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Industrial Strategy

Volume 550: debated on Monday 10 September 2012

(Urgent Question): To ask the Secretary of State for Business, Innovation and Skills to make a statement on the Government’s industrial strategy.

Creating a strong and balanced economy continues to be the Government’s priority. This means creating an environment in which entrepreneurs find it easy to start and grow a business, and pursuing demand management policies that stimulate growth and maintain financial stability.

There is also a role for an industrial strategy, which I shall set out in detail tomorrow. This means addressing the need for a long-term vision and having the courage to take decisions that bear fruit decades later, and focusing on the things we do best. There are two main themes, one of which is the need for long-term decision making. Many industries operate on that basis, including a company that I worked for, Shell, which thought in terms of decades. The other theme is the need for partnership between business and industry. Very few countries have a purely laissez-faire approach, and we should learn from their experience. We also should draw on our experience; I have learned much from some of my predecessors, particularly Lord Heseltine, who has an office in my Department and is contributing valuably to thinking on this subject.

We have identified several specific fronts on which Government action can have a real and early impact, including access to finance; partnership with specific sectors; support for emerging technologies; creating a pipeline of skilled workers; Government procurement; and the development of supply chains. In the short time available, let me say a little about each of them.

On access to finance, we are living in the aftermath of a disastrous banking collapse. Big firms, by and large, can raise short and long-term finance via capital and equity markets. The latest SME Finance Monitor, however, shows that in the last 12 months, 33% of businesses that applied for loans were rejected. The big banks, including the semi-state-owned banks, are preoccupied with repairing damaged balance sheets and there is a real shortage of long-term patient capital for business. We are tackling these issues by launching the funding for lending scheme, which reduces the cost of funding for banks that increase their lending; running schemes such as the enterprise capital funds and the enterprise finance guarantee to help early-stage businesses without a track record or collateral to access venture capital finance or bank finance; and stimulating the development of non-bank financial sources through the £1.2 billion business finance partnership. The big banks have launched the £2.5 billion business growth fund to provide equity. We are now actively looking at a proposal to establish a business bank that could work through alternative providers such as the new challenger banks and non-bank lenders to direct private capital towards growth and innovation and to corral our existing interventions, such as co-investment and guarantees.

Secondly, let me say a word on the sectoral approach. The second strand of the industrial strategy is to build on a collaborative strategic partnership with key sectors. Of course, different industries require different degrees of business support and collaboration. At one end of the spectrum, much of the economy flourishes on its own. Here our efforts are best placed on making the UK a good place to do business, with attractive policies on taxation, regulation and free and efficient markets. At the other end of the spectrum, there are sectors that require a long-term, strategic partnership with Government; the Automotive Council and the aerospace leadership groups are good examples. Tomorrow, my Department will publish a new analysis of UK sectors, setting out those areas where support should be focused—in particular, advanced manufacturing; knowledge-intensive services, professional services and higher education; and industries that provide key inputs to our internationally traded activities, such as the digital economy and the energy supply chain.

Thirdly, on technology, one of the most powerful levers at our disposal is the potential of innovative technologies. Ground-breaking technologies are often too risky or resource-intensive for individual companies to nurture on their own, so the Government have an important role to play in accelerating the journey from academic research to commercial application. The Government Office for Science is in the process of updating its Foresight report on “Technology and Innovation Futures”, taking a fresh look at technologies with the potential to support sustained economic growth over the next 20 years or so. The report has identified a number of technologies that can have a material effect on future growth rates. The Technology Strategy Board is now concentrating on supporting the nascent disruptive technologies that have the potential to grow into new industries within a decade or more.

We also need a long-term commitment to world-class skills. The Government have focused on apprenticeships, and we have seen a 63% increase in the number this year, with 400,000 new starts in the first three quarters alone. However, we recognise that we cannot rest on our laurels, and Doug Richard will report next month with ideas on how we can gain even more value from apprenticeships.

As employers know better than anybody the long term-skills needs of their work force, we have launched an employer ownership pilot scheme which is giving business direct access to £250 million of funding for vocational training. Employers, working together in sectors or supply chains, have put together a wide range of innovative proposals to design and develop their own training programmes. One of the biggest long-term challenges will be the supply of engineers; we are chronically short of them at present, and have been for a long time. That is why we decided—as announced in the aerospace strategy—to fund, jointly with industry, 500 masters degree places in aerospace engineering between 2013 and 2016.

Lastly, on procurement, we acknowledge that we have a responsibility to take seriously the role that public procurement plays in creating the confidence that enables businesses to make long-term investment decisions—alongside, of course, value for money. We are overhauling the way in which the Government procure services in order to increase clarity for businesses, particularly small and medium-sized enterprises. In April we published data on £70 billion-worth of future Government contracts that are planned for 13 sectors over the next five years. We are also assessing what the 13 pipelines tell us about the strategic capabilities that will be required in the future.

Those are the broad contours of the industrial strategy on which we will work with industry in the months ahead. The strategy will contribute to the generation of the confidence that is needed to ensure that business invests for the long term, and I commend it to the House.

May I ask first why the Secretary of State is not setting out his strategy in full to the House of Commons, instead of doing so in a speech tomorrow?

Earlier this year, the Secretary of State rightly said that the Government lacked a compelling vision. Having made 15 speeches in which he told us that he wanted this strategy, he has at least set it out today. He said, as on previous occasions, that Lord Mandelson had bequeathed him a good platform on which to build such a strategy; for example, he has praised us for what we did in respect of the automotive sector. But why has it taken so long?

There is little controversy over the role of Government in creating the right business environment—improving infrastructure, access to finance, skills, corporate governance and so on—but an industrial strategy is about much more, which is why I broadly welcome the general approach that the Secretary of State has set out. We would not advocate a return to picking winners, but we do believe that Government can and should support and develop sectors in which we have a competitive strength and a comparative advantage. After all, success in the global economy will not come from being quite good at a lot of things; there is a premium on being the best.

It will, however, be impossible to implement the strategy without the unequivocal backing of No. 10 and the Treasury. Lord Mandelson was successful because he was fully supported by his Chancellor and Prime Minister. Can the Business Secretary say the same now? Does his strategy even enjoy the support of his ministerial team, let alone that of other Departments? While, in the 1970s and 1980s, he was working for the late great John Smith, his new deputy—the Minister of State, Department for Business, Innovation and Skills, the hon. Member for Sevenoaks (Michael Fallon)—was working for Lady Thatcher, and it is her approach that the Minister of State was going around advocating over the weekend. That explains why, while at the back of the business section of yesterday’s edition of The Sunday Telegraph the Secretary of State was making the case for the strategy that he has outlined today, his Minister of State was saying, in an interview featured in the front of the main section,

“Deregulation and privatisation worked before”,

suggesting that that was the answer to the problems that we are experiencing today. Who is in charge of policy in the Department? Who should businesses listen to when trying to make sense of the Department’s direction of travel?

Above all, the Secretary of State must give business the certainty that will enable it to invest, and that means aligning Government support, Departments, higher education, skills and regional structures with his strategy. Sadly, however, all those have been thrown into disarray by the Government.

In the short term, we need the growth on which we can build the foundations of the future. The Government’s overall economic policy, which the Secretary of State continues to champion, has pushed the country into a double-dip recession, and that needs to change as well.

My opposite number challenges me to set out our approach to this in full, but I was trying to respect the conventions of the House, and in particular your emphasis on brevity, Mr. Speaker, which I have done. The hon. Member for Streatham (Mr Umunna) also quotes me as having said that his party bequeathed us a good platform. I cannot remember ever saying that, but I shall hastily correct the record if what he thinks I said is correct. Let me set out what that collapsing platform actually involved. In 1997, the share of industry in the British economy was 18% of GDP, yet when we inherited it, it was just over 10%, which represents the most rapid decline in any major western democracy. Employment declined even more, of course. On international trade, the share of British merchant goods in international markets halved, from 5% in 1997 to 2.5% in 2011, when we took over. That is the platform that we are trying to build from, and it is not a very strong one.

Of course, I acknowledge that there were good ideas, and Lord Mandelson, like Lord Heseltine and others, had a sensible approach to working with the public and private sector in a collaborative way. Institutions such as the Automotive Council are good, and I have been very happy to work on them and develop them.

We are not returning to picking winners, as it is sometimes called. As the hon. Gentleman kindly pointed out, I worked with the late—and, indeed, great—John Smith in the late 1970s. I worked in his office in the Department of Trade and Industry, and we saw evidence of the failures of picking losers. Vast amounts of public money were used in very unproductive forms of public intervention, but I think that subsequently the pendulum swung too far in the opposite direction. We must now get to a sensible middle point, often learning from the experiences of other countries, including South Korea, Germany and Finland, where there is a sensible balance between the role of Government and the role of the private sector, and that is what we are striving for.

The hon. Gentleman seems to imagine that there is some kind of one-size-fits-all policy for business, but there are many companies that do not want Government anywhere near them; they just want to get on with their job of making money. Large numbers of small companies are in that space, and we respect that and want to create an environment in which they can operate, but many others are quite different, such as those with long-term technological horizons and big and complex supply chains, and need a more collaborative approach, and we are seeking to develop that.

Let me just emphasise that this industrial strategy has the full support of the Prime Minister, the Chancellor and my colleagues behind me on the Treasury Bench, and that we shall be working together on a team basis to deliver it.

Order. I appeal for brief questions and brief answers, in order to maximise the number of contributors.

I applaud the Secretary of State for the work he has done with the automotive sector; we have seen the benefits in Stratford-on-Avon. He is rightly not going to be picking winners, but does he agree that what we should be doing is picking sectors where we can be world beaters, and improving and supporting those sectors?

My hon. Friend is right; we need to make that distinction. There are many examples. He chose the automotive sector, where Britain is now performing extraordinarily well. For the first time in a generation we have a trade surplus in the automotive sector, with £6 billion in new commitments of investment, but there are many other sectors whose experience also serves to illustrate the wisdom of Government and the private sector sitting down together, and one of them is the space sector, as my colleague who represents higher education, the Minister for Universities and Science, knows very well. Britain now has one of the most outstanding space sectors in the world, and a lot of that is a product of sensible collaboration.

I broadly welcome the Secretary of State’s comments, which in many respects are long overdue. However, can he reassure me, and organisations such as the Engineering Employers Federation, that the lack of political will of which his Government accuse past Governments on this issue will now change? What reassurances can he give us that the political direction will change, and that the new political backing will ensure this policy is rather more successful than the economic plan for growth introduced last year?

There is strong political backing for this. The hon. Gentleman refers to various industrial groups, and I am well aware that the Engineering Employers Federation, and, indeed, the CBI, have called for an industrial strategy of this kind. I will be working very closely with them and the other business groups.

Will my right hon. Friend reassure me that he will not allow Opposition Members, in their clamour for economic intervention, to drive us back to the misery and impoverishment of the 1970s?

There were certainly many mistakes in that era, which I saw at first hand; I was in government at the time. We are determined to learn from both the positive and the negative experiences of that time.

If the Government have an industrial strategy supported right across government, why is HMS Ark Royal to be decommissioned abroad, rather than in the north-east of England, where she has a long association and where there are eight workers for every job available? The shipbuilding skills are there to decommission the ship in the north-east: why cannot that be done?

I am certainly very happy to talk to my colleague the Secretary of State for Defence about the cost-benefit analysis he will have undertaken in order to make that decision. Historic associations are not really a good base for business decisions; none the less, the right hon. Gentleman has made a case and I will try to establish why that business decision was made.

May I congratulate the Secretary of State on visiting the Sustainable MotoExpo in my constituency over the weekend, and on the support it demonstrated for green technology design and engineering, which the Government are already giving through bodies such as the Technology Strategy Board? I hope that that continues and increases.

My colleague reminds me of an event that took place on Saturday in Cheltenham that was a very good advertisement for the industrial strategy approach I am describing. The Government have put some £400 million into the development of electric vehicles, and my colleague the Secretary of State for Transport has supported the bounty for charging points. We are now seeing that technology getting to a take-off point. My hon. Friend showed me dozens of examples of small and large car makers in his constituency—led by the Nissan Leaf, which we have been supporting directly—that will make this a major industry in future years.

The right hon. Gentleman likes to present himself as the voice of progressive dissent within the Cabinet. How does he square that with taking responsibility for measures to make it easier to sack people?

I certainly like to think I am a voice of progressive opinion. We are dealing with changes in the tribunal system that will help small-scale companies to deal with some of the issues they have. But as I pointed out to the House the other day, the specific proposal of no-fault dismissal is not something we are proceeding with.

With the Government accounting for 50% of the economy, I am sure the Secretary of State will agree that industrial strategy should be based not on more borrowing for more government, but on more encouragement for more entrepreneurs. Will his Department therefore look at the local enterprise funds initiative, which has the potential to galvanise people who can invest in businesses in their local community to do so, and which more than 83 Members of Parliament have already expressed an interest in setting up in their local communities?

That is an extremely good suggestion and I am very happy to talk to the hon. Gentleman in more detail about how he sees this happening. Of course, we have the local enterprise partnerships—perhaps they have a key role in making that happen. However, his premise is correct: it is entrepreneurs in the private sector who will drive recovery, and they are fundamental to the industrial strategy.

There was no mention in the Secretary of State’s statement of the defence sector, yet we have had some notable losses of export opportunities, a lot of rhetoric and very little action in the last two and a half years. Will he set out what lessons he thinks he can learn from the United States and France in the way they work with, protect and promote their defence industries?

Of course, the defence sector does have an important role to play in the approach I am developing, particularly in procurement and in research and development. We want that approach to be fully cross-government, and it will include defence. We work closely with the French, as the hon. Lady knows, in the aerospace sector and we learn from their experiences, not all of which are successful, one has to say.

Does the Secretary of State agree that as well as having an industrial strategy we need to do everything we can to encourage business confidence and that at this moment we need everyone to get involved, including the Opposition?

Yes, I totally take that point. I thought the comments today were a little carping and negative and not terribly original, but I will continue to encourage the Opposition to be more constructive.

The Secretary of State spoke about the supply chain, a sectoral approach, training, bank lending, a new bank and the importance of procurement. They are all important, but he said precious little about fiscal policy. He will remember that the industrial buildings allowance boosted manufacturing and tourism in the past. Indeed, the agricultural buildings allowance did the same in that sector. Does he see a role for such fiscal change to leverage private investment and grow capacity on the supply side?

The Chancellor is doing a great deal of that. Indeed, he is trying to create an encouraging tax environment for business. Of course, what we have to do—and what he is doing—involves a trade-off between specific incentives and producing an over-complicated tax system, about which I know that the hon. Gentleman, with his detailed knowledge of the sector, would be the first to complain.

Given that growth is a key objective, will the Secretary of State cut at least some of the funding for infrastructure projects, as we cannot export bridges, roads or houses, and instead fund tax cuts for small and medium-sized enterprises to encourage them to grow? That is a more sustainable way of reducing unemployment, particularly if the dead weight of regulation is reduced, too.

I may need to reflect on the question, but I do not think that there is a strong argument for cutting back on infrastructure, as efficient infrastructure is crucial to the efficiency of the economy. I might have misunderstood the question, however.

Both the right hon. Gentleman and the Deputy Prime Minister have made quite clear their opposition to regional pay, which is welcome. What are he and the Liberal Democrats doing within the Government to stop regional pay coming in by the back door in 20 NHS hospitals in south-west England?

The Government have made it clear that we support local flexibility. The model we have studied was introduced by the Labour Government in the Courts Service. It does not involve large-scale regional differentials, but does involve giving parts of the public sector the opportunity to vary their pay to reflect performance and local conditions.

Will the Business Secretary confirm to the House how much happier he is to be developing his industrial strategy in partnership with the Conservative party than he would be with the Labour alternative?

I am very happy developing the strategy at the moment and am open to any support from all comers.

There has been some discussion in the press this morning in the north-east of England about the Deputy Prime Minister establishing a new inquiry into the growth of the north-east as an economy, involving people such as the chief executive of Northumbrian Water and the Bishop of Durham, with Lord Adonis as the chair. What does the Secretary of State think he can do in conjunction with an inquiry of that nature to grow confidence in the economy so that British business starts to invest the £700 billion that it is sitting on?

I recognise that there are severe problems in the north-east, as I have been there many times and I have talked first hand to representatives and to the business people involved. The north-east has one potentially major advantage in an economy that is rebalancing, as manufacturing forms a high proportion of its total economy, as do exports. I was last in Newcastle a few weeks ago, and there are many good, positive new industrial developments on the Tyne. That might be an indication of better things to come, as might developments in the car industry in that part of the country.

I welcome the Government’s announcement of a commission to consider strategy for the north-east economy, chaired by Lord Adonis. May I impress on my right hon. Friend and the commission the importance of the A1 road link and of maintaining the Government’s commitment to renewable energy, both of which are important to industry in the north-east?

My right hon. Friend is a formidable advocate of north-east interests. He makes two specific points. I have heard the point about the road link many times. I do not know quite where we have got to in the process, but I will check up on it. He also emphasises the importance of renewable industries and will be aware that industries are beginning to revive on the Tyne, involving rigs for the North sea, that were previously in the oil and gas sector but have been adapted to renewables. We will see a great deal more such work on the east coast and, of course, it has explicit Government support, financial and otherwise.

The manufacturers’ organisation EEF has called for an industrial strategy after criticising the Government’s approach to growth so far as inconsistent, incoherent and unaccountable. It was not clear from the Secretary of State’s contribution whether tomorrow marks a step change in his industrial strategy or more of the same. Which is it?

We are of course dealing with a gradual evolution of policy; business wants certainty and clarity, rather than sudden changes. I return to the point I made in response to the hon. Member for Streatham: we are starting from an inherited position on the manufacturing industry that was very weak after a long period of decline. Turning that around will not be easy.

The Secretary of State had a starring role in the Channel 4 programme “Bank of Dave”, in which I made a brief cameo appearance. He talked today about access to finance being a key part of an industrial strategy. I hope he agrees with me that local banks such as Dave’s bank have a key role to play in that.

I thank my colleague for that. I have met Dave. He is an impressive entrepreneur and very public-spirited and, as I understand it, is doing a great job in Burnley in channelling savings directly to local businesses. That seems an extremely attractive model that could well be reproduced elsewhere.

With the gap between the south and the regions widening, I am disappointed that the Secretary of State has not included a regional element in the industrial strategy. Does he now regret the hasty decision to abolish the regional development agencies and replace them with the impoverished local enterprise partnerships and the incoherent regional growth strategy?

The gap between north and south, which is of course a good deal more complex than the hon. Gentleman suggests—there are parts of the north that do extremely well—has been widening for many years, in spite of the regional development agencies. I am absolutely satisfied that the structures we have introduced, the local enterprise partnerships, are more relevant to local geography, much more business focused and, together with the city deals, will give an energy to the development of some of the areas which have been struggling that they have not had for many years.

Does the Secretary of State share my concern that all too often viable small businesses are refused loans by high street banks simply because they operate within a sector of which the banks have taken a negative view?

The hon. Gentleman is right. As I said in my brief introduction, there is a serious and declining trend in business lending to SMEs. He is also right that certain kinds of businesses find borrowing extremely difficult. Creative industries are a good example, because they do not have physical security and the banks are extremely risk-averse, which of course is difficult for companies engaged in international trade. That is all the more reason why the Government have to intervene to support lending in such instances.

The Business Secretary mentioned innovation, but does he not recognise that the share of national income spent on research and development has declined over the past three decades? Why did he not advocate in his statement measures to increase Labour’s research and development tax credit to ensure that we do not continue to lag behind Germany, France, America and Japan?

One of the things the Chancellor has done is improve and focus the R and D tax credit, taking it to below-line research expenditure, which was hitherto a major inhibitor. One of the things I very much want to see arising from this work is a much bigger commitment to R and D, particularly the role of the Technology Strategy Board, which I think is one of our best institutions.

I, too, welcome the Secretary of State’s comments. Today the Associate Parliamentary Manufacturing Group released a think-piece on modern industrial policy, which is available to Members online. It states that we need a formal strategy document, created by the Government and overseen by a dedicated Minister for manufacturing, delivered to Parliament regularly and created in full consultation with industry, trade unions, all political parties and parliamentarians. Will he meet the group to discuss these ideas and how we might be able to integrate them into Government policy?

I am certainly very happy to meet the group. A key part of the industrial strategy relates to manufacturing. However, it is important to stress that the modern economy is much more complex than the old sub-divisions. Much of the value in manufacturing these days derives from what are called intangibles—intellectual property, for example, and IT work. The services sector in its modern form contributes massively to our economy, which is why one of the areas we want to focus on is services that can be sold overseas and that have a large knowledge or technology component.

Following on from a previous question, SMEs regularly tell me that they find it difficult to access funding from the big banks, and in some cases the banks are actually obstructive. The question therefore arises: where will the industrial strategy succeed, where the Merlin agreement apparently failed?

The Merlin agreement did not fail. It was not sufficient, but it did have the effect of stabilising lending to SMEs by banks above the level it would otherwise have reached. I am often critical of the banks, but to be fair to them, a major factor is the change in the system of regulation—much of it taking place internationally—which is forcing the banks to hold more capital and to weight their risks in a different way. That has the effect of discouraging lending to SMEs. We are proceeding with a whole lot of interventions that are designed to counter that trend.

I welcome the Secretary of State’s focus on the aviation sector, particularly from the point of view of engineering. However, does he agree that a proper strategy for industry requires all aspects of engineering to be considered by most companies involved in any form of manufacturing and that we also need to give engineers a boost at boardroom level?

The hon. Gentleman is absolutely right, but that requires a big cultural change, and that is beginning to happen. We see from university applications this year that engineering was the most popular subject among applicants, which suggests that we have been successful in recognising that engineering is an essential discipline.

The Secretary of State will be aware that there is a plan for a major wind turbine plant in my constituency and that there are major plans for offshore wind turbines off the east coast of Scotland. I therefore welcome what he said to the right hon. Member for Berwick-upon-Tweed (Sir Alan Beith) about support for renewables. However, people in those industries are asking questions about the commitment to the renewables industry of other people in the Government. Will the Secretary of State take this opportunity to dissociate himself from those in the Government who question the role of renewables in our industrial revival?

There is complete support in the Government for what is happening in offshore wind, which is what the hon. Gentleman was describing. I introduced, with the support of my colleagues, a new centre to promote research and development—in Scotland, as it happens—and I was recently in Edinburgh supporting one of the new ventures there. The Government are fully behind the industry, which is building up on the east coast of Scotland and England in particular, taking advantage of the opportunities in the sector, which has enormous potential.

Developing new sectors is vital, but does the Business Secretary agree that it is equally important to maintain and pass on viable manufacturing skills, some of which have been established over generations? Will he therefore join me in congratulating management and workers on the reopening of the former Ideal Standard factory site in Middlewich, under the new name of Ours Sanitary Ware Ltd? The site is creating valuable new jobs in the UK ceramics industry and bringing back to Cheshire the manufacturing and production of bathroom ware, which has a proud tradition in the area, but was sadly run down under the previous Government.

The hon. Lady is right that a lot of manufacturing capacity was run down under the last Government. We can be positive not just about some of the more sophisticated, high-tech manufacturing, but about traditional sectors—she cited ceramics as one example. The first industrial visit I made as Secretary of State was to a bicycle factory, which was doing extraordinarily well, expanding and exporting to China. With access to good process innovation, traditional manufacturing can do just as well as some of the newer and more sophisticated forms.

The Secretary of State mentioned procurement, yet the Government are, for example, giving away major train manufacturing contracts abroad. Yesterday it was reported that civil servants in the Department for Transport are trying to nobble their new Secretary of State for having the temerity to back British train manufacturer Bombardier in Derby. Will the Secretary of State back his colleague, put those disloyal civil servants in their place and stand up for British industry—and, indeed, for the policy that he has just enunciated?

I do not think there is any question of disloyalty; the public service has a set of different obligations in relation to procurement, one of which, of course, is to obtain value for money. Another is to observe the law, which we all have to follow. My colleague the previous Secretary of State for Transport worked closely with me in developing a more strategic approach to the procurement of trains, and we have begun to see that in the framing of the contracts that are now happening.

The chief executive officer of Alcan UK has recently said that differentially high energy prices are a much bigger issue for his business than the eurozone crisis. Energy prices have not been discussed so far in this urgent question. Does the Secretary of State agree that it is hard to have an industrial strategy based on more manufacturing when our energy prices are potentially higher than those of our neighbours, such as France?

The hon. Gentleman is right that there is a real problem. That is why, in the last Budget, we agreed to proceed with a scheme that will effectively compensate energy-intensive producers, in the metals industry and elsewhere, for the relatively high cost of electricity that they face. We have been through a process of consultation, which has recently finished, on how that complex set of problems should be dealt with. We fully recognise the problem.

The Secretary of State has placed great emphasis on the regional growth fund. Is he not embarrassed and concerned that, 20 months after the first-round bidding has closed, companies are still waiting for the money, and facing the prospect of a further 12 months’ wait? What is he going to do about that?

I am not the least bit embarrassed about the regional growth fund, which is a major success story. Wherever I go around the country, I get strong appreciation for the contributions it has made.

The hon. Gentleman knows very well that, once a decision in principle has been reached, there has to be due diligence, which is not necessarily quick. Very often the companies change their own plans, which then have to be negotiated; some fall by the wayside. There is a very large number of projects that not only have disbursed finance but are up and running and creating large numbers of jobs across the country.

I thank the Secretary of State for his personal support for the life sciences sector in east Kent. If there is to be public money behind any partnership, will he particularly consider equity so that the taxpayer can share in the success? Will he also consider the idea that the proposed industrial bank should be the business growth fund retasked, expanded and floated for the future?

It is certainly true that in developing the idea of an industrial business bank, we need to take account of existing mechanisms of funding and bring them together in a more rational way.

I thank the hon. Gentleman for what he said about east Kent, which is a good example of how, even in successful growth industries such as the life sciences, technologies change, competition is intense and companies close. A large part of government is dealing with the painful restructuring that has to happen. We cannot stop markets working.

The Secretary of State mentioned Lord Heseltine, who is credited with the vision of developing London docklands and beyond. He also rightly mentioned the importance of infrastructure. How does his industrial strategy relate to the construction industry—in particular, possible support for east London river crossings, without which we will not be able to maximise the potential of Canary Wharf, Stratford and the Thames Gateway?

Construction is one of the key enabling sectors; it has to be. It has been doing badly in recent years, since the collapse of the housing and commercial property boom, and is in considerable distress. One of the reasons why the economy is not growing is what is happening in construction projects. To address the problem, the Government are now deploying a combination of support for infrastructure, the guarantees that the Chancellor has announced and the initiatives on housing and planning that were announced a couple of days ago.

Many of my constituents work in the motor manufacturing industry, which has grown strongly in the past two years. Many UK motor manufacturers are now looking to repatriate their supply chains back to the UK. What support and help can the Secretary of State offer to facilitate that aspiration?

That is absolutely right. It is very important that we stress this. The big investment that has been made by the main car companies—the original equipment manufacturers—is only part of the story. There is now a will to bring back a lot of the lost supply chains, which went for a variety of reasons, including exchange rates and a fashion for outsourcing that has been partially reversed. This is being actively pursued through the Automotive Council, which is involved with the Government in doing so. As my hon. Friend may know, we have a supply chain funding initiative that is currently open to competition, and a variety of bids have come in actively to support the process that he describes.

To be truly successful, an industrial strategy should be shared on a cross-party basis so that business knows that it can invest without having to see radical shifts in policy. However, it is not altogether clear that both sides of the Government agree on it—after all, it has taken two years to get to this point—so what assurances can the Secretary of State give us that it will not be undermined by the Treasury and the Prime Minister again?

The starting point of the hon. Gentleman’s question is right: there has to be cross-party support, because if we are thinking 10, 15 or 20 years ahead, we do not know what form of Government will emerge over that time. There is undoubtedly cross-party support among Government Members. I think that I heard support from the Opposition, but I was not totally clear about that.

I hate to say this to the Secretary of State, but there is not cross-party support from this particular quarter. His statement sounded to me like one that any Labour Minister in the previous Administration could have made; it talked about state intervention and picking winners and said nothing about cutting red tape and regulation. It was a Labour statement, not a coalition statement.

The hon. Gentleman has his own very distinctive and unique style which we all admire. What I said goes in tandem with the announcements that my colleagues and I made this morning about scrapping a substantial amount of red tape. Of course, for large parts of the small-scale business sector that is rather more crucial. The two things coexist.

Further to the Secretary of State’s comments about tax, what conversations has he had with the Treasury about helping businesses that want to invest in the technology that we will need if the coalition Government are sincere about rebalancing the economy?

I meet the Chancellor very frequently. He has supported, through the autumn statement and the Budget, a whole series of innovation spending, building on the science budget, which, as the hon. Lady will remember, was ring-fenced in the spending review. He understands the needs in this area very well.

Does the Secretary of State agree that the multi-million-pound regional growth fund investment in David Brown’s offshore wind turbine gear systems technology innovation centre on the outskirts of Huddersfield shows that this Government are investing in renewables?

The hon. Gentleman took me to that factory, which was one of the first successful projects launched by the regional growth fund. It is a great advertisement for British industry, and I know that he has been personally very supportive of it. There are many examples of that kind which offset some of the negativity we have heard from Opposition Members.

Given that manufacturing badly needs demand, why are infrastructure projects being announced but not started? For example, none of the road schemes announced in the autumn statement has yet started. Will the Secretary of State make sure that things begin to happen?

A lot of those projects are starting. As the hon. Gentleman well knows, infrastructure development needs to be properly planned and permissions need to be sought. The Government are anxious that these projects and infrastructure in general should now move ahead very rapidly.

The Secretary of State will be aware that part of his statement lies right at the heart of the current inquiry by the Science and Technology Committee on bridging the “Valley of Death”. Many witnesses told us that the Technology Strategy Board needs to be expanded, and I am sure that the Secretary of State agrees with them, but does he also agree that that should not be done at the expense of investment in the research councils?

No, indeed it should not. I was in Swindon last week talking to the research councils, whose role is entirely complementary to the TSB. They deal with an early stage of innovation. What they do is often highly relevant to British business, but it happens at an earlier stage of development than the work of the TSB. They are complementary bodies and their funding arrangements reflect that.

A successful industrial strategy requires decent infrastructure for transport, as well as regional balance. Will the Secretary of State assure us that he will work with the Secretary of State for Transport to ensure that airports such as Birmingham International are able to use their capacity and expand it as and when they need to?

Birmingham International airport does, indeed, have vast potential, and I am a great advocate of it as part of our overall airport expansion, which we will clearly need in the years ahead. I think I am correct in saying that the regional growth fund and the Going Places fund have been used to improve access to Birmingham International airport.

The regional development agency did a great job in north-east England and real industrial jobs were created, among others. Of course, we did some things that the Secretary of State now thinks necessary, but in the light of opposition in the coalition he is not able to progress an effective policy. The CBI said that he had “lost the plot”. Does he expect to find it at No. 10 or No. 11 Downing street?

I am not quite sure what the question was. The hon. Gentleman started with regional development agencies. I know that there is nostalgia for them in some quarters, particularly in the north-east, but my experience, particularly in areas like Teesside, is that they are much happier with the LEP approach, which is much more business-focused, much more action-oriented, and actually getting things done.

A number of my hon. Friends have rightly raised the serious criticism of Government today by the Engineering Employers Federation. What is the Secretary of State going to do for the estimated 900,000 SMEs—the backbone of our economy—that are struggling because of reduced capital allowances?

First, the EEF has actually been very supportive of many of the things that the Government have been doing. I am in frequent contact with it. It invited me to give a presentation on employment law some months ago. It is very supportive of our proposals and of what we are doing with regard to industrial strategy.

As far as the SME sector is concerned, let me make one general observation. If the SME sector is so weak, why is it that 900,000 new jobs have been created in the past two years? They have been created by very dynamic entrepreneurs at a grass-roots level, within a business environment that this Government are trying to engineer.