Pat McFadden
MP for Wolverhampton South East · Labour · United Kingdom
“In his review Alan Milburn considered that issue and said that, “the UK’s NEET crisis is much more long-term and deep-seated than any decisions taken in the last few years.” As I said earlier, 400,000 more people are in work this year than last year, and the number of young people in employment is up since the election.”
“Since our last DWP questions, both Alan Milburn and the Pensions Commission have published their respective interim reports on young people and on the current state of saving for retirement. I look forward to receiving their final reports later in the year.”
“As Alan Milburn pointed out in his recent report, the UK’s NEET crisis is much more long-term and deep-seated than any decisions taken in the last few years. There are 400,000 more people in work than last year. The number of young people in employment is up by 74,000 since the election.”
“I thank the right hon. Gentleman and send him commiserations for whatever has left him reliant on his crutches today. I am happy to congratulate the businesses he mentioned in his constituency. He raises a serious point: it is important not only to come up with the right policy, but to make it simple for businesses to use.”
“My hon. Friend is right, and I thank Cardiff football club for being a partner. We are supporting nearly 1 million young people and creating up to half a million opportunities for jobs and training.”
“We are making strong progress on expanding youth hubs, with around 130 already in operation across Great Britain. In March, I announced the locations that we want to open in this year, and I have just announced a further 180 locations for the following two years.”
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“If the hon. Gentleman wants to talk about outcomes, I would remind him that the action that the Labour Government took helped to ensure that the level of repossessions, business failures and unemployment during the recession that we are just coming out of was about half that in the recessions when his party was in power. As I said, growth has to be spread evenly throughout the country. This is not just an economic question; it is a social and political one too, because if parts of the country are left out of the country’s economic future, there is a profound disaffection that affects all of us. So what policies might we look to so as to ensure that such growth occurs? Of course, finance for industry is essential. We have reached a point where there is a dialogue of the deaf between banks and businesses.”
“Friend the Member for Vauxhall (Kate Hoey) said that we should not have introduced our Bill. I offer the opposite lesson, however, as the truth is that if we had managed to get our Bill through, we would have had a publicly owned Royal Mail and might not have had to face the measure before us. There is a fundamental difference between what we were proposing and what is before us today. That difference is a majority publicly owned Royal Mail—a difference, I suggest, that is worth having.”
“The taxpayer is taking on the historic pension deficit and the liabilities therein, so why should not the taxpayer share the upside of the modernisation that the Bill is designed to achieve? That explains the logic behind keeping a majority stake in taxpayers’ hands. All that has been cast aside by the Government. Our Bill was a proposal for partnership; this Bill is a proposal for privatisation. On employee shares, yes, we were in favour of that, too, but again, only in the context of a company that would remain majority-owned by the taxpayer. What guarantees are there for the universal service obligation, the inter-business agreement and the taxpayer sharing in the upswing envisaged by the Bill? Finally, there is a lesson for Labour Members, too. My hon.”
“Clause 3 of Labour’s Bill said: “Each Royal Mail company must at all times be publicly owned.” Anyone wanting to see the difference between our proposals and this Bill need only scan the present Bill to try to find such a clause—they will not find it. That clause meant that any private investment had to be on a minority basis. The idea of having a minority stake was not particularly new; it had been floated as far back as 1998. Why keep a majority public stake? It gives the taxpayer an ongoing interest in the maintenance of the universal service obligation and an ongoing interest in the inter-business agreement, which is so essential to the post office network. Even more important than those two elements, however, it also gives the taxpayer an ongoing interest in the transformation of what is, after all, a public service.”
“Regulation, however, is about more than the heading on the notepaper or the address of the building. It is also right to put at the heart of the regulatory system the maintenance of the universal service. This Bill, like Labour’s Bill, has a reserved power for a levy to support universal service. In his report, Richard Hooper was sceptical about the need for this, seeing it perhaps as an excuse for modernisation not to proceed. We felt it was right to take such a power to ensure the maintenance of the universal service in the future. So much for areas of agreement. The fundamental area of difference is on ownership.”
“The Secretary of State attempted to say that it was much the same Bill as the one proposed by the previous Government, but it clearly is not. They have some areas in common, however. The Government taking on an historic pension deficit—and, indeed, the way in which they are taking it on—is something with which I can agree. The taking on of both the assets and the liabilities puts postal workers on the same basis as nurses, teachers and so forth. This method was attacked by the previous Conservative Opposition as a raid on the pension fund, but I am glad to say that, now they are in government, they have turned their backs on that position and adopted the method we proposed. Similarly, when it comes to regulation, it is right to move from Postcomm to Ofcom and regulate mail services in the wider context of communications technologies.”
“Perhaps it is natural to concentrate on the things that we believe we can change, but just because we cannot change that technological shift, it does not make it any less real or any less fundamental to the challenge being faced by our post offices and by Royal Mail itself. All this is not necessarily bad news for Royal Mail, because there is a growth in fulfilment mail, as it is called, as well as in internet shopping and in selling things through eBay. However, Royal Mail’s business needs fundamental modernisation if we are to keep the universal service obligation and the six-day-a-week delivery service that lies at the foundation of our postal system. There are some areas of the Bill with which I can agree.”
“We have had many debates on post offices and Royal Mail in the House over the years, and we have often concentrated on the competition regime governing the different mail companies that are engaged in the delivery of mail. Less often, we have concentrated on the technological shift away from all mail companies to new technologies, including text messaging and the use of the internet and e-mail, to which my hon. Friend the Member for Hampstead and Kilburn (Glenda Jackson) has just referred. This is a fundamental shift, and it lies behind many of the problems that Royal Mail now faces.”
“We also have the news that a major Tory donor wrote to the Government specifically on this point and appealing for the loan not to be granted. Now the permanent secretary’s letter shows that the Deputy Prime Minister has got his facts wrong again, this time on the issue of financial approval of the loan itself. I ask you, Mr Speaker, how can we ensure that when the Deputy Prime Minister next speaks at the Dispatch box, he does not simply spray around unfounded accusations but gets his facts right on this crucial issue?”
“That letter says that “when a new project or policy is considered the Department provides thorough advice to Ministers, including on the following aspects: value for money, legal implications, delivery of policy objectives, stakeholder and media reaction and available sources of funding. When funding cannot be identified from within existing departmental budgets it is agreed with HM Treasury. I confirm that the process above was in place while you were a Minister here”. In other words, the permanent secretary, an official for whom I have the highest regard, is clear that it was not the case that the previous Secretary of State approved financial decisions for which funds were not available. The Deputy Prime Minister has already got his facts wrong on the directors’ shareholdings.”
“On a point of order, Mr Speaker. Yesterday at Prime Minister’s questions, the Deputy Prime Minister, when trying to justify the recent decision by the Government to refuse the proposed loan of £80 million to Sheffield Forgemasters said that the decision taken by the last Government had been made knowing the funds were not available. He said: “Lord Mandelson was writing out cheques to companies like Forgemasters, which he knew would bounce”. —[ Official Report , 21 July 2010; Vol. 514, c. 343.] But I am in possession of a letter sent to me a few days ago by the permanent secretary at the Department for Business, Innovation and Skills commenting on the financial controls in place during the time that the decision to approve the loan was taken.”
“If the Minister says tonight that this decision had nothing to do with the directors’ shareholdings, why did the Prime Minister and Deputy Prime Minister allege that that was the case as justification for this decision?”
“Given that today the company has announced that it is suspending work on the 15,000 tonne project for which the loan was proposed, what is your advice on when it would be appropriate for the Deputy Prime Minister to come to the House and admit publicly that the Government’s justification for this decision has been admitted by him to be wrong?”
“Yet this morning’s newspapers reveal that, in a letter to the company’s chief executive on 2 July, the Deputy Prime Minister said: “You explained to me the composition of equity holdings in the company including your own stake and made clear your own willingness to dilute your equity share”. Mr Speaker, this letter clearly contradicts statements made by the Deputy Prime Minister and the Prime Minister to the House, and I am sure that you will agree with me that it cannot be right for factually inaccurate statements to be made publicly in the House and then corrected purely by means of a private letter.”
“On a point of order, Mr Speaker. Can you give us your guidance on the appropriate procedures for a Minister to come to the House and correct factually inaccurate statements made in the Chamber? On 22 June, the Deputy Prime Minister told the House that the reason the Sheffield Forgemasters loan was not approved was that the company’s owners “did not want to dilute their own shareholdings in the company”. —[ Official Report , 22 June 2010; Vol. 512, c. 148.] On 1 July, the Prime Minister repeated the point, saying that “there was opportunity for them…to get more equity into the business if they wanted to…dilute their own shareholding”.”
“I want to return to the issue of capital allowances. The Minister and the Secretary of State have said that they want to rebalance the economy, but the Budget proceeded with plans to cut £3.1 billion from capital allowances and the investment allowance by 2013. The IFS has said that “cutting capital allowances is not a good way to raise money because they are an efficient way to promote investment”. In addition, the Engineering Employers Federation has said that the cuts “make the investment needed to rebalance the economy more expensive”. Labour’s Budget in March doubled the investment allowance for manufacturers, but this Government have cut that by 75%. We are all saying that we want to rebalance the economy, so how can the Minister justify these cuts of £3 billion a year in our support for manufacturers?”
“Do the Government accept that it would be wrong to have that option in place in a way that squeezed out competition, and will they therefore set out their plans?”
“May I ask the Secretary of State about an important area for consumers and businesses—the future of mobile broadband internet? As he will know, it is growing exponentially, and is hugely important for consumers and businesses. Will the Government therefore put an end to the uncertainty on the issue that has been created since the election, and proceed with the statutory instrument on the planned future spectrum option, which can make the sector grow in the UK? That measure, which was put together by the Labour Government, would have ensured fair competition through caps on the amount of spectrum that could be bought by a single operator. There has been great uncertainty on the issue since the election.”
“As the hon. Gentleman has mentioned apprenticeships again, can he tell the House whether, in the 12 months he is talking about, if we take together what he and his colleagues are proposing on Train to Gain and apprenticeships, more learners will be funded by the Government or fewer?”
“Just a week before polling day he said that “it would be foolish to rush into significant cuts now which take the economy down even further, which lead to an even bigger deficit problem”. Yet just days later, the Secretary of State was signing up to his part of £6 billion of cuts in this financial year—cuts that mean 10,000 fewer students going to university than under the published plans, and £300 million being taken out of the regional development agencies this year.”
“Let me make it clear at the beginning of the debate what I said during our initial exchanges at oral questions a couple of weeks ago—deficit reduction is important and I do not say that every decision to reduce expenditure is wrong. The Secretary of State and I both fought the recent election on policies to reduce the deficit. But the Opposition believe that this must be done in a way that supports economic growth, and not in a way that undermines it. It is critical to our future that fiscal consolidation is done in a way that supports rather than undermines growth. On the timing of deficit reduction, I am still saying what the Secretary of State and I were both saying back at the time of the election, but he is now saying something very different.”
“I beg to move, That this House notes the need for a clear deficit reduction plan, and that such a plan must have at its heart measures to foster growth and create the conditions for a strong business-led recovery; believes Government has a crucial role to play in fostering economic growth and in creating a better-balanced economy; supports strategic decisions to back key sectors such as digital, life sciences, low carbon manufacturing and civil nuclear power; congratulates the previous Government for supporting businesses through the downturn and laying the foundations for the UK to be globally competitive as the country makes the transition to a low carbon economy; expresses serious concern that the Government’s decisions risk removing key support for business and industry at a critical moment in the economic cycle; further believes that cutting investment allowances will pull away vital support for manufacturers seeking to invest and grow; further notes that the Government’s scaling back of the regional development agencies at a time when recovery is fragile will impact on investment vital for regional economies; and regrets the coalition Government’s decision to place a question mark over a number of vital industrial support decisions taken by the previous Government.”
“He said it was all about events in euroland, but to paraphrase Frankie Valli, “Greece” was the word, although I have a feeling that in the present coalition the Secretary of State does not go into work in the morning singing, “We can be who we are”.”
“My hon. Friend makes an important point. Before the election we were told that £6 billion could be taken out in efficiencies, but the announcement proved that that was not the case, and that the cuts will have a real effect on constituencies such as his, mine and many others around the country. What could be the reason for the volte-face on the timing of deficit reduction? There may be cynics on the Opposition Benches who might think it had something to do with the election result or with the fact that the Liberal Democrats were in coalition talks with the Conservatives, but the Secretary of State leads us to believe that that was not the case at all.”
“That policy was in our manifesto, and we believe it would make an important contribution to economic growth. Our argument today is that if we want a successful economy in the future and if we want to rebalance our economy and support strong manufacturing and powerful regions, a focus on deficit reduction alone is not enough. It is not enough just to have a plan for the deficit. The Government also need a plan for growth; and for that to work, we have to understand that they have an important role to play in supporting industry and creating the right environment for success.”
“The review of industrial support decisions has indeed created damaging uncertainty that should be brought to an end in a positive way as soon as possible. The Labour Government knew that we had to play our part if rhetoric about rebalancing the economy and making the most of the shift to low carbon was to lead to new industries and new jobs. That was not, as some Government Members have sought to portray it, some kind of irresponsible bail-out plan concentrated on failing companies. It was a strategy about supporting key national capabilities in the industries and jobs of the future, ensuring that we had strong regional economies, and having the right tax measures in place to foster investment in new plant and machinery and to support research and development here in the UK.”
“Do we really believe that if the new Government elected here turn their back on this approach, other Governments who are also trying to attract new industries and new jobs will do the same? I do not think so.”
“The creative industries, including those that my hon. Friend mentions, are absolutely critical for our future economy. As with other areas, I believe that Government have a role in play in ensuring that the creativity of those industries flourishes here in the UK. Of course, our future economy will be market-driven, and success depends on motivated individuals, great ideas, and enterprising and thriving companies. Our point, however, is that there is a critical role for Government when market gaps occur—a job to do in supporting investment that can pay dividends many times over in future. Let us remember that this is something that many Governments around the world are doing.”
“It would not have helped us when we were trying to support world-class aerospace at Airbus and Rolls-Royce. It would not have assisted in our ambition for the UK to move into the world premier league in the nuclear supply chain through the loan for Sheffield Forgemasters. Nor would it have done any good when we were trying to attract manufacturers of the next generation of off-shore wind turbines to make their products here in Britain.”
“I absolutely agree. That sounds like exactly the kind of project where Government, through the RDA, and business can come together for the benefit of the local area. Our concern is that the new Government do not understand the role of Government in fostering new industries or may even be ideologically opposed to it, believing, as the Secretary of State has said, that “one of the most important jobs of Government...is actually to get out of the way”. Getting out of the way would have done us little good when we were trying to get Nissan to build its battery plant and LEAF electric car in the north-east. It would not have helped us when were extending a loan guarantee to Ford to make the next generation of low-carbon diesel engines here in the UK.”
“My hon. Friend makes a good point. A lot of industrial support is in the form of loans or loan guarantees. The depiction that the new Government have attempted to create of the indiscriminate giving of grants that were not in the public interest is absolutely not true.”
“The answer will be shorter than the question. I am aware of that report. However, my point is that if we want to stimulate private sector investment through some of the companies that I have mentioned, Government have a role to play. Simply walking away will lead to fewer, not more, private sector jobs.”
“Member for Mid Worcestershire (Peter Luff), who is now an Under-Secretary of State for Defence and a ministerial colleague of the Business Secretary, said that it was “profoundly disappointed that to date not one single penny has been advanced through the scheme”— the automotive assistance scheme—and added: “We hope that this will change rapidly.” That is the same scheme that has funded Ford and General Motors, so let us have fewer accusations that there was a huge rush in the run-up to the election to spend money profligately.”
“Let me deal head-on with the accusation about rushed and politically motivated largesse. These projects were not agreed in a hurry. We negotiated for months with the car companies, with the wind turbine suppliers and with Sheffield Forgemasters. All those projects were subject to careful scrutiny by officials and to the usual value-for-money criteria used in decisions of this kind. In the last Parliament, time after time, I stood at the Dispatch Box opposite and was criticised by some of those who are now Ministers sitting in front of me—not for going too quickly on industrial aid or for being rash about it, but for dragging my feet. In a report published as long ago as July 2009, the Business, Innovation and Skills Committee, which was chaired at the time by the hon.”
“My hon. Friend makes a good point. Sometimes a bit of investment from the public sector can lever in significant extra investment from the private sector. I want to turn to the criticisms of the approach that I have set out that have been made by the Secretary of State and the Prime Minister in recent weeks. They have made specific accusations, saying that the projects were agreed in a hurry and were politically motivated. Indeed, the Prime Minister repeated that allegation a short time ago at Prime Minister’s questions, when he spoke of fiddled grants for political reasons. Last week, he alleged that we had spent tens of billions of pounds on industrial support. I have to say that it is no wonder that he is sharpening his public spending axe if that is his grasp of the amount of money that we were spending on industrial support.”
“The hon. Gentleman sums up the problem with the attitude of the Liberal Democrats. They are determined to say that we are no longer a strong manufacturing country, but I have news for him: we are the sixth biggest manufacturing economy in the world.”
“Are the Government really saying that when faced with those alternatives, their first reaction would be not to ask how to secure the investment and the jobs for Britain, but to reach for the electoral map to see who the local MP is? What a dismal view of the Government’s role in supporting UK industry.”
“I am going to make some progress but I will give way later. I was speaking about the timing of the previous Government’s decisions, but I also want to address the accusation that the political representation of this or that area was a motivation for our decisions. Not only is that complete and utter nonsense, but the fact that the new Government see it that way speaks volumes about how they see the Government’s role in supporting industry. Our country was faced with a choice of Rolls-Royce manufacturing here or in Singapore, Nissan could have gone to Portugal, and nuclear components could have been made in Japan or Korea.”
“The Secretary of State must confirm the Government’s position on that, because I must tell him that there are a lot of rumours going around about their attitude and response, and that if the loan does not go ahead, it will mean he is behaving exactly like the banks that he criticises for not supporting industry. We said that we would support industry, and it is time that the Government’s position on that loan is cleared up.”
“The director general of the CBI visited that plant the other day and said: “It is hugely exciting to see such impressive technology and innovation being developed on this scale, here in the UK. The size and quality of the products being developed at Forgemasters is outstanding and this expansion programme builds on that by making a real investment for the future.” That was the verdict of the CBI. The previous Government decided to back the expansion of Sheffield Forgemasters not because we wanted to give aid to one company, but because we wanted a greater national capability in the nuclear supply chain, which is critical for Britain when many countries are building more nuclear power stations.”
“My right hon. Friend makes a strong point, but I want to make progress. The previous Government’s decisions were neither rushed nor politically motivated, and our manufacturing industries deserve a better future. The Government say that they are reviewing the projects to which I referred. We have already had a welcome confirmation of the Nissan decision, and I pay tribute to my hon. Friend the Member for Houghton and Sunderland South (Bridget Phillipson) for pressing the Government so effectively on that, but damaging uncertainty still exists, so let me ask the Secretary of State some specific questions. What is the position on the loan guarantees to GM and Ford? What is the position on the loan to Sheffield Forgemasters?”
“The proposals we made on the tax to which the hon. Gentleman refers would have kicked in next year. If I were him, I would not be so cocky about tax just a week before his Chancellor comes to the Dispatch Box to tell us his tax proposals. To return to my specific questions, will the new Government go ahead with the port development competition that was so pivotal in attracting offshore wind suppliers to the United Kingdom? Will the new Government stand by the support to Airbus and Rolls-Royce, which was mentioned by my hon. Friends? The Government have already caused damaging uncertainty by placing a question mark over those projects. If they abandon them, all their words about manufacturing and rebalancing the economy will rightly be seen as worthless.”
“But one of his first acts, together with other Departments, was to take £300 million out of the RDAs, so I know that he will not claim that that was about efficiency. Will he admit that that will have a real impact, with business support cut, projects cancelled and delayed, and—as my hon. Friend the Member for Stoke-on-Trent South (Robert Flello) said, less private investment levered in to those projects?”
“On innovation, can the Secretary of State tell us where we stand on the Hauser report and Labour’s plans for innovation centres to help the crossover of ideas between academia and industry? Let me say a word about the regional development agencies. These were introduced by the Labour Government a decade ago because we had seen the success of the Scottish and Welsh development agencies. They have, for the most part, performed well, with independent evaluation showing that for every £1 spent, regional economies benefited on average by £4.50. I know that the Secretary of State agrees that every part of the country should share in future economic growth. Before the election, he said that “efficiency has become the new politically correct word for sacking people and cutting services”.”
“For that reason, the previous Government introduced the idea of a patent box—a corporation tax rate of just 10% on future profits made from patents. When we announced that policy, Andrew Witty, chief executive of GlaxoSmithKline said: “The patent box is exactly the sort of active, long-term and creative support that we need from the government to ensure that the UK remains an attractive place for highly skilled sectors such as pharmaceuticals.” When the Secretary of State was asked about that a couple of weeks ago, he did not answer, but I want to give him another chance to do so today. If the new Government believe so much in a lower rate of corporation tax, will he now tell the House whether they support that proposal for an extra-low corporation tax rate for that part of the economy engaged in research and development here in the UK?”
“The new Government, however, are pledged to cut those allowances to pay for their planned cut in corporation tax, a move described by the Engineering Employers Federation as “a disaster”. It has said that if those plans went ahead: “Any business would have to think twice about investing in the UK.” Before the election, the Chancellor said that that plan would involve the removal of allowances amounting to £3.5 billion, which would otherwise support manufacturing. Can the Secretary of State confirm that it remains the Government’s policy to cut investment allowances for manufacturing industry? Another issue is supporting research and development. We are all agreed that we want research and development, and the manufacturing associated with it, to take place here in the UK.”
“No—I have already given way to my hon. Friend and I want to make progress. Support for industry is not just about specific interventions, but about having the right measures in place to foster investment and innovation, and I want to ask the Secretary of State where we stand on some of the key measures in that area, such as capital allowances, which the Government provide to encourage investment in new plant and machinery. The allowances are vital to manufacturing companies, particularly when we want them to be moving to lower carbon production. For those reasons, we doubled investment allowances in our last Budget, which meant that the new allowance—of £100,000—covers some 99% of capital investments made by companies every year.”
“Can the Secretary of State tell the House today exactly what the position is and how he is going to make a judgment on this? He talks of business and local authorities deciding in particular regions. How will that be done? Will it be one vote per council or one vote per business? Will it need a 55% majority? If it will be up to the region, how will he make the judgment on this important issue?”
“The previous Government set out many proposals, including some £900 million over the next few years in the expenditure of the Department in which I was a Minister. We also said that we would save billions more than that on public sector pay and pensions, and we set out many other proposals. I do not stand here as someone who says that there should never be cuts. My point today is that cuts must be made in a way that supports a strategy for growth, not in a way that militates against it. That is why I raised the issue of industrial support and regional development. Apart from the Budget, what about the future of the RDAs themselves? Government policy on this is in a total mess. We have had statements that they will be abolished, that they will be replaced, and that their replacements will both be different and look the same.”
“I know that the hon. Lady cares about these issues, but I have to disagree with that point. Until the situation is clarified, businesses in various regions do not know with whom they will be working, and a damaging lack of confidence is emerging about how projects that cross local authority boundaries are to be managed in the future.”