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Westminster Hall

Wednesday 24 January 2001

[Mr. Michael Lord in the Chair]

Manufacturing (North)

Motion made, and Question proposed, That the sitting be now adjourned--[Mr. Kevin Hughes.]

9.30 am

Dr. Ashok Kumar (Middlesbrough, South and Cleveland, East): I have been trying to secure this debate for two months, partly because of the recent newspaper headlines about Nissan and the future of Corus, and partly because I am passionate about manufacturing and strongly believe that it is the only sound way to success for our economy,

In our region, manufacturing is bigger than merely Nissan and Corus, important though they are to Wearside and Teesside. The north-east was built on manufacturing. Our existing technical strengths are built on the historic foundations of shipbuilding, iron and steel making, heavy chemicals, mining technology and bridge building, but the world has changed and our region along with it. Change often means an uphill struggle, and we are having such a struggle at the moment. As the commentator William Keegan said in The Observer last Sunday:

Our region is still heavily dependent on manufacturing, because it makes up a larger part of our economic base than it does in other regions and involves a larger percentage of the labour force than in any other region of the United Kingdom--174,000 people in all, which is a fifth of all people employed in the region--and also because most of our manufacturing firms are in specific sectors with specific skill needs.

What are those sectors? Mechanical engineering employs about 45,000 people. It includes the steel industry, which is centred on Teesside and Hartlepool, and the shipbuilding and offshore yards along the Tyne, Wear and Tees. We have the automotive industry, which, as I said, is more than Nissan--the sector is made up of some 235 firms employing up to 40,000 workers. Nissan is obviously the focus, but it is not generally realised that the north-east has a large automotive products industry selling throughout the UK and the globe.

We also have the chemical industry, which is primarily located in my area of Teesside and employs about 18,000 people, who were once mainly employed by ICI, but who now work for a large number of chemical multinationals, many of them household names such as DuPont, BASF and Dow, which bought into the divested ICI bulk businesses. We also have electronics, which employed 15,000 people in the mid-1990s. Since then, employment has increased, despite the loss of Siemens and Fujitsu. Much of that increase has been in mass production and assembly functions. A number of Pacific rim companies have also located in the north-east. All those sectors have managers and workers with skill, talent and initiative.

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We need to take account of certain factors when we consider long-term plans to improve manufacturing competitiveness. Studies of mechanical engineering show that that area of technology is divided into two broad sub-sectors. One is based on knowledge-intensive, high-technology processes and applications, which feed into global supply chains. That group is characterised by the steel industry and the more advanced engineering companies. The other is based on a large number of smaller, less-advanced employers that undertake fabrication, mechanical engineering and associated installation and plant services. The north is home to both sub-sectors, but the second is the bigger employer.

The biggest threat is to our steel industry, and I speak with passion as I was a British Steel employee before I came to Parliament. We have no clear knowledge of the intentions of Corus, but the omens for both south Wales and Teesside are not good. There has been speculation in the newspapers that as many as 7,000 steel worker redundancies will be announced in the next week. I urge the Minister and the Government to do everything possible to assist in minimising the number of redundancies. They could leave a devastating hole in the economy of Teesside, as well as heaping pain and misery on the individuals affected and their families. It has been estimated that redundancies would also result in a loss of gross domestic product to the area, at a cost of £28,000 per annum for each job lost, plus £8,150 per annum per job lost as a result of loss of tax and payment of benefits. There are also the massive costs of cleaning up and decontaminating such heavily used sites, which have seen nearly a century of steel making.

I recognise that the Government, and certainly the Secretary of State for Trade and Industry, have given us support and help on Teesside when we needed it--when job losses were announced last year--through the setting up of a rapid reaction taskforce that embraces the local authority, the Department of Trade and Industry and the Department for Education and Employment, and agencies such as the Employment Service and the local training and enterprise council. As a Member of Parliament, I am also involved.

What a contrast that is with the world before 1997, when the previous Government were utterly indifferent as millions of jobs were lost throughout the country--[Interruption.] The hon. Member for South-West Hertfordshire (Mr. Page) laughs.

Mr. Richard Page (South-West Hertfordshire): I have to laugh because the hon. Member is giving us the propaganda rather than the facts. If he studies manufacturing industry in this country, he will find that from 1993 to 1997 the numbers employed increased, year after year, for the first time in decades. It is only since 1997 that they have started to go down again. If the hon. Gentleman is referring to the 1980s, his argument may have some validity, but if he is talking about the 1990s, he has got it wrong.

Dr. Kumar : I merely refer the hon. Gentleman to what William Keegan said, which is that the manufacturing sector has gone up by 2.2 per cent. He is a well-respected commentator.

The threats still remain to jobs in manufacturing--in mining, shipbuilding, engineering and car making. Manufacturing is vital to the working of a modern

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economy and must be viewed by the Government as such. It is too vital to become merely the plaything of City institutions and day traders looking for easy profits.

The automotive industry arose on the back of the original Nissan investment. The presence of that world-class employer on our doorstep has meant that suppliers know what quality is required of them. However, the movement of motor manufacturing across European borders, the loss of critical customers such as Ford and Vauxhall and the slimming down of Longbridge and Cowley will mean that competition will be tougher for their former suppliers.

I know from my experience as the chairman of the all-party industry group that the chemical industry is also in a period of rapid change. It is not a sunset industry: it powers material manufacture, backs up the pharmaceuticals industry and is vital to the manufacture of food and drink. Issues such as higher energy costs, less-developed logistics and a fragmented world market with different systems of regulation mean that traditional bulk production is under pressure. Chemical companies also have to face new competition from new facilities in south-east Asia and Latin America, which can draw on a pool of low-cost labour.

The electronics sector is also under intense pressure. The mass-market industries, especially those manufacturing domestic goods, are extremely sensitive to new products, innovation, price and marketing strategies. In order to remain competitive, plants must undertake continual reinvestment, retooling and retraining.

The north-east electronics industry is still a branch of plant operation, which means that most companies have few engineers, technologists, managers and other professionals--people able to develop new ideas and innovation into world-beating products that could be made in the north-east. The market factors with which northern manufacturers now have to cope are increasingly severe. That on its own would be enough, but northern manufacturers have other worries. They are concerned about a growing north-south divide in manufacturing with high-tech sectors increasingly investing in the south of England, and the north being seen as lagging behind when it comes to high-tech investment. Figures from the northern TUC are sobering. They show that the south-east gained 6,000 manufacturing jobs between 1998 and 2000, whereas the north-east lost 1,500 similar jobs over the same period.

How are we in the north-east going to reverse this decline? How much of the solution is in our hands and within our power, and how much is within the power of central Government? I recognise that central and regional government will have to co-operate to get the best deals for our communities and for our local businesses.

I applaud the establishment of the regional development agency, One NorthEast, which is the most integrated approach to industrial reinvigoration that we have seen. I applaud the formation of regional and sub-regional structures to integrate the planning, transportation and development functions essential to greater competitiveness and growth. That has led to a

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world that is much changed since 1997. There are more people in work than ever before. Unlike the previous Government's training schemes, the new deal is more than a revolving door for unemployed people. New public spending measures have pump-primed our schools and our colleges, and have helped universities to produce better-qualified people to meet the needs of industries that are having to compete on a global footing.

However, the scale of the downturn in manufacturing employment is such that other solutions have to be devised with the blessing and backing of central Government. There should be no shame in that. It is not a matter of reversing pledges, but merely of recognising that the world has changed and that we have to adapt policies to meet new circumstances. Above all, we must recognise the changing balance of trade with mainland Europe--the biggest export area of our manufacturing firms.

There is no time in this debate to discuss our entry into the euro. The need to ensure that we have some price comparability in selling finished goods on the European mainland has to be recognised. We must enter into the single currency zone as soon as possible. I fully support the Government's commitment to a referendum, only after the key economic tests have been satisfied. We must also take heed of the doctor's test of the good health on our manufacturing industry. At present, that test will prove that it is suffering from a rapidly worsening attack of economic anaemia.

Other measures are needed. I am aware from reports that my right hon. Friend the Prime Minister is contemplating a post-election shake-up of the Cabinet structures. One reform that could be instituted quickly is the designation of a Minister for Manufacturing, who could champion manufacturing, just as small businesses, universities and farmers have ministerial champions--a minister whose role should be to ensure that a framework of incentives and rewards is developed to encourage entrepreneurs and to ensure that the technologies developed can be exploited with incentives. That suggestion came from Sir Ken Jackson, the general secretary of my own trade union, the Amalgamated Engineering and Electrical Union, whose knowledge of manufacturing should not be underestimated. He is someone who should be listened to, and I know that the Prime Minister takes his views on board.

We also need a domestic policy for growth that recognises that manufacturing can be successful only if there is a customer base for its products. The state itself is one of those customers. When we examine the matrix of economic indicators available to us, we should pay attention to the power of the state as an agency that can create growth. That can be done in many ways: by infrastructure projects, such as new road and new mass transit schemes, an example of which is the metro extension to Sunderland; by considering carefully the procurement budgets for individual spending Departments; by speeding up the reclamation of derelict industrial sites that still disfigure too many parts of the north-east; by working with the oil and gas industry to try to speed up the opening of new oil and gas field developments in the North sea and Atlantic shelf; and by helping with a programme of scrapping older, less environmentally friendly North sea platforms at the end of their working life.

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New private sector infrastructure projects could be speeded up by a more targeted use of state aid, and by speeding up the planning system, so that a project deemed to be of national or regional significance could have a quicker planning route. We could even look to climate change as a vehicle for helping manufacturing. Flood defences work often needs the civil engineering skills associated with building North sea structures. We could examine how to create a water grid of pipelines linking the saturated north with the drier south, which would provide a massive fillip for the north-east steel industry.

We must begin to put flesh on the bones of the cluster concept. Clusters are rapidly assuming a new status as a way of encouraging upskilling, investment and a virtuous circle of improvement and partnership. Partnership leads to greater growth, productivity and wealth creation. Our RDA has championed the idea of clusters, which I welcome. Clusters should be encouraged in certain areas to allow the free flow of collaboration between companies engaged in the same area of business and on joint marketing, research and development, blue sky research and training. The establishment of clusters in specific areas, such as chemicals, food and drink and marine technology, is well advanced. Indeed, I attended a debate in Westminster Hall only a few months ago on a chemical cluster for Teesside.

The Government must make an explicit commitment to clusters, especially to the chemical cluster, by providing physical incentives, by the fine tuning of the national and regional grant regime, and by underwriting partnerships between manufacturers and universities. I recognise that the new Learning and Skills Council and the Small Business Service will play an important part in that, and I should be interested to know whether the Minister can give us any information on progress so far.

The north-east has great potential, and the opportunities are limitless. Therefore, I merely say the obvious--that manufacturing is very important for our region.

9.49 am

Mr. Derek Foster (Bishop Auckland): I congratulate my hon. Friend the Member for Middlesbrough, South and Cleveland, East (Mr. Kumar) on securing the debate. The subject of manufacturing industry in the north-east is close to his heart, and he has spoken--both inside and outside this Chamber--passionately and consistently on that matter since he was elected in 1997. My hon. Friend displays considerable courage in doing so, because we would rather not hear critical remarks that need to be made about our Government.

Over the past four years, the Government have made enormous progress in pursuing their macro and micro-policies on manufacturing. The emphasis has been on research and development, innovation and the spin-off from universities acting together as a knowledge base--jobs can be created in university engineering departments and high technology departments--and that is all now beginning to come together. Universities in the north-east are outstanding, and are now acting together far more effectively than in the past. In the next decade, we anticipate even more spin-off into our manufacturing industry.

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Many people say that the north-east does not have the skills to cope with modern developments. That may, sadly, be true in that we still have the poorest educational performance of any English region at all levels. That has been the case for the 30 years that I have been involved in politics, despite the efforts of all Governments to rectify it. Part of the problem is that not enough jobs are available, so there is no incentive for people to acquire skills at the higher educational level. Economic growth and the development of talent must go hand in hand. With mass unemployment, people's skills and employability are all too quickly dissipated. Growth and skills must run in tandem. I congratulate the Government on recognising that and doing something about it.

The north-east is proud of its manufactories, some of which have had to struggle for years against adverse circumstances, and we have some fine examples of global players. My own constituency, for example, includes Black & Decker, Thorn Lighting and Electrolux--all those outstanding companies are within half a mile of each other in Spennymoor ward. Glaxo Smith Kline, as it is now called, employs 1,500 people at Barnard castle--it is a global player.

The north-east has always had a long tail of uncompetitive smaller companies. Our great problem is how best to dissipate best practice from the global players throughout the whole chain. We may take complaints from some of the less efficient and less competitive manufacturers with a pinch of salt--it is always possible to find staggering ways of improving competitiveness. However, when the global players complain, we know that other measures should be taken.

Recently, we have heard complaints about the high value of the pound or the low value of the euro, which led to a 30 per cent. reduction in competitiveness, most of which took place under the previous Administration. Although it may be possible for companies that are already global players to improve their competitiveness by 5, 6 or 7.5 per cent. per annum, it certainly is not possible quickly to improve competitiveness by 30 per cent., especially when the majority of our manufactures go to Europe. Companies who send their manufactures to the United States have done quite well, because the exchange rate has not been a problem, whereas those who have sent most of their manufactures to Europe have experienced enormous problems because of the high value of the pound, and that even includes the global players.

The economic cognoscenti believe that there is very little that can be done about that problem. That is why the Government have preferred not to mention it too often, because the next question they are asked is what they intend to do about it. For some people, the easy answer would be to join the euro. I have been pro-European for 40 years--I was a lonely voice in the Labour party in the early years--but I have always been cautious about the single currency, and remain so. I would love us to join the euro at a rate that we could live with and at which we could prosper. If that were possible, we would do it tomorrow, and I would accept

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everything else in its wake. However, that will be hard to achieve, so we must remain cautious about that whole agenda for the time being.

Mr. A. J. Beith (Berwick-upon-Tweed): The trouble with being cautious is that it gives manufacturing industry very little hope that the situation will improve. Does the right hon. Gentleman think that the Prime Minister may have been rather less cautious in his conversations with Nissan, and may have wanted to stress to them that there is a prospect of Britain joining the single currency in a reasonably short time?

Mr. Foster : There may have been a window of opportunity immediately after the 1997 election to have a referendum. If we had gone into the euro at that stage, we may have avoided some of the problems that we are discussing this morning. That window was open for only a short time, and as we have lost that opportunity, entering the single currency will be one of most delicate negotiations that any future Government will face.

I am glad that mention was made of Nissan because I am enormously proud of what it has achieved. I was on the Tyne and Wear metropolitan county council in the mid 1970s when we reserved the Usworth airport for the big one. The big one was not going to be anything to do with the motor industry--that was the last thing on our minds. We did not want the motor industry to come to Tyne and Wear, but the arrival of Nissan not only created a large number of jobs, both direct and indirect, but tuned the quality of management throughout manufacturing in the north-east.

People in the north-east are ready to embrace the future and are keen to continue the improvements in productivity and quality. However, just as we begin to run the race effectively, we have to run harder to stand on the spot. That always seems to be the problem in the north-east. We have restructured our economy continually throughout the past 30 years, but we have always needed to do more and more to remain on the spot.

Mrs. Louise Ellman (Liverpool, Riverside): Does my right hon. Friend agree that one of the problems for the whole of the north is the relative absence of investment in high technologies? Is he aware that a number of the universities and businesses in the north-west have come together, as he advocated earlier, and have proposed the Casim project on the Daresbury laboratory site, which is currently being considered by the Department of Trade and Industry? Would he support that project, as he does for similar projects in the north-east?

Mr. Foster : Yes, of course. Bringing together research and development is crucial for the future of our regions. I am enormously keen for information and communication technology companies to come to the north-east, so it is rather depressing that most are going to London and the south-east and to parts of the south-west. Therefore, the north-east is falling further behind in the new economy.

I say kindly to my hon. Friend that although the Government rightly emphasise that the future largely depends on the new economy, the unintended message

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to manufacturing industry in the north-east is that it does not really matter, and that investment will go into ICT. The suggestion is that the future is with information communication technology, as if that had nothing to do with traditional manufacturing. The future for traditional manufacturing lies in the application of all these new technologies to each of their processes, so it is divisive to talk about the new economy as if we could dispense with the old economy.

I associate that view not so much with the Department of Trade and Industry, but with the Treasury--and not necessarily Treasury Ministers. I have been a Treasury watcher for 40 years, and it has always been keen on a strong pound, whatever the consequences to manufacturing industry, and has always believed that manufacturing is old hat--that view reached its peak in the days of Lord Lawson. The belief that manufacturing is of no great consequence to the nation arises from the coalition between senior Treasury officials, the Bank of England and the City, as they see all new investment going in other directions. We in the north-east want our share of ICT design and artistic developments. We want the new rapidly growing industries to come to the north-east. Part of our problem is that we can never get our share of those rapidly growing industries.

I advise my hon. Friend the Member for Middlesborough, South and Cleveland, East to resist any pressure from the Treasury suggesting that manufacturing industry is of declining importance to the nation, that its effect on our gross domestic product is diminishing and that employment in that industry is reducing. We do not need to be concerned about that. Employment in manufacturing industry is reducing because of its more efficient use of labour.

We could talk about this subject for the next three or four hours, but I shall close my remarks by urging my colleagues at the DTI to resist pressures from the financial authorities that manufacturing does not matter. It does matter. It is crucial, and we cannot prosper without it. No matter how we restructure our economy, manufacturing is important, and we want the Minister to understand that.

10.4 am

Mr. John Cummings (Easington): I am grateful for the opportunity to speak in this debate, which was successfully obtained by my hon. Friend the Member for Middlesbrough, South and Cleveland, East (Dr. Kumar). My hon. Friend has a great passion for his constituency and works tirelessly on behalf of the people whom he represents. My area resembles his, in that Easington was founded on coal. Nothing was ever developed on the Usworth site because we required coal miners. One of my predecessors, Mannie Shinwell, once said that as long as there was coal, we could forget about modern engineering plants of any size in the north-east. Mrs. Thatcher put paid to all that. An area that once had 14 coal mines no longer has any. The region has suffered a creeping paralysis over a period of about 35 years. Fortunately, the corner has been turned and that paralysis is now on hold.

There are lessons to be learned from the past, one of which is that the great strength of our area--mining and heavy engineering--was also our great weakness.

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Virtually with a stroke of a pen, 9,000 coal mining jobs were lost overnight. Coal mines will not come back and we must look to the future. That is being achieved through superb partnerships between industry, district councils, county councils, One NorthEast and the Government office for the north east, which have achieved a great deal and which are providing the necessary infrastructure in my constituency to attract future inward investors. Existing industrialists--such as Caterpillar, NSK Ball Bearings and the GT group, under the dynamic leadership of Geoff Turnbull--have given a practical expression of their faith in the area by remaining in it. They rely on the strengths of a work force who are willing to learn, re-skill, adapt and travel. My thanks go to all the industrialists in the area who have remained, through thick and thin--and there have been some very difficult times.

To attract manufacturing to the area, we need to have something on offer. That has been accomplished with the establishment of enterprise zones at Fox Cover and Dawdon, the new development on Dalton Flatts of a £37 million retail park, the reclamation of the Hawthorn mine and the new Glebe centre in Murton, which was opened on Friday by the Prime Minister. All the pieces of the jigsaw have finally been put together. It is a ringing example of what can be achieved for coalfield areas through partnership and Government initiatives.

However, while much has been accomplished, we find ourselves at a standstill. The textile industry is moving into Slovakia. NSK, which is a superb, model employer, now has a plant in Poland. The shipbuilding industry, which lies to the north of Easington, finds itself disadvantaged because hidden subsidies have allegedly been granted to foreign shipyards. In Italy, for example, shipyards are owned by municipalities, which means free rent for shipbuilding and repair.

I am not sure whether the civil servants in the Department of Trade and Industry are as assiduous as they should be in watching developments in Europe. They may wish to apply themselves to the situation in France, for example. Why do we never get French ships for repair in Britain? Why do Italians constantly undercut us? There is more to the situation than meets the eye. The DTI should follow that issue in some depth, to discover whether we are being deliberately disadvantaged.

If shipbuilding is not already in crisis, it shortly will be. The problem lies with the work force, whose average age is between 50 and 55. They are looking towards retirement. Where will we find the skills base to provide the work force, should we be successful in once again embarking on shipbuilding and continuing ship repair?

To attract industrialists and manufacturers into an area, money must be expended in rather different directions than the provision of an infrastructure and an enterprise zone. We need more money in my area to tackle deprivation. It has been recognised by the Government as the area of the greatest deprivation in the country. I do not want to talk the area down; I have never done that. I want to talk it up. But the areas of deprivation cannot be ignored. We must ultimately attract industrialists to the area. We need more than the brand new and exciting business parks such as Peterlee and Bracken hill, where several thousand jobs have been relocated into the call centre industry. There is an ideal opportunity for high-tech industry to move into the

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exciting new units adjacent to the A19. However, more money must be expended in the surrounding colliery villages, with their run-down and dilapidated housing.

We must increase funding for our schools. My right hon. Friend the Member for Bishop Auckland (Mr. Foster) mentioned the low standards of education. There are also low standards of health. The Government have recognised that, but we are still waiting for further funds to flow into the area. How on earth is it that gap funding is to be removed at perhaps the most critical time in the north-east, in the middle of the largest regeneration project? It beggars belief. Have civil servants and Ministers fought tenaciously enough to retain gap funding?

My basic message is that five years ago there was a feeling of helplessness and hopelessness in the area. We were still reeling from the loss of more than 9,000 jobs. Well, we have virtually pulled ourselves together, but in order to help ourselves, we must receive help from the Government. It should be looked upon not as a handout, but as an investment for the future--a true, gilt-edged, solid investment. Those are the messages that I want the Minister to take back to the Department and his officials. All is not lost. I am not painting a rosy picture. An immense amount has been achieved over the last three years, but much more is to be achieved, provided the Government direct the correct stimulus and resources into the area.

10.14 am

Mr. A. J. Beith (Berwick-upon-Tweed): I am glad that we are having this debate. I congratulate the hon. Member for Middlesbrough, South and Cleveland, East (Dr. Kumar) on introducing it so thoroughly and covering so many topics. The hon. Member for Easington (Mr. Cummings) made a heartfelt plea, and I echo much of what he said as, like him, I represent an area that had many coal mines--it still has one--and it shares some of the same problems. The right hon. Member for Bishop Auckland (Mr. Foster) also made some interesting points. As one would expect, Labour Members, although constructively supporting the Government, wish to draw attention to what needs to be done to help our region.

There are advantages for manufacturing industry in the region and scope for further development. There is space for sites, and it is an attractive area in which to live. We have good labour relations and low labour costs--that is the other side of the low-wages coin--and low housing costs. There are abundant water supplies. As the right hon. Member for Bishop Auckland said, there are numerous universities, most of which have a long tradition of working closely with manufacturing industry. Some of the universities were founded on their association with manufacturing industry.

However, there are some serious weaknesses, or the figures would not appear so alarming. The gross domestic product per head is 15 per cent. below the United Kingdom mean; the density of businesses by population is 40 per cent. below the UK mean; new VAT registrations by population are 50 per cent. below the UK figure; employment in high-tech business is 10 per cent. below the UK figure; the business spend on research and development by regional GDP is 33 per cent. below that in the UK; average earnings for

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full-time employees are 11 per cent. below the UK mean; and the proportion of graduates in the work force is 32 per cent. below the UK mean.

Those are worrying figures. Admittedly, they are 1997 statistics, but the Government do not claim that there has been a substantial change in the interim, and yet manufacturing is crucial to the north-east. It provides 21.3 per cent. of employment in the region, compared with 16 per cent. in the country as a whole. Despite the decline, it is still a much larger element in the jobs of our region than in those in other parts of the country. It includes major international companies, such as Proctor and Gamble, Nissan and Alcan, and smaller specialised exporters, such as the House of Hardy in my constituency, which exports the highest quality fishing tackle all over the world.

However, only two of the top 10 manufacturers who provide 10 per cent. of all manufacturing jobs in the region have their headquarters in the area, and the threat of losing those companies whose headquarters are elsewhere is pretty frightening. My constituency lost Pringles, the knitwear manufacturer, and Polychrome--both companies with headquarters outside the region that decided to move their manufacturing activities elsewhere.

The small and medium-size business sector is most important, as the Government acknowledge. The right hon. Member for Bishop Auckland expressed his anxiety about the availability of skills, resources, and expertise to sharpen competitiveness. A great many people have achieved an enormous amount in our smaller businesses by innovation and sheer hard work, but they often need help in keeping up with the increase in competitiveness that is necessary even to cope with the exchange rate problem. Business organisations have drawn my attention to that problem.

A very good organisation called Manufacturing Challenge, which brings together large and small business to explore relevant issues, was started in the region by my constituent Mr. Karl Watkin. It has drawn attention to the shortage of resources and expertise to promote competitiveness in the SME sector.

I quote the business view of major international companies:

They refer to the "blue lines on the atlas" position; manufacturers can see that the lines showing the motorways do not extend into our region. They continue:

The retention of international businesses is crucial to the regional economy. Infrastructure is of fundamental importance to the continuance of manufacturing industry in our region, and action is needed. If the region had more power to decide how resources are used, it would help us to tackle those infrastructure problems. We are strongly committed to a regional assembly, and

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we want the Government to keep moving on that. We do not want just a talking shop but a body, like the Scottish Parliament, that has the capacity to make resource decisions within the region in the light of the needs of regional industry and business. That is why fairer funding is important.

It is no accident that several local authorities in the region are among those worst hit by the standard spending assessment system with regard to educational spending. It is increasingly recognised that the absence of a mechanism like the Barnett formula, which has helped Scotland so much, means that the region does not have the public expenditure per head to improve infrastructure to the same level as in similar parts of Scotland with similar problems.

The exchange rate problem, and the uncertainty over Britain's future position on the euro, is of crucial importance to manufacturing industry in its exports to Europe. Our region depends on the manufacturing industry, so it is disproportionately affected. International companies, such as Corus and, crucially, Nissan, are affected by those problems and that uncertainty. Will the right hon. Member for Bishop Auckland tell me what he thinks that the Prime Minister really said to Nissan--in addition to the discussion of regional aid--about Britain's future in the euro? Every car that Nissan exports to Europe from Sunderland is exported at a loss, because of the exchange rate problem and the sheer unpredictability of the exchange rate--not because the company is not an efficient producer. In fact, the company has set such a good example that it has brought great efficiency throughout the region.

Mr. Jim Cousins (Newcastle upon Tyne, Central): Does the right hon. Gentleman think that the Prime Minister should have told Nissan that we would lock on to the euro at the prevailing exchange rates?

Mr. Beith : I am sure that the Prime Minister did not say that. I suspect that he told Nissan that, if he were re-elected as Prime Minister, there would be an early referendum, and that the Government would try to reach the position in which we could join.

Given that discounting takes place in international markets, one of the factors at play is whether people believe that Britain is likely to join the euro. A commitment not to join the euro for the next five years--the duration of the next Parliament--would not help to get our currency closer in exchange rate terms or give industry the confidence to continue to develop manufacturing in our region. Nevertheless, that is the position taken by the Conservative party, although it is is a little cagier about the matter in the region. I received a leaflet through my door that said that the Conservative party's position, unlike that of the Liberal Democrats, was that we should join the euro only when it was in Britain's interests to do so. I entirely agree with that--I sign up to that statement. However, if we can get to an exchange rate level that is sustainable for us in the euro, it will certainly be in Britain's interests to join, and very much against them to rule out membership, as the Conservative party has done.

The Conservative party may say that we should never join the euro out of principle, but it must realise what a big sacrifice our region would have to make. Anyone

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who has the interests of the region's industry at heart must realise how important it is, and that we should attempt to reach a point at which Britain can enter the euro zone so as to give our industry a chance to compete and ensure that international industry remains within our region.

Smaller and medium-sized enterprises depend to a larger extent than the biggest businesses on support systems. Business men have sometimes expressed their dissatisfaction to me about the support systems for smaller business. Between 1997 and 1999, approximately £80 million--one third of the region's total allocation of European structural funds--was directed towards the business support community to provide innovation and technology services. In addition, the training and enterprise councils and business links, co-funded by European regional development fund cash, spent a further £4.5 million. Some £100 million has been spent on publicly funded innovation and technology support. That is a lot of money, so it is perhaps surprising that there has been so much criticism about the outcome.

The figures suggest that that funding is not achieving the desired results. When I ask why, business men tell me that too many programmes and projects have focused on the transmission of technology rather than preparing the ground for its reception and absorption. Too much emphasis has been placed on inward investment from other countries and external businesses, with little attention paid to the growth and retention of the existing stock of businesses. It is largely left to service providers to determine the detail of what services are needed by industry.

The perception in business is that the cash is used to look after the providers, not the people whom they are supposed to be supporting--that is, those in business. The providers are not driven by the needs of business. That is the view of many people who want to use the support facilities. Business representatives often express that point of view forcefully to me and to the other Members who represent Northumberland constituencies.

Clearly, the debate has revealed that much should be done to strengthen manufacturing industry in the north--a region that depends on it. The Government must recognise the vital significance of manufacturing--the hon. Member for Middlesbrough, South and Cleveland, East suggested that there should be a Minister with responsibility for manufacturing, which is an idea that is worth exploring. The Government must give the regions more power to make decisions that can benefit manufacturing industry and close the infrastructure gap through fairer funding. If we are to get a skilled and adaptable labour force, they must also tackle the inequalities in education. They must listen to what business representatives say about the support mechanisms for business and respond to those views and be clear about Britain's need to enter the euro as soon as we can get terms and an exchange rate that makes it right and sustainable to do so--they should take action to achieve that outcome.

10.26 am

Mr. Richard Page (South-West Hertfordshire): I add my congratulations to the hon. Member for Middlesbrough, South and Cleveland, East (Dr. Kumar)

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on initiating this debate--the more the merrier, because in many ways this debate adds to one in this Chamber two weeks ago on the same subject. It does no harm for us to hammer home the message that manufacturing matters, and I shall develop that theme.

I agree with much of what the hon. Member for Middlesbrough, South and Cleveland, East says, and I know of his enthusiasm and support for manufacturing. He has been a member of the all-party group on the chemical industry throughout the years that he has been a Member of Parliament.

This debate presages the one that will take place this afternoon in the main Chamber. I do not know whether the Minister will be replying for the Government this afternoon. If he is, he will have two speeches for the price of one. If not, he can hand it to his colleague who is winding up this afternoon's debate.

I will delicately twit the hon. Member for Middlesbrough, South and Cleveland, East. I will not call it a diatribe, but he gave us a mantra about the declining numbers employed in manufacturing industry, and said that it was all the fault of the Conservative party. I freely admit that in the 1980s the number of people employed in manufacturing fell dramatically. On the other hand, the restructuring of so many of our nationalised industries--

Mr. Derek Foster : Will the hon. Gentleman give way?

Mr. Page : After I finish my set piece I will welcome whatever the right hon. Gentleman has to say.

Nationalised industries were being run under the lunchtime directive--politicians thought that they could run businesses better than those who had spent a lifetime doing so. I am surprised that there was not an even greater shake-up.

Mr. Foster : Will the hon. Gentleman confirm that in the early 1980s, during what was dubbed the deepest recession since the war, employment did not merely fall--we lost a third of all manufacturing jobs in the north-east? In the 1990s, when we were beginning to recover, we entered the longest recession since the war and lost a further tranche. Numbers did not merely go down under the Tories, they fell dramatically.

Mr. Page : I said that in the 1980s numbers went down dramatically. It is amazing that they did not go down more. To refresh the right hon. Gentleman's memory, at the start of the 1980s, the nationalised industries in the sector were costing the taxpayer £50 million every week. After the restructuring, that sector was making contributions of £50 million a week in company and corporation tax, which was a huge turnaround and a basis on which to grow, work and develop. From 1993 to 1997, the numbers went up.

Dr. Kumar : Does the hon. Gentleman recall that when the Conservative Prime Minister, Mrs. Thatcher, visited the north-east and unemployment was mentioned, she said that people were moaning minnies? Does he agree with her that we were moaning minnies asking for jobs?

Mr. Page : Any Conservative Member of Parliament who says anything derogatory about a previous

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Conservative Prime Minister or Government treads dangerously. People always tend to ask for handouts rather than practical recovery programmes. I shall say no more.

In the United Kingdom today, we must look to the future, not over our shoulders. I am remarkably grateful to the Labour party. If inflation had not been at 26 per cent. in 1976--stagflation--with the whole country going to pieces and regarded as the sick man of Europe, I should not have been successful in a by-election in Workington, which is not exactly the home territory of the Conservative party. That shows the disillusionment that existed. Let us put all that behind us and see how to progress in future.

The present Government have been in power for nearly four years and they had 17 years in opposition to prepare for office, yet we have a serious problem of job losses in manufacturing. If necessary, I can cite the various figures that have been produced by the TUC. Mr. Edmonds said that he thought that 96,000 manufacturing jobs were lost last year. John Monks, the general secretary of the TUC, reckons that the losses this year will be in the region of 10,000 each month. I cannot see anything happening to reverse that. The Government seem almost paralysed--fixed into some jelly from which they cannot break out to develop a positive programme to move manufacturing forward.

Talk of a north-south divide is growing daily, as the facts are emerging. Total unemployment--not merely in manufacturing--in the north-west has increased for the past four months. All Confederation of British Industry surveys show a loss of confidence in industry in the northern regions.

I agree with what the hon. Member for Middlesbrough, South and Cleveland, East said about critical masses. If there is no critical mass in a sector, the consequences down the line for small businesses are serious. He said that about 235 firms in the north depended on the car industry. Which Government were responsible for introducing the Nissans and Toyotas into the north, to provide the critical mass--the cluster--and thus to provide jobs? The right hon. Gentleman made a remark about a previous Prime Minister, but she was one of the drivers for a practical solution to overcome the problems in manufacturing in the north-east. Like all right hon. and hon. Members in this Chamber, I want the critical mass and the clusters to work and to be successful.

Of course, critical mass can go the wrong way. If it gets too small, the problems are greater. It is a virtuous circle if it goes one way, and a disaster if it goes the other. One worry about Corus and our steel industry arises in the light of the actions of Ford and Vauxhall. Let us hope and pray that Nissan decides to stay in the country. Our steel consumption has decreased by about 10 per cent. in the past few years--an example of the downward spiral mentioned earlier. More steel is being used, but it is being imported from abroad in manufactured items. Once in a downward spiral, more jobs will be lost in the steel industry.

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I regret that every report that I see adds another 500 or 1,000 to the number of steel workers who may lose their jobs. Before Christmas, there was talk of around 4,000. The last figure that I saw was over 6,000. Let us pray that the figure will be lower.

Mr. Cousins : Like the hon. Gentleman, I do not underestimate the power of prayer, although I do not think that working politicians are necessarily the best people to refer to that. With regard to Nissan, does he think that the Government aid package, which has now been approved by the European Commission as consistent with its rules, is enough, not enough or too much?

Mr. Page : The hon. Gentleman puts the question in the manner of the old shaving advertisement, "Is there too much foam on my mouth, or is it just right?"

Mr. Cousins : An analogy with shaving is not really appropriate in my case.

Mr. Page : No, it is not. I was pleased that the aid package was processed, pushed and developed by the DTI much more effectively and efficiently than the Rover package. I am glad that it is in place and I hope that it will encourage the Nissan management to make that decision. Of course, we all know about the ownership of Nissan and where it may go. The aid package is a sign of the importance that the country attaches to retaining Nissan and that critical mass.

The right hon. Member for Berwick-upon-Tweed (Mr. Beith) referred to the price differential on every product that goes abroad. We know that about 75 per cent. of Nissan vehicles are exported and that the company has a turnover of about £1.2 billion. Nissan is losing about 20 per cent. on every vehicle because of the exchange rate. Therefore, no sum of money will be big enough to enable it to trade against the euro at the present rate. The package is an expression of support and confidence. Let us hope that we can run our economy with a greater and more comfortable relationship with the euro. I will return to that subject if time permits.

I agree with much that the right hon. Member for Bishop Auckland (Mr. Foster) said. He made an interesting contribution, and he is a living example of the old political adage that if one has political views and stands still long enough, the wheel will turn and eventually one will be in the mainstream thinking of one's party. There he is, right in the forefront today.

I agree with the right hon. Gentleman's comments on education. There is a story about a schoolteacher who took a class round a factory shop floor. When they got into the coach to go home, he turned to them and said "There, if you do not pass your exams, that is where you will end up working." That shows a mental attitude that I find extremely worrying--and I went to school, passed all my exams, got the standard 3 'A' levels, but decided not to go to university. I took an industrial apprenticeship and did four years as an indentured, manufacturing apprentice, so I know the importance of manufacturing. That lesson has remained with me all my life. Therefore, I am a firm and committed supporter of the importance of manufacturing to this country.

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Hon. Members may find this difficult to grasp, but I welcomed some of the Government announcements this morning. An election is coming and it is not fashionable to agree with anything that is being announced by another party, but I agreed with the Secretary of State for Education and Employment on the establishment of school courses--leading to qualifications--on manufacturing and industry. That would be a valuable lesson for school children on the importance of manufacturing, rather than the more esoteric and theoretical subjects.

I disagree with the hon. Member for Middlesbrough, South and Cleveland, East about having a Minister for Manufacturing--I thought that that was the Secretary of State for Trade and Industry. If the hon. Gentleman is calling for his right hon. Friend's removal and replacement by a Minister who will do the job properly, then we are as one, but I would say no to someone doing that job in addition to the Secretary of State.

The hon. Member for Easington (Mr. Cummings) mentioned the importance of education. He spoke about the mining industry and the necessity for change. His message is that we are not clockwork mice, who are wound up with one education or training and set loose, but when that spring winds down we do nothing else. Today, we have to be able to retrain several times because of our career structures and the fact that technology moves on--the ability to make wagon wheels today may be superfluous tomorrow.

The hon. Gentlemen briefly and quietly touched on a disaster area that is almost regarded as a secret--the textile industry. For the past few years, we have been losing thousands of jobs every year in that industry. The figure is now well over 100,000 and has been exacerbated by the decision of Marks and Spencer to start sourcing abroad. That brings me back--a slight variation on a theme--to the importance of clusters and critical masses of sources on which all small businesses can run.

As I said in this Chamber a couple of weeks ago, I find the Government guilty on manufacturing--not of persecuting the sector directly, but of indifference and of abandoning it. Three or four hammer blows are hurting manufacturing. The first is the climate change levy, which is going to hit the sector hard. I will not ask the hon. Member for Middlesbrough, South and Cleveland, East, who instigated this debate, to comment on that subject because I know his views only too well. When the Conservative party sweeps to power in a few weeks at the next election, we will abandon that levy. We will take that burden from manufacturing to give it a chance to grow.

The right hon. Member for Berwick-upon-Tweed mentioned the price differential between the pound and the euro, and how it feeds through and hurts our industry. Frankly, while the fiscal policy of our Chancellor of the Exchequer is to spend more money than we are earning, I cannot see how the Monetary Policy Committee can do anything but keep interest rates higher than they need to be. As a result, we cannot get anywhere near parity with the euro to take the burdens and pressures off our manufacturers, who are trying to sell their products but suffer from the huge differential due to the exchange rate.

The Government came to power saying that they would do much to remove the pressure and pain of regulation, yet over the years we have had record

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numbers of statutory instruments. Regulations pile up year on year. In 1999, we broke the record with 3,700 plus, and I am told that last year we went through even that barrier.

I congratulate the hon. Member for Middlesbrough, South and Cleveland, East on introducing this debate on manufacturing. It does matter, and we must keep on raising the issue until the burdens are removed and our manufacturers are given the proverbial level playing field on which to compete.

10.45 am

The Minister for Competitiveness (Mr. Alan Johnson) : I, too, apply for membership of the appreciation society for my hon. Friend the Member for Middlesbrough, South and Cleveland, East (Dr. Kumar), who has been a tireless campaigner on behalf of his constituents and the chemical and steel industries. This has been an important and excellent debate. There will probably be more blood and thunder this afternoon, but thoughtful contributions have been made in this debate, and the tone set by my hon. Friend in his opening speech will generate a lot more light, if not as much heat, in the debate generally.

I am pleased that hon. Members who represent the north-east are present, reflecting the importance of the issue in that region. My hon. Friends the Members for Liverpool, Riverside (Mrs. Ellman), for Newcastle upon Tyne, Central (Mr. Cousins) and for Hamilton, South (Mr. Tynan)--whose constituency could be described as being in the north, rather than the north-east--have also been present. In the short time available, I shall do my best to respond to individual contributions.

The hon. Member for South-West Hertfordshire (Mr. Page) was right. On 10 January we had a debate in this Chamber on the steel industry. This is a wider debate, but as I said in the previous debate on the Government's behalf, manufacturing matters. Hon. Members on both sides of the Chamber are right to say that manufacturers want to hear that message continually from Government. I do not think that we can say it often enough. This debate helps to reinforce the fact that manufacturing is a key part of the economy. It makes up about one fifth of our national income and directly employs about 4 million people.

The Foresight manufacturing report was commissioned and funded by the Department of Trade and Industry to look at manufacturing in 20 years' time. It was published last month and concluded that manufacturing would remain of major importance to the United Kingdom. The report also acknowledges that much remains to be done to secure the UK's position in what will be a European manufacturing competition, but that the UK can succeed.

Hon. Members have raised many crucial issues that we need to address. I am not here to say that the Government have done everything that we need to do on manufacturing in the last three and a half years, and everything is hunky-dory. There are problems that need to be addressed, but I have serious disagreements with the hon. Member for South-West Hertfordshire, which I shall deal with in a moment.

This is a period of major business change and restructuring. All sectors must adapt, and UK manufacturers have a crucial role to play in the

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knowledge-driven economy. My right hon. Friend the Member for Bishop Auckland (Mr. Foster) emphasised the point that this country does not have two types of economy: the new economy and the old, metal-bashing economy. We in government talk all the time about the knowledge-driven economy. I organised a conference on behalf of my right hon. Friend the Prime Minister last February to make that point. It is a matter of harnessing new developments and technologies to traditional industries such as steel, chemicals and the automotive industry. Anyone who walks round a steel plant can see that the knowledge-driven economy is as much about steel as it is about any other industry. We must support manufacturing by providing a stable macro-economic framework.

There has been a lot of talk this morning about the contribution of trade unions. In my time as a Minister with responsibility for an industry with which I had not traditionally been involved, I have been constantly impressed by the constructive approach of trade unions--particularly the Amalgamated Engineering and Electrical Union, the Manufacturing Science and Finance Union and the Transport and General Workers Union--in every sector of manufacturing.

What is the business world saying? In its December report on manufacturing, the Confederation of British Industry said:

That is the prime responsibility of any Government. We also need to support manufacturing by investing in education and skills, investing in Britain's knowledge base, ensuring a decent infrastructure, and helping business to boost productivity and secure effective competition. We need to support business by creating a culture in which enterprise can flourish. All those points have been touched on by hon. Members in this debate.

The manufacturing sector has faced--and is still facing--serious challenges. Some parts of the sector are in the middle of a period of great uncertainty, primarily as a consequence of the march of globalisation. Many sectors of manufacturing are undergoing major restructuring. Nowhere is that more apparent than in the steel, automotive and textile industries.

My hon. Friend the Member for Middlesbrough, South and Cleveland, East is unfortunately only too well aware of the massive problems facing the steel industry--which are of particular concern at this time. That issue was discussed in detail a few weeks ago. The Government were deeply concerned about the redundancies announced by Corus last year, but we are playing our part in helping those workers affected. We await further announcements from Corus, following their statement on 5 December, but I can assure hon. Members that DTI Ministers and the National Assembly for Wales have, almost daily, met representatives from Corus at every level to establish whether the Government can help the situation, and ensure a constructive outcome to the current review.

Some companies in the automotive sector have experienced serious problems in the past few months. The most prominent company mentioned in the debate

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was Nissan, which is central to the north-east, and the most productive car plant in Europe. We wait in the hope that the plant will receive the go-ahead to produce the next generation Micra. I know that it has been well publicised, especially in the north-east, that the Government have offered up to £40 million of regional selective assistance. I am pleased that the European Union, having carefully considered the terms of the offer, has given it the go-ahead. It is now a matter for the Nissan board, and we await their decision, which I think is imminent.

It is beyond question that the numbers employed in manufacturing have fallen in this country, but there has been a similar decline in all other G7 countries. We estimate that, since 1997, 250,000 jobs have been lost in manufacturing. By comparison, under the previous Administration, from 1979 to 1997 the figure was 150,000 jobs lost each year in manufacturing. That was not decimation--decimation is one in 10. As my right hon. Friend the Member for Bishop Auckland said, that was far worse than decimation.

Overall unemployment is falling in all parts of the country. Indeed, the most recent figures confirm that not only is unemployment falling nationally, it is falling noticeably in the north-east. The hon. Member for South-West Hertfordshire mentioned the north-west. I do not have the figures available--I doubt the accuracy of his figures--but we will look into the point that he raised. In the north-east, the number of unemployed is dropping, and the number in employment is rising. According to the figures, for the first time, the north-east is closing the earnings gap and the gap in employment prospects with the rest of the country.

The Secretary of State for Trade and Industry made an important announcement yesterday on the regional innovation fund. That fund plays a small part in helping the process of restructuring. Regions undergoing manufacturing restructuring will particularly benefit from the new fund. Previously, it was calculated on a flat rate across the country, but it is now being calculated so as to put more resources into areas such as the north-east and my own region of Yorkshire and Humberside.

It is impossible to talk about manufacturing without making reference to the strength of the economy. We recognise the problem that the weak euro causes some exporters, but things have picked up recently as the euro has strengthened against the pound. This is a genuine issue of debate between us and the Liberal Democrats, although not the Conservatives. Many companies, such as Nissan and Toyota, are keen to know that the options are being kept open for membership of the single currency.

The hon. Member for South-West Hertfordshire represents a party that would close those options and see significant investment in this country disappear overnight. We believe that the best contribution that the Government can make is to secure long-term economic stability based on low inflation and sound finances. We have had a growth record of 2.7 per cent. since the election compared with only 2 per cent. between 1979 and 1997. Under the previous Government, we had the worst record on economic growth of any member country of the Organisation for Economic Co-operation and Development since the second world war.

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The period 1999-2000 was outstanding for attracting inward investment. The right hon. Member for Berwick-upon-Tweed referred to the problems that overseas countries face when they look at a map of the UK. We are beating the world on inward investment. We attracted 757 inward investment projects in 1999-2000, 40 per cent. of which were in the manufacturing sector and they created 52,700 new jobs.

Those are the points that I need to make on behalf of the Government about the macro-economic climate. I turn now to the individual problems and points raised in the debate. I shall return to the chemicals sector if I have a few minutes at the end. My hon. Friend the Member for Middlesbrough, South and Cleveland, East wanted a Minister for Manufacturing. I could describe myself as that, but the Foresight report proposed something slightly different. It suggested:

The Government are considering that proposal, but we have already set up the ministerial group on manufacturing, and its first meeting is due shortly. It was initiated by my right hon. Friend the Secretary of State and will involve Ministers from every Department, including the Treasury and the devolved Administrations. That development may meet my hon. Friend's request.

My right hon. Friend the Member for Bishop Auckland, with the benefit of his wide and long experience, was right to stress the point about the new economy and the old economy and the need to invest in research and development, innovation, skills and training and the infrastructure. I entirely agree with that.

My hon. Friend the Member for Easington made some interesting points about the background of areas such as the north-east. I know from my own experience in the fishing industry in Hull how that affects education in the city. When large numbers of jobs were available for which no qualifications were necessary, the whole education system tended to be of secondary importance. That must now be built up. A lot more work is needed in the north-east, Yorkshire and Humberside. My hon. Friend also mentioned the textile industry, and made a specific point about shipbuilding, ship repair and hidden subsidies. We are considering those issues closely. I remind hon. Members that, for the first time in the history of this maritime nation, we have brought the industry, the unions and the Government together in the shipbuilding forum, which is doing much good work.

I had much to say about chemicals, which was a specific problem that my hon. Friend the Member for Middlesbrough, South and Cleveland, East raised, and about the clusters initiative, which is being taken forward. Perhaps I can talk to him outside the Chamber on that. I congratulate him on instigating an important, intelligent and constructive debate. Over the coming weeks and months, the Government will consider carefully the points that he raised, and those of other right hon. and hon. Members.

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