track in Scotland. I hope that the Financial Secretary and the Secretary of State for Scotland will encourage the Secretary of State for Transport not to leave that essential work in the slow lane. The Scottish Government also need to play a central role in increasing capacity, principally between Glasgow airport and the city centre, through the reinstatement of capital funding for the Glasgow airport rail link, which has—as my hon. Friend pointed out—the potential to create 1,300 jobs in the west of Scotland. A further priority is the upgrade of major roads, such as the completion of the M74, because half of those who work in Glasgow live in constituencies outside the city’s boundaries—for example, that of the hon. Member for East Dunbartonshire.

Secondly, more has to be done to tackle Glasgow’s historic underperformance in labour productivity, particularly in the service sector. BAK Basel Economics benchmarked Glasgow against a group of 35 European cities, and Glasgow averaged an annual growth rate of 2.3% in productivity from 2000 to 2005, which puts it in the top 10 cities. However, Glasgow lay in 33rd place in relation to measures of labour productivity in 2005, which is relatively low in comparison with other major EU cities. Thirdly, Glasgow’s economy needs to diversify in order to take advantage of the expansion in the renewables sector, of our universities as centres of scientific and other research excellence, and of high-value-added manufacturing.

The life science community within the west of Scotland is home to 180 companies, including those in Nova park, Robroyston in my constituency. Those companies range from major pharmaceuticals, to diagnostics, therapeutics, medical devices, contract researchers and manufacturers, all of which jointly employ more than 80,000 people. However, continued business support from the Government is required to ensure that they flourish in the coming decade.

Glasgow is home to a quarter of the west of Scotland’s core energy sector businesses and many other energy sector supporting businesses. Research undertaken by the sustainable Glasgow initiative found that Glasgow currently emits around 4 million tonnes of CO₂ per annum, which is linked to its energy use. The initiative proposes a series of measures to reduce those carbon emissions, such as renewable energy systems, fuel switching and energy management systems.

[Ann McKechin (Glasgow North) (Lab)]

I am speaking as a Glasgow constituency Member rather than as an Opposition Front Bencher. I very much welcome what my hon. Friend has said. Does he agree that Glasgow is a perfect location for the new green investment bank proposed by the Government, given its track record not only in financial services, but in innovation and in having a connection with the renewable energy sector?

[Mr Bain]

I am most grateful for that intervention. As on so many other matters, my hon. Friend anticipates the argument I was about to advance. She has pointed out why it is particularly regrettable that the creation of the green investment bank, which could kick-start many renewable energy projects in Glasgow, has been caught up in a game of Whitehall pass the parcel. As the Secretary of State for Business, Innovation and Skills revealed last week, plans for capitalisation are unlikely to be published before May at the earliest. It is still uncertain whether the green investment bank will have sufficient operational independence from the Treasury, and there is a wider need for capital for new innovatory business start-ups. In addition, there is a strong argument for investigating the case for a wider British investment bank.

The city council has identified low pay as an area requiring urgent attention. In 2006, the average Glaswegian earned 2% less than the UK average, but thanks to the adoption of a living wage policy—first of £7 an hour, but rising to £7.15 an hour this year—by 150 businesses that employ 50,000 people in Glasgow, average earnings are now 3% above the UK average.

It would not be fair to leave out the records of the Scottish and UK Governments in recent months on assisting Glasgow in developing a strategy for growth. I regret to say that Glasgow has not been particularly well served by either Government. The city council experienced a cut in funding of 3.6% from the Scottish Government, which was 1% more than previously indicated and is the worst financial settlement since 2007. Despite that, the city council has made job creation, particularly for young people, a priority. It has invested in the Commonwealth apprenticeship initiative, through which 241 companies took on 600 apprentices last year, and the Commonwealth jobs fund, which aims to create 1,000 jobs for young unemployed people across Glasgow through a £6,500 subsidy per job. That is open to every private and third-sector employer in the city.

However, it is clear that, at a UK level, the cut in capital and investment allowances is affecting manufacturing exporters and harming Glasgow business. The UK Government’s failure to continue the future jobs fund beyond the spring and the revelations this morning that fewer people will proceed through the Government’s work programme than under the initiatives of the previous Government add to concerns that the hard-earned progress on employment levels of the past 13 years will slip backwards. As my hon. Friend the Member for Glasgow East intimated in her remarks, incomes will also be damaged by the Government’s proposals on housing benefit, which it has been estimated will cost £10 million to £12 million a year in lost spending capacity by the poorest families and individuals in the city.

The Glasgow economy has the potential for continued growth in existing and new areas in the next decade, but it will require Government at all levels to exhibit a sustained and credible strategy for growth, rather than simply a plan for an over-hasty fiscal retrenchment that may cost jobs and damage Glasgow’s competitiveness.