§ Motion made, and Question proposed, That the sitting be now adjourned.—[Dan Norris.]9.30 am
§ Ross Cranston (Dudley, North)
On Friday, just around the corner from my office in Dudley, I visited an archaeological dig led by Pete Boland, Dudley's archaeologist. The dig is uncovering features of the local glass industry dating from the 1700s. It closed around the mid-19th century. I saw the remains of a glass cone and its furnace, which are now being unearthed, cleaned and studied with the help of Birmingham university archaeologists.
So Dudley has had a long association with manufacturing. Abraham Darby, father of the industrial revolution, was born on the Wren's Nest in 1678. A forerunner of the coking process had been developed earlier by the son of the local Baron of Dudley. By the mid-19th century, glass, iron and other manufacturing dominated the life of Dudley, as manufacturing did other parts of the black country. Stuart Crystal—a major glass company in the area—was the manufacturer of the crystal glass used on the Titanic.
Although manufacturing is alive and well in Dudley and the black country more generally—and I will return to that later—its character and size have changed. The large iron and steelworks have closed, although there are still castings and the fabrication of metal products. Royal Brierley Crystal has a limited presence in my constituency. There was a steep decline in those employed in manufacturing in the 1980s from 43.3 per cent. of the work force in 1981 to 31.9 per cent. in 1991. The relative number employed in the manufacturing sector seems now to have stabilised at about a quarter of those working in Dudley.
Also on Friday, I spoke about this debate to four people in Dudley whom I know especially well: Bob Duncan, Barry Guest, Rod Adams and Melvyn Mottram. All have worked in manufacturing and all have experienced its vicissitudes, the redundancies, the closing of factories. It is fair to say that they all acknowledge the realities of a globalised economy—the competition from cheap-labour economies such as China and the restructuring of British industry that that involves. They are conscious of the present downturn in the world economy, but they are adamant about the continued importance of manufacturing to this country. They raise serious issues, with implications for Government policy—the loss of skills, the availability of training opportunities, the access of smaller businesses to finance, the balance between large and small companies and the burdens on business such as the present costs of liability insurance. I would welcome the Minister's assurances on some of those points.
2WH As to the continued importance of manufacturing to this country, those four men are absolutely right. Manufacturing contributes importantly to our earnings from abroad with more than three fifths of our exports. Any further fall in manufacturing's share of the economy would, as the Engineering Employers Federation has put it, create the danger of a large structural trade deficit, which would leave us dependent on our earnings from investments abroad and on attracting capital inflows. Moreover, manufacturing is a key to closing the productivity gap with other European countries such as Germany and with the United States, as it achieves faster growth in productivity than the rest of the economy.
Manufacturing is also an important source of innovation in the economy; it is responsible for around 80 per cent. of research and development. Finally, there is the contribution of manufacturing to particular regions of the country. In the west midlands, more than 500,000 people are employed in manufacturing—more than in any other English region. In the 1980s, manufacturing took a hammering in the west midlands, with devastating consequences for individuals and their prospects. Any downturn in manufacturing has a disproportionate impact on the region, and on Dudley, which is part of it.
In the past year or so, the Government have made explicit their belief that a strong manufacturing sector is vital to our future prosperity. That explicit commitment to manufacturing in "The Government's Manufacturing Strategy" published in May 2002 was important in correcting a perception that in their first term the Government did not take manufacturing as seriously as they should have done. My right hon. Friend the Secretary of State and my hon. Friend the Minister for Employment Relations, Industry and the Regions have done much to assert that manufacturing matters. The seven pillars that they identified in the strategy highlight key goals and policies and will prove useful in measuring progress. I commend them for their work so far.
In the past six years, the Government have provided macro-economic stability, with low inflation and low interest rates, and there have been specific fiscal measures such as the lowering of corporate tax rates, especially for small firms. The issue that manufacturers consistently raise with me, however, is the value of the Cap pound. Yesterday, Gemini Ernst and Young helpfully provided me with the results of the business outlook survey carried out in December 2002 on 750 manufacturing companies. It found that 38 per cent. of UK manufacturers increased the proportion of their total output produced overseas during 2002 in a bid to cut labour costs and—this is the point relevant to macro-economic policy—to obtain a more favourable exchange rate.
I cannot see an easy way round the exchange rate issue. Manufacturers are certainly not overwhelmingly of the view that entry to the euro will solve the problem. In the Financial Times yesterday, a MORI poll of 164 chairmen and chief executives from the country's top 500 companies showed that 50 per cent. do not support the principle of entry, against 42 per cent. who do. That reflects a movement against entry, which is also evident in the recent British Chambers of Commerce survey.
3WH An attempt to manipulate the exchange rate, by the Bank of England lowering interest rates for example, would stoke inflationary pressures. That might be good for property owners in the south-east, but not for west midlands manufacturers. Deflating the economy through fiscal measures, in another attempt to manipulate the exchange rate, would have unacceptable social consequences as well as reducing the demand on which manufacturers partly depend, unless they export their total output.
I return to some of the concerns raised by my four Dudley informants: first, the loss of skills. By that they mean not simply personal skills but our collective knowledge as a nation. Firms in Dudley and the black country were often pioneers and innovators. I know that my hon. Friend the Minister is concerned with encouraging more innovation and getting British companies to invest more heavily in R and D. Compared with other major industrial countries, we have invested proportionately less, although the Treasury's reports on productivity in the UK chart encouraging improvement since 1998. The R and D tax credit and the fiscal measures to encourage science should reinforce that trend. Although the UK has a strong science base, however, the conventional wisdom is that we fail to translate that into commercial success. The most recent confirmation of that was the report last June, to my noble Friend Lord Sainsbury, by the UK nanoscience and technology advisory group.
There is much to hope for with the launch of the Department of Trade and Industry Manufacturing Advisory Service and its mission to encourage manufacturers to innovate with new technology and practices. I am especially pleased that the regional centre for manufacturing excellence in West Bromwich adjacent to my constituency is up and running and already providing advice and assistance to companies in Dudley. I congratulate the Minister on that initiative, with which he had a close involvement. Perhaps he can inform us of the experience of MAS to date and the comparisons with other national advisers to industry such as MICE, which seeks to deliver improvements in the metal sector through the application of lean manufacturing practice and supply-chain efficiency.
The picture is disappointing for individual skills in Dudley and the black country. In January 2001, the Basic Skills Agency reported that 46,660 adults in the borough aged 16 and over had poor literacy, and that 48,920 had poor numeracy. That places Dudley slightly above the national average for poor literacy and numeracy. Information technology skills are also under-represented in the Dudley work force.
The low skills base is reflected in the vacancies that are unfilled at professional, technical and senior levels. However, I am especially pleased at the progress that David Wray and his team at the Black Country learning and skills council have made. The black country has had one of the worst staying-on rates in the country for young people over 16, but there are the first real signs of change. Reports published in December suggest that Dudley has seen the largest increase in 16 to 18-year-olds staying on in sixth-form colleges, which takes us from well below the national average to just above it. 4WH Tackling adult literacy and numeracy skills has taken a turn for the better after a local publicity campaign overcame the shortage of tutors.
I am especially pleased with the excellent work being done by Dudley college, which has 1,000 staff and 40,000 students, including 500 from abroad, and has earned the Basic Skills Agency post-16 kitemark and three beacon awards for excellence. The college provides most of the training for MG Rover apprentices. An adult learning inspection recently awarded MG Rover six grade 1s for its training for apprentices. The inspectors' report states that work-based learning in engineering, technology, and manufacturer business administration and management are excellent. The college is in the process of establishing a Black Country centre of vocational excellence for engineering and manufacture to provide for advanced technology skills in support of regional manufacturers. I invite my hon. Friend to visit the centre once it is established.
Skills are also necessary at the top level of manufacturing. The Engineering Employers Federation report of late 2001 identified important management failures, such as not adopting techniques such as lean manufacturing, despite evidence that 30 per cent. of companies that do so reap significant productivity gains. Last October, a McKinsey report examined 100 manufacturers and concluded that the crisis in the sector was due above all to poor management. It suggested that the key to the relatively strong performance of foreign-owned companies in the United Kingdom was management, not employee performance or Government regulation.
There are good UK managers in manufacturing, who are concerned about innovation and investment and not simply about reducing costs. They focus on design and marketing as much as on making things. On 26 March, the Black Country chamber of commerce will launch its manufacturing support campaign in the Palace of Westminster. My hon. Friend is sure to be invited. The policy and representation director of the chamber of commerce, Ian Brough, told me about some of its major themes. I am pleased that helping management to identify niche segments, promoting high value-added products and fully exploiting design and innovation will be at the forefront.
That approach resonates with that advanced by my right hon. Friend the Secretary of State. Last year, she launched a study led by the United States management expert Professor Michael Porter to review and collate existing studies of UK management practices and to analyse their effect on productivity. I hope that his report, which I understand is due to be published soon, will help to guide those in British management to make the best of their resources in people, processes and equipment. They need constantly to ensure that they are providing the right products for the world outside. British managers should try to keep up to date with developments and provide the right environment for harnessing innovation in their organisations. I look forward to seeing Professor Porter's report, and hope that there will be useful lessons for the black country.
The McKinsey study downplayed the role of regulation in manufacturing difficulties, yet a constant refrain from business is that it is overly burdened by regulation. Only last Friday, the Black Country chamber of commerce was quoted in The Birmingham 5WH Post as calling on the Government to help to boost business confidence by slashing red tape. Indeed, at regular meetings with the chamber of commerce, the subject of red tape is raised, but when members of the chamber are challenged to produce examples, they are strangely silent. I would need several hours to unpick the notion of over-regulation. I do not deny that in some cases, a lighter touch might be justified, but let me make three brief points.
First, the notion of regulatory burden often ignores the interests of other stakeholders in manufacturing—notably employees and their interests in, say, a healthy and safe working environment. Secondly, the notion is not always borne out by the response of management to specific aspects of regulation. For example, I was especially taken last year with the SGS Consultancy national survey of small and medium-sized enterprises. Nearly three quarters of respondents said that the minimum wage had had no effect, while almost two thirds said that equal opportunities legislation had had no effect and 19 per cent. said that it had had positive effects.
That leads to my third point: the acknowledged benefits of regulation. One example that I shall mention in passing is the Black Country forging and foundry project, the aim of which is to reduce noise in the industry. That will benefit employees and residents of the area.
The Government have a prime role in providing institutional support to industry and not just in regulating it. I mentioned the Manufacturing Advisory Service. The Small Business Service is also up and running, providing support to small manufacturers and other businesses. In its 2002 report, the Trades Union Congress warmly welcomed the refocusing of the Government's industrial and economic policies towards regional level, as do I.
Last week, my hon. Friend the Minister met the new chairman of the West Midlands regional development agency, Advantage West Midlands, to discuss its priority of supporting industry. Perhaps he can give a brief report on those talks. It is early days for AWM, although I have struck a couple of unexpected bottlenecks in relation to projects in Dudley, which I may need to bring to my hon. Friend's attention later this month. That said, AWM's agenda for action—modernisation, diversification and excellence—is certainly the right one.
In 200 years, industrial archaeologists will, I imagine, still be excavating in Dudley. If industry invests in R and D and pursues technical design and innovation, and if the Government's manufacturing strategy delivers skills and expertise to factories and workshops, the archaeologists' reports will be of the historical success of manufacturing and its adaption to the challenges in the first part of the 21st century.
§ Mr. Jim Cunningham (Coventry, South)
I was particularly interested in what my hon. and learned Friend the Member for Dudley, North (Ross Cranston) had to say about manufacturing. I think that we are really talking about the situation in the west midlands and nationally. Some hon. Members will know that the west midlands has been one of the economic 6WH powerhouses of the country in manufacturing innovation. However, it is fair to say that in western countries manufacturing has been in decline for some years, and the decline in the United Kingdom seems to have been sharper. Let us consider the economy of the west midlands, for example. A quarter of the industries are manufacturing industries, so a quarter of the jobs are in the manufacturing industries.
One issue that my hon. and learned Friend touched on and which we have campaigned about is research and development. Anyone who knows anything about manufacturing knows that a considerable percentage of outside labour costs goes into R and D. A company such as Rolls-Royce, for example, would invest heavily in projects and new engines, but would not get a return on that for 10 to 15 years. That is one of the problems that such companies have experienced over the years. Over the past five or six years, Rolls-Royce—as—as I am sure hon. Members know—has gradually been shedding labour. That process started before 11 September; I remember attending a series of meetings with the company. It might be argued that, in that loss of labour, there is an element of outsourcing to other countries. The trade unions will raise that as an issue, if anyone ever has discussions with them, but such outsourcing does not occur only in companies such as Rolls-Royce. Outsourcing is widespread, and it might be said that it is costing jobs in this country.
A further aspect of declining manufacturing in the west midlands is one that we sometimes tend to forget: the small supplier. The small supplier can be badly hit when there are cuts. Such suppliers are often small companies which, in brighter times, we would say were the backbone of innovation in British industry. We should be aware that some of the events and actions that emerge from central Government or result from world events can often hit the small company.
I am sure that some hon. Members will remember the Rover situation a few years ago. Anyone who visited the area at that time would have been struck by the fact that many people——even those who worked at the corner shop—knew someone or had a relative who worked at Rover. It is probable that thousands of small suppliers would have been badly hurt if Rover had been allowed to go to the wall. The Government and the Trade and Industry Committee put tremendous effort into trying to save Rover, and, fingers crossed, MG Rover seems to be thriving these days.
Coventry, in a similar way to the black country, has a tremendous industrial history, from the manufacture of bicycles to motor cars. Coventry was one of the first places to be devastated by the recession of the early 1980s. I remember the thousands of redundancies there during that period. However, through diversification over a number of years, the city has been able to reinvent itself economically.
Although we should not be alarmed by current trends, we should nevertheless be cautious. Recently, there has been the Marconi situation and its ramifications not only in Coventry but nationally and internationally. Although Marconi has restructured, it is still going through a process of job losses. Over the next couple of weeks, the local MPs will meet the employees of Marconi to see how far the company has progressed in its restructuring and, more important, how many jobs can be saved or will be lost.
7WH We should not talk ourselves down; we should remain optimistic. However, the textile industry gives cause for concern, as I am sure the Minister will be aware. We might debate the reasons why the textile industry is in decline in this country. Traditionally, the industry has been the preserve of the east and west midlands as much as of any other part of the country, and its decline has been having a sharp effect on the east midlands. I am sure that colleagues from the east midlands could elaborate on that a great deal better than I can.
We should, however, welcome the new manufacturing strategy; I am sure that those who work in industry will also welcome it. A manufacturing strategy can offer a five to 10-year programme for training and investment to meet the needs of the economy and, more important, to promote exports. The strategy is probably the first attempt for about 30 years to try to take manufacturing seriously. We must also encourage investment—my hon. and learned Friend mentioned red tape—and do nothing that hinders it, because investment is very important to manufacturing industry.
It is also important to get our transport structures right. We all know of difficulties with the railways, which play a vital part in transporting our manufacturing goods abroad. That is why, a few years ago, the west midlands took an interest in the Hams Hall project. My hon. Friend the Minister will know exactly what I am talking about. Without that project, goods coming from and going to Europe would not have stopped in the midlands. The next stop would have been Newcastle and then Glasgow. The midlands would have been bypassed, accelerating its decline. That shows how vital it is to have a proper transport structure for transporting our goods.
The regional development agency has been up and running over the past two or three years; it played a major role in reviving Rover. The RDA is still in its infancy, but the resources made available to it to help industry are insufficient and should be increased. I hope that the Minister will reflect on that. More generally, we need to help industry by providing a major retraining programme. Several retraining programmes are in force in Coventry, but I wonder how strong programmes like them are nationally and in the east midlands more widely.
I welcome this morning's debate and I thank my hon. and learned Friend for introducing it. Despite what people think, the west midlands still takes manufacturing seriously and we are always guarded about its future. The area has a tremendous history of innovation, enterprise and inventions such as the motor car.
The bulk of employment today is in small rather than major companies, many of which outsource. Today, about 4 million people work in the manufacturing sector. It is worrying, but I try to remain optimistic without being over-confident. We should certainly be vigilant about manufacturing in this country and try to learn from our competitors abroad.
One important body not often mentioned is the World Trade Organisation. People do not realise the significant role that it plays in manufacturing. Some 8WH agreements are made—or foisted on us—that make it difficult for us to subsidise our industries, whereas the French and certainly the Americans can, particularly to do with research and development for defence. The costs of such R and D are covered through defence programmes—always a burning economic issue. The public in this country often do not realise that the WTO fixes everything from the price of sugar to that of an aircraft engine. We do not debate the WTO often enough, though it is half the problem of third-world exploitation. We should focus more on the effect of the world economy on people's daily lives.
I shall conclude on that note and congratulate my hon. and learned Friend once again on securing this debate.
§ Mr. David Drew (Stroud)
I am pleased to participate in this debate at such an opportune time and I congratulate my hon. and learned Friend the Member for Dudley, North (Ross Cranston) on securing and introducing it. He gave a precise run across the terrain, though manufacturing is so diverse that much more could and should be said—and I hope to make a few additional points.
When people hear of Stroud, they often misunderstand the nature of the area that I represent. To many people, it means the Cotswolds and the Severn vale—a beautiful environment with a large service industry. In fact, something approaching 40 per cent. of employment in the Stroud valley is still in manufacturing. Therefore, when manufacturing catches a cold, at the very best we sneeze but sometimes we get the flu. We saw the decline of the early 1980s, which my hon. and learned Friend well described. Manufacturing has been in the doldrums for some years, but there is another side to consider.
I had the opportunity yesterday to visit one of the new companies that have come into my constituency. It is a company of which many hon. Members will have heard, and it has held a conference today at the Queen Elizabeth II conference centre. It is Unite, the leading manufacturer of what are technically called modular built units, which we are now providing for students and key workers. It was good to see under the leadership of John Tonkiss the way in which the company has embedded itself into the local economy. It is providing jobs and would seem to be destined for success.
I want to make three points to put manufacturing in a sensible context. One is entirely positive, although the other two are less so. I start by paying tribute to my hon. Friend the Minister. We have had dealings on a particular case, which I will not mention for reasons that he and I both know about, and he has always been interested and responsive when I have been to see him. I hope that that relationship can continue, as the nature of manufacturing means that the Department of Trade and Industry has to act quickly on particular cases.
The positive point, which relates to those congratulations, is about the work of regional development agencies, which my hon. and learned Friend mentioned. We are fortunate in the south-west, as the South West of England Regional Development Agency has been keen to make its mark and has benefited from its chairman, board members and full- 9WH time staff. I am particularly grateful for its intervention in Dursley, where a major diesel manufacturer, Lister-Petter, was in considerable difficulties. I pay tribute to the RDA's strategic direction and willingness to get its hands dirty in the nitty-gritty issues of keeping companies going and sites available for manufacturing.
More than that, I pay tribute to the way in which the RDA brought on board not only the company, its work force and the trade unions but the local community in a groundbreaking attempt to consult widely on how we wanted the site to be redeveloped. The agency went to enormous lengths to lead that change and examine how to return industry to that site, which was mixed with housing in order to factor in some income and make the development as important as possible given the wider background of difficulty in manufacturing. Notwithstanding some of the Conservative party's comments about RDAs, I hope that it will reconsider its opposition to them. They are important, strategic and detailed organisations that can make an enormous difference.
The first of my two less positive points concerns the interpretation of state aid rules on manufacturing. I spoke about the subject in a recent debate in this Chamber, and I make no apology for returning to do so again. One of the worst aspects of the European Union is that it restricts the way in which companies can build relationships with the Government. We are prevented from intervening when it is appropriate by the simple fact that a competitor or European rival could complain that any intervention falls foul of the so-called state aid rules. I am sure that the state aid rules are written down, but they are subject to wide interpretation. The difficulty is that the system is negative in that it prevents one from intervening in the way in which one otherwise might, so one cannot test the waters because of the likelihood of being fined and hauled over the coals by the European Commission.
It is often alleged that other countries are far more liberal in their interpretation of state aid rules. I hope that my hon. Friend the Minister will be robust in defending industries and companies, because manufacturing is the lifeblood of this country. Our attitude in that field can be contrasted with our willingness, on all occasions, to intervene in agriculture. As someone who represents farmers and spends much time talking to them and seeking to change the common agricultural policy, I suggest that we move some of the money from agriculture to industry, which would have benefits all round.
I am talking not about favouritism or bolstering companies that are clearly past their sell-by dates, but about investing in high-tech and in research and development to rebuild our industries from within. Some money could go in that direction rather than being spent entirely on agriculture. I say that as someone who, as I am sure hon. Members know, always advocates fairness to farmers and the food chain. Sometimes, however, subsidy levels in the food chain have been counter-productive.
10WH I am afraid that my third point is very critical of one of the seven strands, which I am sure my hon. Friend the Minister knows about and which my hon. and learned Friend the Member for Dudley, North has already touched on: the role of the banking system. I am not here to criticise individual banks or to cast aspersions on everything that banks do, but when this Government were elected in 1997, I genuinely believed that the banking system was beginning to look more to the longer term. That was my experience in the Lister-Petter case. The banks involved were signed up to trying to stay on board over a period of time, including taking ownership of companies if that were required. It is a difference between us and the Germans that banks in Germany have always had shares in companies, to the extent that they have almost taken ownership of some. I see that as part of a genuine partnership between Government, companies and the banking system.
It is with some sadness that I have to say that my experience locally and nationally suggests that, although some banks seemed convinced in 1997 that a new relationship was required, that relationship does not yet really exist in practice. I hope that my hon. Friend the Minister will comment on how we are trying, by talking to those in the banking system in this country and—as one now has to—globally, to find ways of creating a brand new environment in which banks understand that they cannot invest in manufacturing for the short term. That must be for the long haul, but if it is done properly and partnerships are developed appropriately, rewards will be reaped. If we are looking at only short-term returns, manufacturing is, quite simply, doomed. We cannot do that. I hope that the Government have some good messages about how, at the individual and the wider environmental level, they are going to get to grips with ensuring that banks play their part, along with companies, the Government, employees, trade unions and local communities.
I have a quick rejoinder to my hon. and learned Friend, who rightly highlighted, as did my hon. Friend the Member for Coventry, South (Mr. Cunningham), the roles of training and bringing skills into industry. We have to be sorry that we have lost so many skills as a result of the closure of so many important companies. We must ensure that we attract younger people, particularly as the generation of people who currently work in engineering begins to die out.
I strongly agree with my hon. and learned Friend that there is a need for work-based training. Through the work of the regional agency and business link in Gloucestershire, we have tried to encourage those on industrial estates to make available a training room with up-to-date equipment so that people can train during as well as outside work time, and so that they do not have to make the effort to attend college courses—notwithstanding the fact that many such courses are very good.
We all know that time is precious. Many trainees work for small and medium-sized enterprises and, because of the constraints of the company's operation, they cannot be allowed to disappear for parts of the day. Therefore, I would like training rooms on every industrial estate throughout the country where, with the support of employers and initiative from trade unions, more people can be given encouragement to upskill or build the skills that are sadly lacking. Such measures will 11WH give people the hope that they are working in the right area and ensure that we begin to join the circle so that manufacturing in this country can again be strong and receive the support that it deserves.
§ Mr. Gareth Thomas (Harrow, West)
I congratulate my hon. and learned Friend the Member for Dudley, North (Ross Cranston) on securing the debate and on the way in which he introduced the topic. I apologise to my hon. Friend the Minister and the Opposition spokesman, the hon. Member for North-West Norfolk (Mr. Bellingham), because I may not be able to stay to hear the winding-up speeches.
Unlike my hon. and learned Friend the Member for Dudley, North and my hon. Friends the Members for Coventry, South (Mr. Cunningham) and for Stroud (Mr. Drew), I do not come to the debate with any important parochial manufacturing interests to help to inspire my contribution. My constituency is not famous for its manufacturing industry, but I seek to lock into the Minister's brain the name Thales Acoustics. The company is not in my constituency but just outside it, in the constituency of the Under-Secretary of State, Office of the Deputy Prime Minister, my hon. Friend the Member for Harrow, East (Mr. McNulty). It is an example of a successful, modern and effective acoustics engineering and manufacturing business. When the Minister is in discussions about contracts with colleagues in the Ministry of Defence, particularly the Minister for Defence Procurement, Lord Bach, I ask him gently to press the case of Thales Acoustics.
My interest in taking part in the debate is to make a case for a potential area of manufacturing for British industry. Renewable and sustainable energy technologies offer considerable new opportunities for British manufacturers, particularly as we try to accelerate the process of reducing greenhouse gas emissions.
Britain is well known for its windy climate and, therefore, for the potential of wind energy. Many in the fledgling wind industry await with interest the energy White Paper that is to be published soon by the DTI. At present, there is just one major manufacturer in the UK of wind turbines—the Vestas plant in Scotland. For other renewable technologies, there was only a manufacturer of solar panels, Intersolar in Bridgend, south Wales, which I understand has recently gone into insolvency.
Many in the House will be well aware of the problems faced by those who seek to develop combined heat and power systems, given the impact of the new electricity trading arrangements and, more important, the rise in gas prices, which has effectively killed off many of the plans for CHP manufacturers to expand in the UK. That is why CHP manufacturers are looking to the White Paper to begin the process of restoring confidence and providing new opportunities in the manufacturing of those technologies.
It is fair to say that the DTI has not always been a friend to Britain's fledgling renewable energy industry. Until 1997, under the previous Conservative Government, it was notorious for being a friend of the 12WH nuclear industry and of the coal industry—when Baroness Thatcher was not trying to destroy it to accelerate the take-up of gas. The Department was certainly not a generous funder and supporter of the development of renewable energy. Since the Labour party came to power, however, there has been a shift in the Department's attitude to renewable energy, which was no doubt helped by our 10 per cent. target, based on 1990 levels, for the take-up of renewables by 2010, and by our manifesto target to reduce carbon dioxide emissions by 20 per cent.
I urge the Minister to take away from the debate the need to champion the case for more investment in capital grants for offshore wind power and solar panels to allow us to create the domestic market from which to win new export orders. I say that not only because of the needs of British manufacturing but because CO2 emissions are rising in the UK. Accelerating the development of renewable industries in this country offers a win in terms of both British manufacturing and bringing down CO2 emissions.
If the Minister shares my enthusiasm for the development of renewable energies, I hope that he will seek to discuss with the Office of the Deputy Prime Minister the problems with planning applications, which thwart and delay the take-up of renewables in the UK and therefore limit the expansion of the manufacturing side of the industry. Some two thirds of planning applications for wind farms end in rejection or substantial delay. I know that the Office of the Deputy Prime Minister is looking at that issue and is sympathetic to it, but I hope that my hon. Friend's considerable talents will be put to good use in making the case for the speedy reform of PPG22.
Although the National Assembly for Wales is an excellent institution, which is led extremely effectively by the Labour party in Wales, I hope that my hon. Friend is willing to persuade his officials to encourage a more positive attitude to wind farm applications from the civil servants who serve it. For some reason, Wales has suffered from a planning blight in which renewables applications have been turned down.
My hon. Friend may also be aware that the take-up of renewables in the UK, and thus the opportunity to develop the manufacturing potential of renewable technologies, has been in part frustrated by the objections of the Ministry of Defence to a number of wind farm sites. I do not condemn it for its objections—wind farms interfere with radar—but a solution needs to be found if we are to see an expansion in the take-up of manufacturing opportunities in renewables. Any further effort that can be put into resolving and speeding up the MOD's handling of its objections to wind farm applications will be important.
The need for sensible regulation of the manufacturing industry is a point that has been well made by my hon. and learned Friend the Member for Dudley, North. If we are to see the take-up of manufacturing opportunities for renewables, the Office of Gas and Electricity Markets is an important source of regulation. With that in mind, the selection of a new chair and chief executive of Ofgem, which is beginning, is a particularly important process for the DTI. I ask my hon. Friend to remind other Ministers in the Department of the need to ensure that the person who is appointed is not the usual dry economist with no understanding of the needs of 13WH renewable technologies, but someone with a genuine sympathy for the manufacturing opportunities that renewables offer in the UK.
§ Mr. Drew
As I would expect, my hon. Friend is making an excellent speech in support of renewables. Does he agree that the two key points, for the promotion of renewables and the companies themselves, are the need to try to build the entrepreneurial spirit and the need to ensure that there is engineering expertise? That is why the background that he talked about is necessary; we need people to have both skills.
§ Mr. Thomas
My hon. Friend is right, and I want to consider some of the institutional mechanisms that can support the take-up of renewables and therefore the manufacturing potential of renewable energy technologies.
On the planning argument, I ask the Minister to offer to meet Opposition Front Benchers to encourage their party to adopt a more sympathetic attitude to renewable technologies. Conservative Members have often opposed wind farm applications in the House. I hope that the Minister will encourage them to dissociate themselves from that notorious flat-earther Bernard Ingham, who has led many a campaign to prevent wind farm applications from being accepted. I hope that the Minister will encourage the Liberal Democrats to be consistent in their attitude to renewable technologies. They say that they are always keen to support them, but whenever there is an application in a Liberal Democrat constituency, they are always willing to oppose it.
I hope also that the Minister will consider the institutional mechanisms. As I said in response to my hon. Friend the Member for Stroud, I have long believed that we need a sustainable energy agency in the Government to help to make a case against enthusiasts and lobbyists for nuclear power and the coal and gas industries—not that I am against those things. Given the fledgling nature of the renewable and sustainable energy industry in the UK, we need such an agency to bring together the expertise in the Government and to provide one clear point of access for those who seek to make their case and to develop renewable energy options. There is a sense that regional development agencies are beginning to recognise the manufacturing potential of renewable technologies. I hope that when the Minister meets the heads of the regional development agencies, he will encourage them to look with a bit more enthusiasm at the potential in that area.
§ Mr. Edward O'Hara (in the Chair)
Order. We have 37 minutes left. For reasons of equity and courtesy, it is desirable that Front-Bench spokesmen each consume no more than one third of that time.
§ Dr. Vincent Cable (Twickenham)
I shall honour your request, Mr. O'Hara.
I congratulate the hon. and learned Member for Dudley, North (Ross Cranston). The challenge in such debates is to say something new. This is the fifth or sixth debate that I have attended on manufacturing industry. However, the hon. and learned Gentleman is doing us a service. This is an important subject for the reasons that 14WH he explained. It is not just important at a parochial level for many constituencies; the manufacturing sector is still large in aggregate terms. We are talking about almost 20 per cent. of the national economy. It accounts for over half of trade and is important for productivity growth. Even though the themes and arguments are the same, it is important that we keep making them.
The key point is the pronounced long-term trend—it has been going on for half a century—of manufacturing industry slowly declining as a share of the national economy, regardless of which Government have been in power. Since 1979, the share has declined from 27 per cent. to 17 per cent. One can draw a line along a ruler to reflect that; there has been no marked deviation. That has been happening in the rest of the industrial world, but it has probably gone further and faster here than in other countries.
The most recent trend, however, is a little worrying. In the past five years, manufacturing industry has hardly grown at all. On average it has grown by 0.4 per cent. a year. The service sector has grown 10 times faster—by about 4 per cent. a year. The British economy is doing reasonably well, and growing at a rate of 2.5 per cent. It is stable, out-performing the rest of the western world and sustains a fair degree of buoyancy. However, it is almost entirely driven by the service sector. The manufacturing sector has been stagnating, and it is right to ask why.
Before dealing with that question, I want to make the point that it is unhelpful to draw a clear distinction between manufacturing and services and say that there is no connection between them. The contribution to the debate of the hon. Member for Harrow, West (Mr. Thomas) was useful in that regard; there is a connection. In my constituency, we have only one factory, which employs 75 people. There are others employed by "services", but that is misleading.
Over the past generation, many manufacturing companies which used to conduct design and marketing in-house or have their own IT consultancy branch have begun outsourcing such work. It is carried out by firms called service companies, but which are fully integrated with manufacturing. I often joke that Twickenham is one of the largest shipbuilding centres in Britain. Boats are not actually built there, but specialist IT companies in my constituency carry out all the design work for the Tyneside shipbuilding industry. There is a link between the service and the manufacturing economy, which we are in danger of overlooking.
Why has manufacturing apparently had uniquely difficult problems? They are not unique to manufacturing. The same sort of crisis has affected agriculture and traded services. As MPs in London know, a very sharp contraction is taking place in financial services, partly because of the problems of the stock exchange, but partly for the same reasons that manufacturing and agriculture have been affected. They are traded parts of the economy that are exposed to international competition. If there is a recession in the world economy, as there has been during the past year, it will hit those traded sectors more than others.
One factor makes the British manufacturing problem much worse than that of other countries, and it was mentioned by the hon. and learned Gentleman: the problems of the exchange rate. People often do not 15WH realise how damaging that has been. Manufacturers often produce a list of grievances about their difficulties, and the exchange rate is one of them. British manufacturing, agriculture and traded services have taken an enormous hit in recent years.
According to the Organisation for Economic Co-operation and Development, British manufacturing has lost about 30 per cent. of its competitiveness. In the jargon, the real, effective exchange rate, which is a measure of how one loses competitiveness because of exchange rate movements, stands at 30 per cent. The International Monetary Fund suggests that it is even 40 per cent. That is a staggering amount to lose. It is amazing that so many manufacturing industries keep going, make money and compete despite the enormous hit that they have taken.
That issue is central to the difficulties of manufacturing, particularly in recent years. As the hon. and learned Gentleman said—it is not a partisan point—it is difficult to deal with that. I do not pretend that there is a magic cure for the problem. We believe that if the Government declared their intention to lock in sterling to the currencies of Europe at a much lower and competitive rate, they would help the process to happen because the market would respond. I do not pretend that that is easy; we are not discussing a magic cure. The exchange rate is crucial to a definition of the problem.
What else can be done? The Government have produced a manufacturing strategy and many of its elements are sensible, so we can agree with them. It tends to emphasise macro-economic stability, training, infrastructure, attracting foreign investment and creating the right market framework—all of which are right and sensible and from which I doubt any of us would dissent. It is also important, not so much for what they say but for what they do not say, that the Government have not gone down the road of massive intervention and trying to rescue companies that are in difficulty or trying to bail out failing enterprises. That is right and an important development, although the Government do not advertise that. I have no quarrel with the basic framework of the manufacturing strategy, but I want to make two specific points.
First, the Government still have some manufacturing intervention. We still have the innovation budget, which amounts to around £1.4 billion. Some parts of that are well received and the small-industry element is popular with business, but how far are the Government evaluating the effectiveness of their own programmes? From time to time we hear reports that the Secretary of State has commissioned studies into how effective the programmes of the Department of Trade and Industry are in helping business and particularly industry. I am a bit sceptical about where some of the money goes and the results. Is there a point at which the Government will produce a self-critical evaluation of their own efforts in the DTI to help business? Which programmes are succeeding and which are not? How much of the money allocated reaches the front line and how effective is it? It would be useful in a non-partisan way to examine what the money is buying and how successful it is.
16WH My second specific point concerns complaints about regulatory burdens and business taxes. Although such burdens and taxes are minor in their impact compared with the exchange rate, they have an effect. One of the particular problems for manufacturing industry is that if a new tax, national insurance surcharge or whatever is introduced, it cannot pass it on to customers—unlike the service sector which can pass it on to consumers. So, the problem is doubly difficult.
The one area in which the Government should think again about policy is the climate change levy, which has aroused enormous ire because it bears disproportionately on manufacturing industry. I fully understand the environmental reasons for it, but the same objectives could have been achieved in other ways—through a carbon tax, applied upstream to filter through the whole economy without bearing disproportionately on manufacturing. The Government have heard that many times from manufacturers and I hope that they will rethink the matter while retaining their environmental objectives.
In conclusion, where do we go from here? I want to be optimistic, but dark clouds are appearing over the world economy. The United States economy is poised on a knife-edge and things could go badly wrong, particularly if the prospective war goes badly wrong. Japan is in a serious state of deflation and the German economy is in serious difficulty. All that will have an impact on our manufacturing industry and the outlook is not particularly good. I fear that in a year the hon. and learned Member for Dudley, North might return with another debate on the same subject and we shall, unfortunately, be saying many of the same things.
§ Mr. Henry Bellingham (North-West Norfolk)
I congratulate the hon. and learned Member for Dudley, North (Ross Cranston) on securing this debate because the matter is crucial to the constituencies of many hon. Members.
I should declare an interest: I am a non-executive director of a plastics manufacturing company. There is a strong manufacturing base in my constituency, especially in food processing and engineering, and several other manufacturers are based there.
Although the economy has done well in the past few years, the manufacturing base has been in decline compared with the service sector. I agree with the hon. Member for Twickenham (Dr. Cable) that we cannot be insulated from the global economy. There are some worrying trends. The service sector, which has been the driver behind the fall in unemployment, will come under pressure if consumer confidence starts to falter. That confidence has to a large extent been built on rising house prices, low interest rates and the ease with which consumers have been able to remortgage houses and spend the money on improvements to their homes and other things. I do not expect a hard landing, but if the economy gradually slows down, the weakness in manufacturing compared with the rest of the economy will be even more important, and it is vital that the Government do their best to arrest that decline.
The hon. and learned Member for Dudley, North talked about the structural trade deficit, about which the Engineering Employers Federation expressed concern 17WH when I met its representatives recently. They said that the recent trade figures were pretty deplorable—the worst for 300 years, I believe. That is very worrying, as there has also been a big increase in the number of days lost to strikes and a fall in the European productivity league and the inward investment figures, which have been extremely good for the last 15 years.
There is obviously a limit to what the DTI and the Treasury teams can do to insulate this country from the global economy, but they have taken various initiatives, which the Opposition support. The Government cannot control the increasing trend of sourcing manufactured products in low-cost economies in the far east and elsewhere, and they cannot do anything about the companies who are looking in that direction, but there are positive steps that they can take.
The hon. and learned Gentleman played down the damage done by red tape, bureaucracy and other burdens on business, which organisations in industry and business have told me is what worries them most. Taken individually, many of those burdens are not show-stoppers or deal-breakers, but the accumulated burden is starting to have an impact. The Government inherited an extremely vibrant supply-side economy with a very flexible labour market, which was the envy of the rest of Europe. In a number of years, we have moved much closer to the American model and away from European rigidity and inflexibility. However, rather than supporting what was going on because more companies wanted to invest in Britain as the No. 1 location in Europe, and bringing its regulations and burdens down to the British level, Brussels wanted our regulations to be increased in line with those in other European nations.
One regulation—the agency workers directive—will be of pivotal importance in its potential to damage the economy, and it sums up the attitude of Brussels. To be fair to the Minister, he is doing his best to oppose the directive and I congratulate him on his efforts in that respect. I invite him to give us an update and to say when the matter will next be discussed by the Council of Ministers. He has not been helped by his MEPs, who voted for the directive. I do not blame him, as he was not a Minister when the Government decided that they would re-adopt the social chapter without any provision for flexibility or opt-outs from directives that were clearly going to damage the United Kingdom economy. The Government's hands are therefore tied to some extent.
The hon. and learned Member for Dudley, North mentioned the Engineering Employers Federation, which is very concerned about the agency workers directive, as are the Federation of Small Businesses, the Institute of Directors, the CBI and many other organisations, including trade unions. When we talk of agency workers, people who are not conversant with that part of the market often think of gang labour in East Anglia—people who work on the land for very low wages and are exploited by ruthless agencies. That may be typical of a small part of the agency workers market, but the most important part of the sector is the often highly paid, highly motivated people who are comfortable with the flexibility and way of life. They may go from one job to another depending on the contracts that they can secure.
18WH I have talked to several companies, including British Aerospace and IBM. Both those companies have a significant number of highly paid technicians whom various agencies have supplied. IBM made it clear to me that agency workers are an important part of its business, as they increase flexibility. Moreover, the agency workers do not want permanent contracts and the firm does not want to put them on to permanent contracts; nor are the trade unions agitating for them to do so. No one seems to be pushing in that direction except the Commission. It is extraordinary that several of our European counterparts do not understand how the UK labour market is different from their own. There are very few agencies in countries such as Denmark, Holland and Belgium, as they have few agency workers.
The directive will hit this country disproportionately. It will not suit anyone: not the agencies, employers or the employees. Confidential details about wages and other terms and conditions of employment will have to be made available to the agencies and agency workers, which will undermine confidence and the good working relationship between certain agency workers and the companies for which they have been working. There is no doubt that the directive will lead to a significant loss of jobs.
The directive will especially affect the interim management market, which is positively the top end of agency work. The interim management market is extremely vibrant. There are many retired chief executive officers, managing directors, people who may have lost their job as a finance director in their forties or fifties and others who may have retired early because they sold their business, who want to go on working and to put something back into business.
Those people can go to specialist agencies that can find them interim management positions, and take a temporary job in a "turnaround situation", or in a company where the key finance director or divisional manager is ill and the agency is providing a suitable replacement. The interim manager will then work for three, four, five or six months on a high salary. He does not want a permanent contract and the firm does not want to give him one. The directive could completely undermine this important sector, and it would be a disaster for British industry. I wish the Minister well in his attempts at least to water down that damaging directive, although we are not optimistic. It will be a grim day for British business if he fails.
To conclude, we support several of the Government's initiatives to help industry. I simply flag up some of the ones mentioned by the hon. and learned Member for Dudley, North. They secure all-party support. We also take a pretty favourable view of the Government's handling of the macro side of the economy. We know that their hands are often tied when it comes to regulating and controlling business, but we implore them to look at those areas where they are in the driving seat and where our domestic legislation gives them a significant say in what happens. We also urge them to fight as hard as they can for British business in Europe. We could be moving into far more turbulent times. There are parts of the global economy from which we will not be insulated and we must do our level best to help manufacturing and jobs in this country.
§ The Minister for Employment Relations, Industry and the Regions (Alan Johnson)
Thank you, Mr. O'Hara. I should like to say at the outset that I am genuinely pleased that my hon. and learned Friend the Member for Dudley, North (Ross Cranston) has raised this issue. As the hon. Member for Twickenham (Dr. Cable) said, we have been over the ground several times, but this is a serious time for manufacturers, and it is right that we debate it as fully as we can. This has been a very constructive debate, and it has lacked the Punch and Judy atmosphere that these debates sometimes have. If we are going to help British manufacturers we must concentrate on resolving the problems, rather than indulging in synthetic indignation, which we are all too good at manufacturing here.
My hon. and learned Friend's four Dudley informers put their finger on the main issues. The Government feel that we inadvertently gave the wrong message during our first term. We care about manufacturing, but we gave the impression to manufacturers themselves that we regarded it as the industry of the 20th century, not the 21st. We have tried hard to address that problem over the last 12 to 18 months. Of course manufacturing is important. It represents 60 per cent. of our exports, a fifth of our GDP, 4 million jobs directly and millions more indirectly. Let us not get this out of context: manufacturing is 16 per cent. of GDP in the USA and 18 per cent. in France. In Germany it is 22 per cent., which is higher, although not much. We should not run away with the feeling that manufacturing in this country is collapsing as a percentage of our GDP while it is holding up in other industrial countries.
Manufacturing matters. When I talk to manufacturers, I am amazed at how much they value Ministers and Members of Parliament repeating that phrase. We have probably said it to the point of exhaustion. That message has got across. So what are we going to do about it? Just over a year ago in Birmingham we met all the major manufacturers, the trade associations, the regional development agencies and the trade unions. We tried to thrash out a practical strategy, not a pouch of fairy dust, for manufacturing. It was the first such strategy in this country for 30 years.
To a large degree, this is boring stuff. It will not make front-page news. It is hard slog rather than quick fix. Nevertheless, we have identified the issues on which we need to concentrate and where the Government have a role. This is not a command economy, and we are not returning to the days of bailing out lame ducks, as they used to be called in the early '70s. There are areas where the Government obviously have a role.
My hon. and learned Friend was quite right to point out major issues of skills and best practice. He mentioned the problems in management. Sometimes manufacturers and business people feel insulted, thinking that we are being derogatory; we are not. We are saying not that this country does not produce good people, but that we have not paid enough attention to managerial skills in the past. We assumed that when people became managers they would acquire the appropriate skills on the job, so the correct training was not provided.
That is an important part of Professor Porter's review, which examined competitiveness with particular focus on managerial skills. The Council for Excellence 20WH in Management and Leadership said that 36 per cent. of managers are not fully proficient. The number of managers with NVQ-equivalent qualifications in managerial skills is tiny. We have not focused on the issue seriously enough and I am glad that my hon. and learned Friend highlighted it.
Regulation is another important issue. I am extraordinarily pleased that the hon. Member for North-West Norfolk (Mr. Bellingham) did not bang on about it. He banged on about the agency workers directive, and I will deal with that in a second. On regulation, the OECD said in its most recent report that we are in many ways a beacon. We set up the Better Regulation Task Force and other initiatives because we were concerned about the issue. As the hon. Member for Buckingham (Mr. Bercow), who is becoming a hero on our Benches, recently pointed out, the idea that all the problems of government relate to regulation is extraordinary. We should reflect carefully on where regulation is needed, weed out bad regulation and provide more sunset clauses so that it does not stay on the statute book any longer than necessary. The contribution of my hon. and learned Friend the Member for Dudley, North was extremely thoughtful.
In my remaining time, I shall attempt to respond to the contributions before reading the script. My hon. Friend the Member for Coventry, South (Mr. Cunningham) has long taken an interest in these matters and often plays a constructive role, sometimes behind the scenes, in assisting manufacturing industry in his constituency. He spoke about the importance of research and development, one of the seven strands of our manufacturing strategy, which is recognised by all major manufacturers and has been helped by the research and development tax credit.
My hon. Friend also referred to outsourcing, which needs to be tackled. With tariff barriers coming down and communications becoming much easier, the flow of companies into central Europe and other parts of the world is bound to happen. The move into central Europe is partly due to the efficient geographical location of countries such as Slovakia and the Czech Republic and partly to the low-wage, high-skill nature of the economies there. We cannot deal with those problems by pulling up the drawbridge and becoming a fortress UK economy.
My hon. Friend also mentioned textiles. No Government sat down with the textile industry and the trade unions to discuss problems in the sector until 1998, when my right hon. Friend the Member for Leicester, West (Ms Hewitt), now the Secretary of State, set up the textiles industry forum. Similarly, in the whole history of this maritime nation, the Government had never sat down with the shipbuilding industry and its work force to discuss problems until the recent establishment of the shipbuilding and ship repair forum. Problems will not necessarily diminish as a result, but the opportunity to debate how best to deal with them is useful.
My hon. Friend the Member for Coventry, South also mentioned the World Trade Organisation, which is an important issue, and Longbridge. It is right to note that we move on from problems and do not look back at them. My right hon. Friend the Member for Tyneside, North (Mr. Byers) was Secretary of State when we were urged to feed Longbridge to the asset strippers, and he held out until a company prepared to keep it as a going 21WH concern—Phoenix—moved in, saving thousands of jobs. Thanks to him, many people are still working, successfully producing cars at Longbridge.
My hon. Friend the Member for Stroud (Mr. Drew) is right about the bucolic image of the Stroud valley. I was trying to think of a manufacturing version of "Cider with Rosie", but could not do so in the time available. I was pleased to hear what he said about the South West of England Regional Development Agency. Its recently retired chairman, Sir Michael Lickiss, was personally attacked in an Adjournment debate, which I thought was disgraceful, by two Members who turned out to know little about what the development agency was doing. My hon. Friend is right: the agency had to tackle the problems, including those in tourism, caused by foot and mouth disease, and the Eden project is a monument to the agency's interest and energy in the south-west. My hon. Friend also asked the hon. Member for North-West Norfolk to end his party's opposition to RDAs, and I will come to that in a second.
My hon. Friend made two less positive points. One was about state aid rules. Everywhere I go, I hear that the UK plays by the rules—it seems that people do not say "cricket" any more—whereas other countries bend the rules. I was in Denmark recently when its Government held the EU presidency, and the Danish are convinced that Denmark plays by the rules and every other country in the EU does not. Apart from the fact that it is a saloon bar discussion, we always ask manufacturers to give us one example of state aid rules being breached elsewhere so that we can pursue it, which we have done. This example has nothing to do with manufacturing, but Deutsche Post was found to have breached state aid rules recently and was fined heavily.
My hon. Friend also mentioned the banking system, and that issue is under review. We have set up regional venture capital funds to help, but I know that my hon. Friend's point was about banks' attitudes to failing companies. That goes a bit wider than manufacturing, but we are keen to work with other Departments to influence the situation.
My hon. Friend the Member for Harrow, West (Mr. Thomas) cannot be here. I think that he has an exaggerated sense of my abilities. He asked me to speed up the Ministry of Defence, to ask the Liberal Democrats to be consistent, to encourage the Conservatives to have greater sympathy for renewables and not to appoint dry academics to positions in the regulator. That is all a bit beyond me, but I will try my best.
The hon. Member for Twickenham made several important points, in particular about the synergy between manufacturing and services. They are 22WH interlinked, and that point needs to be made more often. For every manufacturing job, between one and four jobs are created in the service sector, depending on which analysis we use. The synergy argument is not raised enough.
The hon. Gentleman also asked about business support, which the DTI is evaluating. That is a difficult process, and I have nothing but admiration for my right hon. Friend the Secretary of State for many reasons, but especially because she is asking stakeholders what they think about the DTI. I know that the hon. Gentleman wants to abolish the DTI, as I explained to my staff. I said, "If there's a Liberal Democrat Government, you're out of a job", and they were pleased to get that assurance of job security.
Nevertheless, we were brave in asking stakeholders what was wrong with the DTI. Again and again, they said that we have many good people doing lots of valuable work, but our business support system is too complex and much of the support that we offer is outdated. It may have been relevant in the mid-1970s, but not any more. We are examining that and looking to streamline the system into four or five portfolios, so that people understand where to go depending on which type of business support they want. We hope to announce at least the first tranche of change in the spring, although I realise that spring is loosely determined in political circles as any time between February and December.
The hon. Gentleman also mentioned the climate change levy, which is an important development for manufacturers. Announcements about that in the pre-Budget report will help, but the companies that are excluded from the integrated pollution prevention and control directive and cannot gain access to the 80 per cent. discount have a point. The Engineering Employers Federation produced a good document on that recently.
I am pleased that the hon. Member for North-West Norfolk spoke about the limit to what the DTI and the Treasury can do, although he placed too much emphasis on the agency workers directive. We are pleased and proud to have signed the social chapter. It was the right thing to do, and we should do nothing other than crow about workers in this country having basic, civilised standards. That is an important development. The point about not having opt-out from the directive is that we engage in debate. The directive is a problem: there should be a directive, but it should provide for a longer derogation period.
Finally, I urge the hon. Gentleman to talk to his party about its opposition to RDAs and its commitments to abolish the Small Business Service and to wipe out £300 million of business support. That would not help manufacturers.