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25 Oct 2006 : Column 465WH—continued

The debate has been useful and is timely. I was particularly struck by two contributions—I hope that other right hon. and hon. Members will not be disheartened. The remarks of my hon. Friend the Member for Mid-Worcestershire (Peter Luff) showed his wisdom, not least as the Chairman of the Trade and Industry Committee, and were particularly helpful, so I am grateful for those. I commend also the remarks of the hon. Member for Birmingham, Northfield
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(Richard Burden). Like him, I hope that the Minister will be able to tell us when the MG report will be published.

The manufacture of cars and their components in this country is an industry of long significance, and will continue to be of great economic and technological importance. As we have heard, the industry accounts for 10 per cent. of manufacturing in the UK— £45 billion if we put that into real money—and supports roughly 800,000 jobs. I understand that our exports are worth about £20 billion.

Despite some well-reported problems, car production has remained remarkably steadfast in recent years, and is, roughly speaking, about 1.6 million vehicles. Several hon. Members alluded to the fact that those figures do not show the change in the industry’s structure over that decade. During the period, there has, on the one hand, been the demise of familiar British names, such as TVR, and, on the other hand, their replacement by leading overseas players in the industry. It has gone from being a British car-making industry to being a car-making business in Britain.

On the debit side, MG Rover recently went into administration and Peugeot made the announcement about its facilities at Ryton, and Vauxhall has sought to cut production of its Astra model with the loss of 900 jobs. No one in the Chamber, or among our constituents, welcomes the demise of those enterprises, nor does anyone underestimate the distress that it causes to hundreds, if not thousands, of workers. The hon. Member for Birmingham, Northfield highlighted that extremely well. We should also not forget the many small and medium-sized enterprises in the supply chain, the component chain, who often do not hit the headlines. They are often ignored by the national media when this kind of event takes place.

On the credit side, we should not ignore the good news, which the hon. Member for Chorley mentioned. In Sunderland, Nissan has invested another £125 million to enable it to build its fifth model in the UK. In Swindon, Honda has invested up to £1.3 billion so far and is just about to open the new logistics operation. I am sure that the hon. Gentleman knows, and is pleased about, the fact that Leyland Trucks has turned its plant in Lancashire into the most productive commercial vehicle plant in Europe. I believe that it turns out about 15,000 units a year. All of those stories are to be welcomed. They show that the UK is still able to attract international investment, but it can do so only if we are able to offer the right combination of skills and markets.

The Select Committee is considering the fact the UK still faces considerable competitive challenges. In the short time available, I want to focus on three areas: skills, investment, and—several hon. Members have mentioned this—regulation. Car and component manufacture needs both basic and specialist engineering skills to compete. Sadly, this country is not keeping up with our competitors on both counts. A recent survey by the Society of Motor Manufacturers and Traders Ltd highlighted that 83 per cent. of its members found that low employee skills are holding their businesses back.

The independent Leitch review of skills confirms the problem. It was commissioned by the Treasury, and its interim report found that one third of working adults
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do not have a basic school-leaving qualification. Worse still, it shows that the result of the Government’s current plans for skills would leave 4 million adults without the basic literary skills expected of 11-year-olds and 12 million adults without their numeric skills. Why are the Government planning for such low attainment? How does the Minister expect the industry to cope with staff who have such inadequate skills?

On graduate engineering skills, a CBI report has shown that since the mid-1990s the number of students obtaining a first degree in engineering and technology has fallen by 11 per cent. That has serious implications for motor engineering and car making. Given that, why does the Minister believe there has been such sharp decline? As a former Minister with responsibility for higher education, which of the Government’s policies in particular does she think are failing?

On business investment, the Government have set themselves a target to increase the UK investment in research and development to 2.5 per cent. It is a laudable ambition, given that it is fair to say that we have had a historic habit of lagging behind France, Germany and America. Therefore, it is disappointing to report that the most recent figures show that research and development investment has remained static as a proportion of gross domestic product; it has gone nowhere in nine years. The Chancellor is proud of his research and development tax credits, yet the Government’s own evidence shows that they have failed to help the Government to reach that target. We are exactly where we were nine years ago. Why do they think that the investment has not increased? What does the Minister think is wrong with the research and development tax credits? Can she say today that she is still absolutely confident that the Government will meet their target?

Several hon. Members have alluded to the fact that the burden of regulations is one thing that has increased. A recent survey by the Engineering Employers Federation showed that 62 per cent. of its members cite regulation as having a negative effect on the ability of this country to be a place to which people want to come to invest and do business. They are right. The annual level of regulations has risen since 1997 by more than 50 per cent. It is now the equivalent of having 15 new regulations every working day. Does the Minister recognise how the burden impacts on car manufacturers? Does she accept the figure from the Federation of Small Businesses that the average small business spends 28 hours a month simply complying with Government paperwork? If she does accept that those figures are correct, what steps does she intend to take, as the Minister with responsibility for small businesses?

Equally, conflicting regulatory objectives can create serious confusion. Let us consider recent EU initiatives about health and safety, and environmental protection. On the one hand, the EU has initiated regulations to reduce tailpipe fumes, which affect our health. However, these Euro V regulations involve installing particulate filters, which increase the weight of the car. The result is an increase in carbon emissions, which directly contradicts another EU policy that seeks to tackle climate change. For car makers, that conflict between policies is immensely frustrating and confusing. Which policy comes first for them? As the
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Minister responsible for industry, is she aware of the regulatory confusion? If she is, what does she propose to do about it?

The car and component-manufacturing industry remains vital, not just to today’s economy, but to our future prospects. Improving skills, increasing investment and reducing regulations will all require an energetic and positive approach from the Government. Given that, I hope that the Minister will explain her plans for supporting the industry. In particular, I hope that she will respond not just to my questions, but to those raised throughout the debate.

3.47 pm

The Minister for Industry and the Regions (Margaret Hodge): In 13 minutes I shall try to do justice to this well informed and high-powered debate. I congratulate my hon. Friend the Member for Chorley (Mr. Hoyle) on securing it. I also congratulate Amicus, the union with which he is so closely associated, on the work that it has done to raise the profile of British manufacturing, and the car industry on its day-to-day work and in the important partnerships that it creates.

I should be up front in admitting that I have a Vauxhall Vectra; it is my Government car. Those cars used to be produced in Ellesmere Port, but I am unsure whether they still are. Perhaps my hon. Friend the Member for Ellesmere Port and Neston (Andrew Miller) could help me on that.

Andrew Miller: I have checked with my hon. Friends, and they are.

Margaret Hodge: I was going to ask my permanent secretary whether he could get me an upgrade to one of the Deputy Prime Minister’s Jaguars.

I will try to do justice to what everybody has said. The hon. Member for Mid-Worcestershire (Peter Luff) talked about the Select Committee report. I look forward to the outcome of that. I want to deal with one or two of the issues raised by my hon. Friend the Member for Birmingham, Northfield (Richard Burden). As he knows, it is the inspectors who are reporting and not the Government, so we must wait for that to happen. He is going to talk to me later about the particular issues in relation to the taskforce, and I hope that I will have good news for him. I should say some general things about the planning system, but I know that the planning application on his particular site has not been called in. That should not hold up that particular development, although I accept that planning is an issue of concern in Ellesmere Port and elsewhere.

The Chancellor set up the Barker review to try to tackle some of the conflicts that exist, so that we can ensure that our desire to achieve growth in the economy, particularly in the manufacturing sector, is not impeded by slowness in the planning system. We all look forward to the outcome of the Barker review, which should be around the time of the pre-Budget report.

I shall respond to the other contributions more generally. Manufacturing always provokes bad news in the press and its image is an issue that I must tackle. Manufacturing is vital and a key part of our
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infrastructure. It provides 14 per cent. of our gross domestic product, one seventh of our national wealth and 50 per cent. of our exports. It is interesting that many of the contributions about the car industry this afternoon were positive. British car manufacturing has a good story to tell and, without being too party political and partisan, it was a Labour Government who brought British car manufacturing back from its all-time low in the 1980s of about 900,000 cars a year to 1.6 million a year now—[Interruption.] I will take a sedentary frown from the hon. Member for Mid-Worcestershire.

My right hon. Friend the Member for Oxford, East (Mr. Smith) told a warm story about what is happening at the Cowley plant where there has been not only a massive increase in the work force from 1,500 to 4,500, but a welcome increase in apprenticeships—many hon. Members talked about training. It is interesting that cars are built in Oxford, but sold with a flag. Car manufacturing is an important export industry and whether that is in south Derbyshire, where Toyota’s vehicle manufacturing is based, or Oxford, East, we should not lose sight of the fact that we export cars. That is hugely important.

My hon. Friend the Member for South Derbyshire talked about Toyota, which I recently had the pleasure of visiting in Japan. I am incredibly impressed by it and particularly by its investment in new fuels and its consideration of safety. It is much more grounded in what I think will be the future that customers want from their cars than are some other car manufacturers with an American base who are in trouble.

There was a positive story to tell about all car manufacturers in this country, including Nissan and Toyota. My hon. Friend the Member for Middlesbrough, South and East Cleveland (Dr. Kumar) talked about Nissan, which is a fantastically good-news story. Nissan has the wonderful feature of being Europe’s most productive car plant today and we are proud of that, although Toyota at Burnaston and Honda at Swindon are also in Europe’s top 10.

I cannot let time pass without mentioning Ford. Jaguar’s Halewood plant has become Ford’s most productive plant and I am proud that in Dagenham, the constituency next to mine, we are producing so many engines, many of which are also exported.

The supply chain is strong with 2,600 companies employing 130,000 people. The just-in-time location for supply chain products to feed into the manufacturing process is extremely important and one of the messages that I received from Toyota when I was in Japan was that we need to work together to improve the performance of supply-chain companies so that they can produce within cost, to quality and on time to meet demand. It is important to put some effort into that as we move forward. The supply chain is crucial and it is good to see that BMW is increasing—

3.54 pm

Sitting suspended for a Division in the House.

4.9 pm

On resuming—

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Mrs. Janet Dean (in the Chair): We shall resume the sitting. I call the Minister.

Hon. Members: Hear, hear!

Margaret Hodge: I hope that I can do my hon. Friends justice.

I shall say one more thing about United Kingdom car manufacturing: its productivity went up by 44 per cent. between 2000 and 2004, the years for which I have figures. That is why in Oxford, East, South Derbyshire, and Middlesbrough, South and East Cleveland there is such successful manufacturing capacity.

I want to deal quickly with the issues that have been raised, and then with the vision that my hon. Friend the Member for Ellesmere Port and Neston (Andrew Miller) described. Procurement is a difficult issue, as he knows, but a lot of purchasing takes place: the Post Office purchases Transits and Vivaros, Royal Mail purchases from LDV, and Toyota provides a lot of cars for the Post Office. The Government car fleet could do better—I accept that—but we must ensure value for money. Britain does well because we have an open market, and we are producing so many cars because we are competitive. That is good for the British car industry in the long term because it makes it sustainable and helps us to export.

The importance of a stable economic environment was mentioned by my right hon. Friend the Member for Oxford, East, my hon. Friend the Member for Middlesbrough, South and East Cleveland and the hon. Member for Solihull (Lorely Burt). The matter is key, and I say to my hon. Friend the Member for Chorley that there are many myths about employment rights in the UK. A Department of Trade and Industry survey found that five of 15 EU countries have collective redundancies that are implemented more quickly than those in the UK. In Denmark and Greece there are shorter periods of notice and lower severance payments for blue-collar than for white-collar workers, and in France, with which we are often compared, there is an insider-outsider problem. Those who are in work have their jobs protected, but it is much more difficult to take people on. That has led to a 25 per cent. unemployment rate.

Hon. Members mentioned the shrinking number of jobs in the car industry, but that is not peculiar to the UK. Volkswagen, for example, is to cut 20,000 jobs at six West German plants. Energy costs are a consideration, and until 2005 ours were comparable with those in continental Europe or, in many cases, slightly lower. Things went wrong in the winter of 2005, when there was an increase in demand and in energy prices internationally because of the decline of North sea gas production. By about mid-2006 we were competitive again, and new infrastructure, such as the new gas pipeline from Norway that the Prime Minister recently opened, will help us to equalise the situation.

We must do what we can in the energy sector. Hence the Carbon Trust, which we set up to provide direct advice to industrial companies; hence the enhanced capital allowances scheme, which means that companies can claim 100 per cent. first-year allowances; and hence the climate change programme, which a number of hon. Members mentioned.

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Transport infrastructure and logistics are key. We are discussing them with Toyota and a feasibility study is being undertaken with the regional development agencies. We are conscious of the issues affecting Vauxhall, and I congratulate my hon. Friend the Member for Ellesmere Port and Neston on having done an enormous amount of work on them. We must try to unlock the problems faced. It is crazy that we cannot use the railway lines to support our car industry and that we have to rely on road transport. I think we would all accept that.

I end by mentioning what we are doing for the car industry, a subject that the hon. Member for Hertford and Stortford (Mr. Prisk) raised. I shall not reply to him in detail, but he said that there are 4 million adults with no skills. When we came into government there were 7 million. We have nearly halved the figure. There was no research and development tax credits system, and R and D investment was on the down. I shall talk to him in another arena about small businesses, but some regulation is good. For example, we all support opening up the right of older workers to have a place in work.

The car industry is central to the manufacturing base of the UK, and we are strong in it. We all need to talk it up, not down, and ensure that we put the right investment in the right places. The automotive innovation and growth team report was published under my predecessors, and we are going ahead with that work. A huge amount of work is going into building skills. We have the automotive academy, which I visited on a recent visit to the west midlands and which is doing good work, and we are building centres of excellence and investing in the examination of new fuel technologies. We have a technology programme of almost £400 million, and one of the innovations coming from it is the low-carbon vehicle partnership. There is InnovITS, which brings people together on telematics. We must focus on the supply chain, and we have put money into that. Companies must work with their peers to improve productivity and their management of the supply chain. All those elements make for a good, healthy car industry. That is what we want—an industry that produces for UK residents but also for export. That is how to build a prosperous UK with a growth in jobs.

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Wednesbury to Brierley Hill Midland Metro

4.15 pm

Lynda Waltho (Stourbridge) (Lab): I am delighted to be able to discuss this important issue and pleased that the Minister is here to respond. Although the title of the debate refers directly to Midland Metro and its possible future routing through the black country, hon. Members should recognise that the context of that extension is not solely one of transport. It is set within a wider sub-regional framework now known as “Black Country Study”.

I shall take a little time to set the scene, Mrs. Dean—a rhyme there. Very nice. I must outline the importance of “Black Country Study”, which sets the context for the crucial Midland Metro extension and how it will support the key aims identified. The study began three years ago when the region’s political and business leaders recognised the need to consider radical change in the sub-region to counter the decline of the past 30 years.

The process got under way when a 30-year future vision was agreed with partners, which provides the driving force for change. There is now a sub-regional study for the black country to outline the priorities for the regeneration of its physical, environmental, social and economic fabric. The West Midlands regional assembly, as the regional planning body, has accepted the study as a supporting document for the draft regional spatial strategy phase 1 revision, submitted to the Government on 31 May. Hon. Members will know that regional spatial strategies guide major transport, land use and regeneration decisions, in this case until 2021.

Across the black country there are important challenges, some of which have been ignored by successive Governments. An example of the fundamental challenges in Stourbridge and in most of our part of the west midlands is provided by the large number of people who leave the region’s villages, towns, cities and boroughs, including Dudley, Sandwell, Walsall and Wolverhampton. There is a high number of low-skilled workers, which means an over-reliance on basic, manually-based jobs.

The black country’s ability to retain people with higher skills and attract new highly skilled workers is severely restricted, and only limited measures are in place to protect and enhance the environment to create a safe, attractive and healthy place to live and work. I am delighted to say that “Black Country Study” seeks to address those matters.

I came into politics to help to improve the quality of life of local people, and as a Labour Member I am proud to serve my community while a proposal such as the study is being considered. There must be an urban renaissance in our region, and a key constituent part of that can be delivered through major investment projects such as the proposed extension of Midland Metro. I was recently astounded to learn that of the 2 million trips, not including walking and cycling, that are made every day in the black country, 83 per cent. are by car and only 17 per cent. by public transport.

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