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"Any business would have to think twice about investing in the UK."
Before the election, the Chancellor said that that plan would involve the removal of allowances amounting to £3.5 billion, which would otherwise support manufacturing. Can the Secretary of State confirm that it remains the Government's policy to cut investment allowances for manufacturing industry?
Another issue is supporting research and development. We are all agreed that we want research and development, and the manufacturing associated with it, to take place here in the UK. For that reason, the previous Government introduced the idea of a patent box-a corporation tax rate of just 10% on future profits made from patents. When we announced that policy, Andrew Witty, chief executive of GlaxoSmithKline said:
"The patent box is exactly the sort of active, long-term and creative support that we need from the government to ensure that the UK remains an attractive place for highly skilled sectors such as pharmaceuticals."
When the Secretary of State was asked about that a couple of weeks ago, he did not answer, but I want to give him another chance to do so today. If the new
Government believe so much in a lower rate of corporation tax, will he now tell the House whether they support that proposal for an extra-low corporation tax rate for that part of the economy engaged in research and development here in the UK?
On innovation, can the Secretary of State tell us where we stand on the Hauser report and Labour's plans for innovation centres to help the crossover of ideas between academia and industry?
Let me say a word about the regional development agencies. These were introduced by the Labour Government a decade ago because we had seen the success of the Scottish and Welsh development agencies. They have, for the most part, performed well, with independent evaluation showing that for every £1 spent, regional economies benefited on average by £4.50. I know that the Secretary of State agrees that every part of the country should share in future economic growth. Before the election, he said that
"efficiency has become the new politically correct word for sacking people and cutting services".
But one of his first acts, together with other Departments, was to take £300 million out of the RDAs, so I know that he will not claim that that was about efficiency. Will he admit that that will have a real impact, with business support cut, projects cancelled and delayed, and-as my hon. Friend the Member for Stoke-on-Trent South (Robert Flello) said, less private investment levered in to those projects?
Tony Baldry (Banbury) (Con): Earlier, the right hon. Gentleman accepted the need to control the budget deficit. Is there any area in which he thinks public spending should be reduced? Can he share just one such area with the House?
Mr McFadden: The previous Government set out many proposals, including some £900 million over the next few years in the expenditure of the Department in which I was a Minister. We also said that we would save billions more than that on public sector pay and pensions, and we set out many other proposals. I do not stand here as someone who says that there should never be cuts. My point today is that cuts must be made in a way that supports a strategy for growth, not in a way that militates against it. That is why I raised the issue of industrial support and regional development.
Apart from the Budget, what about the future of the RDAs themselves? Government policy on this is in a total mess. We have had statements that they will be abolished, that they will be replaced, and that their replacements will both be different and look the same. Can the Secretary of State tell the House today exactly what the position is and how he is going to make a judgment on this? He talks of business and local authorities deciding in particular regions. How will that be done? Will it be one vote per council or one vote per business? Will it need a 55% majority? If it will be up to the region, how will he make the judgment on this important issue?
Lorely Burt (Solihull) (LD):
RDAs are important, but does the right hon. Gentleman concede that the performance of some RDAs has been patchy-to put it
kindly? Does he agree that we can still deliver support for business in a cost-effective way, but more flexibly using local enterprise partnerships? One size does not fit all in all areas of the UK.
Mr McFadden: I know that the hon. Lady cares about these issues, but I have to disagree with that point. Until the situation is clarified, businesses in various regions do not know with whom they will be working, and a damaging lack of confidence is emerging about how projects that cross local authority boundaries are to be managed in the future.
David Simpson (Upper Bann) (DUP): The right hon. Gentleman has mentioned research and development, but one of the pressing issues in industry today is apprenticeships. We have been promised 50,000 new apprenticeships, but does he agree that they must lead to relevant qualifications at the end of them, so that apprentices are not just going through the process for the sake of it? They need to be relevant to the industry and to the companies involved.
Mr McFadden: When we were in government we brought apprenticeships back from the near-death state that they were in and made them once more a mainstream part of the labour market. They are valuable, and we increased the number available many times in our time in government. I agree that they are very important in providing opportunities for young people.
We sought this debate because we believe that while it is right to cut the deficit, it is not possible to go forward, as we come out of the recession, on the basis of tax and spending plans alone. Since the election, the Government have been determined to paint a picture of unremitting doom and gloom about the next few years in an effort to manage public expectations about the cuts that they are planning. Of course the situation we face is challenging-I do not deny that-but we do not believe that Britain is broken. We believe that we can have a strong industrial future if we have a clear plan for growth alongside the plan for deficit reduction.
Austerity alone will not shape our economic future. The Government should see their role as being ambitious for Britain, as well as one of managing public expectation about the cuts with which they have seemed to be obsessed in recent weeks. The Government should be ambitious to make the most of the transition to low carbon; to make the most of our excellence in creative industries and the information economy; and to build on what we have done in education and science and ensure that our economy benefits from it. As an MP who represents a manufacturing constituency, I also think that we should be ambitious to ensure that Britain makes things as well as provides excellent services. The Government are fond of talking about manufacturing in terms of decline. The truth is that the output and value of manufacturing have remained constant over the last decade up to the period of the recession, which is a tremendous achievement for our manufacturers as it was achieved in the face of the greatest wave of globalisation that the world economy has ever seen. We are in a stronger position than the Government make out.
The new Government have shown much about how they see things by making inaccurate statements about the amount of money that we spent on support for
business, the speed at which the decisions were taken and the political motivation behind them-as I say, it had nothing to do with who represents the constituencies in which our manufacturing is located. The country and the economy deserve better than that. We are clear about the Government's role in shaping the economy of the future. We have an opportunity before us, because we stand on the brink of a second industrial revolution as we move from a high-carbon economy to a low-carbon economy. We should be ambitious about seizing the opportunities that that represents, and that requires an active role for Government and a proper plan for growth. That is why we have tabled this motion today and that is why we raise these issues today. I commend this motion to the House.
1.37 pm
The Secretary of State for Business, Innovation and Skills (Vince Cable): I beg to move an amendment, to leave out from "power" to the end of the Question and add:
"welcomes the Government's £150 million investment in a further 50,000 apprenticeships and their £50 million to support the college building programme that was in chaos under the last Government; further welcomes the extra 10,000 university places on offer for 2010-11; notes with concern the wasteful, ineffective policies pursued by the last Government regarding industrial support, and commends the Government's plans for local enterprise partnerships that will deliver better value for money and support long-term growth objectives; recognises the need for a review of all projects approved since 1 January 2010 to evaluate their worth to the economy and taxpayer; welcomes Government support for entrepreneurs by reducing bureaucracy and increasing flexibility for both employees and employers; and believes the Government has made a strong early start in providing the conditions for long-term low-carbon economic growth and rebalancing the economy.".
I have introduced many Opposition day debates and it is a pleasure to be able to respond to one. I know that hon. Members attend such debates for different reasons. Some come to make party points, and that is quite right-it is an Opposition day. Some come for constituency reasons, and I will have something to say later about some of the very specific projects that have been mentioned. I want to put those in context, so hon. Members need not feel that they have to intervene at any moment-
Joan Walley (Stoke-on-Trent North) (Lab): Will the Secretary of State give way?
Vince Cable: Let me finish my introduction; I will come to specific projects later.
In relation to taxation, the right hon. Member for Wolverhampton South East (Mr McFadden) knows that I am not in a position to pre-empt the Budget, but if he reads the Chancellor's speech to the CBI a few weeks ago, he will see that it fully acknowledges that not only do we wish to see lower rates of business tax overall, but we understand the importance of capital allowances in manufacturing.
In my days in opposition, I tried to engage constructively and find common ground, and we have approached today's motion in that spirit. It includes some excellent statements, to which we are happy to subscribe. I shall start by working through some of those areas that appear to be common ground. The motion states that the
"Government has a crucial role to play in fostering economic growth and in creating a better-balanced economy".
That is absolutely right, and we totally sign up to it-it is exactly what the Government are about-but it pre-empts the obvious question: why is the economy so unbalanced to start with, and who was running the Government who led it to be so unbalanced? By unbalanced, most of us mean that one sector, and one part of the financial services industry-the City and big banks-became too dominant, while the rest of the economy, including trade in goods and services, and in particular manufacturing, was allowed to decline relatively. That is the imbalance we are talking about.
It is worth putting that in context, however. My hon. Friend the Member for Burnley (Gordon Birtwistle) made this point from a local context a few moments ago. The share of manufacturing in the British economy shrank from just over 20% in 1997 to just under 12% in 2009. Of course, that is a historical trend, but I remember in the 1980s when people were concerned about deindustrialisation. It is worth noting that the rate of decline in manufacturing over the past decade was three times as fast as it was in the 1980s. Manufacturing employment during the period of the Labour Government, when this imbalance grew, fell by 1.7 million-that is the population of Leeds, Sheffield and Glasgow combined. That demonstrates the decline in manufacturing. Furthermore, the number of manufacturing companies fell by 12% over that period. That was the imbalance created when the right hon. Member for Wolverhampton South East and his colleagues were in government.
Mr MacShane: I welcome the Secretary of State to his job, and he will recall that I reviewed his memoirs very positively, which added considerably to sales. He is right about the decline, but the same decline is reflected in America, Spain, France and Italy. However, one part of manufacturing as important as the rest is steel, which is an industry that I represent in Rotherham. May I bring steel industry employers and workers to talk with him? Steel requires a complex matrix to do with energy, electricity prices and trade. We had a very good relationship with the right hon. Gentleman's predecessors, and I ask him whether, at his own convenience-there is no great hurry-I and some steel people could meet him to talk about these issues.
Vince Cable: That was a very constructive intervention, and I would be delighted to meet the right hon. Gentleman's constituents. I met steelworkers before the election-indeed, I went to Redcar, which is now represented by a Liberal Democrat, and met the Corus workers there-and I would be very happy to meet any steelworkers whom the right hon. Gentleman wishes to bring.
Joan Walley: I congratulate the right hon. Gentleman on his new post. My intervention, along with that of my hon. Friend the Member for Stoke-on-Trent South (Robert Flello), is made in the spirit of trying to find a constructive way forward. In his speech, will the Secretary of State take account of the existence of heartland areas that have been over-reliant on manufacturing? One such area is Stoke-on-Trent, where we have large inequalities and where we need to do all that we can for manufacturing. Someone in his Department needs to be answerable purely for the ceramics area. We are desperate to meet with him to ensure that we can go forward with the regional development funding, irrespective of who administers it, in partnership with the Government in order to get what Stoke-on-Trent needs.
Vince Cable: I would be very happy to meet the hon. Lady and her colleagues. Her colleague the hon. Member for Stoke-on-Trent South (Robert Flello) spoke up a few moments ago on behalf of the black country-
Vince Cable: Indeed. It is part of a conglomeration, but he spoke up for Stoke-on-Trent in particular. I met the chamber of commerce from that area; it came up with some excellent ideas, and I would be happy to meet it and the hon. Lady again. Clearly, this part of the country is deprived and needs special attention, and I am happy to give it.
I return to the question of how the imbalances arose. Of course, there is a trend, but it was aggravated by bad policy. I shall remind Labour Members, not all of whom were here during the period, of some of the big developments that occurred and which produced this excessive decline in manufacturing and the excessive dependence on the banking sector. Five or six years ago, I and other colleagues were warning from the Opposition Benches about the bubble that was developing in the property market, the reckless bank lending that was fuelling it and the instability that it was going to create. We were dismissed at the time as scaremongers, but of course the bubble did burst, with the disastrous consequences that we are now paying for.
Going further back in time-probably to before the right hon. Member for Wolverhampton South East was a Member of the House-a very important report was commissioned by the former Prime Minister, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown). The Cruickshank report set out graphically how the British banking industry simultaneously was pursuing short-term profits while being dependent on a Government guarantee, and was also severely damaging British small-scale business because of the lending practices being adopted. At the time, we urged the Government to act on that report, but nothing was ever done.
John Woodcock (Barrow and Furness) (Lab/Co-op): The right hon. Gentleman talks about the past, but does he agree with the chief executive of the Cumbria chamber of commerce who said it would take the region back to the economic dark ages if we were to scrap the Northwest Regional Development Agency?
Vince Cable: I am happy to come to RDAs shortly. We have a view on them, and I have been asked specific questions by the right hon. Member for Wolverhampton South East about them. The hon. Gentleman will also have heard me speak specifically about the north-west at Business, Innovation and Skills questions a couple of weeks ago-but I shall return to that.
Mr Michael McCann (East Kilbride, Strathaven and Lesmahagow) (Lab): The right hon. Gentleman said that, when on the Opposition Benches, he urged the Government to take action against the banks. What were his friends in the Conservative party asking for back then?
Vince Cable:
The Chancellor of the Exchequer made a very good statement earlier, setting up the commission that will look at the structure of banking. Indeed, we are working together on improving the very poor performance of the banking sector in terms of credit to
small and medium-sized lending. The record of the Labour party is terrible in that respect, and we will improve on it.
It is clear that the last Government had an industrial policy. I cede that point. We have to go back to the seminal moment when the former Prime Minister, the right hon. Member for Kirkcaldy and Cowdenbeath, made one of his famous factory visits-to the headquarters of Lehman Brothers in London-and announced:
"I would like to pay tribute to the contribution you and your company make to the prosperity of Britain".
The consequences of that policy are with us today, in the costs of the collapse, the recession that followed and the enormous problems that we have inherited. That was the industrial policy; that was the imbalance of which hon. Members complain.
Richard Burden (Birmingham, Northfield) (Lab): I welcome the activist approach towards banks that the Secretary of State is outlining. He will be aware that the House has debated the situation of former workers at Longbridge who are still waiting for money from a trust fund promised to them in 2005. At the moment, that seems to be being held up by an argument between Lloyds Banking Group and the Phoenix Four. Will he get involved to try to ensure that they finally receive the money that they deserve and which they were promised so long ago?
Vince Cable: I was in Birmingham last week, and people affected by that problem have approached me-indeed, the city council also raised the matter with me-and I have asked for it to be investigated. It is a complex legal problem, but clearly it needs looking at.
I shall proceed to the second statement in the motion with which we agree. The Labour spokesman was explicit, forthcoming and realistic about cuts. The motion reads:
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