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Manufacturing

7. Jim Sheridan (West Renfrewshire) (Lab): If she will make a statement on how public procurement affects productivity and innovation in the UK's manufacturing sector. [182684]

The Secretary of State for Trade and Industry (Ms Patricia Hewitt): The Government spend £109 billion a year on goods and services, which can be a powerful incentive to businesses to develop new products, processes and services. That is why I have brought together industry leaders and trade unions, to ensure, with the Government, that innovation is in fact supported and encouraged by the procurement system.

Jim Sheridan: I thank my right hon. Friend for that response. Does she agree that, in terms of the £109 billion procurement budget, a successful strategy to support manufacturing must make full use of both EU and international law? Does she also agree that the basis for the award of the procurement contracts should not just be the cheapest option, but should take into account the benefits to the British taxpayer, British industry and, most important, British workers?

Ms Hewitt: I entirely agree with my hon. Friend that instead of looking at the cheapest price the criterion has to be, as it is, best value for money. We shall not abandon competition in public procurement, because it delivers best value to the taxpayer and the best result for public services, but I agree that the ideal outcome is to get best value for money and to have the goods made in Britain. That is why we are bringing together manufacturing industry and the Ministers and officials who make procurement decisions. That is why we are backing British manufacturing.

Mr. David Kidney (Stafford) (Lab): There is a growing manufacturing industry in this country in terms of renewable energy. Can my right hon. Friend do anything to encourage the use of renewable energy in public buildings for their heat and power supplies?

Ms Hewitt: My hon. Friend raises an extremely important point. As I think he knows, we have put renewable energy, along with energy efficiency, at the heart of the new energy policy. We are investing substantially in the renewables sector and we are of course encouraging and, in some cases, requiring the public sector to improve its energy efficiency and thus to make more use of renewables.
 
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Inward Investment

8. Bob Spink (Castle Point) (Con): How much inward investment there has been into the UK in each of the last five years. [182685]

The Minister for Trade and Investment (Mr. Mike O'Brien): UK Trade and Investment published the following numbers for inward investment decisions by foreign-owned companies to invest in the UK. In 1999–2000, there were 757 projects; in 2000–01, 869 projects; in 2001–02, 764 projects; in 2002–03, 709 projects and in 2003–04, there were 811 projects.

Bob Spink: I am grateful to the Minister for that response. Does not the Organisation of Economic Co-operation and Development report showing that inward investment to the eurozone is poor while inward investment to the UK—which of course is outside the eurozone—is relatively good, show how wise it is for this country to keep the pound?

Mr. O'Brien: We believe that long-term investment in the UK, especially foreign direct investment or FDI, would improve if Britain were a member of the euro. However, that would depend on the circumstances in which the UK entered the euro. If we entered at the right time and in the right circumstances we would obviously benefit substantially, but we have learned from the failure of the Conservatives in 1992, when they entered the exchange rate mechanism at the wrong time, for the wrong reasons and certainly at the wrong exchange rate. We have our five economic tests, which will, I am sure, enable us to make the right decision at the right time and for the right reasons.

Mr. Martin O'Neill (Ochil) (Lab): Does my hon. Friend agree that it is not only the extra, new foreign direct investment that is important, but continuing investment by foreign companies in existing UK plants? Is he aware that when members of the Trade and Industry Committee visited the United States last week, we received the impression both in Chicago and in Silicon Valley that Britain is still the preferred European location for inward investment from the US, for all the obvious reasons?

Mr. O'Brien: My hon. Friend is entirely right. There were 285 expansions by existing investors—up 22 per cent. on 2002–03—so, as he says, we are seeing that the economic stability; the investment in skills and education; the support provided by the DTI to industry, which is very much a factor that foreign investors see as welcoming for Britain; and the flexible labour market that we have created all ensure that the United States and other countries continue to see Britain as the place to do business. The US improved its investment projects in the UK by 11 per cent. last year, so the US and other foreign investors reckon that Labour has made Britain a good place to do business, which is why the economy is so successful today.

Mr. James Arbuthnot (North-East Hampshire) (Con): What an incredibly complacent answer. The
 
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OECD report last month, to which my hon. Friend the Member for Castle Point (Bob Spink) referred, said that the foreign direct investment

"flows into the United Kingdom fell almost by half in 2003, from a level that was already unimpressive by historical standards."—

in other words, by comparison with what happened under a Conservative Government. Why is it that, under Labour, we have falling investment, the lowest economic growth in the Anglo-Saxon world, the biggest trade deficit in 300 years and a collapse in competitiveness and productivity? Is that anything to do with the fact that the hon. Gentleman is in his position?

Mr. O'Brien: The statistic from the OECD that the right hon. Gentleman quoted relates to investment flows. Under those statistics, Luxembourg, not the UK, is the country that benefits, but no one tends to use those statistics to compare foreign direct investment. No one does. Under the method of collating statistics that considers stocks, the UK is clearly the country in Europe to which most foreign investors want to go. We can compare the statistics under the Conservatives: whereas, this year, 811 projects from abroad have been invested in the UK, 10 years ago under the Conservatives the figure was 431—less than half. Under the Conservatives, when we also saw the disease of Euroscepticism putting Britain at the margins, causing squabbling with European partners and internal divisions in the Government, FDI was going elsewhere. Under Labour, stability is ensuring that foreign direct investment comes to this country.

Mr. Peter Pike (Burnley) (Lab): Does my hon. Friend agree that inward investment into the regions of this country is very important? If we choose to have elected regional assemblies, will they not, in fact, give us more power in the north-west to ensure that more of that inward investment comes to the north-west to create jobs in the manufacturing sector?

Mr. O'Brien: My hon. Friend is entirely right: if we support regional development, as we have been doing, foreign direct investment will flow to the regions, and regional assemblies would certainly enhance that prospect. Our work with the regional development agencies has shown that they are an enormous success. We want to continue that success in the regions.

Sir Robert Smith (West Aberdeenshire and Kincardine) (LD): It was intriguing that the Minister used the number of projects as a measure of inward investment, rather than the impact on the economy of the jobs involved or the value of those investments. Obviously, one large project can have more impact than several small projects that do not add up to the same impact on the economy. Will he explain why the Department considers the number of projects?

Mr. O'Brien: One reason why we consider the increasing number of new projects that find their way into the UK is that they are often high-tech and the number of jobs involved in the UK will expand in the years to come, and the quality of the jobs that we are getting is improving enormously. For example, a manufacturing plant, Abbott Laboratories in Dartford, has set up a substantial new project—one third of new
 
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projects coming to the UK from foreign direct investment are in manufacturing—in which 80 per cent. of the employees must be graduates, and 20 per cent. of them are PhDs. Those are high-tech, highly paid jobs, and that is why getting large numbers of new projects into the UK is so important.

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