Draft Financial Assistance for Industry (Increase of Limit) Order 2002

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Mr. Hammond: Will the Minister detail which of the schemes to which he referred have spent significantly more than the budget? The Government are telling us that the bucket is empty some 22 months after the Secretary of State predicted that this £200 million tranche would last three or four years.

Alan Johnson: That relates to the hon. Gentleman's question about costs per job. Those statistics are in the annual report, which we must lay before Parliament under the Industrial Development Act 1982, and which we laid before Parliament in September last year. The debate is not about budgets, and we are debating not the budgets for individual schemes but the authority under the legislation as set out in the 1982 Act. The expenditure that brought us back to seek another increase earlier than expected was created by the new schemes that were introduced especially to help small businesses and the UK coal operating aid scheme. The figures announced last week show record numbers of people in work. That is the first quarter since the minimum wage increased to £4.10 on 1 October. Hon. Members will remember an

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employer's organisation that said that we should not apply that increase after 11 September as it might have a disastrous effect on jobs. There has been no such effect, only record levels of employment.

Mr. Hammond: Will the Minister tell us about the trend in manufacturing output, as he is so busy telling the Committee about record employment?

Alan Johnson: I will come to that when I reply to my hon. Friend the Member for Bolsover and others about the manufacturing industry. I will cover the waterfront as far as I can.

The hon. Member for Runnymede and Weybridge asked whether it is yet clear which schemes will still be in force and which will disappear under the Department of Trade and Industry's review. It is too early to say, as work is still in progress. In response to the point raised by the hon. Member for Weston-super-Mare, let me say that part of that review is to make the system more user friendly and to remove some of the complications that businesses and hon. Members experience in dealing with the myriad schemes. The Confederation of British Industry once tried to put them on to a chart, which was difficult. Simplification is a major part of the programme. Three schemes have gone since the last time that the issue was debated in 2000, and that is set out in the annual report. We are closely scrutinising such schemes under my Department's review.

The hon. Member for Runnymede and Weybridge talked about the defaults on long-term guarantees. Since the scheme began 30 years ago, the defaults have been 25 per cent. As an independent assessment, that is not a bad rate in the 35 years in which the scheme has operated.

Hon. Members asked about the Post Office. The Liberal Democrats supported the performance and innovation unit report, which was published in 2000. I believe that the Opposition also supported the report, although it is difficult to tell. The National Federation of Sub-Postmasters and other interested groups certainly supported it. The report said that the Government should protect post offices in rural and deprived urban areas. The rest of the network comprises some 5,000 urban post offices, and the report suggested that in some areas there were too many post offices for each sub-postmaster to make a decent living. They cited, gloriously, the London borough of Islington, where one cannot walk down the road without tripping over a post office. The PIU report said that that was nothing to do with government and that representatives of the Post Office and the National Federation of Sub-Postmasters should meet to see whether there would be any sense in moving to bigger, brighter offices, perhaps with the same number of serving positions, in those urban areas.

That would be nothing to do with the Government unless the discussions showed a need to close urban post offices, in which case the Government should provide the money for a decent exit package for sub-postmasters. That was what we agreed. We accepted

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every recommendation in the PIU report. That is what we announced in 1999, and that is what the money that we want to deal with under section 8 relates to.

Mr. Hammond: How much does the Minister expect to spend under section 8 in relation to arranging for the exit of urban sub-postmasters from the system?

Alan Johnson: As I understand the situation, the report of the agreement between Post Office Counters Ltd. and the National Federation of Sub-Postmasters has still not arrived at the Department of Trade and Industry, so we cannot make an assessment at this stage.

The hon. Member for Runnymede and Weybridge asked when we were likely to seek a further tranche. I said in my opening remarks that I believed that what we are considering would last us another year, at the end of which we would want a fourth and final payment under the Industrial Development Act 1982. The hon. Gentleman asked what would happen afterwards. I have set out two possible routes, and we shall decide which of them to take when the fourth tranche of money under the Act is dealt with.

I shall take this opportunity to discuss manufacturing, which is having a tough time. I do not want to understate the problems of manufacturers. They are having a tough time in America, Germany and Asia. The three major trading regions have all experienced dramatic reductions, with manufacturing output falling further and faster than in the UK. That is ostensibly to do with the situation since 11 September.

We cannot insulate ourselves against changes in the world economy, but 2.5 million jobs were lost in manufacturing under the Conservative Government. Our assistance to manufacturing has included practical assistance through, for example, the industry forum. Participants have been helped to raise their game. For the first time in this maritime nation's history, representatives of government, the shipbuilding and ship repair industry and the trade unions have sat at a table to talk through their problems. That approach has produced practical projects that are being pursued in all parts of manufacturing industry.

Mr. Hammond: Before the Minister passes on to another subject, having blamed the difficulties of the manufacturing industry on 11 September, will he confirm that there were three successive quarters of declining manufacturing output up to the end of September?

Alan Johnson: Yes, I will confirm that if the hon. Gentleman will confirm that his party is still pretending that what is happening has nothing to do with the global situation or Europe. The latter is a relevant issue. Most manufacturers argue to me that the single currency might solve their problems. They will not get much sympathy for that view from many Conservative Members. [Interruption.]

The Chairman: Order. We are straying too far wide of the order.

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Alan Johnson: I agree, Mr. Illsley, and I shall not test your patience any further.

The hon. Member for Runnymede and Weybridge asked about the company Viasystems. I am grateful for the notice that he gave me. I understand that assistance under section 7, not section 8, of the 1982 Act is relevant, but Viasystems received a Government grant of £12 million and £5 million from English Partnerships in 1998, I think. Viasystems is still in operation and negotiations for the return of the money are under way. Clearly, the company has defaulted on the terms of the grants, which were to increase the number of jobs in the north-east. We are trying to get the money back, and discussions are taking place to that end.

Mr. Hammond: I am sorry to interrupt the Minister again. However, the reason for my question was that my understanding is that the business that is now being conducted in the United Kingdom is not just a continuation of the previous business, which was effectively expatriated to the Cayman Islands. What arrangements are in place to prevent people from taking the money, then running before something goes wrong, so that the UK Government are able to recover money in circumstances in which it should be recovered?

Alan Johnson: I am not aware of that level of detail. I am sure that the hon. Gentleman's intelligence is correct. I can tell him that we are in active pursuit of the sums owed and we have asked our lawyers to seek recovery in the courts, if necessary. If the hon. Gentleman is correct, we shall learn lessons from the fact that the situation has been allowed to happen.

I have answered the points raised by the hon. Member for Weston-super-Mare for the Liberal Democrats, except for the one about the hoops that people have to pass through. We are aiming to simplify them. However, as we are dealing with taxpayers' money, we must be absolutely sure that we give it out only on the basis of a very sound business case and that it could not be accessed elsewhere.

The hon. Member for Runnymede and Weybridge asked how sure we are that the schemes are robust. They were independently monitored last year and details are available. That evaluation confirmed that such schemes are cost-effective ways of reducing unemployment and gave them what amounts to a clean bill of health. That is not to say that we cannot improve on them, nor that some of them might not have passed their sell-by date.

Brian Cotter: I am still concerned about how effectively small businesses are represented in the matter of getting over hurdles. What part does the Small Business Service play in rationalisation and in representing small businesses? The Small Business Council also needs to be listened to carefully.

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Alan Johnson: The hon. Member for Runnymede and Weybridge mentioned that the SBS is peripatetic. We try to co-locate the Small Business Service with the RDAs, in order to ensure that their work is properly integrated. That is one of the reasons why the SBS is moving house, so to speak, although it does not impact upon his point about headquarters. It should also be remembered that the SBS is very new—the business link part of it was only introduced last April. We are convinced that it is effective. The Opposition are still pledged to do away with RDAs and with the SBS. Perhaps the hon. Gentleman will tell us—

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