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House of Commons

Thursday 16 February 2006

The House met at half-past Ten o'clock

PRAYERS

[Mr. Speaker in the Chair]

Oral Answers to Questions

TRADE AND INDUSTRY

The Secretary of State was asked—

Manufacturing/Research and Development

1. Mr. Jim Cunningham (Coventry, South) (Lab): What steps his Department is taking to encourage manufacturing and research and development in Coventry, South and the west midlands region; and if he will make a statement. [51995]

The Minister for Industry and the Regions (Alun Michael): The manufacturing strategy has been designed by the Government to encourage manufacturers in all regions to move to high value-added production through the application of science and innovation, world-class practice and skills development. There is a long list of the support given by the Government, directly and through the regional development agency, but to save time I will send that to my hon. Friend.

Mr. Cunningham: I thank the Minister for that answer and I appreciate that there has been considerable investment in the west midlands, but does he understand that we need considerably more, particularly in manufacturing—I am sure that he knows of events with Rover—where there is serious concern about the intentions of Peugeot? What discussions has he had with that company on future investment models?

Alun Michael: I recently met the chief executive of Peugeot, Mr. Folz, to discuss the issues and to stress my concern, which very much reflects that of local Members of Parliament. There was a positive response to the wish of the Government to work closely with the company and an understanding of our concerns and hopes for the future. These are obviously commercial decisions for the company, but we continue to maintain those contacts—for instance, my officials are having a meeting with the company in the next few days.

Miss Julie Kirkbride (Bromsgrove) (Con): Can the Minister give us any information about the prospects of car manufacturing at Longbridge? He will be aware that the plant is now owned by the Chinese, and they have promised that they will reinstate a car business at
 
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Longbridge. However, we heard earlier this week that the first six months' option on the land owned by St. Modwen has lapsed. The Chinese can still produce cars if they take up that option, but does the Minister have any information as to whether they intend to do so and to make good their promises?

Alun Michael: The company is certainly saying that it intends to develop production in the way that has been promised and is publicly maintaining that position.

Richard Burden (Birmingham, Northfield) (Lab): Does my right hon. Friend agree that the west midlands has a really good research base—in Birmingham itself there are three excellent universities? All too often, however, the problem is linking that to development and translating it into products. He and my right hon. Friend the Secretary of State will shortly be considering the report of the MG Rover taskforce, and the key thing will be to ensure that technology corridors work and that that is translated into regeneration in the Longbridge area and the broader west midlands. That will regenerate local communities as well as attract investment to the area, which it so desperately needs.

Alun Michael: My hon. Friend makes a good point. He is aware that the grant given in recent times has included £32 million to the premier automotive research and development centre at Warwick university. He is right that the important thing is to link research and development work to the sharp end of business. There is a very good story to be told by the automotive industry in the west midlands, and we want to support that and see it continue.

Michael Fabricant (Lichfield) (Con): Notwithstanding the recent announcement of the closure of GKN in Lichfield, the Minister is right to stress that businesses and manufacturing should concentrate on high-value production, but what can he do about the tax credit system for research and development? Although it is a good system in principle, it is very difficult for smaller high-tech industries to claim R and D tax credits. They vary so much from region to region and inspectors make different value judgments on whether a project is an R and D project. The problem is that there is no consistency in the United Kingdom or ease in applying for such a tax credit.

Alun Michael: Sometimes it is down to a lack of information and of knowledge on the part of companies. We want to promote such information. For instance, the Manufacturing Advisory Service has generated £212 million-worth of added value for companies. We want to spread that knowledge and understanding. Secondly, since its inception, the research and development tax credit has provided £795 million in Government support, the majority of which has been for manufacturers. The hon. Gentleman makes the important point that there is a need for greater knowledge and to ensure that it is applied at the sharp end.

Mr. Brian Jenkins (Tamworth) (Lab): My right hon. Friend will be fully aware that manufacturers move into and expand in an area only if there is a skilled work force
 
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to produce their products. He will also be aware that the west midlands work force have the lowest level of qualifications. Has he had discussions with my right hon. Friend the Secretary of State for Education and Skills on plans for joined-up government to improve the qualification base in the west midlands?

Alun Michael: My hon. Friend makes an important point. We are working closely with colleagues at DFES to ensure that there is a proper focus on the development of skills. One way of ensuring that that happens properly is the work to link the regional development agencies with the skills bodies, particularly through the regional skills strategy. We have, too, the manufacturing academy, which is being developed in a positive way to make sure that the skills at every level through industry are appropriate to its needs. That must be done by focusing on the regional and local need in the way that he suggests. That is very much at the forefront of our minds.

Mr. Alan Duncan (Rutland and Melton) (Con): Following the disastrous intervention of the right hon. Member for North Tyneside (Mr. Byers) in the sale of Rover, which unfortunately sealed its fate, it now turns out that the sale of the Longbridge plant to Nanjing was somewhat botched. There is, however, some potentially good news: there is a serious prospect of moving the plant from Longbridge to Coventry so that car production can resume. What can the Minister tell the House about that? [Interruption.] Is he prepared—now that he has had something whispered in his ear—to engage fully with Nanjing and all the investors involved in trying to make that happen and, in doing so, to encourage the project, give grants where appropriate and attend any meetings that might assist the project?

Alun Michael: The hon. Gentleman seeks to promote misery and misapprehension by his comments. He should be aware that the Government and colleagues in the Department are fully engaged in all these issues to try to achieve the best possible outcome. As I suggested earlier, there is every indication that the company intends to pursue the intended prospects. He referred to employment, and he is surely aware that it is at virtually its highest level for the past 15 years.

International Trade

2. Andrew Selous (South-West Bedfordshire) (Con): If he will make a statement on his Department's policy on increasing the UK's share of international trade and inward investment. [51997]

The Minister for Trade (Ian Pearson): Overseas trade is an essential part of the UK's prosperity. UK Trade & Investment helps companies in the UK to develop their businesses internationally. UKTI also works to attract high quality inward investment and the UK is the No. 1 location in Europe for inward investment.

Andrew Selous: The United Kingdom's 2005 trade deficit was not only the largest ever at £47 billion, it was a fifth larger than the year before. Even within the European Union, we are running a trade deficit in goods of some £3 billion a month. Do the Government think
 
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that we, as a country, can go on indefinitely importing more than we export? Even Belgium sells more to India than we do.

Ian Pearson: The UK's trade performance with India is growing strongly and it is absolutely right that we do more to trade with China, India and other emerging markets. Our trade deficit is about 2 per cent. of gross domestic product. The United States trade deficit is 6 per cent. of GDP. In 1989, under a Conservative Government, our trade deficit was 5.1 per cent. Our current account deficit is forecast to widen a little this year, but it is easily sustainable.

Rob Marris (Wolverhampton, South-West) (Lab): In terms of international trade, two growing areas are medical technology, and pollution control equipment and environmental control materials and so on. What is the Department doing to encourage UK companies to invest, research and export in those two sectors?

Ian Pearson: My hon. Friend is right to point out that those are two important areas. Certainly, with regard to countries such as China, health care and pollution technology are recognised as key priority areas where we have expertise in the UK in our research base and in many of our companies. We are actively supporting those companies to win business contracts in China. It is not just China, but India, Brazil and other emerging markets where we need to up our economic performance in such areas and in other sectors as well.

Peter Luff (Mid-Worcestershire) (Con): I think that the Minister said two slightly contradictory things. In answer to my hon. Friend the Member for South-West Bedfordshire (Andrew Selous), he said that our trade performance in India was very good. Now, quite rightly, he has just said that we need to up our game. Has he seen the recent survey from KPMG that suggests that British businesses are retreating to the comfort blanket of north America and Europe and are largely ignoring the opportunities in the emerging and developing economies of the world? What can the Government do to re-engage those companies and help them to rediscover the sense of enterprise and adventure that created the wealth that we now enjoy in this country?

Ian Pearson: I did say that our trade with India is increasing, and that is to be welcomed, but to quote a Japanese quality guru, Shigeo Shingo,

We need to improve continuously trade performance, just as our manufacturing and other industries need to improve continuously. I am aware of the study to which the hon. Gentleman refers, and I want to see more UK companies taking advantage of the opportunities available in the emerging markets of China, India, south-east Asia, Brazil, South Africa, Mexico and other countries.

Mr. John McFall (West Dunbartonshire) (Lab/Co-op): I acknowledge the importance of manufacturing industry, but the Minister is aware that service industries account for 70 per cent. of gross domestic product. What specific initiatives in the emerging markets of China and India is he undertaking to ensure
 
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that companies already in those countries and doing well in the financial services industry are given further stimulus from the Department of Trade and Industry?

Ian Pearson: My right hon. Friend is right to point out the importance of the service sector to the UK economy and to our international trade. He knows that Lloyd's of London managed to enter the Chinese market. The deal was sealed during President Hu Jintao's state visit to the UK last year. We are doing a great deal on financial services in both China and India, working with the Mayor of London and a number of others to open up the insurance, re-insurance and financial services markets. These are areas where the UK has a great deal of expertise. Public-private partnerships are another aspect of financial services where we have tremendous expertise, which we can trade internationally. There is a great deal of work going on, particularly in China and India and through the joint economic trade relationships that we have with those two countries.

Mr. Geoffrey Clifton-Brown (Cotswold) (Con): My hon. Friend the Member for South-West Bedfordshire (Andrew Selous)—

Mr. Speaker: Order. If the hon. Gentleman is unhappy about who I call, he is out of order. Those on the Conservative Front Bench make a demand on these questions, and I am obliged to call Front-Bench Members. That means that Back Benchers lose out.

Sir Nicholas Winterton (Macclesfield) (Con): Further to your observation, Mr. Speaker, which was obviously directed—

Mr. Speaker: No, there are no points of order. I will not take the hon. Gentleman complaining—

Sir Nicholas Winterton: I never complained. I never uttered a word.

Mr. Speaker: Well, that is news to me. I have heard him complain. Mr. Clifton-Brown.

Mr. Clifton-Brown: My hon. Friend the Member for South-West Bedfordshire has the done the House and the country a favour by drawing attention to our record trade deficit, up 25 per cent. on last year. Yet at the same time the United Kingdom's main trade and investment body, UKTI, has had its budget cut this year by £6 million. The Government's obsession with fragmentation and dilution to the rural development agencies and the devolved Assemblies is blurring our trade effort throughout the world. Is it not a fact that UK plc's trade and inward investment effort could and should be a great deal more effective?

Ian Pearson: The hon. Gentleman tried to get angry, but the simple fact is that UKTI has a budget of £280 million per annum. It helps companies in over 100 markets worldwide through its network of posts and staff. It provides a range of services. According to the most recent trade figures, our export volumes are 9.7 per cent. higher than in the same period last year. Value for money is important to the Government, and £65 million was spent on four main business support programmes.
 
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That helped 6,000 companies and produced £1.1 billion in net additional benefit. By any measure, that must be good value for the taxpayer's money.

Mr. Michael Clapham (Barnsley, West and Penistone) (Lab): I hear what my hon. Friend says about the increasing trade with India and China, but does he believe we are doing as well as our competitors? For example, are we encouraging joint ventures at the rate at which we ought to be doing so, and are we encouraging larger companies to piggy-back smaller companies into those markets—a measure with which the Germans were very successful in the mid-1990s? Are such initiatives being taken up by UKTI?

Ian Pearson: My hon. Friend makes several good points, and I can assure him that UKTI is taking them up. Our performance is lagging behind in relation to India—we should be doing better. We have strong historical and cultural ties with India, and we are not leveraging those to maximum benefit. I am dissatisfied with that, and I want us to make more progress. We have made great strides with China in recent years. There is a bumper crop of exchanges at top levels. We have formalised relationships through the joint economic trade committee, and that is bearing fruit. Exports to China are up massively. Two-way trade and investment is growing strongly, and I am sure that it will continue to do so in future years.


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