Question for Short Debate
My Lords, I am grateful for this opportunity to speak about the north-east of England. In initiating this debate, I refer noble Lords to my interests listed in the Register. The purpose of this debate is, first, to celebrate the rich social and economic history of the region, to consider the facts of our recent economic performance and then to offer some advice on how the Government could help the region in these challenging economic times.
The north-east is a very special region of this country. It is blessed with areas of outstanding natural beauty bordering the North Yorkshire moors in the south, the matchless Northumbrian coastline in the east and the glorious Lake District to the west. The region is a region of contrasts, being voted home to the most tranquil county in England—Northumberland—and the party capital of Europe—the city of Newcastle. It is home to the Roman Wall and was the cradle of Christianity in England in Lindisfarne and Holy Island. The north-east was the home to some of the greatest minds of the Industrial Revolution: George Stephenson, “father of the modern railways”; Joseph Swan, inventor of the electric light bulb; Charles Parsons, developer of the first steam turbine that transformed maritime transport; Sir William Armstrong, who harnessed hydraulic power for cranes and power generation; and Cleveland Bridge and Dorman Long who built many of the world’s iconic bridges, including the Sydney Harbour Bridge.
Until the early 20th century, north-east shipyards were responsible for building one-third of the world's shipping. The coalfields of Durham and Northumberland were literally the powerhouse of the industrial revolution. While the Tyne and the Wear dominated trade in coal and shipbuilding, the Tees soon came to dominate in steelmaking and chemicals. The first trading estate in the world was built on the Team Valley in Gateshead. More recently in the 1980s, Sir John Hall pioneered the out-of-town shopping centres based on the Metro Centre in Gateshead. Sir Lawrie Barratt changed the face of suburban Britain through development of modern housing estates. Sir Peter Vardy's innovation in car finance made cars affordable for the first time for millions of hardworking families. Moving right up to date: Greggs, the national chain of food outlets based in Newcastle employs 19,000 people and exports the great, legendary ham and pease pudding stottie to the discerning culinary audience around the country. Sage business management software is now used by 5.8 million businesses worldwide. It is headquartered in Newcastle and employs more than 14,000 highly skilled people in the north-east and California. Kilfrost started off life de-icing football pitches and is now a world leader in aviation de-icing technology with substantial operations in North America and Asia. SMD, CDC Marine and Tomkins form a cluster of companies leading the world in sea bed engineering, now in demand around the world for the construction of offshore wind farms.
Today, a third of all UK pharmaceutical production happens in the north-east at operations such as GlaxoSmithKline Beecham’s Barnard Castle plant. Teesside hosts the largest polyethylene plant in the world operated by SABIC. The Biofuels Corporation operates the world's largest biodiesel plant at Seal Sands. The largest bio-ethanol plant is operated by Ensus. All in all, the north-east process industry cluster employs more than 40,000 people directly, most of them in highly skilled engineering posts.
The future development of electric vehicles is one in which the north-east has a sustained and historic competitive advantage. It is already host to Smith Electric Vehicles, which manufactures milk floats. Indeed, it is the largest manufacturer of electric vehicles in the world, based in Washington, which is also, coincidentally, or perhaps strategically appropriately, the home of the largest and most productive car plant in Europe—Nissan.
The ports of the Tyne and the Tees remain vibrant and Seaham, Blyth and the Wear are receiving significant new investment. PD Ports is planning a £300 million deep sea container port called Northern Gateway, which could employ 5,500 people. The Tyne & Wear passenger transport metro is the only underground public transport system in England outside London, serving more than 40 million passenger journeys a year. Overall, the ability to take the innate skills and discipline of engineering, which were first honed in the industrial revolution, and apply them to the challenges of the modern era, particularly as regards low-carbon and renewable energies, offers great opportunities to the north-east.
We have two world-class research universities in Newcastle and Durham. We have three cutting edge centres of excellence established by the regional development agency: the Centre for Process Innovation on Teesside; the Centre for Nanotechnology, Microtechnology and Photonics (Cenamps) in Newcastle; and the New and Renewable Energy Centre at Blyth.
The inspired slogan developed by the regional development agency One North East is “passionate people, passionate places”, and this perfectly captures the essence of the region. Recognising that no region can be adequately summed up in a range of economic indicators, but that no society can be sustained in the long-term by ignoring them, I offer some pause for thought.
The north-east’s GVA per capita, at £15,688, is the lowest of any region in England. The unemployment rate at 8.3 per cent is second only to the West Midlands. The proportion of workless households, at 23.7 per cent, is the highest proportion in Britain. On the positive side, the north-east is the only region in the country which exports more per head than it imports. The level of business failures is a cause for concern. According to Equifax, the north-east saw a 41.2 per cent year-on-year increase in the level of business failures. What makes this more concerning is that the north-east already has the smallest business stock in the UK and the lowest number of start-ups in the country.
The contribution of the public sector to the north-east economy, according to the CEBR is 57 per cent and rising. This is of concern simply because it exposes us to potential downturns in the recession, which may come with inevitable reductions in public expenditure. This dependence is illustrated by employment. Over the past eight years, public services employment in the north-east has increased by 47,000, while manufacturing employment has fallen by 58,000.
I do not want to indulge in point scoring. I recognise that the Government care deeply about the region, and many good things are happening. However, my criticism is that they have often failed to present the north-east with the realities of the economic situation until it is too late and we are left with a series of abrupt social upheavals, rather than gradual adjustments to the new realities.
The truth is that we need to ratchet up our productivity as a region, and that can only be done through: skills, especially apprenticeships and the development of science graduates; enterprise—shaking the culture through schools and the careers service whereby the option of leaving education to create a job rather than getting a job is positively encouraged; investment in physical capital, which is being held back by the lack of liquidity in the capital markets, but is desperately needed for a region that depends so heavily on manufacturing and engineering; and embracing competition as a driver of innovation and efficiency.
I suggest a number of areas in which the Government could do more to increase our competitiveness as a region. The north-east already suffers in terms of public expenditure on transport per head of the population, which has been only £577 per head from 2001 to the present time, compared with £1,637 per head in London. The most important element needed is the upgrading of the western bypass of the Al(M) at Gateshead, and moving to a systematic enhancement by dualling the A1 north of Newcastle.
The Government should give every possible support to working with the Hitachi team as they consider the options for awarding a contract to build 1,400 high-speed train carriages in Gateshead, which would return train manufacturing to the home of the railways. The Government should seek a meeting with Tata, the parent group of Corus, to see what could be done for Teesside Cast Products, where 2,000 jobs are under threat. This is a profitable business, and is a strategic plant and asset. It has been undermined because of the scurrilous way in which two steel manufacturers—one Italian and another South Korean—have reneged on their contracts. The Government should be robust in searching for those contracts to be honoured and for a buyer for the plant.
Strategic air links are very important for a peripheral region such as the north-east—nowhere more so than on Teesside. The air link from London Heathrow to Teesside was ended in March of this year. In 1995, Heathrow served 21 domestic destinations. Today it serves only six. For an area such as Teesside, which depends deeply upon the petrochemical and processing industries, it is vital that that link is reinstated.
Only 660 new social homes were constructed in the region, and that issue should be focused on. The Government should ensure that Northern Rock is returned to the private sector as soon as possible. The management team of Gary Hoffman has done a phenomenal job of turning around the bank.
In conclusion, we can celebrate a huge number of good things about the north-east of England. If we are honest about our problems, strategic about our investment and our actions, and, inevitably, proud of our history, we can ensure that the socio-economic future for the north-east is not only good, it is great.
My Lords, I congratulate the noble Lord, Lord Bates, on securing this debate and on his choice of subject. Indeed, it is a pity that in only five minutes it is not possible to pick up on many of the points that he very eloquently made. I pay tribute to his commitment to the north-east and I found myself in agreement with many of the points that he made. It was good that he referred to Joseph Swan. It is tragic that Joseph Swan, unlike that other brilliant inventor Edison, was not quite so good at publicity. For that reason, Swan’s reputation is not really appreciated, even here in the UK—never mind worldwide. I very much echo the noble Lord’s points about Joseph Swan and his wonderful contributions.
The noble Lord and I have long been associated with Gateshead in the north-east. Perhaps he would join me in paying tribute to what the Gateshead local authority has achieved in recent years in the wonderful facilities that it has given to the region as a whole on the Gateshead side of the banks of the River Tyne, and to the way that Gateshead has shown that not only do we have successful firms in the region, but we actually have successful local authorities, which could very well be described as public entrepreneurs.
It is also good that Newcastle and Gateshead have increasingly joined together in recent years and that, instead of looking at each other with a degree of antagonism across the River Tyne, they now work very closely in partnership for the good of their residents in both localities, and for the good of the region as a whole.
It is also refreshing that a member of the Conservative Party recognises the importance of regions in this country, as well the importance of towns, cities and rural areas. I hope that the noble Lord will use his influence—particularly with his Front-Bench colleagues in another place—to raise the profile of regions such as the north-east and make sure that they have appropriate structures, such as regional development agencies, to promote future regional and economic prosperity if that party comes to be in a position of power.
By holding this debate at a time of economic downturn, following the dramatic financial turbulence of the past year, all of us who are attached to the north-east will be concerned that the region does not disproportionately lose out and is not disproportionately adversely affected by our economic difficulties. I hope that my noble friend can be reassuring on this point. All of us here will remember the terrible experience of the 1980s recession in the north-east, which was possibly unique in that all its industries went into steep decline at the same time—coal, steel and shipbuilding. The current economic downturn, so far, feels very different from that; but none the less we need to ensure that the north-east can come through it strengthened for the future, not weakened.
The north-east has many strengths. I was struck by the fact that it has a positive trade balance and an export-led economy, while retaining an important manufacturing base, which the noble Lord, Lord Bates, referred to. The Government have also channelled resources into the region, particularly in health and education, and I have seen the dramatic effects of that expenditure on the area of the north-east that I used to represent in another place.
In five minutes it is not possible to raise all the issues that I should like to, but I conclude on two—one very local, one regional. The first concerns a highly successful firm in my former constituency which, unusually for the north-east, has its research and development base as well as its manufacturing there. It is concerned about current migration rules which might hinder it in training a small number of overseas graduates each year. While there is no time to explore this issue in detail, I should like to write to my noble friend about it and ask if she could look into it, in support of my honourable friend in another place.
The second issue concerns the repatriation of the Lindisfarne Gospels to the north-east of England, for which there has been a vigorous cross-party campaign for a number of years, which the former Bishop of Durham, the Right Reverend Michael Turnbull, to whom I pay warm tribute, was active in pursuing in your Lordships’ House.
There have been many improvements in the north-east, and much help from government; but we need to do more to make sure that the region prospers in future. That will be good news for all its residents, as well as for our country as a whole.
My Lords, I have been privileged to serve the people of the north-east for the past 11 years. I, too, am grateful to the noble Lord, Lord Bates, for initiating the debate. The north-east is indeed a very special place. Over the past 11 years, the region has experienced a considerable amount of change. I will make four brief points as we look to the future.
Some of the change has been very visible: new developments and new cultural projects that are important symbols of renewal, such as the quayside along both banks of the Tyne, mentioned by the noble Baroness; the Sage and the Baltic; the Institute of Modern Art in Middlesbrough; Alnwick garden; and the Angel of the North. Just as important, though less dramatic and less obviously symbolic, are the new schools, hospitals, colleges, redevelopments of brownfield sites, residential developments and business parks throughout the region. At least parts of the region look and are very different from 10 years ago.
Other changes are less visible, but highly significant. The economy has changed: we now have a post-industrial economy that previous generations would not have recognised and could not have imagined. There has been the dramatic decline in manufacturing and the expansion of the service sector, especially public sector services. The largest employers in Newcastle are the hospitals, the universities, the DSS—known locally as “the Ministry”—and the local authority. According to recent research by Fred Robinson of St Chad’s College in Durham—this is a sobering thought—more people in the north-east now work in shops than in factories. There is little doubt that the growth of the public service sector has saved us from even more serious economic difficulties. As the noble Lord, Lord Bates, indicated, that makes the north-east particularly vulnerable and likely to be badly affected by the cuts in public expenditure that we all fear in the coming years.
Thirdly, there is still the north-south divide, which is getting ever wider. The north-east still lags far behind the south of England on all the indicators. Within the region, too, there are great contrasts, perhaps greater than ever. Put simply, Easington and Hexham live in different worlds. The north-east is still the least prosperous region in the United Kingdom, and has a great deal of catching up to do if it is to become more aspirational, more entrepreneurial and more open to, and accepting of, change. The Barnett formula is still a major handicap and urgently needs revisiting. It is particularly notable how disadvantaged our region is in relation to our neighbour immediately to the north.
In summary, I am excited by what has been achieved, but anxious about some parts of the future, because we are the least prosperous region and our economy has structural weaknesses. The recession, together with rising unemployment, is a major threat to our future. I am anxious, too, because of the difficult circumstances faced by many of our young people. Today, 25 per cent of children in the city of Newcastle live in poverty—that is one in four. The figure for the whole region is even higher—29 per cent. That is why government initiatives like Sure Start and New Deal have been so welcome. Yet in some of my parishes—this is not unique to the city of Newcastle—three generations of some families have never worked. On some of our estates, 80 per cent of males over 16 are in receipt of benefit. Poverty remains the stubborn, overriding problem—the awful, grinding, multiple deprivation that so many experience, not only in the inner-cities and on the outer estates, but, increasingly and often hidden, in the rural parts of the region.
What do we need for the future? We need a new Barnett formula, a regional development agency—established by whoever forms the next Government—with focused regional policies to support and develop some of the new industries, not least in renewable energies, that are beginning to be developed. We need investment in transport. When is the A1 going to be dualled? We must be the only region in the country that does not even have a dual carriageway running through it. Above all, we need the recognition that the people are our most precious and important asset. The sense of identity, place and community still survives. All our policies—local, regional and national—must put our people first, to give them hope and confidence to develop the new and essential skills that will be needed for our region in the future.
My Lords, being a strong believer in one nation, I thought it entirely appropriate that someone coming from the English region that is furthest from the north-east should speak in support of my noble friend tonight, expressing solidarity from the deepest south-west of England.
I greatly admire the north-east, and its greatest resource is its people—that was the note on which the right reverend Prelate ended. He was too modest to point out to your Lordships that the north-east has the highest number of Christians of any English region— something that should be celebrated. The noble Baroness, Lady Quin, mentioned regions. Regional development agencies may have a role, but I note that the very sensible people of the north-east—78 per cent of them—voted in 2004 against having the incubus of a regional assembly imposed on them by a Labour Government whom a majority of them must have voted for. That shows the great common sense of people in the north-east.
As we have heard tonight, the north-east is particularly lucky to have such a powerful, persistent and eloquent advocate as my noble friend Lord Bates—truly a regional treasure in every sense of the word. In supporting him tonight, I have four questions to ask the Minister. The first is whether the fact that the north-east still has the lowest GDP of any English region is a matter of any concern to her and to the Government, and to ask whether she will pause in her speech for a moment to tell the House what the Government have done since 1997 to address this issue at the heart of the socio-economic prospects for people in the north-east.
Secondly, are the Government satisfied that the region—one of their political heartlands—is getting its fair share of public expenditure and effort, whether for the modernisation of transport links—again, to which the right reverend Prelate referred—or excellence in training or whatever else?
Thirdly, does the Minister share my deep concern that as Scotland and England—alas—drift further apart, any north-eastern disadvantages in socio-economic expenditure and gross domestic product are being more starkly compounded by the much greater per capita socio-economic expenditure north of the border in Scotland? This uncomfortable fact will become progressively more uncomfortable as we see the institutional frontier between our two countries becoming more entrenched. I must tread delicately here. Some, as it were, Scottish characteristics are present in the north-east, ranging from the highest rate of male heart attacks in England to the highest number of students likely to pick a university in their home region—75 per cent of students in the north-east come from that region. The figure for Scotland is 95 per cent. This is not good for one-nation mobility and people learning from as well as with each other.
Fourthly and last, does the Minister feel, as we slowly come out of the recession, with capital costs and long-term interest rates being that much lower, that an energetic region like the north-east will gain most—as my noble friend Lord Bates said in his formidable speech—by exploiting its skills in software, systems engineering, clean energies and in biosciences, and by building on those firm foundations, as it once did so splendidly on coal, ships and chemicals?
My Lords, I am delighted to follow the noble Lord, Lord Patten. He and I entered the other place together in 1979 and have been political opponents ever since, but I agreed very much with what he said. I also congratulate the noble Lord who initiated the debate and pay tribute to the very eloquent way in which he has very quickly become a strong advocate for his own region. He was a very good constituency MP, if I may say so, and also rather a good Government Whip, and I am delighted to see him appear on the Front Bench opposite from time to time.
My own credentials for intervening in this debate are that I have been an acute observer of the north-east economy for at least 50 of my 72 years. I was born and educated in the region before I went away to the noble Lord’s university, Oxford. The whole of my extended family was scarred by the dreadful experiences of the 1920s and 1930s, and that has given me a passion against unemployment and for economic prosperity and the abolition of poverty, which lives with me still.
I have been a practitioner in the realm of economic development in the north-east for almost 40 years, having headed up economic development at Tyne and Wear in 1974 and having been chairman of the North of England Development Council, the predecessor of the predecessor of One North East, in 1974. Of course, I have seen different Governments and different economic policies come and go. Some of them have been better for the region and some have been worse. From about 1994 onwards, I saw the continuous economic growth which went all the way through the Blair Government and, sadly, ended at about the time of the Northern Rock debacle, the credit crunch and the global crisis. During that long period, I saw the economy of the north-east utterly transformed, as were the riversides of Tyne and Wear and the Tees.
The infrastructure was transformed too but, more importantly, we saw all five universities punching their weight in the economic development of the region. There is still some way to go but it is a very welcome development. We also saw the growth of entrepreneurship. Historically, following the glorious days of which the noble Lord spoke—of Swan, Armstrong and all the wonderful entrepreneurs of that generation—our region became far too wedded to large organisations and entrepreneurship fell by the wayside. It had grown extensively during the long period of economic growth, but it still has a long way to go. I have long been an advocate of SME development and micro-business development, and I criticise the many small business agencies of successive Governments which have talked the talk but very often have failed to walk the walk. They have not given local entrepreneurs the kind of advice that they have needed. They have been given all kinds of other advice, often from failed business people, but not the sort of timely advice that the entrepreneur needs. Therefore, that is something for the Government to look at again. However, the region has been transformed and I am enormously proud of the resurgence that it has experienced, symbolised by the Baltic, the Millennium Bridge and the Alnwick gardens, among many other things.
It looks as though my time has quickly disappeared. I am pleased to have taken part in the debate, although I wish I could have spoken for a couple of hours more.
My Lords, I join in congratulating my noble friend on obtaining this debate, but I want to look back a little and ahead a little in considering the issue of creativity. The north-east used to be famous throughout the world for its creativity. At Middlesbrough, on one of the three rivers, in 1820 there were 25 people, two farms and a hermit’s chapel. By 1853, Bolckow, who came to England in 1827, was the mayor and the Member of Parliament for Middlesbrough. He had created with Vaughan the modern iron-making, then to become the steelmaking, business.
Gladstone went to Middlesbrough in 1846 and called it the Hercules of England, and there are many other such examples in the region. In 1833, the Stockton and Darlington railway reached Middlesbrough, and that is where passenger-type railways started. Then there is the Iron Bridge in Sunderland, and there are many other examples, including Bell Brothers, Dorman Long and the bridge over the Tyne—the prototype for the Sydney Harbour Bridge. However, everything that has happened in the north-east in the three rivers region since then does not match the creativity of that period. In many cases, it has been driven by very large companies whose headquarters are not in the north-east—not in Newcastle, Sunderland or Middlesbrough.
Starting in the 18th century, Newcastle became, and remains today, famous for its glass. In fact, you will find Newcastle engraved glass achieving the best prices at Christie’s, Sotheby’s and other auctioneers. We also have the potteries. In Newcastle, we had Maling, Austin and Dixon, and Linthorpe in Middlesbrough with Dresser as the designer. There were also the potteries in Stockton, one of which used to spell Wedgwood wrongly on the bottom of its pottery so that no one thought that it was actually Wedgwood. These are now collectors’ pieces. All that went with the disappearance of Jobling, which manufactured Pyrex in Sunderland.
I do not need to go into the disappearance of all the pits and the iron ore from the Cleveland Hills because it was not of a suitable quality for today’s iron and steelmaking. All sorts of things have happened on the three rivers. For example, there was the building of the Liberty ships in Sunderland, which in the war represented an amazing effort on the part of that shipyard. There is nothing equivalent today.
We need to recreate the spirit of adventure and creation, but there are two preconditions to that. The first is that we have to remove centralisation, particularly in education, together with the idea that one way of developing creativity is the right one. I am sorry to disagree with the noble Baroness, Lady Quin, but the regional development agency—God bless it—is full of good endeavour but it will never be creative. Governments absolutely do not score on creativity and never will. Secondly, we need to make room for social leadership in the region, not by politicians but by independent institutions and individuals. We need many more decisions to be made by those who can lead and who are not in the official loop but are often defiant of authority. We need far fewer strategy and committee meetings, and the virtual disappearance of consultants. After all, if you cannot do it yourself, you become a consultant.
My Lords, I thank the noble Lord, Lord Bates, for introducing this debate, which has enabled those of us who live in the north-east to blow its trumpet. Of course, we are all very aware of some of the problems. One or two themes are running through the debate. The region has the lowest GDP and is dependent on the public sector. There are transportation problems, as the right reverend Prelate said, including the ever present problem of dualling the A1 throughout the country. I have spoken about that many times before, so I shall not do so today, but I hope that the Minister is well briefed on it and can perhaps say something about it. There is also the issue of a fair deal for those in Northumberland. I live in the very north of the north-east, in north Northumberland, right up against the Scottish border, so the fair deal and the Barnett formula are very close to my heart.
I want to say a little about the differences that affect us in north Northumberland. We need more help with education and training and with communication—not just the transportation on the A1 but also internet access in rural areas. I shall say more about that in a minute. We need a fair deal. Our local government has been reorganised. Under the old system, we had six districts and a county. The rural areas received extra funding to deal with their problems, and the urban south-east—the Ashington and Blyth area—got extra funding to deal with the deprivation there, too. The area has all been put together in one authority and we do not get any of that now. I ask the Minister to look carefully at that. I know that the Secretary of State, John Denham, at CLG, is aware of this, but can we please have more pressure to ensure that we have a fair deal on funding?
The take-up of further education and higher education in my area is very low. We have been particularly badly hit in Northumberland by the debacle of the Learning and Skills Council and the funding for further education colleges. Northumberland is the only county not to have benefited from the substantial budget of more than £20 billion already spent on the further education capital programme. Recently, the bid from Northumberland College has fallen apart, which means that in Berwick we shall not get a £20 million skills centre. I would like to quote from a letter from the principal of Northumberland College. She wanted me to bring this to the attention of the Minister. She says:
“I do not believe Ministers are fully aware of the hugely destabilising effect the whole LSC capital funding debacle has had on individual colleges, made even worse by the subsequent announcements of a reduction in adult funding and demands for £500m efficiency savings, all at a time of economic recession. The FE sector historically has been able to help individuals and communities hit by mass redundancies retrain, finding new skills which equip them to access new employment opportunities … Ironically, the college finds itself in a position of having to make some of its own staff redundant as a result of funding cuts and the hugely challenging aim to achieve a surplus against all the odds in one of the largest, and most sparsely populated county in the country”.
That sums up the problems that we have in further education, but we are miles from higher education. Berwick-upon-Tweed in north Northumberland is further from higher education than almost anywhere else in the country. A local group there are putting in a bid to HEFCE, under the auspices of A New “University Challenge”. I hope that the Minister can ensure that we get some help on that front.
We have already talked about the A1, but I am grateful to the Commission for Rural Communities, which has pointed out the problems that we have in north Northumberland with access to the internet. Three-quarters of rural internet users say that they use the internet for transactions, which is a larger proportion than of those who do not live in rural areas, but only 1.5 per cent of homes in villages and hamlets can access cable-based broadband services, whereas almost 60 per cent of urban homes can. That limits access to government services and to the full range of social benefits available, such as cheaper bills and healthcare diagnostics through the internet. The UK has the highest number of public services available online, but if you look at a map showing the spread of high-speed broadband in the country you will see that Northumberland has big blobs without it. That also affects people trying to get jobs. Only 31 jobcentres, out of a total of 868, are in rural areas.
My time has run out and the Whip on the Front Bench opposite is indicating that I should wind up. I hope that the Minister can address some of these issues. I believe that north Northumberland is particularly disadvantaged.
My Lords, like other noble Lords, I am most grateful to my noble friend Lord Bates for bringing forward this debate today on a region that he knows so well—a fascinating, rugged and, as he said, beautiful part of our country. Its people, of which he is such an excellent example, are resilient and generous and reflect its countryside, which also contains some of our vital natural resources. It is a diverse region. Its urban areas clearly have very different characteristics from its rural areas. There are key differences, too, between each of its major urban areas. It is a spectacularly keen and capable sporting region.
As we have heard this evening, not least from the right reverend Prelate the Bishop of Newcastle and the noble Baroness, Lady Quin, it is a region that has been through decades of structural change. Your Lordships will also well remember the tragedy, as the noble Lord, Lord Foster, said, of Northern Rock. The automotive and construction sectors have recently been particularly hard hit. It saw the largest increase in business failures of all regions in the UK last year, at over 40 per cent, rising at the end to nearly 60 per cent. Nissan and Corus, among others, have had well publicised problems and have laid off large numbers of people, adding to the hardship being suffered. Unemployment in the region is among the highest in the country, despite which many of the region’s manufacturing businesses have trouble attracting higher-skilled engineers. The critical links in the supply chain—for example, in the auto-manufacturing sector—are especially vulnerable.
Transport infrastructure, especially for freight, has also come in for criticism. My noble friends Lord Bates and Lord Patten, the noble Baroness, Lady Maddock, and others have spoken of road transport. This is particularly worrying if the north-east is expected to maintain its exciting emerging pre-eminence in exports.
A key challenge facing the region is its overreliance on the public sector. As government finances become ever more stretched, as the right reverend Prelate said, this will place it at considerable risk. Furthermore, while the Budget promises emphasis on infrastructure and green investment, as Simon Hanson of the FSB said to the North East Regional Committee of the other place on 5 June, not much of the promised investment is filtering down through the RDA to business. Tony Sarginson of the Engineering Employers’ Federation says that such help as is available is confusing, complicated and difficult to access.
However, it is not all bad news. Although the north-east has subsequently taken a knock, in the year to last September the region showed the highest growth in exports in the country. As the noble Baroness, Lady Quin, said, it was the only region with a positive balance of trade. Employers and unions are working together to maintain skills in businesses.
As the noble Lord, Lord Foster, told us, the region has five universities, with respected excellence as a knowledge base, which will be essential to lifting us out of the recession. My noble friend Lord Eccles spoke of the importance of creativity. The presence of Sage, of which my noble friend Lord Bates spoke, shows that the region can produce the necessary highly technically literate people. The region is well placed to benefit from a national shift of emphasis from financial services in favour of manufacturing and there are early signs of promise in its green economy, to which my noble friend Lord Patten referred.
We on these Benches recognise the region’s potential and, as shown by the fact that we have three senior shadow Ministers responsible for different areas within it, we are 100 per cent committed to it. We believe that we must rebalance the region's economy, so that it does not rely proportionately so much on the public sector. We must revolutionise support for small businesses—ever more crucial in a recession. Across the country, 33 per cent of funding intended for them is lost in operating costs on its way through the RDAs and their organs. We would incentivise local government to encourage the start-up and expansion of local businesses, reform the business rates system and overhaul the hugely centralised system of bureaucracy.
Noble Lords will be aware that we on these Benches are sceptical of too much national and regional government. We would focus the RDAs much more clearly on economic development—something that, in fairness, One North East has been better at than others—and demand improved delivery. We recognise, too, that life is not just about economics. The social advantages that my noble friend Lord Bates referred to are also important.
Last but by no means least, as the noble Baroness, Lady Maddock, said, education and skills are crucial to the future of the north-east. As we have said in our debates on it, the apprenticeships Bill is so far a wasted opportunity. We look forward to another day in Committee on it on Thursday, when we will continue the process of trying to improve it to the benefit of all regions, not least the north-east.
My Lords, I am grateful to the noble Lord, Lord Bates, for his informative history, as well as for giving us the opportunity to discuss the prospects of the north-east region. As the noble Lord said, it is very special in historic, cultural and economic terms. It is also a region that, as the right reverend Prelate the Bishop of Newcastle acknowledged, has transformed itself significantly in the past 10 years.
In 1997, the north-east was at the bottom of the league table of English regions, in terms of gross value added and unemployment—a matter of great concern, in response to the question asked by the noble Lord, Lord Patten. It has since become the fastest growing of the nine English regions. The north-east economy has grown by 2.2 per cent a year in real terms since 1998, which compares with the average growth of just 1.1 per cent between 1990 and 1997. That has delivered a real change in the living standards and life chances of the people of the north-east. Traditional industries in the region have given way to new, knowledge-led enterprises based on innovation, entrepreneurship and international competitiveness. The region is gaining competitive advantage in sectors from healthcare to life sciences and process industries to renewable energy, many of which the noble Lord, Lord Bates, illustrated very effectively.
That is in part a result of this Government’s policy of supporting and investing in economic development in the north-east to strengthen enterprise and support job creation—a somewhat different approach to that of the Leader of the Opposition's favourite think-tank, Policy Exchange, which called for the people of the north to move south. We have indeed funded the north-east RDA significantly. One North East receives funding of £98 per head, more than any other RDA, and well above the average in England of about £44 per head. Although, as the noble Viscount, Lord Eccles, says, it may not score on the creativity front, the RDA has a very successful track record. An independent evaluation found that, since 2002, One North East has generated £4.30 for every pound that it has spent and, in terms of the business support schemes, £11.60 for every pound that it has spent.
I am very pleased that the noble Lord, Lord Bates, acknowledged the performance of One North East; it is of course a shame that his conviction is not shared by the noble Lord, Lord De Mauley. Indeed, the Opposition have often called for the abolition of the RDAs, although there is some confusion in that policy with regard to the north.
My noble friend Lady Quin rightly asked about the impact of the global recession on the north-east over the past year. Our assessment is that its economy was first and hardest hit at the start of the recession in the last six months of 2008. While Northern Rock was of particular symbolic importance, it was the region’s continuing reliance on manufacturing that drove that early performance. Since then, while still contracting, the rate of decline has eased in comparison with other regions because of lower input costs, flexible working and competitive sterling.
In addition to helping stabilise Northern Rock, our help to the north-east in the recession has allocated £46 million to frontline business support this year to ensure that viable companies can survive. This includes £6 million for its capacity fund to boost the skills supply in priority areas. The car scrappage scheme, which has 94,000 registered orders in the country, is directly supporting Nissan in the north-east, which has said that as a result of the scheme, it has resumed three-shift volume production and is recruiting extra workers. The car scrappage scheme will also increase demand for Corus steel. The Government have also offered Corus up to £5 million of funding for training to help protect jobs.
The Government will never be complacent about the need to support businesses and individuals through the recession and to ensure that they recover in a way that allows them to compete in the global economy. The key to this recovery is a balanced economy that increases the productive base of every region, not relying on the south-east as the engine of growth. We are doing, and will continue to do, all we can in the north-east to combat the immediate effects of the recession, stimulate a sustainable recovery and improve its prosperity relative to other regions. As the noble Lord, Lord Bates, said, the key is to increase productivity based on skills, enterprise, innovation, exports and new industries, each of which I shall briefly comment on.
There are significant challenges remaining in upgrading skills in the region, as the noble Baroness, Lady Maddock, pointed out, but we should also celebrate the fact that the north-east has moved from being the second worst in level two skills in England to being in fourth position, an increase of 41 per cent since 1998 and the largest rise seen in the English regions. While I recognise the problems that the noble Baroness pointed out, the Higher Education Funding Council’s university challenge has agreed to provide an extra £2.5 million to the region’s five universities to equip businesses and individuals with new skills. I also assure the noble Baroness that we made a commitment in the Digital Britain report on universal access to broadband that will affect the regions that were discussed.
My noble friend Lord Foster rightly focused on the importance of small businesses and enterprise. There has been some progress in forging an enterprise culture within the region. Of course, there are fewer people in business or aspiring to start a business in the north-east, but the region has grown its business stock at a faster rate than the national average for the past five years, and its early stage entrepreneurial activity has increased from 3.2 per cent to 5.1 per cent, therefore closing its gap with the rest of the United Kingdom, which has increased to 5.5 per cent.
The north-east scores highly on innovation, and we are reinforcing that position. It has the greatest average annual domestic expenditure on research and development, running at 2.4 per cent per year since 1998. In 2007-08, One North East, the RDA, invested £45 million in programmes directly attributable to science and innovation. The region is also very strong on exports and runs a trade surplus. Until September 2008, the north-east enjoyed eight successive quarters of export growth and outperformed every other region in the United Kingdom. Although that fell back in the early part of this year, exports to key markets, emerging markets and growth markets, such as Brazil, China and India, are still growing, and we are supporting that through UKTI.
In addition to exploiting overseas markets, the region is also attracting foreign direct investment. It had 53 inward investments in 2008-09 from the US, India, Japan, China, Sweden and Norway in sectors including autoelectronics, energy, life sciences and digital media. They are worth over £200 million in capital investment, will create almost 2,900 new jobs and will safeguard 1,400 existing jobs over the next three years.
Looking to the future, the region already has expertise in developing green technologies from offshore wind to bioprocessing and has had the particular foresight to establish a new and renewable energy centre in Blyth. The offshore wind market alone could generate £3 billion for the regional economy and create between 15,000 and 30,000 jobs. We will work with north-east businesses to ensure that they reap these commercial rewards.
I have not been able to address all the questions that have been asked, but I have made a note of all of them and I will answer any outstanding ones in writing. I thank the noble Lord, Lord Bates, for the opportunity to showcase the north-east in this debate and to demonstrate the Government’s commitment to building its economic strength, to developing new areas of expertise and to enabling the region to return to the sustained economic growth that it has managed to achieve since 1997.