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5. Vera Baird (Redcar) (Lab): What recent assessment he has made of the state of the UK's manufacturing sector. [60675]

The Minister for Industry and the Regions (Alun Michael): Manufacturing contributes a sixth of our national wealth, employs more than 3 million people directly and supports a further 2 million people in the service sector. In a tough competitive environment, our manufacturing industry shows many success stories based on high value-added, high skills and high technology.

Vera Baird: The Tees valley economy is more dependent than most on manufacturing and processing. The new chair of our local chamber of commerce regards our economy as robust, and up to 10 investments are proposed in manufacturing and processing in my sub-region. However, the short-term problem, which faces the chemical manufacturing industry in particular, remains high energy prices; indeed, one plant in my constituency, at Wilton, has had to close temporarily due to that problem. Has my right hon. Friend any advice for that important industry about better prospects in the near future?

Alun Michael: I agree about the importance of the sector, and it is good to hear optimism from parts of the industry in my hon. and learned Friend's region, which
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very much needs the strengths of our modern, manufacturing industry. Energy prices are certainly an issue for many parts of our industry, including, as my hon. and learned Friend says, the chemical sector. That is why it is such a high priority for the Government to tackle both short and long-term energy needs and why the energy review was set up. The situation is hitting industries in other parts of Europe, too, so the best advice I can give is, "Hold your nerve."

Peter Luff (Mid-Worcestershire) (Con): I declare a non-pecuniary interest as chairman of Worcester cathedral council.

Does the Minister agree that one of the problems facing British manufacturing industry is the unintended consequences of regulation? In that context, will he look at the impact of the European Union directive on the restriction of hazardous substances on a small but important British industry—organ building? Does he understand that the regulation will have the effect, if implemented as currently intended at the beginning of July, of destroying the industry, making it illegal to build new organs, such as the one we are planning for Worcester cathedral, and actually making it illegal for Durham to reconstruct the cathedral organ, which is currently lying in pieces in the cathedral?

Alun Michael: One of the great problems is the pessimism of people such as the hon. Gentleman. The directive to which he refers will not have an impact on the refurbishment or maintenance of existing organs, whether or not they have electronic components—the issue that has been raised. The pipe organ industry can apply for an exemption for new electronic organs and the Government are happy to continue to provide information to help it to do so. DTI officials have been in regular contact with those concerned and will be meeting the sector soon, so I trust that the hon. Gentleman will now become more optimistic about the future.

Mr. Jim Cunningham (Coventry, South) (Lab): I am sure that my right hon. Friend is aware of the concern about the lack of investment in manufacturing skills and research and development in the west midlands, and we have seen the motor car industry in Coventry diminish greatly. Can he enlighten us about what is happening regarding Peugeot in Coventry?

Alun Michael: As my hon. Friend knows, I have been in contact with the company and have met Mr. Folz, who heads it. We maintain regular contact and hope very much indeed that its engagement and production will continue in this country. Indeed, at the meeting that I had with Mr. Folz, he went out of his way to reassure us. Clearly, we are aware of the rumours and the concerns in my hon. Friend's constituency and in the wider region. That is why we maintain close contact with the company and will continue to share and communicate with Mr. Folz and his colleagues on these issues.

Mr. Deputy Speaker (Sir Alan Haselhurst): Order. May I just point out to Ministers that, if they turn their heads to their Back Benches, they go off microphone, which makes it very difficult for the Official Report?
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David Simpson (Upper Bann) (DUP): According to the Federation of Small Businesses this morning, the scheme that operates for the manufacturing companies in the United Kingdom, whereby they can claim up to a 50 per cent. reduction on their rates, does not apply to Northern Ireland, although it is part of the United Kingdom. Can the Minister explain why?

Alun Michael: The simple answer is no. I leave matters that relate to Northern Ireland to colleagues who are responsible for them. However, support for manufacturing industry—for example, with the R and D tax credit—is generally available. There are many levels of support for manufacturing industry in every part of the United Kingdom, and I am afraid that questions of anomalies that relate to Northern Ireland are matters that the hon. Gentleman should take up with the relevant Ministers.

Mr. David Kidney (Stafford) (Lab): When I speak to manufacturers, I find that most of them are aware of the climate change levy and red tape, which could hold them back, but fewer of them seem to be aware of the R and D tax credit and the existence of the manufacturing advisory service, which could be of great benefit to them, and both of which the Chancellor announced were being extended yesterday. Does my right hon. Friend agree that he, his Department, ourselves as Members of Parliament and local chambers of commerce could do more to raise awareness of those two helpful benefits for manufacturers?

Alun Michael: My hon. Friend is absolutely right, and I try to give such encouragement—I did so yesterday when the FSB published its review of its members responses, which demonstrated, for example, that 4 per cent. of its members make use of Business Link, which is an interesting statistic, given that 96 per cent. of the people who use that service are satisfied with it and would advise others to use it. The benefit of the manufacturing advisory service is that it has put £213 million into the bottom line of manufacturers in this country, whereas the R and D tax credit has provided £795 million of support for small and medium-sized enterprises, apart from the support for large businesses. Anything that my hon. Friend and hon. Members on both sides of the House can do to help the success of our manufacturing industry by indicating the support that is available would be very welcome.

Mr. Alan Duncan (Rutland and Melton) (Con): Is it not undeniable that the number of jobs in the public sector has increased by more than 600,000, which is more than the population of Sheffield, while the number of jobs in manufacturing, which helps to pay for public sector jobs, has fallen by well over 1 million? Many companies have massive pension fund deficits. They face ever more burdensome regulation, and their corporation tax liability was not even inflation indexed in yesterday's Budget. Does the Minister agree with the Leader of the House, who said that

or with the Prime Minister, who said that

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Alun Michael: Funnily enough, I agree with the Prime Minister. The hon. Gentleman seems to see a contradiction between those two remarks; I do not think that there is one. Where it is necessary for our industry to compete—and it is competing—is at the high-level, high-skill, high-value-added end of industry, and in that context, the Leader of the House is right. The hon. Gentleman talks down British industry. About two thirds of the new jobs in this country have been in the private sector, and we have seen considerable success in our manufacturing industry, despite the fact that the number of people employed in it has fallen, as it has in every developed country.

Mr. Duncan: The climate change levy was supposed to be revenue-neutral on the grounds that it also reduced employers' national insurance contributions. Since its introduction, both NICs and the levy have gone up. If the levy is genuinely to be a tax on climate change, not just a tax on energy use, surely all logic should compel the Government to design a system that constrains emissions, rather than just clobbers manufacturing. In what possible sense does the climate change levy distinguish between those who use energy that does produce emissions and those who use energy that does not?

Alun Michael: That sounded like an essay, rather than a supplementary question. The fact is that about 40 per cent. of the reduction in carbon has come from precisely the approach that the hon. Gentleman criticised, which is why we have succeeded in relation to the Kyoto agreement. It would be good if he pointed to the way in which the Government are supporting manufacturing industry and pointed industries in the direction of the help that is available to them, rather than seeming to want to undermine the success of manufacturing industry in this country.

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