asked Her Majesty’s Government what plans they have to improve support for the British Motorsport industry to ensure it does not lose its global leadership.

The noble Lord said: I start by declaring an interest, as the unpaid president of the Motorsport Industry Association, the MIA.

Five years ago, the DTI Minister, Patricia Hewitt, announced government support of £16 million,

“to sustain and develop the British Motorsport Industry”.

She went on to say that,

“this industry is the jewel in the crown of our British Automotive Industry. In such a fiercely competitive market, we cannot afford to be complacent. This industry is exactly where the future of British manufacturing lies”.

The following year, the noble Lord, Lord Sainsbury of Turville, in reply to a question that I had asked, confirmed the Government’s commitment to provide £16 million over five years from four regional development agencies, the DTI and the DCMS. In January 2005, the House of Commons Trade and Industry Committee report on the UK automotive industry clarified that 50 per cent of the £16 million of public investment into the motorsport sector was earmarked for “skills”.

Anyone reading those positive statements would applaud the Government for their positive plans to sustain one of the few globally successful British business clusters. However, the reality has proved to be a long way from the rhetoric. The scheme has failed to live up to its promise. It is time to admit this and move back to the traditional sector relationships with government.

In January, Motorsport Development UK, the body set up by the Minister to co-ordinate this programme, produced its annual report. It makes very sorry reading and is the primary reason for my Question today. The highly publicised £16 million has been reduced by 40 per cent to only £10 million. The report is entirely devoid of any financial details or figures covering salaries, overheads or expenses used in distributing the fund—nor does it explain the value, efficiency or effectiveness to the industry, or the taxpayer, of the objectives. This lack of explanation by a publicly funded body is a scandal.

It appears that MDUK still remains funded by just four of the 12 devolved Administrations and regions, plus the Department for Business, Enterprise and Regulatory Reform, to the tune of only £400,000 each per year from their multi-million-pound budgets. Why is the Department of Culture, Media and Sport now absent from the list of funders? Is it no longer associated with this initiative? Has it kept the £6 million earmarked for this project for some other sport? If not, what has happened to this significant sum and why has this not been made public?

As the report fails to clarify many important points, and there is real concern in the motorsport industry, would the Minister's department be able to provide a clear, detailed financial breakdown of the MDUK performance and expenditure, with regional budgets and spending, and explain what happened to the full £16 million announced by the former Minister to such fanfare? I suggest that this is done in the form of a letter to me, with a copy placed in the Library.

The apparent lack of understanding of current issues in the sport and the industry led me to note that, of the current eight members of the Motorsport Development UK board, just one appears to be fully engaged in the UK motorsport manufacturing industry. I am even more concerned that one member of this UK-focused board is fully employed and living in Bahrain, where he is the director of the Bahrain international circuit, a newly developing competitor to UK circuits. How and by whom were these appointments made?

The chairman of MDUK, when presenting his report, admitted in reply to a question that the body had not,

“achieved much in the area of business development”.

Yet this had been one of the most important objectives for both the Government and the industry. He also said that the industry was in,

“a healthy state, particularly at the high end”.

In contrast to this reassuring view, it has been widely reported that, in fact, the UK industry faces a dramatic downturn at the “high end of motorsport” in the very near future. The sport’s governing body, the FIA, has confirmed that it will shortly require a significant reduction in the spending budgets allowed in Formula 1. As the majority of F1 teams are based in this country, this will commercially affect us far more than any other country in Europe. There will be substantial cutbacks in the employment of engineers in the teams and by their specialist UK suppliers. Sadly, it seems that we will be a victim of our past success.

The Prime Minister’s Strategy Unit discussion paper, issued last month, Future Strategic Challenges for Britain, identified UK motorsport as a prime example of Britain hosting world-class, high-performance innovation and engineering leaders. These skilled employees are precisely those on whom the Prime Minister relies for the future of UK manufacturing; they are all well skilled in advanced, innovative, value-added high-performance engineering. Through no fault of their own, or of their employers, they will find re-employment difficult within this specialised sector during a period of such significant decline.

Will the Minister seek an urgent meeting with the FIA, the MIA, the UK Formula 1 teams and their UK suppliers to see how best these clearly commercial decisions from a sports governing body can be mitigated? When other UK industries faced similar problems, regional and national support was swiftly made available to help re-employment. These skilled individuals are a particular asset to the UK and must be retained here.

The Financial Times, in the same week as the MDUK report, headlined that Britain was losing its global dominance in this sector. British motorsport companies have lost many major global contracts over the past three years. Sadly, this trend continues unabated and unrecognised by either the Government or their MDUK advisers. Most worrying is that this business is not going to the emerging nations of China or India, but rather to our direct competitors in high value-added engineering: the US, Italy, France and Germany. The motorsport industry is regularly highlighted as the perfect metaphor for future British manufacturing by the noble Lord, Lord Jones of Birmingham, as he sells Britain to the world with UK Trade & Investment, as does the FCO.

I am pleased that the redevelopment of Silverstone appears to be making good progress, with planning approval close to being agreed. This will attract many global companies to the UK and create a sound financial base for the British Grand Prix at last. We trust that the Government will do what they can to help resolve any planning matters that are outstanding.

We congratulate the Government on the R&D tax credits. Motorsport SMEs are innovative, creative and competitive, attracting commercial sponsorship for their R&D. They spend over 30 per cent of their annual sales on R&D—nearly three times as much as the pharmaceutical industry. This reaps commercial rewards, delivered on the track, for their sponsors. Outcomes from their substantial investment in innovation strengthen industry partners in defence, aerospace, automotive and maritime areas throughout the UK. In 2002, the industry told the Minister that it required a series of,

“urgent, co-ordinated actions to ensure the leading position of our industry is retained in the face of increasing overseas competition”.

We must actively and intelligently sustain our leadership where it occurs in such high value-added sectors, and not stand by and allow it to decline.

What has happened? After six years, the government response through the MDUK has singularly failed. The fears of those original industry advisers have become reality. I am surprised that no national survey has been undertaken since that delivered by the MIA and the MSA in 2000. Government departments still rely on this clearly outdated survey, citing £5 billion of sales, 38,000 employees and so on. Although the MDUK claims to have spent £10 million, it declined bids by research groups and the industry association to update this vital knowledge. Such research would allow a much clearer understanding of the success, or perhaps failure, of this initiative and the industry that it claims to sustain. Will the Minister’s department work with the MIA and the MSA—the national motorsports governing body—to enable them to update their joint national survey so that they can work with government departments to create a strategy for the future? I am pleased that the leading role of the FIA under the inspired leadership of Max Mosley in creating innovative environmental technology programmes was highlighted in the recent European Parliament report, CARS 21. The FIA also recognised,

“the role motor sport can play in changing attitudes and customer behaviour towards environmentally friendly technology”.

The urgent need to popularise and increase public demand for energy-efficient vehicles is one of the greatest social challenges that we face while dealing with climate change. In 2003, the world’s first Energy Efficient Motorsports Conference was organised here in the United Kingdom by the MIA to gain the leadership for Britain in this exciting new opportunity. This was actively supported by the Government, but not by the MDUK. Sadly, today, the USA is securing the high ground in energy efficiency in motorsport. Washington recently announced a direct partnership between its Environmental Protection Agency, the American Le Mans Series and the US Department of Energy.

Rhetoric and lack of initiative from the MDUK has allowed global leadership to pass largely to the USA, to Germany through Audi, and to France with Peugeot—another example of the very complacency of which the Minister had warned. In a recent nationwide electronic survey to the industry, over 70 per cent of those who replied said that the MDUK had “not helped their business”. The same number felt that little or no progress had been made in co-ordinating investment into the cluster to widen sports participation or attract world-class events. However, 100 per cent made it clear that these issues, among others, remained critical.

Professor Porter of Harvard University advised the DTI as a world expert in successful business clusters, and explained the importance of industry-respected institutions for collaboration. Such a credible institution was and remains the MIA, which has grown its UK membership by nearly 50 per cent in the same period in which this funding experiment has remained in place, and is fully owned by the industry itself. Its members should be putting their expertise and knowledge into working more closely with government in future to ensure that Britain does not further weaken its position as a global leader.

In the light of that, what are the Government’s plans for Motorsport Development UK once its five-year plan has been completed? Can the industry and the sport return to dealing directly with relevant government departments, all interested regions and devolved Administrations?

I start by congratulating the noble Lord, Lord Astor, on an interesting and informative speech and on initiating today’s debate. The motorsport industry and the sport itself are of increasing importance in the UK but they have been little debated in this House and the other place, despite the industrial and sporting success of the industry. Lewis Hamilton has attracted a lot of new viewers to Formula 1 in the past year alone.

I have some links with the sport. Back in the early 1980s my Chinese father-in-law owned a Formula 1 team. In those days you could support a half-decent team for about £2 million, although that is certainly not the case now. He simultaneously had a Formula 5000 team and a USAC team. I knew many of the drivers well, and I look back with huge pleasure on trips to Silverstone and Brands Hatch, sitting in a trailer at the back of the pits, when our car came well down the field on almost every occasion.

When I was looking at material for today’s debate I was pleased to see that WOMAC, Women on the Move Against Cancer, a charity linked with the motor racing industry, is still going strong and has a Valentine’s Day party annually. I was a great admirer of Jean Denton, Baroness Denton, who in a previous incarnation was a racing driver. I think we all have fond memories of Jean and what she did, both in this House and outside it.

I must admit that when I was sitting in that trailer at Silverstone I had no idea how the industry would develop over the following 20 years. Preparing for this debate and listening to the noble Lord, Lord Astor, have been extremely instructive. It has been a great success. The sport and the industry are inextricably linked, and we have seen something like 500 per cent growth over 10 years. I was pleased that the noble Lord, Lord Astor, mentioned the noble Lord, Lord Jones of Birmingham, because he is a great advocate of the UK motorsport industry. On almost every occasion when he goes to China or India or makes speeches to audiences in the UK, he mentions the great success of Formula 1 and Motorsport Valley. After all, seven out of 11 Formula 1 racing teams have their bases here, and all those engineering companies are clustered in southern and central England.

We have world-class engineering companies serving Formula 1 and other aspects of motorsport as well. As the noble Lord, Lord Astor, said, the sport has an innovation culture, especially now in energy efficiency, with advanced materials technology, design engineering and new product development.

I heard what the noble Lord had to say about the latest statistics, but even a £5 billion contribution to the UK economy is of enormous significance, and it may well be more than that. A £2 billion contribution to exports through 4,000 companies is highly significant, and there should be further research if those figures underestimate the industry’s contribution. Those partnerships with the major car manufacturers involve some 40,000 jobs and some 25,000 skilled engineers. The noble Lord, Lord Jones, and the UKTI have done a good job in promoting the industry and promoting the links with emerging markets such as China and India, as well as Malaysia and Bahrain for good measure. Those links are of huge importance. We all remember the great experience surrounding the Shanghai Gran Prix last year, and the Shanghai international circuit has been forging links with Motorsport Valley. There will also be an increasing transfer of technology to other industries within the UK itself. So we cannot underestimate in any sense the significance of the industry.

The industry has been successful even in mature markets such as Japan. It has been very innovative in terms of selling itself through the annual National Motorsport Week and Autosport International show, which was held at the Birmingham NEC in January. The industry is no slouch in promoting itself generally. There are also strong links with academic institutions such as Cranfield University, which has an employer recognition scheme for motorsport educators and trainees, and a motorsport engineering and management MSc programme at postgraduate level designed to ensure that there is a pool of high-calibre engineers with management ability. There are some very good aspects regarding the development of the industry.

As well as the role played by the noble Lord, Lord Astor, the industry has many supporters in this House who have expressed concerns about the factors which could lead to the UK motorsports industry losing its dominance. We must take those concerns seriously. The issue discussed by the noble Lord, Lord Astor, that of the function of Motorsport Development UK and the funding provided by the Government and pledged by Patricia Hewitt, is crucial. I would ask the Minister whether it is the case that we have shrunk the funding from £16 million to £10 million. What is the reality of the function of Motorsport Development UK? It is extraordinary that so few people connected with the industry actually serve on its board, and I must say that when I looked at its functions, I was surprised to find that the annual report for 2006 is not on its website; only the 2005 report is posted. That lack of transparency is a great problem.

However, there are some other good aspects. It is great news that the Silverstone plan seems to be on track and that it has the support of the Government and local people. That is crucial because the development of Silverstone is extremely important. I was pleased to see that discussions between the FIA and the BRDC are ongoing, as well as work on the submission of the plan which looks as though it is going to take place shortly. I hope very much that the planning application will have a fair wind.

I turn now to the grassroots funding of motorsport. We know that Lewis Hamilton started his racing career in carting. Making carting available at an accessible price is vital for encouraging budding young drivers to take their place in motorsport, but it appears that carting receives nothing from the National Lottery or from sports distributors. Grassroots funding is needed, so why cannot the motorsport industry receive some lottery funding in this respect?

The noble Lord, Lord Astor, rightly raised several other issues, but I shall content myself with these remarks. It appears that a number of individual members of the Government really do understand the motorsport industry, and I hope that the rest of the Government wake up to the potential and importance not only of the industry but of the sport itself, and respond to the questions being raised today.

I wish to emphasise some of the remarks made by my noble friend Lord Astor concerning the prospects of the motorsport industry. In so doing I thank him for introducing this interesting Question.

Motorsport Development UK, the body set up by the Government some five years ago to co-ordinate the development programme, produced its annual report in January in which its chairman said, among other things, that,

“the UK motorsport industry was in a healthy state, particularly at the high end, and stable”.

Can the Minister explain the difference between this emphasis and the Motorsport Industry Association’s report that the industry faces a dramatic downturn due to the imminent cuts imposed by the FIA on Formula 1 team budgets? As she knows, the majority of Formula 1 teams are based in the UK and the industry has grown with the success of the teams and assisted by the large amounts of private funds put into the area by the team owners and others. The MIA spokesman said that there are likely to be extensive cutbacks in the employment of engineers both within the teams and their specialist UK suppliers. What will the Government do to help with the re-employment of these extremely valuable human assets to persuade them to stay in this country?

We are also losing increasing amounts of business to our competitors in Europe. Why is this not, apparently, recognised by the Government or, indeed, by their adviser, MDUK? I wanted to call it M-DUCK, but that is not very elegant. What will the Government do about this? Does the Minister agree that there seems to be a shortage of up-to-date information on these subjects? What are the Government doing to find out what the situation is now, not last year or the year before?

I am afraid that I cannot match the experience of the noble Lord, Lord Clement-Jones, as a young driver. My first car in 1953 was an Aston Martin, the Atom, a prototype built in 1939, which is now in the motor museum at Gaydon, near Coventry, so I can say that I have been interested in motorsport and racing cars for well over 50 years. During that time the sport and the industry have flourished.

This leads me to say a few words about Silverstone race track. The British Grand Prix has been held there for more than 50 years and it is famous throughout Britain and the world. It is, indeed, the main reason for the establishment of the motorsport industry business cluster in the area, wherein the UK motorsport industry contributes more than £6 billion to the British economy every year. It employs directly more than 100,000 people. It is under intense threat from new motorsport circuits, for example Bahrain, Istanbul and Shanghai, as has been mentioned, all of which provide brand new, state-of-the-art facilities. It is therefore essential that Silverstone circuit and its facilities are updated to keep the British Grand Prix, and therefore retain the many large and small companies nearby linked to motor racing.

I am sure that the Minister knows of the extensive plans developed by the British Racing Drivers’ Club, the owners of Silverstone, to secure its future as one of the great world venues of motorsport and help to ensure the UK retains its pre-eminence in this sector. The BRDC “vision” for Silverstone includes the redevelopment of the circuit to provide state-of-the-art facilities which should secure the future of the British Grand Prix at Silverstone and a new business park focused on hi-tech production and motorsport uses that will provide flexible and modern accommodation to meet the needs of burgeoning companies in this demanding sector. It includes an advanced technology park for companies with significant research and development needs and an education campus that will take advantage of the hi-tech nature of Silverstone’s motorsport cluster of companies and provide courses across a broad range of specialisms from vocational to higher education. An imaginative dual use of the circuit facilities is envisaged which would help to make the courses very attractive to youngsters. The last thing is to create a centre of automotive excellence with substantial opportunities for economic and employment growth.

I have laid this out in some detail as it deserves wide and continued public knowledge. Plans for implementing this vision are well advanced, as was mentioned by the noble Lord, Lord Clement-Jones, and, as he said, there appears to be broad support for it across key local stakeholders and—this is just as important—relevant planning authorities. Substantial investment is obviously needed, and the bulk of that will undoubtedly come from the private sector. Support and partnership will be sought from many organisations to turn this vision into reality. Can the Minister say what the Government’s view is of this project?

The motor racing enterprise that Silverstone has been for so long deserves government support that will eventually translate into an even more successful operation than it is at present. I hope that the Government will consider it extremely carefully.

I have to conclude by saying how sorry I am that the noble Lord, Lord Drayson, is not in his place. With his current experience of motor racing, he would have been a most useful contributor to this debate.

I must apologise that I cannot quite fill the shoes of my noble friend Lord Drayson in his first-hand knowledge of the sport, but I reassure noble Lords that I am very passionate about the UK industry's competitiveness and what it represents in modern manufacturing, advanced engineering and world-class skills. That is critical in a fiercely competitive global economy. This is about ensuring that we continue to hold pole position as a world leader in this field and seize the benefits that this can bring to manufacturing and the economy more widely.

I acknowledge the enormous contribution of the noble Lord, Lord Astor, to the motorsport industry. However, I may not quite share the depth of pessimism that he expresses about the sector. Motorsport covers a wide range of events and activities; sometimes we focus only on the high profile world of Formula 1, which is at its pinnacle. The motorsport industry in the UK plays a crucial role in showcasing UK engineering excellence globally and in acting as a magnet for inward investment. Our leadership is recognised globally. As the noble Lord, Lord Clement-Jones, said, seven of the world’s 11 top Formula 1 teams are based here.

The reasons for that are clear. We have a sector that specialises in the very best hi-tech manufacturing. UK companies conceive, design, develop and manufacture everything from hi-tech chassis, seats, cockpits, seatbelts and helmets to market-leading engines, transmissions brakes and suspension systems. They produce a seemingly endless range of precision components.

Research data from the Motorsport Academy last year shows that the sector is supported by 2,500 engineering companies with more than 100,000 employees. Most of those are skilled engineers or technicians. Those companies are growing. There was discussion of the value that they contribute to the economy. That research shows that it is about £6 billion, of which 60 per cent is exported. Two-thirds of the companies have sales of more than £500,000; more than 80 per cent expected to grow by 50 per cent in the next two years; and almost half expect to recruit new people.

The noble Lord, Lord Luke, refers to contracts being won by overseas companies. It would be fair to say that many UK companies have also been successful in winning contracts. For example, the majority of the A1 GP contract apparently lost to Italy has been subcontracted to UK companies.

People are key not just to the success of our motorsport industry but to the transfer of technology to other sectors. Many motorsport companies operate in the mainstream automotive industry, with highly skilled engineers bringing expertise and know-how to innovate new products and processes. It is one reason why the UK is a global centre of excellence for automotive powertrain design and production and all aspects of performance engineering. There are many examples of technology transfer. Most recently, Cosworth engineering used its expertise in high quality, short production runs to supply engine parts for Rolls–Royce marine engines.

For government, it is critical to sustain this success, which is why we established the Motorsport Competitiveness Panel in 2002. It identified market failures around the development of the industry at all levels from engineers to drivers. The panel of senior sport and industry experts, including the MIA, also recommended the need for an independent body to,

“fill a gap in the market, lead, coordinate and prioritise activities”.

This resulted in 2003 with the creation of Motorsport Development UK, with a budget of £11.5 million. It undertakes five key programmes to tackle these market failures; that is, skills in the workforce, the motorsport academy, the motorsport learning grid—which is targeted at getting schoolchildren interested in engineering careers—energy efficient motorsport, business development and widening participation more generally by the public.

Of course, I will facilitate a detailed financial breakdown to be made available of MDUK’s performance and expenditure costs. I recognise the noble Lord’s concerns regarding a shortfall from the originally foreseen £16 million of funding. As I understand was made clear in a Parliamentary Question in 2005, it is correct that DCMS has been unable to provide the £3.5 million funding that it envisaged due to limited resources and other priorities. However, I should like to clarify the noble Lord’s point on the remaining £1 million. This has been spent as part of SEEDA’s contribution and was expended directly on a knowledge exchange facility at Oxford Brookes University. If the noble Lord wishes, I would be happy to provide more information.

Through the academy and the learning grid, 2,500 people have been helped to develop their engineering skills. Importantly for the future, more than 100,000 children have taken part in learning grid activities such as Formula Student, Formula 1 in schools and Greenpower, thus enthusing young people—boys and girls alike—to have an interest in engineering. Further support has gone into the volunteers; for example, more than 1,500 new marshals have been recruited and a further 800 have been trained. Without these volunteers many of today’s events could not take place.

The noble Lord expressed surprise that statistical data have not been refreshed since the MIA survey in 2000. That does not, of course, take into account the work that MDUK has done in developing Motorsport 100, which I understand is proving to be a worthwhile barometer of business confidence in the sector, as well as the data that I quoted earlier that the Motorsport Academy research has made available. With my department’s funding devolved to the regional development agencies, I would nevertheless suggest that the MIA discusses the opportunities for making a proposal on this subject with the relevant RDAs. Additional data that are fit for purpose are always valuable.

With environmental impact as one of the key issues facing this and other industries, the noble Lord rightly points out the important contribution that the industry makes to energy efficiency. The energy efficient motorsport programme—EEMS—has directly supported 15 projects to encourage energy efficiency, with some notable successes; for instance, the first biofuel success in a major championship—the car co- driven by my noble friend Lord Drayson—and the first class win for a hybrid vehicle, and, in Formula Woman, the first championship run entirely on biofuel.

The UK industry is pioneering the use of alternative race fuels such as bioethanol, LPG and diesel. For instance, the A1GP series recently enrolled as an EEMS campaign partner. The series has switched to biofuel and has committed to cut waste, to offset unavoidable emissions and to promote environmental awareness at its meetings around the globe.

My department will continue to fund MDUK until 2009, as committed. There is no budget for this activity beyond that date, but the Government’s involvement and interest in the industry, which is wider than any one organisation, will continue. I will be meeting MDUK in June to hear about the progress made and to discuss the future when it has its board meeting. I can respond to the noble Lord’s suggestion by saying that I would also be delighted to meet with the FIA, the MIA, and the UK Formula 1 teams.

Looking ahead, we must ensure the long-term competitiveness of the industry. That means starting with young people, so that we sow the seeds of success in our classrooms. We are keen to ensure that programmes such as the academy and the learning grid can continue to develop an enthusiasm for engineering amongst younger students, and to develop skills once those young people are in the workforce.

As noble Lords mentioned, my noble friend and ministerial colleague Lord Jones is no slouch when it comes to being a tireless champion all over the world. I am pleased to say that UKTI has recently agreed that advanced engineering, including this industry, will be one of its new strategic sectors and is planning support for four UK events.

It is essential that we retain Silverstone Grand Prix as one of the showcase events for UK design engineering services. I assure the noble Lord that we will help in any way that we can if planning or any other issues arise. As the noble Lord, Lord Luke, said, I am aware of the exciting designs that have been developed for the pit and paddock area and my department will continue to be engaged in discussions on its progress.

I am not sure that I would paint as bleak a picture as the noble Lord did about the state of the industry. As ever, we know that in a fiercely competitive global environment, there is absolutely no room for complacency. I welcome this debate and will ensure that we will continue to maintain our interest in this industry.

The Committee will adjourn until three o'clock.

[The Sitting was suspended from 2.41 to 3 pm.]