I beg to move,
That this House regrets the continuing lack of balance in the UK economy and the UK Government’s over-reliance on unsustainable consumer debt to support economic growth; notes in particular the UK’s poor export performance, which resulted in a trade deficit in goods of £123 billion in 2014; further notes the UK’s continuing poor productivity record and the lack of a credible long-term plan to improve it; and is deeply concerned by the UK Government’s change to Innovate UK funding of innovation from grants to loans, which this House believes will result in a deterioration of private sector research and development.
This is a serious debate, and it is appropriate that we have it today given the news published yesterday that UK industrial output has suffered its sharpest fall since 2013, and the further assessment that describes how real-terms earnings in the UK are still substantially lower than they were in 2009 and that even GDP growth over the past decade or so has been lower than that of Japan during its decade of stagflation. It is important that we recognise that the matters we are going to address are not short-term issues. This is not about a quick political hit; it is about trying to get to the root cause of a long-standing and systemic problem in the UK—the failure to address trade, exports, innovation and productivity, in total, over a prolonged period.
We have chosen to debate all these matters because they are linked. The debate is also, rightly, about the imbalance in the UK economy, because that is part of the equation. That imbalance, or, more accurately, those imbalances are recognised by this Government, but they cannot and will not be resolved, first, without the real political will to do so, and secondly, until the other areas that we are discussing are fully and properly addressed. The imbalances in the economy are not only between England and Scotland or London—a city previously described by a Minister as a black hole sucking resources and talents out of everywhere else in the UK—and the rest of the UK, but still, sadly, between manufacturing and services, businesses that export and those that do not, and companies that innovate and those that do not.
The impact of all this is most starkly seen in the balance of trade numbers. For the full year in 2014, the UK ran a balance of trade deficit of £93 billion. For the same year, the deficit in trade and goods was an extraordinary £123 billion—that is £123 billion in the red just in the trade in goods. The impact in GDP terms, as is well known and published by the Government, was negative, and unsurprisingly the summer Budget confirmed that it would remain negative in every single year of the forecast period in this Parliament through to 2020.
The hon. Gentleman has referred to Japan. He will not have missed the fact that Europe has been in recession for much of the period in which our economy has been growing, and that has had an inevitable impact on our balance of trade with our biggest partners.
If the trade deficit was simply a consequence of the deep recession, the hon. Gentleman would be right, but, as I will demonstrate, this has gone on not for five, 10, 20 or 30 years, but 50 years. We need to address that deep, underlying systemic issue.
As I said, the contribution to GDP is negative for the entire forecast period, as published in the summer Budget and again in the autumn statement. Worryingly, those figures were marked down—they were actually worse than the corresponding forecast published in the spring Budget before the election. We are not seeing a stabilisation, or a recovery that would allow us some sense of normality, but a continuing decline. That appears, as I hope to demonstrate later, in almost every metric that we look at.
Yes, I have seen the OBR forecasts, and I will quote some of them later. However, I am taken by what the Chancellor said more recently than the latest OBR forecast, which is that it is no longer a case of “mission accomplished”, almost as if he is getting his excuses in first and preparing to blame other people. Despite the OBR forecasts, things are not all hunky-dory; everything in the garden is not rosy. As I pointed out, when we are looking at GDP growth over a decade worse than that of Japan’s lost decade, it would be wrong to be complacent like some of those in the hon. and learned Lady’s Government.
The hon. Gentleman is absolutely right. The long-term economic plan is just a soundbite. It was predicated on the deficit being reduced, the debt being reduced, and borrowing falling to barely £20 billion last year. Every single one of the targets the Government set, they failed to meet. The Chancellor did not meet a single one of the key fiscal targets that he set for himself in the previous Parliament.
The key thing about the impact of trade and exports on GDP is that the figures are negative and have been marked down. I ask the House to consider how different that reality is from the promise made by the Chancellor when he stated that exports would be a significant contributor to GDP growth, primarily to shift the economy away from a reliance on household consumption. As we saw in yesterday’s reports, because industrial output is down and exports are likely to continue to fall, and certainly not to grow in the way that he has promised, we will continue to see a dependence on household consumption and a rise in household debt that is inconsistent with a properly rebalanced economy.
A great deal of private sector industrial investment over the past 30 years has been connected with the oil industry. I am thinking of the threat to jobs and working families in Scotland, in particular. Will my hon. Friend commend a system of exploration credits like those successfully introduced in Norway some years ago to kick-start exploration as a means of addressing this crisis? After 30 years of Governments raking in £300 billion of revenue, should it not be payback time for North sea workers?
It certainly should in the sense that the sector is important not simply for Aberdeen or for Scotland, but for a supply chain throughout the UK. Indeed, the right hon. Member for Rutland and Melton (Sir Alan Duncan) set out, in his question at Prime Minister’s questions, the potential damage should the sector continue to suffer. This Government—indeed, all Governments, but particularly these Ministers, because many of them are believers—should do several things: continue to protect people who want to enter the sector by making sure they are properly trained; continue to support the supply chain in the North sea basin; and, to internationalise, look again at supporting the industry as it cuts its own costs and of course at the overall fiscal framework, which is a substantial cost. Essentially, as my right hon. Friend the Member for Gordon (Alex Salmond) said, the Government should look again at all the credits available, whether for exploration or production and whether for geographic areas or specific oil types, to maximise absolutely the longevity, employment and contribution to the economy of a sector that, as he rightly reminds the Government, has raked in more than £300 billion since oil started coming ashore.
Does the hon. Gentleman see any inconsistency, in the answer he has just given to his colleague, between looking for ways to increase the output of North sea oil and the Scottish National party’s aim of totally decarbonising energy production in Scotland?
No. The decarbonisation of electricity production is sensible for many reasons, which may well include carbon capture and storage. On a number of occasions during the past five years, and very recently under this Government, we have seen the cancellation of a competition to develop an industrial-sized testbed to show the efficacy of a technology which would make us a world leader.
I will not give way at the moment, because I have been quite generous. I will make a little progress, and then I will be happy to do so.
I was talking about exports. Let us remember what the Chancellor said in his Budget speech in 2012. He acknowledged the UK’s falling share of world exports, but still said that
“we want to double our nation’s exports to £1 trillion this decade.”—[Official Report, 21 March 2012; Vol. 542, c. 797.]
Total export sales in 2013 were £521 billion, which was a reasonable start, but that fell to £513 billion in 2014. The numbers are moving in the wrong direction; yet the Chancellor and this Government still expect us to believe that exports could in effect double over this Parliament. The OBR’s most recent forecast suggests that they will miss that target by about £350 billion, so the target set is simply unachievable.
That is not an abstract political or obscure economic point. The jobs of real people depend on a thriving and growing manufacturing export market. The hopes and aspirations of people in Scotland and throughout the UK for a real rebalanced economy depend on the rhetoric and pipedreams of an out-of-touch Chancellor. However, that was not the start and end of the Chancellor and the Government’s rhetoric on exports. They described how they wanted to
“make the UK the best place in Europe to start…and grow a business; encourage investment and exports as a route to a more balanced economy”.
The Chancellor said:
“So this is our plan for growth. We want the words ‘Made in Britain’, ‘Created in Britain’, ‘Designed in Britain’ and ‘Invented in Britain’ to drive our nation forward—a Britain carried aloft by the march of the makers.”—[Official Report, 23 March 2011; Vol. 525, c. 966.]
They were powerful words, but, given the reality, no more than rather empty rhetoric.
The SNP spokesman is right to point out the importance of exports, although the current account gap has been falling consistently during the past two years. Does he not agree, however, that the way to increase exports in the long run is through innovation, new technologies and investment? By being part of a larger United Kingdom, Scotland is likely to get greater quantities of all of those—through the Technology Strategy Board—than if it was on its own.
I agree with the hon. Gentleman’s assessment that we need more innovation, exports, technology and investment, all of which I will come on to. The Government and I can have a debate about precisely what they are doing, but his assertion that being part of the UK will allow such things in bigger quantities is tenuous at best and probably not confirmed by the reality.
To return to the Chancellor’s “march of the makers” speech, if those words appeared far-fetched when he first said them, they appear rather shallow and empty in the light of the reality of what is going on. In that regard, during the last Parliament—this is linked to the intervention about investment—another Tory-led Government, in a press release about business investment, a balanced and sustainable economy and all the matters we are discussing, boasted about investment in the UK Green Investment Bank. We supported that institution. We believed that it would deliver support for innovation and growth in a new industry, and indeed it has done so. Incredibly, however, it has been systematically undermined by this Government, while many of the changes they have announced since are undermining the commitment to the green economy generally.
One of the levers at the disposal of any Government to increase exports is to push aggressively for new free trade agreements. Does the hon. Gentleman agree that the SNP has been less than fulsome in its support for free trade agreements around the world, particularly the Transatlantic Trade and Investment Partnership, on which the SNP’s position is opaque at best?
It is not opaque, so let me make the position really clear to the hon. Gentleman. We welcome trade agreements. We think that they are a good thing in general. However, we will not countenance a trade agreement that opens the door to the systematic undermining of our essential public services. That is not opaque; that is crystal clear.
We need rather more than words from the Government: we need action to reverse declines, particularly in manufacturing, and to ensure that the last quarter’s fall in manufacturing output—which I mentioned earlier—does not become a pattern. At least in part, that will require—again, this is a response to the intervention—more innovation.
No. I have already given way to the hon. and learned Lady.
Innovation is as much a part of building a larger, more productive and faster growing manufacturing base as it is important in its own right. We know about the positive impact of innovation from many sources, not least the recent PricewaterhouseCoopers global innovation survey. It confirmed what it describes as a “direct link” between companies that focus on innovation and those that successfully grow faster. As I am sure the Minister will know, the UK’s most innovative companies grew on average 50% faster than the least innovative.
We also know that substantial problems need to be overcome. While 32% of UK companies saw innovation as very important to their success, the global figure was 43%, and while 16% of UK companies saw product innovation as a priority in the coming year, that was barely half the global figure. Most worryingly, although the UK—Scotland and the rest of the UK—has in many ways a clear competitive advantage in the university sector, a significantly lower proportion of our businesses planned to collaborate with academics than did their international competitors.
I want to say a little about the approach we have taken in Scotland specifically to deal with that issue. Funding has been approved for five new innovation centres in industrial biotech, oil and gas, aquaculture, big data and construction. That funding has been put in place to build on the original three centres that were launched three years ago, which covered the growing areas of stratified medicine, sensors and imaging, and digital health. There is the provision, essentially, of £78 million to help the development of 1,000 new inventions, products or services. That cash will also—this addresses the international comparison—support 1,200 businesses to work directly with universities.
The UK has Innovate UK and we have looked closely at its delivery plan. The SNP welcomes aspects of it, not least the £1.5 billion global challenge fund. However, the overall policy of changing Innovate UK’s funding model so that, by 2020, £165 million of innovation grants will be delivered as loans sends out all the wrong signals. We are concerned that it may suppress essential innovation even further compared with our international competitors. That fear was confirmed by KPMG’s head of small business accounting, who said that the measure was
“a false economy that threatens to stall the growth of small businesses across the UK.”
Indeed it does. The quotes from businesses when it was announced were extremely clear. They are happy to seek bank funding and to use their own resources, but when they are undertaking what may be slightly risky innovation and R and D, they have an expectation of a little help from Government. If that is a grant, the work can proceed and the thinking can go ahead. If it is a loan that requires to be repaid, that might just tip the balance in favour of the risk being too great, which will drive down innovation even further.
The reason innovation is so vital, particularly in manufacturing—and why it is so important to encourage it—is that as it has fallen as a share of R and D investment over the past 20 years, manufacturing exports, jobs and output have also fallen. One can see the speed and length of that decline. Manufacturing has gone from making up 30% of the economy in the 1970s to less than 10% today; from accounting for more than 20% of all jobs in the 1980s to only 8% today; and from making up a quarter of all business investment in the 1990s to barely 15% today.
We see the reduction in global export market share in the OBR’s most recent fiscal forecast, in which it falls throughout the forecast period to the end of this Parliament. What is more worrying is that the figures in the November forecast were marked down in every single year from those in the July forecast. Everything is going in the wrong direction. The complacency from the Government and the limited plan they have are simply no longer enough. That is why we need an unrelenting focus on innovation in manufacturing in relation to trade and exports.
I welcome this debate and the hon. Gentleman’s focus on rebalancing the economy, which is undoubtedly a huge issue. However, when we talk about rebalancing the economy, we have to remember that because the recession in 2008 was a financial recession, it was inevitably followed by monetary policy hitting the floor, perpetuating higher house prices and all those other things we wanted to avoid, but which were an economic necessity. That being so, does he regret the role his party played in advising Royal Bank of Scotland to purchase ABN AMRO, which ushered in the huge financial crash and brought down our financial giant?
There is a historical disconnect here. The fight over ABN AMRO was between the board of RBS and the board of Barclays. One of them called it wrong and one of them got lucky. I suspect that my input and that of my right hon. and hon. Friends had precisely no bearing whatsoever on Mr Goodwin’s decision to persuade his board to buy ABN AMRO. The suggestion is quite extraordinary.
I have said that we need an unrelenting focus on innovation in manufacturing in relation to trade and exports. Although manufacturing has suffered the largest falls, it still accounts for 44% of all UK exports because the deficit in trading goods is so large. Any Government who are serious about rebalancing the economy and correcting the trade deficit in goods must have a laser-like focus on encouraging innovation in manufacturing, as well as on supporting existing exporting businesses.
This debate is about more than innovation, manufacturing and exports; it is about boosting productivity. That is vital because—this is undisputed—both Scotland and the UK sit only towards the top of the third quartile of advanced countries by GDP per hour worked. We are below many smaller European countries and, importantly, below major competitors such as the US, Germany, France and even Italy. I am pleased that Scottish output is now 4% higher than pre-crisis levels. That is a good thing, but clearly there is substantially more to be done, not least because UK productivity growth is at 1.3% a year, which is barely half the level of the 2% pre-crisis rate.
Scotland has an economic plan based on four principles to boost productivity: investment in education and infrastructure; internationalisation and encouraging exports; innovation, which, as we have discussed, is essential; and—in many ways the most important aspect—inclusive growth. The latter point is vital because we know from the numbers—we have all seen them—that the UK lost 9% of GDP growth between 1990 and 2010 because of rising inequality. We are concerned that that mistake is being repeated by this Government, with their arbitrary surplus fiscal rule, which is requiring them to cut far more than is necessary to run a balanced economy and denuding them of the resources that are needed to tackle inequality and maximise economic growth.
Absolutely. I was describing the growth since the pre-crisis level. The quarter-on-quarter and year-on-year figures are undeniable. That is why I said that we all have far more to do. I will make criticisms of the UK Government where they are valid, but I certainly will not deny the numbers. I hope that the hon. and learned Lady will welcome the fact that we are 4% ahead of pre-crisis levels, notwithstanding the difficulties we have seen in the North sea. That is a quite remarkable achievement, when the limited powers of the Scottish Government are considered. In terms of the deployment of those powers—[Interruption.] The Minister for Small Business, Industry and Enterprise is chuntering away on the Treasury Bench, as she is wont to do. She will be throwing her arms in the air and harrumphing soon. If she wants to intervene, I am happy to have the debate—maybe not.
Returning to the powers that have been deployed in Scotland, we have a Scottish business pledge, which requires firms, in return for the support of Scottish agencies, to seek to innovate, to seek and take export opportunities, and to pay the living wage. That is part of the solution to tackling inequality and delivering inclusive growth that will enable us to avoid the loss of GDP output that we saw in the 20 years to 2010. I urge the UK Government to take a similar approach.
I do that not least because our concerns about a lack of balance and the need for action to tackle the ongoing productivity challenge are shared by the International Monetary Fund, which is often prayed in aid by the Government. The IMF has spoken of the need to lessen wealth inequality and the need for increased spending on infrastructure. It has also called for an enhanced focus on decentralisation.
The hon. Gentleman is making important points about inequality, and if we are serious about addressing sustainable equality—the Government do not seem to be—it is important to invest more in people on low incomes, and to reduce the gap between them and people on high incomes. I am particularly interested in his point about productivity. Since 2006, what has the SNP been able to do to reduce the productivity gap in the OECD?
I do not have the figure for 2006 to date, but if I can get hold of that specific number I will happily provide it to the hon. Lady. The whole point of tackling the attainment gap, health, investment, supporting innovation, encouraging exports, and supporting, promoting and helping the delivery of the living wage, is so that everything that can be done is being done—as it must be. It is all part of a project of lessening inequality to deliver precisely the inclusive growth that avoids the shortfall in economic growth that we have seen from the UK Government.
I was making a point about some of the demands from the IMF, one of which was an enhanced focus on decentralisation. That is vital if we are effectively to use all tools at our disposal to tackle the economic challenges we face. To give one example, research and development tax credits to support innovation are a function of corporation tax. As corporation tax is not devolved to Scotland, one of the most important tools to help support that research is denied to the Scottish Government in their efforts to build on the work already being put in place. Given the challenges we all face, that is illogical.
The hon. Gentleman is right to highlight the role that devolved institutions can play in helping to boost productivity. May I commend to him the work of the Greater Manchester combined authority, which in its new devolved functions has awarded funding to English Fine Cottons so that it can open a £5.8 million new cotton mill in Dukinfield in my constituency—the first cotton mill to open in Greater Manchester, or “Cottonopolis”, for more than 40 years?
I welcome that intervention and the new cotton mill—I hope it is a huge success. The hon. Gentleman makes an important point: there is no point in devolving powers and responsibilities, whether to Northern Ireland, Scotland, Wales, parts of England, or anywhere else, unless the funding and ability and authority to raise the cash go with it. That is the weakness in some of the asymmetric devolution that the Government have put in place. We believe that the Government should look again at their decision to replace £165 million of innovation grants with loans, and that they should deliver real devolution—not least of corporation tax and its associated credits—so that those tools are available to all the devolved Administrations to maximise R and D support.
Northern Ireland now has record employment and higher levels of international investment than at any other time in our history. Does the hon. Gentleman agree that having a strong devolved aspect to trade, enterprise and investment helps to boost the competitiveness of the UK regions, particularly Northern Ireland?
Yes, absolutely. The more we can devolve, including authority and real power, the more that people on the ground can do—that is self-evident. The talk of record employment is good, and I think there is near record employment almost everywhere. The issue, however, is that real-term wages have fallen and remain five points lower than before the crisis. If we are to drag living standards up, we must do all those other things as well, but—in general terms—the devolution of real power is absolutely right.
On the transfer of power, the Government should recognise that a comprehensive solution to boost productivity is required, which covers investment and education infrastructure, internationalisation, innovation, and the policies to deliver inclusive growth. They should recognise that rebalancing the economy needs a focus, not just on London versus the rest of the UK, but on the growth benefits from those firms and the whole economy, and we should export, innovate, and support more of them to do so. That focus should be heavily weighted to manufacturing because the fall in R and D, jobs, exports and output from that sector cannot be allowed to continue.
Above all, although we believe and agree with setting ambitious targets, unrealistic and unachievable export targets that fly in the face of reality will simply weaken the Government’s credibility, in exactly the same way that failing to meet debt, deficit and borrowing targets did in the last Parliament. To set a target of doubling exports without the means being put in place to deliver that is bad economics and bad politics.
Let me turn briefly to what the Government have said in this Parliament. In July they published, “Fixing the foundations: Creating a more prosperous nation”, which was supposed to cover many of the areas that we are discussing today. It is very thin. Their approach to raising productivity is covered by two bullet points, a paragraph, and a little chart. The section on long-term investment merely confirms that long-term investment, going back as far as the 1960s, has bounced along the bottom of the OECD average—the 10th to 90th percentile range for those who care about these things. It hit that average in one year around 1990, but has fallen off the bottom of that for many years since.
Investment is primarily in transport. I welcome transport investment, as well as the increase in capital investment in the summer Budget. Let us be under no illusions, however, because that change came about only after the Government were discovered cutting capital spending for every year of the forecast period in the spring Budget. They have the audacity in the “Fixing the foundations” report to talk about:
“Reliable and low-carbon energy, at a price we can afford”,
while systematically undermining the sector and the Green Investment Bank. On innovation and industry, which is at the heart of the solution to a long-term problem, we have three small paragraphs.
The document was published only six months ago—[Interruption.] I am sorry if the Minister is slightly bored hearing about her Government’s failings. It mentions £1 trillion of exports by 2020. That shows a modest rise in exports to BRIC countries, a modest rise in exports to the rest of the world, and a catastrophic decline—the Minister is shaking his head—in exports to the richest OECD countries. That document was published by the Government in this Parliament. A sense of reality is probably a good starting point for a debate.
Each of the areas that we have started to discuss today could form a debate in its own right, but we believe that the motion is a starting point to begin properly to understand and address UK Government policy weakness in the areas of trade, exports, productivity, innovation, and a fundamental rebalancing of the economy. I commend the motion to the House.
I am grateful for the opportunity to debate a number of the Government’s key economic priorities. I will begin, however, by singing the praise of my Cabinet colleague the Secretary of State for Scotland. Not only is he outstanding as a Secretary of State, but today he made a very important announcement about what in many ways should be his private life, although it is not because it is in the public domain. It took great courage, and I am hugely proud to sit in the Cabinet with him. I can see nods all around the Chamber in support of our Secretary of State at what might be a difficult time for many, but I am sure for him is a very happy day. Finally, he can be the man he has always been, and can sing out and be proud of being that man. I pay tribute to him and I am pleased we all agree on that.
It is absolutely right and appropriate for the Secretary of State for Scotland’s Cabinet colleague to announce her support in the Chamber, and Scottish National party Members welcome what has been said. In terms of the debate, however, and notwithstanding that we hope he is happy, may we say that we fundamentally disagree with his politics?
I took that as read! I put it on the record that the First Minister for Scotland has tweeted her support. Frankly, I am not surprised. In this day and age, I think most people will just shrug their shoulders and say, “Yeah, whatever. Am I bothered?” Of course we are not. We celebrate what is, and should be, a happy day for my right hon. Friend.
Let us get on with the debate. The motion before us refers to the United Kingdom economy and economic growth. I wish to take a very quick trip down memory lane to put this debate into context, because that is important. The hon. Member for Dundee East (Stewart Hosie) talked about the Government’s record. I want to talk about the past six or seven months, but I also want to talk about the previous five years, notably to remind everybody of the situation we faced back in May 2010. It is important to remind everybody that at that time we were in the worst recession that our nation, the United Kingdom, had faced for 100 years: the biggest budget deficit in our peacetime history and over half a million more people on the dole. That was the situation that we on the Government Benches had to pick up: an economy brought to its knees and on the brink of bankruptcy from Land’s End to John O’Groats, and from London to Inverness and Bodmin. All across our nation, we saw a country on its knees.
To save us from that economic mire we had to take some very difficult decisions to control spending, reduce the deficit and rescue our economy. Those decisions, every single one of them, were opposed by the parties sitting on the Opposition Benches, notably Labour and the SNP. Each and every decision was opposed. How wrong they were. It is thanks to the hard work of the British people that our economic plan has worked and continues to work. The deficit is down by more than half, there are over 2.2 million more people in work, and there are over 900,000 more businesses. The United Kingdom has been the fastest-growing economy in the advanced world. That is a record of which Government Members are proud.
Scotland has been part of that success story. It is unfortunate that the hon. Member for Dundee East has just made us a long speech full of doom and gloom, trotting out this, that and the other and talking down the Scottish economy, because it is part of the United Kingdom economy. That is wrong and sad, because there is a success story.
Although the SNP spokesman spoke for over half an hour about trade, export, innovation and productivity, he did not once mention free markets, entrepreneurship or the power of deregulation. Is it not this Government’s priority to focus on those issues to ensure we can achieve the goals we are setting?
In the Minister’s history lesson on the long-term economic plan, to which plan is she referring? Is she referring to the plan from the first two years, when the Chancellor desperately tried to reduce public spending, or the one that followed the first two years when he listened to those on the Opposition Benches and loosened up on public spending, with the result that the economy then started to grow?
I am sorry the hon. Gentleman did not hear me, so I will repeat what I said. I am referring to the long-term economic plan that delivered a deficit down by more than half, 2.2 million more people in work and 900,000 more businesses, and the long-term economic plan that made this country the fastest-growing economy in the advanced world. That is what I am referring to, and I do so with pride.
Scotland has been a part of that success story. Since 2010, we have 178,000 more people in work and over 60,000 more businesses in Scotland—economic growth that has all occurred north of the border. This has been a recovery based on private sector growth, employment and living within our means. Both the SNP and the Labour party are wedded to abandoning fiscal responsibility and putting our economic security at risk. Government Members know the job is not done. We know we must oppose Opposition Members who would return to the bad old ways and days of spending beyond our means.
We know that to lock in our future economic security and prosperity, we need our businesses to increase their exports, boost productivity and continue to innovate to stay ahead. We believe in cutting red tape, as my hon. Friend the Member for Bedford (Richard Fuller) told us. We believe in all the good strong parts of a free economy, an economy that does not believe in over-regulating people but allows businesses to get on and do business—the thing that they know best. That does not mean to say I am an ideologue who is absolutely wedded to a free market without any constraint. Of course not. I am absolutely a caring, compassionate Conservative. I do not believe in monopolies. I do believe in responsibility among all who do business, which is why I am so proud that the Government are bringing forward the living wage. That is a true benefit to workers across our country, especially the lowest paid. I am very proud of all we have achieved on that.
Does the Minister agree that Government Members are equally committed to encouraging first-time entrepreneurs, first-time employers and first-time exporters to be able to do things that perhaps their parents have never done before, and that in that way we are also encouraging social mobility?
Absolutely. My hon. Friend makes a very good point. New small businesses and start-ups that scale up are absolutely at the heart of everything we seek to achieve, because we understand their value. It takes great courage for somebody to start their own business. We do what we can to assist them, for example through start-up loans. By devolving right down to a local level, through local enterprise partnerships, business growth hubs and the other measures we have put in place, we are ensuring that help, assistance and advice are available to them as they start up and begin to grow their business. In particular, we are doing the right thing by small businesses by reducing the regulatory burden. We achieved a lot in the past five years in government. We have more to achieve. It will be tough, but we are absolutely determined to do that.
My hon. Friend makes another important point. Starting up one’s own business is a great way for somebody to shake off their past—and the things in their background perhaps in danger of holding them back—and advance in the way that we want people to do. That is what brought people like me into politics: a desire to make the lives of everybody, especially those from less-advantaged families and backgrounds, better. I believe that our economic policy will continue to achieve exactly that.
I said I would give way to the hon. Lady.
I thank the Minister for giving way; I am glad she has not quite forgotten about me. Does she agree that there is actually no comfort in the new minimum wage for workers under the age of 25, as they will not qualify for it? They will still languish on about £3.87 an hour, which is not good enough.
What is very interesting is the number of companies introducing the new living wage, irrespective of the age of their employees. I absolutely welcome that. For every good thing we do, however, there is always somebody who knocks us and wants something more. There is nothing wrong with wanting more, but people should give credit where credit is due. This is a huge achievement, and I am proud the Conservative party has done it.
I have to say that I really struggle to take lessons on the economy from the Scottish National party. It is a party that built its whole idea of independence, which mercifully the good people of Scotland rejected, on the idea that oil was going to be the lubricant—the foundation—of their independent economy. Goodness me! Oil is now $35 a barrel, and it is accepted that if the SNP had been successful, the cost would have been somewhere in the region of £5,000 for every single household. Scotland would have been in the most atrocious economic place if it had voted for independence—thank goodness the good people of Scotland took the wise decision that we were undoubtedly better together. It is therefore really difficult for me to take lessons from this rag, tag and bobtail SNP, which encompasses everything from tartan Tories to tartan Trots. It is going to be very interesting, as the Smith report—
The Minister is making an interesting speech, but I must challenge her on this flailing economy. The Government were meant to have eradicated the debt by 2015 and they have only halved it. They are borrowing £73.5 billion this year, so the Minister is obviously putting a positive spin on this economic plan. Let us see how long it lasts—the Government have been giving warning signs that it might not. To pick up on what the hon. Member for Dundee East (Stewart Hosie) said, the IMF has said that if we invest more in the 20% on the lowest incomes, we will boost economic growth—something that the Government have singularly failed to do. Why have they not done that?
The IMF has been wholesome in its praise of our economic plan and the successes we have had. Much as I may like the hon. Lady on a personal level, I really struggle to take lessons from her. The last Labour Government doubled debt, whereas we have “only” halved the deficit. I am rather proud of “only” halving the deficit, while we see from her words that the poor old Labour party cannot learn from the mistakes of the past. Goodness knows the route it is now embarking on under its current leadership, but it looks set to be in opposition for a long time.
Our debt has gone up; I am not—[Interruption.] All right; it is not about scoring cheap political points, as the hon. Gentleman knows—obviously I would never engage in such a thing—but he cannot deny that 2 million more people are in work. That is part of our proud record. He should be praising that. The Labour party would do well to do that when we do the right thing. Over 2 million more people in work—why can the hon. Gentleman not give credit where credit is due?
It only took the Minister 12 minutes to revert to type. “Rag, tag and bobtail” if she likes, but that is as nothing compared with how the Scottish people describe her party. However, let me clear up just one little fact about the oil price, which I thought she might raise. Yes, we said it would be $110 a barrel. That is absolutely correct, but can we be absolutely clear that the UK Government’s Department of Energy and Climate Change had the barrel price at between $114 and $127, and at the very least admit that the UK Government got it wrong?
I will give way in a moment; I just want to say something about trade and exports, because it is important. Otherwise, I will be speaking for far too long and Madam Deputy Speaker will admonish me, and rightly so.
In considering trade and exports, we should recall the importance of the United Kingdom’s large domestic market and the benefits it brings to all parts of the UK. The rest of the UK is by far and away Scotland’s biggest economic partner. Sixty-three per cent of all Scottish exports go to the rest of the UK. The biggest threat to Scottish exports is the SNP, which would put up barriers between Scotland and the rest of the UK. Trade and exports are a key element of continuing to grow the UK’s economy, which is why this Government are committed to making it easier for companies to export. We provide support to companies wanting to export, through UK Trade & Investment, and work with other Governments to reduce barriers to trade. Our trade deficit narrowed by £0.3 billion in the three months to November, and the number of companies exporting both in the UK and Scotland is up since 2010, but we know we have a lot further to go.
Delivering on all the EU’s trade negotiations could add £20 billion to the UK economy annually. We know that trade agreements work. In the four years since the EU-Korea free trade agreement came into force, the value of UK exports has more than doubled. We have seen a 1,000% increase in the value of jet engine sales. The UK sold just 2,315 cars to Korea in the final year before the FTA was agreed. Last year, that number reached 13,337, and it is not just the big companies that benefit. One Scottish business was able to sell 100,000 jars of jam in Korea last year, after the FTA slashed import duties. That is why this Government are committed to delivering freer global trade, concluding major trade deals with the United States, Japan and many other trading partners.
That, as hon. Members might imagine, brings me to the Transatlantic Trade and Investment Partnership. Last year I responded to the debate in the House about TTIP. I am not going to repeat all the things I said, but it really is disingenuous of those on the SNP Benches—and, indeed, on the Labour Benches—to oppose TTIP on the utterly false premise that it would threaten our public services, in particular the NHS. It is not true. There are so many letters, including—I think a number of hon. Members were in that debate, so they will remember—the letter from the EU, which was written in December 2014, to the Chair of the Select Committee on Health, who had asked specific questions about whether TTIP posed any threat to our national health service. Every time the answer was an overwhelming no. Everybody who could have said, “There is no threat from TTIP to any of our public services, especially the NHS”, has said it, over and over again. It is grossly unfortunate that Opposition Members and Opposition parties peddle these untruths about TTIP. It is simply not right or fair to mislead people as they are.
There does seem to be some ambiguity, because despite the letter to the Select Committee, we have evidence saying completely the opposite. In view of that ambiguity, why does the Minister not say that the NHS will be exempt from TTIP and rule it out completely?
I do not know how many times I have said it, but I am going to send all the information to the hon. Lady. It will say all these things and make it absolutely clear that TTIP is not a threat to our public services and our NHS. In fact, on the contrary, it will deliver billions of pounds of wealth to our economy, because it will free up trade between us and the USA. I think Opposition Members have got to be honest about it. I think the real problem is their prejudice against the USA. They should fess up and be honest about it, because they are creating bogeys that do not exist.
If I may return to the oil price and the sheer joy that Members in the Chamber expressed at the collapse in the oil price—I look at the hon. Member for Rugby (Mark Pawsey), who is sitting directly behind the Minister, and the joy and almost delight that were on his face. In the real world, in the constituency I represent, that means jobs are being lost. The Minister has expressed her delight at Scotland staying in the Union, so can she explain to me what the Union is doing to help Scotland at its moment of need?
It is not for me to speak on behalf of others, but I can assure the hon. Gentleman that there was no joy on the Government Benches at the fall in the oil price. The joy, I would like to think, was at the point I made, and made rather well. The hon. Gentleman is in a party that put all its faith in the oil price as the salvation of Scotland’s economy and it was absolutely wrong. I hope the hon. Gentleman will forgive me for not knowing the constituency he represents, but I suspect it is in the north-east of Scotland. He makes a good point, and this is the only good point, about the concerns we all have about the future of the oil and gas industry.
I am well aware of the importance of the oil industry to north-east Scotland. I am also well aware of the redundancies announced yesterday by BP, and I agree that there is much that we—the hon. Gentleman should note the “we” bit—can do. It would be so good for the UK Government to work with the Scottish Government to make sure that we do all we can. We have a fantastic oil industry, based largely in Aberdeen, that is one of the finest in the world. There is much that we can do, working together, to make sure that we do not see further job losses, especially on the scale we have seen.
I thank the Minister for what she has just said, which was helpful. However, she has twice made the incorrect and false assertion that we based any forecast only on oil, which was never true. The Minister has accused others of misleading the public over the approach to TTIP; I hope she does not want to mislead the public over her assertion that the economy is based solely on one industry.
It is a fair challenge to remind the Government how important the oil industry is to our country. That is why on Monday we will debate the Energy Bill, which enacts the findings of the Wood review. The review was much required and greatly sought by the industry, and I very much hope, as I am sure does the Minister, that Labour Members will support it.
I cannot add to my hon. Friend’s extremely good and well-made point.
Let me now move on to deal with the important issue of productivity. Delivering a return to productivity growth is one of the key economic challenges for this Parliament and the route to raising living standards for everyone in the UK. We have lagged behind other major economies—let us be honest about it—for decades, and productivity in Scotland is still 2.5% below the UK average. That is why we are determined to fix it, although I shall not pretend that there are any short-term measures. This is going to take some time and a lot of hard work.
In last year’s summer Budget, the Chancellor set out the Government’s ambitious plan, “Fixing the foundations: creating a more prosperous nation”. That ensures that we do everything possible to deliver higher productivity in the UK. Skills and education are, of course, key to improving productivity, and we have invested in skills, delivering 2 million apprenticeships in the last Parliament, with 3 million to be delivered in this Parliament.
Our education reforms are already raising standards. Unfortunately, under the SNP, standards of numeracy and literacy in Scotland have been falling, and fewer of Scotland’s most deprived children attend a university compared with any other part of the UK—just 10.3% of the poorest 20% of Scots attend university, compared with 18.1% in England, 16.3% in Wales and 16.3% in Northern Ireland. We have also protected science spending, with £4.7 billion per year in resource and £6.9 billion in infrastructure to 2021. We continue to invest in our catapult centres.
We are delivering one of the largest and most ambitious infrastructure programmes in recent memory, with projects such as HS2, which I have no doubt everybody should back because it will bring huge benefit to our country, especially to my constituency, as we hope to have the east midlands hub in Toton. In addition there is Crossrail, a huge project across the capital, and the largest investment in our roads since the 1970s. We are beginning to see signs of improvement. Output per hour grew by 0.5% in the third quarter of 2015 compared with the previous quarter, and was 1.3% higher than for the same period in 2014. UK productivity has exceeded its previous peak by 0.7%.
Alongside trade, innovation is another pillar on which our economy is built. Innovation is an important lever for increasing productivity. The excellent work of my colleague, the Minister for Universities and Science, has ensured that science spending is protected in real terms, with record investment across the UK—£4.7 billion per year in resource funding, rising with inflation, and record investment in our country’s scientific infrastructure, at £6.9 billion to 2021. The Government will protect all that in cash terms, with total spending on business-led innovation coming through Innovate UK.
We recognise that access to finance remains an important challenge for innovative enterprises, which is why we are committed to introducing new types of finance products to support companies to innovate. New products such as loans will replace some existing Innovate UK grants, and will reach £165 million by 2019-20. In 2014 alone, more than £2 billion was raised in venture capital in the UK—up 50% on the previous year. I see no reason why the UK cannot be Europe’s number one destination for innovation finance.
I understand why the Government might want to change the way in which some research and development is financed, but does the Minister accept that, given the long lead-in time for many R and D projects, loans are not appropriate and will lead to innovation and research either going outside the UK or stopping altogether?
We are taking time to bring them in. It is, of course, a mix. In some instances, providing loans is absolutely the right thing to do, whereas in others we might well provide a grant. Flexibility is the right approach, and this allows us to put in the necessary money, even in these difficult times. I think we are doing the right thing about that.
The Federation of Small Businesses report on productivity identifies late payments to small businesses as one of the key issues. Will the Minister commit to addressing cash retention in the construction industry—a key issue that is due to come before us again in the Enterprise Bill?
I realise that there is a good argument in favour, but we are conducting a consultation. As the hon. Lady knows, my door is open. I would be more than happy to discuss it with her because I know about the powerful arguments in favour, but there are also strong arguments against it. The consultation might allow us to make some progress.
I have not seen that paper and I am not going to pretend that I have. I always view it as important not to comment on things that have not been read or on issues that might have been taken out of context. Perhaps I will drop the hon. Gentleman a letter, when I have had the opportunity to read the paper.
The Minister makes a good point about innovation. One change that the Treasury has made is to enable ISAs to be used to provide peer-to-peer lending. Will she therefore have some conversations with her colleagues in the Treasury about making it possible within ISAs to make equity investments to small private companies?
That is a very good point, and the straight answer is simply yes. If my hon. Friend would like to continue the conversation after this debate, I would be more than happy to do so.
This Government continue to encourage business investment in research and development through tax incentives. Take-up of this scheme continues to grow, with 18,200 companies claiming £1.75 billion of relief from £14.3 billion of innovative investment. In Scotland, there were 1,045 claims, giving a total relief of £55 million. That means more investment in R and D, more high-value jobs and greater productivity.
The Government continue to invest in our catapult network, and the first seven catapults are now operating from their established facilities with total public and private investment exceeding £1.6 billion over their first five years of operation. These include Offshore Renewable Energy in Glasgow and the Advanced Forming research centre in Strathclyde, which is part of the high-value manufacturing catapult. As we have taken the difficult decisions to fix Britain’s finances, we can afford to continue to invest in science and innovation, investing in Scotland’s future and helping to ensure Scotland punches above its weight.
That is the point. If we have a good, solid and sound economy that is growing, we will be able to do all this type of work. We will be able to spend taxpayers’ money to support our great British businesses and particularly the ones that are so innovative in their approach and in the work they do.
To conclude, Madam Deputy Speaker—
Before the Minister concludes, may I ask her to address the issues that are currently affecting the steel industry? During the steel summit back in October, UK Steel presented a strong case for the urgent action it needed the Government to take. Some recognised the Government good will in relation to energy prices and energy costs, but I must impress on the Minister that this is a very difficult time for steel, particularly in the south Wales area I represent. Yes, the Government have acted on energy costs, but what are they doing about the other issues that were raised at the summit?
We are absolutely delivering, and not just on energy costs. I am hugely proud of the way in which we have changed the procurement rules. The hon. Lady knows that we are determined to continue to do everything we can to keep what the Prime Minister has called a vital industry in production. We do not want to see the blast furnaces close at Port Talbot any more than we want to see them close at Scunthorpe. I note that the hon. Member for Redcar (Anna Turley), as ever, is present. No doubt she will want to intervene at this point, but I must move quickly on; perhaps she will join in the debate later. Let me say to her that if we could have done anything to secure SSI, we would have, because we recognise the importance of the steel industry to the British economy. She can have that assurance. Indeed, the same is true at Dalzell and at Clydebridge. I pay tribute to the Scottish Government: I have been pleased to work with the Deputy First Minister in trying to ensure that we do all we can to keep those two plants open in Scotland.
Trade, exports, innovation and productivity are vital components of the Government’s strategy. That is why we have developed a clear plan of action, and why Scotland, and indeed all parts of the United Kingdom, benefit from our continued commitment to those key priorities. Scotland has been a part of the economic and jobs success story of the last six years as our economic plan for the whole United Kingdom continues to deliver economic security and prosperity for all our people. The biggest threat to businesses, growth and jobs would be a Scotland isolated and cut off from the United Kingdom, led by a party that wants to return to the failed policies of more spending and more borrowing that led us to economic oblivion last time.
Let us stick to the plan that has rescued our economy from the brink and turned it into the fastest-growing economy in the advanced world, and is now tackling the long-term structural issues head-on to ensure that there is a more secure future not just for our children but, notably, for our grandchildren. I will not support the motion, and I urge other Members not to support it either.
Let me begin by conveying apologies from the shadow Business Secretary, my hon. Friend the Member for Wallasey (Ms Eagle), who is in Brussels today meeting members of the European Commission and the European Parliament to discuss, in fact, many of the issues that we are discussing here today.
In her speech, the Minister indulged in something of a history lesson about what happened in 2010. I fought that election as a candidate for the first time, and I well remember making the case that in 2010 we faced half the levels of unemployment, repossessions and business failures that we had faced during the comparable Tory recessions of the 1980s and 1990s. The Labour Government had a record of protecting jobs, businesses and people’s homes. The economy was recovering in May 2010, when the coalition took office, but that recovery was choked off by the Chancellor’s emergency Budget in June. I am afraid that ever since then, as other Members have pointed out and as we know from the figures that were discussed earlier, the recovery has been the slowest on record. That is the true record of this Government when it comes to the economy. The Conservatives blew the growth that was steadily happening when they came to power as part of a coalition.
I am not going to give way too many times, because mine is the second Opposition party in this debate.
As was pointed out by my hon. Friend the Member for Oldham East and Saddleworth (Debbie Abrahams), the Government have failed in their own terms to eradicate the deficit. The Chancellor promised that it would be gone by last year, but the Government have borrowed more in five and a bit years, and had borrowed more before the election, than Labour did in its 13 years in office. So, in their own terms, they have failed.
If the Minister wants Opposition Members—from whichever party—and members of the public to be reassured that she is not just producing warm words on TTIP, she can exempt it from public services and we will then be sorted.
I thank the hon. Gentleman for giving way. He is very generous. Will he acknowledge that the United Kingdom has signed 110 other bilateral investment treaties with other countries around the world, none of which excludes public services, and all of which include the investor-state dispute settlement mechanism? I do not believe that it is the policy of either the Labour party or the SNP for Britain to withdraw from any of those important bilateral investment treaties.
And, as I have said, the Minister and the Government could relieve the concerns of many people in the country, not just in the Chamber, by undertaking to exempt TTIP from public services.
When it comes to boosting productivity and growing our economy, the interests of workers and the ambitions of businesses are not at odds with one other. Workers do well when there are successful businesses to give them secure employment; businesses do well when they can draw on a skilled workforce, and when they are selling products and services in a high-wage economy. We have many fine businesses which are making some of the best products in the world, delivering some of the best services, and developing many of the best new ideas. Those successful businesses have highly committed and skilled workers who are competing with the very best, but too many of our 5.2 million businesses face headwinds that make business more difficult than it should be, and too often lead to closures and job losses that are entirely avoidable.
We can learn from the success that exists in this country, in science, in digital, in engineering and in our universities, and we can learn from other countries as well. Success leaves clues. As for the countries that are outperforming us, one striking reason for that is the relationship between Government, business and workforce. What often works in successful countries, and in successful companies, is a three-way partnership for growth and productivity. That means secure, skilled, well-paid workers, businesses working with the infrastructure and the workforce that they need in order to expand, and a Government who build the stable foundations on which the partnership between business and workers can grow.
The Business Secretary is unwilling even to utter the words “industrial strategy”, but that is what is needed. An industrial strategy is nothing more than a Government's willingness to enter into a partnership with business and workers, matching their ambitions by looking beyond election cycles and investing in the infrastructure and training that they need in order to flourish. Businesses are clear about what they need from the Government. They want the Government to take a long-term approach to capitalising on new technology, and to nurture sectors that will boost exports, create jobs, and generate sustainable growth.
From green and renewable energy to high-end manufacturing and digital technology, the United Kingdom is not short of opportunities. It is not short of innovative entrepreneurs who want to put it at the global forefront of those emerging sectors. Under this Government, however, the UK spends less on research as a share of GDP than France, Germany, the United States and China. It has embarked on real-terms cuts to Innovate UK; it has axed the Business Growth Service, including the Manufacturing Advisory Service and the growth accelerator programme; and it is stifling game-changing innovation by converting grants for bold start-up companies to loans.
Those are not the actions of a Government who are committed to playing their part in the creation of opportunities for the next generation of entrepreneurs. The growth accelerator programme alone assisted more than 18,000 businesses. A great deal of the £100 million in finance that the programme helped SMEs to raise went into the development of innovative new products and services: products and services that create jobs and boost productivity. If the Government had wanted a partnership with business, they would not have completely shut down the long-term dividends to the economy that those schemes were already beginning to deliver, for the sake of scraping together short-term cuts for the Chancellor. The decision to axe these schemes is not just a knee-jerk reaction to departmental cuts; it speaks volumes about the Government’s real lack of long-term vision and commitment to businesses. Productivity cannot improve and sustainable growth cannot be secured as long as this Government’s message to entrepreneurs and innovators is “You’re on your own.”
Businesses want a trained workforce and a steady supply of skills to expand their operations. In a recent survey by the EEF, the manufacturers’ organisation, half of manufacturers pointed to a skilled workforce as the single most important factor in boosting growth and productivity. ManpowerGroup UK says that more than 30% of the largest construction companies have had to turn down work due to a shortage of skilled labour. For all the Chancellor’s talk of skills, more than two thirds of businesses say they are badly in need of more high-skilled staff. The engines of growth in the UK—construction, manufacturing, science, engineering and technology—all face chronic and growing skills shortages. Once again, there is a gulf between the Government’s rhetoric and action; their £360 million in cuts from the adult skills budget would dampen the ambitions of people hoping to learn the skills they need to enter the workforce and take skilled jobs.
While we on the Opposition Benches agree with the principle of an apprenticeship levy to increase funding to tackle the skills shortage, we will be carefully examining the details. It is vital that the policy is used to drive up the quality, as well the quantity, of apprenticeships. It is important that it meets the ambitions of learners, as well as the needs of employers. It is also important that it does not become, as Seamus Nevin of the Institute of Directors, puts it, a “payroll tax” that hits medium-sized businesses. The payroll threshold laid out by the Government could mean that the cost spills over from larger companies, so the details need to be watched carefully as they emerge, to ensure smaller companies are exempted.
Businesses want decent infrastructure, strategic road networks, improved broadband and cheaper energy supplies. These businesses will create jobs, boost productivity and generate growth, but Government’s role in that partnership is to build the physical infrastructure they need to operate in. A recent CBI survey of businesses showed that nearly two thirds are worried about the slow progress of infrastructure projects, and they are right to be concerned. The gulf between the Government’s rhetoric and the projects they have actually delivered is widening. The quality of our infrastructure is now the second worst in the G7. Capital spending has more than halved as a proportion of GDP since 2010.
The Government seem to be missing two simple facts. We have world-beating innovators and businesses that want to expand and create jobs. They cannot do that without roads, broadband and good rail and air links. That is the Government’s responsibility, and they are failing to deliver. If the Chancellor still claims to be leading a “march of the makers,” I am afraid the evidence over the last five and a half years shows he is leading in the wrong direction entirely.
Goods exported last July reached their lowest levels since September 2010. In the three months to November 2015 the trade deficit stood at £7.7 billion. The truth is the trade deficit is a problem that this Government and the previous coalition Government have said a number of times they would address.
Will my hon. Friend join me in welcoming the fact that in the north-east the balance of trade is positive, and a large contributory factor in that was the steel industry on Teesside? Does he share my disappointment—in fact, my anger and frustration—that the Government failed to do anything to step in to save steelmaking on Teesside? Looking forward, will he also help to put pressure on the Government to ensure that China does not get market economy status, which could put the final nail in the coffin of the national steel industry in this country?
This is the first opportunity I have had to congratulate my hon. Friend and her colleagues from the steelmaking areas on the fine work they have done in representing, and attempting to save, the steel industry. I will talk about the steel industry in more detail later, but I completely agree with the point that she makes.
The Chancellor said he wants to double exports to £1 trillion by 2020. Office for National Statistics forecasts show that he is set to miss this by more than £350 billion—in other words, he will be 70% short of his target. In 2011 the Prime Minister said that he intended to increase the number of UK exporters by 100,000 by 2020, and in its annual business survey the ONS found that the number of UK exporters actually fell by 8,600 last year.
The risk to long-term growth and productivity of failing to increase exports is stark. Failure to boost exports means slower long-term growth, depressed wage growth and an even more depressed rise in living standards. As David Kern, chief economist at the British Chambers of Commerce, said last year,
“unless radical measures are taken to strengthen our export performance, our trade deficit will continue to be a threat to the country’s long-term economic performance”.
But just as serious is the threat posed by a Government divided over whether or not to pull the plug on UK businesses’ main trading partner. Trade with the EU was worth £227 billion to the UK economy last year. It is a lifeline for many businesses, and for many workers. The risk we face is from a Government that fail to unite in wanting to honour a partnership with those businesses and workers who rely on EU trade for their livelihood. Instead they are divided over whether to kick the legs out from under UK business, not least in respect of relationships that account for almost half of UK trade and which are especially important for many SMEs.
The problem of UK exports is compounded by our lagging productivity. ONS statistics show that, as of 2014, productivity as output per hour worked in the UK was 21% lower than the average for the rest of the G7 countries. According to the ONS last year,
“the absence of productivity growth in the seven years since 2007 is unprecedented in the post-war period.”
Productivity has been revised down next year, the year after and the year after that, and the gap between UK productivity and that of the rest of the G7 is now the widest since 1991.
A long-term strategy to boost productivity, trade and innovation is a partnership. That partnership cannot ignore the workforce; on the contrary, they can be one of our most powerful assets. A partnership between workers, businesses and Government to boost productivity is a long-term vision that requires a commitment to long-term investment from Government—one that stretches over many Parliaments and one that requires a large degree of political, as well as industrial, consensus.
If we truly want to boost the UK’s productivity, manufacturing is a good place to focus our attention for a number of reasons, not least because the productivity benefits of industry reach far beyond itself, to benefit growth, skills and productivity in the UK as a whole. Manufacturers improve efficiency at a pace and intensity that outstrip almost any other sector. In fact, they currently inject three times the amount of their output share of the economy into improving machinery. An EEF survey conducted in 2015 showed that 80% of its members intend to invest in machinery with the aim of increasing productivity. That technology, again, filters out. The investment and innovation of one manufacturer becomes a tool to boost productivity across a host of sectors and in the wider economy as a whole. Investment in processes and systems improves efficiency and accelerates the diffusion of technology.
Generating sustainable growth, raising skill levels, and dispersing opportunity to every corner of the country: prioritising manufacturing should be the cornerstone of a strategy for increasing productivity. But this Government’s track record shows that they either do not understand this or else they are simply not willing to do what is necessary to support the industry. As my hon. Friend the Member for Redcar (Anna Turley) said, the tragic situation that unfolded in the steel industry is a case in point. The UK steel industry ran a trade surplus in all but three of the last 17 years. Steel exports were worth £6 billion to the UK in 2014, not to mention the 20,000 families the industry supported. Serious challenges coalesced: a glut of global supply, energy costs, a strong pound. These were difficult challenges, but surmountable for a Government.
We have debated this so many times. The Minister knows that some countries choose to operate the state aid rules far more beneficially than we do. It is about time the Government chose to do the same.
The industry needed the Government to play their role in what should have been a partnership. The situation demanded that the Government see the long-term strategic value of steel production and do what other EU Governments did: move swiftly to protect their industries. Instead, they have lacked a strategy and shown themselves unwilling to make strategic interventions to support the industry with practical steps well within their capabilities, such as tackling business rates through the supply chain, dealing with electricity costs and ensuring better procurement practice to favour British steel. They failed to step up to the plate as a partner of industry, and in doing so turned a temporary, toxic mix of challenges into a permanent gap in our industrial make-up.
We have to take that lesson seriously. UK productivity will continue to lag as long as Governments sit on the sidelines and wash their hands of responsibility for safeguarding key industries. The aspiration is one that everyone in the House will agree with: an economy with high-skilled, well-paid jobs in which businesses can grow, export and invest to boost productivity. Agreeing on the aim is one thing, but how we go about it is another. It requires a long-term partnership championing the workforce and business; investment, not cuts; an industrial strategy, not laissez-faire dogma; and an economy that creates wealth, instead of relying on consumer borrowing. We need a strategy in which workers, business and the Government work together for Britain. The Government’s role is not that of an observer but to make sure our exporters get the help they need; to take action to boost productivity; to tackle the skills emergency; to safeguard key industries; and to build the infrastructure that growing businesses need.
The Minister and the Government have failed on each point. They cannot deliver and they will not be an active part of that partnership because they do not believe in intervening. Their empty rhetoric will get our economy nowhere. Only a long-term industrial strategy will deliver the high-value economy we all want. We need a strategy of partnership that is both pro-business and pro-worker.
I am delighted to be called so early in this important debate. I was particularly keen to catch your eye, Madam Deputy Speaker, because we have so few debates on exports, but I believe that if we are to grow our economy sustainably, we must increase our exports.
Given the importance of this debate, it is a great pity that our politics produces such negativity from all the Opposition parties. That is in total contrast to the Minister for Small Business, Industry and Enterprise, my right hon. Friend the Member for Broxtowe (Anna Soubry), who is positive and outward looking and produces good policies that the Government have been pursuing, both in the last Parliament and this one. I am passionate about exports. With my hon. Friend the Member for Newark (Robert Jenrick), I have the honour to chair the all-party trade and investment group dealing with exports. I want to see this country exporting more.
I just want to champion some of the Government’s achievements, which, unlike the Opposition parties, help exporters considerably. They have committed to cutting £10 billion of red tape in order to back British business and put resources into more productive use—and that is on top of the £10 billion we cut in the last Parliament. We have cut corporation tax to 20%—one of the lowest rates in the G7—and have an aspiration to cut it further. We are boosting skills and productivity by improving the quality of apprenticeships in England and increasing their number by 3 million in this Parliament, on top of the 3 million in the last Parliament. As my right hon. Friend the Minister has said, we are investing, up to 2021, £6.9 billion in UK research infrastructure and, in particular, protecting the science budget of £4.9 billion per annum. All that will help innovative companies in this country, as will building stronger links with emerging markets, especially China and India. I was therefore delighted to see the leaders of those countries—the most populous nations in the world—visit this country in the last year. And what successful visits they were.
My right hon. Friend the Business Secretary, launching the Government’s productivity plan, “Fixing the foundations: Creating a more prosperous nation”, said:
“Britain is home to some of the world’s most innovative and dynamic businesses, staffed by incredibly talented, hardworking individuals…And higher productivity means higher incomes. When productivity rises, standards of living rise too. So today I’m proud to publish ‘Fixing the foundations’. It’s our plan for productivity, and our blueprint for creating a more prosperous nation.”
Hon. Members on both sides of the House have commented on productivity, and it is true that we lag behind some of our major competitors. Many economists have puzzled over this, but I think the reason is simple. In the list of achievements I gave just now, I omitted the fact, which must be hugely welcome to all Members, that a record number of people are in work thanks to our flexible labour laws. In this country, 32 million people are in work—more than ever before—and that number is rising. I believe that, because more people are employed, some companies might not have invested as much as they might have done in labour-saving capital equipment, as has happened on the continent, where their labour laws are much more difficult and therefore they have higher unemployment. Greece, for example, has 50% youth unemployment. It is no wonder those countries have such problems, yet here, I am grateful to say, youth unemployment is dropping. It is a terrific achievement for this country.
Let us look at where trade is going around the world. In 2014, the UK’s exports of goods and services totalled £513 billion and its imports totalled £548 billion. The EU accounted for 45% of exports and 53% of imports, meaning the balance of trade with the EU is against us. In other words, we are importing more than we are exporting. There is no reason, therefore, not to look elsewhere in the world to see where we can export more. I commend that approach to the Minister. It is against a background of UKTI’s policy of increasing trade by 2020 to £1 trillion and the number of companies exporting by 100,000. There is no reason why we could not do much more.
UKTI has been transformed in the last few years. I was delighted to take one of my successful medium-sized companies to see the trade Minister, the right hon. Lord Maude, the other day to examine how we might get UKTI to do even more to encourage medium-sized businesses. The one in my constituency employs 45 people, exports to 40 countries around the world, makes it products in China and exports them directly to Australia, without their ever touching this country, and yet it remits its profits to this country and pays UK corporation tax. That is precisely the sort of medium-sized company we ought to encourage to export more.
That company told me there was too much emphasis on people in UKTI and not enough on the tradeshow access programme. Trade shows are a particularly important part of manufacturing businesses’ exporting programme. We need to encourage, via greater incentives from UKTI, such companies to go to these tradeshows, particularly where they have a record of success. At the end of my speech, I will make five or six suggestions to the Minister on how to encourage exporting, but one of them is to extend TAP from three to four years. As this company pointed out, the first year is about exploration and the second is about getting to know the customers, and only in the third year, if it is lucky, does a company begin to make a profit. It therefore needs an extension from three to four years. It is in its third year and about to be cut off just as it is becoming profitable, so it would be useful if we could give it a bit of extra help.
I am delighted that my hon. Friend saw my constituency predecessor, Lord Maude, recently. We have a number of manufacturing firms in Horsham. Does my hon. Friend agree that such firms are now getting a better service from the Foreign Office and from our ambassadors abroad to help British exports? That should be put on record and welcomed.
I am sorry to say that I only partially agree with my hon. Friend. I am not going to name the embassy in question, but a representative of the company I have been describing went to one of the nearer embassies to this country and was distinctly unimpressed by the trade representatives there. He described them as spotty youths who were just out of university. He felt that we needed people in our embassies and in UKTI who have a good track record in the private sector, and that we should incentivise such people. If they have had a good record in the private sector, it is likely that they would be successful in UKTI in helping companies to export.
There are approximately 1 million small and medium-sized companies in this country. UKTI helped 48,000 companies to export last year, but I suggest to the Minister that there is still much to be done. Far too many companies still do not understand what it means to export and do not understand the advantages of exporting. The figures are well known. Once a company has exported for the first time, its productivity goes up by 7%. So not only will its profits go up—one hopes that it will do profitable export business—but its productivity will go up as well because that activity sharpens the whole operation through dealing with an extra dimension. We could do much more, in collaboration with UKTI, with UK Export Finance and with the local enterprise partnerships. We should make them all come together much more closely.
Another suggestion I have for the Minister is that Innovation UK and UKTI could get much closer together so that some of our best seed-generated companies, including high-tech companies, could be encouraged to export right at the beginning of their existence rather than waiting until they are established. They should be encouraged to think about exporting as one of the first things they do.
I concur with the hon. Gentleman about the importance of UKTI. Unfortunately, in the autumn statement, the Chancellor slashed UKTI’s budget. So outraged was the organisation that its chief executive resigned. Clearly, this Government are not helping UKTI to help exports.
I think we all have to encourage UKTI to operate within the financial climate that exists. I have to say that I would put the money into UKTI in order to expand exports, but I would make sure that it was operating as well as it possibly could. Another suggestion that I have for the Minister is that UKTI should be benchmarked against the best export agencies in the world to see how it is doing. We should never be complacent in this life, and benchmarking is one way of getting that information.
Despite what the company in my constituency said when we went to see Lord Maude, I think that what my hon. Friend the Member for Horsham (Jeremy Quin) has just said is right. Our ambassadors are some of the best trained in the world, and we have one of the most comprehensive networks of embassies. After all, it was the Conservatives, in this Parliament and the last one, who started opening embassies where the previous Government had closed them. We have the network, but in some places we need to sharpen up the expertise. However, we have a good foundation on which to build.
We have the British brand and the British language and we exercise our soft power through the BBC World Service and the British Council. We are very well established in many of the major markets in Brazil, Russia, India and China—the BRIC markets—and in other smaller markets where we need to concentrate our efforts. We need to concentrate on the high-growth markets, as opposed to on Europe, which has lower growth. I am delighted that our exports to China are growing in such big quantities, albeit from a very low base. UKTI is putting significant resources into China, and it is paying dividends. The visit by China’s Premier, Xi Jinping, last year will only help to cement those efforts.
I do not want to make too long a speech, but I want to outline some things that we could do to help companies to export. I have some specific ideas for fiscal incentives to give to small and medium-sized businesses. We could give them fiscal help with export-related activity. That could be a better way of alerting many companies to the possibilities. Companies are very astute about ways of saving tax, and we need to find the best ways of encouraging all small and medium-sized businesses to export. It would also be helpful to inform them that finding out more about their potential export markets need not involve huge costs.
A further suggestion, which I have already mentioned, is that we should extend the TAP programme from three to four years where success has already been demonstrated. If a company cannot achieve success within three years, it is unlikely to do so, but if it has already demonstrated success, as that company in my constituency has done—[Interruption.] I wish that my right hon. Friend the Minister on the Front Bench would listen. Please! If the Government extended the TAP programme from three to four years where success had been demonstrated, it would be helpful.
My third suggestion is that we should buddy a successful exporting SME with one that is exporting for the first time. That would be really helpful, because there is a real fear of the unknown for a small company with only a few employees. It has to deal with the VAT, the national insurance, the marketing and the manufacturing, and that can be quite frightening for a small company. It can be quite off-putting. Buddying such a company with one that is in the same market—although not one that is directly competing—would be helpful.
I think I will ignore that intervention. I could have come up with something a little better myself.
My fourth suggestion is to give local enterprise partnerships a stronger exporting role. I believe that we in Gloucestershire run one of the better LEPs, but it is still not sufficiently focused on exporting. It has nine divisions, and every one of them should be utterly focused on exporting. I would also propose a much stronger connection between UKTI and Innovate UK, as I have mentioned. Innovate UK is developing the technology forward strategy and helping companies to expand their ideas. It often helps them to incubate ideas from the best universities. This is an area in which the greatest companies can grow from little acorns, and we should encourage export activity there.
I would also reinvigorate UKTI by encouraging it to employ more people from the private sector, particularly those with a record of exporting in their own company. Those people should be properly paid and incentivised; otherwise, the private sector will always continue to employ the very best people. We have made good progress in the last Parliament and in this one, but there is much more to be done. Our all-party parliamentary group on trade and investment will help the Government whenever possible by putting people in touch with UKTI and with their LEPs. As we go round the world, every Member of Parliament should be alert to the possibilities of export markets and to which companies in their constituency might be able to export to those markets. We should then put the companies in touch with those possibilities. In that way, we could all become trade and export ambassadors, which would help the exporting effort of this country considerably.
It is a pleasure to take part in the debate, and to follow the hon. Member for The Cotswolds (Geoffrey Clifton-Brown), who has made some sensible suggestions. His proposal for buddying businesses is one that all the agencies involved should take on board. I was not expecting to speak quite so early in the debate. This topic is clearly of interest to some Members, but the memo about it does not seem to have been passed to the official Opposition. Some Labour Members are here, providing an honourable exception, but it is surprising to see so few here, given the importance of these fundamental tenets of the economy not only to the economy itself but to the services that they provide the money to pay for. If we do not get the economy right, we do not have the services.
I am really pleased to take part in this debate, and I am going to focus on one area where the UK, and in particular Scotland, has strong natural and competitive advantages: energy. I thank the Minister for a positive response to my question about oil and gas. It would be more helpful if we focused on what could be done to help the situation, rather than getting into some of the politics around it. I accept fully that we are in a political environment here, but we need to reflect on what message this place is sending to the folk in Aberdeen who are being laid off when we are having knockabout about the oil price—it is not helpful. Having said that, I respect, accept and am thankful for the positive comments made.
It would seem that the Government have turned over a new leaf in 2016 in their approach to oil and gas. Today, I have had positive conversations with the Energy Minister, who also gave a positive response to the questions from my hon. Friend the Member for Livingston (Hannah Bardell) about incentives for oil and gas at Energy and Climate Change questions last week. We are in an incredibly difficult position with the oil price, and jobs are being lost, but there is still a bright future. The industry is doing what it can to reduce costs—unfortunately, in many cases that will require job losses—but it is also innovating, and I will come on to discuss that. Help from the Government is, however, required in order to bridge over what we hope will be a temporary downturn. Most people expect the oil price to rise at some stage, but it is not clear when or by how much.
Aberdeen is a city of innovators—there is no doubt about that. Some of my SNP colleagues may be surprised to learn that the city in Scotland that filed most patents in 2014 was Aberdeen. It filed more than Edinburgh, whose population is twice the size of Aberdeen’s, and more than Glasgow, whose population is almost three times as large. These patents were primarily in oil and gas, but they were also in life sciences, biosciences and food and drink, and so the city is thriving. It is, however, unquestionably an oil and gas and energy hub, and the job losses announced by BP yesterday, coming on the back of 150 announced by Petrofac the day before, are genuinely heartbreaking for those involved. As I have said, the industry is taking the steps it can to innovate. Innovation is one of the hallmarks of the oil and gas industry, and it was heartening to see the level of innovation and of renewed collaboration that is taking place in the industry, as it works to deal with the lower oil price.
Some of the issues the oil and gas industry faces pre-existed the oil price fall but they have been exacerbated by it. There are three sides to the coin in terms of the costs and changes in income that oil and gas companies face. The first is the oil price, and none of us can do anything about that. The second is the costs that the industry is exposed to, and it is doing what it can there. The third is taxation, and I am pleased that it would seem Ministers have an open mind on that. I plead with them to look at oil and gas taxation in the round to see what can be done to help.
The important issue of the apprenticeship levy has been raised. We wholeheartedly support the levy, provided it has the investment coming to Scotland. There have been questions asked, again by my hon. Friend the Member for Livingston, about the potential double imposition of an apprenticeship levy-type scheme on oil and gas companies, which already pay significantly into training schemes through a number of industry levies.
As part of maintaining and progressing Aberdeen’s position as an innovative hub, our local authorities—Aberdeen City Council and the Aberdeenshire councils—are exploring a city deal. They are looking at significant investment in infrastructure, which is obviously an important part of this debate and a key way of securing economic growth, and very much at how they can continue to make the best of the expertise in innovation that the city of Aberdeen is proud to host. There are proposals within the city deal to create an innovation hub around the two universities, bringing together industry and universities in a way that has already been discussed today. Measures are required to protect the north-east of Scotland and provide the bridging for the oil industry that I mentioned, and the Aberdeen city region deal is a very important part of that toolkit. I commend it again to the Government, hoping that they will look upon it favourably and act quickly.
Even in these times of difficulty, there are many ways in which innovation in the oil industry can provide a massive support to the UK economy. Enhanced oil recovery is one such way, as is looking at being one of the first movers on decommissioning. We would not want to see that happening prematurely, but if it is inevitably going to happen, we have the ability, as we have one of the more mature oil and gas basins in the world, to take our expertise and export it globally. We cannot afford to miss that opportunity.
Let me move on to exports, the north-east of Scotland and the oil and gas supply chain, which is about much more than Aberdeen, as it goes the length and breadth of the UK. That situation is good and it is getting better; Aberdeen relies much less on the North sea, in terms of supply companies based there, for its income. I wish, however, to draw the House’s attention to something announced at the tail-end of last year. In principle, I support this, and I am not criticising it, but it needs to be taken in the round, with a more supportive approach being taken to oil and gas. I refer to the announcement that there would be an export credit agreement of $500 million for a couple of UK-based companies for exports to Petrobras, the Brazilian state-owned oil major. That is good in and of itself. It helps support exports from the UK—from Aberdeen—but when we are looking at these things, we need to be careful. If we are providing exports to something like the oil and gas industry elsewhere without providing the same at home, we may inadvertently end up requiring greater imports of oil and gas in the future. We do need to get the incentives for exploration right. Again, I do not mean to criticise, but we have to have both sides there; we have to have support not only for exports, but for the domestic industry.
Aberdeen, and Scotland more widely, have huge natural advantages on green energy, and the Paris deal cements the opportunity we have in that regard. There is a sad irony here, in that the deal comes at the same time as the UK Government have taken the hatchet to a number of green energy policies, undermining the opportunity to truly embrace what will be one of the biggest global growing markets of this century. In her much-heralded “reset” speech, the Secretary of State for Energy and Climate Change said:
“At the same time, we are building new interconnectors to make it easier to import cheaper electricity from Europe.”
I support the building of interconnectors, as does my party, because an integrated European market for electricity will be a good thing, but the ambition shown there and the logic for making this move is the wrong way round. We should not be doing this to import electricity; we should be doing it to export the green electricity that can be produced from the wind and the waves—the sea and the tides—in Scotland. That is what we should be doing. That is the opportunity interconnectors provide; the opportunity is not about importing cheap electricity, but about building an industry that we can be proud of, in order to develop the skills that we need.
The renewables sector is an important part of rebalancing the economy, in geographical terms as much as anything else. The criticism often made of renewables, particularly of onshore wind, is that they do not provide that many jobs. The reality is that onshore wind does provide a lot of jobs, doing so in places where without the wind industry it is likely that there would be no jobs at all. We cannot overstate the importance of a small number of highly paid jobs in an area where they did not exist.
I have heard that asserted year in, year out, but, as far as I understand it, the tourist sector in Scotland is doing very well. It continues to do well and it is a major sector of growth in the Scottish economy, so I do not quite understand those assertions. I have read that there is anecdotal evidence—it is no more than that—of somebody saying, “I came to Scotland. I drove up the A9 and didn’t like the wind turbines, so I am never coming back.” Well, somebody else is there to take their place, and there always will be, as Scotland offers world-class tourism that is not in any way “despoiled”—in the words of the hon. Gentleman—by wind turbines.
It is not overly negative to say that genuine critiques can be made. On green energy policy, for example, various things have been done, but the most damaging to the United Kingdom’s reputation and to the financial and investor confidence that is required to secure investment in the UK was the decision at the 11th hour—actually it was even later than that—to pull the plug on carbon capture and storage. Two projects—Peterhead and White Rose in Yorkshire—took part in a CCS competition. Big companies invested significant time and resources on the basis of the supposed good word of the United Kingdom Government. Before they had even had the opportunity to submit their bids, the plug was pulled and the damage was done. We cannot underestimate the impact that that and all the other incremental attacks on green energy policy have had. We are missing a major trick here. As I have said, this is a huge opportunity to grow our economy and our skill base and to do it in differing parts of the United Kingdom. To send out such damaging messages really brings into question the commitment of the UK Government not just to green energy, all the talk at Paris and the global climate change deal, but to the economy and investment more widely.
Finally, let me touch on the Green Investment Bank, which was mentioned by my hon. Friend the Member for Dundee East (Stewart Hosie). It was supported by this party and also by the entire Chamber when it was debated—clearly, that was before I was elected to this place. The bank is a shining example of how we should address market failure. It is how we can ensure that investment is directed to the right areas, and that support is given to nascent industries to help them get off the ground. We have repeatedly criticised what is proposed. Again I say that we will oppose the privatisation of the Green Investment Bank if we do not get cast-iron assurances that its green remit will be protected.
After Paris, the rules of the game have changed, and the UK and Scotland have a chance to seize the benefits. Scotland is ready, but I fear that, as part of Tory Britain, we are being left behind.
I am grateful for the opportunity to speak in this afternoon’s debate.
I agree with the Minister for Small Business, Industry and Enterprise and my hon. Friend the Member for The Cotswolds (Geoffrey Clifton-Brown): Opposition Members have painted a pretty gloomy picture this afternoon.
The UK economy has improved significantly since Labour’s great recession, and is now, thanks to rising employment, growing faster than that of any other G7 nation. I hope that all Members welcome that rise in employment. Economic growth is not, however, the result of improved productivity. As my right hon. Friend the Minister said, we are looking at addressing productivity not only because it has been a long-term problem affecting our economy and one that successive Governments have failed to tackle, but because our productivity has consistently lagged behind that of other major economies.
I challenge the motion before us today, as I believe that the Government have rightly recognised the productivity gap, publishing the productivity plan last summer. There is recognition that addressing that gap will be key to ensuring a sustainable recovery and a long-term successful economy, delivering our long-term economic plan for Britain. We must recognise though that that will not happen overnight.
The productivity plan outlines 15 key areas that need to be addressed and are based on two pillars—encouraging long-term investment and promoting a dynamic economy. It includes measures to promote and encourage trade and exports, on which I wish to focus my remarks this afternoon.
The “Exporting is GREAT” campaign will, I hope, inspire and support thousands of new businesses to export. Firms that export are more productive, more innovative and less likely to go out of business. It is for that reason that I shall jointly host an export event in Cannock next week with UK Trade & Investment and Chase chamber of commerce. This will be an opportunity for local small and medium-sized businesses to understand what global opportunities exist; the benefits of exporting; and what practical help is available.
The export experiences of ATP Group are an excellent example of the power and opportunities available in the export market. I invite my right hon. Friend the Minister of State to visit ATP with me. Based in Cannock Wood, it is Europe’s largest independent re-manufacturer of automatic transmissions and vehicle electronics. Essentially, it rebuilds car parts—for instance, gearboxes—to the specifications of the original product, using re-claimed, re-engineered and new parts. Its clients include Ford, Land Rover, and Volvo, to name but a few. Exports make up two thirds of its business, and it is exporting to around 35 countries. During the past year alone its international trade has increased by more than 57%.
ATP has shown that one of the best ways to address productivity and increase exports is by investing in skills development, new technology, and research and development to support specific customer requirements.
I am thrilled that my right hon. Friend will join me in visiting ATP. I know that the company will be incredibly pleased. I shall send it a message this afternoon.
The Government have set out an ambition plan to narrow the trade deficit, and are taking the issue of exports very seriously, with an ambitious £1 trillion export target to be met by 2020, and the aim of seeing 100,000 more companies exporting their goods and services.
The point I was trying to make is that we want to increase exports. I will highlight a few points relating to that.
The productivity plan outlines several measures that will help to meet that target, including building stronger links with emerging markets, especially China, India and Brazil. The plan also sets out a range of funds and initiatives designed to promote and encourage exporting. Let me echo the point that my hon. Friend the Member for The Cotswolds made about extending the tradeshow access programme.
Based on ATP’s experience of exporting, I want to raise a number of other issues and challenges faced by exporters that I would like the Minister to consider. They fall into three key categories—uncertainty, red tape and competitiveness—each of which presents real obstacles and barriers to exporting.
Uncertainty comes about partly because of currency markets, but the particular issue I want to focus on is that of Her Majesty’s Revenue and Customs impounding shipments for random checks. That can make it really difficult, both from an importing and exporting perspective, when a “just in time” ordering mentality is commonplace. Are there ways in which we can balance the understandable need to monitor shipments and at the same time provide more certainty to firms that are importing and exporting?
Businesses, both in the UK and abroad, regularly refer to the issue of red tape. I welcome the Government’s commitment to cut £10 billion of red tape, to back British business and put resources to more productive use. Customs warehousing is a facility for importers to delay duty and import VAT payments until the goods leave the customs warehousing facility or enter another customs procedure. According to ATP, it is an excellent service for importing parts, but the red tape associated with it is cumbersome. As such, ATP no longer uses the facility, as the amount of paperwork outweighs the benefits. That means that an excellent facility is underutilised. Will the Minister therefore review the facility and consider ways in which the paperwork could be reduced and simplified so that it can be used by SMEs, which have less capacity to deal with red tape than larger organisations?
My hon. Friend makes an important point about bureaucracy at our borders and the role of border control. I reassure her that the Government are reviewing that with their one government at the border programme. At present, 92% of consignments at customs are cleared within five seconds, but her constituents are clearly encountering difficulties. I will talk on her behalf to the Minister for Trade and Investment and look into the specific problems she faces.
I am grateful for the Minister’s update on the review and look forward to receiving more information over time. I will also feed back his comments to ATP, which is not using the facility at the moment but might want to start using it again.
On competitiveness, the costs and risks of exporting can be off-putting. If we are really serious about encouraging exports, surely we should be considering ways to incentivise businesses to do so, potentially through tax breaks. One tax that can be a burden to exporters is air passenger duty, which, in reality, is a tax on exports. ATP, for instance, spends thousands of pounds a year on air taxes alone. Every time it signs deals, it has to travel abroad and the costs over a year are significant.
We have to realise that ATP, like many businesses, is competing in a global market. Therefore, onerous air passenger duty makes it less competitive on contract delivery compared with other companies bidding for the same contract. With some companies actively trying to avoid the tax by booking tickets abroad, the Treasury is already missing out.
Given that APD is going to be a devolved matter and the Scottish Government have announced that they will cut it by 50%, with a view to abolishing it altogether, the need for us to consider our position is probably more urgent than ever. Will the Minister consider ways in which we could provide tax breaks on air passenger duty for those who are exporting? I appreciate that, at face value, that will cut tax revenues, but I believe that that will be overcome by the economic gains of more of our businesses exporting their goods and services.
In conclusion, given the need to address the productivity gap, and given the role that exporters play in closing it, it is important that we do everything we can to encourage businesses to consider exporting. That is why I would like the Government to consider ways in which we can address the three overriding obstacles of uncertainty, red tape and competitiveness.
I do not support the motion, because it does not reflect the current picture and the Government’s commitment to productivity and exporting.
It is an honour and a privilege to follow the hon. Member for Cannock Chase (Amanda Milling), who is a valued fellow member of the Business, Innovation and Skills Committee and provides real insight and personal wisdom to our inquiries.
Unlike the hon. Lady, though, I do support the motion, because, to be frank, I agree with every single word of it. It gets to the heart of the worrying structural imbalances in our economy, including our reliance on consumer spending based on debt, at the expense of investment; our reliance on domestic consumption, at the expense of potential and growing international markets; the priority given to short-term value extraction, at the expense of long-term value creation; and our reliance on the service economy, at the expense of manufacturing, which can inject real innovation and productivity gains across the country, thereby raising living standards for all of us and all of our constituents.
In addition to the points raised by the Opposition motion, I would also like to mention the geographical imbalance in our economy. As a north-eastern MP, I am here in London for half the week and back in God’s own country for the remainder of it. The economies of London and the south-east are overheating, which is in turn putting pressure on infrastructure and housing supply in the capital, at the expense of sustainable economic growth elsewhere in the United Kingdom.
I welcome the motion’s focus on productivity. The BIS Committee’s first inquiry of this Parliament was on the Government’s productivity plan and we shall produce our report, I hope, shortly. I also welcome the motion’s reference to the change of research funding from grants to loans. As has been said, that is of deep concern because it could undermine our country’s competitiveness. Capital is global, and firms will see where they will get the best return. They could leverage in public sector investment as a result of their own private sector investment. This country could lose out on foreign direct investment. It is incredibly important that when we attract foreign direct investment into this country—to be frank, this and previous Governments have been very successful at that—we make sure that we remain at the cutting edge of doing so. The measure puts that at considerable risk.
A good, competitive tax rate is vital. Global firms consider a dashboard of different metrics—including tax rates, regulation, flexibility in labour laws and capital allowances—in a holistic manner in order to decide where they are going to put their capital investment, the returns on which they might not get back for 10, 20 or 30 years. It is important not only that we have stability, but that we make sure that, if a particular firm is putting in investment, we address what the Government are doing. Other countries recognise that and ensure that there is a partnership, but I am worried that we do not have that.
It is an honour to participate in this debate. The hon. Gentleman’s Select Committee and mine are doing a joint inquiry on productivity and it will focus on skills. Does he agree that, given the fact that more than 50% of foreign direct investment comes via the European Union, there is a really strong case to remain in the EU to encourage even more FDI in the future?
That is incredibly important. Firms make investment decisions not just because of the UK domestic market, but because they see the UK as a springboard into the largest consumer marketplace—500 million consumers—on earth. Japanese firms such as Nissan and Hitachi are not just here for the domestic market; they are here because we are a springboard into the whole European market. We risk that at our peril.
Trade performance is a good barometer of economic health at both the macro and micro levels. At a macro level, a buoyant trade performance contributes to economic growth and helps to provide a surplus on the country’s current account. As the hon. Member for Dundee East (Stewart Hosie) mentioned, the motion cites a
“trade deficit in goods of £123 billion in 2014”.
However, in that year, the current account deficit widened to 5.1% of national income, which was its largest in post-war history. For much of the past 30 or 40 years, the trade deficit has been offset by investment income from overseas. However, and most ominously, net primary income derived from assets abroad has fallen from 3.3% of GDP to 0.1% in 2014. The Minister should outline the Government’s view about that because they have been quiet about this crucial economic issue.
At a micro level, exporting is positive, especially for firms, and it is good for the wider economy and society, too. Evidence suggests that an exporting business tends to be successful, sustainable and socially aware. Such a company tends to employ more workers and to offer better wages than an equivalent non-exporting company. Companies that export have been shown to be more productive and to invest more in research and development. There is a strong link between exporting and innovation. More often than not, a business with a desire to export overseas has the discipline, ambition and entrepreneurial flourish to develop new products and services that will better serve new export markets. Such companies will be sensitive and responsive to customer wishes, which is always the hallmark of a successful business. There can be a virtuous circle for exporting businesses whereby they become exposed to new demands, fresh ideas and increased competition, which in turn makes them more productive and outward looking, and better disposed towards thinking about new products and improved profitability.
On average, according to the British Chambers of Commerce, businesses that export grow 20% more than those that do not. We need to encourage such activity much more because far too few excellent British firms providing great goods and services that could be offered throughout the world export. Only one in five British firms do so, whereas the average figure for the EU is one in four.
The motion refers to the UK’s “poor export performance”, but with the greatest respect to the Scottish National party, I would go further. I think that our trade performance over the past 30 years or so has been dire and woeful. It has declined markedly over that period with no genuine prospect of improvement. The UK accounted for one in 10 of the world’s exports in 1950, but now the figure is less than 3%. Of course, with the development of emerging economies, it was inevitable that there would be a relative decline in the market share of UK goods and services, but not at the rate that we have unfortunately experienced. Given the forecast that world trade will expand by $250 trillion by 2050, there should be a co-ordinated effort—in the House, across the country and in government—to ensure that we capture as much as possible of the growth in the world economy for British firms.
The hon. Gentleman is making important points in his impassioned speech. He is right that there is a challenge for more business to step up to the plate and move into exporting, but does he agree that the situation shows that we need a real cultural change involving not only the Government, but businesses examining what they have done in previous years and moving further forward?
The hon. Gentleman has a fantastic track record of talking about trade and investment, and how we ensure that we boost our sales of exports throughout the world. I will deal with his important point about what we can do in a moment.
In November 2015, the UK’s trade gap was £3.2 billion, while the trade deficit in goods was £10.6 billion. In 2014, UK goods exports fell by 4.1%, which represented the lowest growth rate since the recession in 2009. We were the only G7 economy to experience a negative growth in exports, although it is not all doom and gloom because the north-east still has the only consistent trade surplus in goods. However, as the hon. Member for Dundee East said, there is precious little evidence of a “march of the makers” with modern manufacturing at the heart of a rebalanced economy and providing export-led growth. That is reinforced by yesterday’s Office for National Statistics publication showing that the UK manufacturing sector is now back in recession. I fear that we are sleepwalking back to the long-standing British model, which has been prevalent over the past 40 years or so, of debt-fuelled customer consumption based on an assumption of ever-rising house prices. That did not work in the past—it never has—and it cannot be a model for sustainable and competitive economic growth.
As we have heard several times during the debate, the Government have set a target of £1 trillion of exports by 2020. I genuinely want them to achieve that because it would be good for firms and the country, and would bring about economic growth and broadening prosperity for everyone. However, it is now more or less a given that the Government will fall spectacularly short of their target. Few expect it to be achieved, including the Secretary of State when he gave evidence to the Select Committee. The Office for Budget Responsibility’s “Economic and fiscal outlook” that was published at the same time as the autumn statement forecast the cash value of exports in 2020 to be £647 billion, which is 23% lower than its March 2012 forecast and 35% lower than the Government’s ambition. It is not acceptable for the House, the Government or the country simply to shrug our shoulders and say, “Do you know what? It was a tough target and it’s unachievable, but at least we had a go.” We must be more ambitious than that, but the evidence suggests that the Government have not even had a go. A strong export performance matters, which was why the BIS Committee launched an inquiry into exports and the role of UK Trade & Investment.
I think that I speak for all members of the Committee, several of whom are in the Chamber, when I say that we all want the £1 trillion target to be achieved, but given the enormous shortfall that is forecast, we need a vigorous focus on changing course and embarking on policies that will bring about an improved performance, yet I have not seen the Government demonstrating that there will be such a step change. Will the Minister outline what is being done differently to ensure that we get as close to the £1 trillion target as possible? What active steps are the Government taking to ensure that 100,000 more companies are exporting by 2020?
To respond to the intervention made by the hon. Member for Macclesfield (David Rutley), while the Government do not control this, they can put in place a framework and facilitate the environment. We need to think about what firms are doing. They might have a good domestic market in which they feel comfortable, but how do we ensure that they can put their toe in the water of exports? Businesses will be concerned about whether they know the regulations and laws of a particular country and if they will get paid, so they might think that exporting is too much hassle and that they will stick to the domestic market. However, we need to encourage them to export, and that brings me on to the role of UKTI.
The hon. Gentleman accepts that the target is challenging, but if the Government know, given the OBR forecast, that it might well be missed by 35%, we have early-warning signs four years in advance showing that something needs to be done, so action should be taken.
The hon. Gentleman is right. Given that we will fall spectacularly short of the target, how will the Government revise their policy on trade and exports to ensure that we do not miss it by 35%, but get as close to £1 trillion as possible? Is UKTI sufficiently proactive about working with British firms to identify and navigate foreign markets? It has been affected by turbulence, with cuts in funding and disruption at the top of its management. Do the Government think that it is fit for purpose?
To answer that directly, I think there is much reform that can be achieved. Does the hon. Gentleman agree that the hon. Member for East Lothian (George Kerevan) was wrong when he said that the former CEO of UKTI had resigned because of the budget cuts, and that Mr Jermey moved to the Foreign and Commonwealth Office to take up a new appointment as the international counter-extremism co-ordinator? Does the hon. Gentleman agree that the new head of UKTI was appointed before there was any change in the funding? Will he confirm that the amount that UKTI received from BIS in 2014-15 was £264.1 million and for 2015-16 is £338 million?
It is important that the right hon. Lady clarifies the reasons for the personnel changes.
The hon. Member for The Cotswolds (Geoffrey Clifton-Brown), who is no longer in the Chamber, spoke about benchmarking UKTI against other comparable trade organisations around the world to see whether we are getting value for money for the taxpayer and whether sufficient money is being provided. The Select Committee’s inquiry can look at that.
This is not an academic exercise. In the past a trade deficit was so significant that it could bring down a Government. I am far too young to remember the 1970 election. I was not born then, but I have read about it in history. Some of those present may have been in the Chamber talking about it. That is an example of how important trade performance used to be. In the modern age, and in news reporting for the 21st century, it seems to have lost that impact. We should return to highlighting the importance of trade deficits for the general prosperity of this country. Poor performance in overseas markets acts as a drag on competitiveness, productivity and rising living standards for all. The Government should focus more attention on that and demonstrate how they will change track to achieve their targets. The whole House would be behind the Government if the Minister could demonstrate that tonight.
It is always a great pleasure to follow the Chair of the Select Committee on which I am proud to serve, the hon. Member for Hartlepool (Mr Wright), who gave an interesting speech with a fair balance of criticism and positive views. It was in contrast to the speech from the Opposition Front-Bench spokesman, the hon. Member for Sefton Central (Bill Esterson), which in both content and delivery reminded me of the Brezhnev era with its catalogue of unremitting misery. I shall spare the blushes of the Chair of the Business, Innovation and Skills Committee and just say that unremitting misery is clearly what one gets with socialism, which is why this country has decisively and continuously rejected it.
I shall add to the positive views we have heard by making some comments of my own. I do this with some humility. We are debating some extremely important matters. The Chair of the Select Committee must be embarrassed that he has only two Labour colleagues in the Chamber, including the Whip, who is supposed to get people into the Chamber to take part in debates. Let us hope that as the debate progresses, we see a little more commitment from the Labour party to the entrepreneurs, the small businesses and the wealth creators in our country.
As the hon. Member for Dundee East (Stewart Hosie) rightly pointed out when opening the debate, we have to understand Government policy and the matters we are debating today in the context of long-standing issues. We should recognise that in the global economy we are going through a period of substantial overcapacity in production and the transition of some major economies from a production to a consumption sector. That will have an impact on the ability of companies everywhere in the world to export. We have reached a point where—we may disagree on this—the British Government and the British economy have to start living within our means, which has been summed up by the Chancellor as seeking stability and security.
On trade, innovation and productivity, entrepreneurs and business people think about that every day. Low down their list of possible solutions to the issues facing them will be the words, “I had better go and ask my Member of Parliament.” The innovations that we make and the trade and exports that we do will be done by those individuals. I am a strong believer in free market capitalism and in entrepreneurship, and I want a Government and a Business Secretary who believe in that. One of the benefits of the election was a change in the leadership of the Department for Business, Innovation and Skills to someone who understands the motivations of the person who does not talk in billions and perhaps does not talk in millions, but is taking the first step and the first risk by investing their own money to start their business. Whether they are in Scotland, Bedford or other parts of the world, that is extremely important.
A number of hon. Members have talked about the persistent current account imbalance in the UK. We should bear in mind two things about that. First, if the issue has been there for so long and we have not all fallen apart, something about it must be hidden or going okay. Secondly—lies, damned lies and statistics—we must remember that trade statistics do not include value added. One of the important changes in global trade over the past 30 years has been a shift in the value added in various sectors. The statistics on that may paint a different picture.
The hon. Gentleman is making a thoughtful speech, as ever, and much of what he says is interesting and potentially accurate. However, I am sure that even he would agree that it is worrying when the contribution to GDP growth from exports is continually marked down in forecast after forecast. While there may well be good, hidden things, the general trend is working against growth in the economy.
I was just about to agree entirely with what the hon. Gentleman was saying because I thought he was talking about forecasting accuracy—a topic on which, of course, the SNP has a very good track record. The issue of marking down does point to the frailty of setting targets. It is a fair criticism of all Governments that they find it very easy to set targets and then very difficult to meet some of them.
Let me talk about what the Government are doing. First, a number of hon. Members have referred to the very broad nature of the Government’s productivity plan. I see that plan as being more about how we implement things than the variety of outcomes they will have in terms of the overall impact on productivity.
Secondly, the Government’s policy on the living wage will provide a substantial increase in productivity, specifically labour productivity. The living wage is, in essence, a 38% pay increase for the lowest-paid workers in our country. I am sure that the Government and the OBR have factored into their statistics the implications for comparability with other pay rates within the economy. A Conservative Government pushing to increase the wages of some of our hardest-working but lowest-paid workers will have, in a market economy, a positive impact on improving labour productivity.
It is important to clarify that, as has been discussed previously in this House, the increase in the national minimum wage by the UK Government is not the same as the living wage that has been set by a number of independent bodies. Conservative Members must recognise that.
The hon. Lady is of course factually correct, but unfortunately that is like having a beautiful sunny day where someone consistently wants to put a cloud on the chart. This is a major and very significant change in the British economy. We should all be looking to the businesses that now have to pay the increase in wages to ensure that they are able to do so without it leading to unemployment. If we could co-ordinate our efforts around that, then, as she rightly says, we can think about the other level that we should move to. Let us join together, support what the Government have done, make sure that our businesses can deal with it, and then look to the next stage. I think there is common agreement across this House that the disparities have gone too far and now we are doing something about it.
The squeeze in the public sector is identifying new ways to improve productivity. We do not talk enough about that positive impact on the economy. Personally, I would be happy if the Secretary of State had accepted a larger reduction in the Department’s budget in doing his bit to get the deficit down, but I do understand that perhaps he is holding something back for later. Another positive on productivity is that the Government are focusing on the sharing economy, which our Committee is also considering.
On innovation, I am very pleased that the Minister said she would talk to the Treasury about looking at new ways in which tax policy can support equity investment in private companies, particularly involving individual savings accounts, as proposed in the excellent “High Growth Small Business” report launched by the hon. Member for Hartlepool.
May I tell the Department that I took to the previous Secretary of State the idea of a Bedford business fund? The idea is that people who care about a community—in this case, my constituency of Bedford—could put money into a fund to support the growth of businesses there. We do not have the advantages of Milton Keynes, Cambridge or Northampton, which have large businesses or science parks; we have to grow our own small businesses to create prosperity in our community. The idea of having a business fund in which people can invest tax-efficiently to grow businesses in their community could not just be followed in Bedford, but replicated across the country. I ask the Business Secretary to look at that again.
Building on the success of the Bedford business fund and having, happily, been re-elected in May, I am taking forward the idea of a Bedford community business school. In conjunction with Bedford College, there will be a series of courses over four weeks. Anyone in the community who is interested in starting a business can learn about public relations and marketing, and about accountancy and getting finance from business. Again, community business schools are a good idea that could be replicated across the country.
I want to make some points about the Department. I have already spoken about the potential for further reductions in its budget. I know that the Minister is a little more fond than I am of spending taxpayers’ money, but she is a true Tory and will look for efficiencies wherever she can. One thing we hear constantly from business is: “The Government do a lot of stuff, but where do I start.” Decluttering and providing some focus for what the Department does would be helpful.
May I make one specific suggestion? I understand that with the Treasury, through Her Majesty’s Revenue and Customs, people will be able to log on and see their own tax accounts. Why is it not possible with the Department for Business, Innovation and Skills for a company, with a company tax identification number, to be able to log on to a website and see in one place all possible ideas that are suitable for the business, tailored to the specific interests of the company? Through the tax identification number, the Department will know whether it is a large or a small company and what sector it works in. With today’s technology, the Department should therefore be able to provide, up front and quickly, the Government measures that are available to support them. On deregulation, the issue for many companies is not how much money is saved, but how much time is saved.
I find it amusing that my hon. Friend is now encouraging me to spend taxpayers’ money on such a service. It sounds like a great idea, but does he agree that the private sector could do it even better, particularly for small businesses? In effect, the website would be a one-stop shop where they could access all the various forms of support available to them. We do not need to use taxpayers’ money to achieve that.
The Minister is somewhat ingenious in suggesting that I want taxpayers’ money to be spent on such a website. The issue is not about the money, but about the access to the Department’s information, which is of course privileged information within the Government. If the Minister is today committing herself to force the Department to deal with private sector companies wishing to create such an access portal and giving them free rein to do so, I am sure private capital will flood in. However, that will require a commitment and it will require access, which is her decision, not mine.
I am looking forward to the Minister coming back to the House with a recommendation, and I will of course be happy to meet her when she has that recommendation. [Interruption.] People may say that is unfair, but the truth is that this is a very positive initiative. The one thing we know about the Minister is that when she sees a problem to be tackled, she goes for it, and heaven help anyone who stands in her way. I am highlighting the fact that this is an opportunity for her. She is the right person to go for it, and I will of course encourage and support her all the way.
The most important thing highlighted by the motion—unfortunately, I do not support it—is that SNP Members are bringing forward ideas on some of the most important issues affecting the wellbeing of our country. Even though Members of Parliament may be low on the list of people entrepreneurs want to call to get answers, SNP Members, as well as others who have spoken, have done a service to the House and I commend them for it.
The last six years have seen an amazing deterioration in Britain’s external trading position. The purpose of this debate is simply to get on the record how bad it is and to encourage the Government to do something about it.
The Government’s default position is to say, “Well, there’s been a global recession” and, “Our biggest trading partner is in the EU so we were bound to lose some traction in the markets.” The point is that in the six years since the Government came to power, world exports have increased by 30%. The world market for sales has grown extensively. If we have lost market traction in that situation, what will we do if the global economy starts to contract overall?
Normally, when there is a recession in domestic demand, a country’s industry is forced to export. Strangely enough, therefore, the core eurozone countries that suffered the worst from the euro crisis have done well in exporting. They had nowhere else to go, so they had to export. Spain and Italy have doubled their exports since 2010. Ireland, which had a catastrophic fiscal implosion, is selling more in exports than ever before in its history.
The point that we are trying to make to the Government is that their insouciance and their pretence that everything is all right in the international sector belies the fact that in the six-year period when they should have been concentrating on turning around British exports, increasing them and grabbing a bigger market share, they have failed totally. They keep putting it off. They keep thinking, “Well, we’ll have another paper plan and it will get better.”
If we look at the numbers, which have been repeated in a number of speeches, in 2014—the last year for which we have the full figures—the UK current account deficit came to 5.1% of GDP. The hon. Member for Bedford (Richard Fuller) asked whether that mattered, but if a country runs a current account deficit, it has to fill it somehow. It has to either borrow foreign currency from other countries or sell its assets into the ownership of other countries. It is no surprise, therefore, that large chunks of British industry and the British property market are owned abroad. The Government’s obsession with trying to cure their own fiscal deficit has only resulted in the deficit being transferred to somebody else.
Everybody knows that when a country’s current account deficit hits something like 5% or more of its GDP, the warning signs flash up in marketplaces all over the world. It is unsustainable. If a country runs that for two, three or four years, a quarter of its GDP will be in hock. We cannot continue to do that. In normal circumstances, the UK has typically run a current account deficit, but at a tiny fraction of its GDP. In 2014, the UK’s current account deficit had the worst performance in peacetime. That is the problem that the Government simply refuse to recognise.
Far from our economy being rebalanced towards manufacturing in order to export more, the numbers on that are just as bad. Let us take the total production data for the UK and strip out the most important components. UK manufacturing output is now less in value than it was in 2000. During the last 16 years, Germany has managed to increase its manufacturing output by that definition by 22%. It would be reasonable to say that we are almost back to a second wave of deindustrialisation. A lot of that has happened since 2010, although it goes back a little further. In fact, UK manufacturing output is barely ahead of where it was in 1990, so we have had a generation of marking time.
Over the last six years there was no national emergency and something could have been done, but the Chancellor did not focus on rebalancing the economy as he said he would. In 2012, he belatedly came up with a target—he is good at making targets—to double exports by the end of the decade. That was a ridiculous promise then, as it is now. If Government Members would just say, “Okay, let’s lay that target aside and concentrate on the practical nuts and bolts of expanding our exports”, we might move forward, but as long as the Chancellor comes up with these fancy proposals and does not deliver, Opposition Members can reasonably say, “You are not serious.”
What nuts and bolts does the hon. Gentleman think are missing from the Government’s package at the moment? He is long on rhetoric about the shape of our export performance—I can understand that—but the Government have done a huge amount to support those exporters, and we have been languishing in the depths of a European-wide recession.
I take the hon. Gentleman’s general point. I do not gainsay a number of the micro-decisions that the Government have taken, but we are not seeing the wood for the trees. Let us understand why we cannot get more investment into the manufacturing industry, and why the whole tenor of the economy is anti-export. It goes to the heart of how the Chancellor has conceived his job. He tells us that we have growth, but where has that growth come from in the past six years? It has come from pumping up domestic consumption, not from investment or selling abroad. Where does that extra consumption come from? Does it come from wages? There has been some wage growth in the past few years, but in the most recent statistics, pay growth has slumped to its lowest rate in two years. The growth is coming not from pay but from borrowing.
Let us consider the latest consumer borrowing figures. We do not have to go back a long way—let’s look at what is happening now. Consumer borrowing on credit cards and overdrafts is expanding at its fastest rate since the financial crisis. Unsecured consumer credit was up by 8.3% in November—consumers borrowed an extra £1.5 billion of unsecured credit in November alone in the run-up to Christmas. While we are facing a potential rise in interest rates, we have merely returned to unsustainable consumer debt in order to carry growth forward into 2016. Yes, there has been growth, but it has come from borrowing. All that the Government have done is to transfer a fiscal deficit from the public sector to private individuals who are even less able to bear it.
I understand the point that the hon. Gentleman is trying to make, but it is too strong to say that Government policy is anti-export. That is not the case. The Government have been trying to navigate their way through a difficult economic situation, as I am sure the hon. Member for Dundee East (Stewart Hosie) would agree. Being anti-export is not the intention, and the hon. Gentleman is overstating his case.
I am glad that we have moved on from me being wrong to me merely overstating the case—we are making progress. I repeat: in the depth of a crisis such as this, we will move on from unsustainable debt by moving towards export-led growth. That is what some of the countries that suffered worst in the recession and from the crisis with the euro have done. We have not even begun to do that, and if we do only one thing today and persuade Government Members that that is the case, we might have made progress.
I do—that was my point. However, Italy, Spain and Ireland have still managed to double their exports, which is the one thing that the Chancellor said he wanted to do but has not yet even begun.
Why has the Chancellor not been able to rebalance the economy? What has gone wrong? In truth, although previous Chancellors began this, under this Chancellor Britain has a taxation system that favours investment in physical property, rather than long-term investment in manufacturing. It has continued to have a banking and financial system that prioritises gambling—to use an extreme word—money, and foreign exchange markets, rather than supporting manufacturing and innovation.
Let me give Members an example that goes to the heart of the matter. Britain’s premier engineering company is Rolls-Royce, a company we would need to rely on as our flagship if we were to rebalance the economy towards manufacturing and exports. Let us look at the tragic history of Rolls-Royce in the past two years. Just over a year ago, Rolls-Royce sold off its gas turbine business to Siemens for £1 billion. Gas turbines, by the way, are the third largest export sector in UK manufacturing. What did Rolls-Royce do with the £1 billion? Did it invest it in a new wave of innovation? Did it invest it in new technology? Did it do more research? No. The nature of the fiscal taxation system, reinforced by cuts to corporation tax, meant it was easier for Rolls-Royce management to use that £1 billion to buy back its shares.
I am not in favour of raising corporation tax—I think fiscal incentives are good for industry—but the Chancellor continued to cut corporation tax when he knew that most of the money from many companies would actually go on share buy-backs. Rolls-Royce, by dint of buying back its own shares, pushed its share price to something like £10 in the early part of last year. Where is the share price now? It is half that. Our premier engineering company is now in a disastrous commercial state. In fact, the halving of the share price means that the shareholder value of the £1 billion it received from selling off its key turbine business to Siemens has been wiped out.
Meanwhile, the market has caught up with Rolls-Royce. Its key sales of engines for large, wide-bodied jets have started to dry up. The market has moved on to new jet engines for narrower-bodied jets. The Americans are cleaning up because they had the product ready to go into that market. Rolls-Royce is now in serious trouble. In fact, there is now talk in the City of it being taken over.
Does the hon. Gentleman agree it is very important that in this House we do not talk down one of the most outstanding British success stories? Given that he has already given the House incorrect information about the moving on of the head of UK Trade & Investment, will he please agree that it is very important that the information he continues to put on the record is accurate? It has not been so far. Will he agree to withdraw his comments about Dominic Jermey and his moving on to the Foreign and Commonwealth Office?
On a point of order, Madam Deputy Speaker. Is it not important for all Members, when they make a mistake, to correct that mistake so the record can show when they have given an inaccurate account to this House, especially about someone who does not have the ability to speak in this place? If somebody else gives a contrary view based on sound information, is it not beholden on the Member to accept it? We all make mistakes. An hon. Member who has made a mistake should just accept it.
Thank you, Madam Deputy Speaker. I am always willing to bow to the Chair. If ever I am found to have made erroneous remarks in this Chamber, I will always withdraw them. We can come back to that.
The Minister intervened because she wishes to continue to say that those of us who raise serious points about our poor economic performance are talking down British industry. Far from it. I am passionate about British industry. I want industry to grow. It is the fact that the Government are not doing their job that is the problem. I have a profound respect for Rolls-Royce, its history and what it has contributed to this country. During world war two, Rolls-Royce’s main aero engineering factory was in Glasgow. The engines that powered the Spitfires that saved western Europe and democracy in 1940 were produced in Glasgow by Rolls-Royce. I am second to none in my admiration for the company and its engineering history, but I am worried that we are now talking about it being taken over by American aerospace companies because of the situation it is in. I am now worried that the Government may have to consider taking over parts of Rolls-Royce—this has been a matter of press comment in recent weeks—in particular its nuclear engineering division. If anything went wrong and, God forbid, Rolls-Royce were taken over by a foreign company, the Government would be talking about nationalising bits of the company. That is quite a serious pass to have come to.
The hon. Gentleman is making an interesting and important point about foreign takeovers, particularly hostile takeovers. One of the important ones recently was Pfizer’s attempt to take over AstraZeneca. I am sure he agrees that that case concluded in absolutely the right way, by protecting one of the great British assets and enabling it to continue its long-term strategies of investment in innovation and technology. Does he agree that this issue should perhaps be seen as a case for reform of the Companies Act 2006, so that we see far more long-termism built into the UK’s corporate culture and a move towards investing in innovation, R and D, and skills? If we do not do that, we will never change to a more sustainable business model.
I could not agree with the hon. Gentleman more. One of the things that has led to the short-termism over the last 20 to 30 years is precisely the fact that companies are not in a position to think long term themselves, because the way that the City of London and the casino economy work means that their shares are always in play. We need company reform to allow investment to take place without it being subject to shares being shorted and without share buyback activity by Rolls-Royce or other companies when the money should be going into real investment.
This is an interesting issue, and the hon. Gentleman is making an important point about long-term investment. Of course, it is already on the agenda, not least in the Bank of England, where Andy Haldane, the chief economist, has raised the issue of long-term investment, contract law and the need to effectively encourage firms to think not just about shareholding, but about long-term investment. Does the hon. Gentleman agree that that is the kind of thing we need to encourage smaller firms to become bigger firms, especially given the nature of the Mittelstand-type firms that we need to see in the manufacturing sector?
I could not agree more that what is clearly missing from the UK industrial structure is those medium-sized Mittelstand companies that export and create a value chain, and instead we have a dumbbell shape, with a small number of very large companies and a large number of small companies. One of the reasons we have been unable to do that is because as companies grow to a certain level, they have consistently needed to sell out, usually to foreign ownership, in order to raise capital.
That brings me to another issue—I shall not be long, Madam Deputy Speaker—which the hon. Member for Bedford raised when he referred to the current account deficit. We have normally been able to fill the current account deficit, even though on a smaller basis, thanks to the financial remits coming in from assets owned by British companies or British citizens abroad outweighing the money from assets owned by foreign concerns leaving the UK. What has changed dramatically since 2010 under the auspices of the Government is the balance between the ownership of assets in the UK and the remit of funds abroad, and UK assets owned abroad and money coming back here. The total value of British-owned overseas assets since 2010 has slipped down to about £1.2 trillion. In that period, the value of UK assets held by foreigners has soared, from £1 trillion to £1.4 trillion. In other words, we are now a net debtor nation. What we own abroad is less than what is owned here, so the net outflow of money will mean in the balance that we cannot cover our current account deficit.
In the last year for which we have figures—2014—there was a bare surplus of £2 billion of positive foreign direct investment coming in versus money going out. That could go like snow off a dyke. That has led the Chancellor into what I think are dangerous grounds. Here we need to link up another aspect of financial wheeling and dealing in the UK with the need for manufacturing investment.
The fundamental way in which we have recently covered our current account deficit is via a huge inflow of money for buying up property in the UK and particularly in the City. Wealth investors have acquired about £100 billion-worth of property in London, using blind overseas companies in just the last six years. Since 2008, something like 28,000 individual purchases of homes, buildings and lands in the capital have been made by corporate structures registered in external tax havens. One in 10 properties in Westminster is owned by an offshore firm. We are funding our current trade deficit by allowing a vast influx of cash from offshore companies coming in to buy property here, yet in many cases we do not know the ownership or where the money has come from. The Chancellor has now developed into an art form the attempt to find ways to get money in to cover the current account deficit, and it is partly connected with his new cunning plan for China.
I might start by ensuring that we actually know who the beneficial owner is when anybody buys property in the UK. That might resolve part of the problem—we could find that some of the money coming in previously no longer continues because people do not want to reveal its source.
The Chancellor’s latest wheeze is to open the door to Chinese cash. China has no track record of building nuclear power plants, yet the Chancellor has offered massive subsidies over the next 20 years in the hope of encouraging Chinese state companies to invest in our nuclear power industry. So much for encouraging British manufacturing! I believe that the Chancellor’s cunning plan has little to do with energy security, and everything to do with getting China to cover Britain’s disastrous current account deficit. With Chinese money coming in, foreign currency will stay here and cover the deficit. Unfortunately, China is already eating into its capital reserves in a desperate bid to shore up its own currency and stop its rocky banks from imploding. What I think we are likely to see in the next five or six years is running out of the foreign currency to fill the trade gap, which will have big implications for interest rates and our trade surplus.
What we really need is an industrial policy, which my hon. Friends have mentioned, to revive domestic manufacturing. Instead, the Chancellor has slashed the budget for the Department for Business, Innovation and Skills by 17% in the autumn statement. I chide the Minister on the fact that the budget for UK Trade & Investment is being cut over the next four years by £42 million. Yes, it is going up marginally this year, and if the Minister is selective in choosing which years to look to for the budget, she can pretend that there has been an increase. Over the four-year period, however, UKTI funding announced by the Chancellor in the autumn statement will go down by £42 million.
How can this Government pretend to support exports and promise to double them when they are cutting the budget of the very agency we rely on to liaise with our companies to assist our exports? The Chancellor promised to double exports, and he has form in making similar promises about eliminating the annual deficit—but he did not keep them. This Chancellor has no clothes; if he had, he would have had to import them.
Order. We have plenty of time, so I shall not apply a time limit, but 13 more Members are seeking to catch my eye. That works out at about 10 to 12 minutes per speaker. I would be grateful if Members could keep within those informal limits.
I am happy to announce, Madam Deputy Speaker, that I shall not speak for 24 minutes, unlike the hon. Member for East Lothian (George Kerevan). I am, however, very pleased to follow the hon. Gentleman, who made a very interesting speech. You will be glad to know, Madam Deputy Speaker, that I did not agree with everything he said. I thought that some aspects of his speech were wrong. Although his points were made in the right spirit, some of his conclusions were wrong.
Let me begin by registering my own interest in the debate. My constituency is a hub of local business and private enterprise. Indeed, Staines was the No. 1 area for business start-ups last year, and we wish to continue that tradition and record of achievement.
During this interesting and important debate, a number of Members have spoken about the need for an industrial policy or strategy, without, in my view, spelling out the details of what such a strategy would be. Yes, it is true that we could be doing better with exports, and it is certainly true that we could be increasing, or trying to increase, our productivity; but the general remarks that Members have made have not been fleshed out with concrete proposals. I make one exception: my hon. Friend the Member for The Cotswolds (Geoffrey Clifton-Brown) did come up with some concrete suggestions and interesting points about the Government’s role in UK Trade & Investment, and about the function of UKTI.
What I want to focus on, however, is the general economic context. The hon. Member for East Lothian said that, across the eurozone, the current account figures had improved. He suggested that that was largely a consequence of increased exports, but those of us who followed what went on in the eurozone will know that those countries had drastic fiscal consolidations, in the course of which they killed off domestic demand. They tipped their economies into recession, and, as everyone knows, if an economy is in recession, imports will fall considerably.
Does my hon. Friend, like me, welcome the fact that 2 million extra jobs have been created in this country, whereas—as we heard from the hon. Member for East Lothian (George Kerevan)—there are record levels of youth unemployment elsewhere in the European Union?
I take that intervention in the spirit in which it was made. My hon. Friend makes a very good point.
It is not right or fair to argue that our friends in the eurozone have succeeded where we have failed. Their success, in terms of the current account figures, is actually a measure of failure. It is a measure of the fact that their domestic demand was completely crushed by very tight fiscal consolidation measures. Notwithstanding the political rhetoric, we have avoided much of the very severe fiscal consolidation that those countries have experienced.
That is an excellent point. It is clear that if domestic demand in those countries has been sharply contracting, their capacity and ability to buy our exports has diminished commensurably, and that has unquestionably made life much more difficult for our exporters. I believe, however, that when it comes to British exports and our trade missions, the most fundamental thing that any exporter or manufacturing concern will seek is a degree of economic stability in the home market, along with a degree of visibility and a degree of responsibility on the part of the Government to ensure that there is some economic stability, and that our problems are being dealt with in respect of such matters as fiscal consolidation and deficits.
Those who speak to businesses, as I do in my constituency and as I am sure many other Members do in theirs, will hear from them that, broadly, the Government’s policy, although not perfect, has been conducive to a degree of economic stability. Policies such as those on apprenticeships and the significant reduction in corporation tax have made life easier, or more attractive, for exporters and business-people in general. When we tackle a debate of this nature, it is very difficult to divorce the issues of trade, the current account and innovation from the general economic strategy the Government are pursuing. It is clear that although many challenges lie ahead a large section of people feel comfortable that the Government are taking the right approach to the economic management of this country. That is an important point to make at the beginning.
As I have noticed in this debate, we talk about abstract concepts such as exports and trade deficits as though we were living in the 1960s or earlier. This language evolved in a period when Britain was the industrial motor of the world—the factory of the world—and it was very much a Victorian model of the economy, which arguably persisted until 1939. But in the economy of 2016 it is very difficult to disaggregate exports in goods from exports in services and from hybrid exported products that are manufactured but have a degree of service element to them. The hon. Member for Hartlepool (Mr Wright) referred to the trade deficits of the 1960s which he had learned from his reading brought Governments down. Every day in the 1960s people looked at the trade figures; that was the big number. The model of the economy today, however, is completely different from that of 1967 or 1970, yet many of our debates are couched in the language, and reflect the concerns, of a bygone era. It has been almost 50 years since the 1967 devaluation and it is crazy for us to conduct this debate as if nothing has happened in the last 50 years.
We should consider the British economy—how wealth is created and distributed, the role of exports, the role of manufacturing. It is true that manufacturing has diminished, for instance, but I would argue that that is in large part a function of the evolving nature of the British economy. The economic history of Britain shows we have gone through lots of different phases. The phase of industry in which we manufactured huge amounts has gone, sadly.
The hon. Member for Sefton Central (Bill Esterson) mentioned the steel industry and said how terrible it was that the Government had not subsidised and protected it. Wolfgang Eder is head of Worldsteel. Current capacity in Europe is about 200 million tonnes, and he says that for it to be sustainable it should be halved. There is overcapacity among European steelmakers. The idea that we can somehow subsidise things endlessly on an unproductive basis is simply wrong.
Nobody is asking for subsidies. The UK steel industry is asking for a level playing field. We are seeing the massive dumping of heavily subsidised Chinese steel—70% of Chinese steelmakers are state owned—dragging down the price of steel and crippling the British steel industry. This is not about subsidies but about smart regulation, proactive Government intervention and taking action and answering questions afterwards. I am seeking reassurances that the Government will not support China’s application for market economy status, because that would completely undermine any anti-dumping efforts. This is about proactive regulation and intervention, not subsidies.
I accept the hon. Gentleman’s intervention, and he makes a good point about China’s export practices, but I was making the general point that the steel industry believes there is overcapacity in Europe. This is not a British but a European problem. No Government action in the world will push water uphill or militate against that broad trend.
I digress from my main point. This has been a helpful and interesting debate, but my main concern is that we are not taking into account the different nature of the British economy. In terms of the phraseology, the context of the debate, and the words in the motion, we are reflecting circumstances that have not existed for two generations.
There is always a case for Government supporting industry by setting the table, by setting the context—making sure the economic management is good and the regulation tolerable. I am reminded of the phrase of Adam Smith—I mention him not simply because he was Scottish but because he made some good points—about easy taxes and a tolerable administration of justice. These are the things Governments can affect. It is difficult, however, for Governments directly to subsidise individual industries exposed to the vagaries of international markets and massive price fluctuations.
This has been a valuable debate with some very good speeches, but I suggest we think more about how the British economy has evolved, instead of using terms that date from the 1960s and before, when the structure of British industry was very different.
I am delighted to follow the hon. Member for Spelthorne (Kwasi Kwarteng), particularly because he said this debate was about a bygone age. In talking about innovation, I intend to bring things a wee bit further up to date by talking about the situation not only today, tomorrow or in four years’ time, but in 10 or 20 years’ time. In doing so, I hope that a ray of light will fall upon the Government Benches and that the scales will fall and tip in favour of innovation.
The Government have underplayed innovation. It is about imagination, vision and determination—words often applied to leaders and leadership. We all agree that innovation is a good thing. I have heard many times people describe the digital economy as one of the key tenets of innovation. Members have talked about the opportunities throughout the nations of the UK for small and medium-sized enterprises to help us grow and develop the economy and about the contribution they already make across rural and urban areas. New technology is available to assist businesses here and now, including the opportunities offered by superfast computing. That involves wiring together many high-speed computers to perform in just minutes actions that would normally take days or even weeks, and companies can get hold of that technology. An example of its use would be rendering an animation for industry. That kind of technology is available now but its availability is limited because companies need to be able to connect to it.
The new levels of hand-held technology available to business and industry today can transform not only business and the economy but public services, allowing us to invest more in providing better services for people. When I was a boy, I used to watch a television programme on the BBC called “Tomorrow’s World”. It was about the things that were going to happen tomorrow, but things are moving faster now. The developments that we are talking about are already here. An example is driverless car technology, which could transform the way in which we use our roads. It could transform aspects of industry and of rural connectivity. Suddenly we have an opportunity to connect people in a different way, but that innovation is not being discussed enough by this Government or by Members of this House in general. These things are available to us here and now.
Let us imagine one side benefit of looking at these issues properly. There is an opportunity for driverless technology to be used across the nations of the UK. An individual road traffic fatality costs £1 million or more— leaving aside the tragic loss of human life—but we could avoid that kind of thing by deploying new technology. We might then start to see the benefits of embracing such technology.
Members might also have heard about the internet of things. It is a real thing. We are now connecting appliances, apparatus and machinery over great distances to enable them to operate automatically. Also, 3D printers are now able to do mind-boggling things that would not have been considered possible just a few years ago. We have the opportunity to revolutionise our cities through the proper embracing of smart city technology. We have a golden opportunity vastly to reduce emissions to help our position on carbon use.
New technologies can spur growth and create great benefits for the economy. They can revolutionise and democratise things for us, including teaching and learning, allowing greater access to the subjects that are currently available only to the few. They can grow high-quality jobs and provide opportunities for people who are still locked out. These include opportunities for our young people, for young girls and for women to get into industries that they have traditionally been unable to get into—such as science, engineering, technology and IT. As my hon. Friend the Member for Dundee East (Stewart Hosie) said earlier, these new technologies can provide opportunities for inclusive growth. In 2013, the digital economy was worth £11 billion in Scotland alone. That is a substantial business.
Entrepreneurs are already leveraging digital technologies to create successful businesses and significant economic impacts, but that number could be increased. This is especially true given that small businesses grow two or three times faster and create new jobs when they embrace new digital technologies. The hon. Member for Bedford (Richard Fuller), who is not in his place just now, talked about encouraging growth in small businesses. We can encourage such growth in rural areas and places that are difficult to get to by helping them to embrace digital technologies. With the aid of technology, small businesses can also go global from day one, reaching overseas markets and talented potential employees.
Those opportunities are there to be embraced, but let us consider some of the barriers that are being created by the UK Government. We heard again from my hon. Friend the Member for Dundee East about the head of the small business operation at KPMG saying that we are talking no longer about grants for innovation, but about loans. That is a barrier to success, although I will not repeat the many arguments that have been well made in this House on that already.
Barriers also arise from the technology that is available to people across the nations of the UK at the moment. I welcome a commitment to universal broadband, as that is a good thing and it should be embraced fully. What is being proposed by the UK Government at the moment, however, is at best—I am being very kind here—a bare minimum for the future. A speed of 10 megabits per second is technology from a bygone age now and it is not good enough for communities in the future, as we see particularly when we look in detail at the plans. A lot of the bridging is going to be done by satellite technology, which is good where there is nothing else, but it is affected by the weather; it has a high latency potential, it suffers from poor uploads; and, in general, people can get up to—that is the key term—only 6 megabits per second with it. That is what is being proposed for rural areas. The costs of satellite broadband also present a considerable barrier, as people are looking at £30 to £100 a month for these contracts in order to take advantage of it.
The hon. Gentleman is discussing businesses in rural areas. Does he agree that many small and medium-sized enterprises throughout the UK that have relocated from town and city centres to rural areas on a cost basis now find themselves disadvantaged, precisely on the broadband access grounds he talks about? That needs to be addressed by the Government.
I am very grateful for the hon. Gentleman’s intervention, as he hits on a key point. There is a vibrant, intelligent, work-ready employee base in rural areas, and people there are ready to take advantage of opportunities presented by employers. He rightly describes, however, what people may suddenly find when they move to a rural area, and I have some personal experience of this. When I was working in Windsor, lots of things were available to me by way of technology, but when I then moved to the highlands, I suddenly thought, “Ah, I might have made a mistake here.” I am glad to say that I did not make a mistake and we worked through it, although at some expense. Broadband access is a real barrier to people being able to set up businesses in rural areas. If the UK Government want to take a view for the future, they have to consider people across all parts of the regions of the nations of the UK and make sure that people in rural areas have the same opportunities to engage in business as those in urban areas.
Does my hon. Friend agree that we need not only a much higher specification for the universal broadband commitment, but provision of a better service level by broadband suppliers so that a customer gets what they know they are signing up to and so that once they have signed up they continue to get it? Customers sometimes suffer a drop-off when other people connect without even being aware of it or how they go about dealing with it. Robust service level agreement provisions must be put in place, too.
I thank my hon. Friend for that intervention, and I completely agree that the service level is important. I am pleased that the UK Government seem to have accepted that, and I believe they will be making sure that contracts are able to be changed or cancelled if the service does not live up to what was promised. I am also pleased that they have accepted my suggestion that that should also apply to mobile phone contracts, and let me give due notice now to the Minister that I will be chasing up on that shortly. I am grateful that they have accepted my point that mobile phone contracts should as quickly as possible come under the same terms.
I wish briefly to discuss mobile signals, because one opportunity for all the nations of the UK is for universal coverage to be undertaken properly in terms of forthcoming technology, specifically 5G. The 5G spectrum is due to be launched in around 2020. Now this is very important. We will hear Ministers and others say, “Oh, but it’s coming in the future. We can’t deal with it now because it is not yet real.” The same was said about the 4G spectrum when it was launched, and the same was also said about the 3G and 2G spectrums when they were launched, and yet the failures continue. It has been a failure for business and for people on 4G, 3G and 2G across the piece. There are still parts of the UK that do not have any mobile signal at all. Mobile telephone companies could have been challenged on that during the licensing regime. The UK Treasury has made billions of pounds out of these licences. It is not beyond the wit of the Government to look at those things and ensure that, in future, when the contracts come up and when they are applying the licences, they insist that there is full coverage not only for urban areas, but for rural areas as well. Not dealing with those issues leads to an enduring digital divide.
There is also a bigger threat to these isles from cyber-security failures than there is from nuclear threat, and yet we are not encouraging enough people, particularly young people, to get into the industry to ensure that we are in a position to put our defences in place. The living wage, which has been mentioned in this Chamber a few times today, actively disadvantages young people. It is an absolute scandal that we treat our young people with such contempt and that we do not encourage them to be part of the overall journey to economic success. Such encouragement should be given to all our people regardless of where they live in this country. They should feel involved and part of the culture. We need to stimulate, guide and help them to get involved in new technology and in other industries such as engineering and science. We need to ensure that they are involved in life sciences so that they can get jobs that will be more worth while to them and their families in the future. We need that competitive edge and to be able to innovate into the future. Such encouragement is particularly pertinent for young girls and women who, in the 21st century, still do not have the same opportunity to get into those industries. We need to work hard across the piece to innovate and to ensure that we challenge that behaviour.
In Scotland, the curriculum for excellence is encouraging young people from primary school through to secondary school to look at outcomes of education in the round. I am pleased to be part of the Highland Science Skills Academy, which is directly challenging the norm. It is working with private companies, Government agencies such as Highlands and Islands Enterprise, The Highland Council, the NHS and other bodies to encourage young people, particularly girls and young women, to understand and to be able to interact with these skills. It is that kind of innovation that we must put in place to ensure that we are embracing the digital economy and allowing people to take part in it.
I will finish on this point. People are embracing the digital economy, and they are using the technology now. They are grasping the opportunities in their business and they must have support. The world is moving ahead. There is a choice: we can follow or we can lead. I always remember the words, “Where are all those people going because I need to lead them?” I do not know where I heard them, but they remind me of the UK Government.
It is an honour to participate in this debate and to follow the great speeches of my hon. Friends the Member for Spelthorne (Kwasi Kwarteng) and for Bedford (Richard Fuller), who is a great friend. It is also an honour to follow the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry), who gave a thoughtful speech on innovation, and that is a fact. I had better inform the House that two very important exports from Macclesfield are helping his local economy. Two players from Macclesfield Town football club are now playing for Inverness Caledonian Thistle and helping them in the Scottish premier league—good luck to them.
This has been a very thoughtful and at times serious debate, with passionate speeches by Members on both sides of the House. I congratulate the hon. Member for Dundee East (Stewart Hosie), with whom I served briefly on the Treasury Committee. He is a very thoughtful Member and is right to raise the subject. We have benefited from the debate. I also welcome the contribution of my right hon. Friend the Minister for Small Business, Industry and Enterprise, who brought to the debate her characteristic robustness and energy, which are absolutely needed for the work required.
Our long-term economic plan for Britain is right and fair. It provides opportunities for this country’s businesses and individuals for the years ahead. Ministers are not only ensuring that we continue to get our public finances in order, but protecting frontline services through the way in which funding is allocated. We are, of course, taking no chances with our national security or, for that matter, our national economic security. We have a clear plan not only to make sure that Britain once again lives within its means, but to deliver an economy that generates more means within which to live. Those two sides of the same coin are very important.
In the summer Budget debate, I noted the importance of rebalancing our books after Labour’s spendthrift years; of rebalancing incentives in favour of work; and of rebalancing economic geography towards a northern powerhouse. It is interesting that the Conservative Government in London are as committed to decentralising power away from Downing Street as the Scottish National party is to centralising power to Bute House, whether it relates to the police, fire services or further education.
Does the hon. Gentleman agree that the Scottish Government have done a fantastic thing this week by supplying £500,000 to encourage local communities to partake in participatory budgeting, thereby allowing them to make their own decisions? That is a real example of decentralisation. Similarly, the first thing the SNP Government did was remove ring-fencing for councils, to allow them to make their own decisions.
SNP Members may justify their position, but what we are committed to doing for this country is to decentralise. It is vital that we do that, because it will give further power to local communities to come up with their own solutions on a broader scale. I think that there are lessons for Scotland to learn from that—that is my opinion.
It is fundamental that we do that, because it will encourage economic growth and ensure higher rates of productivity and exporting, and, indeed, success in innovation, which the hon. Member for Inverness, Nairn, Badenoch and Strathspey was so keen to stress. If we do that, it will help us move on from those reckless years of boom and bust delivered by the Labour party.
To unlock that local dynamism, we are advancing important initiatives, including local economic partnerships, city regions and—this has been vital in the Macclesfield area—strategic deals between city and county, such as that involving Alderley Park, to turn the tide in favour of civic renewal and increase the rates of growth and economic activity across the country.
That will build on what we have already done to achieve record levels of employment in this country, to reform welfare and make sure that work pays, and to incentivise tens of thousands of households to transform their lives. That is what we want to do—we want to help people to transform their lives and get on their own two feet.
The Government are committed to getting the balance right and to getting the job done. That is why we have set challenging targets on exports and raising productivity. We are doing all we can to promote entrepreneurialism and to lower the barriers that for too long have stood in the way of people who want to set up their own businesses and move on with their lives.
As I have said several times in this Chamber, I believe that economic success and growth rest on the four Es: entrepreneurs, employers, exporters and, of course, employees. They all need to be given the opportunity to succeed in the important work they do. In order to have the enterprising economy that we need, we have to help in particular those who are seeking to fulfil those activities and roles for the first time. We are making progress in that area. For example, the new enterprise allowance has enabled thousands of people who were previously unemployed to get on to the rewarding path of self-employment and enterprise. I am especially pleased that the Department has taken forward an initiative with Julie Deane, the founder of the Cambridge Satchel Company, to review how we can help the self-employed. The move to self-employment is an undeniable trend in our labour market and Conservative Members are committed to helping the self-employed.
My hon. Friend—my great friend—the Member for Bedford highlighted key community initiatives such as the business school in Bedford. We were lucky enough to be at business school together, where we learned much. Great lessons can be learned in the community and, through our Make it Macclesfield organisation, we are privileged to have Enterprising Macclesfield, a community-led initiative that involves local businesses working together to help more businesses to succeed and flourish, and to get the advice that they need to move forward. If we are to crack down on the blockages that have led to social immobility in this country for too long, we need to help people to establish themselves in first-time employment, or to become first-time employers or, importantly, first-time exporters.
The hon. Member for Hartlepool (Mr Wright), the Chair of the BIS Committee, who is no longer in the Chamber, highlighted the deep cultural change that is required to get more businesses exporting. We are committed to addressing this deep-seated situation, which is why we have set such high targets. It is not always easy to get someone to do something for the first time, and those of us who have been involved in marketing know—I have first-hand experience—that that can be one of the hardest tasks. As we have heard, only one in five businesses exports anything, but the figure for Germany is one in four. We are behind countries such as Belgium and the Netherlands, so it is not just that we are being held back by Brussels bureaucracy, although that is the case too often. There are wider, deep-seated issues that we have to address. We therefore need to ensure that we get behind businesses and help them to learn how to crack new markets. We need to demystify the exports process, and that is a role not just for the Government, but for business.
There is no question but that we are playing our part by setting ambitious targets and taking the challenge of exports seriously. I welcome Lord Maude’s appointment to his key ministerial role because he has a great track record of taking forward a change agenda and getting the job done, which is exactly what we need for exports. The Treasury and BIS have taken great steps to de-risk the exports process. Last year, through UKTI’s exports work, more than 48,000 business were supported. The new first-time exporters initiative, which offers training and advice to businesses that really need it, will be vital in moving that work forward.
Export finance for smaller businesses has been improved and it is critical that we make it easier for businesses to pitch for high-value opportunities. UKTI should be providing not only information, but opportunities that businesses can hook into to ensure that UK plc has more success in export markets. I am pleased to note that UKTI has a new chief executive, Dr Catherine Raines, who is a neighbour of mine—I said that Macclesfield exports many good things. The focus on exports is improving significantly, and the “Exporting is GREAT” website identifies the good work that is done each day and provides the signposts that businesses need to succeed.
There is more that we need to do, however. People ask what we should do to help on exports, but the Prime Minister and the Chancellor are leading the way, not least through their trade missions to China. I am sure that my hon. Friend the Member for Gloucester (Richard Graham), the chair of the all-party group on China, welcomes—he will probably mention this in his speech—the phenomenal things that we are doing to make contacts, to help to add value and to win market share in countries that are sometimes difficult to get into. From a local perspective, I am very pleased to see the Chinese invest in Airport City Manchester. They have experience in that. When I went to China a couple of years ago, I found out that they had built 45 airports in the previous five years. They know what they are talking about and we can link in with not only their funding, but their experience.
It may be useful for hon. Members, including those from the SNP, to be aware that many of those new airports in China were designed by a great British company, Arup, led by the head of its airport and aviation sector, who is a Scotsman based in Edinburgh.
I am pleased to hear it—good things come from Scotland, as well as from Macclesfield. When I was in China I met representatives from Arup, which is doing phenomenal work. Again, we are in a global economy and the interactions that we have with the Chinese are vital.
Trade shows cannot be just about having a shop-window. They are an opportunity to initiate contacts, enabling businesses to find a way to seal the deal. UKTI’s role has to be even more proactive in this arena and help roll out the red carpet for businesses that are taking those risky decisions to move into new markets. We cannot focus solely on traditional export markets such as north America and Europe, which has been all too comfortable for businesses in the UK since the second world war. I was massively disappointed a couple of years ago when I held a UKTI conference, which was incredibly well supported in north-east Cheshire. UKTI did a tremendous job, but I said, “Let’s bring along representatives from China and from India to support this.” UKTI would not do that. I asked why not, and it said, “Because the businesses are so focused on the US and Germany.”
We have to shake things up. Government have a role to play and business has a role to play as well so that we have the right focus on emerging markets, as well as on traditional markets. We need a bit more of the buccaneering spirit that the Minister for Small Business, Industry and Enterprise has demonstrated in the Chamber today and throughout her ministerial career.
Like a falling tree, we might ask, “If help for businesses is available and only a few businesses hear about it, is it effective enough?” Communications do matter, not just Government-to-business communication, but business-to-business communication. We need a better way of communicating to businesses if we are to step up a gear and become better at exporting goods, just as we have shown the world that we can lead the way in exporting financial services. In services we have the leading role. That should point the way forward for the opportunity to export goods. Let us make sure that Ministers in BIS and across Government make an extra effort to get those banks that have been successful at exporting their services to help their customers in the UK become better exporters of goods. There is a leading role for those banks to play.
When we say that we need to do more, it is not just about what the Government do; it should include businesses as well. I know the Government have been doing a huge amount of work to encourage exports. We are leading the horses to water. I see prime-time TV ads promoting the benefits of exports. Those horses now need to drink and businesses need to take a lead in exporting.
We are a great trading nation, but we need to do more to reach our current export potential. By focusing on the needs of first-time exporters and spreading the lessons of our trading history across more businesses for a vibrant and noteworthy trading future, we can spread opportunity across the country and revitalise the old British trading spirit—can-do policies for a can-do generation in a can-do United Kingdom.
It is a huge pleasure to speak in a debate that is of such great importance to SNP Members and to our SNP Government. I am sorry that the numbers on the Labour Benches are so deficient, but I pay tribute to those who have been present since the beginning, those good souls who have stuck with us.
It is always difficult at this stage of a debate to produce new ideas. I shall focus on productivity, innovation and investment in the context of inclusiveness and equality, which have not been mentioned much from the Government Benches. My hon. Friend the Member for Dundee East (Stewart Hosie) spoke passionately of the work that the SNP Government have done in this arena and of the importance of productivity and inclusive growth in closing the trade deficit, and I would like to expand on that. I will also highlight the importance of equality, diversity and inclusiveness in any nation’s drive to be productive and innovative and to encourage investment.
Nobel laureate Professor Joseph Stiglitz, who is part of Scotland’s fiscal commission working group under its chairman, Crawford Beveridge, has said that
“countries which are more unequal do not…grow as well and are less stable…A concentration of income restricts economic growth by limiting the potential of people to contribute productively. At the same time inequality may restrict government investment in infrastructure, education, and technology.”
He points out that since 1975 the income gap has grown faster in the UK than in any other developed country, stating:
“Such patterns of inequality will continue to have a negative impact on growth and prosperity over the long-term.”
If we want to make the UK and its nations an attractive place to invest in and to export from, we must have a stable and equal society. Yet all too often the policies pursued by this Government point in the opposite direction. In contrast, the Scottish Government, with much more limited powers, are developing a more egalitarian economic model. Professor Stiglitz has praised this model, saying:
“Tackling inequality is the foremost challenge that many governments face. Scotland’s Economic Strategy leads the way in identifying the challenges and provides a strong vision for change.”
Meantime, the Conservative Government are pursuing policies that attack our fundamental freedoms and civil liberties and risk widening the gap between rich and poor and the gender pay gap while, worst of all, marginalising the most in need. Those policies come in the form of the repeal of the Human Rights Act 1998, the anti-worker Trade Union Bill, and welfare cuts that take us back to a Dickensian era. Ultimately, the Government are balancing their books on the backs of the poor. If they are serious about boosting productivity, innovation and investment, they should not pursue policies that damage the very fabric of the society they seek to build and develop.
While we welcome the creation of any jobs, productivity is not just about paid employment—it is also about how people can contribute to society and what those from all sections of society can contribute, whatever their ability, race or gender.
Investment in what has become known as our human capital and the engagement and happiness of our people should all be part of a rounded strategy. We must ensure that across the nations of the UK we can positively engage with our people, whatever their race, gender, sexuality or ability, in ensuring that they get the opportunity of good-quality, long-term sustainable employment and, with that, boost our productivity levels. We must operate in a society where inclusiveness and diversity are central.
I recently met members of the Scottish Centre for Voluntary Organisations who spoke of the work they are doing on how we look at employability and productivity. The SCVO has undertaken extensive work on taking a rounder view of the contribution that people can make to Scotland’s economy. It is exploring the notion that being productive is not just about being in full-time, well-paid employment but about what kind of contribution people across the social spectrum can make as volunteers, activists or carers, to name but a few examples.
I do not think we would find any disagreement across the House, or indeed in society, about the fact that not everyone can always be in full-time paid employment. Many women, in particular, will take a break from their careers to have children; men may take a break to share parental care; and many men, although generally more women, may have to take time out later in their careers to care for elderly parents or relatives. These breaks may result in a change of career direction, the setting up of one’s own business, or long-term care of a child or elderly parent. Whatever the case, these roles all play an important, and indeed productive, part in an inclusive society.
I reference the experience in my own family. When my sister-in-law returned to work after having her first child, she could not get the flexibility in her work that she would have liked. She set up her own photography business and decided to go full time with it. I am sure that we all have across our constituencies such cases of women—and men—starting their own businesses because they could not find the flexibility in the workforce that they would have liked.
For some women, these breaks or diversions in their working life can often have detrimental impacts on pay and progression. We have debated and discussed much in this House the reasons and remedies for the gender pay gap. In the UK, the gender employment gap is currently 10 percentage points, but I am pleased to say that the gender employment gap in Scotland has narrowed from 10.6 to 6.3 percentage points since 2007. That is evidence that a greater sense of equality, inclusiveness and egalitarian values are helping in many areas of Scottish society.
How we innovate—not only in technology, but in our workforce—is of critical importance if we are to drive up productivity. We must work hand in glove with businesses and create the circumstances in which they can flourish, innovate and develop. No Government or policy maker has a monopoly on wisdom or a silver bullet, but listening and engaging must be at the forefront of our minds as we set policy and create legislation.
Many Members have spoken about the oil and gas industry and the challenges that it currently faces. Before I came into politics, my last professional job was in the oil and gas sector in Aberdeen. As I have often done recently, I think today of my friends and former colleagues whose jobs are under threat or those who have already lost their jobs. I urge Members on both sides of the House to put aside politics, where appropriate, and look at constructive ways in which we can help the industry.
I learned a great deal in one of my roles working in an oil and gas company. It was partnered with a Scottish technological company, which was a spin-off from Heriot-Watt University. Its technology provided the intelligence for an autonomous underwater inspection vehicle, while the company I worked for provided the hardware and investment. To give the House a brief flavour of the technology’s potential use, there was a significant gas leak offshore while I was in that role. If that technology had been advanced enough, it could have been used to stop the leak much sooner. It was stopped only when it was finally safe for humans to go in and fix the issue manually.
It is some time since I left that role, but I recall that the Scottish tech company was acquired by an American firm shortly after my departure. Such tales are all too familiar across the UK. I am sure all involved felt that it was a positive move, but I would like to think our historical reputation in Scotland as a great nation of innovators means that our developing tech firms will not see acquisition by American firms as a trademark of success. I am sure we all hope that we can retain and develop as much home talent as possible. After all, in the words of American writer Arthur Herman, Scotland “invented the modern world”. From the television to the telephone, penicillin and even the overdraft, we are a proud nation of innovators. Every day, in labs, workshops, offices and classrooms, the imaginations of our young people, academics and entrepreneurs are innovating and designing products that may be tomorrow’s solution to some of our greatest challenges, so why can we not bridge the gap between ideas, academic excellence, innovation and productivity?
The world rankings for universities were released yesterday. With Scotland hosting three of the world’s leading universities and the UK overall hosting 18 of the world’s top 100 universities, we punch above our weight as a family of nations. Yet at a recent CBI round table discussion I attended, the issue of the day—why productivity was lagging—had many scratching their heads, given how well the UK does in academia. I suggest that financing, access to funds and this Government’s failure to listen on funding for innovation has something to do with the challenges that the UK faces.
We have discussed manufacturing and the need not only to continue to drive it, but to modernise. For the steel industry in particular, the Scottish Government have invested and done all they can to protect jobs in that sector. We hope that the UK Government will continue to push the EU on energy tariffs.
Carolyn Fairbairn, the director general of the CBI, has said that
“the shift from grants to loans for Innovate UK could dampen bold and game changing innovation, particularly amongst smaller businesses.”
In Scotland, we have the example of CodeClan, which is supported by the Scottish Government. It encourages young people or people retraining to come into the area of coding.
In Scotland, output per hour has grown 4% since 2007, compared with zero growth in UK productivity during the same period. The result is that Scottish productivity has caught up significantly with UK levels, rising from 92% of the UK average in 2007 to 98% in 2013. These trends are encouraging, and the Scottish Government are committed to improving them further, with measures such as the living wage, the Scottish business pledge and more encouragement for businesses to focus on improving productivity.
We have many great examples of companies innovating and deploying their expertise in the UK or exporting across the globe, but we must sustain investment to encourage more to do so. Among such companies are Craneware in Edinburgh, which specialises in software for healthcare billing, and Waste Switch Ltd in my constituency, which is engineering and designing innovative waste management systems across the UK. We could all cite a raft of fantastic local and national success stories, but we must work together to ensure that we create the right policies and an environment in which businesses and people can innovate, export and boost productivity.
In her book, “Difference Works”, Caroline Turner argues that
“retention, productivity and profitability can be boosted through inclusion.”
Arianna Huffington, the founder of The Huffington Post, wrote compellingly in her book, “Thrive”, about the third metric and stated that redefining success was about:
“Creating a life of well-being, wisdom and wonder.”
I was particularly struck by her comments about the race to the bottom and the burn-out that are driven by male-dominated cultures, particularly in corporate business, which are about who can be in earliest and leave latest. It reminded me a little of this place.
If we are to succeed across the nations of the UK, we must put inclusive growth at the heart of our drive to innovate, be productive and narrow the widening export gap. Today, more than 100 disabled people will lobby Parliament about their concerns over the Welfare Reform and Work Bill, although I probably will not get there because I have been in the Chamber all day. Those people represent a very important section of society that contains unique perspectives, skills and talents. They may have a range of physical or other disabilities, but they are equal members of our society who can, and no doubt want, to play an active, engaged and productive role.
I feel passionately that whatever a person’s gender, race, sexuality or ability, they represent hope and opportunity in some form. Although some may not fit into this Government’s view of what productive work means or be able to tick a specific box, it does not mean that they cannot play an active and productive role. We must, across all party boundaries, work together to ensure that we have an inclusive society that gives everyone the opportunity to contribute and be productive.
It is a pleasure to follow the hon. Member for Livingston (Hannah Bardell), with her list of Scottish innovations. I had no idea that the overdraft was developed in Scotland, but one learns something new every day. I do not know what that great Scottish innovative thinker, Adam Smith, would have thought of her speech, but it was interesting none the less.
It was interesting to hear the tour d’horizon of the proposer, the hon. Member for Dundee East (Stewart Hosie), setting out what he thought was the root of the problems identified in the motion. In response to my intervention, he said that our problems were 50 years in coming. To go through the problems of the last 50 years might be pushing it in a 10-minute speech or in the much shorter contribution that I intend to make, Madam Deputy Speaker, but it is worth touching on some of those issues.
Over the past 50 years, we have seen the decline of empire, on which my hon. Friend the Member for Spelthorne (Kwasi Kwarteng) is an expert. We have seen our entry into the European Union and the rise of China, India, South Korea and eastern Europe, to name but a few. Of course, those huge macro changes have had an enormous impact on our manufacturing base, the shape of our economy and the pattern of our imports and exports. At the same time, there has been a revolution in the service sector across the world and in technology—two things in which this country is at the absolute forefront.
In proposing the motion, the hon. Member for Dundee East said he would not deny the numbers, and I know he would not. He dwelt, understandably on the circumstances, on the manufacturing figures for the last quarter. They are not a happy set of figures, and no Conservative Member would suggest they were. Equally undeniable is the fact that over the last year our economy grew by nearly 3%, making us the fastest growing economy in the G7. This year, the OECD forecasts that our growth will equal that of America at 2.5%—again, the fastest rate of growth in the G7.
To build on that success and to grow exports and innovation, we need thriving small companies and, of course, investment. That is why I have no doubt that Members on both sides of the House will be delighted by the record of smaller business creation under this Government, particularly the 300,000 that were created in 2014 alone. I am sure that those on both sides of the House would also be delighted to recognise that, with the general election safely out of the way last summer and a new Government established, investment by business grew 7% in the third quarter of 2015, compared with the same quarter in the year before.
Equally, as a result of that general election we have one of the lowest rates of corporation tax in the OECD at 20%. That is down from 28% under the Labour Government, and it is falling still further. In response to the hon. Member for Hartlepool (Mr Wright), I recognise that that is only part of a package, but it is important in bringing foreign direct investment to our country, and the Government should be congratulated on that. Another part of that package is the benefit of being—according to the World Bank—the sixth best place to do business in the world.
The motion addresses the rebalancing of the economy, and no one would underestimate the importance of manufacturing, or our disappointment with the recent figures to which the hon. Member for Dundee East referred. However, we can go to business districts in London, Manchester and Glasgow, and in just those areas we will find more tech start-ups than in the whole of some of our EU partner countries. The UK is rated second in the world for global innovation for a reason.
I commend and congratulate the Secretary of State on his paper, “Fixing the foundations”, which back in July tackled head on many of the issues raised in this debate. We have heard today that the paper was too short, but I do not think that British businesses want “War and Peace”; they want simple, workmanlike solutions, and that is what they are getting from the Government. I welcome the £7 billion of committed investment over the next five years in research infrastructure, the protected science budget, and the £14 billion benefit from R and D credits that is being provided to 14,000 companies. As the hon. Member for Dundee East was gracious enough to acknowledge, the £1.5 billion global challenge fund will also bring benefits. Those measures, combined with a Government who have a clear sense of economic purpose, imbed confidence.
One example of that confidence is found in my Horsham constituency, and I am delighted to announce the deal made last week between Novartis and the county council, and the creation of a new science park in the heart of our town.
On exports, the Government’s focus on the emerging markets is reaping dividends. Companies in my constituency say that a new generation of ambassadors is pushing our export drive. They have had that direct experience, and they are grateful for it.
The hon. Member for Hartlepool and my hon. Friend the Member for The Cotswolds (Geoffrey Clifton-Brown) referred to UKTI and said that we are not yet all the way there. I think that is recognised across the House, and I look forward to the report on UKTI that the Business, Innovation and Skills Committee will produce. I know that Ministers on the Treasury Bench, and Lord Maude, are at the forefront of ensuring that UKTI is working its hardest for our exporters. The level of that support is witnessed in what the Prime Minister and Chancellor have been doing on their visits abroad, and in the visits of the Prime Minister of India and the Chinese Premier. Above all, it is witnessed in the 68% increase in exports to China from this country since 2010.
On exports, I counsel some caution, as I did earlier in the debate, because—as the hon. Member for East Antrim (Sammy Wilson) eloquently put it—we have real problems in exporting at a point when our economy is booming in relative terms, and when an extra 2 million people are in work and spending money, yet our main trading partners on the other side of the channel have been in recession. That will inevitably cause problems for our export record.
The hon. Member for Sefton Central (Bill Esterson) referred to our productivity, and it will not have escaped his attention, or that of other Opposition Members, that what the Government have done to tame the excesses of the City, and the sad consequences of what has been going on in the North sea and with oil prices recently—the hon. Member for Aberdeen South (Callum McCaig) spoke eloquently about that—has of course impacted on two of our highest value sectors, and that in turn has impacted on our productivity statistics. Given those two existential impacts, I hope that the whole House will congratulate the Government on the conditions that they continue to create to allow UK plc in general, and particularly its many new small businesses, to be productive, to export, and to flourish.
In any debate of this nature, there is always a tendency of Opposition Members to emphasise the negatives. In her headbutt-the-Opposition-and-kick-them-when-they’re-down speech—I do not mean that as an insult; I am congratulating her, and I quite enjoyed it—the Minister emphasised that we should not talk the economy down. That is true. She highlighted, as many other hon. Members have, the very positive things that have happened: high growth, the creation of a lot of jobs and inflation under control. We should not knock the economy, but equally, I have to say, we should not be complacent about its performance. Some of the headline figures have been good, showing that the Government have achieved some success in their plan for the economy. Nevertheless, there are very worrying underlying trends, and the Opposition and the hon. Member for Dundee East (Stewart Hosie) are right to identify them.
First, we have a problem with our balance of payments. The hon. Member for Bedford (Richard Fuller) asked whether we should worry. Well, of course we should worry. If more money is being taken out of the economy as the result of a balance of payments deficit, that will be deflationary. As was pointed out, the difference has to be paid. The sale of assets or borrowing money from abroad has long-term consequences. If we are not exporting as much as we should, one measure that has been shown to improve the productivity performance of firms is exposure to foreign markets. Productivity and exports are therefore linked and we need to be concerned about them.
The fact that we have a huge deficit with the rest of the European Union answers those who say that, if we decided to leave, the EU would close the door on us. It could not afford to close the door on such a lucrative market as the United Kingdom. That is an important point to bear in mind in the wider debate about EU renegotiation.
Our export performance has been poor. Our productivity performance has been poor. Indeed, it has been described as abysmal. We have been meeting only a tenth of the long-term 2% trend in recent years. That in turn affects our competitiveness and the Government’s ability to bring in tax revenues, so productivity has an important role to play. The fact that we are one from the bottom of the seven major industrial nations in the world should cause us concern.
Another underlying trend we should worry about is the decline in our manufacturing. It is not enough to say the economy evolves and we are moving towards service industries, or that there is less of a distinction between service and manufacturing industries. Manufacturing is important. The Government, in their plan, accept that manufacturing is important. Yet we find that manufacturing output has actually fallen. Measured against the Government’s own criteria, this is another factor we cannot be complacent about.
Finally, as has been well documented in today’s debate, there is a dependence on consumer demand for growth. Even the Chancellor seems to have either ignored this or tried to play it down. Why we should be concerned about Government debt, which is 80% of GDP, yet have no concern about consumer debt, which is 145% of gross disposable income, is beyond me. If public sector debt is not a good basis for growth then private sector debt is not a good basis for growth either, unless of course we can say it is going into the kinds of areas that are productive and yield a high return. We cannot afford to be complacent, and it is wrong of Conservative Members to attack those who raise the issue today by saying they are somehow or other being disloyal or hurting the economy. We have to try to get these things in perspective, and although there have been successes, which I hope I have at least acknowledged, there is no cause for complacency.
Let me look at the issues that need to be addressed, the first of which is productivity. The Government’s seven-point plan in “Fixing the foundations” highlights a whole raft of issues. There will be an important role for the private sector in some of them—investment by the private sector and training workers—and the apprenticeship scheme is putting more and more emphasis on the private sector, but many of the measures listed will require public investment. We need to make a distinction when we talk about borrowing and Government spending. If public investment can yield a return, why is borrowing for that purpose a bad thing? Borrowing is not a bad thing for firms or households to do if it provides a return, so why should that kind of borrowing somehow be lumped with all general Government borrowing, so that the Government can say, “Look, we can’t afford to do it”? If it brings a return, it is important. Whether the Minister has admitted it or not, “Fixing the foundations” indicates that substantial public investment will be required to build up the infrastructure needed to increase productivity.
Increasing exports is the second issue. Ministers in the House of Lords have
“pledged to mobilise the whole of government behind exporting, working alongside a more effective UKTI and better export finance.”—[Official Report, House of Lords, 21 July 2015; Vol. 763, WA15.]
I wonder whether the Government have really lived up to that rhetoric. Yes, there are difficulties with Europe, but Europe is not the only market. Indeed, let us look at the growth in world trade. Why do we have such a small proportion of that additional trade? Firms would tell us one of the reasons for that. Eighty per cent. of them do not export anyway, sometimes because of regulation. Some of it cannot be avoided if it is overseas, but some of it could be dealt with by changes here. The Government could make regulations on exporting goods less onerous.
How much do we use our network of embassies across the world when it comes to introductions to markets? There is a role for regional government to play in that. In Northern Ireland, our exports have gone up by 4% in the last year, but that has been the result of hard work by Invest NI, and there are lots of different ways of doing it. We now have the friends of Northern Ireland—expatriates and people who have studied in Northern Ireland and then gone back home—to look at contacts in markets that we want to target. Can we use that network on a more UK-wide basis? Do we make full use of the contacts that our embassies have? I know that trade missions from Northern Ireland have sometimes found embassies to be less than helpful. How can we take those initial steps? Many firms will say that they need to go out to a market two or three times before they start making contacts, which is expensive, especially for small and medium enterprises. What help can be given with that?
The last issue is boosting manufacturing industry. A number of contributions today have highlighted the issue of energy costs. The steel industry is only one example, and in Northern Ireland recently we have lost a lot of jobs from huge employers who cited energy costs as one of the main reasons. There appears to be a schizophrenic attitude, even from the Government. Although they are removing subsidies from the most expensive form of electricity generation, even today at Question Time the Prime Minister, while on the one hand saying it was more expensive to produce green energy, boasted about the amount of green energy in the pipeline that would be introduced in future. If that is the aim, let us be honest: we will find that we make it difficult for some kinds of manufacturers. It is significant that onshoring in the US has occurred as energy prices have come down. That is a lesson for us.
I shall try to abide by your ruling, Madam Deputy Speaker. I have had my 10 minutes. I trust that the Government will take this debate seriously. I accept that there is a role for regional government to play in Northern Ireland. We are reducing corporation tax, for example, and we believe that the devolution of air passenger duty for long-haul routes has been important in extending our ability to attract inward investment and bring inward investors into Northern Ireland by reducing the cost of travel. We have undertaken some other measures, but only the central Government can deal with the national measures that are beyond our control.
It is a pleasure to follow the hon. Member for East Antrim (Sammy Wilson), with his enthusiasm for what can be done to help boost exports and growth in Northern Ireland. In declaring an interest as the Prime Minister’s trade envoy for the Association of Southeast Asian Nations in Indonesia, I welcome this Opposition day debate. It focuses on important issues such as the balance of our economy, our export and productivity challenges and the financing of business research and development. These are important, although sadly not important enough to attract more than five Labour Members, but I should highlight the presence of both the hon. Members for Hartlepool (Mr Wright) and for West Bromwich West (Mr Bailey)—former and current Chairmen of the Select Committee on Business, Innovation and Skills, and now lonely champions of business in a party more committed to strikes and reshuffles than innovation and exports.
The hon. Member for Dundee East (Stewart Hosie) led us off on today’s debate. Although he made some interesting points, his speech was overshadowed by what I can describe only as an overwhelming gloom or an extended rendering of the lament from Private Frazer in Dad’s Army—“We’re all doomed”. I waited, pen poised, to hear some of his proposals to lift us from this gloom. The UK economy, he said, should have more manufacturing. I agree—we all do—as it halved under Labour and is still recovering, but no suggestions came. He highlighted the UK’s relatively weak productivity, but offered no solutions. We await the BIS paper and Select Committee recommendations. He felt that there might be a deterioration of business R and D funding, but he gave no recognition of the importance of the R and D allowances, the capital allowances and, indeed, the explosion of venture capital funding for smaller companies. We know the answer, alas, from the hon. Member for Dundee East—“We’re still all doomed.”
Today, I want to try to offer some shafts of light amidst the encircling gloom. Here I have to disagree slightly with the fellow Eeyore of the hon. Member for Dundee East on the Labour Benches—the hon. Member for Sefton Central (Bill Esterson). He suggested that Britain’s rise to head the G7 growth table within a few years of the great recession was inevitable. I do not believe that any recovery is inevitable, and certainly not one that generates more jobs than the other 27 countries of the European Union put together. Both are driven by a determined partnership between Government and business, with MPs across the House playing our part by hosting jobs fairs, hiring apprentices and helping businesses to export.
Let me say a few words about Gloucester, where I hosted in 2011 the first constituency and county-based China seminar with the China-Britain Business Council. I shall mention some of the manufacturing products that we export from Gloucester to bring some cheer to the SNP Benches about the state of our manufacturing. We export cylinders that are in every Dyson vacuum cleaner across the world. We export giant valves into the oil and gas sector, and we export dental drills predominantly to China and America. Both those companies are almost 100% exporting. We export gantrails for container ports and marine diesel engines for customs and other marine boats. We even make shirts, which are sold both directly from the factories in Gloucester or via Jermyn Street in London. We have a series of manufacturers who are subcontractors in the world of aerospace, especially to Airbus, with the landing gear for every Airbus, several Boeings and every Eurofighter made just outside Gloucester.
It is true that we have not yet sold our “made in Gloucester” cricket bats to China. I am working on that, but what I can confirm is that our “Gloucesterpreneurs” have sold flavoured tea back to China. This is part of an overall UK growth in exports to China and Asia, now generating more than £500 billion of exports a year—up some £80 billion since 2010. I pay tribute to Ministers, and to UKTI. They have added to resources in China, although I would add that some modest rebalancing towards south-east Asia would be very welcome.
There is always more to be done in relation to exports and growth. As the hon. Member for East Antrim said, we cannot and should not over-egg the current situation. Here are a few suggestions.
First, we need a restructuring of UKTI resources to focus on where value can be most added. I believe that that is happening as we speak, and I believe that value is best added not by the writing of otiose reports, but by a serious, customer relationship-driven approach.
Secondly, we need additional trade envoys for markets where nothing is easy but everything is possible, and doors need to be opened by representatives of the Prime Minister. The model is proven, and it provides continuity with Governments overseas.
Thirdly, we need to focus on the industries of the future. The honourable exception to the tale of gloom on the SNP Benches was provided by the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry), who did say a little about that subject. We should be focusing on creative media, cyber, FinTech, aerospace and marine technology, as well as on some of the current great exports, which, by the way, include education.
Fourthly, we need closer relationships with universities, not just because of their export potential—important though that is—but because of their research output. For example, Bristol University’s research produced the wonderful electronic and driverless robot “pods” that deliver some people to their flights at Heathrow’s terminal 5 from the car park.
Finally, we need greater use of technology to capture the success of our SME exporters, and to communicate it remotely via film to seminars as far away as Portaferry, Pembroke, Plymouth or Perth.
What cannot be doubted, however, is the Government’s commitment to business and exports, led by the Prime Minister himself—as my hon. Friend the Member for Macclesfield (David Rutley) rightly pointed out—and by successive Trade Ministers. That commitment can be seen in the expansion of the capital that is available from UK Export Finance, the reduction in red tape and corporate tax, and the increase in the allowances to which I have referred, as well as in new sector-specific funds such as the skills investment fund and the video games prototype fund. It can be seen in the patent box, the new investment allowance which is so important to the oil and gas sector in Scotland, and—last but by no means least—the creation of the GREAT campaign from No. 10 itself. I believe that its creator was awarded the OBE in the new year’s honours, and rightly so.
All that makes for a strongly export and growth-focused Government, but there is another aspect of UKTI’s work that has not yet been mentioned: inward investment. Given our mountains of inherited debt, we need others to finance our infrastructure growth, and we have been successful in almost doubling foreign direct investment in the last five years. Why, and how, does that boost UK manufacturing? The question was raised earlier by the hon. Member for East Lothian (George Kerevan), and the answer is that so much of the design, construction, servicing and operation of the new Hinkley Point power station will be provided by British companies and British expertise.
While those figures do nothing for our exports in themselves, they boost our manufacturing and our growth. The same will be true of Crossrail, HS2, and other key infrastructure projects. They also act as a catalyst for the growth in our services, which are the one part of our exports that is growing sharply, and play a key role in our overall growth.
Another aspect that has been missing from the debate so far is the impact of tourism to Britain, driven by our heritage and boosted by important incentives for film makers and those in the creative arts—some of which, incidentally, were introduced by the current Secretary of State when he was Secretary of State for Culture, Media and Sport. Tourism follows another great success: our bids to host great sporting events. The Labour party can take pride in the successful bid for the 2012 Olympics as well. I have first-hand experience, from the great rugby world cup of 2015 and the impact of the games at Kingsholm on the city of Gloucester. I pay tribute to the role of the captain of the Scottish rugby team, Greig Laidlaw, who is Gloucester’s scrum half. The athletics championships are coming soon, and Scotland itself will surely remember—this is, after all, an SNP-driven motion—the importance of those great sporting events from the Commonwealth games in Glasgow, which took place only about 18 months ago.
This is a Government who are trying to do their bit for growth in a series of different ways, which brings me to my last point about Scotland. In the 18th century, when Scotland joined England in what has arguably been the world’s most successful union, the land of my ancestors was full of entrepreneurs. They exported not just products but themselves, all around the world. They set up what is still the largest non-Government employer in Hong Kong, Jardine Matheson, started a still-flourishing tea business in Bangladesh and Kenya, Finlays now owned by Swire, created teak merchants in Burma, railroads in Canada and helped Raffles himself establish Singapore, and much more besides. My ancestors exported themselves to Northern Ireland and helped create the linen business over there.
My point about these great Scotsmen is that they did not advocate a welfare state or an ever-increasing role for the Government or belong to the International Marxist Group like the hon. Member for East Lothian; they were innovative and they got on with the business of business. So where are they today? The two giant Scottish banks crashed, oil and gas is struggling, nuclear defence is disdained. It is time for the SNP to get behind the new entrepreneurs and increase Scotland’s share of UK exports, which is currently 7%, slightly less than that of the east midlands. I believe the land of my ancestors can punch significantly better than that.
The UK is here to help. UKTI has offices in 200 countries abroad and in 2013-14 helped 2,300 Scottish companies to export, and all of us involved in exporting are ready to help. I have twice spoken to groups of businesses and universities in Edinburgh and I will happily come up again, and I know my right hon. Friend the Minister will do her bit, too.
The hon. Gentleman and his colleagues will know the answer to that question better than me, but I think he will find that the expertise involved in setting up the Commonwealth games largely came from the 2012 Olympics held in London, so it was a perfect example of how the UK can work together for the greater good of everyone, including Scotland.
I am sure the hon. Gentleman would not seek to mislead the House, so let him answer the question my colleague asked: the answer is zero. In terms of the Olympics, Scotland—along with many other parts of the UK—had its lottery funding sucked away into that project and did not for quite a considerable period of time get the returns it was promised.
The hon. Lady, of whom I am a great fan, risks sounding as if she is carping on the issue of the Commonwealth games. I did make the point that that was a really good example of working together. [Interruption.] She will know of the input from all the people who made such a success of the Olympics. [Interruption.]
So let me now to the final bit of my speech—despite the chuntering of the right hon. Member for Gordon (Alex Salmond), who is welcome to intervene if he wishes. [Interruption.] He is still chuntering; we still do not know if he wishes to intervene. He has his chance. [Interruption.] An hon. Member says he is not allowed to speak from the Bench he is currently occupying; well, there we have it—we will keep his chuntering for another day.
We can surely all agree today that there is a great deal more to be done. I hope the report from the Business, Innovation and Skills Committee and the Education Committee will contain helpful recommendations to Government, and I know the Ministers are working on their own productivity plan. I hope the Government will take note of the suggestions made both by my neighbour my hon. Friend the Member for The Cotswolds (Geoffrey Clifton-Brown) and me.
Sadly, I have not heard many positive ideas from the SNP Benches, with the honourable exception of the hon. Member for Inverness, Nairn, Badenoch and Strathspey, as I mentioned earlier. I do believe that Scotland needs to rediscover her entrepreneurial spirit, and find more Tiggers and fewer Eeyores to promote business, and I am sure the hon. Members for Livingston (Hannah Bardell) and for Ochil and South Perthshire (Ms Ahmed-Sheikh) can do this and get that brave heart playing its full role in the revival of the growth of the UK, with a drive for all of us to increase our exports and our inward investment.
It is a pleasure to follow the hon. Member for Gloucester (Richard Graham), not least because I am an expatriate Gloucestershire person myself—and I have to say my late father made a significant contribution to the Gloucestershire economy near to him as a former aircraft fitter with Gloster Aircraft Company and more lately with Dowty company.
I do not have a lot in common with the hon. Member for Dundee East (Stewart Hosie), but I did mean to start my speech with the very quote he started his with. One part is worth repeating because it sums up the issue. The Chancellor, in his Budget of March 1911—I mean 2011; it is just me who’s old, not the Chancellor—said:
“We are only going to raise the living standards of families if we have an economy that can compete in the modern age.”—[Official Report, 23 March 2011; Vol. 525, c. 966.]
Our export performance and balance of payments figures are perhaps the most accurate measurements of how effectively we are competing in the modern age, and on that basis the Government have done very badly indeed.
That is partly as a result of problems that are long standing. I do not pretend that they all started with this Government, but some of the better things they have done did not start with them, but have built on foundations laid by the previous Labour Government. However, the Chancellor said that in pursuit of their objectives they would secure £1 trillion of exports by 2020; rebalance the economy away from the service sector towards manufacturing; ensure that economic growth was no longer fuelled by consumer demand based on unsecured credit but the outcome of rising real wages; and rebalance the economy away from London and the south-east to the regions. Those are all hollow words.
I recognise the hon. Gentleman’s expertise and the important work he did in the previous Parliament, particularly on life sciences, as Chair of the Business, Innovation and Skills Committee, but before he turns into an Eeyore, which I know he is not, will he not acknowledge—this is something he actively supported in the last Parliament—that life sciences are moving forward, including, notably, in Macclesfield, where the AstraZeneca site accounts for 1% of all UK goods exported?
If the hon. Gentleman will be patient, I will mention some of the things I think require recognition.
The triumphalism and overstatement of the Government’s so-called economic successes mask the sheer scale of the problem and leave us in danger of understating the change in Government policy necessary to address those problems. It is no consolation to be given a diatribe on increased employment and so on, when we have companies desperately seeking investment to invest and grow and workers on zero-hours contracts and when millions have seen their real wages reduce over the past five or six years. Ultimately, this all stems from our lack of productivity and weak exporting performance.
The 2008 recession was a serious one, but the Government do not mention, of course, that it has taken far longer for this economy to come out of it than any other comparable economy and that, most unusually, productivity has failed to increase, as it normally does when an economy comes out of recession. It has also failed to increase in comparison with other economies. Figures from the Office for National Statistics show that in 2014 output per hour worked was 21% lower than the G7 average. The reasons are not simple, but one main reason is that the primary driver of productivity is manufacturing, and our manufacturing output has stagnated over the last five or six years, despite the Chancellor’s claim to be backing the “march of the makers”.