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"it would be foolish to rush into significant cuts now which take the economy down even further, which lead to an even bigger deficit problem".
Yet just days later, the Secretary of State was signing up to his part of £6 billion of cuts in this financial year-cuts that mean 10,000 fewer students going to university than under the published plans, and £300 million being taken out of the regional development agencies this year.
Robert Flello (Stoke-on-Trent South) (Lab): Such cuts will hit my constituency and those of my hon. Friends the Members for Stoke-on-Trent North (Joan Walley) and for Stoke-on-Trent Central (Tristram Hunt). The cuts will hit places such as Stoke-on-Trent particularly hard-areas that have struggled to come forward from the 1980s. The impact will be devastating.
Mr McFadden: My hon. Friend makes an important point. Before the election we were told that £6 billion could be taken out in efficiencies, but the announcement proved that that was not the case, and that the cuts will have a real effect on constituencies such as his, mine and many others around the country.
What could be the reason for the volte-face on the timing of deficit reduction? There may be cynics on the Opposition Benches who might think it had something to do with the election result or with the fact that the Liberal Democrats were in coalition talks with the Conservatives, but the Secretary of State leads us to believe that that was not the case at all. He said it was all about events in euroland, but to paraphrase Frankie Valli, "Greece" was the word, although I have a feeling that in the present coalition the Secretary of State does not go into work in the morning singing, "We can be who we are".
Mr Jim Cunningham (Coventry South) (Lab): Does my right hon. Friend agree that the uncertainty about the future of Advantage West Midlands, for example, is creating problems for small businesses locally? Does he also agree that if the Government set up a green investment bank-the sooner, the better-that could go a long way to helping industry in the west midlands?
Mr McFadden: That policy was in our manifesto, and we believe it would make an important contribution to economic growth.
Our argument today is that if we want a successful economy in the future and if we want to rebalance our economy and support strong manufacturing and powerful regions, a focus on deficit reduction alone is not enough. It is not enough just to have a plan for the deficit. The Government also need a plan for growth; and for that to work, we have to understand that they have an important role to play in supporting industry and creating the right environment for success.
Mr David Hanson (Delyn) (Lab): Does my right hon. Friend agree that a potential blight is being put on companies such as Airbus and Vauxhall near my constituency, where grants signed by the previous Government to help to support the growth of manufacturing industry are now being reviewed by this Government? That is damaging the long-term potential for growth, and decisions should be reached urgently so that we end that blight and get a move on in creating jobs.
Mr McFadden: The review of industrial support decisions has indeed created damaging uncertainty that should be brought to an end in a positive way as soon as possible.
The Labour Government knew that we had to play our part if rhetoric about rebalancing the economy and making the most of the shift to low carbon was to lead to new industries and new jobs. That was not, as some Government Members have sought to portray it, some kind of irresponsible bail-out plan concentrated on failing companies. It was a strategy about supporting key national capabilities in the industries and jobs of the future, ensuring that we had strong regional economies, and having the right tax measures in place to foster investment in new plant and machinery and to support research and development here in the UK.
Jim McGovern (Dundee West) (Lab): I am sure that my right hon. Friend is aware of how crucial the computer games industry is in my constituency, not only for the number of people the industry employs but for the students who study at the university of Abertay. The previous Government made a commitment to tax breaks for the computer games industry; does he agree that that commitment should be honoured?
Mr McFadden: The creative industries, including those that my hon. Friend mentions, are absolutely critical for our future economy. As with other areas, I believe that Government have a role in play in ensuring that the creativity of those industries flourishes here in the UK.
Of course, our future economy will be market-driven, and success depends on motivated individuals, great ideas, and enterprising and thriving companies. Our point, however, is that there is a critical role for Government when market gaps occur-a job to do in supporting investment that can pay dividends many times over in future. Let us remember that this is something that many Governments around the world are doing. Do we really believe that if the new Government elected here turn their back on this approach, other Governments who are also trying to attract new industries and new jobs will do the same? I do not think so.
Alex Cunningham (Stockton North) (Lab): This week, One NorthEast, the regional development agency in the north-east of England, confirmed a grant of £7.3 million to INEOS Bio to construct Europe's first advanced bioethanol-ethanol from waste-plant in my constituency. That will create 350 construction jobs and 40 permanent skilled jobs, and I am sure that my right hon. Friend agrees that that is another fine example of why One NorthEast should continue its good work with the level of funding that has given it the power to help the north-east's economy to diversify so successfully.
Mr McFadden: I absolutely agree. That sounds like exactly the kind of project where Government, through the RDA, and business can come together for the benefit of the local area.
Our concern is that the new Government do not understand the role of Government in fostering new industries or may even be ideologically opposed to it, believing, as the Secretary of State has said, that
"one of the most important jobs of Government...is actually to get out of the way".
Getting out of the way would have done us little good when we were trying to get Nissan to build its battery plant and LEAF electric car in the north-east. It would not have helped us when were extending a loan guarantee to Ford to make the next generation of low-carbon diesel engines here in the UK. It would not have helped us when we were trying to support world-class aerospace at Airbus and Rolls-Royce. It would not have assisted in our ambition for the UK to move into the world premier league in the nuclear supply chain through the loan for Sheffield Forgemasters. Nor would it have done any good when we were trying to attract manufacturers of the next generation of off-shore wind turbines to make their products here in Britain.
Mark Tami (Alyn and Deeside) (Lab):
Is not Airbus a perfect example not only of how hundreds of millions of pounds have secured and created thousands of jobs,
but of the fact that that money is repayable, and has been repaid, and that royalties are paid on every aircraft sold, which means that this is also a very sound investment for the Government?
Mr McFadden: My hon. Friend makes a good point. A lot of industrial support is in the form of loans or loan guarantees. The depiction that the new Government have attempted to create of the indiscriminate giving of grants that were not in the public interest is absolutely not true.
Richard Graham (Gloucester) (Con): Is the right hon. Gentleman aware of last week's Centre for Cities report, which highlighted the growth, or lack of growth, in the private and public sectors over the past 10 years? Some 69% of the 1.2 million jobs added to city economies over the past 10 years were public sector positions. In my constituency, the growth rate in the private sector fell by 10% over that period, which meant the loss of 4,600 jobs from the private sector while the public sector grew by 7,600 jobs. My city was the fourth worst in the country; the city of Stoke, represented by the hon. Member for Stoke-on-Trent South (Robert Flello), was the worst. May I put it to the right hon. Gentleman that if that is the result of 10 years of massive spending in the public sector, it is simply unsustainable to carry on losing that number of private sector jobs, and that our job is to re-stimulate the economy and the framework for growth in the business sector?
Mr McFadden: The answer will be shorter than the question. I am aware of that report. However, my point is that if we want to stimulate private sector investment through some of the companies that I have mentioned, Government have a role to play. Simply walking away will lead to fewer, not more, private sector jobs.
Robert Flello: Returning to the subject of RDAs, a firm in my constituency wishes to bring the manufacture of ceramic products back into Stoke-on-Trent from abroad, but it is unlikely to be able to pursue that ambition because Advantage West Midlands is now unable to confirm its support. The ceramics industry is trying to bring jobs back into Stoke-on-Trent, and it is quite capable of doing so, but not without a little extra support.
Mr McFadden: My hon. Friend makes a good point. Sometimes a bit of investment from the public sector can lever in significant extra investment from the private sector.
I want to turn to the criticisms of the approach that I have set out that have been made by the Secretary of State and the Prime Minister in recent weeks. They have made specific accusations, saying that the projects were agreed in a hurry and were politically motivated. Indeed, the Prime Minister repeated that allegation a short time ago at Prime Minister's questions, when he spoke of fiddled grants for political reasons. Last week, he alleged that we had spent tens of billions of pounds on industrial support. I have to say that it is no wonder that he is sharpening his public spending axe if that is his grasp of the amount of money that we were spending on industrial support.
Let me deal head-on with the accusation about rushed and politically motivated largesse. These projects were not agreed in a hurry. We negotiated for months with the car companies, with the wind turbine suppliers and with Sheffield Forgemasters. All those projects were subject to careful scrutiny by officials and to the usual value-for-money criteria used in decisions of this kind. In the last Parliament, time after time, I stood at the Dispatch Box opposite and was criticised by some of those who are now Ministers sitting in front of me-not for going too quickly on industrial aid or for being rash about it, but for dragging my feet.
In a report published as long ago as July 2009, the Business, Innovation and Skills Committee, which was chaired at the time by the hon. Member for Mid Worcestershire (Peter Luff), who is now an Under-Secretary of State for Defence and a ministerial colleague of the Business Secretary, said that it was
"profoundly disappointed that to date not one single penny has been advanced through the scheme"-
the automotive assistance scheme-and added:
"We hope that this will change rapidly."
That is the same scheme that has funded Ford and General Motors, so let us have fewer accusations that there was a huge rush in the run-up to the election to spend money profligately.
Mr Adrian Bailey (West Bromwich West) (Lab/Co-op): My right hon. Friend quoted what I intended to say. I was a member of the Committee that produced that report, and when I represented it in a debate on local radio, I repeated the accusations that appeared in our report.
Mr McFadden: I am pleased to hear from my hon. Friend and I wish him well in his new role as the new Chairman of that Committee.
Gordon Birtwistle (Burnley) (LD): May I welcome the former Minister's conversion to a balanced economy? In that past 13 years, the previous Government virtually destroyed manufacturing industry and hung their coats on the financial industry, so this country went down. My constituency has lost hundreds of jobs in manufacturing industry because of the economic policies of the previous Government.
Mr Speaker: Order. So that I do not interrupt the flow of the right hon. Gentleman, I should say now that there have been a number of interventions whose eloquence-this is the fairest that can be said of them-has been matched only by their length. Interventions do need to be a bit shorter.
Mr McFadden: The hon. Gentleman sums up the problem with the attitude of the Liberal Democrats. They are determined to say that we are no longer a strong manufacturing country, but I have news for him: we are the sixth biggest manufacturing economy in the world.
Matthew Hancock (West Suffolk) (Con): Will the right hon. Gentleman give way?
Mr McFadden: I am going to make some progress but I will give way later.
I was speaking about the timing of the previous Government's decisions, but I also want to address the accusation that the political representation of this or that area was a motivation for our decisions. Not only is that complete and utter nonsense, but the fact that the new Government see it that way speaks volumes about how they see the Government's role in supporting industry. Our country was faced with a choice of Rolls-Royce manufacturing here or in Singapore, Nissan could have gone to Portugal, and nuclear components could have been made in Japan or Korea. Are the Government really saying that when faced with those alternatives, their first reaction would be not to ask how to secure the investment and the jobs for Britain, but to reach for the electoral map to see who the local MP is? What a dismal view of the Government's role in supporting UK industry.
Mr Denis MacShane (Rotherham) (Lab): I am grateful for my right hon. Friend's robust point. The Prime Minister said that all that money was sent to Labour marginals, but that did not work, did it? If we want a strong manufacturing sector, will the three and a half pro-Europeans in the DBIS ministerial team-the Under-Secretary of State for Business, Innovation and Skills, the hon. Member for Wantage (Mr Vaizey) is the half-keep British manufacturing ahead of that of France? That is their responsibility.
Mr McFadden: My right hon. Friend makes a strong point, but I want to make progress.
The previous Government's decisions were neither rushed nor politically motivated, and our manufacturing industries deserve a better future. The Government say that they are reviewing the projects to which I referred. We have already had a welcome confirmation of the Nissan decision, and I pay tribute to my hon. Friend the Member for Houghton and Sunderland South (Bridget Phillipson) for pressing the Government so effectively on that, but damaging uncertainty still exists, so let me ask the Secretary of State some specific questions.
What is the position on the loan guarantees to GM and Ford? What is the position on the loan to Sheffield Forgemasters? The director general of the CBI visited that plant the other day and said:
"It is hugely exciting to see such impressive technology and innovation being developed on this scale, here in the UK. The size and quality of the products being developed at Forgemasters is outstanding and this expansion programme builds on that by making a real investment for the future."
That was the verdict of the CBI. The previous Government decided to back the expansion of Sheffield Forgemasters not because we wanted to give aid to one company, but because we wanted a greater national capability in the nuclear supply chain, which is critical for Britain when many countries are building more nuclear power stations.
The Secretary of State must confirm the Government's position on that, because I must tell him that there are a lot of rumours going around about their attitude and response, and that if the loan does not go ahead, it will mean he is behaving exactly like the banks that he criticises for not supporting industry. We said that we would support industry, and it is time that the Government's position on that loan is cleared up.
Matthew Hancock: The right hon. Gentleman has talked a lot about growth and the need for a growth strategy. Is it still the Labour party's position to put a tax on jobs in the middle of the recovery?
Mr McFadden: The proposals we made on the tax to which the hon. Gentleman refers would have kicked in next year. If I were him, I would not be so cocky about tax just a week before his Chancellor comes to the Dispatch Box to tell us his tax proposals.
To return to my specific questions, will the new Government go ahead with the port development competition that was so pivotal in attracting offshore wind suppliers to the United Kingdom? Will the new Government stand by the support to Airbus and Rolls-Royce, which was mentioned by my hon. Friends? The Government have already caused damaging uncertainty by placing a question mark over those projects. If they abandon them, all their words about manufacturing and rebalancing the economy will rightly be seen as worthless.
Mark Tami: Will my right hon. Friend give way?
Mr McFadden: No-I have already given way to my hon. Friend and I want to make progress.
Support for industry is not just about specific interventions, but about having the right measures in place to foster investment and innovation, and I want to ask the Secretary of State where we stand on some of the key measures in that area, such as capital allowances, which the Government provide to encourage investment in new plant and machinery. The allowances are vital to manufacturing companies, particularly when we want them to be moving to lower carbon production. For those reasons, we doubled investment allowances in our last Budget, which meant that the new allowance-of £100,000-covers some 99% of capital investments made by companies every year.
The new Government, however, are pledged to cut those allowances to pay for their planned cut in corporation tax, a move described by the Engineering Employers Federation as "a disaster". It has said that if those plans went ahead:
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