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I wish to conclude by discussing some of the other issues that the Government now have to deal with. These are major issues that we have inherited and where major policy is required in order to strengthen growth. The first issue is trade. That is fundamental to recovery, yet does not even merit a word in the Opposition's long motion. Do they not understand its importance? In the next few days a trade White Paper will: set out a new approach to the Export Credits Guarantee Department, a largely moribund organisation to which we are giving a new suite of products; refocus the activities of UK Trade & Investment; and stress the importance that we attach-I am personally involved in this-to trade liberalisation within the single market, in bilateral agreements with India, Brazil and the European Union, and through multilateral trade.
One of the things that we do, and I do-the Prime Minister has given his personal leadership on this-is ensure that Ministers spend a lot of their time attracting inward investment and opening up the big emerging markets that will be crucial to our growth. The right hon. Member for Southampton, Itchen asked what I had been doing in the past few weeks and months. Most recently I have been to India twice; I have also visited China, Brazil and Russia trying to open up markets and attract inward investment that will provide the growth and the jobs of the future, many of which are now materialising.
Vince Cable: I shall give way in a moment. The factually incorrect reference is to tax revenue, because in fact the banking levy will result in the Government raising three to four times as much tax revenue from the banks as was going to be raised by the one-off profits levy last year, and that is excluding the effects of getting the major banks to comply with anti-avoidance procedures; the previous Government completely ignored that. There is an issue to address-I am sure that my hon. Friend the Member for Witham (Priti Patel) is intervening to tell me about it-concerning medium-sized and small companies that cannot attract bank lending. That serious problem is continuing because of the massive deleveraging taking place in the banking system. We have extended the system of bank guarantees. We now have a fund of £2 billion, and that process will continue. The Chancellor and I are personally negotiating with the banks to ensure that we deliver a substantially improved flow of funding to viable British companies.
Priti Patel: I have previously raised with the Secretary of State the horrendous time that my constituent, the chocolate maker Amelia Rope, has had in getting finance for her business so that she can make even more of her outstanding chocolate bars. Will the Secretary of State comment further on what he is doing to get more finance to businesses such as hers so that they can thrive and prosper and start doing more trade internationally?
I know of the hon. Lady's frustration regarding this particular company and the banks, and I, or the relevant Minister of State, will be happy to meet her and the banks if that will help to get a proper
evaluation of what is happening there. One development in that area is that a bank task force has been established, which will have a proper system of investigating complaints when banks behave unreasonably. I am very happy to take her through that, to meet her and to try to expedite that particular business transaction.
Geoffrey Clifton-Brown (The Cotswolds) (Con): I congratulate my right hon. Friend on what he is doing to increase trade in this country, because the one way that we can help small businesses to grow is through trade. Will he commit to providing more help for small and medium-sized businesses to trade not only with north America and Europe but in the more difficult markets of Asia?
There are many areas in which we have improved, and are improving, policy, but our overriding concern, over which the right hon. Member for Southampton, Itchen and his colleagues seem to have a serious amnesia problem, is sorting out the underlying problem of the public finances. That process will continue for several years. It is worth quoting from an OECD peer group of government that has been looking at our progress. Last week the OECD's secretary-general said:
"dealing with the deficit is the best way to prepare the ground for growth in the future. In fact, if you don't deal with the deficit you can be assured that there will not be growth because confidence will not recover."
That has been the central preoccupation of Government policy. It is painful and difficult but we are going to persist with it, and for that reason we will succeed in restoring stable and balanced growth to the British economy.
Mr Adrian Bailey (West Bromwich West) (Lab/Co-op): Let me start by saying that, on a personal level, I know from my discussions with Ministers that they are personally committed to the growth agenda. My reason for speaking in this debate is that I feel that they have failed to get their personal priorities and commitment translated across the rest of Government policy. Current Government policy on the economy and growth is politically driven and fundamentally economically flawed. Above all-even if one does not accept those first two premises-it is totally incoherent in its application.
"But my argument this morning is that the Government has not been nearly so consistent and focussed when it comes to policies that support growth. It's failed so far to articulate in big picture terms its vision of what the UK economy might become under its stewardship."
"And it's taken a series of policy initiatives for political reasons, apparently careless of the damage that they might do to business and to job creation."
We must emphasise the importance of job creation and growth in dealing with the deficit. Mr Lambert pointed out in the same speech that the deficit was partly a result of public spending last year being up by 3% from 2008, but was, above all, because tax receipts were down by 13%. One would reasonably expect, in a policy designed to eliminate the deficit, that there would be a balance of measures designed to cut public spending and get economic growth, but what we have had are measures designed simply to cut public spending and not to get economic growth.
Mr Sam Gyimah (East Surrey) (Con): The hon. Gentleman says that our policies are not designed to promote economic growth, but what about our tax policy, which will make us one of the lowest-taxed countries in the G7? Will that not generate economic growth?
Mr Bailey: I would love to talk about tax policy such as the VAT rise that is cutting demand, particularly in the construction industry, in which 7,500 people are going to be made unemployed as a number of businesses go down. I could go on for a very long time about the Government's tax policy. Corporation tax cuts will benefit the rich-[Hon. Members: "Oh, come on!"] They will benefit the banking community and those within it, but I want to see an increase in capital allowances, which is what the manufacturing sector wants to enable investment to take place. However, I shall move on.
Let us consider the financial implications of economic growth for tax receipts. A 1% rise in gross domestic product brings in £7.7 billion in tax receipts. Over the lifetime of a Government, a 1% increase in GDP growth would bring in something like £37.5 billion-nearly half the deficit that the Chancellor says we need to cut over this period. It is therefore the responsibility of BIS to push and push for Government priorities to ensure that the elimination of that deficit is effected largely through economic growth, but it has failed to do that. I think that was acknowledged in Mr Lambert's comments.
The growth White Paper has been abandoned because there was not enough in it-hardly sterling support for industry and the private sector. Some of the policies we are talking about do not involve any expenditure to implement but are about the priorities of other Departments and how they impact on growth. One would reasonably expect BIS to demonstrate to other Departments how they are damaging growth. Localism is one example. We have heard a lot about the abolition of regional development agencies and their replacement with local
enterprise partnerships. By abolishing RDAs, the Government stripped away a core of local business support and they put in its place LEPs, which may or may not be successful, but which have not delivered a single job so far.
Geoffrey Clifton-Brown: I am grateful to the Chairman of the Select Committee on Business, Innovation and Skills for giving way. I have listened to the spokesman for the Opposition and to the hon. Gentleman, but apart from one costed programme to accelerate broadband I have not heard a single policy from Her Majesty's Opposition. Is it too much to expect the Chairman of the Select Committee, who should know about these things, to announce some positive policies?
Mr Bailey: We would have sustained the level of support at local level that would have allowed manufacturers to benefit from the sort of programmes that were being developed to get us out of recession. However, the hon. Gentleman must forgive me if I concentrate on the issue at stake, which is the performance of BIS in promoting growth.
On LEPs, I am second to none in my praise for my local Black Country chamber of commerce and those who are committed to making it work. I shall do everything I can to support the LEP, but I know that there are serious reservations about the lack of funding it has for submitting applications and about the delay that occurred when its original application to become a LEP was turned down.
What, above all, is very worrying as regards the potential for LEPs is the fact that the planning proposals in the Localism Bill do not include LEPs having any role whatever in the process. How the Government can create a local organisation with a brief to drive growth but not include it in the local planning plans for a local community defies all credibility and belief. Without the support of local planning authorities, it will be difficult for local businesses to push for growth.
Immigration has already been mentioned. The revelations that we heard yesterday in the Business, Innovation and Skills Committee on the impact of the Government's cap on recruiting people for vital, iconic businesses that have demonstrated time and again their ability to deliver jobs and growth are a real worry. Some of us thought that the Secretary of State had had some success in that regard, but it looks as though the headline announcements are not being reflected by the attitudes of the Departments involved. That is, in itself, a reflection on this particular Department's ability to get what it needs from other Departments in delivering on an agenda that is essential for the Government and the economy.
BIS should be taking a lead role and ensuring that there is a growth impact test on the actions taken by other Departments. That is not so. This is why, under a Labour Government, we were growing ourselves out of-
Simon Kirby (Brighton, Kemptown) (Con):
The right hon. Member for Southampton, Itchen (Mr Denham) is absolutely right when he says that the Government must take decisive action-decisive action to address the staggering deficit and huge public debt inherited
from the Labour party; decisive action as a direct result of the previous Government spending more than they raised in taxation; and decisive action because the Labour party burdened generations to come with the liabilities incurred for the current generation. That decisive action will help to put in place the right macro-economic conditions for recovery.
Mel Stride: Does my hon. Friend agree that only the prompt action that the Government took in the emergency Budget shortly after the election ensured that we stabilised the markets, which in turn kept interest rates low, which in turn kept sterling low and encouraged manufacturing exports?
Coalition Ministers are driving forward a programme with one purpose-creating jobs. There is talk about what is happening. A raft of measures have been introduced, and those are designed to support economic recovery, boost business and help the private sector to create jobs. Corporation tax is falling for both small and large firms. The previous Government's planned increase in employer national insurance contributions has been stopped. National insurance contribution discounts are being offered to encourage new start-ups to take on employees. Small-business rate relief has been doubled for a year, and the Government are getting to grips with the red tape that strangles so many of our small firms.
Brand UK is strong, and it is important that we talk Britain up, not down. We must dispel any perception that the UK is a burdensome place to do business. We need to be aware of the huge competition from Asia. The Prime Minister, the Foreign Office, the Treasury and BIS have all given the highest priority to the business and skills agenda.
The coalition Government are ensuring that entrepreneurs and business owners are able to access the information and advice that they need. The Business Department is undertaking a number of reforms to Government-funded business support. The Work programme will provide personalised support for those with the greatest barriers to employment. The new enterprise allowance will help people to make the jump from unemployment to self-employment. Investment will ensure that workers have the skills that they need in a modern labour market. Young unemployed people will get much more help to access extended work experience opportunities.
Mr Gyimah: Does my hon. Friend agree that our skills strategy goes further than the previous Government's in enabling people who want to reskill to gain funding to do part-time courses, and therefore get back into the workplace and get jobs?
"Cities with strong private sector economies and limited public spending cuts, such as Brighton, will be well placed to drive the UK's economic recovery."
Just this week, recruitment specialists are reporting a surge in vacancies in Brighton and Hove, with firms returning to pre-recession staff levels. Amex announced last week that it is looking to expand still further in Brighton by relocating many hundreds of well paid and permanent jobs from Madrid.
Developers are still looking to invest in Brighton and Hove, and Brighton and Hove, with its Conservative-run council and its three new non-Labour MPs, is a place to do business. No wonder the right hon. Member for Doncaster North (Edward Miliband), the Leader of the Opposition, came down recently to see how it is done. Contrast that with the previous Government-the Labour party, which told us, "There is no money left." We see in the new Government decisive action, both locally and nationally.
Karl Turner (Kingston upon Hull East) (Lab): When Labour left office, growth was picking up, unemployment was falling, inflation was low and the deficit came in more than £20 billion lower than forecast. Under this Government, inflation is rising, growth has stalled and unemployment is rising. They really are facts, so will the hon. Gentleman accept them?
Simon Kirby: No, I will not accept those facts. I am often struck, looking at those on the Opposition Benches, by how few people have been in business, how few have employed people and how few have filled in a VAT return. I have employed more people than could fit in this Chamber, and I speak from some experience.
Mel Stride: On the point made by the hon. Member for Kingston upon Hull East (Karl Turner), does my hon. Friend agree that it is typical of the previous Government that they left office with unemployment higher than when they came to office-the case with every single Labour Government in history?
There is much more to do, and the times we live in are very difficult, but, taken together, the Government's measures will create the right conditions for business to thrive, compete and create sustainable economic growth and employment. The coalition Government are doing a good job, getting us out of the mess left by the previous Labour Government-decisive action by a decisive Government. I, for one, applaud the progress made by the Government and wholeheartedly disagree with this very mean and inconsiderate motion.
Mr Pat McFadden (Wolverhampton South East) (Lab): We should begin the debate by considering, as the motion asks us to do, the role of the Department for Business, Innovation and Skills. It has in recent years become a major spending Department, with the stewardship of universities and further education colleges. It is different from other Departments in that, uniquely, it stands on the boundary of the public and private sectors. Its job is to sell Britain abroad as a great location for doing business, and to help UK businesses to penetrate foreign markets. It is also, of course, the key location for business and employees to come to Government with business-related issues. It is, as the Secretary of State has described, the Department for growth-or it should be.
How Government achieve that growth-the role of Government in helping to foster growth-is what divides the House. There are those on the Government Benches, including the Secretary of State, who is no longer in his place, who previously called for the Department to be abolished, and who thought that there was no role for Government to play in fostering growth, apart from getting out of the way. That is not our view; we believe that there is an important and active role in fostering growth.
I take issue with one of the arguments that the Secretary of State has deployed time after time since the election-that the actions taken by the present Government would have been taken by Labour because we were committed to the same level of cuts. It is not true. The Government have launched a programme of cuts which is tens of billions of pounds more than anything that was being planned by the Labour Government, and he cannot continue to rest on that argument.
Mr Brian Binley (Northampton South) (Con): I am grateful to the right hon. Gentleman for giving way. He is always very kind in these matters. If he knew the plans of the previous Government, having been a member of the previous Government, will he explain them to us in order that we can understand how the deficit would have been met?
Mr McFadden: If the hon. Gentleman casts his mind back a little more than a year to the pre-Budget report, he will find that cuts in spending were set out by the Department while I was a Minister there. He simply needs to read the pre-Budget report.
I admit that over time during the Labour Government our view on the Department's role shifted. In the early days we were, perhaps, too reluctant to intervene in markets, but we got to the point where we were playing a much more active role and co-ordinating activity across Whitehall on key industrial and employment opportunities.
For example, with the Department of Energy and Climate Change, we produced the low carbon industrial strategy to achieve the most for UK industry out of the shift to low carbon power generation. On transport, we worked with the Department for Transport on an ultra-low-carbon vehicle strategy. In other words, the Department for Business, Innovation and Skills played a leading and co-ordinating role to take advantage of the industrial and employment opportunities of the future. That is what we were doing to try to foster growth and employment.
Alison McGovern: As my right hon. Friend knows, Vauxhall Motors is close to the southern end of my constituency. Will he comment on the previous Government's approach in setting the ground work for electric vehicles and ensuring that high-tech manufacturing, which is employing people in my constituency, is part of this country's future and not part of our past?
Mr McFadden: My hon. Friend is right. The sad fact is that whereas we wanted to support General Motors in its plans for restructuring in Europe, by the time the current Government got round to making a decision on that, Vauxhall had decided to go away and sort out its own financing.
Let me turn to some of the issues that have arisen since the election. We could trade quotes from Sir Richard Lambert all day, so let us be candid about what he said last week. He said that he agreed with the Government on the deficit reduction strategy, but he thought that there was no wider vision for the economy and there was a danger that the Department was turning into a "talking shop". That is a fair summary of Sir Richard Lambert's speech.
What business wants is for the Department to be winning battles in Whitehall. That, sadly, has not been happening. The Department and the Government talk about rebalancing the economy. By that we mean rebalancing away from an excessive dependence on financial services and from excessive dependence on certain parts of the country. How, then, can the Government justify in their first Budget cutting some £2.8 billion in investment allowances from manufacturing industry? The corporation tax cut, which has been mentioned, adds up to a benefit of £2.7 billion. In other words, what has happened is that manufacturing industry is paying for a tax cut for the rest of the economy.
The Secretary of State referred to the decline in manufacturing as a proportion of output and of employment. What he did not mention was the fact that we were going through the biggest wave of globalisation in world economic history. He takes an entirely national view, when there was profound change going on in constituencies such as mine and other black country constituencies in manufacturing during that period.
The programme of grants for business investment has been responsible in the past six years for some £400 million of grants to small and medium-sized mostly manufacturing businesses. Fewer than one in five of the grants is more than £1 million. Those grants have supported some 1,800 projects, secured almost £4 billion in investment, and helped to secure almost 80,000 jobs. How on earth does abolishing that programme fit in with rhetoric about trying to rebalance the economy?
Further, those grants are specifically geared to the assisted areas-areas that need help most, such as my own in the west midlands. We met people from the Black Country local enterprise partnership a few days ago. I pay tribute to the business people in that area who have worked so hard to pull together the Black Country LEP. I reflect a fear and a concern, which I suspect are shared elsewhere. Despite the commitment
of the business people, will they get the support that they need from the regional growth fund? That fund is grossly oversubscribed. If business has put in the effort but Government do not back those bids and projects, business will rightly feel let down, and my constituents will rightly feel let down by the prospectus that has been offered.
On trade and immigration, the Minister for Universities and Science is in his place. How does he feel that the soft power that is gained from the UK as a wonderful location to study will be affected by the new proposals on restricting the right to work of people who come here to study? How does that help us to sell Britain abroad as an attractive location for investment?
The truth is that business is concerned about the difference between commentary and delivery that we see in the current Department. That is the difference between opposition and government. The Secretary of State, having lost the battles over LEPs, where the Department for Communities and Local Government appears to be running the show, and over immigration policy, has been left to bet the farm on the banking commission. It is not even fully within his control. Business will want to see less commentary and more delivery in future.
Lorely Burt (Solihull) (LD): The thrust of the Opposition motion is that the coalition failed to deliver its promise on growth and jobs. Let us consider the facts. We are seeking to rebalance an economy which, under Labour, became over-dependent on the financial sector. For a long time I have called for more focus on encouraging manufacturing in the UK. Last year, sadly, we dropped to seventh in the global league in manufacturing, but now we have the beginnings of a different story.
"Rates of expansion in UK manufacturing new orders and employment accelerated to reach levels without precedent in the nineteen-year survey history".
I often say that the role of Government is not to interfere, but to create a fair playing field and then get off the pitch. Government should create an atmosphere in which businesses can survive and grow, and the coalition is doing that. The effect of the moves that we have made to reduce regulation is not yet being felt. The Secretary of State has announced new rules that will be coming in to create fairness in employment law so that employers and employees can navigate through disputes more easily, and tax rules are being simplified.
We can restore economic stability in this country only by bringing the deficit under control, but we need to ensure that business continues to invest. That is why the Government have set out plans to promote growth by reducing corporation tax to the lowest level in the G7. Many welcome measures are being introduced, and I particularly welcome the new enterprise allowance that will allow unemployed people to get off the dole and realise their often long-held dreams of starting up their own business.
Ian Murray: The hon. Lady, like many of her coalition colleagues, has mentioned the cut in corporation tax as a massive driver of economic growth. Does she agree that corporation tax is paid only on profits and that many small businesses, particularly those in the service and tourism sector in my constituency that write to me, are more concerned about their profits because they have either no customers or fewer customers as a result of the massive VAT hike?
Lorely Burt: The Government have been particularly generous to small businesses for the coming year. He is right that no one wanted to increase VAT, but unfortunately the alternatives were even less palatable.
There is also the national insurance contributions holiday for the first 10 employees in the first year of business for new companies outside London and the south-east. The regional growth fund has been much maligned today, but I think it will play an important part in stimulating growth.
Nadhim Zahawi (Stratford-on-Avon) (Con): When providing help to business, one of the most important things is to check that it is administered correctly. One need only look at the Export Credits Guarantee Department to see the symptoms of the previous Government's failures: 90% has gone on aerospace help, which is wonderful for that industry, but the 10% for other industries has dropped by 40%. Such funding is obviously not fit for purpose, compared with other countries where it is going up. That is a perfect example of the previous Government's failures of administration.
Lorely Burt: I totally agree with the hon. Gentleman. The big companies that shout the loudest often benefit disproportionately from Government funding. On that point, I note that the Government have an aspiration to procure 25% from small businesses. With regard to exports, it is important that small businesses receive their fair dues. I also welcome the technology and innovation centres, which will bridge the gap between good ideas and their implementation and the readiness to bring them to market.
All those measures are yet to come into effect, so how can we claim that the improving business situation is due to us? We have created a climate of confidence in this country. We have put in some pretty harsh measures to tackle the deficit. Not a single Liberal Democrat colleague has taken a moment of pleasure in that, but we joined the coalition and signed up to the agreement because we felt that it was necessary to restore confidence, and it did. Following the June Budget, we saw our triple A credit rating restored. The credit rating agencies backed our deficit plan, and so did the International Monetary Fund, the OECD, the CBI, the European Commission, the World Bank, the Governor of the Bank of England and one Mr Tony Blair. Other countries, before and after the Budget, have faced financial meltdown,
and if we had not done that, we would be paying the crippling interest rates that people in Ireland are now paying.
Lorely Burt: We are hearing a lot of denial from those on the Opposition Front Bench. Had we not taken that action, we would be facing greater wage cuts than we are already suffering and more job losses. Not everything that John Cridland, the director-general of the CBI, has said about the coalition Government has been complimentary, but this week he said that
"the coalition government has a lot of credit in the bank with the British business community for the way it's tackled the deficit. That was task number one and it needs driving through and it mustn't allow itself to be knocked off course".
The Secretary of State has referred to the £4 billion cut in the Department's budget. Labour has opposed this, but it has failed to say even once where it would have cut to achieve their stated £44 billion worth of cuts. BIS was an unprotected Department under its plans. It criticises us for our plan for business, but it does not have a plan. It should criticise after it has produced an alternative, because what it did for the past 13 years certainly did not work. Under Labour, Britain fell from seventh to 13th in the World Economic Forum's global competitiveness league. Tax competitiveness also fell: in 1997, the UK had the 11th lowest corporate tax rate in the world; but in 2009 it was the 23rd lowest. The British Chambers of Commerce has claimed that Labour created £83 billion of red tape that was simply choking off businesses' ability to grow.
I know that things are choppy, and we have heard about the lack of growth in the past month, but I would like to finish on a positive note, because it is not just about manufacturing. The Reed job index, which is run by the country's largest recruitment website, has shown that employers seem to be in job creation mode. I am not pretending that we are out of the woods yet, but things are certainly improving under this Government.
Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab): I am sure that the Minister is aware of the great success story of the North East of England Process Industry Cluster: it made £1 billion, gross value added, in six years with just £3 million of public support. It was set up by One North East, the local regional development agency, and has an ongoing portfolio of 62 projects worth £8 million. One particular project, the Tenergis project, which is worth $5 billion, could rejuvenate the local economy and, in turn, attract further world-scale investment.
Chemicals contribute to more than 30% of the nation's industrial economy, and the sector attracts some of the chemical and process industry's world leaders. Teesside's process industry contributes about £10 billion to the north-east's economy-almost a third of regional GDP-but has seen a series of job cuts and plant closure announcements in recent months, despite having grown in the past five years.
What has that sector seen from the Department since May? The Government have put much emphasis on export-led growth-pretty much a statement of the bleeding obvious. A friendly voice from the Government
Benches will no doubt state that manufacturing growth in general has increased amidst a sea of GDP decline, but such statements will not be followed with the caveat that the majority of that growth is in inventory spending, meaning the restocking of raw materials for production. It is a restocking at a time when raw material and commodity prices are at a real high, inflating the costs per measure of materials purchased. I fear that that will be demonstrated in the second and third quarters of this year as domestic demand unfortunately wanes, especially if domestic interest rates are raised. That is combined with the VAT increase, the increased national insurance contributions, wage cuts, fuel costs and the fact that although the world function is based on the retail prices index, the Government function is based on the consumer prices index. We are looking for a domestic multiplier here.
Any policy that is reliant on export-led growth ignores reality as the EU's internal problems continue and Asian markets become increasingly more protectionist and insular in their dissemination of vital raw materials. NEPIC's vision in its industrial plan is to seek out other clusters like itself and send its industrialists there to win the crucial research and development contracts that will hugely benefit our economy. Getting £l billion in six years from £3 million is good business in anyone's book. It is a clear example of how public investment can and does attract private investment, both domestic and from abroad.
As well as the scrapping of One North East, the body that helped set up and support NEPIC, we have now seen the abrupt end to the emergency package devised for Teesside in the wake of steel job losses. It targeted jobs growth in the chemicals sector as an alternative to steel jobs. That scheme has been axed, even though it is still allocating work and has £18 million in uncommitted funds that could have been used to support and enhance the objectives of NEPIC member companies.
Now we hear that a long-standing and successful job-creation fund, which over the past decade has helped to create many hundreds of thousands of jobs in areas such as the north-east, is to be axed by stealth. That fund, the grants for business investment scheme, has been-under its own name of regional selective assistance-responsible in the north-east for pumping £112 million into poorer parts of the region and for helping to create 25,000 jobs.
Jim Shannon: Does the hon. Gentleman agree that we need to foster opportunities for young people, especially when unemployment among young people has reached 951,000, the highest it has ever been? One in four people between 16 and 25 years old are out of work, and there is a need to create opportunity for young people.
In various forms and under successive Governments, the scheme has been in place since the late 1960s. It survived the Heath years, the 1970s Labour Governments and even the Thatcher and Major years and the most recent round of Labour Government. Despite differences on economic policy, all those Administrations recognised the value of regional selective assistance. It was a genuine central-local partnership, handled by the Department
for Trade and Industry and then by Department for Business, Innovation and Skills' offices in London, but its decisions were guided by a regional evaluation board made up of regional businessmen and women. A measure of its success was its crucial role in bringing Nissan to the north-east in the 1970s. More recently, it helped Teesside to secure jobs in the offshore engineering sector and underpinned the decision to rebuild the SABIC Wilton site catalytic kraken, currently the single-most important plant on the Wilton site.
What is worse, and what puts us at even more of a disadvantage, is that the scheme will close only in England; Scotland and Wales will keep it and be able therefore to compete directly with the north-east for a position of advantage. It is tragic that the scheme will go, because it will only put more pressure on the hopelessly oversubscribed and underfunded regional growth fund, which seems to be the Government's sole contribution to regional economic growth. The RGF, which has about £300 million to allocate, has already had bids from throughout the region, from Berwick in the north to Boulby in the south, topping £3 billion.
The Government cannot keep relying on a weak pound or ignore industry's need for direct investment in research and development and for partnership with them. I asked the Secretary of State where his influence was when the feted local enterprise partnerships are in the Localism Bill. Why has he handed the European regional development fund over to the Secretary of State for Communities and Local Government?
Does the Business Secretary not acknowledge that the Office for Budget Responsibility told him explicitly that unemployment would increase as a result of his policies? Only 3% of people who have achieved work since the recession have gained full-time work. Could he not have reformed RDAs rather than destroy them, or at least asked industrialists in the north-east what they thought? Does he not find it bizarre that more money will be spent on post offices than on the entire English RGF? Why is he allowing long-term timber deals between biomass generation plants and the Forestry Commission to be undermined by Ministers in the Department for Environment, Food and Rural Affairs, who want to sell off cash-crop forests?
The Department for Business, Innovation and Skills and its Secretary of State are summed up by his magical mystery tour last year of the beam mill at Tata's Redcar plant, which is part of the long products division, not of Teesside Cast Products, the actual plant in question. His party and his Government promised that they would not stand by while steel jobs were lost. In fact, they did more than that. At Forgemasters in Sheffield, a site where I was the union official, Labour put pen to paper when money was requested to help industry. The Secretary of State's Government ripped it up.
When my right hon. Friend the Member for Wolverhampton South East (Mr McFadden), the Business Minister in the previous Labour Government, contacted the former chief executive officer of Corus Europe, Kirby Adams, a personal friend of the Prime Minister and much mentioned in the leaders' television debates, he literally put the phone down on a Labour Minister offering help.
The Secretary of State has metaphorically put the phone down on Teesside's manufacturing, cutting almost one third of the funds set aside for the Tees valley
industrial aid package. Standing idly by? No, I could not accuse him of that. Turning his back on Teesside? Yes, I could certainly say that. It was again evident when he was dictated to by his colleagues in DCLG, the Treasury and the Departments for Energy and Climate Change and for Environment, Food and Rural Affairs.
The Secretary of State's colleagues at DECC refer to high-energy manufacturing as sunset industries. Why on earth is he allowing a rammed-through consultation on carbon price support and energy market reform with no impact assessment on energy-intensive industry in either case? Why does the consultation have a short time scale? He says he wants to take away regulation. That is utter nonsense: he is allowing far more complex and damaging regulation through that programme; and he is attacking workers, particularly those in the steel industry, who kept their patience over two and a half years when they had more than a few good reasons to take industrial action. I know, because I led them alongside colleagues, but we restrained ourselves to ensure that we had an industry in Teesside and an industry for this country.
Geoffrey Clifton-Brown (The Cotswolds) (Con): In America the official unemployment rate is 9.5%; unofficially, it is 13%. Americans face the worst fiscal deficit since the slump of the 1930s, and, despite the huge fiscal stimulus package introduced by President Obama, the US economy is not producing enough jobs to reduce those rates of unemployment, let alone to create enough jobs for new entrants to the job market.
Unfortunately, our economy faces similar conditions, and, as I said in my speech during the Budget debate on 23 June last year, it is essential that as the public sector contracts, everything is done to encourage the private sector to grow as fast as possible in order to take up the necessary slack and to create desperately needed jobs, particularly among the young. At this time, small and medium-sized enterprises collectively account for 99.9% of all enterprises, 59.8% of private sector employment and 49% of private sector turnover. It is clear that our economic recovery will be fuelled by those firms, to which the Government should provide all possible help. The Government have taken a number of steps to help in doing so. They have reduced corporation tax, both large and small; increased the threshold at which employers begin paying national insurance contributions; they are consulting on reforming employment tribunals; and there is a welcome and significant increase in apprenticeships.
There are significant problems out there, however. The banks are lending to certain favoured sectors, and even in other sectors their arrangement fees have increased hugely over the past year or so, thereby increasing borrowing costs. The introduction of regulation on flexible working and paternity leave, although desirable in themselves, could have serious negative implications for small businesses, which can ill afford to lose a member of staff for a considerable time. It is vital that the Department for Business, Innovation and Skills wins those arguments with other Departments, and that business policy is ruthlessly put first.
Does my hon. Friend agree that on family-friendly policies, which are vital for supporting the improvement of children in our country, small
businesses with very few employees need to be given special attention? They are special cases, and we need to look after their needs as much as possible.
Geoffrey Clifton-Brown: My hon. Friend is prescient, because I was about to move on to that subject. The European Union has what it calls a "Small Business Act", which requires the EU to look at every new regulation before it is introduced and consider its effect on small businesses to see whether very small firms might be exempted from it. We should do more of the same here.
The greatest challenges and opportunities lie in inward investment-foreign direct investment, FDI-and exports. As I identified when I was shadow Trade Minister, the previous Government's policies on those matters were incoherent, particularly with regard to the enormously expensive regional development authority offices that were based throughout the world, often in the same city, and competing for the same inward investment to UK. Thankfully, we have put a stop to that, and I am delighted to hear that my right hon. Friend the Secretary of State is about to produce a White Paper on trade. That will be very welcome, indeed, and I am sure it will address several measures that I am going to discuss in my speech.
If the newly created local enterprise partnerships are not to have any role in FDI, presumably UK Trade and Investment will deliver the policy centrally from London, with small teams on the ground in the regions, something that I have advocated. Perhaps the Minister, when he makes his winding-up speech, will confirm that, because FDI is a vital part of the economy. We must not only seek new FDI from throughout the world, but carefully look after what we have. I was alarmed to see that Hua Wei, one of the world's largest IT companies and based in Beijing, has just moved its European headquarters from Basingstoke to Düsseldorf. Eventually, that could affect 6,000 jobs, and the Pfizer decision today is another reminder of FDI's importance.
Alison McGovern: The hon. Gentleman mentions FDI and UKTI-forgive me for using so many acronyms -and their role in bringing in inward investment. Will he comment on how successful centralised action to bring in FDI to regions of this country, such as the north-west and the north-east, was in the 1980s and the 1990s?
I say to the Minister for Universities and Science that we also have to look at bringing in visas for a few very highly skilled people. The other day I visited a local plc. It employs several thousand people, but only a very few-about half a dozen-of the brightest and best people from around the world. It needs visas to get such people into this country-people who, with their ideas and innovation, can act as a multiplier for many other jobs.
Exports will be similarly vital to a growing economy. Recent estimates for the period 1996 to 2004 suggest that firms that are new to exporting experience, on average, a 34% increase in productivity in the year of entry, whereas companies that stopped exporting saw a drop in productivity of 7% to 8%. That is self-evident, because to export they have to be competitive. It is concerning that despite the weakness of the pound against the dollar and the euro, the UK's overall monthly trade deficit on goods and services for the month of November declined from £4.1 billion to £4 billion. We need to keep a watch on that.
Only 23% of small businesses export, and those that do are often stifled by the red tape inherited from the previous Government. Some 70% of our total exports go to the markets of North America and the EU. However, estimates suggest that by 2020 the EU's and the USA's share of global gross domestic product will have declined to less than 40%. It is therefore vital that we give more help to small businesses wishing to export to markets outside Europe and North America, particularly the growing markets of the BRIC countries-Brazil, Russia, India and China-although many other countries out there are also growing very fast.
It was encouraging to see that last year UKTI's budget was increased because of the Foreign Office administration programme, but its future is much less clear. I would say to my right hon. Friend the Minister that as it is about the only bit of government that makes money for the country, and it has a huge task to do, it would be folly to cut its budget.
The ministerial structure that we have at present is too fragmented. Exports and UKTI are handled by the new Minister for Trade and Investment, Lord Green. The Under-Secretary of State for Business, Innovation and Skills, the hon. Member for Kingston and Surbiton (Mr Davey), handles the ECGD; and my golly, as my hon. Friend and neighbour, the Member for Stratford-on-Avon (Nadhim Zahawi), said, it desperately needs an overhaul, with 80%-he said 90%, which is even worse-of all its lending going to aerospace, mostly to Airbus. That is unacceptable. Other countries do much better with their equivalent bodies, and so should we. Local enterprise partnerships are handled by the Minister of State, Department for Business, Innovation and Skills, my hon. Friend the Member for Hertford and Stortford (Mr Prisk). It is not yet clear what role LEPs will have in FDI and exports.
Export licensing is another area that we desperately need to overhaul. I have here a quote from Mark Ridgway of Group Rhodes, who says-I hope that my right hon. Friend the Minister will pay close attention to this-
"We are currently, for example, awaiting an export licence to Pakistan, for which we first applied over 3 months ago. The order will be lost before permission is granted."
In summary, our economy is fragile. The private sector must take up the slack of the public sector. It is vital that we have a legislative and regulatory structure that is ruthlessly pro-business. We must have a coherent plan for FDI and exports, as that is where economic growth is going to come from in the future.
Angela Smith (Penistone and Stocksbridge) (Lab): I am grateful for the opportunity to participate in this debate. South Yorkshire has a very proud history of manufacturing, which has been demonstrated in recent years by investment in advanced manufacturing on a major scale-in partnership with our two fine universities, Sheffield and Sheffield Hallam-and by the advanced manufacturing park established on the border of Sheffield and Rotherham, which boasts partners such as blue-chip companies Rolls-Royce and Boeing, and which was supported very strongly by the regional development agency, Yorkshire Forward. The very model now being recommended by the Tory-led Government is already working in practice in South Yorkshire and is succeeding entirely because of the support and co-ordinating work offered by Yorkshire Forward.
However, much of that is at risk because of the shambolic way in which this Tory-led Government are now running the Department for Business, Innovation and Skills. There is no doubt that the economy of South Yorkshire was hit hard last time the Tories were in power. South Yorkshire suffered the double whammy of the absolute decimation of the coal industry and the serious damaging of the steel industry in places such as Sheffield, Doncaster and Rotherham. Now the same patterns are emerging again, with short-termism-the enemy of manufacturing-no real plan for growth, and no real plan to help South Yorkshire companies build for a better tomorrow.
David Simpson (Upper Bann) (DUP): Does the hon. Lady agree that, although we can reduce regulation and bureaucracy to help small businesses, one of the most difficult issues for them is the cost of energy? The Government have talked about the fuel stabiliser, which will be a vital component in helping small businesses at this time.
Angela Smith: I entirely agree with the hon. Gentleman. The Government's current, very rushed, consultation on energy market reform could add significant extra burdens to the intensive energy-use industries that predominate in my constituency and could make them incredibly uncompetitive internationally.
Given the latest growth figures-or should I say shrinkage figures?-we need more than ever a plan for growth that invests in industry and helps to rebalance the economy away from the financial services and property speculation model that was built not by the previous Labour Government but by the Thatcher Government of the 1980s, with big bang and all the rest of it. I hear nothing about that planning from those on the Government Benches. All I hear is mixed messages and talk that is all about pleasing elements within the coalition rather than what is good for UK plc.
I know that it has been mentioned many times in this Chamber, but the story of the loan to Sheffield Forgemasters typifies all that is going wrong with the Department for Business, Innovation and Skills.
The damage of the withdrawal of that loan has been done. The costs have already gone up and made life very difficult for the future of the nuclear supply chain in this country. As everyone knows, the loan-yes, loan-was evaluated over a two-year period. The conclusion was that the loan made sense for Forgemasters, was good for the nuclear power industry supply chain, and was strategically important for UK manufacturing. Why, then, was the loan cancelled at the whim of Ministers and the real reasons never fully explained? We need an explanation from the Minister today. Was it because the Lib Dems-the coalition partners-do not believe in nuclear power and had to be dragged kicking and screaming into a nuclear power supply arrangement for the future? We need to know, because it has been demonstrated time and again that the money was available and was properly signed off by the Treasury. That is the crux of the problem with how the Department is being run at present. Why should any company take the risk of investing in the future of our nuclear power industry when there is no clarity from the Government on the issue? I ask the Minister to clarify what role the Department is playing in pushing the future of our nuclear supply industry in the Government's planning for the future.
During the previous Parliament, the then Government's industrial activism started to help key industries of the future to ensure that our economy would be better balanced between financial services and manufacturing. Unfortunately, the current Secretary of State and this Government have failed to build on that work. Yes, we have heard tough words from the Secretary of State about how he will get the banks to lend money, how he will stop the bonuses, and how he has an arsenal capable of making nuclear strikes, if necessary, against vested interests. Unfortunately, his tough words melted away with the snows of December, and his arsenal of nuclear weapons turned out to be as intangible as a Lib Dem promise-in other words, it did not amount to very much.
Even the Secretary of State has said that his plans for regional growth are "Maoist and chaotic", and business leaders have said that the process has been badly handled. At a time when the Government tell us that money needs to be directed towards investment, they are scrapping the RDAs, at a cost of £435 million, and their replacement local enterprise partnerships are not even up and running yet. Increasingly, businesses are asking us what is happening in the meantime and where the money is for investment.
The truth is that, at a time when the regions need greater help to grow their economies, the regional growth fund represents a cut in funding from the £1.4 billion a year that was available to £1.4 billion over three years. So much for the boasts from those on the Government Benches on this issue. The fund now includes investment not only for industry and regional development, but for housing and transport-no wonder it is 10-times oversubscribed.
Now is the time for brave Ministers and brave solutions. Now is the time, as Will Hutton recently commented, to build great companies. Now is the time to make the banks work for us, and not in the interests of the bankers. Now is the time to invest in all our futures and in UK plc. Instead, we have a weak Secretary of State who cannot even hold on to his portfolio, and no
growth strategy other than a crossing of the fingers and a "hope for the best". There is a regional growth strategy that even he thinks is chaotic. He can change course-it is not too late. He can decide to invest in British manufacturing. After all, he is a Lib Dem and, as we all know, Lib Dems can change their minds and do so frequently.
Mr Brian Binley (Northampton South) (Con): Today has been a revelation to me. I understood that denial was a medically treatable condition, but I did not know that it was a collective condition. Today has opened my eyes in that respect. The denial is best illustrated by the shadow Chancellor's recent statement:
"I don't think we had a structural deficit at all".
By golly, we have had a deficit every year since 2002. Indeed, it rose massively to the point when, in 2010, we were borrowing £1 of every £4 we spent. If that is not a structural deficit in anybody's book, I do not know what is.
This matter is best understood by recognising the growth in public sector employment of 20%. More than 1 million new people now work in the public sector. That productivity barely rose in some areas and went down in others shows how successful that was. That is an unbelievable fact that any businessman would say is the road to bankruptcy. That is exactly what the previous Government did to this country. Thank God we had an election and a change of Government.
I will move on to other areas in which the previous Government let down British industry. First, let us consider employment tribunals. When I was in business, I stood in four tribunals and won each of them. On each occasion, I was told by colleagues, "Pay 'em." The previous Government created an aura of commercial blackmail that is totally unacceptable. Thank God the present Government are doing something about that.
Mel Stride: Does my hon. Friend agree that it is essential that we do something about claims to employment tribunals, which increased by 57% in 2010? They are feeding lawyers and depriving businesses of investment.
The cost burden of regulation on business increased by £10 billion a year under the previous Government. That money could have been used for investment, but instead it had to be spent on complying with regulation after regulation, which the previous Government had gold-plated.
Nadhim Zahawi: My hon. Friend has a long and respected record in business. Does he agree that there is a lack of recognition that regulation is one of the major factors that holds back small business, along with access to finance? The lack of the word regulation in the motion demonstrates the lack of understanding among those on the Opposition Benches of the pain of small business.
Mr Binley: I am grateful to my hon. Friend. I am delighted that he is a member of the Select Committee on Business, Innovation and Skills, because he brings such knowledge to it. Perhaps with his help, we can get the changes we need to ensure that small businesses thrive in this country again. They have found it very difficult over recent years.
The working time directive was introduced in 1999 and has cost businesses £1.8 billion a year. The vehicle excise duty regulations introduced in 2000 cost businesses £1.2 billion. I could go on. I refer Opposition Members to the words of David Frost, the director general of the British Chambers of Commerce:
"Businesses are facing the toughest economic environment for a generation. Company cash flow is being squeezed and unemployment is growing as a result"
Let us consider the plethora of schemes that the previous Government introduced with a shotgun effect. They were all good headline-catching schemes, but they forgot one thing. Often, it is not what one decides to do that matters within a given set of parameters, but the way that it is managed. Of course, the previous Government did not know anything about management, because most of them had not turned a penny in the real world in their lives. That experience is vital in understanding small and medium-sized businesses, as I can tell them and as the British Chambers of Commerce has told them. The number of companies helped by the enterprise investment scheme fell from 2,379 in 2001 to 1,073 in 2008. It ceased to be effective to a considerable degree year by year. That underlines the fact that it needed to be managed properly.
I could talk about many other areas in which the previous Government failed the people of my constituency sizeably, but I want to make one particular claim, which is supported by information in the Library, so nobody can jump up and question it. The number of unemployed claimants in my constituency rose to 3,460 under Labour. That is 7.4% of the economically active working population. In 1997, my constituency was only 440th among the 630 or so constituencies in terms of the highest proportion of claimants. It rose to 132nd under Labour. There was such a big effect in Northampton, because 94% of the people who are in the private sector work in small and medium-sized businesses. That is how much the previous Government helped my constituents.
As I have said, I could go on. I could talk about a number of schemes, but time is limited. The truth is that the manufacturing industry is beginning to grow. My town has the fastest rate of employment growth in the country. That has only happened since this Government came to power. They have created a new confidence and a new belief that we have a Government who help small and medium-sized businesses. David Noble, the chief executive of the Chartered Institute of Purchasing and Supply said:
"UK manufacturing steamed ahead in January as the sector continues to expand quicker than even the most optimistic amongst us could have predicted. As well as improved market conditions abroad, demand in the UK market also showed signs of growth. This is the much needed kick start to 2011 everyone in the sector was hoping for. A very different picture from last year."
That message will be repeated by small businesses in my constituency again and again. I have one plea, however: they need help from this Government, and they need more cash to help sustain the growth agenda. It is not happening, and I ask the Secretary of State to ensure that we put our money where our mouth is. If we do not, the growth agenda will be much more difficult to sustain.
Mr Mike Weir (Angus) (SNP): I am very pleased to follow a typically robust speech by the hon. Member for Northampton South (Mr Binley). I assure him that I ran a small business before coming into the House, and it is small businesses on which I wish to concentrate.
Many Conservative Members have talked about what has been done for small businesses, and they have mentioned the reduction in corporation tax. That is fine, but I remind them that very many small businesses do not pay corporation tax, because they are self-employed individuals or partnerships. They pay income tax, so a reduction in corporation tax does not in fact help them. They are suffering as much as anyone else who pays income tax.
I also note that towards the end of Labour's time in government, Her Majesty's Revenue and Customs made the situation slightly worse by examining small companies and deciding that many of them were not real companies, because they were operated by a husband and wife. They therefore had to come back out of the corporation tax system and pay income tax again. Many people are not being helped by what the Government are doing on corporation tax, so I ask them to consider how those people can be helped.
Lorely Burt: I am glad to inform the hon. Gentleman that we are indeed examining a lot of those issues, particularly the vexed issue of IR35, which the previous Government did not manage to sort out. It is difficult to do so, but I am sure it is not beyond the wit of man to make tax fair for all small businesses.
Mr Weir: I hope that is correct-but action is needed, not just talk. The situation has been going on for a long time, and many small businesses in my constituency and rural constituencies throughout the country are in serious difficulties and struggling to keep their heads above water. They need help now, and the Government have to move on that.
The motion mainly concerns growth in the economy, which I understand, and I wish to talk about some of the things that small businesses need in order to grow. Many of the points in the motion are specific to England, but I wish to mention two matters that cover all small businesses, including in Scotland.
The Minister may know that, just today, the First Ministers of all the devolved Administrations have issued a joint declaration calling for action to protect the economy. The second point made in it is about addressing access to finance, and it states:
"It is clear that securing affordable finance remains a considerable challenge for many of our companies. This is particularly true for many small and medium sized firms-the bedrock of the Scottish, Welsh and Northern Irish economies.
It is unacceptable that many businesses are being prevented from expanding or are faced with significant increases in lending charges and we need to ensure there is in place transparency and
accountability in the flow of finance for SMEs. We must also ensure that the planned £1.5 bn Business Growth Fund is implemented now to support lending to viable companies."
That is the vital point. Many companies in my constituency are finding it very difficult to access finance, and even when they can, it is at a high cost. At a time when the Bank rate of interest is 0.5%, probably the lowest in recorded history, it is ludicrous that small businesses are having to pay ever-higher charges to banks to get finance, if they can get it at all. It is worrying to small business people to read daily in the papers that the Monetary Policy Committee is being pressed to raise the interest rate to deal with fears of inflation, because that would hit small businesses seriously.
For all the talk of making banks pay more to small businesses, there is no sign of that actually happening. The mood music from the Davos summit, which the Prime Minister and the Chancellor attended, appeared to be that the banks are not interested in that any more. They seem to think that they have got through it all and can get on with business as usual, which is totally unacceptable. The issue has to be tackled now. My constituents do not understand why so much taxpayers' money bailed out the banks yet they are unable to get finance and help local employment. The banks have a duty to help the people who helped them when they were in trouble.
Anne Marie Morris (Newton Abbot) (Con): Perhaps I could draw to the hon. Gentleman's attention the fact that I had a meeting yesterday with the business finance taskforce of the British Bankers Association, whose chief executive told me that its 17 initiatives to support lending are on track. Indeed, mentors are beginning to be recruited and the lending code is almost in place. The business growth fund is pretty much ready and just requires some changes in FSA regulation. I hope that that provides some comfort.
Mr Weir: Again, we hear, "It is almost there, it is coming", but it is not here. Help is needed now. The Merlin process seems to have stalled-we were told that there would be announcements, but they have not come. If they do not come soon, it will be too late for many businesses.
I turn to the second point that I wish to discuss. I agree with the Secretary of State that it is ridiculous that there is no mention of the Post Office in the motion. I tabled an amendment to that effect, but Mr Speaker did not select it. I suppose that, to be honest, it is unlikely that the Secretary of State would have supported it even if it had been selected.
If we are talking about growth, we have to remember that a postal service is an engine of growth for many small companies. Many of them are very worried about it. This morning I chaired a session of the Westminster eForum at which we talked about the Royal Mail's universal service obligation. It was interesting to hear the Federation of Small Businesses say that when the Government initially talked to it about privatisation, it was given assurances that small businesses would be okay and that their interests would be looked after. However, it is becoming increasingly worried about what is happening. It points out that in April, first-class mail will go up by 12%, large letters by 13%, a 2 kg parcel by 8% and a special delivery by 8%. Worse still-I find
this utterly ludicrous-a business that currently goes to a sorting centre to collect its own mail will apparently be charged £210 for the privilege of doing so. Where is the logic in that? What on earth is going on?
I urge Members to read, if they have not done so, Postcomm's research paper "Business customer needs from a sustainable universal postal service in the UK", which was published towards the end of last year. It makes very interesting reading about how small businesses see the postal service.
Many small businesses continue to use the post, as they do not have the ability to get the special deals that are available from other carriers. Of those that spend between £100 and £500 a month on mail, which include the smallest businesses, 72% have either stayed at the same level of Royal Mail usage or increased it in the past year. Many businesses see e-fulfilment, as I am told we have to call it, as a way to extend and grow their business, but they need access to the postal service. Many are becoming increasingly worried, as I am, about what will happen to the universal service after privatisation. They see a reduction in service as meaning that they will be unable to access business at a reasonable cost. The changes that are already coming in show that that cost will go up and up, at a time when businesses are already suffering from fuel price increases. They have been hit all ways, and action is needed now to help them.
Gavin Williamson (South Staffordshire) (Con): I share some of the incredulity of my hon. Friend the Member for Northampton South (Mr Binley) at Opposition Members' apparent total denial of the fact that their party was so greatly responsible for the catastrophic economic situation that it bequeathed the coalition Government.
I remember talking to a gentleman from a trade organisation who told me that the problem with the previous Government was that they were obsessed about presentation and constantly wanted to change the names of the Department, but did not consider the problems affecting business. I am shocked that a Department led by Lord Mandelson would be more interested in presentation, marketing and publicity than anything else.
Alison McGovern: Will the hon. Gentleman therefore explain, for the benefit of the House, why one of the Government's first acts was to change the name of the Department for Children, Schools and Families to the Department for Education?
Gavin Williamson: As hon. Members say, the name was changed to the Department for Education because that is what it is. I am very proud that the Department for Business, Innovation and Skills is not about to change its name again for about the fourth or fifth time in as many years.
While the Labour Government focused on name and branding, they ignored the importance of our manufacturing base, which is much talked about. As has been pointed out, 4.3 million people were employed in manufacturing in 1997, but only 2.5 million were employed in 2010. That is a catastrophic decline. Opposition Members might say that there was an increase in output, but the reality is shown in OECD figures. In the industrial sector, which covers manufacturing, mining and energy production, UK gross value added was 25% in 1997-the same as in Germany. However, the figures for 2008, which are the latest figures, show that gross value added was 26% in Germany, but only 18% in the UK. That is decline in anyone's judgment, and it is the dreadful legacy of Lord Mandelson, the Labour party and their inaction.
Opposition Members might say that lower corporation tax will not encourage growth, but actually, lower taxes do encourage growth. They encourage people to invest in this country, and encourage people both in this country and abroad to bring jobs and investment here.
Neil Carmichael (Stroud) (Con): My hon. Friend makes some fascinating points. I am amazed that we are talking about the machinery of government. I would like to focus on something on which the Department is doing a fantastic job: improving our skills base. That is an area that really needs attention. If he is right about manufacturing, I am certainly right that we need to ensure that we have the right people to employ in a growing manufacturing sector, and it is important also-
My hon. Friend is right about training and giving business the freedom to succeed-freedom from regulation. That is why I pay tribute to Ministers in the Department. They have introduced a one-in, one-out policy on regulations -or I very much hope they will do so shortly. I would
encourage them to be bolder, and certainly to be bolder than the Labour Government, and to make that a one-in, two-out policy. Let us be bold. Let us free industry from the shackles of government.
The hon. Member for Penistone and Stocksbridge (Angela Smith) made a valid point on intensive users of energy. We must be wary of environmental regulation. If we are not careful, we will ship business out from this country to countries such as Ukraine, which do not have a care for environmental regulation. We will not just be shipping carbon abroad; we will also ship jobs. I ask my right hon. and hon. Friends on the Treasury Bench to bear that in mind.
The hon. Member for Middlesbrough South and East Cleveland (Tom Blenkinsop) made the valid point that we need to encourage jobs right across the manufacturing sector. We must be careful with all regulation, but especially with environmental regulation.
Opposition Members sometimes seem not to accept the fact that businesses do not always want to be involved in the intricacies of government. Businesses want the freedom to get on, but they need help with financing. There is a real squeeze for many small and medium-sized businesses in getting the finance that they need. The Black Country Reinvestment Society helps many SMEs in my constituency and much of the black country, including new businesses. It uses small amounts of capital to give those businesses the opportunity to grow and expand. I encourage Ministers to look at the model to see how it can be expanded across the country.
I also encourage Ministers to look at the German model. Many German banks do not simply lend to businesses and provide mortgages and banking facilities; they actually take an equity stake in the businesses. That stake means that they have a long-term vision for those businesses. More support, rather than more interference, is what is needed in this country.
Businessmen do not want a constant dialogue with civil servants and politicians. They want and need low taxes, low levels of regulation and most importantly of all, a stable economy. I encourage Ministers not to think that more government will lead to more business, but to think that less government will lead to more business.
Jack Dromey (Birmingham, Erdington) (Lab): When times are tough, it is all the more important for the Government to have a strategy for growth. That is why the Labour Government, at a time of global crisis, invested in the economy to get it moving, with enormous benefits for our manufacturing base. The car scrappage scheme was warmly welcomed by the Society of Motor Manufacturers and Traders because 400,000 cars were built. The stimulus package in the construction industry was warmly welcomed by everyone from the National House-Building Council and the Home Builders Federation. Some 110,000 homes were built, and 70,000 jobs and 3,000 apprentices were created or saved.
The Government inherited a growing economy when they took power, but they have slammed on the brakes, and the economy has gone into reverse. Let me give three examples. First, 10% of our gross domestic product growth comes from construction. The construction industry was growing in the first half of 2010 as a consequence
of the steps that Labour took in government, but in the last quarter of 2010, it fell by 3.3%. The construction industry and house builders are increasingly concerned about the consequences of the Government's actions in respect of everything from cuts in capital investment to the scrapping of regional spatial strategies. Two hundred thousand planned homes will not now be built, which is why the Federation of Master Builders, which represents SMEs in the building industry, predicts 11,000 job losses, and why the Construction Products Association predicts a 2% fall this year.
Catherine McKinnell (Newcastle upon Tyne North) (Lab): Is my hon. Friend aware that one of the major concerns of the construction industry is skills training and whether it will have a skilled work force for the future? Labour worked to increase the number of apprenticeships vastly, and it is welcome that the Government have made a similar commitment. However, it will not be sufficient to meet the future demand of the construction industry, especially in a low-carbon economy.
Jack Dromey: I agree with my hon. Friend. Representatives of the construction industry who have come to see me have said with one voice that the danger in what is now happening is that capacity is going and vitally needed skills are being dispersed and, in the event of recovery, they would no longer be available.
My second example comes from local government, which has had 27% cuts, frontloaded by the Secretary of State. The impact will be enormous, and it is already clear from the Local Government Association that 140,000 jobs will go in local government. But as PricewaterhouseCoopers has said, for every job that goes in local government, a job will go in the private sector. Local government's procurement budget is £38 billion. Some £20 billion goes to SMEs, so the impact of these savage, deep and frontloaded cuts will be catastrophic for SMEs that depend on local government throughout Britain.
Jack Dromey: With the greatest respect, I am not sure what planet the hon. Lady lives on. The figures on the economy are clear: the Government inherited a growing economy, but it has now stalled and gone into reverse.
My third example relates to the abolition of the regional development agencies. Thirty years ago, the midlands used to be one of the two strongest economies in the country, but it is now one of the two weakest. We had the most successful RDA, Advantage West Midlands, of anywhere in Britain. For every £1 of public money invested, £8.14 was produced in wealth in the private sector. Crucially and in addition, Advantage West Midlands managed shocks to the motor industry, such as the closure of Rover, and promoted the motor manufacturing cluster in the midlands. The cluster is 150,000 strong, from the prime companies through the components companies, the machine tool companies and the logistics companies, all the way down to the games companies with which Jaguar Land Rover is working right now on the next generation of in-car entertainment systems. That cluster, galvanised by Advantage West Midlands,
was one of the key reasons why Jaguar Land Rover last year decided to commit to Britain as its global hub and to invest £5 billion over 10 years, creating thousands of jobs and bringing wealth to our economy.
Mr Marcus Jones: The hon. Gentleman praises the RDA Advantage West Midlands. How does he square that praise with the fact that private sector employment in the west midlands fell rather than increased during the time that this RDA was in place?
Jack Dromey: I believe in the real world of work and in listening to the voice of the business community. There has been widespread concern and criticism from across the business community in the midlands about the abolition of Advantage West Midlands. Indeed, Business Voice WM, on behalf of the business community in the midlands, has put forward a proposal that stresses the importance of maintaining a regional strategic structure if the success of that motor manufacturing cluster is to continue.
Lorely Burt: The hon. Gentleman's experience of the business community in the west midlands is not mine. I have found that the business community has been excited about the prospect of taking its destiny in its own hands, together with elected representatives from the local authority, and creating a forward-thinking local enterprise partnership.
Jack Dromey: Again, with the greatest respect, I am not sure which business community the hon. Lady is talking about. All five of the organisations that represent the business community in the midlands have told me that they are determined to try to make the best of a bad job, following the abolition of Advantage West Midlands, and make the LEPs work, but they are dealing with confused and competing voices. The LEPs have no statutory basis and no funding at a time of major local government cuts. Those organisations are increasingly despairing, because they have lost what worked in favour of something that, at the moment, looks like it will not work.
I listened with amazement to the arguments which in effect said that the Government should get out of the economy and industry. Anyone who has ever had anything to do with the real world of work, here in Britain and in France or Germany, knows the simple truth that the role of good government is key to a successful economy. Time and again over the years I have worked with the private sector and engaged with the Government to try to get them to do the right thing-such as the scrappage scheme and the stimulus scheme that kept our house building industry from collapse.
In the next stages, I hope that Ministers will recognise the value of partnership and industrial activism, and will make the right decisions. Jaguar Land Rover is making applications, under the regional growth fund, on both the lightweight platform and the small engine. Investment in those will create tens of thousands of jobs in Britain. Warwick university's proposal to become a technology and innovation centre would make it the global hub for automotive research and development worldwide and is strongly supported by Jaguar. Investment in that would greatly strengthen the motor manufacturing cluster in the midlands.
Let us not repeat the mistakes of history. It was a tragic error of judgment not to agree the Forgemasters application. If we are to see a renaissance of the nuclear industry in Britain, with British manufacturing benefiting as a consequence, we should back Forgemasters.
Mr Marcus Jones (Nuneaton) (Con): It is an honour to follow the hon. Member for Birmingham, Erdington (Jack Dromey) who has a very positive outlook on the current situation. I welcome the opportunity to speak in this debate, and we should not underestimate the importance of getting economic growth back into our economy. We still face difficult economic times. We must not forget that we have had the worst recession since the second world war, with six quarters of negative growth. We are now suffering from the hangover from that, and from the debt inherited from Labour.
The deficit is one of the greatest barriers to growth. My right hon. Friend the Chancellor is right to stick to his guns on his deficit-reducing strategy. The IMF agrees: it has identified that insufficient progress with fiscal consolidation in the medium term would be a key downside risk to growth. We should all remember that.
The path to growth is likely to be rocky, but we must put the building blocks in place to rebalance our economy into a more sustainable and resilient model, based on a broader spread of industry, rather than put all our eggs into one basket. We must also listen to business. Before and after the election, business was looking for three things-lower taxes, less regulation and more bank lending. Some progress has been made by the new Government and there is far greater intent than there was in the past. But there is still some way to go.
I read today's motion with interest. It seems to hark back to a golden age in which the previous Government proclaimed the success of the RDAs. The former Prime Minister, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), and his then Business Secretary toured the country handing out rubber cheques that no one ever mentioned in the Budget, and which could never have been cashed. Their tenure did not result in an enviable record. The RDAs were top-heavy, with £246 million spent on administration alone in 2008-09. That is not a record to be proud of. However, despite the RDA my region-the west midlands-saw a contraction in private sector employment. That does not make sense, because the RDA was there to promote private sector employment, not throw money into the public sector. Across the country we saw a reduction in manufacturing jobs of 1.8 million under the Labour Government. That is not a record to be proud of, nor is it a golden legacy; it is something that this Government have inherited and are having to deal with.
Let me turn to the coalition Government and the difficult balance that we are having to strike between dealing with the deficit and getting sustainable growth. Despite the Opposition's rhetoric, the coalition parties do have a plan for sustainable growth. There is a common theme or thread running through many policy areas. We have the LEPs, which are far more focused and business-led. I am sure that they will not be like Labour's talking shops, which disengaged business. In particular, the Coventry and Warwickshire LEP, with which I have been proud to associate myself, is doing a fantastic job promoting the Coventry and Warwickshire area. I look forward to the progress that it will make in future.
Nor should we dismiss the £30 billion of investment being pumped into our transport infrastructure, or the fact that the regional growth fund is bringing £1.4 billion into the economy to pump-prime projects such as those being considered at MIRA-the Motor Industry Research Association-on the A5 on the edge of my constituency, which will bring in £250 million of private sector investment and could create 2,000 jobs. [ Interruption. ] Opposition Members shake their heads. They obviously do not want such investments to be made. I am also encouraged by the way in which the Government have started to reduce red tape and regulation, with the one-in, one-out strategy, reducing gold-plating and introducing business mentors to help new businesses grow. All those measures will create jobs. I hope that when the Minister winds up he will elaborate on how we will expedite that process and ensure that it moves forward far more quickly.
I am also pleased that we are committed to reducing corporation tax, which we need to do to move all businesses forward. Lower taxes are a way of stimulating the economy, benefitting not just the banks, as Opposition Members have said. I am also absolutely delighted that my hon. Friend the Minister for Further Education, Skills and Lifelong Learning has introduced another 75,000 apprenticeships this year to close the skills gap left by Labour. We had to bring in labour from abroad to fill the skills gap when the economy was expanding, when we had many people here who could have filled it themselves. I have only a short time left, so I hope that when the Minister winds up he can give me more information on what is happening with bank lending, which is an extremely important part of the package. I know that the previous Government failed miserably on that, and that the new Government are grappling to get it right, but if the Minister can tell us what is happening, that would be very helpful for us to pass back to our constituencies.
Alison McGovern (Wirral South) (Lab): I am sorry that the hon. Member for Northampton South (Mr Binley) has left his place, because he made quite an accusation about Opposition Members, saying that we had no insights into the world of business. I have the greatest of respect for the hon. Gentleman, but I will take no lessons from a party that is led by not one but two former special advisers-especially when the only experience in industry that one of them has comes from working in telly.
I want to say a few words about growth and, briefly, about the impact on young people of the circumstances that we face. Since the election I have visited a huge number of companies in my constituency and the Wirral, especially science-led, high-tech and efficient manufacturing companies. The message from those companies is universal and clear. The thing that they want to drive the growth of their businesses is investment. The question that I am often asked is: where is the Government action to improve investment in high-tech manufacturing? There seems to be some sort of ideological opposition from the Government to backing investment. The Chair of
the Business, Innovation and Skills Committee, my hon. Friend the Member for West Bromwich West (Mr Bailey), mentioned research and development tax credits, and we have seen the sweeping away of investment allowances.
Tristram Hunt (Stoke-on-Trent Central) (Lab): Is my hon. Friend as surprised as I am that the Government's policy seems to be replicated only by Romania, which is countering recession by cutting investment in universities and science, whereas everyone else is adopting a counter-cyclical investment strategy?
"The scrapping of the Grants for Business Investment scheme will leave Merseyside companies seeking smaller amounts of investment aid with nowhere to turn...The flagship 'regional growth fund' currently only accepts applications for at least £1m-and its first round of bids was seven times oversubscribed. Local Enterprise Partnerships will have no funding."
Margot James: The hon. Lady mentioned the science base and investment. The Business, Innovation and Skills Committee heard evidence yesterday from representatives of the aerospace industry, who said that they wanted to continue to invest in the UK because of our skills base. It is not just me saying that the Government are supporting science; the president of the Royal Society has complimented the Government on recognising the importance of Britain's standing in the scientific world. All savings from the science base will be reinvested back into science.
Alison McGovern: That is an interesting perspective, and I obviously have great respect for the learned people that the hon. Lady has mentioned- [ Interruption. ] Of course I have great respect for the Royal Society.
The corporation tax cut will help only companies with profits. We want to see strategic Government-led and business-led investment in the sectors that can most help us to progress out of the recession. I see no leadership from the Government on this issue. They constantly crow about tax cuts for business, but they have effectively handed profits back to the profitable bits of the banking sector and large companies, when they should be using that money to invest in high-technology manufacturing, such as that in my constituency. That message is coming to me loud and clear from the global corporations that invest in Merseyside, as well as from the small companies. They need investment now, not an across-the-board corporation tax cut.
I now turn to the impact of all this on young people and on employment. Everyone in this House is concerned about young people, as well we should be. People will know that in the protests that have been taking place around the world, the action has been most pronounced in countries with extremely high unemployment. We have to face the facts. The Government's offer to young people in Britain has been massively diminished. We have seen an end to the September guarantee and an end to the future jobs fund, which I know was helping young people in my constituency to build their CVs, so that when the recession ended and growth returned, they would be able to apply for jobs. We have seen an end to the education maintenance allowance, which was helping young people in my constituency to travel to the best possible courses for them, and an end to the commitment of the previous Government to the level of funding for further and higher education.
I was so concerned about what might happen to young people's employment prospects that I asked the Minister responsible for employment some parliamentary questions about his expectations for the number of 16 to 24-year-olds on the dole. By my calculation, once we have taken into account the population projection for the current cohort of 16 to 24-year-olds, the Government expect there to be a reduction in the number of 16 to 24-year-olds on the dole across the life of this Parliament of less than one percentage point. I must ask Government Members whether they think it is good enough that the Government's ambition throughout this Parliament is to reduce the number of young people on the dole by one percentage point. I do not think that is good enough.
The only answer that the Government seem to have to the unemployment that young people are facing because of the global crash and the Government's inaction is their spurious figure of 75,000 new apprenticeships. We have already heard evidence that, even during the recession, the Labour Government were supporting a year-on-year increase in the number of apprenticeships of more than that, so the present plan seems wholly unambitious.
There is a further problem for 16 to 18-year-olds, many of whom are the very people we want to get into industry and business. They might not want to stay in full-time education, for whatever reason. As far as I can ascertain-I stand to be corrected if the Minister wants to intervene-16 to 18-year-olds will not be eligible for the new adult apprenticeships that the Minister wants to fund.
The Minister for Further Education, Skills and Lifelong Learning (Mr John Hayes): We do not have much time, so I will be brief. The hon. Lady is right that 16 to 18-year-olds are not eligible for the 75,000 extra apprenticeships, which are based on the £250 million we have invested in adult apprenticeships, but my role in the Department for Education means that I have been able to secure money to allow for 30,000 more apprenticeships for 16 to 18-year-olds, making more than 100,000 in all-the biggest boost ever in the number of apprenticeships in Britain.
I am glad to hear the Minister's intervention; I have often found him to be a partner for peace on this subject. However, I still worry about
investment in business and about business growth. Money might well be set aside, but we still might not see the increase in opportunities for young people that we need.
Let me leave the Minister responsible for further education and the Business Secretary with this final point. They must work with local government. In Wirral, the one thing that has made a real difference to apprenticeships and young people's employment is the Wirral apprentice scheme. It was funded with working neighbourhoods fund money via the local authority, which meant that that small and medium-sized enterprises could access support to hire apprentices. That is the one thing that has worked. Making local government suffer the biggest cuts in any part of government is not fair, and the impact will be worse on young people. I plead with the Secretary of State and the Minister-
Brandon Lewis (Great Yarmouth) (Con): Over the last few years, the thing that I have heard most from business-whether it be from the Federation of Small Businesses, the chambers of commerce or individual businesses that I have dealt with in my own business, as a parliamentary candidate or, for the past 10 months or so, as an MP-is that there is too much regulation. My hon. Friend the Member for Northampton South (Mr Binley) made the point extremely well earlier, and just how much of a predicament that poses for business growth cannot be underestimated. It really does hamper too many business men, particularly those in small businesses, who spend too much of their time dealing with regulation. They spend more time dealing with that and feeding back data than they ever do in developing and selling their businesses. That has got to stop. I congratulate the Government on taking steps to deal with it.
Business is unlikely to thank the Labour party or Opposition Members for tabling this motion. When business people look through it, they will find that it contains nothing positive about either this country's business or what the Labour party suggests should be done about it. Perhaps we are back to the original blank sheet of paper; I suspect that it will stay like that for some time yet.
What business is more interested in is not the clunking fist of Whitehall that pulls a lever and delivers a box that it has to fit into-through some fictionally created regional development agency that was simply not delivering-but the opportunity to develop its own destiny. In my area, for example, the New Anglia local enterprise partnership is excited about the opportunities available for Norfolk and Suffolk businesses to work together. It is something that they desired, which they brought forward themselves, and it is led by the business community. This is not a Government quango or something directed from Whitehall, but something that the businesses want, working on issues that they want to work on. That is hugely important to the LEP. It is why organisations ranging from Adnams and the Federation of Small Businesses to the energy industry and companies such as Lotus are excited about what this can deliver. It has been fantastic to see businesses working together, and with local authorities, to deliver the LEP for our area.
The key is the "L" in "LEP"-local. The LEP can look at what Norfolk and Suffolk want and need. That is why it is able to focus correctly on tourism, for example, or other industries that can create jobs and develop the economy more quickly and more cheaply than almost anything else. Energy, as I say, is also hugely important to our region. The energy industry in our area is represented largely by an organisation called the East of England Energy Group, which brings together private companies, which fund it, support it and work together within it. The LEP has recognised that and is working with the energy industry.
One important shortage is skills. There is a huge gap between the demand for skills in the energy industry-we have a burgeoning energy industry, with even more to come from renewable energy and wind farms-and what is currently available. That is why I congratulate the Department and the Minister for Further Education, Skills and Lifelong Learning on the great work already done. As we have just heard, they are now delivering more than 100,000 apprenticeships for various ages. Potentially even more important is the fact that colleges will have the freedom to develop the skill sets that people need in their local areas to deliver for business.
The energy industry in my region has been screaming out for some time, but it has not been telling me about the great work that the RDAs were doing or thanking the previous Government for what they did. It has been saying, "We need freedom from regulation, and we need to be able to develop skills for the future." I urge the Minister and his Department to view carefully and sympathetically the bid from Norfolk and Suffolk for a skills centre that would focus particularly on the delivery of skills for the energy industry.
The Government's moves to free up colleges, create apprenticeships and invest money are enabling us to develop the skill sets that our country, and in particular my region, need. It is that development of skill sets that will deliver growth, and it is that education and those apprentices that will enable our economy to develop. I congratulate the Department, and our Government as a whole, on the fantastic work that they are doing in that regard. It is just a shame that the Opposition seem to have no ideas of their own to take us forward.
Chris Leslie (Nottingham East) (Lab/Co-op): As only a few minutes remain before the winding-up speeches, I shall be able to make only a limited number of points. I pay tribute to my right hon. Friend the Member for Wolverhampton South East (Mr McFadden), who summed up the Department's current problem succinctly. Its problem is that it focuses on commentary and has no focus on delivery. It is a backward-looking Department.
Something obviously happened to the Secretary of State, once a great champion of intervention, during his transmogrification as he took public office. [Interruption.] My hon. Friend the Member for Wrexham (Ian Lucas) suggests that the Secretary of State's political motives may have changed. In any event, he lost all sight and knowledge of the role that stimulus can play in our economy, and returned to the laissez-faire approach that his new-found friends have always adopted. He has no plans for growth. He ran through a number of
analytical critiques of the previous Administration, but at no point did he reveal a strategy of his own to boost jobs and growth in our economy. That is a great pity.
I shall make two points in the short time available to me. The first concerns the economy beyond Twickenham-the economy that exists out there in the rest of the country. Notwithstanding all the criticisms that Government Members may make of regional development agencies in their particular form, it was not necessary to put in the bin all the programmes, grants, loans and interventions and all the legal powers that were at their disposal at such a critical time for growth in our economy. Unfortunately, our growth rate does appear to be faltering. I am not sure that that can be attributed entirely to such measures as the scrapping of RDAs, but there is no doubt that RDAs brought with them an acumen, and an ability to intervene and engage in dialogue with business, that we are missing as they begin to wind down.
Others have mentioned schemes such as the grant for business investment and regional selective assistance, which invested a significant amount in about 50 companies in Nottinghamshire and created an enormous number of jobs. Every pound that was invested produced £9 worth of growth. I urge the Department to think again about its lack of regional growth policy: it is essential that they return to that mode.
The second point that I wish to raise in the couple of minutes that I have left relates to the Department's failure to tackle the banking crisis properly. Only about 12 months ago, the Secretary of State made a number of fine promises to the country. He said that he would insist that bankers were transparent about executive remuneration. Just 14 months ago, he told the Daily Mail that it was "a small advance"-I believe that he used the word "whitewash"-to make executive pay of over £1 million transparent purely on the basis of the numbers involved. That, he said, was a puny act. He said:
"Shareholders who own the banks and the taxpayers who guarantee them have every right to know who is being paid how much and for what... Directors of public companies are already required to declare their earnings... The failure of Walker to grasp this is compounded by Alistair Darling's meek acceptance of his recommendations. There are splits in the Government... Taxpayers sign the bankers' bonus cheques - so we must see the names and numbers on them."
The Secretary of State's own words are coming back to haunt him. It would be tragic if his emasculation in government meant that his diminishing power slipped further as he moved down the Cabinet table. It is important that he meets that weakness test. I hope that he will find a way to strengthen his position in government and take some action on the basic measures that we need to increase transparency in our economy.
Ian Lucas (Wrexham) (Lab):
The shortness of time available means that I will not have the opportunity to refer to all Members in my summing up of this debate. It has become better humoured as it has progressed and although that is perhaps unusual, I hope that it will continue. I particularly thank my hon. Friend the Member for West Bromwich West (Mr Bailey), the Chair of the Select Committee, for his contribution, which made mention of Sir Richard Lambert's statement that the
Government have "failed to articulate" their vision for growth. That was the case before his speech, but I regret that they have failed to articulate their vision for growth again today. My right hon. Friend the Member for Wolverhampton South East (Mr McFadden) made a particularly valuable contribution, pointing out that £2.8 billion has come out of capital allowances for manufacturing industry and £2.7 billion has gone into the rest of the economy, including a tax cut for bankers. Bankers were mentioned regularly in the debate.
The hon. Member for The Cotswolds (Geoffrey Clifton-Brown) made an interesting contribution, in which he referred to investment and the issue of visas. That continues to be a problem, notwithstanding the efforts that the Secretary of State has made. The important issue of foreign direct investment was also raised. The hon. Member for Angus (Mr Weir) made the valuable point about individuals and partnerships that do not pay corporation tax and therefore do not benefit from tax cuts of that nature. We need to examine ways in which those individuals and partnerships can benefit from support. Investment in business is very important indeed, a fact stressed by the hon. Member for South Staffordshire (Gavin Williamson) in a valuable contribution. I particularly enjoyed the contribution from my hon. Friend the Member for Wirral South (Alison McGovern), who introduced Bill Shankly into the debate. I have to say that the late, great Bill Shankly's views on economic growth were much more coherent than the Secretary of State's.
Last week's growth figures were truly shocking. When Labour left office, growth was increasing and unemployment was falling. The net result of this Tory-led Government's policies has been to create conditions where the economy has contracted and unemployment is rising. In 2008, the Labour Government faced the most severe world economic crisis since 1929. Their response was to introduce a number of policies to support industry and jobs, and they acted fast. They gave business more time to pay taxes. They introduced an enterprise finance guarantee scheme to assist lending to business, and a car scrappage scheme to support our automotive industry at its most difficult time. They also used Train to Gain to help businesses to invest in training. Not one of those initiatives was opposed at the time by any of the parties now on the Government Benches; on the contrary, the criticism that I received at the Dispatch Box was that our Government were not spending enough money fast enough. So all the tears that we see at the moment do not reflect the position of the parties now on the Government Benches when they were in opposition.
As well as providing effective help fast in the short term, Labour's active industrial strategy helped to create the right conditions for industry to grow-that growth was the legacy of the Labour Government to this Tory-led Government. We married research with industry to create the right conditions for investment. We got investment from Nissan and Toyota in low-carbon vehicles, and from Clipper in offshore wind. We obtained investment and support for institutions such as the National Composites Centre in aerospace, with companies such as Airbus, AgustaWestland and GKN plc being involved. That response was led by a Business Department that was at the heart of government when it needed to be.
Growth took place and the deficit, about which we have heard so much from those on the Government Benches, came in £20 billion less because of the action taken by business and by Government to reduce the crisis that faced this country in 2008.
Let us contrast that with the lack of urgency and complacency of this Government. In their hallowed coalition agreement, they said that they needed "to take urgent action", but they have not done so. Nine months on, we have no major loan guarantee scheme and no effective proposals to ensure a flow of credit for SMEs. That point has been made across the House and it is about time Government Front Benchers started to listen. The only step that they have taken on finance is to extend the Labour enterprise finance guarantee scheme. We have had no growth White Paper, and the Maoist and chaotic establishment of local enterprise partnerships means that those who should be working to bring jobs to British industry are looking for jobs themselves. The university sector that is so crucial to our long-term future is, after a decade of increased investment, wrestling with the consequences of an 80% cut in its budget.
At a Federation of Small Businesses dinner last night, I was asked, "What has happened to the one-in, one-out rule?" What are the Government doing about it? We have had the soundbite, but when is the policy going to be implemented? That is what businesses are asking me. The Secretary of State was at the dinner last night, so I hope he heard that, too. I was talking to people from the chemical industry yesterday and they told me about the negative impact on business of the Government's new visa regulations. Similarly, research from the Federation of Master Builders tells us that the VAT increase will cost 7,500 jobs in the construction sector alone. That is the sort of contribution that the Government are making to industry at this time. As the Secretary of State has said today, increased taxes cost more jobs than cuts in expenditure. That is absolutely right, so why did he increase VAT?
To cap it all, responsibility for one of the most successful and important industrial sectors in the United Kingdom-telecommunications-has been transferred out of BIS because of the Secretary of State's incompetence. This very morning, I was asked by telecoms representatives if the sector will be transferred back to BIS when the Secretary of State leaves. Perhaps he can answer that. There is no clearer symbol of the diminution of the Department than that transfer of responsibility for a major sector of the industrial economy. It is a disgrace and it will have a detrimental effect on British business and British industry as a whole.
The Department for Business, Innovation and Skills is at the margins at the very time when it needs to be at the centre of Government policy-and it loses battles. It has lost a battle with the Department for Communities and Local Government about planning, it has lost a battle with the Home Office over visas and it has lost a battle with the Treasury on banks. It is a Department diminished in influence and it is failing and letting down business. For the sake of British industry it needs to change and it needs to change fast.
The Minister for Universities and Science (Mr David Willetts): What a dismal picture of the business of government the hon. Member for Wrexham (Ian Lucas) has just painted. He thinks that all we should ever do is wage war with our own colleagues in order to raise the growth rate. That might be how the Labour Government functioned, with everyone having to fight their own corner against all the other Departments, but it is not how the coalition Government function. We all work together on an agenda to sort out the mess we were left by the previous Labour Government and the only way we can sort out a mess that big is if all the Departments share the same agenda-and we absolutely do. That agenda has business and being pro-business and pro-growth at its heart.
Let me take hon. Members through the measures we are introducing that are aimed absolutely at backing British business and raising our growth rate. For a start, we are reforming corporation tax, bringing the main rate down from 28% to 24%, making it one of the lowest rates in the advanced western world. We have already eased the burden of national insurance on British business by £3 billion and we are specifically helping small businesses. Several colleagues, including my hon. Friends the Members for Brighton, Kemptown (Simon Kirby), for Northampton South (Mr Binley) and for South Staffordshire (Gavin Williamson), have raised the issue of small businesses, to which we are committed. There is the scheme that the hon. Member for Wrexham mentioned, which we inherited from Labour-the enterprise finance guarantee scheme-which helps small businesses. We have put an extra £600 million into it so that there is extra lending to small businesses. In addition, we have created the new enterprise allowance scheme, aimed at helping unemployed people to get work as self-employed. Of course, we know that one of the biggest problems that small businesses face is the burden of employment regulation, which is why we are committed to reforming employment tribunals-to give small businesses confidence to take on new staff.
Of course we are committed to bringing down the burden of red tape. We are absolutely committed to the one-in, one-out rule, and we are also ending the gold-plating of regulations from Brussels that add completely unnecessary burdens to British business. We are committed to well-balanced regional growth, which is why we already have 28 local enterprise partnerships going. They already represent two thirds of all businesses across the country. There is a regional growth fund with £1.4 billion to invest on excellent projects across our regions.
Yes, we are absolutely backing growth and we are tackling the fundamental weaknesses that we inherited from the Labour Government, such as insufficient investment in infrastructure. That is why we have produced a national infrastructure plan, with a green investment bank and £1 billion for energy-efficient investment, with more to come as asset sales come through.
We are committed to trade and to ensuring that Britain is open for business. I can tell my hon. Friend the Member for The Cotswolds (Geoffrey Clifton-Brown) that we absolutely understand that and we will be setting out in our trade policy White Paper, which is due very soon, the overall framework of trade policy. We do not believe that LEPs should automatically be held responsible for trade policy. Inward investment will be a
responsibility of UK Trade & Investment, but if LEPs wish to work with UKTI on that, they are welcome to do so.
We have taken a deliberate decision to focus our trade activity on the big, growing economies of the future-Brazil, Russia, India and China. My right hon. Friend the Secretary of State has already personally led trade missions to all four of those growing economies-crucial markets for the future. So yes, we are absolutely battling for Britain in trade talks.
Geoffrey Clifton-Brown: I made this point in my speech: we should be concentrating not only on the BRIC countries, but on other fast-growing markets such as Indonesia and Turkey, and I seek the Minister's assurance that we will do that.
Mr Willetts: I intend, time permitting, to go to Indonesia, where we have some specific trade objectives, and I think the Secretary of State plans to be in Turkey, so we recognise those countries' importance. All of us, working with Lord Green in the other House, have trade promotion at the top of our agenda for this Government.
I have referred to the burden of tax, the burden of regulation, our support for small businesses, infrastructure and trade. There is also the crucial investment in the skills that we need for the future. Again, we inherited a mess from Labour. Many Members on both sides of the House will remember the disappointment when further education colleges, having had their hopes raised that there would be billions of pounds for capital projects, found that the money ran out. Labour's problem with further education was that the money ran out even before the election, so Labour Members were holding the baby. They know the situation they left us.
Mr Harris: The Minister has outlined the impressive growth strategy being pursued by this Conservative-led Government, which has resulted in a 0.5% contraction in the economy. What would that have looked like without his growth strategy? What would have been the result if we had been deprived of that strategy?
Mr Willetts: We do not know what would have happened to the British economy if the Labour party had been in office, but I tell the House that if Labour had carried on borrowing in the way it was, we could well have faced a crisis of the kind that happened in Ireland, Greece and Portugal. We will never let Labour Members forget that they were taking Britain to the brink of that type of financial crisis. We have taken our country away from it.
I was about to refer to the investment that we are also making in skills, with support through the capital renewal fund for our FE colleges, steered by my hon. Friend the Minister for Further Education, Skills and Lifelong Learning, and a commitment to 75,000 extra apprenticeships. We can already see the impact of our commitment on apprenticeships: in the first quarter of the year, we had 120,000 new apprenticeship starts, while a year ago, at the same moment, the figure was
100,000. Extra apprenticeships are already coming through because of our practical commitment to vocational training.
Alongside vocational training, of course we recognise the continuing pressure on our universities. That is why we had to reform their financing. Had we not done so, we would have faced reductions in the number of university places or reductions in the financial support for each student at university. Instead, we have been able to maintain our commitment to 10,000 extra places at university and urge universities, with requirements to back this up, to focus on the employability skills of their students. When people emerge from university, they should have had practical experience of the world of work already. So we are focusing on skills and universities as well.
We are protecting the budget for science and research and enabling important capital projects to go ahead, such as the UK centre for medical research and innovation at King's Cross. We are taking practical steps to ensure that we can enjoy the benefits of our excellent research effort-speeding up the process of getting a patent and intellectual property protection, which can be too slow. Yes, we are backing research and development, and we are backing the technological application of that by encouraging our new technology innovation centres.
It was a great disappointment when we had the news from Pfizer. I met the global chief executive officer and the UK chief executive of Pfizer on Monday 24 January, when they informed us in strict confidence of their intention to close the Sandwich plant. We did, of course, press them on their decision. They made it clear that it was a decision based on global strategic considerations by the company as a whole, as it moved away from some of the lines of research in which Sandwich specialised. They made it clear that it was not because of any disagreement that they had with this Government's economic policies.
Since then we have been in close contact with Pfizer. I have asked Paul Carter, the leader of Kent county council, to lead a local task force on the matter. The Secretary of State and I will be working hard to try to find innovative alternative uses for that excellent research facility and to back the very skilled people there.
We are doing all this against the background of a serious financial crisis left for us by the previous Labour Government. The shadow Secretary of State, the right hon. Member for Southampton, Itchen (Mr Denham), said, "There are no deficit deniers" on the Opposition Front Bench. He was able to say that only because the shadow Chancellor was not sitting beside him at the time. We know that deficit denial is one of the fundamental problems that the Labour Opposition face if they are ever to become a credible party of government again.
Although the shadow Secretary of State said that he was not a deficit denier, he went on to say that the large deficit had arisen because of the banking crisis. Britain was running one of the worst structural deficits of any advanced western country before the banking crisis. One of the tests of whether people recognise the seriousness of the challenge that they face is their willingness to accept that that was the problem. If they do not accept that that is the problem, they are deficit deniers. It is as simple as that.
Then the right hon. Gentleman seemed to fail to recognise the wide range of business leaders in Britain and elsewhere who have backed our policy to tackle the deficit. He went on to say that we just blamed the snow for the economic problems that we faced. Okay, I will do a deal with the shadow Secretary of State. We do not just blame the snow; we blame the last Labour Government.
It was the last Labour Government who got us into this mess. They left us an economy with the worst deficit, unsustainable spending, the most leveraged banks, the biggest housing boom, unsustainable levels of personal debt and personal saving negative-almost unprecedented in any advanced western country. That is the mess that they left us. That is what we have to sort out. Already, working with the Secretary of State, we are putting in place a growth strategy to emerge from the mess.
My right hon. Friend the Secretary of State was one of the most eloquent and effective people in warning about the mess that Labour was making of our economic situation. He warned about the level of debt. He was quite right to do so. Now, the present Government must tackle it. It was those on the Labour Benches who left the patient dangerously ill. Now they complain as we, sadly, have to deliver the treatment.
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