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6 Nov 2001 : Column 46WH

Employment (South Devon)

12.30 pm

Richard Younger-Ross (Teignbridge): I welcome the opportunity to raise the issues of employment and unemployment in—[Interruption.]

Mr. Nicholas Winterton (in the Chair): Order. Will those who are leaving Westminster Hall please do so silently to enable the hon. Gentleman to be heard by the Chair?

Richard Younger-Ross : Thank you, Mr. Winterton.

I welcome the opportunity to debate employment and unemployment in south Devon. The title of the debate mentions employment because I wanted to touch on low pay and the social deprivation that that causes, as well as on the rise in unemployment in south Devon.

First, I have to dispel a couple of myths. I am sure that most hon. Members have spent time on holiday in Devon and that they remember thatched cottages, white cobbed walls, little streets and sandy beaches. We all have those happy childhood memories, but the reality is far harder, as many people know. Devon is not just a picture-postcard area; there is also social deprivation and poverty.

If we consider how tourism has changed in the last 30 years, we can appreciate some of the dramatic social changes that have occurred. People no longer flock on to trains down to Torquay and Teignmouth and into the South Hams; they go to Luton airport and fly abroad. The tourism industry in Devon has declined. Tourist establishments have been converted into residential care homes, which are now being turned into flats. As they become residential, employment opportunities are lost. There has been a structural decline in what we might call the mainstays or props of the traditional south-west industry.

The other great prop for the south-west, including south Devon, was agriculture. As we all know, it, too, has declined in the last 30 or 40 years. It has been mechanised, which means that fewer people work on the land. Of course, agriculture has had two particularly bitter blows in recent years; the BSE crisis in the 1980s and 1990s and the more recent tragedy of foot and mouth.

Tourism, agriculture and other traditional mainstays of the area are low-income industries. The average income in south Devon is still £100 a week less than the UK average. According to the latest figures that I could find, about 15 per cent. of Berkshire's population pays higher-rate income tax, whereas the figure for Devon is less than 3 per cent., placing it fourth from bottom of the list. That gives us an idea that vast amounts of money are not floating around. Without those high incomes, it is harder for small industries, newsagents and corner stores to flourish.

We would all agree that national unemployment levels are low compared with those of the 1980s and early 1990s. We are grateful for that change, but low unemployment does not mean that an area is wealthy. Low unemployment may mean that many people work for very little money, and it may conceal social deprivation. Low unemployment should not be used as

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an excuse for saying, "Well, everything is all right because everyone has a job." People may have a job and still be struggling. They may not claim benefits because they have been self-employed; Devon has a high percentage of people who have been self-employed. When one is self-employed—I speak from experience because I used to work for myself—one does not sign on when work dries up, because one cannot. One struggles, gets by and borrows money until one gets a little more work. In the meantime, the debts and the problems get bigger. Repairs to the house are not done; one does without.

That reality is often little understood. Public policy is concentrated on areas of high unemployment and city deprivation. The Government have done work on inner-city deprivation but they need to look at social deprivation in rural and other areas, in addition to those that are more obvious or, to use the current expression, more "in your face". Such deprivation is increasing in south Devon. Torbay, a neighbouring area, has had a 10.9 per cent. increase in unemployment over the past year. Totnes, another neighbouring constituency, has had a 7.4 increase in unemployment over the past year.

Teignbridge has had a slight decline in unemployment of 1.4 per cent. However, there are increasing redundancies in the Torbay area, the Teignbridge area and south Devon generally. In my constituency, Centrax, a company that makes parts and settings for jet engines and gas turbines, has just announced 250 job losses. The clay extract company Watts, Blake and Bearne announced earlier this year 60 losses in headquarters staff by reorganising, and recently announced another 50 losses. In addition, Devon Desserts, a successful company that is in the process of liquidation and is being bought out, has lost 16 managers; 400 jobs are hanging in the balance.

It has long been recognised that low-income areas need the introduction of high-skilled jobs. My region has had successes. We had the success of Centrax, for example, which was established in Newton Abbott by Robert Barr, who worked with Frank Whittle on jet engines. It has gone from strength to strength. There is also Nortel, a company in a neighbouring constituency that employs many of my constituents. It has been very successful in the telecommunications industry and in manufacturing mobile phone sets and other linked equipment. However, it has just announced 4,000 job losses. If 4,000 job losses occurred all at once in any major city, everyone would say, "This is dramatic. It is a great loss." However, I do not hear statements decrying these job losses; the Prime Minister is not saying, "Oh, that is a great disaster." Nor do I see the interest in doing something about it. I am sure that, in other contexts and places, that would have occurred.

Centrax has suffered a double blow. Its 250 job losses are occurring as a direct result of the events of 11 September. The jet engine components that it makes go to Rolls-Royce, which makes jet engines for the American executive jet market; people are no longer ordering such jets. The airlines have cut back. That is understandable and cannot be helped but the company has also been affected by direct Government policy.

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Centrax also makes gas turbines. It is affected badly by the climate change levy that has been applied on combined heat and power units and also by the new electricity trading arrangement. The NETA agreement means that companies with combined heat and power are charged and penalised if they put electricity into the grid at the wrong time, rather than being able to sell their spare electricity at any time. The result of that has been a 60 per cent. downturn in the CHP sector and, whereas Centrax might have expected to build five or six turbine sets during the next six months, they will build only one. The Government could take direct action.

I have a general request, and several specific points. My request is that the Government examine how grants are given; what assistance is given and how does it work? The job transition service and the rapid response fund were mentioned in item 4.36 of the November 2000 pre-Budget report, stating:

The Government might help people to move into new jobs but if such people want skilled work, they will have to look in other areas. We in south Devon cannot afford to lose our skills base. If those people stay in south Devon, they may have to move from high to low pay. As I indicated, that has a knock-on effect on other industries and on smaller shops, which are still struggling in my part of the country.

Aid could be given to the aerospace industry by Government contract, although that would not necessarily have an immediate effect on Centrax. However, if the Government were to bring forward military programmes, that might help. If the Government reconsidered their investment in research and development, that might help. I ask the Minister to consider those specific points and pass them on to her colleagues in those Departments responsible for such matters.

The Government's policies directly affect CHP. The climate change levy could be cut for CHP units. We could ensure that the NETA is revised so that small providers are not penalised, and so that it is environmentally friendly and links in with the Government's stated intentions on sustainability. That would promote joined-up government.

Finally, with respect to agriculture and tourism, there is no reason why the Government should not support Devon county council's recovery programme and ensure that it is fully funded. I ask the Minister to do that.

Mr. Nicholas Winterton (in the Chair): It is good to have the Minister with us. We wish her well.

12.42 pm

The Parliamentary Under-Secretary of State for Trade and Industry (Miss Melanie Johnson) : Thank you for those good wishes, Mr. Winterton. I believe that this is the first Adjournment debate for the hon. Member for Teignbridge (Richard Younger-Ross). I wish to congratulate him on securing it, and on raising issues that I know are of concern to his constituents and which I share.

The hon. Gentleman spoke about the difficulties that he and his constituents are facing, partly because of changes in the local economic base and partly because of

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job losses. I will concentrate on some of his points more than others. My parents have lived in his constituency for the past 20-odd years, so I know the area somewhat and can speak with some knowledge of its attractions and the difficulties that it faces. I have first-hand experience as a regular visitor who enjoys the tourism opportunities that the area offers.

Torbay is not in the hon. Gentleman's constituency, but it is worth noting that Torbay is described as the UK's premier tourist resort. He mentioned that there are still many successes and many good things happening in that area. I was pleased to hear that Torbay had a successful summer season and that it continued to do well into the autumn. There are good aspects of what has been happening in that part of the country.

Mr. Adrian Sanders (Torbay): I do not believe that the Government appreciate for one minute the impact of the loss of 4,300 jobs in Torbay since February. The increase in tourism was a direct result of good weather this year, but it in no way begins to negate the impact of those job losses. If those loses had happened in one go in other parts of the country, they would have made the national news. The Minister cannot dismiss the impact by saying that we had a good tourist season.

Miss Melanie Johnson : I was trying to open with some remarks about tourism and I was going to move on to the job losses. If the hon. Member for Torbay (Mr. Sanders) holds his fire for a few minutes, he will see that I will address those issues. I have a little bit of time, so it is worth addressing some of the points that have been raised.

Tourism is still a force to be reckoned with and is still a major part of the economic base of the area. There have been some good tourism stories, even this year, as well as difficulties. I take the point that the hon. Member for Teignbridge made about the relationship with low pay and how people can have a rosy view of what the countryside represents and the difficulties that it faces. We recognise that. Much of the Government's activity increasingly focuses specifically on policies that address the issues facing rural areas all around the country, including the south-west. One of our major changes that will have had a major impact in areas where there is a tradition of low pay is the introduction of the national minimum wage, which I am sure has benefited many in both Torbay and Teignbridge.

The hon. Member for Teignbridge spoke about the difficulties that he and his constituents face because of the loss announced in late October of up to 250 jobs in the aircraft engines sector, which is about a quarter of the work force at Centrax in Newton Abbot. He also explained the impact more widely on Devon, including the job losses in various constituencies; these losses also affect his constituency to a degree. We regret those job losses and local agencies are working closely with the companies to provide the help needed by the employees affected.

The job losses in the telecommunications sector are not a problem specific to south Devon or even the UK, but reflect a sharp downturn in the global telecommunications markets after a period of rapid and sustained growth, from which south Devon benefited

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considerably. There has been a huge increase in jobs in this sector, although I appreciate that numbers have dropped down to pre-1998 levels. Paignton remains by far Nortel's largest global manufacturing operation for its lasers, amplifiers and related components used in optical systems for telecommunications. It is also an important centre of research and development. I entirely understand the points that the hon. Gentleman made about the need to keep the skills base in the area and to build on it.

The Employment Service and Benefits Agency locally are in close touch with Centrax in Newton Abbott about the number and timing of the job losses proposed, so that they are in the best possible position to provide the advice and support that the employees affected will need, particularly to find another job. I am sure that hon. Members share my understanding that future employment is the first thing on people's mind if they face job losses. There will be an application for large-scale redundancy status.

Richard Younger-Ross : It is not simply a matter of finding alternative employment, but of finding a comparable salary. It is no good for someone who is earning £300 a week one week to earn £100 the next. People have mortgages, cars and hire purchase agreements which are lost if they have to downgrade. People tend to move away and that is what I fear will happen.

Miss Johnson : Yes, that was exactly what I meant a moment ago when I spoke about the importance of sustaining centres of research and development as a means of sustaining higher-skilled and better-paid jobs in the sector.

At Centrax, there will be an application for large-scale redundancy status, which will provide immediate access to jobsearch and training programmes, usually available only to the long-term unemployed. Officials in the Department of Trade and Industry remain in close dialogue with companies in the aerospace sector and with the Society of British Aerospace Companies to monitor and evaluate developments. The current reduction in air travel following the tragic events of 11 September is having an inevitable knock-on effect for companies, as the hon. Gentleman recognised, at all levels in the aerospace industry.

Initial discussions with the industry suggest a reduction of production in line with the airlines' capacity reduction of about 20 per cent., but the position is evolving and no reliance can be placed on those provisional numbers. In the longer term, the sector is optimistic about returning to growth. The UK aerospace industry is an excellent example of what the Government hope to achieve in our drive towards a knowledge-intensive, high-productivity economy. Large orders have recently been placed for Airbus. There is still good news nationally in the aerospace industry.

I should like to deal with the redundancies at Nortel Networks, Paignton and JDS Uniphase, Torquay. All the local agencies—including the Employment Service, the regional development association and the Government Office for the region—have been working closely with the companies and the local authority

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throughout the year to ensure that the necessary specific help is delivered. I emphasise that we are succeeding in working effectively across all those agencies to formulate a programme involving large-scale redundancy status, which provides immediate access to the various Government jobsearch and training programmes.

Mr. Sanders : Is the Minister aware that the contract given to Devon training for skills to offer training to people who have not yet been unemployed for six months has, for some reason, been cancelled? Many of my constituents have contacted my office in the past two weeks to inform me that their training programmes are no longer available. Will the Minister investigate that problem and correct it?

Miss Johnson : I shall certainly ask my departmental officials to examine the problem and to discuss it further with him. We shall see what we can do about it.

The Employment Service and the Benefits Agency have continued to try to meet the needs of affected employees. The Government rapid response funding of £250,000 is providing training and support to help back into employment those employees made redundant by Nortel and JDS Uniphase in Torquay. Such help can be accessed for up to 12 months after redundancy. So far, 475 individuals have been supported, with 365 securing employment as a result. I accept that the employment might not be comparable, but it is good news that 365—slightly more than three-quarters—have secured jobs.

South Devon has many advantages to offer, including a beautiful environment and a skilled work force; qualities that have attracted high-tech companies to the area. The current employment difficulties do not alter that attractiveness in the medium and longer term. It is important that the area is marketed effectively to attract the right sort of investment when market recovery comes. That is a job for Invest UK and the regional development agency, working in partnership with the local authorities. The regional development agency is working closely with Nortel as part of its inward investor aftercare programme and Invest UK is in touch with inward investors whenever possible to market existing facilities and skills within the UK.

Invest UK, the Department of Trade and Industry's communications and information industries directorate, the Government Office for the region, the Employment Service and the regional development agency are to meet the hon. Member for Torbay on 13 November to discuss the support that is available to Torbay and the help that is being given through a local task force to help to market Nortel's vacated building to potential inward investors. We hope that we might be able to get a comparable operation to come into the area. Everyone is working with that objective in mind, and I appreciate the support of local Members in trying to achieve it. The chief executive of Invest UK is to visit Devon on 19 and 20 November to discuss inward investment with businesses, the RDA, the Government Office for the region, and Torbay, Plymouth and Devon councils. Much is being done to try to pick up the threads and ensure that jobs of a comparable nature are created. South Devon should not look simply to inward

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investment as a means of increasing employment opportunities and diversifying its economy. A close look should be taken, with all the local partners, at the opportunities for encouraging and supporting business growth locally, including the expansion of businesses, building on potential cluster strengths and opportunities and developing the capacity for entrepreneurship.

South Devon has a range of programmes to help the local economy and to improve skills and employability, including the new European objective 2 programme in the south-west, which is worth £108 million in European grant over seven years. That does not cover the Teignbridge constituency. However, objective 3, the new deal and the new DTI enterprise grant are all opportunities to be grasped.

I am pleased that two major projects by Torbay council and Paignton zoo to regenerate Torquay's harbour area are close to receiving formal offers of support from the objective 2 European regional development fund. Business units are included as part of that scheme. I understand that the total European grant could be worth more than £3.6 million and that those projects have been the focus of Torbay's attention so far. I hope that it will now be possible to consider more widely the potential for objective 2 to support economic development opportunities in the area. There are travel-to-work areas around Newton Abbot and in the Teignbridge area, including Exeter; many people are relatively mobile and can move around locally. Regardless of the specific area for which objective money is available, it can create jobs in neighbouring areas.

So far, little advantage has been taken locally in south Devon of the opportunities that the European social fund provides through the objective 2 and objective 3 programmes to upskill and retrain the labour force. It should be possible to make linkages—for example, between capital projects to provide new employment opportunities such as business units using the European regional development fund and training and retraining support through the European social fund—to ensure that local people have the right skills to access job opportunities.

Richard Younger-Ross (Teignbridge): The hon. Lady mentioned capital projects. Does she include the Kingskerswell bypass?

Miss Johnson : I know that that has been campaigned about for a long time, and I am sure that local Members will continue to do so. As the hon. Gentleman knows, it is not a matter for my Department.

This year, 640 young people in south Devon have left the new deal, 64 per cent. of whom have gone into jobs. Of those, 80 per cent. remain in sustained jobs. That is better than the national average of 75 per cent. The DTI has made nine offers of enterprise grant to small and medium-sized enterprises in south Devon, totalling nearly £0.4 million towards project costs of £2.6 million. That accounts for almost 30 per cent. of the enterprise grant offered in the eligible areas of the south-west as a whole. However, only two applications—both successful—have been made by businesses in Torbay and only one in Teignbridge. No bids were made by

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Torbay in the first year. That is a missed opportunity. There is scope for more bids to be made using the support that is already available to business; I am sure that hon. Members will now be egging people on to do so.

The local regional development agency has been supporting, with more than £5 million, projects worth more than £9 million of investment in south Devon, some of which are completed. Torbay is one of the RDA's five priority areas for regeneration in the south-west. The RDA is, for example, supporting the phase two development of Long Road business park, in Paignton, and the Torquay Living Coasts project to revitalise the waterfront. It is also investing £125,000 from the skills development fund to increase skills for supporting tourism business competitiveness in Torbay.

The Government are trying to help in every way that they can, and to mitigate the effects of 11 September on the economy of south Devon. I am sure that we will continue to do all we can to assist local businesses and local employment. However, I conclude by saying that the news is not all bad and that there are many items of good news for south Devon.

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