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Westminster Hall

Tuesday 6 March 2012

[Katy Clark in the Chair]

Manufacturing and Engineering

Motion made, and Question proposed, That the sitting be now adjourned.—(Greg Hands.)

9.30 am

Neil Carmichael (Stroud) (Con): It is a great pleasure to see you in the Chair, Ms Clark, not least because we are both on the much-loved Environmental Audit Committee, where we have some fun, as well as doing some serious work. [ Interruption. ] It is always good to set the scene and to highlight co-operation.

It is also great to see the new Minister. I congratulate him on his appointment to an important place—the Department for Business, Innovation and Skills. It clearly has some important tasks ahead, so I wish him good luck and good fortune.

This is a timely debate, not least because the north-east has just had the good news that Nissan is making a massive investment in the community of Sunderland. Incidentally, that investment was supported by the regional growth fund to the tune of £10 million, which is great news. I come from the north-east, and I know that people in the area are particularly pleased with the way Nissan has supported employment and contributed massively to our export position over a number of decades.

The debate is also timely because the Engineering Employers Federation conference is under way today. That is emblematic of the importance of manufacturing and engineering. The Leader of the Opposition will say a few words there, but so, too, will the Chancellor of the Exchequer. That is obviously worthy of mention.

Before I go into the meat of what I want to say, it is critical to underline the importance of the Government’s deficit reduction programme, which will lead to stability in the economy and to low interest rates. We cannot talk about rebalancing the economy if interest rates are not low enough to encourage investment and to support long-term, sustainable economic development. Fundamentally, our macro-economic policy is absolutely right, and we should rest every other argument on that central point.

In April, I am holding a festival of manufacturing and engineering in my constituency, and I am pleased to say that the Minister of State, Department for Business, Innovation and Skills, my hon. Friend the Member for Hertford and Stortford (Mr Prisk), is coming along to open it. The festival will run for five days, and I have three reasons for holding it. The first is to celebrate manufacturing and engineering in my constituency, because we have a large number of very effective firms making high-added-value, innovative products that are often destined for export.

The second reason I am holding the festival is that I want to create an environment in which people feel they want to invest even more in my constituency. It is necessary to point out where we are strong and to say that we can be stronger, with appropriate support.

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The third reason I am holding the festival is that I am obsessed with the idea that young people need to be channelled towards manufacturing and engineering when they think about a future career. We have to make it clear that young people should think about manufacturing and engineering. They should do that for themselves because manufacturing and engineering would be a good prospect for them, and they should do it for the economy because it is absolutely necessary that we have the people with the right skills.

Jack Lopresti (Filton and Bradley Stoke) (Con): I congratulate my hon. Friend on securing this important debate. On apprenticeships, is he aware that 30% of the senior management at Rolls-Royce, which has a large facility in my constituency, started their professional lives as apprentices? That demonstrates what a fantastic career people can carve out in manufacturing. It also clearly demonstrates social mobility in action.

Neil Carmichael: My hon. Friend is absolutely right, and I will talk about apprenticeships later. I notice that he has Airbus literally around his neck—its name is on his lanyard—and that is a signal that he understands the importance of large firms such as Airbus and Rolls-Royce in developing our manufacturing and engineering.

The programme for my festival will include investment. I will, for example, highlight the good work of Handelsbanken, which is an effective bank; I have mentioned it on the Floor of the House in connection with investment. We need the right banks—ones that know and understand the sectors they are trying to invest in and the people they are investing with. It is a question not simply of checking out the assets and borrowing against collateral, but of understanding business planning and recognising opportunities for business growth.

Next, the festival will talk about supply chains, which are critical to the economy. It is all very well saying that things are made in Britain when a large number of those things contribute to a bigger thing that is perhaps made in Europe. The importance of supply chains—certainly to my area—cannot be underestimated. The same applies to Wales, Scotland and all parts of England, and it has to be understood. I therefore welcome the measures that the Government are taking to promote good supply chains.

We will also have to talk about women in manufacturing and engineering. We cannot go on with just 2% of girls thinking that physics is a good subject to take; we have to encourage more girls to take it. If we check the economies that are doing as well as, or better than ours, we see they are better at recruiting women into manufacturing and engineering, and we have to do the same.

I am also going to talk about energy and recycling, because such new technologies are important in generating ideas for the future.

Last but not least, we have to get into schools to make sure that they are properly linked to business and that there is a proper interchange of ideas and understanding. We cannot have schools simply saying, “We’re not interested in business, because that’s beyond our ken.” Instead, we have to make sure that schools fashion their courses in ways that encourage pupils to get involved, and interface with, the world of manufacturing.

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David Simpson (Upper Bann) (DUP): I agree entirely with what the hon. Gentleman has said, and I congratulate him on obtaining the debate, but does he agree that we urgently need to look at the cost of doing business? I was in the manufacturing business for more than 30 years, and the cost of manufacturing in this country has gone through the roof. Something needs to be done to help businesses to export and manufacture more.

Neil Carmichael: The hon. Gentleman is absolutely right. That is at the nub of the issues I am coming to. I thank him for his intervention, and I am grateful for his support.

Lots of firms are supporting my festival of manufacturing, and I should name them because they are doing a huge amount. Renishaw is a fantastic engineering firm with factories in my territory. It is really innovative and good at coming up with new products, and it is determined to promote exports. Incidentally, it is also interested in the protection of patents.

There is also Nampak Plastics. One would not think that designing milk bottles was an engineering activity, but it is. Nampak has come up with a milk bottle that is incredibly handy in terms of getting it out of the fridge, but which also uses recycled plastic. Another firm is BPI, which is very effective at turning farm waste products, such as silage wrap, into raw materials for firms such as Nampak to use. WSP—formerly part of Milliken—is the world’s best manufacturer of tennis ball covering and snooker table cloth. It operates in one of the oldest mills in my constituency, and it is a fantastic firm.

There is also Omega, which is a great recruitment firm in the technology sector. I have already mentioned Airbus. Although it is in Filton, near Bristol, it is also supplied by firms in my constituency. That underlines the point that I made about supply chains. Finally, there is Delphi, which makes virtually all the injectors for large, heavy lorries, and it is in Stonehouse.

The policy areas that I want to talk about are straightforward. To begin with banking, I have already mentioned the need for responsive local knowledge, with more emphasis on the plan than on assets, and I want to ensure that the reform of banking, through the Vickers report, brings that about. We must be certain that high street banks and new banks, with new approaches to investment, will be more flexible, and more willing to take early investment decisions. I would suggest that anyone who does not think that is important should go to Germany and ask businesses there what kind of banking they have. They will say that it is exactly what I recommend, and that that is one reason why German firms get started and keep going.

Jeremy Lefroy (Stafford) (Con): On that point, does my hon. Friend recognise that in Germany the top four banks account for some 13% of lending to businesses, whereas in Britain the figure is 84%? That gives an idea of the diversity of banking in Germany, which obviously has a more successful manufacturing sector than we do.

Neil Carmichael: That is right, and a good point, which underlines the one I was making. I like statistics that do that, so I thank my hon. Friend. We simply must make sure that we have that kind of range and opportunity.

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I wanted to discuss planning. We need a cultural change in local authorities. They must start to think in terms of economic growth, as well as slapping up houses, so to speak. We cannot have them being awkward about business planning applications. I came across a good example yesterday, relating to investment in our super-broadband highway. Too often planning authorities stand in the way of the very investment that is needed, by being awkward about granting planning permission; that is something we must deal with.

Procurement is the next area I want to mention. There is another great firm in my constituency: DuroWipers makes the best wipers imaginable for battleships, or any ships, in really rough weather. They will not break. What does the firm want? It just wants better access to the big buyers such as the Ministry of Defence. We say that we want small businesses to have that access, and we must make sure they get it. DuroWipers is a good example of the kind of firm that would benefit enormously.

My hon. Friend the Member for Filton and—

Jack Lopresti: Bradley Stoke.

Neil Carmichael: Yes. My hon. Friend will have to speak up, because I am a bit deaf. He talked about apprenticeships. Training and skills are critical. In virtually every firm in my constituency where I have talked to people, they talk about that. ABB, a global leader in power transmission and distribution technologies, is a good example. In Stroud—in Stonehouse—one of its biggest factories employs 250 people and makes gear for the water and power industries. Sixty per cent. of its products are exported, so that is an example of success not just for local employment but in the sense of reaching out to markets. That firm keeps telling me that we must narrow the STEM skills gap—science, technology, engineering and maths—and it is right to say that.

That is a critical fact, and it means we must focus on maths and science in schools. We must ensure that pupils have access to good teaching, and that they get results that they are comfortable with, so that they can look for the jobs that are available, which will be good for them. That underlines the point I made before—but it keeps coming up in business—about the need for more contact with schools, and the need to get in early, to encourage young people to think of manufacturing and engineering.

One thing that I would like—I am not sure that we will get it, but the Budget is coming up, so I shall mention it—is national insurance relief for companies that support apprenticeships. That is an interesting idea and I am putting that marker down now. We need an update of careers advice, so that careers advisers are fully aware of the opportunities in manufacturing and engineering. Of course, ABB has had some successes in apprenticeships, because one of its apprenticeships is currently in the final of the Gloucestershire Apprenticeships Awards. That is great news; such local recognition is important to businesses and shows what good value apprenticeships are.

The Government have taken some great steps on research and development, but we must be sure that we do the best we can for those who are interested in it. It is true that the manufacturing sector, contains a large research and development sector, and that many firms produce groundbreaking products, but we must carefully

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manage the transition from academic research into the production of useful commercial products. I referred earlier to patents, and to firms such as Renishaw, which has a good relationship with academic organisations. However, we must think carefully about the question of patents. We need to ensure that the relationship between the academic and business worlds is mutually beneficial, and that it encourages the right degree of investment.

Jack Lopresti: Just for the record, my constituency is Filton and Bradley Stoke. My hon. Friend and I are virtually neighbours, so he should remember.

I wanted to ask whether my hon. Friend recognises the importance of university technical colleges in increasing the range of training and opportunity for young people, and providing the link between business, manufacturing and the education sector.

Neil Carmichael: I thank my hon. Friend for his correction about the name of his seat. I was slightly confused about it, because I know it is getting a new name in the boundary review, and I was discussing that with him yesterday. I apologise for my misunderstanding.

My hon. Friend is right. The UTCs are important. I fully support that initiative and I know that Lord Baker has been pivotal—as, indeed, has Lord Adonis—in supporting those projects. We want more of them. In my constituency, I have been vigorously promoting the engineering centre in Stroud college. Funnily enough, there is another link there with the constituency of my hon. Friend because the college has merged with the one in Filton—and quite right too, because is a good strategic alliance. The point I want to make is that it is necessary for engineering to be promoted in organisations, including colleges.

Mr Iain Wright (Hartlepool) (Lab): I am enjoying the hon. Gentleman’s speech immensely and agree with much of it. What does he think about the decision of the Secretary of State for Education to downgrade the status of the engineering diploma? How will that help to promote engineering among young people?

Neil Carmichael: I thank the hon. Gentleman for that interesting intervention. Alison Wolf’s report is clear on the need for proper training in STEM subjects before beginning to worry too much about qualifications. It is right that there should be qualifications in engineering—and those are available in Stroud—but, as I have said, the STEM subjects need to be rigorously promoted in schools and colleges. Alison Wolf made a strong case for taking that line, and I hope the Government will pursue it with rigour.

I want to return to the subject of ABB, which is a member of the Enhancing Value taskforce launched by the Council for Industry and Higher Education. A report is coming out in July on how to make the most of UK research. I hope that the Government will read it and draw lessons from it, if it contains significant lessons; judging by the quality of ABB, I am sure that it will.

No discussion of engineering and manufacturing can fail to include a mention of the European Union. It is critical that we should recognise—as the Prime Minister did yesterday, powerfully—that 40% of our exports go to Europe. We are attached to Europe through all the

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supply chains that I have mentioned, and we must recognise that, in relation to trade development, Europe is a powerful magnet for interests and a strong promoter of our interests globally. A key point that came up in

The Economist

this weekend is the need to ensure that small firms can become big firms. We must look carefully at how the European Union is regulated and remove any barriers that prevent a small firm from growing.

Glyn Davies (Montgomeryshire) (Con): I thank my hon. Friend for allowing me to intervene and to associate myself with his speech, almost all of which I agree with. The point he makes about small firms becoming large firms is crucial in a rural area. Manufacturing can be a key part in promoting a rural economy. I have spent quite a long time involved in this industry. In mid-Wales, the proportion of manufacturing has grown over 20 years from about 7% to 25%. In an imbalanced economy in which financial services are dominant, a concentration on manufacturing can be particularly beneficial in a rural area. Does my hon. Friend agree with that assessment?

Neil Carmichael: Definitely. My own constituency is rural. I have been celebrating, and will continue to celebrate, manufacturing on my patch. I have made it clear that there are still great opportunities for developing manufacturing and engineering in my rural constituency. The issue is to ensure that the right infrastructure is available, which I will come on to shortly.

Let me just finish the question on the European Union. The EU matters to us; we need to be there to promote our economic interests and the interests of our manufacturers and engineers, but the terms of the debate about Europe sometimes become confused. It is essential that we recognise, understand and promote the fact that Britain is part of the European Union and that Europe is a place in which we can and should do business in the most unregulated and appropriate way. We need to send out a signal to our businesses that we are behind them in that project.

There are one or two measures that I wanted to cover, but many of the interventions have already touched on them. One area of Government policy that has not been mentioned is the role of local enterprise partnerships. My own in Gloucestershire is doing some useful work in analysing the needs of businesses, the supply of skills, and the supply chain issues in connection with business. LEPs should work well with local authorities. As it happens, ours is coterminous with Gloucestershire county council, which is doing a huge amount of work in promoting economic development in our area.

A £100 million investment programme is under way and is geared towards focusing on better skills, which is consistent with the work of the LEP. It is also geared towards infrastructure. It has already contributed to the campaign to redouble the Swindon-Kemble line, which will improve the speed and quantity of our rail links, thus ensuring that we have infrastructure that is fit for purpose. It has also invested £7.5 million in broadband, to which I have referred. It is absolutely brilliant that our county council and LEP have a local focus. Critically, I applaud the Government for creating LEPs and for ensuring that local authorities work together and have a duty to co-operate in developing economic growth.

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James Morris (Halesowen and Rowley Regis) (Con): I congratulate my hon. Friend on securing this debate. He is making some important points about local enterprise partnerships. The black country LEP, which covers my constituency, has been instrumental in developing a skills agenda for the area, which is absolutely vital, and in getting investment into the i54 enterprise zone. Some £500 million of investment has come from Jaguar Land Rover, which is already having a big impact on the automotive supply chain in the west midlands. I went to visit the high-tech engineering firm Sandvik in my constituency. It said that demand for its machine tools is at a very high level, so I commend the black country local enterprise partnership for the work that it is doing in my area.

Neil Carmichael: I thank my hon. Friend for his appropriate and useful intervention. The fact of the matter is that we need a degree of co-operation; we need to work together. Business has recognised that partnership is a good thing. However, there is also a need for competition, so we need to strike the right balance between the role that Government agencies perform, which is largely through partnership, and the role that businesses perform, which is largely through competition. We need the right framework for partnership and for competition. That is how we should look on our relationship with the European Union, the Government and the local authorities.

As I come to the end of my speech, I must say that I am overwhelmed with this general sense of agreement. That is a message that I will promote not just here to the Minister but to my constituency. I am quite determined to ensure that Stroud is on track for economic growth and, broadly speaking, that the whole of Britain is too. The key issue is ensuring that our businesses can have access to the appropriate investment. We need to work hard to get the banking sector right so that that happens. I urge the Minister to think carefully about that. It is necessary to redouble our efforts to ensure that the STEM subjects have predominance in the school curriculum. It is no good just talking about manufacturing and not actually ensuring that young people are enthused to become involved in that critical sector.

Whenever I visit factories in my constituency, I am always struck by the cleanliness, the modern sense of technology, the new approach, the research and development and the fact that young people would, if they ever got there, be really impressed and encouraged, which is why it is so important that schools have a strong and sustained relationship with the world of business.

Finally, we ignore our relationship with the European Union at our peril. We must recognise that manufacturing and engineering are a core part of our country; they need to be grown, nurtured and developed. We can do that by having good relationships with the European Union—Germany, France, Italy and elsewhere. That is the key point on which I want to rest. I thank all hon. Members for listening.

9.57 am

Jim Sheridan (Paisley and Renfrewshire North) (Lab): I congratulate the hon. Member for Stroud (Neil Carmichael) on securing this debate, which is crucial, given the stage we are at in the manufacturing cycle.

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Let me start with an apology. I will be extremely brief because I have to attend a Select Committee at 10.15 am. I am extremely disappointed by the Opposition’s lack of interest in manufacturing, which is, I think, a result of the political selection processes in our party. We do not have enough people with a manufacturing background sitting on these Benches—not just the Opposition Benches, but the Government Benches. That has manifested itself in the attendance here today. I welcome the Minister to his new position and wish him every success for the future.

I have spent almost all my working life in manufacturing, whether it be in the shipyards of Glasgow, or working for the defence company, Barr and Stroud, which is now Thales, so I understand the importance of engineering and manufacturing. I take the simple view that we in this country will not survive by cutting hair alone. We need a strong manufacturing and engineering base.

The hon. Member for Stroud touched on the importance of apprenticeships. The previous Labour Government rightly focused on the need for education, and the need to get people into university. We have now reached a level where we need the same resources put into non-vocational skills, and we need to get people back into manufacturing.

Manufacturing is not seen as a sexy industry. In my time working with Thales, I saw many examples of young people coming into engineering as, say, lathe turners only to be seduced into the collar-and-tie side of the section—the buying section, the materials section, or whatever. They would not stay on the engineering side of the business, getting their hands dirty. However, I must say that I am greatly encouraged by the number of young women coming forward to become involved in high-tech engineering. Apprenticeships are extremely important if we are to survive as a country.

The other issue that I want to raise is procurement. Successive Governments have been dismal in using their procurement muscle to secure contracts and jobs. There is no worse example than the contract for the recently announced MARS project, for which, apparently, no British tenders were received. For the sake of Hansard, I should say that MARS is the military afloat reach and sustainability programme. I genuinely believe that there must be an inquiry into why British companies are not tendering for such contracts. I believe that, these days, some of our defence companies are becoming rather snobbish, in that they only want certain defence contracts on the high-tech side—contracts to build ships or whatever. The MARS ships will be massive supply carriers. As I have said before, when I was a shipyard worker, when I woke up in the morning I did not really care what I was building as long as I was building something, keeping myself employed and looking after my family.

I am extremely disappointed that we are losing the MARS contract to South Korea, a country that almost destroyed British shipbuilding in the 1960s and 1970s. Here we are again, going back down the road of giving contracts to foreign competition, such as South Korea. That could seriously damage our shipyards, because there are gaps coming up between the contracts for aircraft carriers that could have been filled by the MARS project contract. For us to surrender that contract and for none of our major defence contractors to have tendered for it is disgraceful; questions should be asked.

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Jeremy Lefroy: Does the hon. Gentleman agree that it is absolutely vital that this country maintains a major shipbuilding capacity, and that we cannot simply let it go?

Jim Sheridan: The reality is that we live on an island; we therefore depend on ships, not just to supply us, but to defend us. It is important that we invest in skills in shipyards, and that we get people back into working in shipyards. I was there when the shipyards were almost closed in Glasgow and Govan; if it was not for Government intervention, they would have closed. I am pleased that they are now thriving, but there is still some work to be done. The hon. Gentleman is absolutely right that we need to invest in shipbuilding.

I want to touch on the issue of Europe. My other experience is of a situation that I found myself in with regard to the Ferguson shipyard, a very small shipyard at the tail of the bank on the River Clyde. That shipyard almost went out of business because of European legislation. Ferguson plays by the rules, as most British companies do; it listens to the civil servants who tell them what to do, while the French, Germans, Polish and others find ways—including by being economical with the truth—of getting shipbuilding contracts at prices that British companies such as Ferguson just cannot compete with. That is something that, from a European perspective, we need to find out about.

I spoke to the management of Ferguson at the time, who said quite clearly that bids for contracts were being tendered by Polish companies that were clearly using European objective 1 funding, and that under no circumstances could Ferguson compete for them; even if Ferguson would not make a profit from the contract, it could never have had any impact on the contract process at all. Again, we need to look at the legislation surrounding Europe, and see how we—and everybody else—compete within Europe, to make sure that we are operating on a level base and are not being sidetracked by people who are being economical with the truth.

The other issue that concerns me greatly—it has already been referred to—is the supply chain. Big multinational companies can survive, but the supply chain to those companies is crucial. I have found that small and medium-sized enterprises experience problems not just with banks—although the banks are important, in terms of lending money to make sure that companies survive—but with the paying of invoices by big companies. Those companies would hold money back from SMEs; the SMEs could not get paid. They therefore could not pay their bills and struggled to survive, or even went out of business. There is a responsibility on major defence contractors to treat the supply chain properly and pay their bills on time, so that we keep these small companies in business.

Rolls-Royce is an absolutely first-class company, and it is well organised, but unfortunately it has just announced, in my patch, that it is not taking on apprentices. That is somewhat disappointing, and we need to look at that, as do the Government. All of us have to consider why companies such as Rolls-Royce, which has an operation in Inchinnan, are not taking on apprentices. After all, Rolls-Royce is one of the leading companies in this country, and if it is struggling to take on apprentices, we need to find out why.

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It would be remiss of me, as a Labour Member, not to mention employment legislation. I know that Government Members might disagree with me, but it is somewhat disappointing that a number of major companies left our island simply because it was cheaper to manufacture in the Czech Republic, China or wherever. A classic example from my patch is Hewlett Packard, which basically surrendered all its manufacturing base in Scotland and gave it to the Czech Republic. The workers in Scotland did nothing wrong. They were told, as we were all told, that if they worked hard, delivered on time, delivered quality, and so on, their jobs would be safe. That was what they did. That was the deal: “We, the workers, will work hard and deliver on time, to make sure that the product gets there on time, and on cost.” As for Hewlett Packard, some director sitting somewhere in Texas decided, “No, we can get this work done in the Czech Republic,” and that is what the company has done.

That story takes me back to my point about employment legislation. I know that people have different views on employment legislation, but it is far too easy for companies, particularly multinational companies, to say, “I’m sorry, we can get it done in another country”—wherever that country is—“far cheaper,” and exploit the labour in that country. That is why we have lost, and are still losing, a lot of our manufacturing base. Putting politics aside, we need to understand why manufacturing companies can easily up sticks and move.

It is annoying that after Hewlett Packard transferred that manufacturing base to the Czech Republic from Scotland, the company applied to the Scottish Government for a £7 million grant—and got it, which was rather foolish of the Scottish Government, in my view—to set up a call centre in exactly the place where the manufacturing operation had been. I disagreed with that at the time. The company was transferring manufacturing and we were losing all those skills, and then we as taxpayers gave a multimillion-pound company £7 million of taxpayers’ money to set up a call centre in exactly the place where its manufacturing operation had been.

Those are just some of the issues that I feel strongly about. I am passionate about manufacturing. I genuinely believe that if we do not have a strong manufacturing base, this country will be in a serious state. Again, I must say that I am somewhat disappointed in the turnout for this debate. I had hoped that there would be a lot more people interested in manufacturing. Perhaps we politicians need to look at how best we can get people with a manufacturing background, or a sense of manufacturing, involved in politics. I do not want to be discourteous, but I do not just mean business people in manufacturing; I mean people who have actually worked in manufacturing, and who have a feel for it. That will help to ensure that we go forward as a manufacturing nation.

Katy Clark (in the Chair): I remind Members that if they wish to speak in a debate, they should stand up when a Member has finished his speech. I call Chris White.

10.8 am

Chris White (Warwick and Leamington) (Con): Thank you for calling me to speak, Ms Clark.

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I am pleased to follow the hon. Member for Paisley and Renfrewshire North (Jim Sheridan). I applaud his comments about shipbuilding, and his speech made very clear his passion for the manufacturing sector. I congratulate my hon. Friend the Member for Stroud (Neil Carmichael) on securing this debate, and on giving us the opportunity to discuss this important area of economic policy. I would perhaps disagree slightly with the previous speakers, in that sometimes in this House, it is when there is general agreement on the importance of a subject, as there is in this debate, that there is a smaller number of speakers. May I also congratulate the Minister on his new post?

As someone who has worked in the automotive sector, for MG Rover, I could not be more delighted to hear the news from Nissan this morning. Although I might be expected to say this as co-chair of the all-party group on manufacturing, it needs to be stressed that no long-term economic recovery is possible for our country without a long-term recovery in our manufacturing and engineering sector. Throughout the world, countries that have managed to protect and support their manufacturing capacity in the good years have bounced back stronger from the financial crisis that has weakened the sector. At present, 88% of our economy is in the service sector; industry comprises only around 11%, and agriculture 0.9%. In Germany, industry makes up nearly 30% of the economy, services 68%, and agriculture 2.5%.

None of us believes that we can turn the clock back completely to the days when Britain was the workshop of the world. However, if we are serious about rebalancing our economy towards a stronger manufacturing sector, we need a credible industrial policy. Only if we are able to focus the full attention of Whitehall on rebuilding our manufacturing sector will we be able to lay the foundation for future success in our economy. This is not a call for central planning or the nationalisation of industry, but a call for every Department and every official to pull in the same direction. We need the same level of consideration to be given to manufacturing as has been given to the financial and services sectors over the past 30 years. That will come about only if there is a co-ordinated strategy across Government, headed by a dedicated Minister for manufacturing, who pulls together the different strands of industrial policy, and who can be held accountable by Parliament, by industry, and by the public.

The all-party group on manufacturing will focus on the issue of the development of such a strategy in the weeks and months ahead. However, in general, the strategy will need to encompass three key areas: skills, export and finance. We need to have the skills in place to give our businesses access to the pool of labour that they need to grow and compete. We need to ensure that we give manufacturers, and particularly small and medium-sized companies, enough incentives to invest in skills for their employees, so that they feel confident in hiring new people and supporting their employees’ skills development over the whole life cycle of their careers in business.

Making our industry fit to export is vital. That does not mean that we should ignore manufacturing for domestic supply. Indeed, import substitution would be one of the best ways to enable us to reduce our balance

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of payments deficit, strengthen our economy and create a base for future export growth. In the long term, we need to be able to access the growing, emerging markets in China, India and south America. This means putting in place a strong system of export guarantees that match or beat those of our competitors; putting more resources into UK Trade & Investment so that it can champion the work of our manufacturers; and ensuring that we continue to push internationally for the reduction of trade barriers.

On finance, we need to ensure that our manufacturers are adequately supplied with credit. Britain historically has a low investment rate in its manufacturing sector. For example, on machine tool consumption, despite being the world’s eighth largest manufacturer, we are the world’s sixteenth largest consumer of machine tools. Without considerable investment in our manufacturing business, we will not be able to compete in the long term with emerging economies or advanced competitors such as Japan, Germany or the United States. Bold and radical policy prescriptions are necessary if we are to redress the balance; there could be a bank for industry, for example.

However, in the short term, the Government can take measures in the upcoming Budget to help support the sector, the most important of which would be to put in place 100% capital allowances for a two-year period, a proposal that has been put forward strongly by the EEF. This short-term measure would encourage companies, many of which are sitting on large cash reserves, to invest in new capital equipment to ensure not only that we make our manufacturers more competitive over the long term, but that we give a short-term boost to many businesses and improve order books. I urge the Minister to encourage the Chancellor to look favourably on that proposal. It would have a minimal cost to the Treasury, but a big impact on our manufacturers.

When it comes to manufacturers, we cannot afford to tinker round the edges indefinitely. I hope that the Government will continue to be bold in their thinking, so that we can, to quote the Chancellor, bang the drum for the “march of the makers”.

10.14 am

Jeremy Lefroy (Stafford) (Con): It is a pleasure to serve under your chairmanship, Ms Clark. I congratulate my hon. Friend the Member for Stroud (Neil Carmichael) on securing this extremely important debate.

My first job after university was as a production foreman with Ford in Bridgend. I am delighted that that factory, 30 years on, is still there. In fact, Ford recently announced a £240 million investment in that engine plant. At the time, it was supposed to be the most efficient engine plant in the world. I believe it is still one of the top ones. The UK has a major role in manufacturing engines not only for the motor industry, but for all types of vehicles, including, for instance, construction equipment, which I will come on to later.

I have been passionate about manufacturing from the start of my career. I welcome the comments made by all Members who have spoken so far. In the past couple of years, there have been major announcements of investments, particularly in the motor industry. As has been referred to this morning, there has been a very welcome announcement by Nissan in Sunderland. There have

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also been announcements from: BMW in both Oxford and Hams Hall in Warwickshire, near the constituency of my hon. Friend the Member for Warwick and Leamington (Chris White); Toyota; Honda; and Vauxhall. Of course, there is also the welcome announcement that Jaguar Land Rover is building an engine plant at the i54 site, close to my constituency. The UK is a world leader in the design, development and manufacture of engines for motor vehicles.

In my constituency, the largest employer in the private sector is Alstom, which employs nearly 2,000 people. It is the only remaining transformer manufacturer in the UK. It is extremely important for the UK electricity supply industry and beyond, as it is involved in manufacturing in the transport and other sectors. I also have in my constituency Perkins, a part of Caterpillar, which makes very large engines to power generators around the world. Some 90% of production in my constituency is exported. As hon. Members have mentioned, manufacturing is by far the greatest earner of export revenue in this country; our manufacturing sector accounts for 54% of our exports.

I absolutely endorse what my hon. Friend the Member for Warwick and Leamington said: we need a long-term manufacturing strategy in this country. I refer hon. Members to my entry in the Register of Members’ Financial Interests. I want to highlight a report from the chairman of JCB, Sir Anthony Bamford, called “UK Manufacturing: Time to Make it Count”. I received it yesterday, which was timely. I recommend that every Member and every Minister reads it, because he makes very powerful points. He has the right to do so, because his is a private company employing several thousand people in the UK and 10,000 in total around the world. It is constantly investing in the UK, instead of choosing to outsource manufacturing to perhaps more convenient places. It continues to invest in people, plants, and research and development here in the United Kingdom.

Hon. Members have already covered much of the scene. I know that others wish to speak, so I will concentrate on two or three areas. On skills, it has already been mentioned that not enough women are going into engineering. In this country, the figure is something like 8.7%; in Germany, it is nearly double that. We can see the results in German manufacturing industry. We need to encourage more people, particularly women, to go into engineering and take it up, not only at degree level, but at apprentice level.

I want to concentrate particularly on finance. I have already referred to the fact that in Germany companies have a far wider range of banks from which to choose. Reference has been made to Handelsbanken; I welcome its growth in this country, because it is committed to this sector, but I want to see more local and regional banks and more mutuals—something to which Sir Anthony Bamford refers. As my hon. Friend the Member for Halesowen and Rowley Regis (James Morris) mentioned, in our area, the Black Country Reinvestment Society is steadily growing and committing funds to local manufacturers.

We have already heard about this country’s export credit guarantee scheme. It is a good scheme, but not nearly good enough. Over the past nine years, Germany’s equivalent scheme has advanced or guaranteed eight times more finance than the UK has done, and the results show. We must do more on export credit guarantee.

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It is not just a drain on the Treasury. People pay for insurance, and it allows them to get from the Government the backing that they cannot get from commercial markets.

That is particularly relevant if we consider where the world’s growth areas are. Six of the top 10 fastest growing economies in the world are in sub-Saharan Africa. Anyone who goes there now, as I do frequently—I lived there for 11 years—will see huge opportunities. Just last month, when I was in Kenya as part of the armed forces parliamentary scheme, I was delighted to see products by JCB and other British companies; I had not seen that there before. There are huge opportunities, and we neglect them at our peril.

I would like to comment on the provision of equity finance. We in this country are poor at equity finance. I welcome the fact that the banks have set up the business growth fund, which should not be confused with the regional growth fund. The business growth fund is like a renewed 3i—Investors in Industry. However, I urge the banks to consider a slightly lower threshold. At the moment, they are considering investments of £5 million or more, and businesses with a turnover of £10 million or more. Many smaller manufacturing businesses would welcome investment; in fact, they are the ones with potential for growth. I urge the banks not to say that it is too expensive to consider smaller businesses, but to see them as an opportunity.

To return to the question of ownership, we in Britain seem to be good at giving away ownership of our manufacturing businesses. As the hon. Member for Paisley and Renfrewshire North (Jim Sheridan) said, the problem is that however competitive the UK is, if a company is not headquartered in the UK, it will not have the emotional pull to invest here—an emotional pull shown by JCB, for instance, which is headquartered here. I am not saying that we should not encourage foreign investment—we welcome it—but at the same time, let us build up home-grown major manufacturing businesses like JCB, Rolls-Royce and others that have been mentioned.

My final point concerns energy costs. There has been a lot of debate in the House recently about energy-intensive companies, working in areas such as steel, ceramics and glass, which are vital to this country’s manufacturing base. I welcome the Government’s recognition of that importance, but we must ensure that we do not unintentionally cause those industries to migrate overseas as a result of things such as the carbon price, which will come in next year. We can be sure that they will not reduce the amount of carbon that they produce. In fact, in the places to which they go, they might be allowed to produce more carbon. Those industries in Britain have a proud record of cutting their carbon emissions over many years, and I give the last Government credit for that.

Ian Swales (Redcar) (LD): As vice-chair of the all-party energy intensive industries group, I would like to comment on that point. I am late for this debate because I have just met Tata Steel, which has a £50 million cost disadvantage in the UK compared with its French competitors as a result of energy prices—and that is now, before various other measures have come into effect. I totally support my hon. Friend’s comments about energy costs.

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Jeremy Lefroy: I thank the hon. Gentleman for saying that. Considering energy costs should be part of a long-term Government approach to manufacturing, and I welcome the chance to raise the issue in this debate.

10.23 am

Glyn Davies (Montgomeryshire) (Con): Thank you for allowing me to speak, Ms Clark. I anticipate making a short contribution to the debate. In fact, I did not intend to speak; I came here to listen to the debate, which I congratulate my hon. Friend the Member for Stroud (Neil Carmichael) on securing, as I thought it was hugely important. However, as the debate unfolded I decided that I wanted to contribute a couple of important points. The first follows up on an intervention that I made about the impact on manufacturing in rural areas. I represent and have lived my whole life in a rural part of Britain—mid-Wales. Although I am a farmer by background, I spent a lot of my life involved in regional development, or what we term rural development. I was chairman of a local authority planning department for several years, and then I was chairman of a development agency responsible for mid-Wales.

When I was holding strategy discussions with senior officials about how I would begin to do that job, the British economy was becoming increasingly focused on financial services and the service sector. We did not think it was possible to develop the economy in mid-Wales, or indeed to transform it. It was in serious decline after the loss of jobs in agriculture and steel in neighbouring areas. The view that we took was that manufacturing was the route on which we should concentrate.

Over about 20 years—I gave the figures earlier—the proportion of manufacturing jobs in mid-Wales increased from about 7% or 8% to about a quarter of the work force, dramatically changing it. While the Government had a policy of intervention, which they do not have now, and while there was a Development Board for Rural Wales and a Welsh Development Agency to support it, the whole environment of mid-Wales was transformed. It became a dramatically important place, and we managed to do that on the back of manufacturing. There was no other way that we could have done it.

Another great benefit was that because mid-Wales is a sparsely populated area, the strategy involved growing very small manufacturing companies. That can be done in rural areas. It involved one and two-man businesses. They were success stories for us. We grew them. That is another fundamental platform on which a manufacturing industry can be based.

James Morris: I come from a constituency that contrasts with that of my hon. Friend—the black country in the west midlands. It was a great area for steel-making and industrial capacity, and is now having to be revived. Does he agree that one way that we can re-energise the manufacturing base is through enterprise zones? That is a good policy implemented by the Government. We should be looking to extend those enterprise zones and provide further enhanced capital allowances to encourage manufacturing investment.

Glyn Davies: Indeed. I thank my hon. Friend for that intervention. It is not only about enterprise zones but about learning from them and perhaps extending the principles underpinning them across the country. As Ministers often mention, we have ended up with an

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imbalanced economy in Britain, because for decades we have not concentrated enough on manufacturing. We have looked to financial services and the service industry as the answer, but manufacturing has not been given its proper place in our economic strategy.

I will comment briefly on the biggest threat to manufacturing in my constituency. Policy on manufacturing is devolved to the National Assembly for Wales—I will not cover that in this debate—but that is not the biggest threat by a long way. Every business that I talk to now is worried about the impact of onshore wind development in mid-Wales. A huge project is proposed, and the whole manufacturing sector faces the prospect of the roads of mid-Wales being completely clogged up for the six, seven or eight years after the mid-Wales connection project is approved.

I cannot overstate the impact that the project will have. Businesses are already discussing moving out, because they will not be able to develop. At least three companies—manufacturing businesses that depend on transport—have written to me already to say that if the project goes ahead, they will not be able to function in the area. The impact of the project must be part of the Government’s understanding here at Westminster of what they are doing when they consign mid-Wales to becoming little more than an onshore wind farm landscape.

My final point is one that my hon. Friend the Member for Stroud referred to in his introduction. Again, I draw on my experience as chairman of a planning authority, which was my first venture into public life. I did that job for seven years, and I realised that it was crucial for the body responsible for the planning process in a local authority to have a close connection to economic development. Apart from dealing purely with planning regulations, looking at a chart and saying yes or no, we have to inject into the process the impact that plans will have on the local economy.

Yesterday I went to a business that wanted to change the use of its site. It would be hugely important for the town where I live, Welshpool. The planning authority is concerned about access. The business has satisfied the authority on access but the authority is insisting on a complete revamp of the whole site. The authority will therefore make it impossible for the business to continue on that site, and the company has said that if it cannot get what seems to be a sensible change-of-use agreement, it will have to move out. That is happening purely because those responsible for dealing with the planning application are not charged with any responsibility to promote economic development. There has to be a close link between those two objectives of a local authority if we are to have a sensible approach that will enable us to maximise the benefits that our nation can get from manufacturing.

10.30 am

Mr Iain Wright (Hartlepool) (Lab): It is a pleasure to serve under your chairmanship, Ms Clark. I congratulate the hon. Member for Stroud (Neil Carmichael) on securing a timely and excellent debate, and I agree with a lot, if not all, of the points that have been raised.

There was a similar debate on manufacturing on the Floor of the House in November. I mentioned at the time that we do not debate manufacturing as much as

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we should in the House. However, we have had two debates on manufacturing in the space of about 100 days, on top of an important speech that my right hon. Friend the Leader of the Opposition is making, even as we speak, on the case for patriotism not protectionism in business policy, to the first ever manufacturing conference of the EEF, which the hon. Member for Stroud mentioned. They are testimony to the belief that manufacturing and engineering have to play a central role in our economic future, and policy makers are waking up to that.

A thriving and diverse manufacturing sector, in which British firms design, innovate, engineer and simply make things, is vital if this country is to pay its way in the world. I hope this debate has shown that manufacturing still plays an important role in the British economy. Hon. Members have quite rightly highlighted manufacturing excellence in their constituencies. We remain the seventh biggest manufacturing nation on earth. We have the largest aerospace industry in Europe and the second largest in the world after the United States. That is something to be proud of, and something that we need to nurture and support as much as possible.

The automotive industry has been mentioned a number of times in the debate. Nissan’s announcement today is very welcome news. Once, the British car industry and the phrase “British Leyland” were the epitome of all that was wrong with British industry—it was uncompetitive and obsolete. Now, however, our automotive industry is one of the most productive in the world, and we should be proud of that.

However, let us be honest: we have relied far too much on far too few sectors and too few regions in this country for economic growth. In the past three decades, Britain lost more industrial and manufacturing capacity as a proportion of its economy than any other leading developed nation. As has been mentioned in the debate, the hollowing out of the UK’s industrial supply chain over the past 30 years has made us ever more reliant on our competitors for raw materials, basic products and increasingly, as the likes of China and India move up the value-added chain, innovation, and research and development.

We therefore need a much bigger push towards manufacturing. I was struck by the comments made by the hon. Member for Stafford (Jeremy Lefroy), who mentioned Sir Anthony Bamford, the chairman of JCB, and his report. Sir Anthony knows a thing or two about industry. His warning last week to the Prime Minister is stark:

“Germany’s focus on value-added products sets it apart. It has a manufacturing strategy which the UK doesn’t. If our politicians fail to deliver a coherent long-term manufacturing strategy, and quickly, we will fall into an economic abyss from which we may never emerge.”

That is absolutely right. The whole House needs to pull together in unity to ensure that we have a long-term economic vision with manufacturing at its heart in order to see the jobs and wealth that this country needs.

My first question to the Minister is: what is the Government’s response to Sir Anthony’s report? He made a nine-point plan to boost manufacturing and engineering, including increasing capital investment by tax incentives, expanding the Export Credits Guarantee Department to ensure that we export more, encouraging more banks to set up in the UK to boost competition,

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and improving in general the public image of manufacturing through media campaigns. Will the Government implement in full Sir Anthony’s recommendations?

Other senior industrialists have echoed that view. Sir John Rose, the former chief executive of Rolls-Royce, has said:

“We need a framework, or a business route map, to create context, drive focus and help prioritise public and private sector investment.”

I absolutely agree.

John Cridland, the director general of the CBI, stated in a speech in November:

“What’s needed is a new form of industrial policy, one that signals ambition, helps develop future capabilities and secures sustainable growth…A new understanding needs to run through all of Government. Industrial policy might be based at the Department for Business, but all Departments need to share the same ambition. They all need to work to join up policies and create a system that’s more than the sum of its parts.”

Again, I absolutely agree with that. We need a more joined-up and co-ordinated approach, not just in the Department for Business, but across Whitehall. The nub of much that I want to say today is that we do not have a joined-up approach to manufacturing and engineering in the Government.

It is not just senior industrialists who are calling for clarity; the Business Secretary is lobbying hard on the matter, as was seen in a letter that he wrote recently. He said:

“There is something important missing: a compelling vision of where this country is heading beyond sorting out the fiscal mess; a clear and confident message about how we will earn our living in the future.”

I could not agree with the Business Secretary more, but I fear that the joined-up approach that is being called for by the CBI and other industrialists is simply not happening.

The Government’s sole economic priority is deficit reduction. I fear that if we cut too far and too fast, far from allowing private sector enterprise to bloom, we will choke off competitiveness and undermine our manufacturing base still further. On the one hand, the Government stress the importance of science, research and development and innovation as a means of supporting our manufacturing and engineering base, but on the otherhand unlike any other developed nation in the world, they are cutting the science budget by 15%. The Government stress the importance of an industrial strategy in defence to help British industrial capability, but at the same time they have published a White Paper that prioritises the purchase of off-the-shelf, sometimes foreign, military equipment. That is why the director general of the CBI, in responding to the White Paper, urged the Government not only to get the best value for taxpayers but to

“take into account employment and industrial implications of decisions.”

My hon. Friend the Member for Paisley and Renfrewshire North (Jim Sheridan) mentioned the awarding of contracts for Royal Navy fuel tankers to South Korea. What was the Department doing when the process was going through Whitehall? Why was it not working with the British supply chain to ensure that UK companies could bid for such contracts? Why on earth did the Under-Secretary of State for Defence, the hon. Member for Mid Worcestershire (Peter Luff), allegedly say:

“We don’t build tankers in the UK”?

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Who on earth is batting for Britain in Whitehall on major procurement decisions if that is the attitude of Ministers?

Several hon. Members mentioned the importance of procurement, and they are absolutely correct. Governments can help shape markets—the Government are often the biggest customer and can often drive innovation and competitiveness. It is frustrating that the Government are not using procurement and the power that they have to back British business and support jobs, skills and innovation, and therefore enhance British competitiveness. I agree with the TUC, which stated that the UK should have a

“procurement policy guided by the principle that every pound of taxpayers’ money should contribute to jobs, skills or the strength of the British economy.”

Yes, procurement should be based on securing best value through competition, and sometimes some British firms will lose out, but let us have a procurement regime that looks at value in the widest and most effective sense. I quote again the TUC, which said that

“a procurement regime that is simply based on lower cost, offering nothing to the long-term development of the British economy, has no place if our industries are to reach new levels of competitiveness.”

We saw the debacle of the Bombardier decision on buying trains; let us not have the same mistake again. Let us ensure that our business policy emphasises manufacturing, but also ensures that we can back British business—patriotism is not protectionism.

Jeremy Lefroy: I am following very carefully what the hon. Gentleman is saying. Does he agree that if we allow our capacity to build ships or trains to disappear, we will be held over a barrel by other manufacturers around the world because we will not have an alternative at home?

Mr Wright: I agree absolutely with the hon. Gentleman. Many people accept, quite rightly, the importance of not being too reliant on foreign sources of energy; that is why we need to ensure that we have a diverse energy policy. Frankly, we need the same approach for manufacturing—we should not be too reliant on our foreign competitors. We need a vibrant steel industry and a vibrant shipbuilding industry to ensure that we have that capacity, and that we produce the next generation of ships and use steel for offshore wind—that is exactly what we need to do.

Let me turn to another important issue, which I mentioned in an intervention on the hon. Member for Stroud: the tie-in between manufacturing, engineering, the wider point about business and schools, and our education system. If we are to see engineering and other STEM subjects rise in cultural importance, it is vital that engineering qualifications have at least parity of esteem with more liberal arts-based subjects. That is why, as I mentioned in my intervention, the decision of the Secretary of State for Education to downgrade the value of the engineering diploma from the equivalent of five GCSEs to just one is simply wrong.

In the previous Government, I was the Minister with responsibility for 14 to 19 reform and apprenticeships. I had responsibility for the engineering diploma, so I feel

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protective towards it. It was, and is, a high-quality and rigorous qualification that has the support of business and backs the interests of many of our brightest young children. The downgrade is the wrong move if we are to promote engineering. Do not take my word for it. Dr Mike Short, president of the Institution of Engineering and Technology, along with 16 senior industrialists, put his name to a letter to

The Daily Telegraph

that said:

“The Engineering Diploma is widely recognised as a significant route to providing the crucial technical and practical skills that young people will need to build a Britain that can compete effectively and internationally where technology can make such a difference to our digital world. Industry and the professional engineering institutions have worked extensively to make this 14-19 qualification a highly robust and attractive qualification, which now appears to be being undermined by the Government's premature decision to downgrade its worth.”

Ian Swales: Does the hon. Gentleman agree that when I asked the Secretary of State for Education a question on this subject a couple of weeks ago, his answer that the engineering diploma had to be seen as level with physics, chemistry or biology showed a basic misunderstanding of what the engineering diploma actually is?

Mr Wright: The hon. Gentleman is absolutely right. For far too long, we have had a culture that considered academic subjects to be successful, and vocational and engineering-based qualifications to be somehow second rate. Germany does not have that culture, which is why it has a flourishing manufacturing sector. We need a similar parity of esteem in this country; otherwise, we will never be able to achieve our potential in manufacturing and engineering.

The world will not wait for us. We need a sense of determination and urgency in light of the fiercest competition the global economy has ever known. Instead, and to my utter frustration, we have a sense of drift and a lack of co-ordination from the Department for Business, Innovation and Skills, and across Whitehall. The time is now, as senior industrialists, the CBI, the TUC, and hon. Members here today have said, to play to our strengths, seize the opportunity and put manufacturing and engineering at the heart of the economy. The Government need to act now.

10.44 am

The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Norman Lamb): It is a pleasure to serve under your chairmanship, Ms Clark.

I congratulate the hon. Member for Stroud (Neil Carmichael) on securing the debate on an important subject. May I also say that all the key points in his contribution were excellent? He is a keen advocate of manufacturing and engineering companies, both in his constituency and nationally. The Minister of State, Department for Business, Innovation and Skills, the hon. Member for Hertford and Stortford (Mr Prisk), who has responsibility for business and enterprise, is looking forward to opening the Stroud manufacturing festival on 23 April, which is an excellent initiative that will promote the case for manufacturing. The hon. Member for Stroud demonstrated the most remarkable array of different types of manufacturing in his constituency.

The hon. Gentleman also highlighted the importance of inspiring young people. I heard recently of a survey of youngsters, aged 11 or 12, on what they wanted to

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do when they grew up. None of them talked about manufacturing, making or designing things. We have to change to that culture and it will take a while. The National Careers Service, which is being launched in April, will work with STEMNET, a body that promotes STEM subjects in schools. It is running a scheme of STEM ambassadors—industrialists, academics and so on—who go into schools to talk to children to try to inspire them, and to think about manufacturing as an option.

Various people have raised the importance of getting women into manufacturing. The hon. Member for Stafford (Jeremy Lefroy) made a comparison with Germany. If we are to make the maximum use of the skills available in this country, we must open up engineering and manufacturing to both sexes, rather than it being the almost exclusive preserve of men.

Mr Iain Wright: Does the Minister think that the downgrading of the engineering diploma qualification is a good and positive thing that will promote engineering to our young people?

Norman Lamb: I absolutely agreed with the hon. Gentleman when he talked about parity of esteem between the vocational subjects, including engineering, and the more academic subjects. In recent years, including during his own party’s tenure in government, that has not existed—there has been no parity of esteem. The vocational, practical subjects have been downgraded in the public mind, and the Government are doing a lot to re-establish them. The university technology colleges initiative is valuable in that regard. On his particular point about the engineering diploma, it is a complex issue with the interaction of school tables. However, the principal learning in engineering—the engineering core of the diploma—will be recognised. That in itself is a vote of confidence. I therefore reject absolutely any idea that the Government do not see the importance of parity of esteem.

I want to mention the fantastic news from Nissan in Sunderland—mentioned by a number of hon. Members—which offers the potential for 2,000 jobs. The shadow Minister was generous in applauding that great news. There are a number of challenges and we hear stories that go in the other direction. However, when we have news that demonstrates a very clear vote of confidence in the UK economy, we should applaud it. The extent to which the automotive industry in this country now leads the way—hon. Members have talked about the fact that we are a world leader in motor vehicle engines—means that we have an enormous amount to build on.

The future of manufacturing is an issue being debated not only in the House, but, as we have heard, at high levels elsewhere today. My right hon. Friend the Secretary of State for Business, Innovation and Skills will address the inaugural EEF manufacturing conference today, as will the Leader of the Opposition. The Minister of State, Department for Business, Innovation and Skills, the hon. Member for Hertford and Stortford, has been speaking at the automated Britain conference this morning and will address the Institute of Mechanical Engineers manufacturing conference tomorrow. He and my right hon. Friend will make it clear that manufacturing growth is one of the highest economic policy priorities for the Government. It is important to stress that.

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The UK is recovering from the biggest financial crisis for generations and the deepest recession of almost all the major economies. We are still feeling the shocks from the eurozone’s sovereign debt crisis. The recent agreement with Greece, although welcome, is not a panacea. One of our first decisions in government was to place manufacturing at the heart of our economic strategy. I reject the shadow Minister’s charge that there is any sense of drift. The Department is focused on manufacturing. The Minister of State leads on manufacturing: he devotes attention to it, and he is closely interested in doing everything he can to support growth in manufacturing.

In placing manufacturing at the heart of our economic strategy, we were under no illusion about the challenge that we faced in turning UK manufacturing around. In the UK, manufacturing as a percentage of the economy fell from just over 22% in 1990 to around 10% in 2010. The decline of manufacturing has been significant, in marked contrast with Germany, which has sustained that share of the economy much more successfully. We have learnt from the mistakes of previous Administrations

Ian Swales: I welcome the Minister’s comments about the importance of manufacturing. Does he agree that even figures such as 10% or 12% far understate the importance of manufacturing to our economy, because so many service sectors, such as logistics, energy and so on, depend on having a manufacturing sector? Will he join me in welcoming the fact that manufacturing employment in the north-east has risen every month for the past 22 months, which shows that the Government’s policies are helping?

Norman Lamb: I applaud my hon. Friend’s work promoting manufacturing, not only in his region but nationally.

Mr Iain Wright: Will the Minister give way?

Norman Lamb: May I deal with the previous intervention?

My hon. Friend the Member for Redcar (Ian Swales) is right to stress the importance of manufacturing in its own right and in respect of services. If we are to get out of economic difficulties, building exports partly based on smart manufacturing is essential. I am conscious that time is tight and I have already given way to the shadow Minister—

Mr Wright: Go on.

Norman Lamb: I would prefer to continue to make my points, despite the hon. Gentleman’s tempting.

There is an absolute necessity to shift activity away from consumption and public expenditure, towards investment and exports. The hon. Member for Montgomeryshire (Glyn Davies) made a good point about rural areas and small companies that can grow. In my very rural constituency, more people are employed in manufacturing than in agriculture. Manufacturing is important in all communities throughout our country.

One of the first things that we had to do as a Government was deal with the deficit. There is a divide on this matter between this Government—the coalition parties—and the Opposition. We believe that to re-establish

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confidence in the UK economy it is essential that we deal with the deficit effectively. We are clearly starting to succeed in that effort. On those foundation stones it is possible to rebuild. The actions we have taken have helped to restore stability and consolidate the UK’s triple A credit rating, which in turn will make this country more attractive to investors. Our job is to help manufacturers maximise their competitive advantages, thereby stimulating economic recovery and reanimating the spirit of industrial enterprise in this country.

Hon. Members have mentioned the importance of finance. In that regard, there are comparisons to be made with Germany, again, which has a large number of local banks, as does America. The concentration of banking in just a few hands in this country is a problem that is well identified. We have to ensure that our successful growing businesses have access to the finance that they need, including equity finance—another matter mentioned by the hon. Member for Stafford.

Hon. Members, including the hon. Member for Montgomeryshire, mentioned the importance of planning. The Government are taking steps to reform radically our planning system, introduce a presumption in favour of sustainable development and ensure that local authorities recognise the importance of facilitating growth in that way.

Last year the Government issued a plan for growth alongside the Budget, which set out a range of actions to stimulate growth in the manufacturing sector, and over the past year we have made progress in a number of areas. I want to deal quickly with some examples.

We are supporting the technological innovation that underpins competitiveness, which is critical. First, we are setting up a network of technology and innovation centres, known as catapults, to smooth the path from original research to commercial success. The first catapult, launched by the Secretary of State at the Technology Strategy Board’s innovate conference last year, is focusing on high-value manufacturing, funded with £140 million over six years. Catapults for offshore renewable energy, an important sector for the UK economy, were launched last month and will be created in 2012, along with catapults for cell therapy, satellite applications and the connected digital economy. The full network of seven catapults will be completed and fully operational in 2013. Many of these initiatives are in accord with Sir Anthony Bamford’s report, which we welcome and are considering. There is a lot of common ground in that report and what the Government are doing.

Secondly, we have modernised the manufacturing advisory service and increased its funding, including an extra £7 million to support supply chains, as mentioned

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in the debate. The revamped service will work with businesses, especially small firms, to improve their productivity, which is still a challenge for this country.

Thirdly, we have introduced a £125 million supply chain initiative, working with major UK-based manufacturers to rebuild capacity and ensure that more of the components and associated services they require can be sourced in this country. Fourthly, we have introduced a £250 million support package for energy-intensive industries, which the hon. Member for Stafford and my hon. Friend the Member for Redcar mentioned, to help offset the costs of the carbon price floor. The Government want to ensure that those industries can remain in this country and remain competitive.

Finally, we are establishing the Green investment bank, an innovative and exciting new concept, and expect to make an announcement about its location shortly. The bank will invest up to £3 billion, initially in five priority areas: offshore wind power generation, which is essential for this country’s energy security; commercial and industrial waste processing and recycling; energy from waste generation; non-domestic energy efficiency; and the green deal.

Mr Iain Wright: Will the Minister give way?

Norman Lamb: I have not got time.

On exports, the hon. Member for Stroud mentioned engaging with the EU and ensuring that our largest market—the single market—is exploited effectively by this country. Whatever our views about the EU, we must recognise the importance of taking every opportunity we can to export through the EU. We must also focus on emerging markets, where there is enormous potential to grow our exports.

Let me mention the regional growth fund. An important element in rebalancing the economy is the use of limited public funds to leverage in private investment in areas of the country that have relied too heavily, under previous Administrations, on the public sector. Nissan is a perfect example of how a bit of public money can leverage in substantial amounts of private funding for this successful initiative.

We are working hard to encourage and support British manufacturers and create an environment where they are free to thrive and compete in a global marketplace. Two weeks ago, we held a second manufacturing summit, which gave ministerial colleagues and me the opportunity to discuss and agree what more should be done to help us meet these challenging ambitions. We want UK industry to be our partner in achieving economic transformation and recovery. This strategy places world-class manufacturing at the heart of a healthy and balanced UK economy.

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Council and Social Housing

11 am

Austin Mitchell (Great Grimsby) (Lab): May I express my great pleasure at speaking under your chairmanship for the first time ever, Ms Clark, and my gratitude for being able to talk on the supply of public or council housing, and housing association or social housing?

We have a crisis building up at the bottom end of the housing market—public housing for rent—which hits those who cannot afford to buy. That can be up to two fifths of the population, depending on the area. The cause is, effectively, 30 years of disinvestment in housing, starting under the 18-year Conservative Government with the right to buy, which substantially reduced the public housing stock. The right to buy is welcome, of course, but should be paralleled by a policy of building one home for every home sold off, to maintain the stock of public housing. There followed 13 years of under-investment by the succeeding Labour Government, who did not invest enough in housing, and who bribed and bullied councils into privatisation. The problem now is that that long period of disinvestment and under-investment is being followed by the neo-liberal policy of the coalition.

When in opposition, the Prime Minister said:

“We support social housing, we protect it and we respect social tenants’ rights.”

That, however, was the prelude to a neo-liberal policy of running down the public sector, building up the private rented sector, and cutting public spending on housing. The result is that we are now building up to a housing crisis that will severely hit those who cannot afford to buy.

Karen Lumley (Redditch) (Con): Will the hon. Gentleman join me in congratulating Redditch borough council, which only last night announced a new programme of building council houses?

Austin Mitchell: I am delighted by any building of council houses, but the figures today from Inside Housing show that public housing construction orders are down to their lowest level for many years. Any initiative that produces council housing and new building is welcome, but it is in the context of low public housing build, which is the essence of the problem.

What used to be socially mixed council estates, with people at all levels of the social scale—from top to bottom, almost—are becoming, because of the disinvestment and under-investment, dumping grounds for the poor and the needy, which was not their purpose. The housing stock has shrunk and, given the Government’s announced policy of selling at even more substantial discounts, will shrink further; the houses cannot be replaced at the discount level being given. The waiting lists are already at nearly 5 million individuals— 1.8 million households—and many will never get the housing that they are waiting for. Also, homelessness applications are up by about a quarter. The English housing condition survey says that 391,000 children are living in overcrowded conditions—a figure that is up by about 18%. Housing costs are now at their highest level ever as a proportion of income, and they will be pushed up further, for the people whom we are talking about,

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by the coming rent increases. Housing build starts are at their lowest level since 1923; there is a pathetic number of council housing starts.

David Simpson (Upper Bann) (DUP): I congratulate the hon. Gentleman on obtaining this important debate. As he will be aware, a call went out in December last year to farmers and rural councils to help with the social housing problem, but that in itself is not enough to deal with the more than 10,000 people on the waiting list.

Austin Mitchell: The hon. Gentleman is exactly right, of course. A number of calls, initiatives and gimmicks are being pursued, but there is no firm conclusion, in terms of house building.

Rehman Chishti (Gillingham and Rainham) (Con): I congratulate the hon. Gentleman on securing this important debate and on the passion he has shown on the subject for many years. He referred to some of what is being done as a gimmick, but in terms of substance, does he welcome this Government investing £4.5 billion in affordable housing over the next four years? That will help to increase supply and provide a major boost to people on housing waiting lists.

Austin Mitchell: Of course I welcome the statistic that the hon. Gentleman read so brilliantly from the brief, but those are hypothetical houses not yet built, and the problem is now. The situation now is that starts are at their lowest level since 1923, and that is what we need to deal with.

Simon Hughes (Bermondsey and Old Southwark) (LD): May I join in the tributes? The hon. Gentleman has a great record on the issue. However, we all understand the difficult position that the country and the Government are in. The previous Government were hopeless when it came to new council housing build; as he knows, they had the worst figures of any Administration since the war. Can he accept that, given the depth of the recession, the Government’s initiatives are moving in the right direction? We should unite at least in encouraging them to ensure that we have more council and social housing, certainly including at rents that his constituents and mine can always afford.

Austin Mitchell: I will come to that point, which is wrong. Hopes are not houses. The Government might have the intention to build an increased number of houses, but the problem is now, and it is getting worse. A crisis is building, to which the only answer is to build more public housing for rent now. That is not being done; it has not even been started. House building is so low that the tragedy will become worse in the next months and years. The right hon. Gentleman is correct in that the Labour Government’s record was pathetic. At the end, we managed to persuade the then Prime Minister—often a difficult job—that we had to build council houses and had to have a building programme. That was initiated by my right hon. Friend the Member for Wentworth and Dearne (John Healey). That was responsible for growth, and for jobs in the recovery from recession, but it was immediately cut by the incoming coalition Government, who had initially promised to maintain that building programme. They stopped it,

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and began a deliberate policy of diminishing, demeaning, draining and dumping social housing and those who live in it.

I say “diminishing” because of the 60% cut in funding for building social housing. Even that spending is predicated on higher rents providing revenue. That meant that areas such as Grimsby and north-east Lincolnshire got nothing, which is unprecedented. We wanted to build, but we could not, because no money was available as our rents were too low. I say “diminishing” because of the cuts in housing benefit, the cost of which is high only because the building rates have been so low. If we had built social houses over the long term and on a sufficient scale, we would not need to pay housing benefit to the homeless and to move them into expensive accommodation, and would not have the kind of abuses that are serialised every day by the Daily Mail . It is failure to build that has made the housing benefit bill so high.

Other cuts are already affecting new claimants and, from April, they will start to affect those who renew their housing benefit. First, there was a cut for adult dependants at home, which was designed to force kids—adult children—out of the household and into a single person housing market that is not there. The bedroom tax, which comes in in April next year, is a cut in housing benefit of 15% for those with a spare room, and of 25% for those with two spare rooms, to force tenants to move to smaller accommodation, which is not there, or into the private rented sector.

There is the renewal rate for under-35s from April next year, who will be getting the shared-room rate for single people. Then universal credit and caps will come in, which will produce even more difficulties, not so much in Grimsby but certainly in London and the big cities. That is the “diminishing” part of the argument.

The demonisation part is that council tenants are being treated and regarded as subsidised scroungers living on state subsidy. In fact, the Localism Act 2011 ends secure and assured tenancies, which are the basis of establishing a settled community and a good life on a council or housing association estate. It replaces them with short-term tenures. That means that if the family get better off—if the head of the household or members of the family get jobs—and income increases, the tenancy will not be renewed.

Andrew Percy (Brigg and Goole) (Con): I thank my next-door neighbour but one for giving way. On the issue of longer-term tenancies, as the hon. Gentleman will know, my hon. Friend the Member for Cleethorpes (Martin Vickers) and I have joined him in the Lobby on the issue of short-term tenancies. However, what he has not said is that it will be up to local councils to decide whether to offer them, so there is an element of local democracy. It may be that our councils in north Lincolnshire decide not to do that. Secure tenancies have not gone completely; it will be up to local councils to decide whether to continue to offer them.

Austin Mitchell: I am a grateful for that point. I am also grateful that, for a period, in Humberside, we have agreed on the issue of short-term tenancies. I hope that the measure will not be enforced by councils, but several

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are already making arrangements to enforce it, and others are being campaigned against by tenants who wish to persuade them not to enforce it. We will have a patchwork quilt over the country, but the net effect will be that in many cases, people are forced out, and are forced into accommodation in the private rented sector that is not there.

Simon Hughes rose—

Austin Mitchell: I give way to the right hon. Gentleman, who is a member of the council housing group, and has worked on the issue for a long time.

Simon Hughes: I want to ensure, following the last intervention, that anybody who reads this debate is clear about the position. It will be up to every council to decide whether all or some of its properties do not have secure tenancies. Southwark council—one of the largest social housing landlords in the country—should, in my view and that of my colleagues, keep the policy that everybody in Southwark council housing should have a secure tenancy in future. If it wants to do that, there will be no risk to any of those people. The scandal is people who have salaries or incomes of £100,000 and are in council properties; some of them are not very far away from the hon. Gentleman and from me.

Austin Mitchell: There are problems and abuses in any system; in the tax system, for instance, there are myriad abuses that are not being dealt with effectively. The general principle should be that tenancies should be either secure for council house tenants, or assured for residents in housing associations. It is up to councils, as the right hon. Gentleman says, to decide. I hope that they will decide to maintain secure tenancies; that is the only basis on which one can have a safe, secure, settled community of people who are assured that they will be able to stay in their houses and that their kids will not have change schools.

Sir Bob Russell (Colchester) (LD): I am grateful to the hon. Gentleman for giving way, because I think we agree more than we disagree on this subject. Will he explain why, for 35 years—from 1945 to 1980—successive Governments were of the view that council housing was an important part of social society, and why, from about 1980 onwards—this includes the previous Labour Government—successive Governments have turned their backs on council housing? I do not understand why that social phenomenon or change has happened. Can he explain?

Austin Mitchell: The hon. Gentleman has asked a difficult question. I do not know the answer. I take it that there was an element of financial stringency—a desire on the part of the Conservative Government to cut taxes, which meant cutting Government spending and therefore spending less on public housing for rent. Certainly, the Labour Government did not spend enough on housing because their priority was to put money into the health service and education, which, after a long period of disinvestment, did get a lot more cash from the Labour Government. The financial situation was pressing in that direction. Also, there was clearly a feeling that we had built enough. That feeling was wrong, because building public housing for rent is a

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means of providing employment, maintaining full employment, stimulating the economy and providing for social need.

Andrew Percy: There was another element; it was not quite as the hon. Gentleman suggests. As he will know from the time he spent in council housing in Hull for “Tower Block of Commons”, there was also a social change, which meant that a lot of people did not want to live in council housing. Consequently, in Hull, where I was a councillor for 10 years, we had hundreds of houses that we could not let because people simply did not want to move into them. It is not quite the case that we simply abandoned social housing the 1980s.

Austin Mitchell: But it is the case that a failure to invest made the estates less attractive to live in. Had those estates been updated, modernised and refurbished in the way that was needed—that was certainly needed on the Orchard Park estate—they would have been more attractive places to live in. In the ’70s, they were very much mixed communities, as all the statistics show. It was because spending was cut that they became unattractive. Housing there was also less available, due to sales, which picked the eyes out of many of the estates. That was the reason why people did not want to move in. That movement was coupled with the fact that the Government were spending less, so the housing was less attractive. They were disinvesting in the policy. I do not have the answer to why Governments were doing that—they should not have done it; it was socially divisive and damaging to other social services—but that was the reality. We were spending less, we were not building, and we were not refurbishing or modernising. There was a big modernisation under Labour, to be fair, which brought in private capital by privatising the estates. Again, that was inadequate to deal with the scale of the problem and the disinvestment that had taken place.

I want to resume my thread and talk about draining public sector housing. The new proposals for giving councils control of their housing revenue accounts involve them paying substantial sums to buy back, in order to pay off historical debts. However, that historical debt has in fact been paid off many times over the years. For instance, in the years when daylight robbery applied—that was begun by a Conservative Government, and was carried on for too long by a Labour one—£13 billion was drained out of housing revenue accounts by that system of financing, and the draining has gone on since. The Government were abstracting £1.6 billion every year from housing revenue accounts to pay off historical debts, they said, and to redistribute. The proposal that historical debt has to be repaid by councils that want to run their own revenue accounts is fallacious. It is an attempt to squeeze council financing of development of new housing once again.

The whole programme is imposing sacrifices on those least able to bear them: the poor, the low-waged, the disadvantaged and the handicapped. Given that the approach is to spend so little on social and council housing, the question is: why should those who are not responsible for the financial crisis and the recession be forced to bear the burden of paying for it? That question is never answered. The Department for Work and Pensions’ own risk assessment shows that the benefit cuts are hitting the vulnerable, the sick, the young, and the

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low-paid. That whole package, plus the other changes, results in fear, homelessness and insecurity. It will also result, particularly in London, in a kind of ethnic cleansing, because the cuts will hit racial minorities who have bigger families harder than other sections of society. People will be forced out to the private rented sector.

The private sector is not rent controlled. We need to restore rent control and regulate conditions more tightly to control the incipient development of Rachmanism and exploitation. Rents are too high in the private rented sector, yet in the public rented sector they are being raised to 80% of private sector level.

Sir Bob Russell: I endorse the points raised by the hon. Gentleman. Does he share my disbelief at the fact that many council houses that have been sold are being rented out by the current owners, yet the rent—which is paid for by housing benefit out of the public purse—is set at a grotesquely higher level than would be paid were the property still a council house?

Austin Mitchell: Absolutely. The system causes instability and damage to the estates. People cannot keep up with their payments, so houses are repossessed and sold at auction. Somebody buys those houses as a speculative venture because they are cheap; they put in any kind of tenants because there are no controls, and those tenants claim housing benefit. The rent goes up, and the public sector is drained to pay for that folly. That is the result of many years of sales. I agree with the hon. Gentleman. We need to maintain controls and regulation in the private sector, because otherwise we will have the return of Rachmanism and a situation where Cathy has to come home time and again. “Cathy Come Home” came out in 1966, and followed a long period of difficulty in the private rented sector. Such difficulties are now returning, and we need to dramatise the situation to get the same kind of public reaction that “Cathy Come Home” received.

The situation is hitting the low-paid, the poor, the unemployed and the vulnerable—exactly those people who any civilised society should be helping. It is also hitting other sectors. How can we have good health without good housing? If people live in overcrowded, unsanitary and damp conditions, a health problem will arise. Good housing is the basis of a good health policy. How can we have a good education policy if kids are being shunted from school to school as their parents are forced to move, or if they do not have room at home to study or work in? It is impossible. How can we maintain stable, crime-free communities in which people want to live together, if they are being moved in and out as if they were in a transit camp? People need housing, but they are being shunted around because they cannot afford to pay for their housing, perhaps because of the bedroom tax or cuts in housing benefit, or because a decision by the council means that if they improve their position, they will have to move out of their home. Those policies will produce instability, insecurity and disturbance of the worse possible kind, and will turn places into transit camps.

The only answer—this point is central to the whole debate—is to build big, to build now and to build more than we ever did. We must build affordable, high-quality, public rented housing. It is the cheapest housing to build and run; it returns money to the councils because

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the rents produce more income that it costs to maintain and manage the estates, meaning that councils will make a profit. Rents are not set to maximise the income of private individuals, but are fixed at an acceptable social level that people can afford and will provide a return to the council. That is the kind of housing that we should be building for people who cannot afford to buy, and that should be the priority.

Rehman Chishti: The excellent portfolio holder for housing in Medway said that the way forward should involve

“More financial encouragement for social renting tenants to become owners of newly built or renovated homes, thereby freeing up socially rented properties.”

Does the hon. Gentleman agree?

Austin Mitchell: I do agree; I always have. Interestingly, before Grimsby council became North East Lincolnshire council, it was one of the first authorities to sell council housing to tenants. When I was in the New Zealand Labour party, we argued for years over whether state housing should be sold to tenants. We finally decided that it should be, and pioneered that policy in New Zealand, which was welcome. Such policies work provided that each sale of a council house is replaced by a build, so that the stock remains constant or builds up. That is the criterion; it is not about selling off houses ad lib to pick out the eyes of the estates. It must be a policy of sell and build.

The Government say that we cannot afford to build. We can afford foreign wars, high-speed trains and Crossrail, but we cannot afford decent housing for our people. Decent housing is an investment; that is why we should build. We could finance it through municipal bonds—that is how council housing used to be financed, and that is what happens in other European countries. Houses are secured by the asset created by the bonds. We could let pension funds invest in social and public housing; we could even use the revenue created by printing money, or quantitative easing. At the moment, money created by quantitative easing goes into the banks and is stashed away in the reserves. Why should it not be used to pay for contracts for social and council housing, which will house people and create an investment, from which we can derive income that can be secured? There are all sorts of ways to invest in housing, but if we do not invest, we slide into crisis.

I shall conclude on an important point: if we invest in housing, we stimulate the whole economy. Look at what happened in the 1930s when recovery from the depression, which was as bad as this one, was precipitated and stimulated by building the houses in which many of us—including me—were brought up. That changed the face of England in the 1930s; it stimulated the economy, created jobs and took us back to higher employment. Housing policy launched the recovery that was sustained by rearmament from 1938. Housing could do the same now, because it creates jobs and demand. People have to furnish their houses and provide everything in them, and that stimulates the entire economy. Everything—social need and economic sense—points to a big housing programme, particularly for social and council housing. Since everything points to such a programme, why are

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the Government not building? Why not begin that building programme now to stimulate the economy and serve the people?

11.27 am

Martin Vickers (Cleethorpes) (Con): It is a pleasure to serve under your chairmanship, Ms Clark, and I congratulate my neighbour—indeed, my own MP—the hon. Member for Great Grimsby (Austin Mitchell) on securing this debate. As my hon. Friend the Member for Brigg and Goole (Andrew Percy) said earlier, the hon. Member for Great Grimsby has a long history of campaigning on these issues.

I was first elected to Great Grimsby borough council in 1980. That seems a long time ago, but the hon. Gentleman was already entering his fourth year as a borough member. I was put on the housing committee and I recall that we had some rather heated exchanges. Many of the hon. Gentleman’s colleagues were strongly opposed to the right to buy, and frustrated many of his constituents in their aspirations to buy their council property. He will correct me if I am wrong, but I recall that he always favoured the right to buy. In the 1970s, Great Grimsby borough council had an enlightened Conservative administration. I must declare an interest because my parents bought their council house at that time. I speak, therefore, as a council house Tory, of which there are a number in this House, and I can bring some personal experience to the debate.

We lived in a privately rented property in Cleethorpes. My parents were then allocated a council house in Grimsby, when I was about five or six years old. I can remember my mother telling me many years later that one of the most important things about the move from the private to the public sector at that time was the security that it gave them.

As my hon. Friend the Member for Brigg and Goole pointed out, he and I joined the hon. Member for Great Grimsby in the Lobby opposing reductions in tenancies. The situation that the Government have arrived at now is much more acceptable than was originally the case. As the right hon. Member for Bermondsey and Old Southwark (Simon Hughes) pointed out, we now have a satisfactory situation. However, security is important, not only from the individual tenant’s point of view but, as the hon. Member for Great Grimsby pointed out, for creating settled communities.

We must recognise that, as with most things in life, there needs to be a balance—a mix between the private and public sectors. I agree with the hon. Gentleman that more public sector housing is needed. I think that it is perfectly acceptable to have a mix involving housing associations, direct council building and various other partnership arrangements that can enter the equation. I very much favour the Government’s plans to extend the right to buy. We need to recognise the aspiration of many tenants to get a foot on the property ladder, and the benefits that that can provide. However, security, as I said, is important. We must recognise that homes are not just bricks and mortar. They are genuine homes and they contain all the memories of the tenants.

A week ago, the hon. Gentleman and I were in north-east Lincolnshire with the Minister of State, Department for Communities and Local Government, my right hon. Friend the Member for Tunbridge Wells

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(Greg Clark). Indeed, we drove from Grimsby to Cleethorpes and were pointing out to him the urgent need to bring more commercial properties that are no longer used as retail outlets into the housing market. I know that the Government intend to ease the planning classifications that restrict that, but more needs to be done. We need to recognise that many commercial properties, as I pointed out on the route from Grimsby to Cleethorpes, are no longer in retail use. They are sound properties and could be brought into use, at a reasonably modest cost, as residential properties. Some sort of partnership between the private and public sectors could determine that.

The other point that I want to make was touched on by the hon. Gentleman. This issue affects Shoreline Housing, the main social landlord in our north-east Lincolnshire area, which receives no Homes and Communities Agency funding at all during the current four-year period. As the hon. Gentleman pointed out, that is because of the low rents in our part of the country. That makes it virtually impossible to balance the books, as it were, in strictly economic terms. I have written a letter to the Minister of State, following his visit last week, on that issue. We need to keep a close eye on it.

To sum up, the points that I want to make are these. We need a mix. We need to provide security for tenants. We need to bring commercial properties into use as residential properties. I hope that the Minister will take away the points that I have made specifically about funding in north-east Lincolnshire.

11.34 am

Heidi Alexander (Lewisham East) (Lab): I am grateful to be able to take part in the debate. Since I was elected to Parliament, I have probably spoken more about the need to increase the supply of genuinely affordable housing than about any other subject. I have done so not because I have any great expertise in that field, but because I know how desperate my constituents are to find homes that they can afford. Successive Governments have failed to appreciate the scale of the housing crisis. My fear is that the policies of the current Government will just make it worse.

Every fortnight, I sit in my advice surgery in south-east London and have the same conversation over and over again with families living in massively overcrowded accommodation who want me to help them find a home. Some will already have a council home or housing association property, but many more will be renting in the private sector. Most of the people who come to see me are in low-paid, often part-time work and juggling the pressures of bringing up their family while holding down a job.

I see mums who are on the edge of nervous breakdowns because their families are living in damp, depressing flats. I see dads who feel powerless to find their children a decent place to live. I often see children who are sharing a bed with their siblings, and sometimes I see children who have no bed at all. I also see families who live in a single room in a shared house. I say to myself that in 21st-century Britain, that cannot be right.

I often ask the constituents who come to see me what they do for a living. I ask them outright how much they earn. Obviously, their answers vary, but in the eight years for which I have been holding advice surgeries,

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first as a councillor and now as a Member of Parliament, not one of the families who have ever come to me for help with housing could afford to buy a property in London. For the vast majority of people who come to see me, even shared-ownership homes and part-rent, part-buy schemes are way out of their league. To access those homes, people need to be earning thousands of pounds more than many of my constituents.

Increasingly, people have been turning to the private sector to meet their housing needs and have been resorting to housing benefit to help them cover their rent. In Lewisham, private rents are basically double what social rents are, so for many of my constituents the private sector becomes an option only if the state pays money to their landlord. Yes, we have heard a lot about the housing benefit bill going up, but let us think about this. If private rents in my constituency are double the social rents, there is no surprise in that. Our failure to build adequate amounts of social housing has resulted in our lining the pockets of private landlords on an industrial scale—and make no mistake: the policies of the current Government will make that situation worse.

Social rented homes in my constituency are a hugely sought-after commodity. Demand massively outstrips supply. If I had a pound for every time I have explained that in my surgeries, I would be a rich woman. In London, 350,000 people are on waiting lists, yet only a tiny fraction of those people will actually be able to move each year. If we are to meet the housing needs of my constituents, we must dramatically increase the supply of social housing. I am relaxed about whether that is housing rented out by councils or housing associations, but I am clear that it needs to be genuinely affordable.

What are the current Government doing to build more social housing?

Chris Williamson (Derby North) (Lab): Not a lot.

Heidi Alexander: My hon. Friend gives the short answer. The current Government’s record over the last two years on social rented housing has been utterly shameful.

Sir Bob Russell: I regret the line that the hon. Lady is taking, because I thought the purpose of the debate was to try to secure consensus—unanimity—on the way forward. However, as she wants to make a critical point, will she confirm that the previous Labour Government built fewer council houses than the Thatcher Government?

Heidi Alexander: I can confirm that in the last five years of the Labour Government, 256,000 affordable homes were built. [Interruption.] I obviously heard the hon. Gentleman when he asked me about council housing and I have said previously that if properties are genuinely affordable, I do not have a problem with whether they are council houses or housing association properties. He talks about the purpose of this debate. My reason for coming to the debate was to scrutinise the policies of the current Government, who I believe are failing. I am sorry if the hon. Gentleman does not welcome my tone, but it is important to put these things on the record.

Let us look at the facts of what the Government have done over the past two years. The national affordable house building programme has been cut by 63%, and there is £4 billion less to spend on new affordable homes

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between now and 2015 than there was between 2008 and 2011, when we spent £8.5 billion. Some 259 new social rented homes were started across the whole country between April and September last year—a 99% fall on the same period the previous year. In London, a city of 7 million people, just 56 new social rented homes were begun in the same period, which represents 8,469 fewer social rented home starts between April and September last year than in the preceding six months. That is not the record of a Government who are committed to building the homes this country needs; it is the record of a Government who are failing.

In the past few weeks, I asked a major housing association in London to provide me with figures on the number of social rented homes it has built over the past three years and what it plans to build over the next three. Its response was illuminating. Although it has averaged an annual output of more than 1,000 social rented homes—homes that have been built new—in recent years, that figure will halve in the next three years. Those projections are borne out by the amount of social housing that has been granted planning permission since the Government came to power. Last week, Inside Housing reported that the amount of social housing that was granted planning permission in 2011 was virtually half that which had been granted permission the year before. If planning permissions are not granted, the homes will not be built—it is simple.

I also question the affordability of any homes that housing associations or councils do build in the next few years, and my hon. Friend the Member for Great Grimsby (Austin Mitchell) also picked up on this issue. The Government have their strangely named affordable rent model, which allows social landlords to charge up to 80% of market rents, thereby bringing in more money to cover the costs they laid out in construction. The problem is that, in some parts of the country, the rents, which are just 20% lower than market rents, will be anything but affordable. If people in receipt of housing benefit move into those properties, will we not just be adding to the housing benefit bill again? I could be wrong, but I thought that was precisely what the Government were trying to avoid.

The supply of social housing is a function of not only what is built, but what happens to existing homes in the sector. Debates about allocation policies are all well and good, but if there is simply not enough social housing out there to meet the population’s needs, we will just be working out how to cut up the cake, knowing there will never be enough to go round.

On the overall amount of housing available at rents that people can afford, the Government’s enhanced right-to-buy proposals are particularly worrying. Like my hon. Friend, I agree with the principle of a right to buy, but when there is such a shortage of council housing, it seems crazy to deplete the overall stock of socially rented homes. The Government will argue that, for every home sold, another will be built, but I do not see how the finances stack up. Research by Hometrack in December 2011 showed that, where a £50,000 discount is applied, the average receipt from a sale would be £65,000, which would be lower than the cost of delivering a new property. That leaves aside the issue of whether the replacement works on a like-for-like basis. Will a

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two-bedroom flat sold under the right to buy in London be replaced by the same sort of property in a similar location?

Mr John Leech (Manchester, Withington) (LD): On that point, two-bedroom flats sold off in London should be replaced by larger properties to deal with the shortage of such properties in London. In the same way, there is a shortage of smaller properties in other parts of the country.

Heidi Alexander: I do not necessarily disagree with the hon. Gentleman, but building a larger property will probably cost more. There are real questions about how we get to a situation where we have the right sorts of properties in the right places. I just cannot see how an enhanced right-to-buy scheme will help to get people into homes at a price they can afford.

I have painted quite a bleak picture, but there are things the Government could and should be doing. They should level the playing field between councils and housing associations in respect of how they borrow money to invest in social housing. If we remove the cap on the borrowing that local authorities can invest, more money might go into new social rented housing. The Government should also be clear in the national planning policy framework that social rented housing is a priority, instead of leaving it to the whim of local authorities, as the current draft does. They should be clear and robust in their planning policy document.

Since the Government came to power, we have heard plenty from the Housing Minister, including lots of different initiatives and gimmicks. I have listened carefully to those announcements, waiting to hear something that will give hope to my constituents—the people I spoke about at the start of my contribution. To be honest, however, I have heard nothing in what the Government have said that will give them hope. We need a dramatic increase in the number of social rented homes being built, but nothing the Government are doing will bring that about.

11.46 am

Mr John Leech (Manchester, Withington) (LD): I am pleased to speak under your chairmanship for the first time, Ms Clark. I, too, congratulate the hon. Member for Great Grimsby (Austin Mitchell) on securing the debate.

The contribution of the hon. Member for Lewisham East (Heidi Alexander) was somewhat unfair on the Government. I would just point her in the direction of the comments made by my right hon. Friend the Member for Bermondsey and Old Southwark (Simon Hughes), who noted the massive under-investment in social housing during the years of the previous Labour Government, when the economy was doing well. Throughout the previous Parliament, I, along with colleagues not only in the Liberal Democrats but across the House, argued for substantially more investment in social housing. Indeed, my hon. Friend the Member for Colchester (Sir Bob Russell) was arguing for that from 1997.

Heidi Alexander: One thing the previous Labour Government had to deal with when they came into office was the £19 billion backlog in repairs and maintenance investment in public housing, but they brought 1.5 million

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homes up to the decent homes standard. Does the hon. Gentleman not accept that that represented an incredible amount of investment in social housing, albeit it did not contribute to the number of new homes?

Mr Leech: I thank the hon. Lady for that intervention. I will not stand here and defend the ills of the Conservative Government pre-1997. However, the previous Labour Government could have done more at a time when the economy was doing well. As my right hon. Friend the Member for Bermondsey and Old Southwark said, the coalition Government have come to office at a time when there is not a lot of cash available.

Although I welcome the additional social housing that will be built over the next three to four years, I emphasise to my hon. Friend the Minister that we need to do more. I point him in the direction of the Department for Transport, where there has been significant capital investment in railway schemes at a time of significant budget cuts. Some capital investment in social housing schemes would be yet another way of helping to boost the construction industry and to deal with the massive shortage of social housing.

Governments cannot, however, be expected to do everything. Local authorities must play their part, and I want to make a few brief comments about that. My hon. Friend the Minister is aware of my concern about the changes to housing benefit regulations, and the prospect of tenants who under-occupy homes in my constituency losing housing benefit unless they choose to move to smaller properties. That policy has been widely criticised by housing associations and local authorities, including my own in Manchester, because of a lack of available smaller properties for tenants to move into. The hon. Member for Lewisham East mentioned a massive shortage of larger homes in London, but the problem in other parts of the country—certainly in Manchester, but also in other areas of the north of England—is a shortage of smaller properties for people to move into.

Manchester city council criticised that change in housing benefit regulations, but when it was given the opportunity to help to provide some additional, smaller social housing accommodation, it chose not to do so. Many local authorities—although London is an exception—have available land, which has been earmarked for housing development, and my constituency is no exception to that. In Chorlton, the former Oakwood high school site on Darley avenue has been earmarked for housing. However, Manchester city council says that there is already plenty of social housing in the area, so there is no need for more. It says so despite having argued that there are not enough available properties to allow under-occupying tenants to move to smaller accommodation. That seems to be a bit of a contradiction.

The council also argues that some homes will, by definition, be affordable, because some property will be available to buy on a shared ownership scheme. That is certainly true—and welcome—for people who are able to get on the housing ladder, but the harsh reality is that many people cannot get a mortgage in any circumstances; therefore, by definition, those homes are unaffordable for those people.

I return, therefore, to the point I made at the beginning, about local authorities taking on some of the responsibility. It cannot just be left to the Government to throw

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billions of pounds at housing development. Local authorities need to make land available—where they have it, because I recognise that some do not—for social housing.

11.52 am

John Cryer (Leyton and Wanstead) (Lab): It is a pleasure to speak under your chairmanship, Ms Clark. I congratulate my hon. Friend the Member for Great Grimsby (Austin Mitchell) on securing the debate. Both he and my hon. Friend the Member for Lewisham East (Heidi Alexander) have said a lot of what I intended to say, so I shall be brief. I intend to speak purely on local issues, and how my constituency and borough are affected.

Six wards of my constituency are in the London borough of Waltham Forest and two are in Redbridge. The borough of Waltham Forest has a housing waiting list of about 13,000. The Redbridge waiting list is probably not much short of that. My hon. Friend the Member for Great Grimsby mentioned that about two fifths of people in the country cannot afford to buy a home. I do not have the figures to hand, but my suspicion is that, certainly in the four wards of Leyton, and almost certainly in Leytonstone ward as well, that figure will be much higher.

We are getting back to the sort of levels of overcrowding that probably were last seen during the Victorian era. Like my hon. Friends the Members for Great Grimsby and for Lewisham East—and other hon. Members in the debate—I sit in advice surgeries week in, week out, taking up housing cases, and I know there is little I can do about the vast majority of them because, as my hon. Friends pointed out, it is simply a matter of the relationship between supply and demand. That relationship is out of balance because of the failure, over a very long period—since 1979—to build council houses, and the partial failure to build social housing.

Yesterday I met a group of GPs from my constituency, mainly based in the Leyton area. We were talking about methods of preventing the sorts of illnesses that are common in my constituency—engaging in programmes of prevention rather than cure. Those GPs are perfectly honourable people, with perfectly good intentions, but the fact is that an awful lot of the problems that they deal with have to do not just with health but living conditions. When entire families live in single rooms—and I have met many who live in those circumstances, which as I said takes us back to almost Victorian levels of overcrowding—it will not be possible to deal with the illnesses, including psychological illnesses, that stem from those conditions.

When siblings must share not just rooms but beds; when there are many people in one room; or when people are in overcrowded social housing, or are tenants of cowboy landlords, in badly maintained and overcrowded properties, those people will not enjoy the best of health, or perform to the best of their ability at school. They will also encounter problems with work—and there are problems at work in any case. All those circumstances together bring things to a critical pitch, and I suspect that if we continue down the path we are on, with overcrowding, and bad living and working conditions, there will be an explosion in many of the illnesses that we associate with those conditions, and serious public health problems.

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[Martin Caton in the Chair]

The number of home starts is now the lowest since 1923, whatever hon. Members on the Government side say. That is a pretty appalling record. I am the first to admit that the Labour Government should have built more council and housing association homes, but in reality an awful lot of money was ploughed into the decent homes standard. Many homes in the social sector—whether belonging to councils or housing associations and trusts—had fallen to such a low level of maintenance that there had to be investment. That is leaving aside the fact that investment was necessary in education and the fabric of schools, and in hospitals and GP surgeries. There was investment in housing, to bring the existing housing stock up to the decent homes standard.

However, in the last two years of the Labour Government some progress was made. When my right hon. Friend the Member for Wentworth and Dearne (John Healey) was Housing Minister, there were council housing starts in many boroughs, including London boroughs, for the first time, in some cases, in 25 or more years. If my right hon. Friend had had more time he would have emerged not just as a good Minister but a great one, and he would certainly have had an enormous impact on the lives of my constituents and many others.

A figure from the history of housing that I always remember is that in 1951, Winston Churchill, who was leader of the Conservative party, stood on a platform of building more council houses than the then Labour Government—the Attlee Government. We were building 200,000—it might have been more, but I think it was about that. It seems extraordinary now that a Conservative leader would say their Government would build more than 200,000 council homes a year.

The house building programme in the council sector peaked under Harold Wilson’s Government, at about 1 million homes a year, in the mid to late ’60s. If we could have even a fraction of that situation today it would make an enormous difference to my constituents, who struggle, day in and day out, with appalling housing conditions. At the moment we are in a vicious circle of cuts, resulting in more people being unemployed in the construction sector, less investment, and more people unemployed and claiming benefits. Since the election alone—in just under two years—65,000 people from the construction sector have joined the dole queue. If we were to invest in housing we could get into a virtuous circle. At the time of the election—this is not a party political broadcast—the deficit was falling, and so was unemployment. We were in a virtuous circle of investing in the public sector. We were building homes, among other things—council homes. We were starting to see a rise in the number of people employed in construction. Getting back to that position would have a great effect on the indigenous industries, the numbers of people employed in the construction sector and those whom I represent who live in appalling housing conditions.

12 noon

Simon Hughes (Bermondsey and Old Southwark) (LD): I am grateful to the hon. Member for Great Grimsby (Austin Mitchell) for introducing this important debate. I want to make a few points. Having a constituency not very far from that of the hon. Member for Lewisham East (Heidi Alexander), we share many of the same

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analyses. Another London MP, the hon. Member for Leyton and Wanstead (John Cryer), has exactly the same sort of housing need pressure on him as I have had for every year since I have been a Member of this House. The pressure on me has not altered; it has been the same under Labour and Tory Governments and even under this Government. It is still 40% or more of the people who come to see me who ask for help with their housing. They may want new housing because they are living in overcrowded conditions, a first home at a cost they can afford, repairs to be done or whatever. The issue, therefore, remains hugely important.

A few months ago, the Halifax and Lloyds bank sent me—and probably many other Members—some key facts about my constituency. I think I knew them, but I will relay them to you, Mr Caton, for the purpose of the debate. The average house price in my constituency at the time this pamphlet was issued in December 2010 was £310,621. The average national house price was £164,310, which was nearly half the cost of a house in a seat such as mine, where most people come from a working-class background and where many have lived all of their lives, and generations before. The average earnings in a constituency such as mine were £52,755, while the average earnings across the UK were £32,178. Of course London earnings are higher, but they are not so high that they make up for the additional housing costs.

My first point is that for people in high-cost areas—it applies not just to London but to inner-city Leeds, Manchester and so on—the additional money that they earn does not make up for the additional cost of their housing. That is a challenge that can only be met by supported housing. By definition, if people do not have the wages to be able to buy into the private sector as owner-occupiers, social housing must be provided.

Secondly, we are required, therefore, to build as much as possible. All the evidence suggests that if we are to get people into work and keep them in work, we need construction projects, whether it is big infrastructure projects or housing. It is how we can get most people into work, doing skilled and productive jobs, and thus benefiting the local economy. It is a win-win situation: we house people and provide work for them.

Thirdly, I have a pre-Budget plea. The Chancellor could help this situation with some tax changes. If we taxed unused, undeveloped brownfield land as if it had been developed, we would incentivise the owners to use the land. They would realise that there was no point in sitting on undeveloped land because they would be paying the same tax as they would on developed land. Let me repeat publicly the plea that I have made to my colleagues in private. Site value rating—it can be called by another name—which the Liberal Democrats have espoused for many years, is really important. We must incentivise people to put their land on the market so that there is the space on which to construct our buildings. There are many unused sites in my constituency that still could and should be used for housing. We must have a tax system that incentivises proper development of property.

If there is new council housing, and there should be, we must change the rules over right to buy. The discount regime has been varied. It was much higher and was

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rightly brought down by the Labour Government, and it has been changed again under this Government. The incentive on councils to build new council housing is never going to be great if, immediately it is built, it is bought out of the council housing sector. There is an argument that different rules should apply to new-build council property and existing council property. I have never supported the discounts when they were high. There should always have been a regime in which the whole of the money went back to the council so that the stock could be replaced. For many years, though, the money went to the Government, leaving the council with only some of it.

I am in favour of mixed communities, but mixed use of blocks of properties, either flats or tower blocks, often does not work at all. There is the tenant who, in many cases, is there for life; the right-to-buy person, who will be there for life or a long time; and then the people who rent, either from people who have bought the flat or from people who have bought and sold on. They tend to be there for two minutes—I exaggerate slightly—and have no stake in the community. They are not naturally very good neighbours. They may not be inherently antisocial, but they may be students, visitors or here on holiday. Such a mix does not make for community cohesion, and we may need to have different rules in the future. I appeal to Ministers to think about how we manage multi-occupancy places—places that are not detached, semi-detached or terraced. The system does not work well at the moment. As any local authority will say, managing an estate with that mix of people is really difficult.

Heidi Alexander: The right hon. Gentleman is talking about the right to buy. Obviously, his Government have consulted on the enhanced right to buy. For the sake of clarity, I want to know whether he supports the proposed £50,000 limit on the discount that can be applied.

Simon Hughes: My instinct is to keep the limit where it is. There is such a need for social rented housing that we do not need to encourage people at the moment.

I have two final ideas. The hon. Member for Great Grimsby and I had an exchange earlier. It is important that we get out the message that it will be up to local authorities to decide whether all or some of their properties will be secure tenancies in the future. I worked very hard to ensure that that was the outcome. My colleagues will remember that in the summer of 2010, the Prime Minister floated the idea that it might be the policy of the Government to end secure tenancies in every local authority.

I was very clear about that from the beginning. I went to see the Minister for Housing and Local Government immediately and he helpfully allowed me to look at the housing policy paper. I was clear that we needed to have a policy that only allowed that if the local authority decided that that should be the policy. We must not frighten people, particularly older people, into thinking that they will lose their security of tenure where they are—that does not apply—or that it will follow that in future council tenancies in Southwark, Lewisham, Grimsby or anywhere else there will not be security of tenure. Councils can decide to keep every property, or 90% of properties or every estate bar one as secure tenancies if they wish. I support that as a principle of localism.

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I will fight to ensure that my local authority, whoever runs it—it has been run by us and by Labour over the years—retains the security of tenure for those who move into council properties unless there is an all-party consensus in a particular block that it should not be retained, for other management reasons.

Finally, I support the Housing Minister and my hon. Friend the Minister who will respond to this debate in saying that if there are people who end up with high incomes, it is wrong that as council tenants they do not pay for that property the market rent it would fetch on the open market. This is a difficult area. The Housing Minister has said that there should be a threshold of £100,000, which I support; that is an easy starting place. I cannot justify saying to my constituents who are knocking on my surgery door that there is not a place for them because someone with a family income of £50,000, £60,000, £70,000, £80,000, £90,000 or £100,000 is sitting in a council property paying a council house rent. We have to deal with that issue, because that is an inequity that was never intended to exist. These homes were intended to be for people on low incomes who could not afford to go elsewhere. At the moment, we have people in them who are on much higher incomes. I do not suggest that those people should be evicted—that would be inappropriate, because we want mixed communities—but they should pay the full whack.

In conclusion, I say to my hon. Friend the Minister that I am grateful for many of the initiatives that have been introduced, particularly the new homes bonus, which allows all authorities—including mine—to spend money on housing. I understand the difficulties that the Department for Communities and Local Government has had in trying to win the battle to get the money that it needs. I am pleased that the new affordable renting system does not mean that the properties concerned will all be at 80% of market rents; in London, I think the average is 64% of market rents, which is better than 80% of market rents. We must try to ensure that we have the maximum number of properties at lower rather than higher rents.

I will continue to urge my hon. Friend the Minister—as I know he would wish me to do—to argue within his Department and within Government as a whole that we should have more local authority housing wherever possible, or that we should give councils the freedom to build it, because we have a huge unmet need for such housing in many parts of our country. We need more local housing that is not all immediately swallowed up by being bought up and disappearing from the social housing sector. I hope that message is heard loud and clear within Government, and I hope that my colleagues within Government are arguing very strongly for it, so that at the end of five years the coalition can have a better record on housing than that of the Governments that have gone before; I know that that is my hon. Friend’s aspiration.