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Economy of Central Scotland

Volume 461: debated on Monday 4 June 2007

Motion made, and Question proposed, That this House do now adjourn.—[Jonathan Shaw.]

I see that we have a little more time than usual, so I look forward to my usual one-hour speech, followed by a fabulous response from my hon. Friend the Minister. I am struggling slightly with my voice, so I may speak a little more quietly than usual although the Boots product which is the equivalent of Strepsils seems to be doing a pretty good job.

I shall briefly present a picture of the economy in central Scotland. From my perspective the essence of the central region is the old Falkirk, Stirling and Clackmannanshire. It all sounds rather parochial but it is a big chunk of the UK economy. Not unreasonably from my perspective as the MP for Falkirk, I see central Scotland as an area that works outwards from Falkirk as the hub, through a series of spokes which include places such as Stirling and parts of Lanarkshire and Clackmannanshire. It includes businesses of all sizes, which will be affected by trade unions and other interests. I hope that my hon. Friend will be able to convince me that the economy of Falkirk and central Scotland is a high priority for him and his colleagues in government.

When I entered the House and prepared my maiden speech, I reread the maiden speech of my predecessor but one, Harry Ewing—Lord Ewing of Kirkford. It contained much that was of great value. He had a hugely successful career and is still regarded locally in Falkirk, Grangemouth and Stirlingshire as a man who interpreted the political landscape with great intelligence and had a fine political career. In his maiden speech—I think that he would be comfortable with my saying this—he said, to paraphrase over a series of paragraphs, that Falkirk is, always has been and always will be an iron town. In fact, within about five years, pretty much all of the iron foundries that served the shipbuilding industry of the Clyde had closed and the economy of Scotland—more to the point, as a local representative, the economy of central Scotland and Falkirk—had changed beyond imagination, even beyond the imagination of Lord Ewing, who was well qualified to try to project a dozen years into the future.

Yet, in the economy of my area now, we have manufacturing still: it would not be true to say that it has disappeared. In reality, the economy of central Scotland remains extremely mixed. We have a successful and famous tertiary manufacturing bus factory, which is now called Alexander Dennis. It has always had “Alexander” in its name. Two or three years ago, following the collapse of the parent company, Mayflower, it looked as though we could lose 1,000 jobs and that would be the end of it. Historically, that would have been pretty tragic given the bus building industry’s links to the iron foundries, metal industries and shipbuilding further down the Clyde. All the iron foundries have gone—most of them are now well-appointed houses—but the bus manufacturing company still exists.

There has been an enormous turnaround in the past two or three years. There are more jobs now than existed before. Many are highly skilled and some are less skilled—there is a great deal of metal bashing—but a lot of it is good, solid, practical, skilled, tradesman-like activity. That, to some degree, is what marks out the Falkirk economy from the economies in parts of central Scotland that are some way out from the main metropolitan bases. There is a great story of survival and success. Alexander Dennis now manufactures buses that are sold, sometimes in kit form, all over the world. It still employs 800 or 900 people. Symbolically, that is almost—obviously, not equally—as important as the jobs themselves.

The Falkirk economy, like every regional or local economy in the UK, requires a strong UK economy. It is fair to say that for the past 10 years we have had a very stable economy; the Minister will know more about that than me and will be able to say more about it in due course. The UK economy has not only been extremely stable and well managed but has created an environment where companies such as my local companies in Falkirk can do extremely well. They can compete with the best, not only in Scotland but in the UK and across the rest of the world. Alexander Dennis is a good indication of that.

A strong economy means opportunities for everyone. We do not want economies to consist only of low-skill, service-based sectors where people do not receive sufficient training, are paid at the bottom end of the scale, and so forth. In my area, we have, to a large degree, a correlation between good employment levels and significant social justice. Falkirk has unemployment levels of just over 3 per cent., as against 7.5 per cent. before 1997.

I declare an interest in the jobcentre in Falkirk because I opened it—and got a plaque on the wall—two years ago when we went through some pain in closing down one or two small jobcentres. The Department for Work and Pensions has done a fabulous job. Other organisations, such as the Shaw Trust, with which we have had a good relationship in the past few years, had a great effect on placing those who are furthest from the job market in employment.

I have been Member of Parliament for Falkirk for the past six years. In the first couple of years, people would come to me and say, “I’ve just failed my medical. What shall I do about incapacity benefit?” In fact, they had passed their medical and could now work. It has been an education to me to see organisations such as the Shaw Trust and Jobcentre Plus picking up those people, who are now in employment. The relationship between unemployment and employment is more complex because people who were formerly on incapacity benefit are now in employment. That enormously increases the affluence—if I may put it that way; the affluence is not huge—of families who were among the least well off. They can never be raised above the most modest way of life until they are in employment.

Two or three years ago, there was a strong correlation between a man being unemployed and his partner being unemployed. That may have been due to social or domestic pressure, but it was a fact. We are beginning to break the correlation. That is enormously important.

In my constituency, we have several successful local companies, which have worked alongside Jobcentre Plus and the Shaw Trust. I met the great chief executive of Lomond plant hire, which is a medium-sized company that employs between 200 and 250 people. It trains people to operate plant, so the work is not unskilled. The company is entirely organic—it came out of the Falkirk economy. It is based on an industrial estate and, although I had seen the odd vehicle driving around, since such companies are mostly located in the places where they operate forklift trucks, JCBs and so on, one does not have a sense of their public or practical presence in, for example, the building industry. However, when one visits the location and meets the people who run the organisation, it is striking how enormously successful it has been in the past 10 years under an effective, strong and competitive UK economy.

Another company, Applied Sweepers, is just around the back. That sounds like parochial stuff to the House, but those companies are multi-million-pound businesses, which effectively came from nowhere and out of the imagination and hard work of the people who created them. They are organic and Falkirk based. Applied Sweepers is famous for the green machine that sweeps our streets throughout the UK and, indeed, the world. It is an enormously successful company, and it is a source of pride that companies such as Lomond plant hire and Applied Sweepers have managed to achieve that success in Falkirk. They are run by Falkirk and central region people.

Another famous local company is called Mathieson’s. It makes my sandwiches and those of many other people in Falkirk. It is a hugely successful bakery, which recently bought fabulous premises, helped by Scottish Enterprise. Of course, that is devolved to the Scottish Executive, but it is fair to praise it in this place. The new factory that Mathieson’s operates in Falkirk has made a step change, which means that it can serve major companies such as Asda and Tesco. They have an excellent policy of taking on local produce and using it throughout the region. In the case of Mathieson’s, that means sandwiches, cakes and so on, but there are local providers throughout the country whose products are taken on. We should show Asda and Tesco respect for having the sense to realise that people want to buy local products from places such as Falkirk.

There is another angle to which I would not have given much thought in the past. Sometimes people who run thriving companies operate out of industrial estates. On some such estates, one or two people could perhaps be categorised as behaving antisocially. They are not on a housing estate or in a house—they are behaving badly not where they live but where they operate their business. It is not unknown—I have checked it with colleagues across central Scotland—to have enormously successful local ventures on industrial estates, but to see people at the margins who are, or are bordering on, being antisocial in carrying out their activities. Ultimately, I suppose it is a matter for the police, but it is interesting from a business perspective. If colleagues with constituencies in central Scotland or perhaps even the Minister visited a local industrial estate in the area, they might find germs of companies that they had not even heard of before. They are profitable, turning over a great profit and treating their staff extremely well by training and paying them well—miles above the national minimum wage. There is aspiration all around, but sometimes these companies are plagued by a couple of people or a couple of businesses at the margins on those estates, which we really should be taking a very close look at because it can affect the way that business is done—parochial point now made, Madam Deputy Speaker.

It is true to say that Falkirk is in a pretty unique position and location when it comes to business. We have three motorways surrounding us: the M876, which is the wee one that takes us up to Kincardine bridge; the M8, which takes us down to Glasgow; and the M9 up to Edinburgh. There are five stations in the constituency and it takes about 25 minutes to get to Edinburgh or Glasgow. Most people go to Edinburgh, but a good chunk go to Glasgow. Anyone standing at Falkirk, High in the morning will see a great welter of people travelling to jobs, perhaps to the Royal Bank and the financial institutions in Edinburgh, or perhaps to Glasgow council and many other businesses in the Glasgow area. When I stand there at Falkirk, High—perhaps the best place to get a perspective on all this—it seems to me that central Scotland and the Scottish economy are really part of what I like to think of as Glasburgh, which I view as a big metropolis extending from Glasgow to Edinburgh, taking in the peripheral areas and acting as the economic driving force of Scotland to a very large degree.

Scotland is particularly interesting in respect of its outlying economies and cultures, but the area between Edinburgh and Glasgow—with Falkirk right in the middle—is also particularly interesting. To some degree it is for the UK Government and to some degree for the Scottish Executive to work out what should be done. I am not always absolutely optimistic about the ability of the new Scottish Executive to do that, but let us wait and see.

It seems to me that an important role should be played by Government generally, and particularly the UK Government, in the context of ensuring a strong economy. The Government should ensure that fledging companies, which can become the Lomond plant hires and Applied Sweepers of tomorrow, are properly encouraged and brought on. Many areas in Falkirk and the central region of Scotland can be developed, yet it seems strange that many attempts to develop are still awaiting success, if I can put it in the most benign way. As a modest Member of Parliament, I do not quite understand why, but the reality is that despite the short journey time to Edinburgh or Glasgow, it is difficult to attract Scottish non-governmental organisations, which seem to prefer Stirling, Perth and Inverness. I do not know whether it is because they are more posh or because people prefer to live there or what, but the operating costs should be less in the central region. These are mainly decisions for the Scottish Executive, but not exclusively so, because some matters are decisions for the UK Government—my hon. Friend the Minister and his colleagues.

Fundamentally, from my perspective, there seems to be an odd economic dysfunction. Falkirk is, as I said, very close to Edinburgh and Glasgow, right in the middle of a motorway system and has five stations. If we spoke to a foreign national, he would say that it sounds like one big metropolis or one big city—and yet there is a big space right next to the motorway in Falkirk, which for some reason is very difficult to sell. I am not exactly sure why that is.

As I look up at the clock, Madam Deputy Speaker, I suspect that the Minister may be getting worried that I am going to take up all the allotted time for the Adjournment, so fair enough. I shall cut my comments slightly short, but, if I may, I should like to quote briefly a couple of excellent local agencies, one of which is Falkirk council, which used a consultancy called DTZ Pieda to say:

“The loss of traditional and more recently high technology manufacturing capacity, and the growth of a service oriented economy, has been the key feature of economic change since the 1970s.”

That relates to my earlier reference to Lord Ewing. It continued:

“Nevertheless, by 2003, Falkirk still retained a substantial proportion of manufacturing—18 per cent. of employment and 25 per cent. of gross value added—in its industrial structure.”

The consultancy went on to say that there was a dichotomy between the petrochemical industry—BP Grangemouth, which happens to lie outside my constituency—and the rest of the economy. In point of fact, however, we have a mixed economy, with a productive local work force. A bit of imagination needs to be applied to the question of why that dichotomy exists in spite of the substantial rise in employment. I will not go on at great length about the figures that show that if the petrochemical sector is included, mean average earnings are much higher than if we extract the petrochemical sector from the figures. It makes no sense to take the petrochemical sector out of the economy of central Scotland, because its existence is real.

If we take the petrochemical sector out, however, it tells us a little about what is going on elsewhere in the local economy in central Scotland. There may be a story about local skill levels. Forth Valley college, which is expanding and dominates education provision in central Scotland, is taking the bit between its teeth and now focuses, under Linda Mackay, its excellent principal, on the vocational. Although it also provides degree courses, art and so on—all of which I know to be good—the reality is that getting people into good, medium to high-skilled jobs is key. Stewart Hogg at Scottish Enterprise Forth Valley puts a great deal of time and effort into developing businesses in Falkirk, as the dominant part of Scotland in population terms.

As to development and land use in central Scotland, the great space at the edge of the motorway, which seems eminently useable, has, for the past six years since I have been the local Member, been the subject of a great deal of hype. Perhaps some of it is not hype, but a realistic projection of the area’s potential. One good thing that has happened is that a new football stadium has been built for Falkirk football club, which has been really successful. My area has three professional football clubs.

Macdonald estates, which has been involved in that, has for the past few years had a number of ideas and plans, which sometimes seem different from the actuality on the ground. I once asked a question of Dan Macdonald, who is the chief executive of what is apparently a public company—although it seems to me more like a family company. At a public meeting, I asked, “Who will move into the many offices and hotels you are going to build? You don’t have to tell me their names, as it might be a matter of commercial confidentiality, and I will take your word for it. Can you just tell me that there are one or two interested parties for the space that Macdonald and Falkirk council were creating in the important and useful gateway project for Falkirk?” He said, “I cannot answer that.” He put up someone junior to tell me why he could not answer it. He wrote me a letter, which, uniquely in my parliamentary experience, should have been written in green ink—he had typed it, or someone had typed it for him. It more or less said that it was outrageous of me to ask him that question. He said that there is all this space, and people will come and use it—if we build it, they will come—and I merely asked him to convince me that one or two people might come to use it.

The Falkirk Helix is a £500 million project. It is described by what is in part MacDonald Estates and in part Falkirk council before the election, so by a previous administration, as “Manhattan on the Forth”. An article says:

“A vision of Manhattan on the Forth with a power to stimulate the wider Scottish economy”

is in place now.

“It will cost £500 million, create £5,000 jobs and take eight years to complete”.

As a minor detail, we are told:

“There will be a marina near the Falkirk Wheel”—

a truly fabulous part of Scotland—

“and streets of offices, not dissimilar to”

New York. It continues:

“These streets will have squares and public places, fronting boulevards”,

and so forth.

If we use that space intelligently, with a bit of vision and realism we will generate jobs, but not if people are concerned about their vested interests. I am a big fan of productivity and good companies, and there are many good companies in Scotland, such as the Royal Bank of Scotland, and as far as I know MacDonald Estates does a good job elsewhere, but people are a bit mad about what is happening. If people from MacDonald Estates turn up to meetings in two-door Rolls-Royces that cost £200,000 and everyone else is earning £12,000, they will alienate themselves from the local community. I am concerned that MacDonald Estates may not be interested in the well-being of the people of Falkirk, but I could be wrong about that and could revise my opinion.

My concern is for the economy of Scotland as a whole and central Scotland in particular—what I would call Glasburgh, by which I mean back offices in Falkirk and front offices and front-facing organisations in Edinburgh and Glasgow. If those services properly come together, Falkirk could be even more affluent. To a degree, that has to be directed by the Scottish Executive, but my hon. Friend the Minister has a significant say in that. I ask him to take full responsibility for the high employment in Falkirk—I am going to challenge him on that—and to convince me that the interests of the people of Falkirk and central Scotland are high on his agenda.

I congratulate my hon. Friend the Member for Falkirk (Mr. Joyce) on securing the debate. Since he was elected, he has always been an outspoken advocate for, and tireless champion of, central Scotland, in particular the Falkirk area that he proudly represents. I also congratulate him on his magnificent struggle with failing health. He managed to get through his speech without his voice giving way, although he had me worried when he declared an interest in Jobcentre Plus. I was not sure what he was going on to say, but he assures me that he is interested in it because he opened it, and there is a plaque on the wall to confirm that.

This is an important debate and it is important to have it at this time. The performance of the economy is always crucial, but at this time, in a period of political flux, it is essential to recognise just how well the economy of central Scotland is doing, and how important it is not to take any decisions or pursue any policy paths that will put the state of the economy at risk.

As my hon. Friend properly outlined, the central Scotland economy makes a vital contribution to the overall Scottish economy. If one widens it out from the central region to what he called “Glasburgh”, we are talking somewhere in excess of 70 per cent. of the value of the entire Scottish economy. I take issue with him on one thing, however: I gently remind him that central Scotland extends west of Glasgow—indeed, some of the most dynamic, exciting and beautiful parts lie there. However, I will not chide him any further. I think he takes my point.

With the area making such a large contribution to the overall Scottish economy, it is reassuring to remind ourselves that as recently as April this year, no less an authority than the chief economist of the RBS Group, Dr. Andrew McLaughlin, said that the

“Scottish Economy is in fine fettle”.

How right he was. The latest growth figures show Scottish output rising by 2.6 per cent. over the year, well above the long-term growth rate of 1.8 per cent. That is the highest calendar-year increase in GDP since 1997. It also marks the 10th consecutive quarter of greater-than-trend GDP growth.

As my hon. Friend said, dynamic sectors such as the financial services sector are creating a prosperous Scotland. Over 2006, financial services grew at the staggering rate of 8.1 per cent. Manufacturing, which played an important part in my hon. Friend’s speech, experienced a 0.9 per cent. quarterly increase in output, meaning that the sector—which, as we all know, has struggled, as it has done throughout the western and the developed world—is no longer in recession. Gross value added per head in Scotland exceeds that in Wales, Northern Ireland and all the English regions except London and the south-east and east of England.

Not only is the Scottish economy performing strongly at the moment, but the predictions are also encouraging. Independent forecasters such as the Fraser of Allandar Institute and the Ernst and Young ITEM Club suggest that the economy will continue to grow at above its long-term rate into 2008.

In the past the economy has done well, but growth has often come without jobs attached to it. That does not apply to the strong Scottish economy at present. The Scottish labour market is experiencing a period of unprecedented strength. There have never been more Scots in work, and the economic activity level and rate are at record highs. The latest statistics show that unemployment is falling, and is currently near an historic low.

As my hon. Friend said, stability generated by the United Kingdom’s strong macro-economic framework has delivered the strongest Scottish labour market for decades. Much as I should like to take credit for that, I think my hon. Friend will agree that much of the credit must go to the excellent stewardship of the economy achieved by my right hon. Friend the Chancellor of the Exchequer. I think everyone in Scotland will recognise that just as he has delivered an outstanding economy overall, he is well placed to take over leadership of the United Kingdom on the basis of his outstanding track record in delivering a strong Scottish economy, with record low inflation, record investment in our public services, and record numbers of people in work. That is the legacy of my right hon. Friend the Chancellor of the Exchequer, and it gets his premiership off to an outstanding start.

More jobs are available than ever before. Over 250,000 more people are in work than in 1997. The Scottish employment rate exceeds the United Kingdom average and that of almost all other countries in the European Union, and, as I have said, unemployment is near an historic low.

It is not only politicians who are making these claims. It might be seen as entirely self-serving if I merely read out a list of statistics, so let us examine what independent sources are saying. On 14 May the senior economist at the Royal Bank of Scotland, David Fenton, said:

“Growth in new business fell on the month, but has been so strong over the past year that order books are now brimming over, with the index of unfinished work also at a record high.”

On 24 April Iain McMillan, director of CBI Scotland, said:

“Scotland’s manufacturers are confident they can match the best in the world. Optimism regarding the business situation continues at a high level with export optimism at its highest level since February 1968.”

On 29 March Professor Donald MacRae, chief economist at Lloyds TSB Scotland, said:

“The Scottish economy continues to grow above its trend rate whilst expectations for future growth have risen to their second-highest level in nine years…Consumer confidence remains high, reinforced by record levels of employment.”

In March Dr. Peter Hughes, chief executive of Scottish Engineering, said,

“the Scottish manufacturing engineering sector continues to have an optimistic outlook with overall improvements in total orders and output volumes continuing.”

As my hon. Friend says, central Scotland is rightly seen as a driver for growth in the Scottish economy. Although all parts of Scotland are making their contribution, tonight we are focusing particularly on the contribution made in central Scotland. In terms of gross value added per head, both Edinburgh and Glasgow easily exceed the UK average and are continuing to grow at a quicker rate than the national average. I have already mentioned the tremendous success of the financial sector in Scotland. Long may that continue. It now employs directly 110,000 people, and a similar number indirectly. New jobs are being created there all the time.

My hon. Friend apologised for being parochial. He has no need to apologise for that. He does what constituency MPs are entitled and supposed to do, which is to make a case on behalf of their constituency on the Floor of the House. His constituency is a prime illustration of the success of the central Scotland economy. In the past year alone, unemployment has fallen by 9 per cent. in Falkirk and now sits below the Scottish average. I am sure that his predecessors would have liked to have been able to come to the House when unemployment in Falkirk was below the Scottish average. In his constituency and mine, unemployment was into double figures, where it stayed for many years. He can now boast that he is an MP at a time when unemployment in Falkirk is below the Scottish average. That does not happen often. He must take some credit for that, too.

My hon. Friend mentioned Alexander Dennis, the coach builder, which is renowned not just throughout Scotland but throughout the world. On a trip to Shanghai, he and I spotted some buses that were made in Falkirk trundling through the streets, so they are clearly well known and well regarded throughout the world. We congratulate Alexander Dennis on winning in March a contract from Stagecoach worth £55 million, for another 393 buses and, just last week, on being awarded a contract by the National Express Group worth £26 million for 119 double-decker buses. In addition, it is making great strides forward. My right hon. Friend the Secretary of State for Scotland saw that when he visited the company recently: he saw the “eco-warrior”, the environmentally friendly double-decker.

My hon. Friend invited me to reflect on the situation of some industrial estates throughout Scotland, including in my constituency. I have an industrial estate in my constituency that closely mirrors the one that he described. In Port Glasgow, the Devol industrial estate does not employ people in the vast numbers of years gone by, but it still makes an important contribution to the local economy in Inverclyde. I can think of several companies there that are still employing many of my constituents in well-paid, well-trained jobs. We lose those jobs at our peril, and we minimise the importance of that at our peril.

I have had a lot of dealings with—I will pick just one of the companies—McLaren Packaging Ltd, which has gone from fairly standard manufacturing of boxes for television sets to sophisticated manufacturing of those cardboard presentation tubes that Scotch whisky now comes in. It is a very skilled job. Many millions of pounds have been invested in the necessary capital, equipment and training of the work force. The Scotch whisky industry is thriving. It is worth a huge amount to the Scottish economy. Companies such as McLaren Packaging Ltd play an important part in allowing Scotch whisky to expand into markets where it is seen more as a niche product. The company will soon be employing upwards of 100 people, and has plans to expand even further. It is making a tremendous contribution to the economy of Inverclyde, and by extension to the economy of central Scotland.

Such industrial estates are not without their problems, as my hon. Friend outlined, but we give them up at our peril. We allow them to be sold off for housing at our peril. They may not be what they once were, but they are still important. We must not minimise the importance of that.

On the broader front, the success of the economy in central Scotland has allowed the Government to make available to the Scottish Executive record sums of money to invest in our vital public services. In Falkirk alone, we have 23 more consultants, 88 more nurses, more midwives, 24 more dentists, and 162 more teachers. That is directly related to the strength of the economy. If it were not for the strength of the UK economy at macro level, and the strength of the central Scotland economy benefiting from that, we would not have the resources to allow us to invest in the college that my hon. Friend mentioned, in the schools and in the hospitals. It is important that we continue with the policies that have given us that strong macro-economic growth, if the new Executive are to continue to have the money that we have made available to the Executive to invest in vital public services.

Tourism in Scotland has increased. The success of the magnificent Falkirk wheel has helped in that. I visited it last year, and it is an astonishing feat of engineering. It is distinctly Scottish, and a triumph of engineering skill. It has taken Falkirk from being an also-ran as a tourist destination to the 12th most visited tourist destination in Scotland, and that ranking will only continue to improve. The wheel has played a tremendous part in that, and I am sure that the local economy near the wheel is benefiting from it. That stands as a great tribute to the people who had the foresight to come up with the idea for the venture, and who then implemented it.

As well as successes in tourism, manufacturing and the financial sector, there is also in the wider central Scotland area a blossoming of a relatively new industry: the life science research industry. Cognia, a US specialist life science database company, has expanded its Edinburgh operations by recruiting 75 new staff. Many life science research companies are locating to Scotland. There is a cluster in and around central Scotland that rivals—and is secondly only to—that of Cambridge in the whole of the UK. That is an exciting development. We must make the right macroeconomic choices to foster and encourage those companies, which will in due course employ my hon. Friend’s constituents.

My hon. Friend made a strong case for the continued success of the central Scotland economy. It is doing well, but he is right to highlight the fact that we must continue to make the right policy choices for it to continue to flourish. Solid economic growth and success does not happen by accident. It happens because tough decisions are made, because the Government have the foresight to put in place the proper macro-economic policies, and because we have over the past eight years worked very closely with the Scottish Executive to ensure that in places such as Falkirk and Grangemouth the benefits of it are enjoyed by our constituents. I hope that that close co-operation on behalf of our constituents flourishes in years to come, and I know that as long as the people of Falkirk have as vociferous an advocate as my hon. Friend, they will continue to enjoy the economic success that they are enjoying today.

Question put and agreed to.

Adjourned accordingly at twenty-two minutes past Nine o’clock.