The
Committee consisted of the following
Members:
Chair: †
Mr.
George
Howarth
Bacon,
Mr. Richard (South Norfolk)
(Con)
†
Crausby,
Mr. David (Bolton, North-East)
(Lab)
Engel,
Natascha (North-East Derbyshire)
(Lab)
Fallon,
Mr. Michael (Sevenoaks)
(Con)
†
Farrelly,
Paul (Newcastle-under-Lyme)
(Lab)
†
Gerrard,
Mr. Neil (Walthamstow)
(Lab)
†
Hemming,
John (Birmingham, Yardley)
(LD)
†
Heppell,
Mr. John (Nottingham, East)
(Lab)
†
Lepper,
David (Brighton, Pavilion)
(Lab/Co-op)
†
Lucas,
Ian (Parliamentary Under-Secretary of State for Business, Innovation
and
Skills)
Plaskitt,
Mr. James (Warwick and Leamington)
(Lab)
†
Prisk,
Mr. Mark (Hertford and Stortford)
(Con)
†
Seabeck,
Alison (Plymouth, Devonport)
(Lab)
Thurso,
John (Caithness, Sutherland and Easter Ross)
(LD)
Walter,
Mr. Robert (North Dorset)
(Con)
†
Wright,
Jeremy (Rugby and Kenilworth)
(Con)
David Weir, Committee
Clerk
† attended the
Committee
Third
Delegated Legislation
Committee
Monday
29 March
2010
[Mr.
George Howarth
in the
Chair]
Financial
Assistance to
Industry
4.30
pm
Motion
made, and Question proposed,
That the
Committee has considered the motion, That this House authorises the
Secretary of State to undertake to pay, and to pay, by way of financial
assistance under section 8 of the Industrial Development Act 1982, sums
exceeding £10 million and up to a cumulative total of
£380 million in respect of a guarantee which may be provided by
the Secretary of State to the European Investment Bank in the event of
a European Investment Bank loan to Ford Motor Company
Limited.—(Ian
Lucas.)
Mr.
Mark Prisk (Hertford and Stortford) (Con):
On a point of
order, Mr. Howarth. I am grateful to you and to the Minister
for that formal motion. I believe that my point of order is of
importance to the whole Committee. Can the Chair confirm whether the
Secretary of State is responsible for ensuring that the Committee has
the appropriate information? I ask because all Members of the House
will have only the motion as the information available to them. I felt
that as we were to have a discussion involving £380 million, we
needed to have it in an informed way, and that five lines were
inadequate for an informed debate. I made several calls to the
Department for Business, Innovation and Skills, and only after the
third call did I receive a background briefing. I now discover that I
appear to be the lucky holder of the briefing, and that the Committee
does not have that
information.
I
wonder whether you can confirm from the Chair, Mr. Howarth,
that the Secretary of State should provide the House with information.
The motion is not a matter of great contention between the parties, but
I feel that the public would assume that we had more information than
five lines, given the amount of money we are
discussing.
The
Chair:
The hon. Gentleman anticipated that this is not a
matter for the Chair. Astonishing though the powers of the Chair are,
they are not sufficient to enable me to insist that the Government or
anyone else provide any particular documentation to a Committee.
However, no doubt the Minister, having heard what the hon. Gentleman
said, will wish to address the matter in his speech to the
Committee.
The
Parliamentary Under-Secretary of State for Business, Innovation and
Skills (Ian Lucas):
Thank you, Mr. Howarth. It
is a great pleasure to appear before you for the first time.
I am grateful
to the hon. Member for Hertford and Stortford for his point of order,
of which he gave me no notice. A request was made of my office, and
information was supplied to him. He did not give me any indication
whatever that the information was inadequate in any way, and, to my
knowledge, no other member of the Committee has approached my office
requesting information. In the circumstances, I believe that the
approach that has been taken in respect of this matter is entirely
appropriate. I will, of course, address the matter before the
Committee. I am here for it to be scrutinised by members of the
Committee.
Mr.
Prisk:
I appreciate the Minister’s generosity in
giving way. I want to ensure that the figures are correct—it is
important that Members have the information. The motion refers to a
cumulative total of £380 million. I am grateful to the civil
servants who prepared the briefing on Thursday afternoon, but it refers
to £360 million. [
Interruption.
]
The Minister says that is correct. Which is the right
number?
Ian
Lucas:
I shall specifically address that point later in my
remarks. I am pleased to say that the staff the hon. Gentleman has
commended have already considered it and fully briefed me on it. If he
will allow me to proceed, I should be grateful to
him.
Mr.
Prisk
indicated assent.
Ian
Lucas:
The hon. Gentleman is most
generous.
Under
the provisions of section 8 of the Industrial Development Act 1982, the
Government are required to seek parliamentary approval for financial
assistance when the sums in respect of any one project exceed
£10 million. On 18 March, the Secretary of State for
Business, Innovation and Skills announced the Government’s
willingness, in principle, to support Ford Motor Company Ltd’s
application to the European Investment Bank for a £450 million
loan through a loan guarantee under the automotive assistance
programme. That programme, supporting projects worth up to £2.3
billion, was designed to help the sector and to ensure that the
downturn does not curtail the essential investment in innovation and
change that will help to support the industry in becoming a world
leader in the development, manufacture and use of low-carbon
vehicles—an agenda that the United Kingdom Government are
resolved to
advance.
The
proposed loan and loan guarantee, if agreed, will support six projects
in the UK, with a total value of £1.5 billion. Ford’s
plans will safeguard about 2,800 skilled jobs in the UK at its research
and development centre at Dunton in Essex, as well as its manufacturing
plants in Dagenham, Southampton and Bridgend. The projects to be
supported cover research and development for Ford’s commercial
vehicles, such as the Transit and Connect vans, and the development of
low-carbon emission diesel and petrol engines. That includes investment
in production facilities for new lower-carbon engines in Bridgend,
which was also supported by the Welsh Assembly Government last
year.
Lord
Mandelson and I are confident that Ford presents a good case for
support under the automotive assistance programme. As Lord Mandelson
said:
“Ford
has an important role to play in the UK’s aim to be one of the
leading manufacturers of low carbon
vehicles.”
Ford
makes a significant strategic contribution to the UK automotive sector
and the wider economy, providing
29 per cent. of the sector’s research and development. Currently,
25 per cent. of all Ford engines worldwide and more than 50 per cent.
of all Ford diesel engines are made in the
UK.
Ford
has welcomed the Government’s offer of support. The chairman of
Ford of Britain, Joe Greenwell,
said:
“Ford
welcomes this positive support from the Government. It greatly assists
in delivering Ford’s commitment to invest over
£1.5 billion in new, affordable, volume-produced low
CO2
technologies.”
By
providing the guarantee, the Government are securing substantive
ongoing investment in the UK by Ford, ensuring that the UK remains a
centre of excellence in engine and commercial vehicle technology.
Without the guarantee, the European Investment Bank would not provide
the loan, which would create a credible risk that some of the projects
would be lost to the
UK.
As
part of our appraisal process, we sought the views of the Industrial
Development Advisory Board, which is independent of Government and
provides advice on large investment projects, based on its wide
commercial and industrial expertise. In this case, the board’s
advice supported extending the loan guarantee to Ford on the terms
proposed. The motion seeks a resolution from the House enabling us to
provide that
support.
The
automotive sector is of key importance to the UK. It supports research
and development, technological innovation, skills and a supply chain
that is a mainstay of the wider manufacturing sector. The automotive
sector directly employs 180,000 people, accounting for nearly 6 per
cent. of employment in UK manufacturing. Another 200,000 people are
employed supplying essential parts and services to the sector, with a
further 550,000 jobs in the retail and service
sectors.
Support
for the sector, including the automotive assistance programme and the
Government’s scrappage scheme, was launched in response to
evidence that the recession was hitting the car industry harder and
faster than other manufacturing sectors. Output and employment was
falling at twice the UK manufacturing average rate. The industry also
faced tough new emissions targets from 2012, meaning that investment in
low-carbon technology was urgently
needed.
In
our “New Industry, New Jobs” strategy, we outlined the
Government’s future approach to the challenges of market
failures and market barriers. Strategic intervention from Government
will help to remove barriers to success, and targeted support can drive
innovation and access to markets in existing and new
technologies.
I
will address specifically the point that the hon. Member for Hertford
and Stortford raised concerning the discrepancy between the £3.8
billion and the £3.6
billion.
Mr.
Prisk:
That was £380 million and £360
million.
Ian
Lucas:
It was £380 million and £360 million;
I beg the hon. Gentleman’s pardon. The Government have agreed to
guarantee 80 per cent. of the proposed £450 million
European Investment Bank loan, which is £360 million. The
difference between the two figures relates to a 5 per cent. cap on
costs required by the European Investment Bank as a condition of the
guarantee.
With that
point, I commend the motion to the
Committee.
4.40
pm
Mr.
Prisk:
I am grateful to the Minister for specifically
addressing the points raised. The motion relates to an important matter
of investment that both sides of the House strongly endorse and wish to
see, so I want to make sure that we get the facts right. My fear was
that the motion itself could have been wrong, which obviously would
have been worrying in terms of the legalities of the process, so it is
encouraging that the Minister has assured me that is not the
case.
The
announcement in November 2008 of the automotive assistance package,
which underpins the motion, was followed by the launch of the package
in January 2009. One of the concerns raised throughout the process, on
which I have persistently badgered, and no doubt annoyed, the Minister,
is the question of why it has taken so long for money to be received by
major manufacturers in this country, because the package was launched
in January 2009 and it is now March 2010. In France and Germany, for
example, manufacturers have been receiving EIB loans of that character
for more than a year. Many people are asking why under the current
Government businesses in Britain are the last to receive the
help.
In that
context, and without testing your chairmanship too far, Mr.
Howarth, as my question relates to that automotive package, could the
Minister indicate how many similar loans have been agreed by the
Government? It would be helpful for us to understand the context of the
motion.
As
I said, we very much welcome the investment by Ford, which undoubtedly
has one of the world’s leading centres for engineering research
and development. It is fair to say that it is part of an encouraging
trend in investment, particularly in relation to how engines are
changing in the industry. We have seen that and other such investment,
and we support the Government’s proposal for their new
automotive council, which is an eminently sensible suggestion. We want
to be constructive and support it. We welcome the investment by the
industry and think that it is right to focus, along with the
Government, on low-carbon vehicle technology. It is absolutely right
that this country should seek to develop expertise on highly
productive, low-carbon vehicle technology, so in that context the
motion is to be welcomed. As I am keen on detail, would the Minster
indicate whether the technologies that Ford will apply will go beyond
diesel and can he give us an idea of the nature of the low-carbon
programme investments taking place?
The Minister
kindly explained the difference between the £360 million and the
£380 million. Are there any other key conditions that the House,
and therefore those we represent, need to be aware of, such as the
circumstances in which the loan guarantee might be called? In what
circumstances do the Government envisage that it might
occur?
4.43
pm
John
Hemming (Birmingham, Yardley) (LD):
I am pleased to serve
under your chairmanship once again, Mr. Howarth. I was a
city councillor for many years and at one stage sat on the
council’s economic development committee, which did similar
things to those we are discussing, although with much smaller sums of
money. I share the concern expressed by the hon. Member for
Hertford and Stortford about the lack of information. When city councils
do such things they produce reports with considerable detail. Some of
the detail might have to be confidential, as happens with a
council’s blue agenda, and as can happen here. I have some
concern about that. Over time that procedural issue may need to be
reviewed, so that Committees get a report rather than just a
motion.
However, we
will support the motion. In my constituency I have had struggles
finding help for businesses trying to expand in the automotive sector,
even with all that has gone on in terms of funding. It has been quite a
struggle and the regional development agency has not been particularly
helpful, so I welcome the proposal. It would be nice to have something
that is fairer to the smaller companies, which also need assistance at
times.
I think those
points are sufficiently clear. The automotive sector is very important
to the country as a whole and we welcome the
motion.
4.44
pm
Ian
Lucas:
I shall respond to the points raised. The hon.
Member for Hertford and Stortford said that France and Germany had
provided finance earlier than the UK Government. Of course, France and
Germany agreed with the UK Government that it was necessary to provide
a financial stimulus to the economy and to invest in and support the
sector.
The hon.
Gentleman will correct me if I am wrong, but I understand that his
party opposed that financial stimulus. That raises the question of
whether the scheme would be in existence under the Opposition. Would we
have been in a position to fund the automotive assistance programme or
the car scrappage scheme had we followed their policies, which would
have deflated the economy
and taken money out of it? Would that have been an appropriate approach?
It is rather churlish of the Opposition to criticise the Government for
delaying—they suggest—the application of the automotive
assistance
programme.
A
number of schemes have been taken forward. Offers were made to
companies such as Tata Motors European Technical Centre and Jaguar Land
Rover, both of which found appropriate private finance and decided not
to proceed with the automotive assistance programme. We have heard
about Ford today and I can confirm that financial arrangements have
been put in place to proceed with General Motors, whose excellent
Vauxhall plant I visited this morning. Through this move and the
investment secured for the car scrappage scheme, the automotive
industry as a whole has been supported by the Government. I am glad
about that.
The
Automotive Council, which the Government established, is not just a
proposal—I have chaired two meetings of it. It is up and
running, and the UK automotive sector is leading the world. We are
driving forward this extremely important
agenda.
I
cannot reveal the terms under which the guarantee is callable
upon—if I may put it in that way. They are commercial terms and
are subject to confidential discussions and commercial arrangements
between the Government, the Ford Motor Company and the European
Investment Bank.
I take the
point made by the Liberal Democrat spokesman that the proposal
necessarily poses scrutiny challenges. However, I believe that it is a
strong and important proposal that will support an important sector in
the UK economy. It is on that basis that I believe all parties will
support it this
afternoon.
Question
put and agreed
to.
4.48
pm
Committee
rose.