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26 Oct 2005 : Column 133WH—continued

Local Enterprise Growth Initiative

4.30 pm

Joan Walley (Stoke-on-Trent, North) (Lab): It is always a genuine pleasure to serve under your chairmanship, Mr. Marshall.

I start by saying how pleased I am to have the opportunity to raise the case for Stoke-on-Trent to be granted funding under the local enterprise growth initiative, which is commonly known as LEGI. I am pleased that the Minister is here today because if ever an area needed a leg up and a helping hand, ours does. I intend to flag up the importance of Stoke-on-Trent's proposed bid, which will be made by the local strategic partnership and the city council by 9 December.

I appreciate only too well that the funding is competitive and that the Minister will not be able to tell me at the end of the debate that our bid will succeed. However, I know equally well that if it is to be successful, it needs the support of the Government office for the west midlands and of the regional development agency, which is Advantage West Midlands.

I make no apology whatever for my twofold purpose in raising this matter. First, I want to prepare the ground for the hurdles that we must overcome regionally and, secondly, assuming that we are successful, I want to ensure that the Government understand fully the scale of the problem facing us in Stoke-on-Trent and the need for a joined-up government approach—that is sometimes elusive—from the Treasury, the Department for Work and Pensions, the Department of Trade and Industry and the Office of the Deputy Prime Minister. I hope that that provides a good background for the decision and that we are successful.

I was pleased to hear in the 2005 Budget introduced by my right hon. Friend the Chancellor that there would be an extra £50 million of this funding for 2006–07, which I understand is set to rise to £150 million for 2008–09, for the country as a whole. On hearing that, I immediately contacted the relevant bodies in Stoke-on-Trent to ensure that they would be well prepared to make a bid. I have read through the literature, and it is clear that in the first phase funds will stretch to perhaps only one successful bid per region.

The Parliamentary Under-Secretary of State, Office of the Deputy Prime Minister (Jim Fitzpatrick ) indicated assent.

Joan Walley : I see the Minister nodding. If the money is to be targeted on encouraging enterprise in the most deprived areas, as it will be because of its links with neighbourhood renewal, the case for Stoke-on-Trent is overwhelming. I want to set out the case for that.

First, we have excellent partnership arrangements and widespread support for the bid from delivery partners. I have already received a letter—I am happy to leave it for the Minister to peruse later—from the elected mayor of Stoke-on-Trent, setting out our delivery team and the importance of the bid. It is clear from the extent of the work that has been done so far and how the proposal has been drawn up that, subject to Stoke-on-Trent being successful, the money will be immediately put to good use on capital and revenue projects.
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That will build on our success in managing enterprise units, business incubation units and enterprise events in schools—I am patron of the primary enterprise club in Stoke-on-Trent—and on our work with business mentors and with promoting inward investment and skills and training initiatives. A £5 million construction skills college has recently been built in my constituency and we need to build a culture of enterprise throughout that work. I make no bones about that. We have the experience and the determination to make the bid work if we are successful.

Business Link, Business Initiative and Business Brokers are backing this bid, as is the local education authority, which is contributing to it, as are the local universities, the north Staffordshire regeneration zone, the chamber of commerce and the Learning and Skills Council. We have partnership working.

It is important to bring to the Minister's attention his Department's housing market renewal programme that operates across north Staffordshire. I am sure he knows that Middleport in my constituency is one of two areas of major intervention that are to get under way quickly. The plans there are closely linked with the co-ordinated regeneration that is under way in Burslem through the work of the Burslem regeneration company, which I am very involved with.

Straight away, if the bid were approved, we would have the opportunity to connect with the housing renewal work that is proceeding. I am mindful of a seminar that I chaired in the House of Commons recently due to my work as a member of the all-party group on regeneration. We examined housing market renewal and concluded that it must link up with economic renewal if it is to succeed.

By ensuring that we connected the proposed LEGI bid with other work being done by the ODPM, we would avoid any proliferation of schemes or initiatives. We would not be reinventing efforts that were already under way. We could ensure that there was a perfect fit with the work the Department has already undertaken across north Staffordshire.

Mr. Iain Wright (Hartlepool) (Lab): My hon. Friend is gracious in giving way because she has only a short time in which to speak. May I declare an interest? Hartlepool is also bidding for part of the LEGI money, so I suppose that she and I are in competition. Does she agree that one of the true barriers to lifting deprived areas into prosperity relates to easy access to capital markets and finance? I know that in Hartlepool and the wider region of the north-east, the banking structure and access to capital markets are not as strong as they should be. The City of London is symbolically and physically a long way from Hartlepool and Stoke-on-Trent. Does she agree that that is a key part of what LEGI could achieve?

Joan Walley : Indeed I do. I hope that my hon. Friend and I will both be on the winning side when the Government announce which bids are successful. I cannot graciously offer the same hope in terms of a forthcoming football match: his team plays Port Vale on Saturday.

I agree with my hon. Friend about access to finance and capital, and about financial awareness, particularly in areas where there is massive structural economic
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change. The way that bankers and investors see areas is not always linked to the industrial heritage and the value of the land. Correspondingly, that has an effect in terms of access to banking finance. We have to be innovative if we are to ensure that we get the investment in enterprise that will be salvation for areas that have been so devastated by the decline in traditional manufacturing. I want to discuss some of them later.

On the point that I was making about housing market renewal, if we fit this programme with that, we can focus on consolidation and growth, which complement existing efforts as part of a broader coherent strategy that picks up all the investment that is under way in my area—I am sure that that is also the case in Hartlepool—in health, schools and the housing pathfinder. Also, as would be the case with our proposal, that will be consistent with the sub-regional plans that are under way in respect of economic planning, housing and health.

We would be certain to ensure that local people and local firms benefit from the initiative. I have seen too many so-called enterprise initiatives where there was new investment but it meant only that people from 300 or 400 miles away benefited from jobs. There was not the spin-off for local people whose jobs had been lost as a result of structural changes. It is important that we fit this to housing market renewal.

It is difficult to touch on the scale of the challenge in Stoke-on-Trent, because this is still a painful subject. The scale of the challenge is one of the overwhelming reasons why we must ensure that Stoke-on-Trent's bid is successful. Even if they make uncomfortable reading, I want to give some background figures to the Minister, so that he can see the challenge. He might not know the scale of the job losses across north Staffordshire, and the resolve that we have to tackle that. Sometimes, Government policy has not been helpful. The Department for Work and Pensions intends to close down a jobcentre in one of the areas of greatest deprivation, without any proper consultation, which is a matter of great concern. There have also been redundancy announcements from large firms. In the past 20 years, 60,000 jobs have been lost in mining, steel and ceramics.

That should give the Minister an indication of what we are up against. I make that point because in Stoke-on-Trent not only have we lost more manufacturing jobs than most other industrial areas, but we have lost them more recently. To date, we have had less capacity to create new jobs to replace the traditional jobs that have been outsourced to the far east than areas with more basic skills and professional expertise in producing proposals that would turn the local economy round.

We cannot ignore the global restructuring that is taking place, and we must make good the loss of manufacturing jobs. However, in Stoke-on-Trent that task is challenging. Some 22.9 per cent. of the work force are still employed in manufacturing jobs. In my constituency, the figure is 35.4 per cent. I am sure that the Minister will not need reminding that the national average is 12.6 per cent. The consultants, Arup, estimated that, nationally, 20,000 manufacturing jobs are still at risk. It stands to reason that areas where there is already a heavy reliance on manufacturing jobs will be more vulnerable to globalisation than most other areas.
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As unpalatable as that is, we must look ahead and plan now. Make no mistake about it, we are doing just that with the investment that is already coming in across the sub-region with the Government's help. However, our fundamental approach must be to make that investment relevant to local people, and we must change the enterprise culture. If we look at our record to date on that, it is simply not good enough, but that is through no fault of our own.

Nationally, 9 per cent. of people are self-employed; in Stoke-on-Trent, the figure is 6.7 per cent. I think that speaks volumes. We will not catch up unless we make even more headway in improving basic skills in the city. Maths and English are essential for small businesses, and I can report that we have made great progress in that area already. This year, in Stoke-on-Trent schools, 47 per cent. of pupils achieved grades A to C at GCSE, compared with 31 per cent. in 1997. Credit must go to Nigel Rigby and to the teaching staff for those outstanding results, which show that we can do great things when we are determined to improve educational standards. We want to repeat across the spectrum what we have achieved with GCSE results. That success must be matched by corresponding success in those basic skills across the age range, so that my constituents are equipped with the skills they need to set up in business.

The most up-to-date figures from Barclays for business start-ups, for quarter 4 in 2004, show that Stoke-on-Trent had eight business start-ups per 10,000 of the working population. Those were the second lowest figures, after Middlesbrough. The UK average was 14. In quarter 3, Stoke-on-Trent's record was seven business start-ups, and we were placed equal lowest. From those figures, we can see that with a working population of 147,400 people, every year we have 100 business start-ups fewer than other comparable parts of the country. If we look at that year on year, the gap is growing. That is why we are determined to do something about it.

We will never catch up if things stay as they are. Economic development is falling behind in precisely the areas where it is needed most by local people. My message to the Minister is clear: however painful the facts, in Stoke-on-Trent we are actively engaged in turning the situation around. We have to make the strongest possible push to get approval for the local enterprise growth initiative.

I can report that our bid is nearing completion. My colleagues in north Staffordshire and I want to ensure that it hits all the right buttons and fits with the work already under way at the council, in children's services and in our primary schools. I want to ensure that, where possible, we consider green enterprise and that that will also be a component of our bid.

So much more is needed. In my research for this debate, my attention was drawn to the work of the Scottish Institute for Enterprise, which has shown what can be achieved when the Government engage with local people to push the enterprise agenda. I want to see a can-do culture develop across my constituency and to send out a strong message to the Minister, the Government office for the west midlands and the regional development agency that this bid has to be supported. I look forward to hearing from the Minister how he could be equally enterprising and ensure that we can provide funding and tackle the enterprise gap.
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4.46 pm

The Parliamentary Under-Secretary of State, Office of the Deputy Prime Minister (Jim Fitzpatrick) : I welcome the opportunity to discuss the local enterprise growth initiative with my hon. Friend the Member for Stoke-on-Trent, North (Joan Walley), who has made a powerful case for Stoke, and to set out the Government's aims and objectives in encouraging enterprise in our most deprived communities. I am pleased that Stoke-on-Trent has taken a keen interest in the local enterprise growth initiative—LEGI—as have so many of the 91 eligible local authorities across the country. Stoke is typical of the communities that the initiative will assist; it has a relatively low business start-up rate and pockets of deprivation.

All the authorities preparing bids are keen to get the attention of the Government, so by securing the debate, my hon. Friend is already ahead of the game. Much work and significant funding has been put into places such as Stoke-on-Trent, which, as my hon. Friend described, is part of the north Staffordshire housing market renewal pathfinder, a scheme designed to rejuvenate the area's housing market. The pathfinder was awarded £30 million in June 2004 and a recent housing market assessment reported that there had been a significant improvement in the local housing market.

I acknowledge that my hon. Friend has taken a strong lead on regeneration issues in her constituency through her work with the Burslem Regeneration Company, whose master plan for the town has been officially adopted by Stoke-on-Trent council. I applaud her determination to improve the Stoke area. I am sure that she agrees that there is a pressing need for economic regeneration in conjunction with those physical regeneration efforts. In his Budget in March, my right hon. Friend the Chancellor launched LEGI and spoke of the Government's commitment to creating

LEGI is designed to foster aspiration and ambition, and encourage innovation and enterprise; it is also about recognising the significance of enterprise to the economy as a whole and the great untapped potential of our most deprived communities in particular.

The importance of enterprise should not be underestimated. Enterprise—a term that covers the formation of new businesses, the expansion of existing businesses and attracting businesses to an area—is one of the key drivers of our economy. In the UK, small and medium-sized enterprises employ more than 50 per cent. of our private sector work force and account for more than £1 trillion of private sector turnover each year.

Enterprise also shakes up the economy: innovation and competition are increased, boosting productivity as new and more efficient ways of doing things are developed. Enterprise benefits us all. There is no doubt that the UK has great potential in enterprise. A recent study by the World Bank reported that we had the best business conditions in Europe, and ranked us fifth among the world's top 20 economies in terms of the cost of starting a business.

However, in spite of our potential, entrepreneurial activity in the UK remains lower than in some of our G7 competitors, and we have nearly 50 per cent. less entrepreneurial activity as a proportion of the population than the United States. Increasing the level
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of enterprise in the UK will increase our economic competitiveness in relation to those nations. So there is a significant challenge in closing that enterprise gap between us and our competitors, and the impact of enterprise on our economy is clear.

There is also an enterprise gap in our own country, between the most affluent and the most deprived communities. That is the gap that LEGI aims to bridge. By addressing the disparity between our poorest communities and their more affluent neighbours, we can also bridge the enterprise gap between the UK and our competitors. We can use the potential in deprived areas to bridge the gap and expand GDP. There is evidence that shows that our most deprived communities have the greatest potential and can offer the greatest rewards for business. In a country where enterprise is open to all, ambitions will not be dulled by someone's place of birth or where they happen to live. By helping the most disadvantaged communities, we will all benefit.

The simple fact is that fewer businesses start up in deprived areas and more of them fail, as was outlined. Why is that? What are the barriers that constrict enterprise growth in those areas? Access to finance is a major obstacle. People may have great ideas for a business, but without access to finance it is impossible to turn those ideas into reality. People in deprived areas are also less likely to access business support services and the advice of experts who can help future entrepreneurs to start their first business and help young businesses to survive. There are other problems that must be overcome in the poorest areas, which suffer from a lack of relevant skills and experience and in which there is limited access to training.

Each of those barriers has contributed to another endemic problem: a weak enterprise culture. A key task of LEGI will be to change the culture in those areas so that enterprise is seen as a valid choice for local people. That is not just about encouraging people to take risks; it is also about providing the means to enable risks to be taken. Not all enterprises will be successful, but successful entrepreneurs learn from past failures and use those experiences in future ventures. Promoting enterprise is not just about the successes; it is also about the failures. It is about offering support to people who have been prepared to take a risk and helping them to use their experiences positively.

How will LEGI bring about that culture change and combat the barriers that deprived communities face? The size of the financial commitment demonstrates the Government's determination to address those issues and to release the economic potential of the most deprived areas. A total of £150 million per annum of flexible, devolved investment will go directly to the local authorities that are successful at the bidding stage. Furthermore, LEGI has long-term objectives and provides long-term funding to create sustainable change in the communities that it targets. The Government also recognise that there will be more than one successful method of promoting enterprise and LEGI is founded on a flexible approach that is unique to the initiative. By giving local authorities the opportunity to work with partners to shape LEGI to their area and to create the most appropriate programme for their community, the initiative will address the problems of low-enterprise growth in the most direct fashion.
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LEGI will focus on outcomes rather than targets. It is about partnerships. Local authorities will have to demonstrate that they have worked with local and regional partners and with the local business community when drawing up their proposals, as well as being able to demonstrate that LEGI will integrate with existing economic and redevelopment strategies in the area. LEGI is not about building new structures; it is about building on existing structures, where they have proved effective, to secure effective outcomes in deprived areas.

LEGI offers not only significant levels of funding, but funding over a substantial period of time: between five and 10 years. There is, therefore, much at stake in the bidding process and local authorities such as Stoke are putting in a tremendous effort to secure it.

Joan Walley : I am encouraged by what the Minister is saying. Will he give me an idea of the kind of money that would be available to the successful applicants in each of the financial years under the LEGI programme?

Jim Fitzpatrick : I will try to come to that point before I conclude. I was just moving on to some issues that are relevant to Stoke.

We recognise that we have asked a lot of local authorities that wish to bid for the first round of LEGI funding, the deadline for which, as was mentioned, is 9 December. We have made some £10 million of pump-priming money available to all eligible local authorities to cover the costs of the bidding process. Although it is a difficult task, there is also a beneficial element to the process, as it forces local authorities and their local and regional partners to think hard about increasing enterprise in their communities. Local authorities will      have to demonstrate in their proposals an understanding of the nature of the market failure in the locality and that they have the right solutions to reverse it.

We should not get too hung up on the 9 December deadline. LEGI is not about quick fixes. Local authorities will be able to bid for LEGI funding in two further rounds. Many authorities will choose to take the extra time to hone their proposals and develop their research, and authorities that are unsuccessful in the first round are free to use the experience to prepare improved bids in the later rounds.

I understand that Stoke has adopted an innovative approach to their proposals so far, inviting a broad range of local partners to submit projects for consideration to build a LEGI bid from the ground. Such innovative thinking is welcome. It will be difficult to turn around the economies of deprived areas without doing new things. We want to learn from innovation, capture it and apply it to other areas. The key to LEGI success will be the quality of the proposal. We want bids that demonstrate the real difference that LEGI funding can bring to an area.
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The process of choosing the successful proposals will have two stages. First, regions will rank bids in order of their quality, set against the national criteria soon to be published. That will involve discussions between Government offices and regional development agencies. As my hon. Friend said, Stoke will need to maintain the close relationships that it has already established with the Government office for the west midlands and Advantage West Midlands. The regions will then make recommendations to Ministers who will make the final national decisions. I stress again how competitive the process will be. We expect to fund only 10 bids in the first year, 10 more the next year and 10 more the year after, but, from what my hon. Friend said and from the discussions that are taking place in Stoke and the west midlands, it seems that Stoke is giving itself every chance of success.

My hon. Friend asked whether there would be one bid per region. Given that 10 bids will be successful each year, it is clear that there will be more than one in at least one region. However, bids will be judged on the success criteria, so there may be more in some regions. My hon. Friend the Member for Hartlepool (Mr. Wright) will be reassured to know that officials have noted the strong bid that Hartlepool is putting together. I am sure that he will continue to watch matters closely. On the amount of money that will be available, my advice is that £2 million to £10 million will be available for successful bids each year for five to 10 years.

So where are we now? A great deal of progress has been made on LEGI in a short time. The extensive consultation process not only demonstrated the breadth of support for the initiative but gave us an opportunity to refine some elements of the programme. In July, we signalled through the next steps document that my hon. Friend the Minister for Local Government presented to the House that we were going ahead with LEGI and setting a broad timetable for local authorities and others. We look forward to reviewing high quality bids in December and to funding them from April 2006.

There is a great deal of work still to do. LEGI has ambitious aims, and we hope that the impact will be far reaching, boosting the economies not only of the most deprived communities but of the regions and the nation. We must learn from successful programmes so that other local areas can adapt LEGI to their local economies. We have never attempted to tackle this problem in such a sustained way, but by working with partners in neighbourhoods, local areas and regions we will try to make a big difference to local economies. I wish my hon. Friends and their local authorities every success in the process.

Question put and agreed to.

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