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Mr. McFadden: The importance that we attach to that plant was evidenced recently by the visit of my right hon. Friend the Secretary of State. We are doing everything we can to ensure that General Motors continues with its manufacturing base here.
We have manufacturing excellence in this country. I have mentioned one or two sectors, and there are others, such as plastic electronics and bluetooth technology—things that we use every day that are made here in the UK and are an important part of our manufacturing future. Of course, we must also acknowledge that, amid those strengths and our strong position overall, manufacturing has had a tough time during the recession. Some companies have gone, including some well known names, and people have lost their jobs. We understand the pain that that causes for individual families and communities. We are determined to ensure that those affected get a second chance to retrain and reskill, and to start again. That stands in stark contrast to what happened in previous recessions, when people in manufacturing sectors and others lost their jobs and were left with little more than a giro cheque to keep body and soul together. They certainly did not get the active help that they needed to have a second chance.
Mr. David Drew (Stroud) (Lab/Co-op): We still have the ongoing debate about whether wage compensation is a realistic approach. It was depressing to hear that even the Proact proposal in Wales has yet to take off. In other parts of Europe, many of our competitor companies have employees on short-time working paid for by the state to keep them in employment. Are the Government still actively considering that as a way to keep our people in employment?
Mr. McFadden: Let us consider the European comparisons. We are not alone in our manufacturing industries being affected by the recession. There has been a decline in trade in goods across the world. In the year to April, manufacturing output declined in this country by 13 per cent. In the US, the figure was 14.6 per cent., in France it was almost 20 per cent., in Germany it was 24 per cent. and in Japan it was more than 30 per cent. The effect has been felt around the world, and it has often been greater in other countries than here in the UK.
No Government can say that they can stop an economic recession having an impact, but we will do everything we can to ensure that the recession is as short and as shallow as possible. I shall tell the House about some of the measures that we are taking to support manufacturing through the recession.
During the past year, the Manufacturing Advisory Service, which does an excellent job, has helped nearly 8,000 manufacturing companies to improve their efficiency and effectiveness, improving gross value added by some £120 million and, in many cases, helping to generate new sales. The vehicle scrappage scheme, which my hon. Friend the Member for Houghton and Washington, East (Mr. Kemp) mentioned, has had a serious impact, with 94,000 orders for new vehicles.
As my hon. Friend the Member for Wolverhampton, South-West mentioned, we also have a £50,000 investment allowance, meaning that the 95 per cent. of businesses that invest less than that sum a year are able to write
those investments off, giving them the confidence to make the investment that our manufacturing industry needs.
We must do more to prepare for the upturn, and that is why we have brought together the former Department for Business, Enterprise and Regulatory Reform and the Department for Innovation, University and Skills in the Department for Business, Innovation and Skills. That will help to prepare the country for the economic upturn and ensure that we put the support in place where it will have most value. We will certainly not stand by and watch the recession take its course, as we were advised to a few months ago by the Opposition. We believe that we have an active part to play and that that philosophy of industrial activism that was once the vogue on the Opposition Benches, before being abandoned, is still important.
Mr. David Anderson (Blaydon) (Lab): Is not our record in direct contrast to that of the Opposition, who actively closed coal mines, actively closed shipyards and actively destroyed the steel industry in this country?
Mr. McFadden: My hon. Friend makes a good point. We cannot insulate the country from closures—I do not pretend that we can—but we do what we can to avoid them and to give help where they take place.
Mr. Ian Cawsey (Brigg and Goole) (Lab): Although I welcome the measures that the Government have put in place to keep the manufacturing sector together, it is also important that we retain certain core manufacturing industries, such as the steel industry in north Lincolnshire and my constituency. A fortnight ago, Corus said that 500 jobs were to go there and this morning it announced that another 366 will go. Active intervention—the report from the Federation of Small Businesses and the TUC talks about wage subsidy, which was mentioned by my hon. Friend the Member for Stroud (Mr. Drew)—is needed to keep such businesses at the capacity that they are at now so that when the upturn comes we still have steel in Britain.
Mr. McFadden: I have been in active contact with Corus in recent weeks. My sympathies go out to my hon. Friend’s constituents who are affected by job losses, and those of other hon. Members. Corus has told me that the critical issue it faces is demand for the product that it makes. Half that product goes into construction, so the best thing that we can do is to try to ensure that there is demand for the product that is made. We have brought forward spending for social housing, for additional investment in schools and hospitals and for initiatives such as the car scrappage scheme so that there is demand for the steel that is made. In the long term, that will be more effective in supporting the steel industry than any short-term wage scheme. I must stress that.
Let me talk about our industrial policy, as published in “New Industry, New Jobs”, and some of the support and initiatives available from the Government. We have set aside £750 million for a strategic investment fund. About a third of that will go to low-carbon initiatives, because we understand that how we build and heat our homes, produce our energy and transport ourselves will all change profoundly in the years to come.
As a Government, we take the view that we want British industry to be in the best possible place to take advantage of those opportunities. We are working with colleagues from the Department of Energy and Climate Change on a low-carbon industrial strategy to ensure that as we come out of the downturn we back the best of British industry in initiatives such as wind and wave power and low-carbon vehicles, as well as others, and that we take advantage of the opportunities represented by the low-carbon economy. As the G8 meets and discusses these things, it is of course a challenge to respond to climate change, but it is also an industrial opportunity. This Government are determined to ensure that British industry has the help and support it needs to take advantage of that.
Adam Afriyie (Windsor) (Con): The Minister is talking about industrial activism and support as regards climate change. That is all to be welcomed, of course, but how much of that £750 million has seen the light of day? How much has been spent or invested so far, when it was announced months ago?
Mr. McFadden: It was announced in the Budget and plans will be brought forward over the coming months. The hon. Gentleman is critical of spending; I point out to him that his party is determined to cut spending by an extra £5 billion this year. I do not see what hope that would give to manufacturing industry, which needs support to invest in some of the opportunities that I have mentioned. I could say the same about training. We believe it is important that our workers have the skills to take part in modern manufacturing, which is why we will put £1 billion into Train to Gain next year. That is money that the hon. Gentleman’s party, as recently as Monday, pledged in this House to abolish. The Opposition have pledged to cut spending on training, and they are committed to cutting support for spending overall. That is not what our manufacturing industries need.
What those industries need is co-ordinated support and help from the Government, directly where it makes a difference. They also need the Government to be a smart customer, because we are a major purchaser of many goods and services right across the economy. In the past, Governments may not have looked so actively at their role as a customer, but we are determined to do that in the future.
A critical part of our manufacturing strategy is that we take advantage of the opportunities presented by the change to a low-carbon economy, whether that involves new nuclear capacity, low-carbon vehicles, or wind and wave power. That is what we intend to do, through the strategic investment fund and other initiatives.
This debate is critical to our economy. Manufacturing is a hugely important sector, and we are a country that makes things. We are the sixth biggest manufacturing economy in the world, and we will continue to be a major manufacturing economy in the future.
Madam Deputy Speaker (Sylvia Heal):
Order. I inform the House that Mr. Speaker had imposed a time limit of eight minutes on Back-Bench contributions, but that additional Members have since expressed a desire to
contribute to the debate. I am therefore reducing the time limit on Back-Bench contributions to six minutes.
3.51 pm
John Penrose (Weston-super-Mare) (Con): Thank you, Madam Deputy Speaker, and I shall try to keep my comments as brief as possible to allow plenty of time for other colleagues to make a contribution.
I shall start on a momentary happy note by saying that the Opposition have one fundamental point of agreement with the Minister. We agree that manufacturing is clearly vital for this country’s long-term economic future. It has been for many years, and must be in future, a core part of this country’s economy and employment. My party would like to see it grow and prosper at a far higher rate than it has in the past.
The Minister was right to point out that manufacturing still accounts for 13 per cent. of our GDP—a substantially smaller proportion than it used to be, but still very material. He was also right to point out that we are sixth in the world rankings on manufacturing. There are plenty of industries in which we can be proud of our standing: he mentioned aerospace, and I completely agree with him.
I am afraid, however, that the situation is not quite as rosy as the Minister tried to paint it. The sad fact is that for many decades the experience here has been of long-term decline in manufacturing, relative to other countries. That has been going on under Governments of all stripes, not just this one, for many decades.
Kelvin Hopkins: Does the hon. Gentleman accept that one factor that has had a crucial effect on our manufacturing sector for a long time has been the overvaluation of sterling, relative to the currencies of other significant developed nations? The countries that have attended to their exchange rate and made sure that it is kept in line—such as Germany, for example—have prospered rather better than we have.
John Penrose: I should love to agree, but I am afraid that I cannot. I am a free marketeer, and so believe that the market is rather better at choosing appropriate exchange rates for most countries than politicians are—certainly, it is better than politicians in this place. In addition, Germany’s experience with the level of the deutschmark and now the euro has not been altogether happy in many periods of its history. I am not sure that it is a good example, although I accept the underlying point that I think the hon. Gentleman is making, which is that many countries’ currencies have been overvalued or undervalued for periods. That clearly creates stresses and strains in the world economy.
To illustrate how long our relative decline has been going on, it is instructive to look at the rate of job losses in our manufacturing sector. Because of various comments from the other side of the House, I shall make one comparison—and I shall limit myself to this—between the Labour and Conservative records. Under the previous Conservative Administration, 137,000 manufacturing jobs were lost each year. However, I am afraid that the rate has accelerated under the current Labour Government, and that the number of manufacturing
jobs lost each year is now 152,000. Clearly, we are still making mistakes and we still face a fundamental underlying problem.
Nia Griffith (Llanelli) (Lab): Can the hon. Gentleman tell us how many manufacturing jobs have been created under the Government?
John Penrose: I do not have a clue, but I am sure that either the hon. Lady or somebody with the appropriate note from the Labour Whips is itching to tell us and will doubtless leap to their feet at some point during the debate.
It is instructive to consider why there has been a long-term decline. Some factors are the fault of Governments and politicians, but others are part of the global economy. It is instructive to realise that, because in the face of the economic winds of change other countries may have dealt with the pressures better than us. We have already heard about Germany, although I did not agree with the precise example.
The most important factor is globalisation. Many countries have become part of the global economy and, because they have a particular advantage in low wage rates, have made huge strides in trading their way upwards and out of poverty. I am sure everybody in the Chamber agrees with that and welcomes it, but the unfortunate and painful downside for the UK has been long-term pressure on internationally traded goods, particularly those that are manufactured in this country. That has been a major factor in the erosion of Britain’s relative competitive position in manufacturing.
That has not been happening only over the past 10 years, although there has been a strong impact on the Government’s performance. In the 1980s and ’90s, before the so-called BRIC countries—Brazil, Russia, India and China—emerged and became part of the world economy, we were all talking about the Asian tigers, who were doing exactly the same thing. It has been going on for many years, and it is up to us to address the issue rather more effectively than we have been.
Some of the problems are self-inflicted, however. In the old days, there was appalling labour market rigidity and industrial strife. Thankfully, that problem has been substantially reduced; it has not gone completely, but it is more a problem of history than of today. The UK has a good record in research-led innovation—scientific innovation from our universities—but unfortunately we are not as good as many other countries, particularly America, in converting theoretical science into practical manufactured products that can be sold abroad. In many cases, other countries are better at taking on such ideas and investing in them. I do not say that we are awful at it, but we could do better.
Mr. McFadden: I agree that there has traditionally been difficulty in bringing great ideas from the laboratory to the market. That is why, as part of “Building Britain’s Future” we have announced an innovation fund, to be shared between Government and levered-in private sector funding, to do precisely what the hon. Gentleman is talking about. I hope he welcomes that initiative.
John Penrose: I am delighted to have been able to give the Minister the opportunity to make that explanation. I am sure we all wish the initiative well, although we obviously need to make sure that it delivers what it promises. I am sure that all hon. Members would agree about the principle that it is trying to achieve.
We must deal with some other external problems, one of which, particularly at a time of recession, is the threat of a resurgent force of protectionism. As the Minister rightly said, we are facing one of the worst recessions in living memory, and it has hit manufacturing and construction particularly badly. There is danger at this point in the economic cycle, because there are always temptations for the voices of protectionism in countries all round the world to try to re-raise barriers, either tariff or non-tariff. Clearly, that would affect the UK’s ability to export. These days, manufacturing is overwhelmingly a global industry and a global business in many sectors. Protectionism is an arrow aimed at the heart of our manufacturing sector if we cannot fend off those siren voices and ensure that the forces of protectionism are held at bay.
Given that scenario, why are other countries doing better than us in maintaining their manufacturing sectors and making them prosperous? What should we be doing? My party has come up with a series of ideas, and I propose to summarise them, but I shall not go on for too long because I am conscious that other Members want to contribute.
First and most importantly, we need a simpler tax regime, and lower taxes wherever possible. Half of one of our tax ideas was mentioned by the hon. Member for Wolverhampton, South-West (Rob Marris), who spoke about our plans for capital allowances. He neglected to mention what we would do with the money; I am sure that that was merely an unintentional oversight, and I am happy to help him out. The aim, of course, is to reduce corporation tax and the cost of employing staff, particularly for smaller companies. Our ideas on that, which are already a matter of public record, are to cut corporation tax and payroll taxes for small firms, to defer small firms’ VAT bills, to introduce measures such as small business rate relief, and to make the latter mandatory.
Those ideas are all simple and straightforward, and will help small firms in many sectors, particularly manufacturing, to prosper. They make life simpler, and they mean that firms do not have to check with their accountants before making an investment decision. The measures allow firms to focus on customers, rather than on tax implications, and firms will therefore be much more likely to remain competitive.
John Penrose: I give way, but with trepidation.
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