| Previous Section | Index | Home Page |
Rob Marris:
I quite agree with the hon. Gentleman: we cannot compete with India and China. We need capital investment. He is right that Conservative party policy is to cut corporation tax from 28 per cent. to 25 per cent. for larger companies; that is where the £3.7 billion comes from. The countervailing measure to make the policy cost-neutral is to take £3.7 billion away from capital allowances. I just put it to him that manufacturing industry disproportionately relies on capital
allowances. We want capital investment, and we have to have it, because we cannot compete on wages with India and China.
John Penrose: I take the hon. Gentleman’s point, but it is also true to say that in the past 10 years, this country’s tax code has become incredibly baroque, long and involved. I think that it is one of the longest in the developed world. It is now incredibly difficult to enact any measures, other than simplification measures, that will have a practical effect on investment decisions, because people cannot understand the tax code, which is supposed to encourage them to do one thing or the other. Simplicity is far more important, as a way of getting people to focus on customers.
I am conscious of the time, so I shall move on and talk about skills improvements. I think that there is a degree of agreement across the parties on the aim and importance of improving skills throughout the economy, although I suspect that we would disagree on how the Government are going about that. I should like to correct one point made, doubtless unintentionally, about the Conservative party’s policies on Train to Gain. The Minister for Business, Innovation and Skills said that we plan to reform Train to Gain, but he did not say how we planned to spend the money thus freed up. Just to make sure that he understands, I point out that our policy is not a cut, but a redistribution of the money so that it is used in a way that we hope is rather more productive. Some £775 million will go to reform Train to Gain. That will create 100,000 extra apprenticeship places, fully fund 77,000 existing places that are currently only partly funded, create a £2,000-per-job bonus for new apprentices in small and medium-sized enterprises and boost group training associations. That is not a cut; it is, we believe, a better way of spending the existing money.
Other factors that are vital for manufacturing are simplifying and speeding up the planning process. It is extremely difficult for anybody who wants to build a new factory in this country to find a site and battle their way through the thickets of our planning law, and in that regard it is difficult for us to compete with many other countries. That puts off many potential investors. The system needs to be simplified and made quicker.
Equally, we have a problem in our energy sector. Many manufacturers—particularly those at the heavier end of manufacturing, who inevitably use a great deal of energy—have come to me and, I am sure, many other Members present in the Chamber, and said, “Look, the problem with Britain’s energy prices is not only that they can be high, but that they are particularly volatile.” Volatility makes planning extremely difficult, and is particularly difficult to cope with for those in heavy industries; it therefore needs to be dealt with.
Mr. Weir: I agree with the hon. Gentleman about energy prices. Is there not also a problem with the type of contracts that some energy companies impose on high-end users? They demand large sums up front because of the effects of the recession, in which so many companies have gone to the wall.
John Penrose:
The effects are many. The hon. Gentleman has picked up one, and it is a major factor. It is extremely difficult in some cases to take out forward
contracts that might allow a firm to hedge its exposure. There are a number of things that can be done, but the problem with them is that none works as well as in other countries.
Finally—here we are in agreement with the Minister—there are great opportunities for this country in green manufacturing and creating a low-carbon economy. There is a degree of overlap between the two parties, largely because we would argue that our party introduced a series of ideas, which the Government swiped and are claiming as their own. Whatever the provenance of the ideas, measures such as smart meters, feed-in tariffs, encouraging renewable energy sources such as biogas and marine energy and, as the Minister mentioned, encouraging low-carbon buildings, transport and commerce by retrofitting energy efficiency measures to existing stock, and in our case proposing a high-speed rail route throughout the country, will stimulate locally produced and locally manufactured products that stand a chance of putting Britain in the forefront of some of the most important and exciting new industry areas in future.
There is much that can be done. Other countries are doing these things better than we are. I have set out the Conservative party’s recipe for coming back up the order of merit internationally, and I commend it to the House.
4.6 pm
Richard Burden (Birmingham, Northfield) (Lab): I welcome a great deal of what my right hon. Friend the Minister for Business, Innovation and Skills said in introducing the debate. If the hon. Member for Weston-super-Mare (John Penrose) will forgive me, I do not think I will be using his recipes in relation to manufacturing.
Those of us who come from the west midlands know how badly the manufacturing sector is being hit by the current economic downturn. The West Midlands Committee is conducting an inquiry and will report in the near future, so I shall not prefigure that. In the short time available, I shall make a few comments about the automotive sector, both because my constituency includes Longbridge and as Chair of the all-party motor group.
I shall not go over the issues about MG Rover that were discussed this week and will be spoken about again in great detail, save to say that, with all the accusations and counter-accusations that have been flying around over the past few days, I hope nobody loses sight of the fact that the important people in the debate are the 6,000 workers who lost their jobs, and their families, the communities that rely on them, and the suppliers to that plant. I hope that when he winds up the debate, my right hon. Friend will confirm that it is the Government’s intention to publish the inquiry report into MG Rover as soon as possible, and that after four years of waiting those employees will be able to get the money that is their due from the trust fund that has been set up.
On broader automotive issues, I welcome the fact that the signs coming out of the introduction of the scrappage scheme are positive. Perhaps there are lessons that we can learn from that for the future. Will my right hon. Friend bear in mind what my hon. Friend the Member for Stroud (Mr. Drew) said about short-time working subsidies, which still have a role to play? We need to look at those more seriously. I welcome the automotive assistance programme that was published
in February, but like others I want to underline the fact that that programme is not yet working quickly enough. That must be addressed.
For companies of strategic significance in the west midlands economy, it is particularly important that things move more speedily in order to attract the necessary investment. One example is Jaguar Land Rover, where the issue is loan guarantees on commercial rates. That must be brought to a conclusion as soon as possible so that that company can realise its undoubted potential.
That brings me to the main issue that I want to cover today—risk. Assessing, managing and taking risk is at the heart of any business. Businesses cannot operate without risk. That is clear from the example of the automotive industry, where there is a risk every time millions of pounds are invested in developing a new product, research and development and so on. It was even clearer this week when motor sport industry representatives came to Parliament to talk about its potential—some hon. Members might have seen the industry’s exhibitions. It is involved in a range of areas—from green technologies to defence equipment—that go well beyond motorsport, and at the root of that involvement is the industry’s ability and willingness to take risk.
At a time of economic downturn, there is a greater consensus about the need for the Government to intervene to nurture manufacturing. That is what the automotive assistance programme is all about, but, if we are to do so when bank credit is difficult to obtain, we must start taking responsible risks. The problem is that the machinery of government—for all the right reasons of looking after taxpayers’ money and so on—can end up being too risk-averse, and the resultant delays can get in the way of what we want to do.
When bank credit dries up, the Government rightly say, “We need to ensure that the European Investment Bank can put money in,” but the European Investment Bank then looks for guarantees. It looks to the Government to back up those guarantees with their own loan guarantees, so the Government go back to the company to try to secure the guarantees that the firm could not provide in the first place. The danger is that we get into that big circle and we do not get very far.
We, as politicians, must learn some lessons from that, because we often create that state of mind. When someone takes a risk, sometimes things will be successful and sometimes things will be unsuccessful, but when something is unsuccessful we politicians have a habit of immediately looking for heads to roll and for somebody to blame and of saying, “You should never have taken that risk in the first place.” We had an example of that earlier this week, when the right hon. and learned Member for Rushcliffe (Mr. Clarke) went back to the MG Rover story and said that, in 2005, at that crucial time, it was absolutely wrong for the Government to invest—to risk—£6 million to try to save 6,000 jobs. Interestingly, the Tories supported the measure at the time, but they attack it now. Political amnesia is an interesting thing. The point is that it was justifiable to risk that money to save those jobs. It was the right thing to do, but it did not achieve the right result. We need to learn some lessons from that, but I certainly hope that they do not lead us to say, “Never take the risk”, or to just play the blame game.
4.12 pm
John Thurso (Caithness, Sutherland and Easter Ross) (LD): May I begin by reiterating the written apology that I have made to you, Mr. Speaker, and through you, to the House? I may have to leave a few minutes before the end of the debate, although our timing is such that I hope to be able to stay for the full debate.
There is no doubt that UK manufacturing has been going through a particularly difficult time and has been deeply affected by the current crisis. We should not underestimate that. Indeed, we have heard about examples of those difficulties from the hon. Member for Birmingham, Northfield (Richard Burden) and the hon. Member for Brigg and Goole (Mr. Cawsey), who mentioned Corus. Office for National Statistics figures show that the drop in output has been worse than anticipated. Many companies are struggling, and that struggle flows through to lay-offs and redundancies. I do not for one moment underestimate those difficulties, but in the short time available to me I should like to turn to the future and to the opportunities that it presents.
It would be wrong to fall into the trap that many people fall into of regarding British manufacturing as somehow old-fashioned, outdated, ineffective, rooted in the past and of no consequence to the future. Far from it; in manufacturing, the high-tech and advanced engineering sectors, in particular, and many others are world-leading and world-beating. We should not only support them now, but nurture them into the future. As the Minister said when he gave his figures, we still have the sixth-largest manufacturing industry in the world, comprising 12.6 per cent. of the economy, by the gross value added—GVA—measure, and 3 million employees. That is important by anybody’s reckoning.
Certain sectors, including the steel and automotive industries, have suffered grievously, but the quality and strength of many others, such as the high-tech and advanced engineering sectors, remain a success story that we must support. I should like to touch on two examples of such opportunities. First, the Pentland firth, which is close to my home in the north, has a tidal resource that it is estimated could deliver up to 31 GW of energy. Given current technology, that is probably a tad optimistic, but a yield of 10 to 15 GW is highly realistic.
The technology is developing rapidly. Three years ago, I was told that in aviation terms it was at the Wright brothers stage, and a couple of weeks ago I was told that it had advanced to the Spitfire stage; in a few years’ time, we hope to be in the jet age. The Crown Estate has a licensing process and British-designed, British-made turbines, leading the world, will be the first in productive service. Companies such as Rolls- Royce, Atlantis and International Power are all involved. We have the opportunity to be the first in the world and to centre the industry in this country, with jobs in the UK—including a few, I hope, in Caithness.
Mr. Alan Reid (Argyll and Bute) (LD): My hon. Friend is right that the renewable energy industry gives a great opportunity for British manufacturing, particularly in remote locations. Will he join me in welcoming the investment made in Campbeltown by Welcon? It has the potential to create a few hundred jobs in the manufacture of wind turbine towers for the offshore wind generation industry.
John Thurso: I am happy to welcome that development in Campbeltown.
The danger is that other countries will see what we are doing and latch on to the technology. How often in the past has British innovation become somebody else’s production? We must not lose the opportunity; the threat is that things will go elsewhere. I make a plea to the Government, and I am meeting Ministers at the Department of Energy and Climate Change to put this point: the Government should play the co-ordinating role that will make sure that at this early stage the bits are joined up so that the opportunity is realised.
The second opportunity on which I want to touch has already been mentioned by the hon. Member for Birmingham, Northfield; it relates to the motor sport industry. I had a fascinating meeting with the industry’s representatives and I love what it is doing. There is such quality and breadth in its engineering. Everybody thinks that it is just to do with Formula 1, but it is not—it is about advanced gearboxes for articulated lorries which will reduce the amount of fuel used, about electric transmission, about the aerospace and defence industries and about £6 billion of exports. The motor sport industry, too, needs to be supported.
If there is to be support, we need three things. First, we need a clear strategy. That is not about picking winners and losers but about identifying strengths and opportunities and making sure that they are supported. The Government have made a good start and I hope to see more of the same. The second point is about skills. In the next three years, we will be approximately 5,000 jobs short in advanced areas such as nuclear technology, the advanced automotive industry and many other activities. We need to find a way of getting the skilled engineers that we need.
The third issue is finance. The current crisis in the City should be regarded as an opportunity. This is a time when we can redirect our finance, which can stop being the purview of the masters of speculation, and when the City can once again become the servant of commerce and industry. That means less debt and more equity. We need to find ways in which we can get more equity to absorb more risk into British manufacturing industry.
There is no doubt that British manufacturing is suffering today, but it is a success story to be nurtured and taken forward. As I said, it will offer a real prospect for sustainable growth once the recession is over. We should not lose sight of that opportunity.
4.19 pm
Mr. Adrian Bailey (West Bromwich, West) (Lab/Co-op): I represent a traditional manufacturing constituency; even today, well over 20 per cent. of the work force are employed in manufacturing and construction—the two sectors that have been hit hardest by the recession.
In my regular conversations with the managers of small and medium-sized companies in my constituency, the Government’s general approach is recognised as being appropriate. When I speak to those people, the first thing they tell me is that the important thing is to sustain demand. Without that demand for the goods and products that they produce, all the schemes are not worth much. The Government’s commitment to bringing forward public spending and to sustaining demand is
therefore crucial in terms of the thrust of the policies that are necessary to sustain manufacturing and make for a recovery. These people are not instinctively supportive of Government intervention and Government spending, but they argue, time and again, that if we do not have the general policies in place to sustain our manufacturing base, when the tide turns and the economy grows we will not have the industrial capacity to secure the jobs and the profits to pay into taxes to pay off the public spending that we are incurring now.
The overarching policy is right, but some pillars are working well and others are not. First, on the balance sheet, I will mention those that are working well. After a slow start, the enterprise finance guarantee scheme is undoubtedly playing an important part in the survival of manufacturing SMEs. The flexibility on tax offered by Her Majesty’s Revenue and Customs is an enormous help to a large number of small companies. The scrappage scheme, which was mentioned by my hon. Friend the Member for Birmingham, Northfield (Richard Burden), appears to be playing its part in sustaining demand in the motor industry and, in turn, the steel industry. The prompt payment initiative is also very welcome.
However, other pillars are not working so well. I want to concentrate particularly on credit insurance. My hon. Friend the Member for Birmingham, Northfield went on at some length about risk. That is nowhere better reflected than in the support that the credit insurance industry gives to the construction and automotive supply chain, which in general does not get much support. Rachel Eades, a representative of Accelerate, the motor industry supply body, says:
“The majority of our clients have all been hit with either or both a reduction in cover and in many cases—and it seems to be growing—the complete withdrawal of insurance cover for vehicle manufacturers and tier one suppliers.”
That is hitting companies in my constituency, and in the rest of the black country, particularly hard. They know that there are opportunities to promote and sustain their sales but cannot get the credit insurance necessary to do so. It does not help that even when they can get it, the premiums have gone up and their overheads are that much greater. In many areas of the motor supply industry, credit insurance has been withdrawn altogether. The Government initiative announced in April to top it up is therefore irrelevant, because one cannot top up something that does not exist. This is a big issue that is hampering the ability of small companies in the black country to sustain their viability. I hope that the Government will look at it again.
The other big handicap in the Government proposals is that they relate only to domestic companies. Our Government representatives are internationally promoting a global fiscal stimulus, with construction in European countries designed to stimulate the European and wider world economy, but companies in my constituency that would be capable of using the competitive pound to sell and to enhance their profitability and potential work force in those markets cannot do so because no export credit guarantee insurance is available.
I know that the Government are consulting on that, and I hope that the Minister will ensure that that consultation reaches a speedy and productive conclusion. Otherwise, there will be companies in the black country that are unable to support the Government’s overall initiatives to promote world growth, and particularly
the element of that growth that will help much-needed small and medium-sized enterprises in areas such as the black country.
| Next Section | Index | Home Page |