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Manufacturing: Economic Policy

Volume 727: debated on Wednesday 4 May 2011


Asked By

To ask Her Majesty’s Government what representations they have received from manufacturers on their economic policy.

My Lords, the Government receive representations from manufacturers and representative bodies such as the manufacturers’ organisation, the EEF, which contribute to the debate on a wide range of topics, including the Government’s economic policy. EEF recently stated that the Government’s growth review has now started to deliver tangible progress in removing barriers to growth, investment and job creation in the United Kingdom.

My Lords, I thank the noble Baroness for that Answer. The United Kingdom, of course, is now the world’s sixth largest manufacturer by output. Although some emerging economies are able to produce goods cheaper than in our country, we still have a number of advantages in design, research, pharmaceuticals and technology. However, there is still a problem between the level of economic activity in high employment regions and areas of high unemployment. What action do the Government propose to limit these variations?

My Lords, the Government fully recognise that a strong manufacturing base across the whole of the country is an essential component of a balanced and dynamic economy. We are working with business, taking action to strengthen manufacturing capability, addressing the barriers to growth in areas, trying to cut excessive red tape, encouraging innovation, export and business investment and improving skills throughout the country. It is a long haul but we are certainly on the move.

My Lords, there is a perception that manufacturing in Britain is dead. However, as the noble Lord, Lord Sheldon, said, we are still the sixth largest manufacturer in the world and manufacturing makes up almost 15 per cent of our GDP. What are the Government doing to help address this misperception? Furthermore, does the noble Baroness agree that the increase in manufacturing recently has been as a result of the weak pound and strong exports? Does she further agree that if consumption suffers because of cuts and tax increases, manufacturing may suffer as well?

My Lords, there were many questions in there and a great deal of good information too. Perhaps I should say that I agree with an awful lot of what the noble Lord has said and see whether that helps me. We are aware that we should look at tax and all the other things which hold back business, and we are doing so all the time. It is important for us to make the United Kingdom Europe’s leading exporter of high-value goods and related services, and anything the noble Lord can do to encourage and help me I will listen to.

My Lords, bearing in mind that the clear objective of Her Majesty’s Government, as has been articulated by the noble Baroness, is to rebalance the economy away from financial services, particularly in London and the south-east, is she concerned about today’s statistics indicating that growth in manufacturing is now slowing?

My noble friend has read the same newspapers as me this morning. I think he is referring to the purchasing managers’ index, which suggests that there is a slowing of the growth rate in orders and output although it remains positive. What has been slowing is consumer spending at home and, in some ways, it is difficult to say that people should go out, get themselves into further debt and spend just to help our industries. The most important thing our industries can do is to make sure that we have the right skills and the right people doing the right jobs. The fact that we are doing so well at exports is the one thing that is absolutely glowing ahead for us.

My Lords, we have heard from employers about the importance of apprenticeships and the way in which they are encouraged in economic policy. The Minister referred to the skills which come from apprenticeships. Does she agree that apprenticeships are very important?

I of course agree with noble Baroness. The Government are putting in place funding for 75,000 more adult apprenticeships than the previous Government were providing—and they were providing a lot, too. So we are on the way. The Government are committed to increasing the number of apprenticeships —particularly advanced apprenticeships—so that we bring people up with the skill base that will be relevant for this century and the next.

My Lords, as many noble Lords are aware, I have run an SME for many years. One of the real problems we have found is access to funding. Can my noble friend say how Her Majesty’s Government can help access to funding, particularly where growth is concerned?

My noble friend Lord Courtown speaks well for SMEs, as he always does. We are trying to ensure the flow of credit to viable SME manufacturers. This is essential for support and growth and is a core priority for government. Some of the things we are doing to help include: continuing the enterprise finance guarantee until 2014-15, potentially enabling more than £2 billion of additional SME funding; continuing the enterprise capital funds programme to provide £300 million of venture capital for early stage innovation SMEs with high growth potential; and working with the British Banking Association on a range of commitments to assist SMEs with accessing the finance that they need. In addition, the Government are taking forward a package of investment readiness support for high-growth potential SMEs through the Business Coaching for Growth programme. My gosh, we should not fail with all that going on.

My Lords, the House will have noted that the Minister agreed with the noble Lord, Lord Bilimoria, that the single most positive factor in favour of manufacturing at present is the decline of the exchange rate. What does the Minister say in response to the independent Office for Budget Responsibility which has reported that government policies on the economy and in particular on manufacturing are likely to have a minimal effect?

My Lords, I repeat what the Chancellor said when we started on this rocky road last summer: we face the deepest recession that we have ever faced and we are going to go through very choppy waters. I have no doubt that, if I read out the hundreds of words that I have here to the noble Lord, we would agree that there are times when we get it right and times when we do not, but at the moment we are on the right trend.