§ Motion made, and Question proposed, That the sitting be now adjourned.—[Mr. Kemp.]9.30 am
§ Richard Younger-Ross (Teignbridgre) (LD):
I do not intend my speech to be one of doom and gloom. My purpose in asking for this slightly longer debate is to give hon. Members from Devon an opportunity to explain why Devon needs extra resources and why manufacturing is as important to Devon as it is to other parts of the country. It is slightly disappointing that the Conservative Benches are somewhat empty, given that Conservative Members have an interest in matters pertaining to manufacturing. They are certainly quite good at making comments to that effect in the local press, and it is a shame that their comments are not reflected by their presence in the Chamber.
Manufacturing in the United Kingdom has suffered over recent years, and we all know that it declined during the 18 years of the Conservative Administration. We are also well aware of the fact that it has declined under the present Labour Administration. Indeed, colleagues in my party's Department of Trade and Industry team have researched the decline in UK manufacturing and found that more than 750,000 jobs have been lost nationwide.
Manufacturing does not employ is many people in Devon as in other parts of the country, so it is not as crucial to the Devon economy in that sense. However, it is vital that what manufacturing there is should thrive and that it should be well watered an d well fed so that it may flourish and bloom.
The hon. Member for Totnes (Mr. Steen) has likened manufacturing job losses in my constituency and that of my hon. Friend the Member for Torbay (Mr. Sanders) to the sinking of the Titanic. Although there is, in fact, no titanic manufacturing industry in Devon, the boat is under construction and on the slipway. The job losses that we have suffered, particularly in south Devon, have been a blow to the construction of Mat manufacturing base. I hope that the debate will point to ways in which we can construct and float that manufacturing ship so that manufacturing in Devon and the south-west prospers.
Some 93 per cent. of businesses in Devon employ fewer than 50 people, and 75 per cent. employ fewer than 10, so the majority of businesses are very small indeed. The Devon economy grew by 15 per cent. between 1995 and 1998—the last period for which I have the figures—and GDP per capita increased to £9,636. That is still considerably lower than he UK's GDP per capita of £12,548 and indicates that, f or various reasons, there has been a lack of investment in the south-west and particularly Devon.
Given those figures, it seems surprising that unemployment is considerably lower than the national average. In fact, it is not surprising, because 138WH employment levels are higher, and 28 per cent. of those in employment work part-time—3 per cent. higher than the national average. The breakdown of the employment figures by sector shows that the hotel and catering trade employs 9 per cent. of people. Agriculture employs 24,000 people, or 30 per cent. of all employees in the region. The wholesale and retail sector employs 20 per cent.; health and social care employs 14 per cent.; public administration employs 8.5 per cent.; and manufacturing employs 13 per cent. That is the scale of it. However, as I have already pointed out, pay levels in Devon are far lower than in most of the rest of the country. Gross weekly pay in Devon is on average £360.20; and in the region, it is £408.50. The UK average is £444.30.
Most employment in Devon is low paid. The importance of manufacturing to Devon is that it pays higher wages for skilled and semi-skilled workers. With other sectors such as finance and construction, manufacturing is in many ways an economic driver to the economy of Devon and the south-west.
That economic driver has recently been facing difficulties. The biggest is the problem facing Nortel, in the constituency of my hon. Friend the Member for Torbay; should he catch your eye, Mr. Deputy Speaker, I am sure that he will speak on that at greater length. However, a number of businesses in my constituency have suffered job losses. Centrax manufactures components for jet engines. The company was set up by Richard Barr, who once worked with Whittle, the man who developed the original jet engine. Centrax is an efficient company; it does not go out and buy big plant but adapts it or manufactures its own.
The company diversified into making combined heat and power units; the unit is basically a jet engine used to convert gas into electricity. However, it has been struggling recently, partly as a result of worldwide problems in the aerospace industry but also as a result of the difficulties faced by the CHP sector. Those difficulties are a direct result of Government policy, and I shall return to that subject.
A number of food manufacturing companies are based in my constituency—at least, they were. We have slightly fewer now. Devon Desserts appeared to be a successful company.
§ Richard Younger-Ross
Yes, it has. The company employed some 400 people, making sweets, trifles—I have just started a diet; it's agony—and lots of other things that I am no longer allowed to eat. Sadly, that company was not successful enough; for various reasons, it over-extended itself and went under, and another company, Uniq Foods, bought one of its two sites. We were full of hope. Uniq Foods started by employing only 50 people, but there was a promise that it would grow and expand. Sure enough, it was as good as its word; it did grow and expand. It grew and expanded—and it went. We heard a couple of weeks ago that it had decided to close its factory in Newton Abbot, with the loss of 120 jobs. Not only that, but it closed another factory at Evercreech, in the constituency of my hon. Friend the Member for 139WH Somerton and Frome (Mr. Heath). The company is looking to sell off another factory and is rationalising its operations to work from one base. That was another bitter blow. We would have liked the company to have relocated to Newton Abbot, but that was not an option, because there was not sufficient land to expand.
About a week later, another company closed. It was called West Country Clothing and used to be known as Invertere. It was a well established business. My hon. Friend the Member for Torbay may refer to the matter later, but before the debate he was telling me that as a schoolboy he had a friend who was part owner of the business and who was the son of the owner. My hon. Friend visited the factory not that long ago—
§ Richard Younger-Ross
Yes; it was a well established business. It marketed clothes abroad, particularly top of-the-range clothes, and made some fine products. Its complaint was about the lack of Government support for the export trade.
Another company called Voodoo Dolls and Headworx, which was next door to West Country Clothing, made surf wear. It has to be said that I am not familiar with those products; my surfing days, if I ever had any, are long past. However, it was a small business that appeared to be doing well and employed 25 people who have now been made redundant.
One of the bitterest blows to my constituency was the case of a company called Aircraft Materials. If I recall correctly, the company had been established since the 1940s. Again, it was a long-established business and it was doing well. There was no reason for it to move from the Brunel estate in Newton Abbot. The company moved because it was enticed to do so by a grant from the Welsh Assembly for the establishment of a new factory in Wales.
I asked the Secretary of State for Wales questions on the matter at the time of the move, and I did not get a particularly clear or good answer to explain why we were using taxpayers' money—from whatever part of the country—to relocate businesses from one part of the country to another. That is a barking mad policy, if I may use the expression. It seems a total waste of taxpayers' money and has worked much to the detriment of people in my constituency.
However, I do not intend to paint a picture of doom and gloom. There are a number of success stories, and I give credit to the Government for that. The south-west manufacturing advisory service has done a great deal of work to help encourage businesses to grow and flourish. I will give a couple of examples of successful businesses, because I do not want the gentlemen from the press to go away and say, "MP paints picture of doom and gloom for manufacturing". It is quite possible to prosper, but the Government could do a lot more to construct more ribs on the ship and make it more seaworthy.
One such successful company is Turton Quality Foods Ltd., which makes sausages. Having received advice from SWMAS, the marketing director, Charles Baughan, said in a letter to SWMAS: 140WHThe MD and I are committed to developing team working. We have achieved a 15 per cent. improvement in productivity over the last 3 weeks (since your visit) with more to come … With the improvement we should be able to demonstrate what could have happened in order to gain more commitment for the bonus scheme.
§ Mr. John Randall (Uxbridge) (Con)
I am sorry to stop the hon. Gentleman in his flow. For my benefit, as not one of the brightest sparks, will he tell me what the initials SWMAS stand for?
§ Richard Younger-Ross
I referred to it just before; it is the south-west manufacturing advisory service, set up by the Department of Trade and Industry, which has a Devon and Cornwall action team. We do not often praise the DTI here, but I shall do so on this occasion on account of the work that it has undertaken. I shall also praise a business that started in Teignmouth—the House of Marble. It began as a small marble manufacturer, then moved to the old pottery site in Bovey Tracey. That is where Devon's manufacturing used to take place—it is where the clay was, and where Wemyss ware and some other extremely collectible pieces were made until pay disputes and strikes in the 1950s led to the closure of the factory and the ending, for a time, of china manufacture in Devon. It was cheaper to take clay to the goal than coal to the clay.
The business went to the old pottery and now makes clayware—as does a company down the road, Cardew Design—and a lot of glassware. It has expanded its marble business but also makes a lot of fine glass, and its workshop, where people can watch the glass being blown, provides a good tourist attraction. The product is sold in Harrods. New York stores and around the world—proof that me can make products in Devon and succeed. My purpose is not to spread doom and gloom but to ask the Government what can be done.
If we were to ask most of the businesses what they would like to see done to help manufacturing business in Devon, communications would top their lists. We have inadequate road and rail structures and too few airports. Consider the roads: the Kingskerswell bypass, which has been planned for more years than I can remember—well over 30—is still on the drawing board. It should have been built in the 1960s; it should certainly have been built in the 1970s; it could have been built in the 1980s, and probably would have been built in the 1990s—except that the then Conservative Government decided to deregulate the road and to leave it to the county council to find the funding for it. The Government were convinced that it would be built instantly thanks to the private finance initiative. That has not happened; Kingskerswell bypass is still on hold. The county council is trying to progress it—it has gone to planning—and the earliest that we can expect any road to be constructed is about 2010–11. That is seven years away. Somebody leaving school today will be in his mid-20s before we see an influx of extra businesses in Torquay if we rely purely on the road.
Businesses in the south-west are waiting for the dualling of the A303. Most of that has been slow to come, and the planning and design have been protracted. Can the Minister tell us what the Government intend to do about that road? I have concerns about the Blackdown hills, but they are surmountable; something can be done.
141WH As for rail links, the Government will say that things are getting better. It is true that recent developments have included improved journey times. However, the rail journey from Paddington to Exeter is still quite a long one—two and a quarter hours, at best. The average journey is two and a half hours. The trouble is that beyond Exeter the journey slows down completely.
Another trouble is that there is only one line—the Paddington line. The Waterloo line is a stopping service, much liked by those who want cheap day tickets to London, as they can travel at low cost. However, it is not very good for business use. The upgrading of that line has been long promised, but is slow in coming. Perhaps the Minister will be able—if not in response to this debate, then later, or in writing—to tell us what proposals there are for upgrading the rail links.
I know that the Government are considering airports at the moment. I also know that the owners of Exeter airport have just made an application for a £20 million passenger terminal. There is a prospect of growth at Exeter airport. If Devon is to prosper—and, I would argue, if Cornwall is to prosper—Exeter is the airport that it must be logical to expand. It is the one that should be a hub for the south-west.
I know that hon. Members for Bristol constituencies would probably argue that we should expand the airport there, but there are capacity limits. There are no particular capacity limits for Exeter. There is an opportunity for us to grasp for the expansion of Exeter airport, which is supported by MPs across Devon, including the hon. Member for Tiverton and Honiton (Mrs. Browning)—[Interruption.] I am corrected from a sedentary position because I spoke of MPs across Devon. There are MPs for constituencies peripheral to Plymouth who may dissent. I want to get that correct, so that they do not have a go at me later. Members for most parts of Devon would support the idea of making Exeter a hub airport.
My hon. Friend the Member for Torbay is particularly concerned about the exporting of jobs to China. His constituency has suffered particularly, and I am sure that he will want to discuss that matter, as do I. We all believe in fair and free trade; I hope that we all believe in the global economy and its benefit, by and large, to western Europe and Britain. However, the benefit is lost if competition is not fair. If we are exporting jobs, we should make sure that those concerned are trading on a fair and equitable basis with the UK.
A particularly poignant instance of what I mean is one that we have covered before—food manufacture. Perhaps I may briefly allude to the agriculture sector. Places such as Thailand can produce chickens more cheaply than we can in the UK. However, if we import chickens, we need to ensure that their production meets the same health and welfare standards as we impose on our farmers' production.
Similar principles should also apply to manufacturing industry. To take another great Devon business, carpet making, as an example, the export of all carpet jobs to factories using bonded child labour in India would be wrong, and would cause a great hue and cry. That aspect of matters needs to be examined, and my hon. Friend the Member for Torbay will almost certainly discuss it.
142WH On exporting and exporting jobs, there is a question mark over how much support the Government give to businesses trying to work abroad. I know that the DTI does a tremendous amount of work for the very large companies, but I must question how much assistance is given to small businesses, such as West Country Clothing, which employs only 40 people and is trying to export.
I referred to Centrax, which makes combined heat and power units in Newton Abbot and could be expanded if it were helped. It is an exceptionally high-quality business and does an exceptionally good job, but it is being strangled by Government bureaucracy and intransigence. It has not had an order for a CHP unit for four years, which is surprising as CHP is a win-win commodity. It is good for the environment, for the UK's security of supply and for companies. The 2000 target for CHP was 5,000 MW, which I am told is still to be reached. Indeed, the Government committed themselves to CHP and made a commitment to it in their 1997 manifesto. They said:We are committed to an energy policy designed to promote cleaner, more efficient use and production, including a new and strong drive to develop … combined heat and power.That has not happened.
In 2002, CHP capacity fell. All the major CHP developers have now left the market. Only a year ago, the energy paper re-committed the Government to 10 GW of CHP power by 2010. That target was never going to be reached. Not that long ago, the Government accepted that they had failed, and reduced the target to 8.5 GW. Whether that target is reached will depend greatly on the development of the ConocoPhillips Immingham CHP plant on Humberside. The company has said that the plant will come on line, but not under the current market conditions.
Another successful business in my constituency is British Ceramic Tiles, which makes all sorts of tiles. It competes with Spain and other countries, and has a very large, modern and mechanised factory. It was considering CHP and at one point had bought a CHP unit, but did not use it because it was not cost-effective. One must ask why. It all comes down to NETA—the new electricity trading arrangements. I strongly argue that the DTI and the Department of Environment, Food and Rural Affairs should stop fighting each other over who is in charge of energy policy. They need to work out a coherent policy that will put CHP back on track so that we can achieve the 10 GW target by 2010. Believe it or not, NETA will become BETTA—the British electricity trading and transmission arrangements. If NETA can get BETTA, I hope that it will be better for the CHP industry. We need to ensure that there is an obligation on the purchase of CHP because that is the one way to develop it.
There are a lot of good aspects to the south-west. In the 1950s, North Carolina had agricultural areas in decline. People used to visit mainly for tourism, but the triangle between Raleigh and the universities has since been transformed into a highly efficient and profitable manufacturing and industrial base. The Raleigh triangle has attracted companies such as IBM, a multinational that everyone knows.
There is a possibility that we could do something similar in the south-west. There is no reason why our universities should not work together or why they 143WH should not receive help and prompting from the Government to do so. There is no reason why Plymouth to Exeter should not be a magic line for industry or why a British company comparable to IBM should not be situated in the south-west. The south-west has the advantages of lifestyle and highly skilled people. The south-west has the capacity to develop.
§ 10.1 am
§ Mr. Adrian Sanders (Torbay) (LD)
I think that I am probably a little more "doom and gloom" than my hon. Friend the Member for Teignbridge (Richard Younger-Ross). I thought that NETA was a Bulgarian footballer, but I will keep that quiet or Chelsea will sign him.
The question for the south-west economy is what an earth has happened to tourism. Tourism has been for many years our main industry and it remains vital, but the tourism of my childhood, and probably that of other hon. Members, was different from that of today. The number of tourists visiting the south-west is not dissimilar to the number visiting in tourism's heyday, in the 1960s and 1970s. However, people are now more likely to visit the south-west for a short break or second holiday than to use up their entire two-week annual holiday.
Whereas in days gone by a small guesthouse could support a family for 52 weeks of the year, one would not now find a small guesthouse proprietor depending on their business for their livelihood. Such people now have to go out and work to make a living, because they do not make enough money from tourism. The ownership of businesses that derive benefits from tourism has also been transformed. National pub chains—Yates's and Wetherspoon—and even national hotel chains are now involved. We used to have a lot of self-catering visitors who would come into town and go to the local butcher, green grocer or baker. Nowadays they arrive and stock up for their stay in Sainsbury's or Safeway.
In all those examples the money spent leaves the town, rather than circulating there as it used to. For the same number of tourists, less of the money that tourism brings remains in the local economy. The Government need to recognise that crucial point, which is not peculiar to the south-west. Hon. Members representing constituencies in such towns as Blackpool, Scarborough, Brighton, Bournemouth and Eastbourne will all say the same thing about changes to the tourism industry. Although important. the industry is less important in terms of wealth in such constituencies.
In that context, there have been moves over the past 30 years, in all seaside resort economies and tourism areas, to diversify. The Government have been successful to some degree. Farm tourism, national museums, such as Tate St. Ives or the National Marine Aquarium in Plymouth, and big developments, such as the Eden project in Cornwall, are examples of successful investment in tourism and attractions. The main problem for local authorities has been to diversify their economies so that they are not over-dependent on tourism.
In the 1960s, thanks to regional selective assistance, Standard Telephones and Cables relocated from north Somerset to Paignton, which is in my constituency. For 144WH the past 30 years, there have always been between 600 and 1,000 people employed on that site—originally in the capacitor industry and, more recently, in fibre electronics. It has been taken over by ITT Industries and Nortel Networks, and is now part of Bookham Technology. When it was part of Nortel, between 1999 and 2001, the number of employees on the site rose to 5,200. That caused some problems for the tourism industry because the existence of those all-year-round, reasonably paid manufacturing jobs meant that, for the first time, there was a labour market shortage in tourism in winter, which was unheard of in the south-west.
As we know, the market for optoelectronic products caught a cold and Nortel racked up massive debts and made many thousands of people around the world redundant, including up to 4,000 in my constituency. That was a devastating blow. Constituents often ask me, "Why is it that you hear about Corus, the steelmakers in Wales, having 1,000 redundancies—t is top of the national news—but we can lose nearly 4,000 manufacturing jobs and it hardly registers anywhere?" There is a problem with getting people at the centre of government and the media to focus on the real problems, particultarly job losses, in the far south-west and in the Torbay and south Devon area.
When there are jobs losses of that scale, what else can people do? We have some light manufacturing, food processing, transport and communications, but they are on a small scale. The size of the problem is demonstrated when one considers the labour market review for the south-west region, which shows that in all the economic areas designated the Government in terms of travel to work, the Torbay area has the highest numbers of economically inactive people of working age, and of people in part-time work. That has become the pattern: people are holding down more than one part-time job or, if they are in full-time employment, there are fewer full-time jobs than in other areas.
The implication of that is that people's incomes tend to be lower. In studies of income per household, Torbay is at the bottom the list for England. We think of Cornwall as being, the low-wage economy, but the objective 1 projects and investment there have lifted their incomes. It is now south Devon, particularly Torbay, that has the lowest wage economy in the country, yet those wages are not low enough to keep another 600 manufacturing jobs from being transferred to China. We have a weak economic base, and we need to discuss how we can build on that.
According to the business community, throughout the south-west there is an exodus of jobs to foreign parts—mainly to China, but to India as well. Some of those jobs are technical, high-tech, skilled jobs. Our skills base is obviously not to blame. The relevant factor must be the amount of money, and other costs. Perhaps the biggest factor of all is something to which the business community has been drawing attention for more than 30 year;—the poor transport system. That affects existing businesses and curbs inward investment.
My hon. Friend the Member for Teignbridge mentioned the infamous Kingskerswell bypass. There have been plans since the 1950s to bypass the village of Kingskerswell. The latest development is that the county council is working up a plan. This highlights something that is a problem for Torbay, although I do not mean any critic ism of Devon county council.
145WH The road is nearly all within Devon county council's area of responsibility. Less than a tenth of the road length is within the Torbay unitary authority area. However, the beneficiary of the road is Torbay, not Devon. For Devon to put the scheme at the top of its list is politically quite remarkable. Often in the past the problem has been the Devon attitude that "that is a Torbay problem", when solving it would really benefit both Devon and Torbay. It will be Torbay that receives a benefit in inward investment, but, as to the environment, the people of Kingskerswell will be the beneficiaries.
§ Richard Younger-Ross
I agree, in the context of the manufacturing base, that industry in Torquay will benefit, but I want to correct my hon. Friend. There is a benefit to Kingskerswell from the bypass, but also many businesses in Torquay and Torbay employ people from my constituency. When Nortel closed, there were people in Teignmouth and as far along as the edge of Exeter who lost their jobs. The impact is not narrow, but is felt across the whole of south Devon.
§ Mr. Sanders
My hon. Friend is obviously correct. Another interesting point can be made about the Nortel redundancies, concerning the impact on the unemployment rate. Ministers have told me, "We know that you have lost all those jobs. but look at the unemployment rate; unemployment in your constituency has hardly increased it all." What has actually happened is that people have found jobs outside the area, putting futher pressure on the road.
Traffic flows are out in the morning and back into Torbay in the evening. People have taken jobs further away, in Exeter—which is booming, thankfully—if they can get there. The only way, effectively, to get there is by car, because the rail links are not adequate. Some people go further afield. That is not very good as a matter of environmental sustainability.
Another aspect of the matter is that people who previously had full-time jobs are now finding part-time jobs, or short-time, seasonal contract work more in keeping with the traditional seaside economy that we desperately want to move away from. Of course, that work is lower paid. Some people who left a window frame manufacturer in the area to work at Nortel, when it recruited, were offered their jobs back when Nortel made them redundant, at a lower wage and with less in the way of benefits. Some people exploited the situation and the people who work in the area—my constituents and those of other hon. Members.
Transport links are crucial. We have been waiting so long for the bypass that people wonder whether it will ever be built. Two things are happening: jobs are being exported from my constituency, because of the bypass issue, and there is a barrier to inward investment and to tourists. The sooner the matter can be settled—the sooner that the Government grasp the nettle, tell us, "Yes, this is a special case and you really need to get this done", and help to push it through, getting the bureaucracy out of the way so that work can begin the better.
Another issue on which I hope the Government can respond positively is the objective 2 programme. They have talked about local areas having more flexibility to 146WH influence the programme, and the recently set up Torbay development agency is keen for there to be more local flexibility so that the money that is available can be used to deal with what has become a fairly dire economic situation in south Devon.
There is another aspect to the issue, however, because the local development agency and the other bodies that are trying to access Government and European grants need technical assistance. That is true across the board. Compared with other parts of the south-west, we receive nothing like a fair share of national lottery funds. Often, that is down to knowledge—the technical ability to know that a fund is available and how to put together an appropriate bid. That is true of the local council and probably of the technical development agency. I say that not to criticise them but simply to suggest that the Government could help to even up the competition by giving us extra help to help ourselves.
My conclusion is that people view south Devon as a bit of a cream tea economy, but that is not true. For a while, it was the leading optoelectronics centre in Europe, and the products that were being made in my constituency helped to roll out the internet and broadband around the world. Indeed, 70 per cent. of all internet traffic in North America is carried along products that were made in my constituency. Clearly, we have technical ability and skills of the very highest, most contemporary level, but it is low wages that have the greatest impact on my constituents. Unless we have many firms such as Nortel competing in the labour market, wages will remain among the lowest in the country, and we are not prepared to put up with that.
People should invest in south Devon. It has one of the most beautiful environments in the world, and Torbay has the world's most beautiful harbour. We have the moorland of Dartmoor. We also have the South Hams, and the hon. Member for Totnes (Mr. Steen) is forever telling us that his constituency has been described as the most beautiful in England. I am sure that he is right. I am also sure that my constituency is the second most beautiful and that my hon. Friend the Member for Teignbridge has the third most beautiful. South Devon has the most beautiful, diverse environment. We have a fantastic skills base, and that is reflected in past investment. We also have quality of life, but creams teas and nice views do not make up for high rents, high house prices, high council taxes, poor public services, almost non-existent transport links and the fact that, because of our lower incomes, we must count our pennies before buying the goods and services that everybody else enjoys. The single biggest issue before us is how to lift our incomes. To do that, we must have inward investment, but we cannot get it without better transport links. So, I say to the Government: come on and help us out.
§ Nick Harvey (North Devon) (LD)
I commend my hon. Friend the Member for Teignbridge (Richard Younger-Ross) on taking the opportunity to air such an important issue. I reinforce many of the points that he and my hon. Friend the Member for Torbay (Mr. Sanders) have made.
It is clear that the manufacturing sector has had a much more difficult few years than the economy as a whole. In fact the strong overall performance of the 147WH United Kingdom economy has masked the difficulties experienced by the manufacturing sector. That is even more true in the remoter parts of the south-west. Our manufacturing sector tends to include a relatively large number of small operators, all of whom are struggling with the difficulty of being a long way from their natural market; and they have to contend with many of the communication difficulties that have already been referred to.
As a good number of manufacturers in Devon and Cornwall supply niche markets, often in Europe, they have had to struggle with the uncompetitive exchange rate in recent years. However, from last week's election results one would not think that that was necessarily widely understood in the south-west.
The point has to be made that manufacturing is of particular importance in Devon. The perception of our economy is that it is based on tourism and agriculture—the cream tea economy, as my hon. Friend the Member for Torbay called it. There is a lot of truth in that, but the existence of a manufacturing sector—a vibrant, successful and healthy sector at that—is an essential ingredient in Devon's economy. When it begins to suffer, as it has in recent years, it will not be long before it has a profound effect on the economy as a whole.
We have had an historic dependency on agriculture and tourism, both of which are now in a period of rapid change. The changes that are coming about in the way in which agriculture is supported will, broadly speaking, be an improvement on existing arrangements; nevertheless, one can see that in a relatively short number of years the volume of economic activity is likely significantly to decline.
The changes in the tourism industry were well described by my hon. Friend the Member for Torbay. He was right in what he said. It is certainly true that a good number of people continue to come to Devon, but the time for which they stay and the amount of money that they spend is not what it was in previous decades.
If we are not to become a huge dormitory—somewhere for people to retire, which is pushing up our house prices—it is essential that we have a hotbed of viable economic activity capable of sustaining our local economy, and of sustaining proper communities with a good spread of ages and generations.
Devon wages rates are extraordinarily low, but visitors to the county do not understand it. With Cornwall making great strides, it will not be long before wages in Devon are the lowest in the country. The Government increasingly take the view that more local government expenditure should be raised locally. In principle, I do not have a problem with that, but the fact that we are such a poor area means that our local tax base is thin, and that will create more problems. It is essential that we do whatever we can to underpin the manufacturing that we have, and to try to bring more into the area.
Both my hon. Friends referred to the problems in their constituencies in south Devon. My constituency is in north Devon, and it has many of the same problems—but they are slightly worse, because we are that bit further off the beaten track. In the past two or three years, there has been a string of closures and 148WH redundancies in the manufacturing sector in north Devon. Thomson IBL, an American-owned engineering company, closed down and left. Selkirk, another company in a niche market, also closed down. It produces industrial chimney flues, many of which are sold to Germany and Spain. Thankfully, another company stepped in and rescued some of the operation. Clarks Shoes is an example of jobs going to south-east Asia, with whose wage levels we cannot compete.
North Devon has had a very successful pharmaceutical industry. Alpharma, previously Cox Pharmaceuticals, is the largest generic pharmaceutical manufacturer in the country. Wrafton Laboratories is one of the largest pharmaceutical manufacturers. In the past couple of weeks,it has had a large number of layoffs. That is before one even mentions the difficulties faced by the Appledore shipyard, which is based in Torridge in a west Devon constituency but provides employment for people throughout the north of the county and into north Cornwall.
Leaderflush Shapland has particular difficulties. When I was elected 10 or 12 years ago, it was the largest employer in north Devon. It employed about 800 people and produced high quality, heavy-duty doors for use in public buildings, hospitals, schools and other such buildings. Now, only about 240 jobs are left. Its parent company, which is based in Nottingham, is committed to keeping those jobs in north Devon but has a serious financial decision to take. It has a valuable site in the middle of Barnstable and wants to move to a new small site on the outskirts. What happens to the site that it owns is crucial to the future of Barnstaple and north Devon. The major planning application, which would facilitate the whole project, keep 240 jobs in Barnstaple and provide most of the 500 badly needed new homes, has been sitting on the desk of the Deputy Prime Minister for six months awaiting a decision, despite the fact that such applications are supposed to be decided in three months.
It is a very regrettable feature of our British political system that such decisions must go to Whitehall at all. It would be far better for these things to be decided more locally. I implore the Minister to ask the Office of the Deputy Prime Minister to decide this major planning issue quickly, whatever the decision may be. If it does not, we will certainly lose those jobs, and that crucial site will probably be disposed of to the highest bidder, with no guarantee as to what a new buyer might want to do with it.
Any manufacturing operations in north Devon tend outpost of larger manufacturing the furthest away from base camp and the most vulnerable when a parent company faces pressures and has to consider where to make cuts and closure. We do our best to try to bring in new companies. We can offer a good quality of life. In recent decades, however, we have not had anything like the sorts of grants of the 1960s to which my hon. Friend the Member for Torbay referred with which to lever them in. Almost all the manufacturing companies in north area in the late 1960s with the benefit of regionals development grants. There have been barely any significant imports of companies and jobs since.
We must continue the quest to bring in new companies. We know that we will not bring in vast manufactures, but we can reasonably hope to bring in 149WH small niche-market players, particularly in the high-tech sector. We can try to add value to the food products that we already produce locally. In passing, I might say that if the Government are serious about moving civil service jobs out of London, I hope that they will not simply plant them in large regional towns, but will realise the good that could be achieved if they were to scratch a little further and consider places such as north Devon.
§ Nick Harvey
I want to consider a few aspects of Government policy. In all honesty, I do not expect the Government to come up with lavish grant aid so that we can try to lever companies in. I do not know whether they will continue to sustain the relatively modest gram aid that they make available at the moment. However, they could certainly do a lot—on transport links, for example.
The A30 and A303 link has been debated and deliberated on for decades, and it is ludicrous that we have not reached a resolution. By the time that north Devon's link road, opened in the late 1980s, was built, it had scandalously been watered down to a single-track road instead of a dual carriageway. It has not fulfilled its potential.
Rail links are pretty dodgy. Even when improvements to First Great Western rail links are planned, they always seem to feature the route from London to Bristol and on into Wales, and do not address in any serious way the connections to Devon and Cornwall.
My hon. Friend the Member for Teignbridge referred to air links. Again, there has been a great deal of muddle and confusion. Plymouth airport cannot expand in any meaningful way. The only rational ind sensible option for the south-west is to expand Exeter airport.
In my view, we have also failed to make full use of the potential that sea links could bring. There is potential around the south-west coast for small, wharf-style developments to bring in and take out a great deal more raw material and products than we do at present.
I regret having to stand in the national Parliament and raise relatively parochial issues. Such matters ought to be able to be resolved far more locally. However, until we have a meaningful devolution of power and resources in this country, we have no choice other than to come to this House to raise such issues.
Last weekend, I was talking to a small business man in my constituency who has been operating for more than a decade. In anguish, he described to me the pain and agony that he has experienced in the past couple of years while trying to pursue modest sums of grant aid. His conclusion is that he wishes that he had never got involved in the first place. The time that he has wasted, the hoops that he has had to jump through, the sheer bureaucracy and red tape of it all has depressed him and has wasted time that he could have spent on his business.
That man came to ask me to try to convince the Government that rather than get rid of the red tape, which I do not think he imagined to be possible, they 150WH should simply abolish the whole damn thing. He honestly thought that business would be better served if, rather than putting Government money into grants that have to be governed by all these excessive checks for reasons of probity, that money was spent on services such as Business Link and business support services. He found such services, by contrast, to be of the highest value. Business Link's timely advice and its signposting of people who could help him was worth much more than the grants would have been had he succeeded. Such schemes might be a better use of Government funds.
When the Government introduced the Regional Development Agencies Bill, I was the party spokesman responsible. I led my colleagues through the Lobby, in favour of regional development agencies, but I did so having expressed my fears that the RDAs might not be able to fulfil their potential. It seemed that they were being introduced in a half-hearted manner and with pitifully inadequate resources. Five or six years on, I am afraid that that seems to be the case. The RDAs are charged, as one of their key objectives, with trying to end regional disparities. However, the RDA for the south-west, a poor and remote area, has, I am told, one sixth of the budget of the RDA for the north-east, which also has to deal with some serious problems. RDAs do not have enough clout or resources, and, even in terms of the amounts that they are given, there are disparities between one area and another.
My overall message to the Government is that we are not here with a begging bowl expecting lavish handouts. However, the Government need to take serious note of the far south-west's difficulties and better target their resources and efforts. They need to listen to the business community of Devon and Cornwall about how best to help. I fear that if we do not act relatively fast, the opportunities offered by objective 1 in Cornwall and objective 2 in Devon may be lost. Looking at the shape of developments in the European Union, I do not think that we shall get those opportunities again. It is therefore essential that we get things right now and take advantage of that resource while we can.
§ Mr. John Randall (Uxbridge) (Con)
I congratulate the hon. Member for Teignbridge (Richard Younger-Ross) on obtaining this debate. I start by offering hon. Members, the Minister and you, Mr. Deputy Speaker, the apologies of my hon. Friend the Member for North-West Norfolk (Mr. Bellingham), who has been unavoidably detained.
I feel rather like the Minister who, in the apocryphal story, turned over the second sheet of the speech that he or she was about to deliver and found that the civil servant, who had been less than pleased with the Minister, had written, "You're on your own now, mate." My sudden promotion to the Opposition Front Bench in a speaking role has allowed me at least not to come with a pre-prepared script. Instead, I can listen to what hon. Members have to say, which I have found extremely interesting. However, I must disappoint those in the Chamber, because, although I have been given incredible power to change my party's policy by speaking out, I shall avoid that and keep to the debate.
Before I came to the House or was even actively involved in politics, I was the director of a retail outlet employing about 35 people. I became involved when I 151WH went to my then Member of Parliament, who would later be my predecessor, to complain that the Government were not doing enough for high streets and the retail industry. He suggested that it would be better to get on the inside than carp from the outside. I realised that many of the problems in manufacturing or in retail are not, of course, the fault of the Government. I therefore sympathise with the Minister because, although she must reply to this debate, there are no easy solutions, as the hon. Member for North Devon (Nick Harvey) pointed out.
The hon. Member for Teignbridge said that my hon. Friend the Member for Totnes (Mr. Steen) had described job losses in the region as being rather like the sinking of the Titanic. I am afraid that the problems with manufacturing in Devon that we have heard about are the tip of an iceberg. What holds in Devon could be true in many other areas, although there may be different factors and different conditions. That is why I was particularly interested to hear about Devon. I have not been to that part of the world for some time—not since my twitching days—and hearing all the names rekindled my desire to visit it again Like the hon. Member for Teignbridge, I think that cream teas are out these days.
Of course there are problems. The hon. Members for Teignbridge and for Torbay (Mr. Sanders) mentioned small businesses. I still have a strong connection with my family retail business so I understand acutely the problems that they face. Everybody talks about over-regulation and red tape. It is true that Governments, regardless of complexion, are not that adept at removing them. Sometimes it seems that our job is to sit here and make regulations. It would be nice to say for a change, "There is nothing to do for a week or two; no more regulations. Go home and do some useful stuff in your constituency," but the endless roll of statutory instruments continues.
I sympathise a great deal with hon. Members from Devon when they talk about the perception of their region. Obviously, tourism goes hand in hand with the thought of Devon; it is a pleasant place to visit. However, even tourism echoes some of the problems experienced by manufacturing—because of its costs, it is not necessarily competitive with what might be found elsewhere. As a father with a young family, I know that it is often cheaper to go abroad, or so it seems. However, there are many advantages of taking a holiday in the UK and I would certainly advocate it. Similarly, I have seen manufacturers whom I have known for many years obliged to move out of the country because of costs.
That is particularly worrying for hon. Members in Devon, where there is already a low-pay economy—the workers in the agricultural sector, the retail sector and tourism are not well paid. I can understand that manufacture is very important. However, the very fact that the higher paid jobs are in that sector, so that elsewhere in the global economy its costs might be seen to be high, has contributed to the exodus abroad. Just as sad is the closure of businesses that have been there for a long time.
I can give a small advertisement for some of the products that are produced in Devon. Over the years, I have sold many of them, not least ceramics and carpets, 152WH and I still do. Anybody looking at carpets would be well advised to look at the fine products that are produced all over the UK, particularly in the west country.
I was interested to hear the argument about airports and air transport. As a member of the Select Committee on Transport, I feel that it is best not to get involved in such matters without knowing a great deal about them. It is rather irritating when people lecture me about Heathrow, which is virtually in my back garden. Therefore, I can understand the points of view that have been expressed. It seems that Exeter is strongly favoured. I shall take a greater interest in it, and try not to be so parochial—if one can say that of a concern about Heathrow and the London airports.
Many of the situations that we have heard about, even down to lottery grants, are echoed in west London, or Middlesex as I prefer to say on a day like today, having left it this morning in the sunshine. In each area, people sometimes seem unable come up with the schemes that they want. Perhaps there is a role, somewhere, for someone to help with suggestions, as the big grants seem to be the ones that a pushed forward. My constituency suffers because we come under London. When all the grants seemed to go to London, people said, "You're really well off," but it is not really like that.
Those changes in manufacturing are echoed in tourism and agriculture. One problem facing the country is that we have to adapt, but that is not easy. My company was founded 110 years ago. In the early days, we were at the forefront of technology, being the first store in Uxbridge to install electricity, but things have changed a bit since then, and we are rather regarded as the Grace Bros. of the area now.
This important debate has increased my knowledge of the area and of the problems it faces. However, that is enough from me—I shall now sit down, as the Minister deserves as much time as possible.
§ The Minister for Industry and the Regions (Jacqui Smith)
I start by congratulating the hon. Member for Teignbridge (Richard Younger-Ross) on securing this important debate, which has been constructive and well informed. I also take this opportunity to welcome the hon. Member for Uxbridge (Mr. Randall) to his well deserved place on the Opposition Front Bench.
I have listened carefully to hon. Members, particularly to their concerns about and aspirations for the future of manufacturing in Devon, both of which I share. I want to use the time available to respond to some of those points, and to spell out what the Government are doing to deal with some of those issues, both through their manufacturing strategy and with practical action on the ground locally.
I agree with hon. Members about the importance of manufacturing and about its significance, not only for Devon, but for the UK economy as a whole. It is an important bedrock of our economy, as it provides a sixth of our GDP, is vital for our trading position—being responsible for two thirds of our exports—and provides around 3.5 million jobs, and millions more through the supply chain. As hon. Members have said, those are often high-quality, highly paid jobs, which are 153WH of particular importance in an area of low pay. The industry is also responsible for 75 per cent. of all business research and development, and is a key generator of productivity and innovation in the wider economy through the introduction of new products and processes. The Government are clear that if we are to continue as a leading economy, we must have a world-class manufacturing sector.
As hon. Members have observed, manufacturing has been through some tough times, many of which are due to global pressures, which are faced even by the relatively small, niche manufacturers that have been mentioned. We have been through a period of weak global demand, during which out put was flat, too many manufacturing firms closed and too many workers lost their jobs. On top of that we have increasing competition from lower-wage economies in the far east and eastern Europe.
Of course, those difficulties are not unique to the UK, and certainly not to Devon: our main competitors in the US, Germany and France face similar challenges. However, there is some reason for optimism, as business surveys in the UK show positive signs of improved confidence. The most recent CBI business survey shows manufacturing in a more positive light, with output expected to rise over the next three months. Just last week, the Office for National Statistics published figures showing a 0.9 per cent. increase in April on manufacturing output in March. That is the highest output since October 2003, and since May 2002 before that.
However, there are considerable challenges. Hon. Members have taken an admirably positive approach to the future of manufacturing, but they have also outlined issues relevant to job losses in their constituencies.
The hon. Member for Torbay (Mr. Sanders) in particular raised the issue of the Bookham job losses. I very much regret those and recognise what a blow they were, when it seemed, as the hon. Gentleman explained, that Paignton might experience a period of stability after Bookham bought the optoelectronics business from Nortel at the end of 2002. The downturn in the telecoms market is continuing to cause difficulties for telecoms equipment manufacturer, across the world. Bookham is clearly not immune to hose problems.
We understand that Bookham is keen to retain key research and development and specialised pilot production capability at Paignton. Although that will employ fewer people, the jobs will be at the high skills, high technology end, about which I want to talk more in a moment. Also, while the job losses are regrettable, their phasing over the next 12 to 15 months provides time for Jobcentre Plus to help with finding alternative employment.
In all significant cases of job losses, all the local agencies have worked, and will work, together to give the affected employees all the help that they need to find alternative jobs. Large-scale redundancy status, which Bookham has, provides immediate access to all Jobcentre Plus, job search and training programmes, supported by additional rapid resp ruse funding, where that is needed.
It is also worth pointing out that, notwithstanding hon. Members' concerns about job losses and pay levels in Devon, since 1997 there are 6.8 per cent. more people 154WH in work in Devon. That is above the England average. Also, as hon. Members have recognised, there are although this does not compensate for the scale of the job losses—many manufacturing success stories. It is sometimes important for us, while recognising the challenges faced by our manufacturing industry, to acknowledge the high quality of much UK manufacturing.
Examples of such success stories include SIFAM Fibre Optics in Torquay—a management buy-out that employs 90 people and expects to take on up to 20 more because of its success. The company has won an international contract to supply components for an underwater link between France and Egypt, and another one to India. It has been supported by a DTI investment of £250,000 in its part of a consortium project examining the use of fibre optics in an aircraft.
§ Jacqui Smith
I will, but the hon. Gentleman must not then complain if I do not cover all the points that he raised.
§ Mr. Sanders
The Minister is correct to highlight the case of SIFAM. However, SIFAM had a mass redundancy exercise at the same time as Nortel. There are big problems affecting former employees and their pension rights. The business is good and growing, and we hope that it will employ more people. However, the issue remains the same: overall, incomes are going down even if people are working more hours.
§ Jacqui Smith
That is why we need to focus on what we must to do provide the right environment for high value, high skill manufacturing, so that we can introduce new products and processes, create new markets and boost prosperity. That is why, two years ago, the Government's manufacturing strategy was produced, based on a new partnership with trade unions, businesses, other stakeholders, trade associations and regional development agencies. The focus is on the key challenges and practical steps for dealing with them.
It was clear to all involved in the strategy development that the way to ensure success was not to cut wages and compete on cost, but to compete on quality by investing in skills, innovation and the latest practices to achieve higher value products and faster and improved production processes. We have been making progress in all the priority areas set out in the strategy, and we will publish a report next month on what has been achieved and what more needs to be done.
One of the practical steps mentioned by the hon. Member for Teignbridge was the setting up of the Manufacturing Advisory Service. I can tell the hon. Member for Uxbridge that MAS provides practical hands-on help and advice to manufacturing and engineering companies throughout the country. In the south-west, the local office has received almost 1,500 inquiries, and has added value of more than £8 million a year to the region's economy. In Devon, it has contacted more than 200 manufacturing businesses, and 60 of them have benefited from MAS advice. Another 25 have 155WH taken part in best practice implementation projects, with an annual cost saving of £104,000 per company. Those are very practical results.
The hon. Member for Teignbridge mentioned Turton Quality Foods. I could mention Algram, a plastics engineering firm based in Plymouth that has benefited from a dramatic reduction in machine set-up times, including a 66 per cent. reduction in change-over times on injection moulding machines. That practical, hands-on support for manufacturers is widely welcomed. The hon. Gentleman also raised the question of support for smaller companies in exporting. I recommend him to advise those companies to make full use of the range of UK trade and investment services, which can be accessed through international trade advisers at their business link.
I was pleased to hear from the hon. Member for North Devon (Nick Harvey) about the business person who likes the local Business Link. That certainly resonates with national surveys, which show an increase in national satisfaction. The difficulty of accessing business support has been recognised by the Government. We have rationalised it nationally, and about 150 different business support products have been cut to a core of nine in order to overcome some of the difficulties outlined by the hon. Gentleman.
We have strengthened the role of regional development agencies. The hon. Member for North Devon was a little sceptical, but we have increased funding for the South West of England Regional Development Agency from £43 million in 1999–2000 to £108 million in this financial year; and we have given the RDAs more flexibility on how they spend it. That is why the South West RDA is able to help tackle the causes of manufacturing vulnerability in that area.
156WH Several hon. Members raised the question of access to markets and communication. It is an important regional factor. The RDA is supporting investment at Exeter and Plymouth airports as part of the regional air transport strategy, in order to maintain and improve air services to the far south-west.
I also recognise the long-standing local support for a bypass at Kingskerswell, to improve access to Torbay. I think that hon. Members accept that a proposal for a bypass is a matter for the local authorities—in this case, for Devon county council and Torbay council. My colleagues in the Department for Transport look forward to receiving detailed proposals, as part of the local transport plan, for major scheme funding. Under the auspices of the local transport plan, considerable investment is being made in such schemes.
The RDA is also supporting investment in increased incubation and innovation activity to enhance and grow the advanced manufacturing base, which is important for developing an innovative, high-skills approach to manufacturing. Examples include the commitment to invest about £5 million in an expanded and improved innovation centre at Exeter university, innovation support services to businesses across the sub-region, and enhancing incubation space at Caddsdown industrial estate in Bideford The RDA is also considering a proposal from the Torbay development agency for a £4.3 million incubation and managed workspace development, some of which would be co-located with a new campus for South Devon college and adjacent to the Bookham Technology site and other employment land under development.
We have had a good debate. I hope that I have been able to outline some of the practical support being provided by the Government.