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Economic Development (Falkirk)

Volume 467: debated on Tuesday 20 November 2007

I want to talk about the economy of Falkirk, because that is my constituency. However, to some degree, it is a false construct, because economies in our constituencies—local, regional, national and global economies—are increasingly interdependent. I shall make two points and ask two questions. I shall ask my hon. Friend the Minister of State, Scotland Office about the enterprise strategy, because it seems to be one of the Government’s most important tasks. The Government are consulting on the strategy, and that will result in a White Paper early next year. I shall also raise the issue of the reorganisation of an agency in Scotland. It is primarily a devolved issue, but it still has important implications for many businesses and industries throughout my constituency. Some organisations that I shall mention operate within my constituency, but they may be based in colleagues’ constituencies. If I refer to such an organisation, I shall explain that it is in a colleague’s constituency, but that it employs my constituents.

I shall start by putting the issue into a localised context for my hon. Friend the Minister. I am absolutely confident that he will want to hear a good deal about Falkirk, so I shall give him some of that action. Employment in Falkirk is at 78 per cent., against the Scottish average of 76 per cent. Historically, Falkirk was an iron town: it supplied the shipbuilding and related industries on the Clyde and in my hon. Friend’s constituency. Until the late 1970s, the general assumption locally was that people would continue to be employed in the iron and related industries, and in the tertiary manufacturing industries that went with them. The typical pattern was for a man to start work at a bus factory—Alexander Dennis, for example, which still exists—and work there for his entire life. Frequently, that was the sole family income, and it was the model of employment for a good chunk of my constituency. Ironically, unemployment was higher and employment was lower than today, so when people look back to the golden age of Falkirk’s iron and related manufacturing industries, which were far greater then, they look back to a period of higher unemployment and lower mean family incomes. Generally, people were less well off.

Today, my constituency’s economy is much more service-based, and based on the fact that it is a 25-minute train ride from Falkirk to Edinburgh or Glasgow. I call the whole area, “Glasburgh”, because it is increasingly becoming one large economic entity of its own, rather like a large metropolitan area in England. Glasgow and Edinburgh are growing economies, and my constituency benefits hugely from that. Many commuters travel to service industry jobs in banks in Edinburgh and—to some degree—in public bodies in Glasgow. Many private sector organisations are based in Glasgow, too, but there is a general pattern whereby more people tend to travel to Edinburgh to work in the private sector.

The claimant count in Falkirk has decreased by 2.2 percentage points in the past half-dozen years. Falkirk is more reliant for employment on large enterprises than others, and many of my constituents are employed in the chemical industries. There is a refinery at Grangemouth in the constituency of my hon. Friend the Member for Linlithgow and East Falkirk (Michael Connarty), and he does a great deal of work with the companies in those industries. In particular, there is a very large company called INEOS, and it is expanding. It has a very successful business story, and the company employs many of my constituents. Unlike Members, they do not often care about travelling across boundaries to do their jobs, so they travel two or three miles out of my constituency and work in the chemical industry.

It is artificial to remove the chemical industry and related industries—the refinery—from the economic footprint of my constituency, or indeed of central Scotland, because if we consider the patterns of employment and the way in which the economy operates, those industries make all the difference to the local economy. If we discount the refinery and the effect of the chemical industries on the Falkirk economy, none the less, there is a varied pattern: a range of industries and companies, large and small, and their future will increasingly shape Falkirk’s future.

Falkirk has a programme called, “My Future’s in Falkirk”, which is a 10-year economic development initiative to transform the area into a diverse and modern economy, and also make it a nice place to stay. Last week, Falkirk acquired a lottery fund living landmarks grant of £25 million, the biggest ever awarded, which will go towards building two, big, nodding kelpies. A kelpie is a big horse, in case there is any doubt. It will be a fabulous landmark, sitting alongside the Falkirk wheel, which was built with funding of £80 million, much of which came from the lottery and from Europe. The wheel is one of Scotland’s foremost tourist landmarks. It does some good for the local economy, but these things take time, and the strategy of all local agencies, including the local authority, Falkirk council, Scottish Enterprise and private sector agencies that help develop the economy, will ultimately—one hopes—generate about 3,000 to 4,000 jobs. It had not gone to quite that extent until now.

The “My Future’s in Falkirk” initiative has generated a commitment, on paper at least, of £750 million of private-sector investment in the area. That is significantly ahead of its original target, which was to generate £200 million by the end of 2012. By then, 4,250 new jobs are expected. That is quite a specific projection, and I never know how those projections are made, but the significant expectation is that the initiative will generate a large number of jobs, and an additional £50 million a year is expected to be generated for the local economy.

I shall mention a couple of points about my constituency’s profile. The economy is significantly affected by Grangemouth’s refinery and chemical industry, but it is proving successful at diversification. It has its first strategic community plan, and it has notched up successes of late, with many more in sight—they are at the planning stage. The general idea is to make it clear far and wide that Falkirk is an excellent place to live, and that it has a growing economy. A masterplan has been unveiled for a 60-acre eco-friendly village. Planning is a devolved issue, and I shall not wax rhapsodic about it, but we must recognise that if one has a service economy, and many commuters hoping to travel to Edinburgh and Glasgow, where land values are high and prices are expensive, we must build houses where we can so that people can live in such locations and travel to work. We must strike a balance of course, because we want to encourage industries locally and people not just to live but to work locally.

However, we must recognise the nature of the Scottish economy and its overwhelmingly dominant area, which is the central belt between Edinburgh and Glasgow and either side of it. Therefore, the development of decent homes is very important. It is a devolved issue, but I always reflect on the importance not just of local employment but of commuters and travelling.

However, throughout the area, Falkirk has more people employed in manufacturing than Scotland as a whole. Perhaps I could say a word or two about Alexander’s, which is unarguably one of the most important companies in the area. It is a manufacturing company that exports much of its product and employs about 900 people. About three years ago, it virtually went into receivership. All those jobs were saved by a new management team, some of whom had previously worked in the company, in conjunction with what was then a Labour Scottish Executive. They turned what could have been a disaster into an enormous success, and Alexander’s continues to employ people right across the skills spectrum. Of course there are some jobs that are towards the lower end of the spectrum, but many of them are highly skilled, which is reflected by the trade unions that represent the workers there. The future for Alexander’s is generally very bright indeed.

Borg Grech Photography, which is also based in Falkirk, is a small photographic company that has developed wireless technology to allow a camera and computer to talk to each other. The technology has proved valuable to visitors to the Falkirk wheel, and the company is currently building on its success to reach out across Scotland.

Another important economic issue in my area is the redevelopment of what was formerly the Alcan site. It was a large, world-sized aluminium company site and at one stage many thousands of people were employed there. The site is no longer in operation and it is being redeveloped by the local authority, Scottish Enterprise and other agencies as part of “My Future’s in Falkirk”. Companies are being encouraged to come in and invest. It is a legendary site because many retired people in my constituency worked there. There are large numbers of former artisans who worked in iron foundries and at Alcan, which was a related industry. They tend to be in their 70s and 80s now, but they talk a great deal about the site, so what happens there is important. I hope that there will be increasing economic activity there, albeit of a different kind.

The Helix development, of which my hon. Friend the Minister will be aware, is at the centre of local discussion, and the £25 million grant is crucial to it. The general principle is that by making the area attractive, we will flag up how Falkirk and the surrounding area is a good place for businesses to be based. That, in large part, will help us to move towards the target of £750 million, although I am always cautious when I refer to such figures as I like to see the colour of the money and know who the companies are and what they are going to do, rather than just see a projection. Although I absolutely welcome the principle of a potential £750 million investment, I am keen to know the detail. I appreciate that it will take time to unfold, but I shall keep my finger on the button.

Another company that I wish to mention is Malcolm Allan, a butcher’s. I went to visit it expecting something quite different from what I saw. The butchery trade has changed enormously in the past few years and, rather than being a few butcher’s shops, the company now supplies products to every town in Scotland—right across the board, even wee villages have a product from Malcolm Allan. It supplies high-quality, top end of the range pies, meat products and so forth and employs about 100 people. Such companies make all the difference to our local economy.

Lomond Plant is another great company. It has been started up by an entrepreneurial family and is doing incredibly well. The only constraint on its growth is the land around it; in one case, an owner is not keen to sell. That is a pity, as it could grow enormously. It employs several hundred people and hires out plant. People tend to work not on the site but with the plant all over Scotland. It is a great success story, constrained only by the unavailability of land in the area.

There is a Falkirk business panel, made up of local businesses, the local authority and Scottish Enterprise, which was recently joined by a group of entrepreneurs from the United States. I know from speaking to them that they were enormously impressed by the energy, drive and imagination of the business panel, which is making a great difference to our area. Environmentally, it is important to flag up the fact that 88 businesses in the Falkirk area are registered with the Scottish Environment Protection Agency for waste disposal and so forth, and more than 3,000 are registered with Falkirk council.

Having given details on some of the companies in the area, I wish to make the point that local businesses, like those across the United Kingdom, ultimately tie into a much larger economy. Their success and failure will depend on not just their ability to recruit and train locally but much larger factors—the cost of money, the fiscal regime, globalisation across the board and competition from the enormous investments that India and China are making in training, science and technology and the threat or potential benefit of that to our economy.

It is essential that my constituents and businesses in my constituency get a chance to feed into the Government’s enterprise strategy. My understanding is that, due to the nature of the Administration in Scotland and devolution, there is a little confusion about what the whole thing means. The temptation for people in Scotland is to think that enterprise is a devolved issue and that anything to do with enterprise strategy is therefore devolved. In this case, many of the issues involved are manifestly reserved, and it is important for the consultation that will lead to the White Paper to be extended to my constituency and right across Scotland. Will the Minister assure me that he will examine the possibility of that happening?

Scottish Enterprise is a devolved body, and I do not intend to comment on its operation, but it acts extremely well in conjunction with many employers in my area, my local authority and other agencies. One can discuss until the cows come home how those organisations are best structured—I do not really have an ultimate view on that—but I understand that they may be restructured, in effect passing certain powers up to the Scottish Executive and certain other powers down to local authorities. In the case of a large local authority such as Glasgow or Edinburgh, I can see how that might make sense, as there are economies of scale and expertise to be made at local authority level. I am lucky enough to have excellent officers and good councillors in my local authority, but there is a danger—I shall put it no stronger—that if certain powers currently held by Scottish Enterprise are devolved to local authority level, local economic decisions may be over-politicised. They really ought to be made for economic reasons, not short-term political reasons.

Within the constraints of devolution, reserved powers and so on, will the Minister say whether he has a view on the reorganisation of Scottish Enterprise and whether he is watching its progress? I am especially impressed by the acting chief executive, Stuart Ogg, and his colleagues in my area, and I know that my colleagues who share the Forth Valley Enterprise area feel the same way. I would be concerned with developments if it looked as though we might overly politicise some local economic decisions that would be best kept at a business and economic level.

It is a pleasure to serve under your chairmanship this afternoon, Mr. Chope. I am sure that you have an extensive knowledge of the economic situation in Falkirk, and that it has been added to by the contribution of my hon. Friend the Member for Falkirk (Mr. Joyce). It is of course an entirely legitimate and expected role of Members of Parliament to act as advocates and ambassadors for their constituencies in Westminster and Whitehall, but there are few more active advocates for their constituencies than my hon. Friend. He never misses an opportunity to promote his constituency as a good place to live, work and do business. It is to his credit that this is the second debate that he has managed to secure in a few months on economic development in the town of Falkirk and the wider region of central Scotland, and that he has been tireless in advocating the needs of his constituency in that regard.

My hon. Friend asked specifically about how the UK Government’s enterprise strategy will be taken forward in Scotland, about the effect of the changes that the Scottish Executive might make to the enterprise network, and about how those factors interact. He was right to say that it is impossible, in the 21st century, to isolate a nation, let alone a region or town, in terms of economic strategy. These matters are interconnected and that is evidenced by the fact that there are Government Departments in both Westminster and Edinburgh with the word “enterprise” in their titles.

It is not possible to say that enterprise is either reserved or devolved; it is closely interdependent with other factors. Decisions that we take here, as a Government, on the macro-economic framework and the taxation regime, and in relation to European regulations and the wider fiscal framework within which business operates, must have an impact on local economic development in Scotland. It is false and simplistic to say that matters relating to enterprise and economic development in Scotland are devolved. That is not the case and my hon. Friend is right to highlight those factors today. I shall address the two issues that he discussed in a moment.

My hon. Friend was right to locate his comments about how the economy in Falkirk is doing within the wider picture of how the Scottish economy is doing. Recent Scottish gross domestic product figures confirm that the Scottish economy continues to grow at above-trend rates. Since the beginning of 1999, there have been 20 quarters of greater-than-trend growth, which shows that Scotland, like the UK as a whole, is performing consistently well. In contrast, over the same period, progress in some of the major eurozone countries has been constrained by sluggish growth and high unemployment, the American economy has experienced well-documented difficulties and many economies in south-east Asia have been in crisis. So, at a time of international economic uncertainty and rapidly fluctuating commodity prices, Scotland continues to perform well, and more and more people are finding work in a growing economy. This year, there have been record levels of engagement with the labour market and historically low unemployment. Moreover, there have been record highs in the number of people available to take up employment.

Those things have not happened by accident. The Government have pursued policies that combine active labour market stimulation with flexible labour market policies, which allow employers to create jobs and people to take those jobs, and which make that choice pay by ensuring that people are better off in work than they would be on benefits. Programmes such as the new deal have helped to provide more than 280,000 additional jobs in Scotland compared with 1997. The new jobs being created in Scotland since 1997 are overwhelmingly in the private sector. We do not apologise for creating more nurses, doctors, police and community support officers, but it is a myth about the Scottish economy that the growth and employment is located entirely in the public sector. That is not the case. As my hon. Friend discussed, the companies that are expanding and doing well in his constituency are typical of private sector companies throughout Scotland that have been expanding and taking on more workers. As he pointed out in his opening remarks, the Scottish employment rate is 76.5 per cent.—that is higher than the UK equivalent and has been for the past three years. The proportion of those who are economically active, meanwhile, outperforms the UK figure, and the Scottish unemployment figure is lower.

Those figures would have been inconceivable 10 or 15 years ago, when my hon. Friend and I were growing up in politics and became used to Scotland lagging behind the UK even in a time of high unemployment. Constituencies such as Falkirk and Inverclyde used to be at the back of a long tail of constituencies with dreadful unemployment figures. Unemployment now stands at 5.4 per cent., whereas the figure across the EU is 7.1 per cent. Behind those figures are people and families who can now aspire to better things for their children, enjoy more holidays and look forward to Christmas in a way that simply would not be possible were we still in the high-unemployment economy that existed when unemployment was regarded as a price worth paying.

My hon. Friend mentioned many companies in his constituency and the people who are creating jobs and driving economic growth. He mentioned in particular Malcolm Allan the butchers, which is a great example of a small, local company with an entrepreneurial spirit seeing an opening in the market and moving it forward. I would like to share with him an example from my constituency that highlights what is going on in Scotland beyond Falkirk. Port Glasgow, in my constituency, has a huge new Tesco store, which is very welcome and has created many new jobs but has put pressure on the traditional town centre. What is going to happen to the traditional small shops and businesses that employ small numbers of people and have been the backbone of the local economy for many years? My hon. Friend talked about the local butcher in his constituency making a difference; our active Port Glasgow town centre traders association is headed by the local butcher, Drew Mackenzie, who is an excellent businessman and has real entrepreneurial spirit and a passion for Port Glasgow. He is helping to drive forward an agenda that will see the town centre flourish alongside Tesco; it does not have to wither and die.

The Minister and I clearly have something in common—entrepreneurial and excellent local butchers—and it is good to hear about Drew and Malcolm. I also have a company called Composite Energy, which is looking to extract methane from under the ground. It tells me that there was considerable risk in setting up the venture, which involved people reducing their incomes and making substantial investments, and that it will not pay off for some time. Does the Minister agree that the way in which we tax such businesses is absolutely fundamental to whether they can make a fist of things in the early years?

I agree entirely. We must have taxation and broader fiscal strategies that encourage entrepreneurialism and encourage people to create jobs. Those jobs might not be created in the same volume as those created by massive employers in our constituencies in years gone by, but we are tired of putting all our eggs in too few baskets. We need a diversified employment base in those areas, and given a choice between having one factory employing 1,000 people and 10 factories employing 100, I know which I would choose. We have to ensure that we encourage those small businesses.

In the few minutes remaining, I shall address the two specific points that my hon. Friend raised. He rightly said that the Government are engaged in consultation with business in preparation for a new enterprise strategy paper next year and that much consultation has been taking place throughout the UK. He is also right to call on the Government to ensure that Scottish businesses are consulted, especially in areas that are not devolved, because we cannot simply isolate the conditions for the economic growth of small and medium-sized businesses and say that that area is devolved; it is not. I assure him that the Government will work closely with businesses in Scotland to make sure that they have an input into our enterprise strategy for the years ahead. As the UK develops its policy, it is vital that the voices of Scottish businesses are heard on many of the broader issues of taxation and European regulation that have been mentioned, and on the question of how we rise to the challenges of globalisation.

My hon. Friend mentioned the reform of the enterprise network. I shall not stray too far on to that because it is devolved, but we are all watching it with interest. We know that it is important to get this right. It is important to have a higher-level strategic view across regions—those of us who have been local councillors know about the demands on local council finances—so that we do not lose vital economic stimulation.

I congratulate my hon. Friend on bringing these issues to the House’s attention. He is an excellent advocate for his constituency and as long as he is a voice representing Falkirk in the House, the needs of business, enterprise and employers in that area will never be short of a close and articulate friend.