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19 Jan 2010 : Column 38WH—continued
Having made that personal plea on behalf of my constituency, I will move back to the speech made by the hon. Member for Great Grimsby. He made two overriding points in his opening remarks. The first was that manufacturing is strategic, and that we forget the strategic importance of manufacturing to UK industry at our peril. His second point was about the need to rebalance the economy away from such dependence on financial services. Interestingly, I came here from a sitting of the Treasury Committee, where Professor Goodhart and Professor Kay were having a solid argument about how that should be done. Everybody is agreed, however, that the days when the financial services industry dictated how the economy of the country should be run are over. We need a financial services industry, but it must be the servant of commerce and industry, not the master of speculation. The hon. Gentleman was right to raise that issue.
There has been an interesting debate about the concept of the exchange rate, and there is no doubt that the exchange rate has been a tremendous boost to a number of manufacturers. I have previously cited in this Chamber a company in Invergordon called Kirker Europe, which makes nail varnish for most of Europe. Its biggest competitors are in China, but during this period of financial uncertainty, most of its customers have returned. They are ordering not simply on price grounds, but because of security of supply and the fact that Kirker Europe can deliver anywhere in Europe within three days, whereas goods would take five or six weeks to come from China. Therefore, in the debate about cost in Britain, it is worth remembering that there is more to value than simply cost. The United Kingdom offers many things in its manufacturing industries that make up components of that value, and although cost is important, we should not talk down all the other factors that we have going for us.
This is the fourth debate on manufacturing in which I have spoken over as many months, and it is fascinating to note that each Member who secures such a debate addresses the subject from a slightly different angle. The central thrust is the importance of manufacturing and what we need to do about it, but many hon. Members have come at that from different directions. It is right to continue to raise the subject, however, as it is one of the most critical issues for our future. One hon. Member-I am not quite sure who-said that perhaps by having such debates on a repeated basis, we will get across to those concerned just how important the issue is.
I attended a business breakfast in the House last week that was chaired by the hon. Member for Mid-Worcestershire (Peter Luff), who chairs the Business, Innovation and Skills Committee. It was the launch of RBS's £1 billion loan fund for manufacturing. One of the most important points raised at the meeting was that we always talk a great deal about manufacturing when there is a recession, but forget about it as soon as the recession is over. If there is one lesson that I would like whoever next sits behind the desk of the "Lord High Great Grand-everything" to learn, it is that we should not forget. We need to learn that lesson this time round in a big way.
The hon. Member for Great Grimsby said that RBS was the bank involved with the bed manufacturer that he mentioned. RBS has launched a fund of £1 billion of
secure money for manufacturing, and it has asked for MPs from all parties to let it know of companies that the money could help-I am dutifully passing on the message.
The other point made at the breakfast was that although we are good at talking ourselves down, a great British characteristic is that we do not talk up what we do well. Let me repeat what I have said before about the importance of manufacturing. We have the sixth largest manufacturing industry in the world, which accounted for more than £150 billion in 2008. Depending on whose figures we believe, between 2.7 million and 3 million people are employed in it. There has been growth in real terms, but it is right to say that there has been a decline in relative terms, for which there are a number of reasons. I believe that manufacturing is a success story for Britain and an opportunity for the future. Anyone aspiring to be in government must recognise that opportunity and undertake to support it.
There are three key drivers that will take forward all industry, particularly the manufacturing industry. First, without a stable financial system, we will not have an economy that can grow. Getting the banking system right-I happen to be in favour of narrow banking-is an absolute prerequisite. More than that, we must learn one of the critical lessons that has come out of the financial crisis: we cannot rely nearly so much on debt as part of the finance mix. More equity must be available, but it must be available across the board.
At the top end, the listed companies have not had any great problems in restructuring their balance sheets. They have been able to go to the markets and acquire more equity, now that that is in vogue, and the analysts are not asking them to sweat those balance sheets. However, that is a much more difficult proposition for early stage companies, small and medium-sized enterprises, and regional firms. For that reason, it is important that we put mechanisms in place to allow people with individual net worth who would like to invest in companies in their area to do so. I have put forward some ideas, one of which is a local enterprise fund. That is about not Government money, but creating a mechanism to connect the investor with the company. However, I do not have enough time to go into detail about that.
The second vital area is getting our skills base right. The last time I spoke in the House on manufacturing was on 2 December. The previous day, I had attended a reception by Engineering UK, which had put across the scale of its problem. It estimates that we will need 587,000 more engineers by 2017-roughly 80,000 a year. On the other side of the skills equation, however, we are losing 30 per cent. of our further education lecturers, because they are retiring and not being replaced, and there is a 17 per cent. drop in the number of students. That is a major problem and I would like a form of bursary support for those in engineering and science to ensure that the right number of graduates come through.
The hon. Member for Manchester, Central (Tony Lloyd) spoke about apprenticeships-I could not agree with him more. I regret the day that the hotel and catering training levy board was taken away. I argued against that closure from the day it happened, and I will carry on with that argument for as long as I can.
My last point is about innovation. We are very good at innovation in this country. We do it well in the lab and in companies-we even do it quite well in the garden shed-but what we do not do is commercialise, and we need to work to be able to get to the stage at which innovations that start in this country are commercialised in this country, rather than ending up being commercialised overseas.
It is essential that we learn the lessons of the recent past and apply them wisely for the future. The greatest lesson that we need to learn is that manufacturing is strategically important, and woe betide any Government who do not understand and support that.
Miss Anne Begg (in the Chair): I remind hon. Members that I would like to be able to call the Minister at 12.20 pm.
12.10 pm
Mr. Jonathan Djanogly (Huntingdon) (Con): I congratulate the hon. Member for Great Grimsby (Mr. Mitchell) on initiating this timely debate on the importance of supporting UK manufacturing. I shall refrain from opining for too long on the weak pound, other than to say that it reflects our weak economy.
The year 2009 was traumatic for many UK manufacturers. Investment in businesses dried up, production was down as demand in many sectors froze, and productivity weakened to the extent that hundreds of businesses were forced to close. The facts are that under Labour, since 1997, 10 per cent. of manufacturing businesses have closed and more than 1.5 million manufacturing jobs have been lost. Following the pre-Budget report in November 2008, the Government introduced a number of schemes designed to support businesses through the recession, but more than a year on from the announcement of those mainly loan guarantee schemes, a great cause for concern is the lack of progress from the Government's approach to the challenges facing the UK manufacturing industry.
The Government were asked to support our industry-an industry that has lost 280,000 members of its work force in the past year alone. Businesses across the UK have experienced, and still are experiencing, acute shortages of finance and working capital, which the Government declared their intention to ease.
Chris Ruane: Will the hon. Gentleman give the figures for the previous recession-the Conservative recession? How many manufacturing jobs were lost at the same point in that cycle? In north Wales 10 years ago, in the last recession, 29,000 people were unemployed; now, it is 14,000 people.
Mr. Djanogly: It is not a question of bandying around statistics. I am simply saying what the situation is at the moment. What we hear from businesses today is that the Government designed their multitude of schemes in such a complicated and confusing fashion that third parties, initially including banks, often did not understand how to operate them or which one to operate. Indeed, it was not always clear on what terms support was being offered to business.
It is telling that the trade credit insurance scheme was quietly shelved by the Government in the most recent pre-Budget report. Announced in the 2009 Budget, the scheme was originally intended to provide up to £5 billion
in the form of top-up insurance guarantees to help firms whose credit insurance cover had been reduced. Out of that £5 billion, which was ring-fenced, just £18 million of cover was provided, to just 72 businesses. A similar pattern can be seen with the Government's now withdrawn working capital scheme.
Even if a business was eligible for a scheme, it often elected not to take part, either because it did not understand the workings of the scheme or because it felt that it could get a better deal on the open market. Indeed, one gets the impression that many of the schemes were more about Government press releases than about delivering any real relief and support to UK manufacturing.
Tony Lloyd: The hon. Gentleman is right to consider the relationship between Government and manufacturing, but I wonder, in that context and in the context specifically of discussions about policies of this Government and the alternative Government, what he makes of the comments of Jeegar Kakkad, the senior economist at the Engineering Employers Federation, which is not normally a supporter of this Government. He said of the Conservative party's plans:
"Reducing the level of capital allowances would be a big problem for manufacturers...cutting the rate to 12.5 per cent. would be a disaster".
Mr. Djanogly: Well, if one looks at capital allowance alone, but of course one has to look at it in the context of our overall plans for taxation, which are to reduce the burden.
Conservatives believe that manufacturing should be at the heart of the economy if the UK is to achieve sustainable economic growth. Even given its current challenges, the UK still has the sixth largest manufacturing economy in the world. Manufacturing still produces more than half the UK's exports and still constitutes more than 12 per cent. of our gross domestic product. The firms that emerge from the recession will be stronger and leaner for the experience and will be a key factor in UK economic growth. Conservatives want to support such firms. Rather than burdening UK business with more burdensome red tape and complex regulatory schemes as the Government have done, a Conservative Government would provide simple practical solutions to help UK manufacturing businesses to recover from the economic crisis.
Last October, my hon. Friend the Member for Weston-super-Mare (John Penrose) published a paper setting out the Conservative vision entitled "Regulation In The Post-Bureaucratic Age". It outlined how excessive red tape and the innumerable quangos established by the Government have undermined the UK's economic competitiveness and left business drowning in red tape. By sweeping away the Government's ineffective system of bureaucracy, a Conservative Government will reform the approach to regulation, thereby allowing policy goals to be achieved in a less burdensome and less intrusive way.
The British Chambers of Commerce has warned that the burden of taxes and regulation on business under this Government is set to reach £25.6 billion over the next four years. Only today, the director general of the BCC commented:
"The cost of employing people must be reduced if future governments are serious about giving businesses the freedom to create jobs and drive our economic recovery."
It is clear to Conservatives that this country needs urgent cuts in the regulation and red tape suffocating our industry and business. For example, under a Conservative Government, regulatory impact assessments will be followed up, three to five years after legislative changes, to ensure that any new regulation is not having a negative impact on UK business. A new Star Chamber Cabinet Committee would enforce a strict one-in, one-out policy on regulation, providing that any new laws must be associated with cuts in old laws, with a target of reducing the net regulatory burden by 5 per cent. Additionally, sunset clauses will be applied to regulations to ensure that their necessity is reviewed. Furthermore, during the first term of a Conservative Government, all regulators will be reassessed and their duties reviewed.
A prime concern of a Conservative Government would be to cut back the overwhelming amount of regulation facing employers in UK business. A good example is the Labour Government's attempt to suffocate the temporary agency worker market with their rushed proposals relating to the agency workers directive. Such is the red tape and bureaucracy attached to employment laws, albeit with the aim of protecting workers, that ironically many UK businesses are telling us that they do not even want to hire people any more. A Conservative Government would seek to roll back much of that redundant and counter-productive gold-plating of European legislation, with the intention of getting businesses employing people again.
To stimulate further growth, Conservatives aim to cut the rate of corporation tax from 28 to 25 per cent. and the small companies rate from 22 to 20 per cent., so that businesses have a chance to get back on their feet. We also want to reverse Labour's job-destroying increases in national insurance. A Conservative Government would further embark on a formal process of tax simplification to make it significantly easier for businesses to predict, calculate and pay their taxes. During the recession, Conservatives would have continued to press for the establishment of a straightforward and easy-to-use £50 billion national loan guarantee scheme that would directly underwrite lending from the banks to viable British businesses.
Conservatives are committed to taking rigorous action to tackle unemployment and help with the reskilling of the work force as part of our "Get Britain Working" plan. The "Work Programme" campaign-a new integrated welfare-to-work initiative-is based on four supplementary programmes. First, the "Work for Yourself" initiative would offer business mentors and other opportunities to would-be entrepreneurs and is designed to encourage people into self-employment. Secondly, the "Work Together" project connects people to volunteering opportunities in their area and will allow people to develop their skills in new areas of business. Thirdly, there will be work clubs-places for people to receive mentoring, skills training and help in finding local job opportunities. Fourthly, the "Youth Action for Work" campaign will provide a huge number of additional apprenticeships.
The Conservative party has set a target for the United Kingdom to overtake Germany and become Europe's leading exporter of high-tech products. To fulfil that goal, we need a long-term strategy based on increased
investment in talent, technological innovation and raising the nation's skill base. That is why Sir James Dyson is leading a Conservative taskforce to set out a clear vision for boosting high-tech production in Britain. We are confident that by harnessing our resources, a Conservative Government could generate a major expansion of high-tech product development and renewable energy, address the capital gap and create real sustainable growth in the UK economy.
Mr. Hoyle: The hon. Gentleman mentions Dyson, but does he not feel embarrassed that that was the man who moved his manufacturing to Malaysia at the expense of British jobs?
Mr. Djanogly: Rather than hitting out at individuals, we should look at the reason why British manufacturers are moving their jobs overseas-that is what the next Conservative Government will do.
Manufacturing has an important future in the UK. It has doubtless faced a testing period, which has stretched the resources of many businesses to breaking point, but a Conservative Government will offer the hope of change and renewal. Only Conservatives can now give business access to the finance that it needs to grow and the skilled work force that it needs to compete with the best on the global stage.
12.20 pm
The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Ian Lucas): It is a pleasure to appear before you, Miss Begg. I am grateful to all hon. Members who have contributed to the debate, but I am particularly grateful to the hon. Member for Huntingdon (Mr. Djanogly), who gave us an illuminating outline of Conservative policy towards industry. Of course, hon. Members on both sides of the House have experienced that policy before, and we do not need a crystal ball to know what it would be, because we have read the book. As my hon. Friend the Member for Vale of Clwyd (Chris Ruane) said, the book included 7,000 redundancies at Shotton in the early 1980s, and there were more than 1,000 redundancies in the steel industry at Brymbo, just outside my constituency, in the early 1990s. That is the history of the Conservative approach to manufacturing.
Chris Ruane: Will my hon. Friend give way?
Ian Lucas: I will have to proceed very quickly because of all the contributions that have been made, so I hope that my hon. Friend will forgive me if I do not.
As we have heard, the Government take an active approach on supporting manufacturing, which contrasts markedly with the approach that the hon. Member for Huntingdon has just outlined. There may be differences among Labour Members, but it is noteworthy that seven Back-Bench Labour MPs have contributed in a disciplined manner to the debate. We have also had positive contributions from the hon. Members for Glasgow, East (John Mason) and for Caithness, Sutherland and Easter Ross (John Thurso). I contrast that with the approach that the Conservative party appears to take.
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