I beg to move,
That this House has considered jobs and livelihoods in developing countries.
I draw attention to my entries in the Register of Members’ Financial Interests.
“A good job can change a person’s life, and the right jobs can transform entire societies. Governments need to move jobs to center stage to promote prosperity and fight poverty”.
Those are the words of Dr Jim Yong Kim, president of the World Bank, in his introduction to the 2013 World Development Report. In 2014, my right hon. Friend the Secretary of State for International Development said:
“Growth reduces poverty through jobs…raising incomes for individuals through the dignity of work and providing tax receipts for governments to fund basic public services like health and education.”
On the other hand, the lack of jobs and the opportunity to earn a living fuels discontent and unrest and drives economic migration. We are seeing the consequences right now, which is yet another reason why working in partnership around the world is both the right thing to do and very much in our national interest.
In sustainable development goal 8, UN member Governments commit that by 2030 they will achieve
“full and productive employment and decent work for all women and men, including for young people and persons with disabilities, and equal pay for work of equal value”.
Just last year the International Development Committee published a report on jobs and livelihoods. One of its recommendations was that jobs and livelihoods were “such an important issue” that its successor Committee in this Parliament should take it up
“to assess what progress has been made.”
I am sure that that will happen in the coming years, but I wanted to ensure that the matter was raised in the House. I am delighted to see so many colleagues present. Other members of the International Development Committee would have been here, but the timing of the debate clashes with a meeting of its Sub-Committee on the Independent Commission for Aid Impact.
Does my hon. Friend feel that the Prime Minister’s initiative to make a number of MPs, such as myself, trade envoys will contribute to the work he is describing, given the wide role we have been given? How much does he think the prosperity fund will play a role in helping to develop local industries and situations to enable the creation of new jobs?
I am most grateful to my hon. Friend for that intervention. He is doing fine work as a trade envoy for Nigeria, which is vital, because British investment around the world will help to create jobs. The prosperity fund will provide opportunities for people to develop that work. I entirely agree with my hon. Friend.
The 2013 World Development Report estimated that, globally, 200 million disproportionately young people are unemployed, with a further 620 million young people neither working, nor looking for work. Due to age profile and population growth, the report estimates that a further 600 million jobs will need to be found in the next 15 years just to keep employment rates constant. Personally, I would put that figure even higher, at closer to 1 billion.
I congratulate the hon. Gentleman on securing this debate. He is discussing the figures and alluded to the fact that we would like to go further. Does he agree that it is almost a pipe-dream that the sustainable development goal that appears to indicate the elimination of poverty and unemployment, particularly in developing countries, will be achieved by 2030? We really need radically to reassess what we are doing to achieve that goal.
The hon. Gentleman makes a valuable point. One reason why I called for this debate is because not nearly enough work is going on around the world. The UK is taking a lead, but he is absolutely right that much more needs to be done here and around the world.
In many countries, much of the work is subsistence agriculture and low-income self-employment—that is true for something like 50% of the 3 billion people working worldwide. Making ends meet is extremely difficult. I have to admit that all the figures I have cited are imprecise and sometimes speculative, which is a problem. We do not have accurate data, but I hope we will see more in future. It is about not only data but action, but action depends on good data.
The World Development Report found that: first, there are too few productive waged jobs in modern, formal sectors; secondly, most people are engaged in very low-productivity, seasonal or subsistence work in both rural and urban areas; thirdly, there are large gaps in job opportunities for women, youth and marginalised groups; fourthly, much work is in poor conditions, or is unsafe or risky, including in formal employment; and fifthly, many labour market-related institutions are ineffective, including skills institutions.
I congratulate the hon. Gentleman on securing this debate. I apologise that I cannot stay for the whole debate, but I am going to an event in the House of Lords to mark Small Charity Week and speak about the importance of small charities in international development. Does he agree that many small and grassroots organisations have an important role to play in equipping people in developing countries with precisely the kinds of skills he is talking about, which they need in order to move into productive employment?
I entirely agree with the hon. Gentleman. I will give an example of that later in my speech, but he is absolutely right. I made a similar point in Monday’s debate in this Chamber on foreign aid expenditure.
What can be done? I shall give several possible solutions. First, let us work with what we have. I shall start with agriculture, because it is at the heart of the economies of most developing countries. It provides most of the work and a considerable share of GDP, Government income and exports. It also provides the basis for local manufacturing. Even in developed economies such as ours, food and drink production is the largest manufacturing sector. Why should that not be the case in developing countries?
Although all countries will of course wish to diversify into other sectors and reduce reliance on agriculture, that is not the same as neglecting agriculture. That mistake has been made far too often in the past, both by Governments and by their aid-funded advisers. I am glad to say that things have changed over the past three decades. Countries such as India and Vietnam, and more recently Ghana, Tanzania and Ethiopia—to name but a few of many—have given much more prominence to agriculture and increased their support of it. The same is true of development agencies, especially the Department for International Development. I welcome that.
Working with what we have in agriculture also means working with the smallholder farmers who are its backbone. When I started to work with smallholder farmers nearly 30 years ago, the view of many was that they were on the way out, and that the future of agriculture was large-scale farming. In fact, they are more important than ever, providing food security even in conflict zones. For example, in the 1970s Angola produced a similar amount of coffee to Uganda, but Angola’s coffee was almost all produced on large estates, while Uganda’s was produced by smallholders. Both countries went through long periods of turbulence. Today, Uganda’s coffee production is the same as it was back then, if not more, but Angola’s coffee production has almost disappeared. Smallholder farmers are incredibly resilient.
I congratulate the hon. Gentleman on securing this debate. He has vast experience of developing countries. Does he agree that there needs to be an emphasis on educating young people so that there are links with the business community? He will know that every year in the House there are campaigns to get children in developing countries into education. That would help them on the pathway to jobs, no matter how little.
I agree entirely. I shall address that issue in a moment, because it is vital.
I have a couple of other examples of sectors in which we can work with what we have. Hospitality is important in every developing country. It is about not only international tourism, but looking after people in one’s own country and wider region. Hilton estimates that, if there is proper investment around the world, the hospitality sector alone could create an additional 70 million jobs over the next decade. Apart from agriculture and agricultural processing, construction is very likely to create and sustain jobs and livelihoods in most parts of developing countries. I shall say a little more about that later in my speech. We must also consider local services. Services are often neglected in favour of large manufacturing investments, yet in every town and city, along every main street, one will see service businesses. We need to support and encourage them, because if every service business employed one more person, millions more people would be employed throughout the developing world.
Secondly, not only should we work with what we have, but we must not stand still. Everyone wishes to see a better life for their family. Incomes from agriculture can be improved in many ways. That subject is worth an entire debate in itself, but, to be brief, they include enhanced productivity through better inputs, advice, irrigation, finance, diversification, storage to reduce crop losses, and access to markets and to information about those markets. In other words, that means moving on from subsistence agriculture.
DFID’s recently published conceptual framework on agriculture puts it well. It says that there is
“the assumption that sustained wealth creation and a self-financed exit from poverty depend, in the long-term, on economic transformation and the majority of the rural poor finding productive and better paid employment outside of primary agricultural production”—
note that the framework says primary—
“Despite the need for this transition, agricultural growth and downstream processing and productivity growth are likely to be important, if not essential, as a continued source, if not driver, of growth.”
When I was involved in buying cocoa from smallholder farmers, we saw the price per kilo paid to farmers, and hence their income, rise at least fourfold over two or three years as result of a combination of improved quality, better logistics, a higher world market price and a greater percentage of that price being paid to the farmers. It also depended on having a reliable buyer prepared to take a long-term approach, rather than one driven by short-term trading considerations. The farmers’ improved incomes not only sustained and improved their own livelihoods but created jobs at a tremendous rate. The money stayed in the local economy to support input dealers, schools, clinics, general stores and bars. That, in turn, created jobs in local and national manufacturing and service businesses. I am a believer not in trickle-down economics, but in trickle-up economics, and smallholder agriculture is at the heart of that.
I have concentrated on agriculture, but the need not to stand still applies to all the other sectors I mentioned. In hospitality, training, good-quality service and investment meet the needs of nationals, not just tourists. There is no reason why someone cannot provide an excellent hotel or tourist spot for their own population. They do not need to rely on a few hundreds of thousands or tens of thousands of overseas visitors.
Construction jobs can be enhanced through a formal apprenticeship scheme of the kind I mentioned. They can also be supported by placing specific requirements on contractors in large infrastructure projects to employ and properly train local people in their work. That is increasingly happening, but it needs to be extended to the most senior levels of the contract, not just the grassroots workers. Skills are best transferred in the heat of building a major road, bridge, airport or railway line.
Does the hon. Gentleman also recognise the importance of urban planning, in particular for the foundations it lays for economic development? We need to do more on that.
That is a very interesting point. I agree. We see the consequences of poor urban planning in many parts of the world. In that context and the general context of construction, I would like to ask the Minister whether all the infrastructure and construction projects that DFID supports now have clauses that require the training and development of local skills, rather than just bringing in professionals and others from outside.
Thirdly, we must act locally and regionally, not just from the capital city. People working at the grassroots are the best at creating large numbers of jobs, so Governments and aid organisations need to concentrate their work there, not just in capitals or large cities. The Bangladesh-based international development agency BRAC is effective at doing that, as I saw in Babati in Tanzania—a small town south of Arusha, which the International Development Committee visited in 2014. Charities such as Hand in Hand, set up by the Swedish entrepreneur Percy Barnevik, also work outside the main cities and capitals.
In Nigeria, which the International Development Committee visited in March, DFID has an office in Kano. I think it is the only major aid organisation based in Kano, which gives it the advantage of having a greater appreciation of the situation on the ground. I would encourage the same elsewhere. I would like to see DFID staff based in regional towns and cities, not just capitals. Given modern communication technology, we do not need expensive infrastructure to do that, and I think many would welcome the chance to do their work outside the bubble of a congested, expensive capital city.
Regional trade is vital. DFID has some excellent programmes—in particular, TradeMark East Africa, which, like many things I am going to talk about, is worth an entire debate itself. I will not say more about it at this stage, other than that I believe it has done some excellent work in breaking down trade barriers across the region.
Fourthly, we need to embrace job creation in public services, which are sometimes forgotten. Building public services, such as health and education, provides huge job opportunities. The NHS is the UK’s largest employer by far. At the moment, in Tanzania there is one doctor for every 25,000 people, whereas in the UK it is something like one for every 350. If Tanzania increased its number of doctors to one for every 2,000 people, that would create more than 20,000 highly skilled roles in that country alone, and probably more than 100,000 in total in the health sector. I am very glad to hear that this month Tanzania is considering increasing its health spending substantially in its budget. If that happens, there will be greater employment in the health sector. The same applies to education.
Of course, there is an argument that that depends on increasing Government revenue. That is absolutely true, but it also depends on choices about how Government revenue is spent. It is a virtuous circle: greater access to healthcare and education helps people’s productivity, and hence increases the income that generates taxes. I do not have an estimate of how many additional jobs will be created in developing countries if staffing and education reached just one quarter of developed countries’ levels, but it would be in the millions globally, and almost all would be filled by the young people who need them most.
Fifthly, we need to be inclusive. We need to ensure that the work covers everybody, and women and girls must be at the heart of it. Policies that exclude people are not only wrong, but bad for jobs and livelihoods, and hence economic growth.
Sixthly, there must be access to the right kind of finance, without which we cannot create jobs and livelihoods. Again, a separate debate is required on that issue, so I will limit myself to two examples. Small and growing businesses, which will create the most jobs and need finance, tend to be seen as risky. Commercial banks are increasingly risk averse in developing countries, as they are in developed countries, as they implement capital adequacy rules designed, understandably, to protect depositors. Loans come with high security requirements, so finance will increasingly need to come in forms that are not so restrictive. The providers will need to be willing to take on risk—that applies as much to the UK as to developing countries. The last thing we should do is discourage entrepreneurs by promising them destitution if things go wrong, which is pretty much what commercial banks in developing countries do: they take everything away if the loan goes bad.
The Economist recently published an article with examples of that kind of finance, including GroFin and Equity for Tanzania. I have to declare an interest: I helped to found Equity for Tanzania, and I am director of its charitable parent organisation in the UK. It leases equipment to the growing businesses in Tanzania, and takes as security only the equipment itself. It has the specific aim of job creation. Returning to the point that the hon. Member for Glasgow North (Patrick Grady) made, it was supported by a small grant from DFID about 12 years ago and developed into a much larger organisation.
The second example is CDC—formerly the Commonwealth Development Corporation—which invests in larger business. It has the specific aim, set up by the previous Secretary of State, my right hon. Friend the Member for Sutton Coldfield (Mr Mitchell), to create jobs and livelihoods, and to work in the most needy countries. I welcome that.
Finally—this also relates to the point made by the hon. Member for Glasgow North—we need education and training. A strong and diverse economy built from the grassroots also needs a vibrant education and training system that teaches not simply the essential building blocks—mathematics, sciences and languages—but the skills that people need to work for themselves or run a small enterprise. When the International Development Committee visited Sierra Leone in 2014, President Koroma stressed to us his desire to see more vocational training. In Nepal in 2015 we saw a vocational training scheme run by the Swiss and supported by DFID. There is a tendency to see traditional vocational training models as ineffective, having high capital and running costs and being inaccessible to young people. I believe we need models that are more akin to our apprenticeship schemes, and that are based on working alongside skilled businessmen and women. People should receive financial support for doing so, together with some central training. That is cheaper and more effective.
I also suggest there is a need to embed business and self-employment training within school curricula. Most students will end up working for themselves, or in small enterprises, and they will be better prepared if the training starts in school—again, the same applies in the UK. We do not have enough of that in our school curricula. It would also raise the status of business and self-employment as something a student wishes to do, rather than as a last resort if they cannot go to university or obtain a government or salaried job of some kind. Excellent work on that is done by Youth Business International, part of the Prince’s Trust network, and Peace Child International.
I will now look briefly at DFID’s work, first at its economic strategic development framework, which has five pillars: improving international rules for shared prosperity; supporting the enabling environment for private sector growth; catalysing capital flows and trade in frontier markets; engaging with businesses to help their investments contribute to development; and ensuring that growth is inclusive and benefits girls and women. I have already touched on many of those subjects, so DFID is already covering a lot of the ground. The DFID framework, however, excludes the role of public services in economic development, especially job creation. When the framework is next revised, I ask the Minister to include that in it; it is important.
The second area in which DFID is doing a lot of work is its youth agenda, “Putting young people at the heart of development”, published only in April this year. It focuses on two transitions, between childhood and puberty, or adolescence, and between education and productive work, going from dependence to independence. The April publication has been followed up with a couple of internal papers on youth and jobs, and youth and entrepreneurship. DFID is apparently preparing for a consultation on the issues later this year. That is good, and I welcome it, but we need not only consultations and papers, but action. DFID has the opportunity to lead such work internationally.
Finally, there is the World Bank, which I began with. I declare an interest, as I chair the international Parliamentary Network on the World Bank & International Monetary Fund. In 2014 the bank launched its Solutions for Youth Employment initiative and an umbrella trust fund for jobs, which is supported by DFID. Will the Minister tell us about any progress on that? Are we simply discussing a lot of nice platitudes, welcome though they are, and even policies, or are we talking about real action to create, or support the creation of, those jobs and livelihoods, which are so urgently needed?
In conclusion, I welcome what is being done at the moment. As the hon. Member for East Londonderry (Mr Campbell) said, we must go a lot further and a lot faster. I want to see every DFID bilateral programme fully engaged with the host Government on jobs and livelihoods, particularly for young people. They will find an open door, because that will always be one of the top priorities of any responsible Government. That does not necessarily mean large programmes in every country—we need to avoid duplication—but it does mean constant dialogue to see how we can support the Government.
DFID needs to use its influence in all multilaterals to put jobs and livelihoods at the centre of activity, particularly in health and education, which we cannot see as somehow completely divorced from jobs and livelihoods, because they depend on people working in them and having their jobs and livelihoods in those sectors.
Make no mistake, this is possibly the biggest challenge of our generation, along with tackling climate change. Hundreds of millions of young people could be ignored, without hope, seeking to move elsewhere, and at the mercy of people traffickers or extremists, or we could have those same young people engaged, valued and able to contribute where they are.
It is a pleasure to speak in the debate, Mrs Moon. I congratulate the hon. Member for Stafford (Jeremy Lefroy), who set the scene very well, as he always does. He clearly has not only a vast amount of knowledge and experience, but compassion for the people concerned and those he has interacted with over the years. It is always a pleasure to hear him, and it is a pleasure to follow him.
This issue must be highlighted; it is one in which many of us have an interest, especially given ongoing concerns about the amount of money that this House sets aside for overseas aid. We had a debate here on Monday about that, and the Minister responded to it. Every speaker in that debate said how important it was to retain the target of 0.7% of gross national income, although there were concerns about how the money is allocated. It is therefore important to not only retain money for aid in line with the GNI target, but look at its allocation.
I am unapologetic about always seeking what is in the best interests of my constituency and highlighting the best we have to offer. I have stood against austerity cuts that affect the vulnerable in our society and impact adversely on those who do not enjoy the same quality of life as many of us in this Chamber. I am proud to be an Ulsterman, with all that that entails—loyalty, compassion and generosity. My wee country is well known for having a big heart, which is why I have no difficulty in saying that it is essential for the Department for International Development to continue overseas aid. I know that on that issue, I speak on behalf of the vast majority of my constituents, who are generous to a fault.
In Parliament, we talk about the living wage and quality of life, and I argue passionately on behalf of my constituents on those issues, but I have also seen the flipside: those in other countries who have no quality of life or living wage. On a visit to a British Army base in Kenya with the armed forces parliamentary scheme—the hon. Member for Stafford was on the same trip—I was given a small glimpse of children living in absolute poverty, with no life and no hope whatever. I saw despairing mothers seeking to feed their children with scraps, and I saw men willing to work, but there was no work to be had. My heart was touched, just as I am touched by the needs in my community. When I saw such need, I knew that I would always stand up for the allocation of a small amount of funding to overseas aid to ensure that we can deliver the jobs and opportunities that the hon. Gentleman spoke about, and that the debate is all about.
I want the funding to be allocated, but there must be wisdom in how it is allocated to ensure that, as the saying goes, we give people the tools to feed themselves and their families for days and months, rather than simply giving them a meal. However, there is no point in giving a starving child a fishing net; wisdom lies in providing the child with a meal and the family with the ability to find future meals. That underlies the title of the debate, which is about promoting jobs and livelihoods in the developing nations that we support.
In March 2015, the International Development Committee published a report on jobs and livelihoods that said:
“Jobs and livelihoods is such an important issue we recommend that our successor Committee takes it up in the next Parliament to assess what progress has been made.”
It was clear in the previous Parliament and this one that the Committee knows that jobs are the only way to make a lasting difference to the lives of people throughout the world. The questions that arise are: have we been successful in our aim? Have we achieved those goals? Are we moving in the right direction?
I agree with my hon. Friend, but does he agree that the sustainable development target of eliminating unemployment and poverty over the next two Parliaments in the United Kingdom stands in stark contrast to escalating youth unemployment in developed nations? The eurozone has 40% youth unemployment. Without a radical and fundamental change, how on earth will we ever see anything remotely close to reducing unemployment and poverty in developing countries, let alone eliminating them?
My hon. Friend is most wise, as always. He sets the scene. There are many difficulties at home and abroad. All we can do in the debate is to set the scene and the goals, and contribute, we hope, to a strategy for a way forward. That is what we are trying to do. In 2014, the UK provided £752 million in bilateral aid directly related to jobs, businesses and the economy. Some £358 million was for particular production sectors, such as agriculture and forestry, and £394 million was for economic infrastructure and services, such as transport and storage, or banking and financial services. Together, that accounted for 11% of bilateral aid from the UK.
My hon. Friend has mentioned substantial amounts of money. Does he agree that it is essential for that money to be targeted on the people who need it? So often, we have seen corruption in a lot of the countries, with the money being siphoned off and going to the black market or whatever, and not getting to the people who need it.
My hon. Friend is right. Monday’s debate in Westminster Hall, to which the Minister replied, clearly hinted at such things. We all outlined examples where aid had not been focused on the sector that it should have been. My hon. Friend is right to highlight that point, as we did on Monday.
The Independent Commission for Aid Impact published a report on DFID’s private sector development work in May 2014, giving it an overall amber-red rating. It found that
“The impact of individual programmes is positive…and DFID has demonstrated its ability to assist the poor through a range of interventions”.
However, it also found that
“It has not turned these ambitions into clear guidance for the development of coherent, realistic, well-balanced and joined-up country-level portfolios.”
The hon. Member for Stafford is therefore right that that is what we should try to focus on.
How much of the money actually achieved its aim? Not much, it would seem. Have we made progress and moved from the amber-red zone? My fear is that we have not. Before her children came along, my parliamentary aide used to go to Africa every year in the summer to carry out mission and humanitarian aid work, and she told me of the horrific corruption in many countries that prevented aid from getting to where it was needed; my hon. Friend the Member for Upper Bann (David Simpson) mentioned that, too. The same goes for containers of agricultural equipment that we in Northern Ireland sent overseas; the containers reach their destination with some things having been taken out of them. In fact, those who pack the containers have learned to pack the essential stuff in the back, in the hope of it reaching its destination. The Elim church missionaries in Newtownards in my constituency of Strangford do fantastic work in in Malawi, Zimbabwe and Swaziland in Africa, as do many other churches across the whole of Northern Ireland, and indeed the United Kingdom.
Stories of corruption make it clear to me that work on ending it needs to be carried out with the Governments to which we send aid. We need to ensure that, when we send aid bilaterally, we do so only when there are procedures in place that allow it to make a difference on the ground, rather than being swallowed up in paperwork and translation. One of the best ways of achieving that goal is to use those who are already on the ground, and to divert funding through bodies that we see making a difference, whether that is Oxfam, Christian Aid or mission bodies with permanent staff on the ground.
The hon. Member for Glasgow North (Patrick Grady) spoke about charitable work. I know of one church in my constituency that, instead of giving Christmas presents, promoted the gift of a cow or a goat to Africa, so that individuals could breed the cows and in the meantime sell milk, or use it to live on. That is a practical way of doing things that changes lives in a small way. It may be a small change for the Government, but the change made in villages throughout Malawi and Zimbabwe was in no way small. Can we learn a lesson from missionaries who have been on the field for 20 years, and who know the systems and how to work in them to achieve results? I believe so.
There is a desperate need for jobs and livelihoods in these countries, and there is an onus on us, as a country that allocates a great deal of funding, to ensure that that is achieved, and that funding is not caught up, or whittled away in the process of getting to the man on the street. I look forward to hearing from DFID. I apologise to the Minister and the shadow Minister for the fact that I will not be here for their speeches, as I have a Select Committee to go to at 10.10 am.
I believe that we can effect change with the much-needed funding that this generous nation of the United Kingdom of Great Britain and Northern Ireland gives each and every year, and I encourage other countries to do the same.
It is a pleasure to serve under your chairmanship, Mrs Moon. What a great opening my hon. Friend the Member for Stafford (Jeremy Lefroy) gave to the debate on this incredibly important subject. As I had only two minutes to speak the other day, I was unable to congratulate the Minister on his knighthood—congratulations!
The UK has made significant contributions to improving the livelihoods of the poorest on the planet, and it is in our interests to help developing states strengthen further, economically and politically, if we are to avert the rise in emigration to the UK from developing countries. The UN states that we will need to create 30 million new jobs every year to keep up with the growth in the global working-age population. The enormity of that challenge is not something that the developing world can—or even should— shoulder by itself.
Our commitment to overseas business development should not be seen as just another programme aimed at helping the poor. It helps everyone, including the countries giving the aid. We are a trading nation, and as such we must always be on the look-out for new markets and new partners to work with. That includes those countries where we have to help develop and foster the conditions necessary for business to flourish.
It is in our national interest to encourage the growth of developing countries by unlocking the enormous potential of the private sectors in those countries. By encouraging business growth, we are turning those who receive state aid into key trading partners. Investment in developing countries brings them into our markets, as we now see across Asia and Africa. For example, our programme to support Rwandan agriculture has transformed the industry from a subsistence-based activity into one that is commercially oriented. With help from DFID, the Rwandan Government have collected greater tax revenues, which has meant that Rwanda’s dependency on foreign aid has declined. The Rwandan Government’s spending on education and healthcare programmes has trebled as a result of the revenues they have collected. Bilateral trade in goods between the UK and Rwanda exceeded £10 million in 2012, and UK exports to Rwanda totalled £7 million. The top exports included power-generating machinery, medicinal and pharmaceutical products, and general industrial machinery.
It is vital that we get the world’s young into work for their own dignity and personal development as well as their economic future. In so many places in the world, we see the consequences of young people feeling that they have no future because of conflict or migration, but where people have the opportunity to support themselves and their families, we see greater stability. That in turn encourages greater business development and attracts more investment.
The UK can be proud of its involvement in the millennium development goals, which significantly improve the livelihoods of billions of people. In particular, the UK’s action on development goal 8 has meant that, between 2000 and 2014, bilateral aid to the least developed countries fell by 16% in real terms, while 79% of imports from developing countries entered developed countries duty-free.
Globally, the population covered by 2G grew from 58% in 2001 to 95% in 2015, and anyone who has travelled in developing countries can see that even the poorest individual now has a mobile phone. Internet use has grown from 6% of the world’s population in 2000 to more than 40% in 2015, and 3.2 billion people are now linked to the content and applications that we can access here in the UK.
Those achievements in internet provision, coupled with the ready availability of technology, mean that people are seeing the quality of life in the developed world, so it should come as no surprise that the UK is a popular destination for those who have the skills and qualifications to get themselves here. Technology has vastly improved all our lives, and the opportunities for developing countries are even greater. Developing countries and businesses based there have leapfrogged obsolete technologies, which has allowed them to take advantage of the same level of technology that we enjoy. That has also placed on us a need to accelerate our programmes and ensure that as the expectations of those who live in developing countries rise, so do the opportunities available to them.
A lack of sustainable jobs, and livelihoods that fall below expectations, threaten to undermine our progress on the wider goals of tackling poverty. Unless we address that problem, we will continue to drain away the most educated individuals from the communities that need them most. As of April last year, about 80,000 doctors registered in the UK had obtained their primary medical qualification outside the UK. Many of them qualified in India, Pakistan, South Africa and Nigeria. In effect, developing countries are paying to train doctors for our health service. We have a high demand for doctors, but taking them from the world’s developing countries is counterproductive and not sustainable. Our foreign aid and investment in business development will not see real results unless we create an environment in which aspirational people see their future in their own communities.
A UN report highlighted that 780 million people in the world are earning less than $2 a day, which is the UN development goals’ definition of absolute poverty. We know that society as a whole benefits when more people are contributing towards their country’s growth, but employment must be worth while and rewarding. That is why it was so important that the UN reaffirmed its commitment to the principles of the global development goals in 2015. We will continue to build on what we have achieved.
We have committed to ensuring that everyone can enjoy prosperous and fulfilling lives by 2030 through the creation of sustainable jobs and by sharing the benefits of technology. Our business development spending must continue to be directed towards developing countries, helping them to build their economies and develop themselves. Continuing with that programme contributes significantly to our wider goals of eradicating poverty and conflict. It is essential that we make that one of our major focuses for the next 15 years and beyond.
It is a pleasure to serve under your chairpersonship, Mrs Moon. I congratulate the hon. Member for Stafford (Jeremy Lefroy) on introducing this important debate. He is a real advocate of what works in international development and it is a privilege to serve on the International Development Committee alongside him.
I am pleased to be able to take part in the debate. I have a great interest in the subject; I am a member of the Select Committee on International Development, and have a local interest as the Department for International Development in Scotland is based in East Kilbride, in my constituency. We need to recognise the importance of making sure that there are sustainable, inclusive jobs across the world; we must place that at the heart of the UK’s development agenda. I am particularly proud of my party’s work on that. The Scottish Government have a firm commitment to advance Scotland’s place in the world as a responsible nation. They have a £9 million international development fund and a £6 million climate justice fund, which supports 11 projects in places that include Malawi, Zambia, Tanzania and Rwanda.
Goal 8 of the sustainable development goals is about jobs and livelihoods. That key objective is required to be achieved by 2030. There is, as we have heard, much work to be done to realise that aim, and progress must be regularly monitored, and measured effectively through improved data collection and the development of disaggregated data. We need to ensure that the disproportionate unemployment rate for young people is tackled. About 600 million new jobs must be created just to keep things constant. Unemployment affects women and disabled people disproportionately. The target includes full and productive employment for all and equal pay for work of equal value, ensuring that no one is left behind. An example to consider is work that has been funded in Malawi, including projects focused on job development and economic growth. This month I met Malawian farmers who had developed a fair trade enterprise that enabled many people in their community to develop sustainable businesses. Their venture supported others besides their own families, and enabled many children to attend school. I would like DFID in future to fund initiatives of that type and think about developing them.
The Global Concerns Trust has run several projects that have helped adults with disabilities to receive vocational training. In one project, 106 adults have been given training in carpentry or tailoring, and the trust has given 57 people the tools they need to start their own business. Our development portfolio should ensure that no one is left behind. Another project has given 62 people with disabilities vocational training, as well as training in business skills and prevention of HIV/AIDS, so that they can help others in their community. That has helped people to earn a living, with a more than fivefold increase in income on average for those trained. Those achievements may seem small in scale, but they have a huge impact. They allow people the opportunity to develop and grow, and to create businesses and become economic contributors. They are then not reliant on government project work or aid for sustainability.
It is important for developing countries to have sustainable economies for growth—but that is not the only reason. There are also enormous psychological benefits to being employed and economically active. It gives dignity and fulfilment. Without a job people feel that there is no future for them or their families. Jobs meet important psychosocial needs, and work is central to individual identity and social status, whereas conversely there is a strong association between worklessness and poor health, including poor mental health, and poverty. Working towards full employment in developing countries helps to create a foundation of growing prosperity, inclusion and social cohesion.
DFID works on private sector development, but there is much work to be done in that realm. We need to engage private enterprise to ensure that the millions become the trillions that we need to leverage our sustainable development goals and make progress. We need a focus on entrepreneurship and allowing people to develop their own skills and attributes, including technological skills, which are so important to economic development. We also need effective measures to eradicate forced labour, slavery and human trafficking. We need to work at many levels.
It is necessary to develop clear guidance to ensure that future assistance is clearly structured to create coherent opportunities. It is a fundamental issue and it is of the utmost importance that we get it right and continually assess our progress. We need the UK Government to report on progress in an open, accessible and participatory way, supporting the active engagement of all, including children and marginalised groups. As I have mentioned, a key issue is that we require better datasets, which should be disaggregated across countries. I am hopeful that technology will be able to transform people’s lives—particularly women’s lives—across the world. Tools and equipment reduce drudgery and increase the amount of quality time that can be spent with family and on education. I would like a fair trade symbol to be developed, if possible, to show in particular women’s contribution to the production cycle, where women lead and develop businesses in the developing world. I should be grateful if the Minister commented on whether that is a helpful idea.
Jobs and livelihoods are crucial for all. The sustainable development goals mean that we must make progress at home as well as in developing countries. More focus is required on enabling, and less on scapegoating of the workless. That will give a motivation for change. I look forward to working constructively in the International Development Committee on this issue, as well as at home in my constituency, developing jobs and livelihoods for all.
It would be remiss of me not to congratulate the Minister on his elevation to a knighthood. I am sure that as a former Vice-Chamberlain of Her Majesty’s Household, who is traditionally held hostage in Buckingham Palace before the state opening, he had plenty of opportunity to lobby the right people, and his lobbying has come to fruition.
It would be remiss of me, too, not to pay tribute to you, Mrs Moon. Through your membership of the Select Committee on Defence you have become an expert in foreign affairs, international development and safety and security around the world, and I pay tribute to you for all that you have done in that field. You are now a leading light in this Parliament on those issues.
I want also to pay tribute to the hon. Member for Stafford (Jeremy Lefroy), whose speech taught us all a lesson. I have been a Member of Parliament for six years. So often in this place Members stand up, and we hear them read out a speech; but with his speech today the hon. Gentleman proved that he cares—and cares passionately. Throughout our debate we have seen something that we should remember in the midst of the referendum—many people try to divide us into in and out camps, but the one thing that unites us is that we are human. People in developing countries may live in places whose names we cannot pronounce, and that we do not understand; but if we care about poverty it does not matter whether it is in Blackwood or Newbridge in my constituency, Stafford or Mozambique. We all have a duty as human beings to care about those who are impoverished and who are suffering, around the world. The hon. Gentleman’s speech, and other speeches today, have expressed that.
There are many things we sometimes take for granted in the UK, which is one of the most developed countries in the world. We have fantastic infrastructure, such as our extensive network of motorways, which stretches across the country. We have the resources to put into projects such as HS2, to make a drastic improvement to rail links between the north and south. We do not have to rely on international aid for our business. Instead, we attract considerable foreign direct investment. Indeed, in 2014 the UK attracted foreign investment in a record 887 projects, which created more than 31,000 jobs in this country. Investors know that money invested in the UK is safe and will generate returns, in the main.
We are the lucky ones. For much of the rest of the world, specifically developing countries, the infrastructure and stability that we take for granted are simply not there. We have a responsibility to contribute towards the economic development of less developed countries, so those who live there become a market for us to trade with. More customers can never be a bad thing. Our assistance to developing countries in their efforts to industrialise, and to create business and thereby employment, is a moral duty. It will help to raise millions out of extreme poverty.
The United Kingdom has a long history of supporting international development. I may be partisan, but I am proud that the Department for International Development was founded by a Labour Government in the 1960s, under Jennie Lee, the widow of Aneurin Bevan. I welcome the commitment to more than double international development funding to £1.8 billion in 2015-16. We must ensure that that money is spent in the most effective way, providing the most value for money not only for our own citizens but for those we are trying to help. However, efforts so far have not been effective enough. The problem cannot be solved simply by throwing more and more money at it. We have seen over and over again that that does not work.
Although it is true to say that private enterprise contributes around 90% of jobs in developing countries, international aid must involve considerable planning and a joined-up approach in public institutions that takes a holistic view of a country. We must ask the question: what do they need, aside from money and finance, to do the business they need and to bring the jobs they need?
Businesses in developed countries rely on stability. It is simply not possible to do good business where there is war, conflict, crime and, above all, corruption. If we throw money at businesses in insecure countries, can we truly expect them to do well and ultimately provide jobs? It stands to reason that businesses will not prosper if they have to pay tributes or bribes to corrupt local politicians, or if corrupt businesspeople pocket aid money rather than invest it in their business. The president of the World Bank, Jim Yong Kim, said in 2013 that
“corruption is public enemy number one”.
In describing the effects of corruption, he said:
“Every dollar that a corrupt official or a corrupt business person puts in their pocket is a dollar stolen from a pregnant woman who needs health care; or from a girl or a boy who deserves an education; or from communities that need water, roads, and schools. Every dollar is critical if we are to reach our goals to end extreme poverty by 2030 and to boost shared prosperity.”
The point the hon. Gentleman makes about corruption is a very good one. Is he aware that the country I look after for the Government—Nigeria—has a President who has come to power to try to cure the corruption problem there and is doing a very good job on it? We are trying to help that through a number of projects, including a very exciting one: the judicial college will help to train judges to be able to deal with that sort of situation.
I am aware of the fantastic work in Nigeria and of the election of the President, who has got to the core of the problem. As we have seen in the past in places such as Rwanda, when corruption hits, it muddies the waters for fantastic projects such as those the hon. Gentleman mentions. It also gives rise to the idea that we should cut back on international aid and affects the efforts we are making.
Our strategy for international development clearly needs to focus on supporting the security infrastructure in developing countries and ensuring they have robust legal systems that can root out corruption. Security is fundamental to stability—I do not have to tell you that, Mrs Moon, since you are a long-serving member of the Defence Committee. Without stability, it is impossible for businesses to not only thrive but, in many cases, to survive.
The joined-up approach must also ensure that aid is given to education services and health services and invested in the infrastructure and logistics capability, which facilitate trade and economic growth in developing countries. A key reason for the rapid development of industrialised and highly developed economies is the heavy emphasis on education. A good, open and inclusive education system not only gives workers the basic skills they need to become a productive member of their local economy, but allows those with the ability to develop the skills to innovate and solve their own problems by developing their human capital.
Another key point is that the aid we provide should allow developing countries to help themselves, which we know they want, as nobody truly wants to rely on charitable aid. We all know the proverb, “Give a man a fish and you feed him for a day; teach a man to fish and you feed him for a lifetime.” In this case, that is very apt.
If we do not focus our aid on the fundamental things without which business cannot flourish—security, law and order, education, healthcare and infrastructure—we run the risk of continuing the cycle of extreme poverty and unemployment. If crime pays more than work or education, it is no surprise that many young men in developing countries turn towards it. That is yet more evidence that developing economies need balanced and simultaneous improvement, investment and aid across the board. It simply will not do to build an extensive road network if corruption is rife, just as it will not do to tackle corruption without investing in infrastructure.
Some say that charity starts at home and that we should cut away aid to developing countries. To me, that is a narrow-minded view. If we support economies in developing countries, we open up new markets where we can sell our products. Surely that is a win-win situation, as we will bring millions of people out of extreme poverty—the goal we all strive towards—and create more export and business opportunities for British companies, creating more jobs at home. We have a moral duty when it comes to international development. I am pleased to see that everyone who has spoken in this debate, from all parties, shares that goal.
Several hon. Members rose—
Order. I need to go to the Front-Bench spokespeople at 10.30 am.
I am grateful to you, Mrs Moon, for giving me the opportunity to speak. I will keep my remarks brief. First, I congratulate my hon. Friend the Member for Stafford (Jeremy Lefroy), who has over a number of years shown great passion, commitment and dedication to international development, and brings a huge experience and knowledge to this place. I have known him for a number of years. We have been to Rwanda, Burundi and Sierra Leone for Project Umubano, and I can vouch for his commitment to international development and in particular to entrepreneurship, livelihoods and jobs. This is a timely debate, following the debate in this Chamber earlier this week about the 0.7% target and the report on the implementation of the SDGs from the International Development Select Committee, of which I am a member.
I will keep my remarks to one simple fact: if we truly are committed to the 0.7% target, which I believe we are, and to the sustainable development goals, the way to move beyond aid and to move countries away from a dependency on humanitarian aid, with which I fundamentally agree, is through encouraging sustainable development and economic development. That means giving people a life chance, whether it is in our country or abroad. As the hon. Member for Islwyn (Chris Evans) said, if we teach a man a fish, he will feed several people. We must give people an education, which they need if they are to get on in life, just as they need to be able to earn incomes to look after themselves and their families.
DFID has a very good reputation for supporting many business projects. I have seen some of them, in particular in Nigeria. We need to keep our focus on enterprise and entrepreneurship. We need to keep women involved in this agenda as well, and above all, we need to recognise the value that business and enterprise can bring.
It is a pleasure to serve under your chairpersonship, Mrs Moon. I congratulate the hon. Member for Stafford (Jeremy Lefroy) on securing this debate. It is not the first of his debates in which I have spoken in this place, and I am sure it will not be the last. I am delighted to contribute today.
As Members have said, goal 8 of the 2015 UN sustainable development goals makes promoting inclusive and sustainable economic growth, employment and decent work for all a key objective for the world to achieve by 2030. Sustainable economic growth will require societies to create the conditions that allow people to have quality jobs that stimulate the economy while not harming the environment. Job opportunities and decent working conditions are also required for the whole working-age population. An adequate supply of jobs is the foundation of sustained and growing prosperity, inclusion and social cohesion. Where jobs are scarce or where livelihoods leave households in poverty, there is less growth, less security and less human and economic development.
In the current turbulent economic environment, job creation is one of the most pressing global development priorities. The aim to support employment and livelihoods with rising incomes, dignity and respect is a development goal that the Scottish National party would like to see at the heart of the UK’s development agenda. Jobs connect people to their society and the economy. Access to safe, productive and fairly remunerated work is a key vehicle for battling poverty.
As has been mentioned, the World Development Report 2013 found that:
“Worldwide, 200 million people, a disproportionate share of them youth, are unemployed and actively looking for work. An estimated 620 million youth, the majority of them women, are neither working nor looking for work. Just to keep employment rates constant, around 600 million new jobs will have to be created over a 15-year period.”
It also highlighted that the problem in many developing countries was that, although unemployment rates could be low, only a minority of workers were wage earners. More than 3 billion people are working worldwide, but almost half of them are farmers or self-employed. Most of the poor work long hours, but simply cannot make ends meet.
The SNP is committed to advancing Scotland’s place in the world as a responsible nation by building mutually beneficial links with other countries, as outlined in the Scottish Government’s international framework. Since 2007, the Scottish Government have doubled the international development fund to £9 million per annum and launched the climate justice fund, bringing the total spend on international development work since 2007 to over £86 million. The SNP has also highlighted Scotland’s commitment to the sustainable development goals.
Work funded by the Scottish Government has included projects focusing on job development and economic growth in Malawi. For over a decade, they have supported the Scotland Malawi Partnership and its sister organisation, the Malawi Scotland Partnership, which is based in Malawi. Through the two organisations, more than 94,000 Scots and 198,000 Malawians work in partnership together, and more than 300,000 Scots and 2 million Malawians benefit from those activities every year. The main focus of the Scotland Malawi Partnership is to work in dignified partnership with local people or Ubale, as they say in Chichewa. Scotland is playing an active and important role in helping to support jobs and livelihoods in Malawi by building markets for Malawian products.
Kilombero rice is a high-quality aromatic rice which the Malawi Government believe is an important export crop. For smallholder farmers it is an effective cash crop, which is popular among the urban population. The challenge is to assist more farmers to turn their smallholdings into effective, market-orientated, small businesses, which together can dramatically improve the livelihoods of people in northern Malawi.
JTS—Just Trading Scotland—is a Scottish fair trade importer. KASFA—Kaporo Smallholder Farmers Association—is a farmers’ association in northern Malawi. They have been working together, with support from the Scottish Government’s international development fund, to improve livelihoods and to strengthen communities. Since 2009, JTS has been working to establish a market for Kilombero rice, selling through civic society groups in Scotland: schools, churches and fair trade groups. This in turn has encouraged fine food distributor, Cotswold Fayre, and larger retailers like the Co-op to stock the product.
Howard Msukwa and Kenneth Mwakasungula, who are both rice farmers, visited Scotland last month to promote the launch of the rice in Co-operative food stores across Scotland and to tell people about the project’s success. The benefits of the scheme have been recognised by local rice farmers in Malawi. I had the pleasure of hearing both gentlemen speak at the Scotland Malawi Partnership road trip in Aberdeen.
Over the last five years, membership of the farming association in Malawi has grown from 2,500 to 6,700. Northern Malawi now has an effective farmers’ organisation that can deliver training and cost-effective farm inputs, and plays a vital role in community development. More farmers can send their children to secondary school and the first students are finding places in universities and colleges.
The key to success has been to link farm development work with establishing markets, which offers farmers an assured income. This encourages them to invest time and money to transform their farms. With altitude, climate and weather conditions ideal for cultivating coffee, Mzuzu coffee is another crop with a fast-growing reputation from one of the best coffee-growing regions in the world. In the 2014-15 Malawi “taste of harvest coffee” competition, Mzuzu took the top five positions. Interestingly, the first coffee plant in Malawi was introduced in the 1870s by John Buchanan from Scotland—it originated in the Royal Botanic Garden in Edinburgh, so there is a strong historical link.
The recently completed project by Scottish Government-funded TraCSS—Trading with Climate Smart Supply—aimed to stimulate sustainable economic growth in Malawi through development of agricultural value chains in a climate-smart and pro-poor way. The objective was to improve the competiveness of tea, coffee and pigeon pea value chains in an inclusive way to deliver improved smallholder incomes and to reduce natural resource degradation. One of the outcomes of the project was the distribution and implementation of the “Handbook for Sustainable Coffee Production in Malawi” through the Coffee Association of Malawi—CAMAL.
I am coming to the end of my time. The work of the Scottish Government and the Scotland Malawi Partnership demonstrates how Government aid and civic society can work to create markets for developing countries that will support jobs and livelihoods in the developing world.
It is a pleasure to serve under your chairmanship, Mrs Moon. I follow other hon. Members in congratulating the Minister on his recent knighthood and elevation. In months to come, we may disagree on many things, but we can agree that there is no question of his commitment and passion to his current role and public service.
I also congratulate the hon. Member for Stafford (Jeremy Lefroy) on securing and introducing this important debate. He has a long-standing commitment and expertise in this area. Indeed, he was present when this important matter was last considered by the Select Committee on International Development. He made some important points in his excellent speech today and emphasised the importance of supporting industries such as construction and agriculture. He also made an important point about young people and putting more emphasis on education and training.
Hon. Members on both sides of the Chamber made passionate and important contributions about ending extreme poverty, at the heart of which is corruption. It is real and must be addressed. It is a major roadblock to economic development around the world.
Hon. Members referred to another important point: the SDG and whether it is over ambitious. I think it is time we were ambitious and aspirational. Unemployment around the world may not be eradicated by 2030, but we can have that vision and I ask the Minister to ensure we thoroughly mark the SDG8 indicators.
Regardless of who someone is and regardless of where they live in the world, a good job can change their life. Decent opportunities and decent wages provide families with shelter, food and security. That not only provides direct benefits for the earner, but their wage gets passed around the community and benefits others. We know this and it presents obvious reasons for helping to create jobs in developing countries. However, around half of the world’s population still lives on roughly $2 a day and the World Bank’s World Development Report 2013 estimated that 200 million people around the world were unemployed and looking for work.
Evidence shows that 600 million new jobs that are needed globally for a growing population and particularly in developing countries, so it is clear that much more needs to be done.
Should we not recognise that, even when people seem to be outside extreme poverty according to statistics and are earning more money, many are in newly urbanised centres in the developing world? Their income may be above the indicators, but that does not take account of the fact that they are paying crippling rents to live in shanty-town conditions, even though their working environment may be quite modern, and they pay huge costs for water. They may have a livelihood, but their living conditions may not be good.
The hon. Gentleman makes a pertinent and timely intervention. He is absolutely right: there is strong evidence to suggest that, for many people, employment does not mean they are not living in poverty or even extreme poverty in some cases. The other issue with regard to urban areas, which I raised in an intervention, is urban planning. That is another barrier and we need to give it a lot more thought.
Certain aspects of DFID’s overall record can be commended. For instance, it provided £752 million of bilateral aid directly related to jobs, business and the economy in 2014. However, the figure fluctuated throughout the time of the last Government before the strategic framework for economic development set aside £1.8 billion, so I would be grateful if the Minister gave an assurance that that spending will be maintained following the bilateral aid review. Can he also indicate when we will have the findings of the bilateral aid review or report?
There are also specific areas where I will give credit where credit is due. DFID is regarded as an expert on mid-level private sector development programmes, and I hope it learns from the success in that area and applies it to others. The International Development Committee, whose Chair, my hon. Friend the Member for Liverpool, West Derby (Stephen Twigg), is here today, noted that DFID also has excellent examples of work in areas such as public financial management that it should build on.
Nevertheless, I seek clarification from the Minister on a number of areas. First, on SDG 8, can he assure me that the indicators will be thorough when we get them? With regard to private sector development, we welcome work that facilitates the development of sustainable and secure jobs in developing countries, and we recognise that the majority of jobs will be created in the private sector. Indeed, the private sector provides some 90% of jobs in developing countries, according to various reports.
That is not to say that we are supportive of all measures. I have a particular concern about the expertise of staff in DFID working on private sector development—the Independent Commission for Aid Impact found in its May 2014 report that there were gaps in knowledge and experience. I would therefore be grateful if the Minister told me whether progress has been made in addressing the concerns raised by the commission. How many full-time staff in DFID are working on private sector development? How many, if any, are externally contracted staff brought in to advise on private sector development projects? How many staff working on private sector development come from backgrounds of working in the private sector and working on businesses in developing countries? Does DFID make training and mentoring opportunities available to staff working on private sector development, so that they can build their expertise? I appreciate that the Minister may not have all the answers to hand, but I would appreciate a response, even if it is a written one, at some stage.
The final issue I want to raise is working conditions. We cannot overlook the potential influence that DFID has in helping to reform labour practices and working conditions in developing countries, so I would like assurances from the Minister that any aid or assistance provided by DFID or other Departments to foreign states or businesses is provided only with assurances that they abide by working standards.
It is a pleasure to follow the hon. Member for Bradford East (Imran Hussain), and I thank him for his kind words. He referred to my passion, but it is clear that his passion equals, if not exceeds, mine, as does that of the hon. Member for Hackney North and Stoke Newington (Ms Abbott). I sometimes imagine that we disagree less than we think, but what is clear is that we all share the same objective and the same passion.
Today we have debated a very important, game-changing report. Since that report, we have been pushed in a direction that we were very keen to head in in the first place. We have created a new directorate for economic development by combining five separate departments. We have created a new youth and education department to focus on the transition from school to work, and to drive that focus through all the bilateral relationships and all our programmes. We have implemented a new growth diagnostic. This is the focus that my hon. Friend the Member for Stafford (Jeremy Lefroy) demanded there be in every bilateral relationship and every programme. The diagnostic informs every team of the barriers to growth in the countries in which they are working, so that they can devise programmes with the greatest impact on growth. My hon. Friend referred to the new agricultural strategy; it is, as he demanded, focused on smallholder agriculture. We will shortly publish—after we have disposed of that business on 23 June—our new economic development strategy.
The delivery of this agenda is vital to all the global sustainable development goals across the entire piece, and not just to the most obvious ones—1, 8 and 9. We will not see a reduction in world poverty of the order that we want unless we get a great increase in inclusive growth. In the past, we have had growth that has not generated inclusivity or sufficient jobs. It is vital that we get inclusive growth, because as we have heard so often this morning, we need 600 million new jobs in the next decade; otherwise, we will have a growing army of underemployed, frustrated and increasingly angry young people. As we have heard again this morning, lack of economic opportunity, a job and a livelihood is the principal driver of migration. That has been going on for decades. Millions of people have dropped everything that they have known and moved from their homes to the unknown in pursuit of economic activity. We are beginning to notice it as we see that tide of humanity coming up from south-Saharan Africa. Nevertheless, that driver has existed for decades, and we have to address it by providing those jobs.
I accept that not any job will do. It is no good having jobs that enslave. That is why we are still concentrating our programmes on work and freedom. There is what we are doing with the International Labour Organisation in Bangladesh, and there is the ethical trading initiative and the responsible, accountable and transparent enterprise initiative. Those are vital, but in the end it all comes down to jobs. The Government have an important role in that regard. My hon. Friend referred to the importance of public services. Yes, public services are important; there are important jobs and roles in public services. It is precisely for that reason that we take—and manage—the very considerable risks of working through Government-provided services in places such as Nepal, where our healthcare programme is channelled through Government provision, although it is a corrupt environment.
I share the passion of the hon. Member for Islwyn (Chris Evans) for tackling corruption. He is absolutely right, and that is why our programme on governance under SDG 16 is so important to our economic development programme. It is precisely for that reason that we held the anti-corruption summit and, the day before, the summit to engage with civil society on how it deals with that. As I say, the hon. Gentleman is absolutely right: where elites hijack the lucrative parts of the economy and wreck it, that impoverishes everyone. When a person gets an important job in the Government or the civil service because they are someone’s cousin, rather than capable of carrying out that function, that leads to complete inefficiency.
Over and over again, we find Governments getting in the way of the creation of jobs, through unwillingness or lack of capacity to raise revenue to invest in the necessary infrastructure; a lack of regulation, or over-regulation; or a lack of contract law or any other law, or of the rule of law. All those things drive away investment.
The real engine of job creation is private sector-led investment. One of the principal barriers to that investment thriving is the lack of necessary infrastructure. A reduction in productivity of some 40% throughout Africa and Asia is accounted for by the lack of necessary infrastructure, and it is estimated that Africa suffers a vital reduction of 2.1% in its annual growth rate as a consequence of the lack of necessary infrastructure.
Some 1 billion people have no access to electricity, and 1.3 billion live nowhere near a road. We must address those infrastructure problems. There is an annual deficit of some $3 trillion a year, in terms of the infrastructure that we need to invest in. Most of that must be provided by Governments. Grant aid will remain important for filling about half of that infrastructure gap, but all investors will need to increase their ability to invest massively if we are to do that. That is why we are working with the World Bank and the regional development banks.
We are working on projects on hydroelectricity in Nepal and power sector reform and roads in Nigeria. We have launched Energy Africa, working in 14 sub-Saharan African countries to address the needs of 600 million people who are without electricity. Although we only launched the campaign last year, we have proved the root; we kick-started the campaign with the work that we did with M-KOPA, which has put in place some 300,000 solar panels that serve 1 million people. It has also used highly innovative methods, so that power can be paid for using pay-as-you-go mobile phones.
Where we have been relatively slow in moving to meet the infrastructure needs of Africa, the Chinese have moved relatively rapidly. Does he agree that that is not entirely unproblematic, because the Chinese do not share our commitment to human rights?
The quality of our investment and the fact that we do not tie our aid certainly make our aid of a higher standard. I accept the hon. Lady’s challenge: we need to raise our game, and that is why we use the Private Investment Development Group to leverage more investment. Through an investment of $1.2 billion, we have secured $20 billion from the private sector and $9 billion from international financial organisations to provide early equity, long-term debt and guarantees to meet vital infrastructure needs. Equally, we use CDC, our development capital arm, to blaze a trail and show other investors that there are profitable opportunities even in the most difficult markets. We recapitalised that with some £730 million last year, and we are driving that into the infrastructure sector. CDC has backed some 40,000 GWh of production as a consequence of the move into the power market.
On the point about opportunities, does the Minister agree that we need policy coherence between the climate change goals and economic development policies?
My hon. Friend is right. Climate-smart development must be integral to everything we do. It has to be a part of it. It is not a box to be ticked; it must be designed into the programme from the start.
My hon. Friend the Member for Henley (John Howell) mentioned the prosperity fund in his intervention on my hon. Friend the Member for Stafford. I take a slightly different view of the prosperity fund. We are spending all this taxpayers’ money creating opportunities and opening markets, and my breath is taken away when other countries simply move in and take the opportunities that have been created by that investment. The prosperity fund’s primary objective must be to reduce poverty. However, it is right that that fund should make British companies alive to the opportunities available to them. We will not tie our aid.
As an aside, I point out that 80% of our procurement is with British companies simply because they are the most competitive we can find, but my hon. Friend the Member for Henley drew attention to an important point in the piece. This is, of course, an enormous agenda. It is a whole trade facilitation agenda, and my hon. Friend mentioned the importance of trade envoys. We spend about £1 billion a year on trade facilitation and improving the ability of the least developed countries to enter our markets and to trade effectively. Trade dwarfs aid. It is a vital part of the agenda. The hon. Member for Bradford East raised the vital issue of urban planning. It is precisely for the reasons that he gave that we launched the new programme for economic development in cities, and that will be driven forward with a will.
The whole piece, including TradeMark East Africa and the trade facilitation agenda, is part of the drive for economic development that is at the centre of everything that we do regarding the provision of jobs. I come back to a point that has been made several times this morning: it is all about jobs. We need 600 million high-quality new jobs that will not impoverish and enslave people. That is what we have to deliver. I defer to my hon. Friend the Member for Stafford to sum up the debate.
I am most grateful to everybody here for their valuable contributions. We have touched on a huge range of subjects that are vital to consider in relation to jobs and development. The hon. Member for Strangford (Jim Shannon) spoke about the need to tackle unemployment everywhere, and the importance of small projects. The hon. Member for East Kilbride, Strathaven and Lesmahagow (Dr Cameron) mentioned the important work that the Scottish Government do through their development fund, and how critical it is to work with young people. The hon. Member for Islwyn (Chris Evans), in a powerful and passionate speech, spoke about the business environment, the importance of tackling corruption, stability and direct investment.
My hon. Friend the Member for Portsmouth South (Mrs Drummond) spoke about many issues, and particularly the importance of the digital economy in the developing world. My hon. Friend the Member for Aldridge-Brownhills (Wendy Morton) mentioned the importance of education. The hon. Member for West Aberdeenshire and Kincardine (Stuart Blair Donaldson) spoke about the vital nature of partnership working and the work that the Scottish Government have done in partnership with Malawi on Kilombero rice and, indeed, Mzuzu coffee, which I have had the pleasure of tasting. The hon. Member for Bradford East (Imran Hussain) spoke powerfully about the need to be ambitious and aspirational, and touched on city planning.
The Minister spoke about DFID’s work, which I commend. He indicated that DFID is moving powerfully in the directions in which I would like to see it go. He spoke about infrastructure and Energy Africa, which my right hon. Friend the Member for Welwyn Hatfield (Grant Shapps) instituted last year, and about how that is already making progress.
Above all, there is a passionate desire here to work for inclusive, job-rich growth in developing countries, because that is important for the people in those countries, and because it allows them to stay where they are and not put pressure on our country. It is in their interests and ours.
Motion lapsed (Standing Order No. 10(6)).
I beg to move,
That this House has considered infrastructure and regulations to support electric and low-emission vehicles.
We have worked together a lot in various all-party parliamentary groups and on various issues, Mrs Moon, but this is the first time I have served under your chairmanship, and I very much look forward to it. There should be a large measure of agreement on this subject; I do not expect much disagreement. My interest is in securing information from the Government, rather than challenging them on policy, so this should be a pretty easy debate for you to chair.
I am not in any way a petrol-head—I am not even a car enthusiast. The drivers behind my interest have been more to do with climate change, the targets we set in 2008 to reduce carbon emissions and, following on from that, safety and training within the motor industry in relation to ultra-low emission vehicles.
The transformation we are seeing in the motor industry in our country and across the world is happening much quicker than we might have anticipated a few years ago. Last year, there was a more than 50% increase in the number of pure electric vehicles sold in Britain. We heard last week that by 2025 all new vehicles in Norway will be electric or low-emission vehicles, which is a tremendous change that will accelerate. This is not one of those issues where we are talking about what might be achieved. It is only five years since most motor companies decided to go down this route. Obviously Toyota started in the 1990s, but five years ago every car company in the world started to recognise that electric vehicles were going to be the future and were moving quickly down the road.
Additionally, we are seeing the development of driverless cars and trains. We are seeing an absolute transformation in the way in which we will use our roads in future. There are many important associated issues. One is the massive investment needed in the vehicle charging network across the country—the infrastructure, electric charging points and hydrogen charging points. We need unbelievable investment, which is the purpose of my speech.
We also need investment in training and developing technicians to support electric vehicles. The main driver behind my initial interest in this subject was the climate change targets we set in 2008 to meet the fundamental target of an 80% reduction in our carbon emissions by 2050. The stepping stones are the fourth and fifth carbon budgets—we are currently discussing the fifth carbon budget—and we want transport to contribute to that. Power generation has changed an awful lot. Generally speaking, we will meet the targets, but transport and heating are two areas that simply have not moved as quickly as we might have wanted.
I congratulate my hon. Friend on securing this debate. The Select Committee on Environment, Food and Rural Affairs recently looked into air quality, and one issue is the hotspots in the cities where we have very high levels of nitric oxide. We therefore need to get our diesel lorries, cars and buses out of those areas. We need more electric cars and electric vehicles. Government support to install the necessary plug-in points, and so on, especially in the centre of cities, is important to increasing air quality in those hotspots.
My hon. Friend is certainly right, but it goes much further than that. We are seeing a whole new industry develop. The motor industry is a big part of the British economy, and it will completely change over the next 20 years. My interest in the climate change targets led me to accept an invitation to go to the BMW training centre at Reading. It was an eye-opener in several different ways, and not just my drive in an i8, which I would recommend to anyone. It is a bit like being in a rocket—it is an amazing experience. The visit helped me to understand what is happening, particularly on the development and training of technicians.
The second eye-opener was on the safety of working on electric cars. I had not realised that the batteries in electric cars are 600 V. Any mistake results in death or very serious injury. That is the reality, so training is crucial. Anyone who works on an electric car without experience and training puts themselves in great danger. We have a lot of work to do to ensure that people are properly trained. Of course, the main distributers already ensure that they have people who can work on such cars, but it will not be long before electric cars enter the second-hand car market and are taken to local garages and to people who do a bit of second-hand car repair. We have to avoid the sorts of accidents that will seriously damage the industry. Developing and discovering technicians is becoming increasingly difficult. The Institute of the Motor Industry tells me that its surveys show that more than 80% of small independent garages have huge difficulty recruiting technicians. Will the Minister comment on how we can increase the numbers, and the skills, of technicians available to work in this emerging industry across Britain?
My hon. Friend is making a powerful argument about technicians and the way that technology is moving. I am delighted that York was awarded “Go Ultra Low” city status for its work on installing electric charging points to move the electric car industry forwards. He is right about infrastructure, but does he agree that electric cars will not solve the whole problem and that we have to consider hydrogen, too? Does he agree that Germany and Japan are moving their hydrogen technology forward at a rapid pace? Is that not something that the UK should follow? We need to train technicians in hydrogen technology, as well as on the electrical side of things.
My hon. Friend is absolutely right. We do not know exactly what the future holds. We should use the term “ultra-low emission vehicles,” rather than “electric vehicles,” because hydrogen fuel cell technology may well develop quicker. Things change incredibly quickly. It is only five years since the companies starting producing electric cars. In another five years, who knows? Hydrogen fuel cells might be the future, but that technology requires massive infrastructure investment, too. Unless people can charge their car at a reasonable distance from home, the industry will not take off. That is one of the issues the Government face. There has to be an element of assessment of what the future will be, but having said that, we must be prepared for technology and invention taking us down a road that we had not wholly anticipated taking.
There are three points that I wish to raise with the Government; I am keen to hear the Minister’s response to them. First, I am not a natural regulator, or a person who would naturally support new licensing regimes; I would probably support the opposite approach. However, this is a massive industry. The IMI claims that by 2030 there will be a commercial and social benefit of £51 billion. I do not know how accurate that figure is, but clearly there will be a huge commercial benefit from what is going to happen. There is potential for a huge export business. All those things will happen, but we must have the safety and the technicians. Developing that side of the industry is important. It is not just about having the ability to manufacture cars; we also need the technicians to support that industry, and at the moment we just do not have them. We have to develop a system to deal with the safety aspects, and probably to help the development of a professionalism in working with these low-emission vehicles.
The Government might have to consider providing financial support, and they will certainly have to introduce a licensing system, because one death in an electric vehicle would clearly be massively tragic for the individual concerned and their family, and also tragic for the entire industry. A report of a death from an electric car on the front page of the Daily Mail would inflict a massive blow on an industry that I think will be hugely important to the future economy of our country.
The second issue is whether the Government should financially support a training industry. Again, I am not a natural supporter of Government intervention, through finance, in commercial markets, but the Government already support the development of the electric car industry. We offer grant support for the purchase of new vehicles, to reduce their price and to develop the industry, so I do not see any reason why we ought not to consider supporting the training infrastructure that is absolutely vital if the industry is to develop successfully. That is another issue that I would quite like to hear the Minister comment on.
The third issue is about the IMI. I have been very grateful for its advice and support; it makes a very strong argument on this issue, and that has informed some of the things that I have said this morning. I hope that the Minister would consider meeting the IMI to talk through the points that it makes very powerfully and persuasively. In my view, such a meeting would be very helpful, and I hope that the Minister is willing to agree to it.
My hon. Friend is giving the Minister some good points to consider; I have a further point that he might wish to consider about this industry. In most EU countries, electric cars increase carbon emissions because of our current generating profile. As was rightly said, the fifth carbon budget is under consideration. Do we not need to be aware that this technology, at least for the next decade, will potentially increase carbon emissions in the UK and most parts of Europe?
I thank my hon. Friend for that intervention. That is a comment I have heard before. However, we are developing a completely new technology. The aim is lower emissions. We are trying to reach a decarbonisation target. Unless we achieve the aim of decarbonisation, this industry will not deliver what we want. However, I think that in the longer run, this is the route that we will go down. Practically, this is what is going to happen, and we need to take commercial advantage of this opportunity.
My hon. Friend has secured an excellent debate, and he is being a very useful advocate for electric cars. However, does he agree that the great advantage of electric cars, as part of the electrification of both transport and heat, is that they present a fantastic storage opportunity within the grid, which may help us to achieve our decarbonisation targets, rather than making them more difficult to achieve?
Again, that is a hugely helpful contribution to the debate. I am on the Environment and Climate Change Committee with my hon. Friend, and we know how important the development of storage is for the future. Electric cars are potentially one of the major means of storage. If their use develops quickly, as I expect it to, they will be a major contributor right across the board to our meeting our decarbonisation targets.
I do not disagree with the Minister; I hope that he can respond to the questions that I have put to him. This debate is the start of a major discussion about the development of a new industry, and I look forward to hearing his response to it. In closing, may I say how grateful I am to those hon. Friends who have intervened? They have made very good points that I probably should have included in my speech.
It is a great pleasure to serve under your chairmanship, Mrs Moon. I congratulate my hon. Friend the Member for Montgomeryshire (Glyn Davies) on securing the debate. I must admit to being a petrol-head, or rather a diesel and steam-head. Nevertheless, I understand that although it is important that we preserve our historic vehicle heritage, we should also look to a more sustainable future. I assure the House that the Government are committed to positioning the United Kingdom as a world leader in electric vehicle uptake and manufacture.
Under the Climate Change Act 2008, the UK became the first country to introduce a legally binding target on climate change—an 80% reduction in greenhouse gas emissions by 2050. Transport needs to play a leading role, both to meet this important national target and to address air quality issues in the UK.
In the transport sector, emissions are dominated by those from road vehicles. We have therefore set ourselves the aim of nearly every car and van on our roads being a zero-emissions vehicle by 2050. That will require all new cars and vans on sale to be zero-emissions by around 2040. I understand that this is a bold and ambitious target, which is why we have in place one of the most comprehensive support packages in the world, and at the last spending review we committed over £600 million to help grow the UK market for these vehicles.
I congratulate the Government on the money they are spending in this sector. However, in the particular hot-spots within cities, where there is actually a court case for Britain to reduce its emissions by 2025, there is a need to act much more quickly, particularly in those inner-city areas where we have problems with nitric oxide.
Thankfully it is not nitrous oxide, which would be a laughing matter. Nitric oxide and nitrogen dioxide are major pollutants. Of course, now that we know more about what is happening in diesel engines after the Volkswagen scandal came to light, the Government are working on that issue. Indeed, I am working with my fellow European Ministers, particularly those in Germany, to address that problem. Sustainable vehicles such as electric and hydrogen cars, which produce no tailpipe emissions, will certainly play a very important part in the transport sector.
It is interesting to note that although the record on car emissions has been disappointing, trucks have been operating pretty much as they should, mainly due to the fact that the monitoring equipment, which previously was too big to get in the boot of a car, is now able to be put on the back of a lorry. So the truck and bus sectors have actually been very good.
Since 2011, more than 70,000 claims have been made for plug-in car and van grants. At least £400 million has been committed to this scheme. With the grant guaranteed until at least March 2018, tens of thousands more motorists will be helped to make the switch to a cleaner vehicle.
Electric vehicle sales are now growing rapidly. Registrations reached a record high in 2015, as 28,188 new electric vehicles arrived on UK roads. More electric vehicles were registered in the UK in 2015 than in the previous four years combined. I am very proud of that progress. Electric vehicles have the potential to unlock innovation and create new advanced industries that spur job growth and enhance economic prosperity.
The low emission vehicle industry already supports more than 18,000 UK jobs and is a key pillar in our ambition for a low-carbon, high-tech, high-skills economy. The UK is already attracting global investment. Nissan’s LEAF, which is built in Sunderland, makes up 20% of electric vehicle sales across Europe. Geely has pledged £300 million to make plug-in hybrid taxis and vans at a new plant under construction in Coventry, creating 1,000 jobs. Ford’s Dunton technical centre in Essex is one of only two global hubs for the development of its electric powertrains.
Support for electric vehicle charging infrastructure has also facilitated the growth of home-grown and ambitious small and medium-sized enterprises. For example, in 2015 Chargemaster, a company that designs and manufactures its products in Milton Keynes, launched its new UltraCharger, which is already being sold in the UK and abroad.
The electric vehicle market is already a success story for the UK, but we need to maintain momentum if we are to meet our ambitious goals. We recognise the need to develop manufacturing and servicing skills to support the growing ultra-low emission vehicle market. The Government have set out an industry-led approach to skills training and apprenticeships. The new Institute for Apprenticeships’ programmes are already emerging, for example at Gateshead College’s skills academy and at Nissan in Sunderland. I understand the point that my hon. Friend the Member for Montgomeryshire made: as cars get older and move down the vehicle food chain, so to speak, there will be more call for servicing at local garages. It is important that they have the skills to service the vehicles safely and so ensure that we do not have any nasty accidents.
In terms of air quality, the Office for Low Emission Vehicles’ “Go Ultra Low” city scheme is dedicated to supporting cities across the UK to deliver transformational change. Some £40 million has been awarded to eight cities delivering more infrastructure, including lane access, additional planning requirements and a host of other measures. Those exemplar cities will be key in demonstrating ways of addressing air quality issues. The Government-backed self-regulatory body for the motor industry is committed to maintaining high standards covering new technologies, warranties, car service and repair. The garage finder helps locate businesses committed to the Chartered Trading Standards Institute’s approved code of practice. I hope the progress we made through the block exemption on data for the servicing of conventional vehicles will also help people access the data they need to service these new kinds of vehicles.
Thanks to Government leadership and growing private sector and local authority engagement, the UK now has more than 11,000 public charge points, including more than 850 rapid charge points. That is the largest network in Europe. There are also more than 60,000 domestic charge points. The latest statistics suggest that the average distance to the nearest charge point is just over 4 miles in Great Britain, although I admit that my constituency is a little bit of a charge point desert, and I hope that will be addressed. There are a number of such locations; the constituency of the Secretary of State for Transport is another that does not have a large number of charge points, and we need to address that in parallel with the tourist industry.
In advance of the Energy and Climate Change Committee’s hearing about electric cars last week, I did some work to look at the roll-out of petrol pumps for petrol engines a century ago. It was clear that the car came first and the petrol network thereafter. Incentivising the uptake of electric cars must surely be the priority, rather than incentivising the roll-out of charging points. Will the Minister comment on how the Department for Transport and the Treasury intend to compensate for the loss of petrol pump tax revenues as a result of an increased uptake of electric cars?
I suspect that that question should be put to the Chancellor of the Exchequer, but falling duty levels from petrol and diesel because we have embraced this new technology would be a very good problem to have. Dare I say it, but I am sure the Chancellor or future Chancellors will come up with other, more devious ways of collecting tax from everyday people. As someone who owns a car constructed in 1900, I am well aware of the problems—particularly in the UK, as we were so slow to embrace the gasoline engine car—that people had refuelling their cars. They are not unlike the problems that people are having in charging their electric vehicles.
The electric vehicle only really makes sense on a slow overnight charge, when we have surplus electricity in the grid. Although fast charging is there to address issues of range, there is not really a prospect of thousands and thousands of cars up and down the country fast-charging at service stations. Electric cars make sense in terms of overnight charging at home.
A point was made earlier about sustainable electricity. We talk about zero tailpipe emissions, but that electricity has to be generated somewhere. Germany has sustainable delivery, but given its decision to abandon its nuclear programme and rely more on fossil fuels, the way that hydrogen and electricity are generated is a problem when it comes to better electric and hydrogen vehicles. Norway, with its large amounts of hydroelectricity, is well able to take that up.
Another point raised in an intervention was about electric cars as a means of storage. I was recently at a conference in Germany, where that issue was raised with Tesla. One of the issues is the number of cycles that a car’s battery may have to undergo if it is used as a means of storing electricity to be released into the grid. Some of the manufacturers are concerned that the battery life of their vehicles—it is very good, and better than many expected—could be compromised by large numbers of charge cycles being used in that way. An alternative is that when cars are scrapped the old batteries could be put into banks and used for emergency power supplies in hospitals or to augment the grid.
I was listening carefully to what the Minister said about the potential for increased carbon emissions due to this technology, notwithstanding the storage point, which I accept. He said that there were 28,000 electric cars in the UK. Does his Department make any attempt to measure the incremental increase in carbon emissions that that has caused, given our current generating profile and our likely profile in the short term? Is that number measured at all? I know that is an issue for the Energy and Climate Change Committee.
The calculation certainly needs to be done as we roll out these vehicles. I expect that the Department of Energy and Climate Change is making those predictions. It depends, as my hon. Friend said, not only on the proportion of sustainable vehicles in the fleet, but on how that electricity is generated, particularly off-peak and overnight. Nuclear energy—the Government are determined to press forward in building a new fleet of stations—is ideally suited to overnight charging using off-peak electricity.
Throughout this Parliament, charging infrastructure will also be delivered through dedicated schemes for cleaner buses and taxis. As part of the £40-million “Go Ultra Low” city scheme, millions of pounds of funding will contribute to infrastructure deployment across eight cities in the UK. Those projects are focused on the most advanced technology for fast, reliable, smart and easily accessible charging for every driver. Highways England, which the Government have more control over than cities, has £15 million of funding to ensure that there is a charge point every 20 miles across 95% of the strategic road network, with rapid charging where possible.
Hydrogen fuel cell vehicles also have an important role in decarbonising road transport. I heard what my hon. Friend the Member for Montgomeryshire had to say about driving the BMW vehicle. I drove the Honda vehicle, and it was no different from driving any other car, which is probably a problem solved. It was a pleasure, and I did not know that it did not have a normal engine under the bonnet. We are supporting infrastructure provision in line with the current state of market development. The Government provided £5 million of funding to help develop 12 publicly accessible hydrogen refuelling stations to support the roll-out of hydrogen vehicles. All 12 are being commissioned during the course of this year and will provide a significant first step towards an initial hydrogen refuelling network.
Just last month, a refuelling station in Teddington in London was officially opened by the Under-Secretary of State for Transport, my hon. Friend the Member for Harrogate and Knaresborough (Andrew Jones). The network of stations will support vehicle manufacturers that are introducing their first models of hydrogen fuel cell vehicles. Indeed, our support for hydrogen for transport has helped secure the UK’s status as one of only a handful of global launch markets for hydrogen fuel cell vehicles.
There is much more that I could have said about our ambitions to press forward with this new technology. I am grateful to my hon. Friend for securing this debate on an important subject. I underline the Government’s commitment to ensuring that these sustainable new technologies are rolled out in the UK.
Question put and agreed to.
I beg to move,
That this House has considered further education colleges and skills in Greater Manchester.
It is a pleasure to serve under your chairmanship, Ms Ryan. May I beg your indulgence and that of other Members? As this debate is about Greater Manchester, we should pause for just a second to reflect that today is the 20th anniversary of the devastating IRA bomb in our city. I remember exactly where I was that day: I was loading my bike on to a car in Northenden, five miles away, and I still heard and felt the blast. I was one of the first civilians to be allowed through the cordon by the security services that week to see the impact at first hand. There were 200 people injured and £1 billion-worth of damage, and 1,000 business properties were wrecked. I pay tribute to the then Prime Minister, John Major, who stood side by side with the Labour authority at the time and—it is worth putting on the record—with the European Union, which pumped tens of millions of pounds into the regeneration of our great city, which started its great renaissance back then.
Greater Manchester is a city region of 2.7 million people and the fastest-growing metropolitan economy outside Greater London. The GM economy has great assets in health and life sciences, finance and professional services, as well as the creative and digital sectors, but there are considerable challenges with employment inequality and regeneration, about which there is wide consensus between stakeholders. Greater Manchester is at the forefront of moves to devolve central Government powers in England, which reflects the strong governance in its combined authority. Although it faces some challenges, the college sector in Greater Manchester also has considerable strengths. There are 21 colleges in the Greater Manchester region: 10 further education colleges and 11 sixth-form colleges.
I want to preface my remarks today by talking about skills in Greater Manchester, productivity and the link between productivity and pay. Finally, I shall discuss in detail the current area review, which is ongoing and hopes to report back in June. In GM, the education, skills and work system is currently characterised by the fact that 40% of children who enter school are not school-ready. Some 47% of young people in GM are leaving school without English and Maths GCSEs. We have a long-standing issue with low skill levels in our working-age population. Qualifications are an imperfect proxy for skill: nevertheless, Greater Manchester has enduring skills gaps at both the bottom and the top end of the skills spectrum. In GM, 33% of the 16 to 64-year-old resident population had at least a level 4 qualification in 2015, compared with 37% across the UK.
However, it is important to remember that there are larger differences within the GM districts than between GM and the rest of the country. For example, 48.4% of Trafford residents hold a level 4 qualification or above, compared with 25% in Rochdale—my hon. Friend the Member for Rochdale (Simon Danczuk) is here today—where there is huge inequality in educational attainment. Last year, 10% of 16 to 64-year-old GM residents did not have any qualifications at all, compared with 8.8% across the UK. In part, skills difficulties in GM owe something to historical problems with schools in the city region. In GM as a whole, in the past academic year 55% of pupils obtained five GCSEs at grades A* to C, including maths and English, which compares with the English state-funded average of 57.3%. Again, there are large differences within districts in GM.
The Greater Manchester city region has been a long-standing and emphatic supporter of apprenticeships. The districts that comprise Greater Manchester co-ordinate a strategic approach to apprenticeships through the apprenticeship hub. Of just under 30,000 apprenticeship starts last year, 27% were for 16 to 18-year-olds, 29% were for 19 to 24-year-olds and 42% were for those aged 25 and older. By level, 64% of starts are at the intermediate level, just over a third are advanced and 2% are at the higher level.
Analysis of job growth and economic forecasting suggest that the strongest job growth will be at level 4. Meanwhile, only a small minority of starts in the further education system are at that level, so there is an active debate about supply and demand mismatching. Employers in several key sectors report difficulties in recruiting the skills they need, and any MP who visits factories, workshops or other places of work in their constituency will hear that from the managing directors of those companies. In my constituency alone, I have recently been speaking to HellermannTyton, Manchester Airport and Endress+Hauser, and they have all highlighted that.
The city region is taking active steps to encourage more provision at level 4, including investing in apprenticeships and supporting the concept of an institute of technology in Greater Manchester. If I may be so bold, I really think that the agenda our current mayoral candidates should be talking about is how we close the gap in the Manchester economy. We spend roughly £23 billion on public services and we raise roughly £18 billion. The first job of any new Mayor will be to break even—to bridge that gap—so that we can become more powerful as a conurbation.
The skills challenge is not simply on the supply side, however; there are also issues relating to skills utilisation. For example, in recent years the number of graduates has risen faster than the number of graduate jobs in the local economy, in spite of Media City, the growth of Spinningfields as a financial district and the growth of parts of central Manchester as an agglomeration of law firms. Demand for skills is also likely to be constrained by the business models of GM employers. I am loth to criticise employers, but it is clear that many in the city region pursue low-cost, low-value, low-skill business models to a greater extent than is the norm in the UK. That has to change.
Let me move on to productivity. Labour productivity in Greater Manchester is lower than the UK average. In 2014 gross value added per job in GM was £39,000; in the UK it was £45,000. There are productivity gaps between GM and the UK in all the main sectors, with the notable exception of manufacturing, where GM has an advantage. The largest productivity gaps are in the knowledge-intensive sectors, including financial and professional services and property. In my recent discussions with Accenture, the company was very clear that the Greater Manchester economy lacks digital skills, which will be one of the largest growth areas in years to come. The low-productivity sectors account for a growing share of jobs; in 2000 they represented 35% of employment, but by 2014 the proportion was 40%. Overall, GM has a £10.4 billion productivity gap with the rest of the country.
Low pay is a significant problem in Greater Manchester. Nearly a quarter of jobs in GM pay less than the living wage. In some districts, such as Oldham and Rochdale, the proportion is around 30%.
Will my hon. Friend give way?
I would be glad to give way; it has been a long stretch.
I am grateful for my hon. Friend’s gratitude—I can see that he is flagging a little. He makes a very good point about areas that get less than the living wage. My constituency is the second-worst in the north-west for constituents not being paid the living wage, which 40% of my constituents do not get.
I could not agree more. The key thing is that it is a complicated mix of skills, qualifications and pay. I do not want to turn this into a row with the Government, but Opposition Members do not believe that the national living wage is the actual living wage, as defined by the Living Wage Foundation. As I said earlier, we need employers to invest in technology and the skills of their workforce, so that people can move up from cleaner to chief executive in all the companies in the conurbation.
Greater Manchester wages are still recovering from the effects of the recession. There has been a decline of living standards in Greater Manchester, where they have fallen faster than elsewhere in the UK. Average hourly pay in 2014 was below that of 2002. In 2004 workers earned £11.62 on average for every hour they worked. By 2014 that was £11. Since 2009 wages have fallen by 10%, and last year inflation-adjusted annual median pay was more than £1,200 a year less than the UK average. Low-paying sectors account for 36% of all jobs in GM’s total employment market of 1.2 million jobs, and some 400,000 people work in those sectors. Approximately 130,000 women and 90,000 men were low paid in 2014. Men’s wages declined most during and after the recession, leading to a shrinking of the gender pay gap due to that levelling down. By 2014, after adjusting for inflation, men earned, on average, £12.92 an hour and women earned just £10.37—a 25% differential. Well over half of young people under 25 are low paid.
The national programme of post-16 reviews was announced in July 2015 and will run for almost two years until summer 2017. There will be 41 reviews in total, covering all parts of England. The University and College Union has raised a number of serious concerns about the Government’s area-based review programme, both in general terms and specifically in relation to Greater Manchester. Currently the net liabilities of the post-16 sector are estimated to be £1.5 billion and there are around 80 colleges in discussions about mergers. Over the past five years, funding has fallen by nearly a third in key areas such as adult education. If we add inflation-based costs, colleges need to make efficiency improvements of around 40% to 50%. At the same time, the general trend is that quality is worsening, according to Ofsted, which is a damning indictment of the Government’s record in the sector.
The review in Greater Manchester started in September 2015 and is now reaching a conclusion. The core aim of post-16 area-based reviews is to ensure that colleges are in a stronger position to deal with the challenges they face in the future, making them more financially sustainable and better placed to provide the education and training needed in their local economies and communities. The July 2015 policy statement on the area-based reviews set out the expectation that they will lead to fewer, larger colleges. The draft proposals would create a number of new groupings in the further education sector: a group in the north comprising Bolton College, the University of Bolton and Bury College; a group in the east comprising Stockport, Oldham and Tameside Colleges; and a group in the centre that would include the Manchester College and Trafford College, along with a number of other training partners. There are also FE colleges that are yet to declare any alignment.
A significant flaw in the review process has been the exclusion of 11-to-18 schools and university technical colleges from discussions about the future structure of 16-to-19 education in the city region. Although there are good logistical reasons for managing a review process with a limited number of institutions, there are more than 50 schools with sixth-form colleges in GM, educating more than 8,000 young people. Some of those sixth forms have very small numbers and may not be financially sustainable at current and future funding rates.
There is also a problem with the banking system. One of the key barriers to implementing change in GM is the banks’ attitude to the sector. They insist on charging colleges with contractual break clauses for their loans when merging with other colleges. Those fees can amount to more than £1 million, which restricts viable colleges from coming together for the benefit of Greater Manchester. Does the Minister believe that colleges will have to divert funds from community development to cover those fees? The Department for Business, Innovation and Skills and the Treasury have set aside a figure for restructuring the FE sector nationally, which is rumoured to be in the region of £500 million. In GM it is being described as funding that will be available only as loans and not as one-off grants. Viable colleges will not want to saddle themselves with debt from the merger with another college.
So what needs to be done? It is clear that Greater Manchester needs to make progress in tackling the large number of people in the workforce without qualifications, as well as attainment at age 16 and higher level skills development. The area-based review and devolution of the adult education budget will help, but in the main they are focused on the 19-plus skills system. Much of the funding is spent on tackling the lack of achievement by age 16. The combined authority would like further powers over the 0-to-19 skills system, rather than its existing powers over the 19-plus skills system alone. Work is under way to put in place a memorandum of understanding with the Department for Education to ensure that its commissioning of provision is aligned with Greater Manchester’s needs and that decisions taken in one part of the system are consistent with those that we are making in the 19-plus part of the system, which will be a devolved matter.
The skills system is confusing for many people and the quality of advice and guidance on careers and education is variable. The Sainsbury review of pathways, which is due to be published shortly, could be significant in helping to clarify that. However, we need to recognise that current Government policy is that skills at level 3 and above are the responsibility of employers and individuals via adult learner loans. Such loans are currently available only for full qualifications, but many people and employers want and need specific short courses to gain employment or tackle skills shortages. Research has shown that 40% of digital and creative companies in Greater Manchester have lost business due to skills shortages. Targeted short courses, for example in social media, could help to solve some of those issues. Greater Manchester is therefore working with BIS as part of the devolution deal to examine the potential for flexibility in adult learning loans. It would be great to hear the Minister’s views on that.
We need to increase employer engagement in the skills system. We know, as local MPs, that there is a huge mismatch. There are some great examples, but there is a lack of consistency across Greater Manchester. We have to work with employer groups to get the message out about investment in skills and to get their input into the provision that GM needs to meet its future needs. We need better modelling of workforce requirements, so that we can train our young people for the jobs of the future. The apprenticeship levy is an opportunity to drive higher level skills development for new recruits to GM companies and to upskill the existing workforce, which will drive higher levels of productivity in GM firms. Greater Manchester has made the case to the Government for greater involvement in the apprenticeship levy implementation. It should also be noted that the devolved Administrations in Scotland and Wales have far greater control over the way in which the levy is spent. The area-based review will help shape an important part of the infrastructure that GM needs to develop future skills, but it only will be part of the solution.
It is a pleasure to see you in the Chair, Ms Ryan. I congratulate my hon. Friend the Member for Wythenshawe and Sale East (Mike Kane) on getting this important debate for Greater Manchester. The decisions made in the review will have far-reaching consequences for young people and employers in the region. He gave an excellent and comprehensive outline of some of the issues that we need to tackle.
In my contribution, I will refer first to the excellent report prepared by Councillor Andy Sorton, who represents one of the priority 1 areas in Stockport—the Brinnington and Central ward. “Educational Attainment in Priority 1 Areas” was produced in July 2015. In his foreword, he sums up the problem:
“Recent GCSE results showed a substantial drop in attainment for secondary school children in priority areas. Attainment in the Central Area of my ward fell from a low base of 36% attaining 5 A*-Cs in 2012-13 to only 14.3% in 2013-2014, a drop of 21.7%. In Brinnington this drop was 43.2% to 20.9%, a 22.3% fall. To contextualise this, performance in Stockport was, on average, 58.4%.”
The latest available figures, for 2014-15, show an improvement on that 36% attaining five A* to Cs in Central, but in the Brinnington area there was a further fall back to 15.3 %, a drop of 6 % on the previous year. Average attainment for the borough was 58.3%, similar to the previous year. Those are shocking statistics.
Stockport is a borough of contrasts, with areas among the 1% most and 1% least deprived in England. The “State of the Nation 2014” report, in a summary of the overall progress being made across the north-west, commented:
“38 per cent of poor children fail to achieve the expected level in reading, writing and maths at age 11: this varies from 32 per cent in Halton to 48 per cent in Stockport.”
Interestingly, of the four secondary schools with the highest number of students from priority 1 areas, when looking at English and maths GCSE results, only disadvantaged pupils at Stockport Academy performed well when compared with their peers by Ofsted. Stockport Academy was built under the Building Schools for the Future initiative of the previous Labour Government, recognising that issue of inequality of attainment for children in poorer areas.
There are further statistics, such as the December 2014 ones on 16 to 18-year-olds classified as NEET—not in education, employment or training—which suggest that 11% of young people from priority 1 areas fall into that category. The comparable figure for the rest of the borough is 4%. Also, 18% of 18-year-olds in priority 1 areas are not in education, employment or training. On absences, pupils from priority 1 areas are almost three times more likely to have an unauthorised absence from school than pupils from outside the areas. Also, 12.4% of all pupils from priority 1 areas were recorded as “persistent absentees” in the 2013-14 school year. That is more than twice the average rate across Stockport, which stood at 6.1 %. The unemployment benefit claimant rate in priority 1 areas is three times the average for the borough. We all know the lifetime effect of failure in the education system for young people and their families.
In an October 2015 letter sent to Greater Manchester MPs, David Collins, the Further Education Commissioner, and Peter Mucklow, the Sixth Form College Commissioner, announced the area review of post-16 education and training institutions. The letter stated:
“This is an important opportunity to shape the provision for learners and employers in the Greater Manchester area and to ensure clear, high quality professional and technical routes to employment, alongside robust academic routes, and better responsiveness to local employer needs delivered by strong, high status, and where relevant specialist, institutions.”
I also agree that savings could be made by amalgamation, with consequent administrative changes, such as the sharing of human resources and payroll, or by looking at duplication of course offers, provided that no young people are disadvantaged by travelling costs. There could also be an argument for having one principal for all the colleges. The area review, however, must also address that issue of inequality of attainment in secondary schools, and the response of the post-16 sector to that.
In the area review, I want to see proposals for further education that will engage young people, such as those in Brinnington, because the challenges are huge. If young people have lost interest at school and have stopped attending, how will that change when they reach 16? How will their educational attainment be improved by a further education offer when they have already failed in the secondary system? At the very least, the offer that Stockport College or colleges in other areas make must be local, and attendance must be affordable for the young people and their families. They must believe that what is on offer will make a difference to their life, that it is something they want to do, and that they will get a job, or self-employment, from it.
Those young people have ability and they are creative, but they are young people for whom the education system and the wider social care system have failed. They are the children of the children I worked with as a social worker; some are the children of those children. Failure will be the inheritance of their children, and they and the wider community will continue to pay a price for that.
Those issues are, of course, not within the remit of the area review, but the response to the review has to have regard to the circumstances of those young people. I will be interested to hear whether, as part of the review, any young people talked to the commissioners about their issues and how they might be engaged more in learning and developing the skills that future employers will need.
As my hon. Friend the Member for Wythenshawe and Sale East mentioned, we are going through huge changes in jobs as a result of automation. I am the co-chair of the all-party group on retail, and we are undertaking an inquiry on the effect of automation on jobs. It is clear that there will be more jobs in retail, but entry-level jobs will be not shelf-stacking, but managing the robots that stack the shelves. That will change the entry-level skills needed. We have to meet those challenges by ensuring that all young people—particularly those who are difficult to engage—have those skills.
I would like, in the area review’s reorganisation of colleges and courses, an offer of partnership working between young people and secondary schools in every locality. Without that, any reorganisation will continue to exclude young people from the opportunity to achieve something in their life by making them an offer that they cannot or will not accept.
My hon. Friend makes a powerful point about joining up the skills system and the further education system. It is astonishing to most Labour Members, who have in general been warm supporters of devolution, that the schools sector has not been devolved. Michael Wilshaw, the chief inspector himself, has said that local politicians in Manchester and Liverpool should get more involved in improving standards in our schools. The one way in which we could do so is by having the school commissioner system devolved to the conurbations. Does she agree?
I absolutely agree. That is an excellent point, which I am glad my hon. Friend has made, because I was about to make it. I put that point to the FE Commissioner—indeed, I sent him a copy of that report—and he assured me that he was on the case. As my hon. Friend has just said, however, if we are to make partnerships work, we cannot have national Government in charge of one part of the partnership and local government in charge of the other. That is where there has been a history of failure in delivering social policy. On the provision of education and skills to young people, there is no longer a separate education agenda and skills agenda; they have to be integrated from quite an early age. I agree with my hon. Friend that for the partnership to work, it must all be devolved to Greater Manchester. That is my plea. I hope that we can have further discussions about how we can make the partnership work, engaging those all-important primary and secondary education systems in how the FE sector responds.
It is a pleasure to serve under your chairmanship, Ms Ryan. I thank my hon. Friend the Member for Wythenshawe and Sale East (Mike Kane) for calling this important debate. I will concentrate my comments on the area review that is taking place and how it relates particularly to my constituency of Rochdale but also to the wider conurbation.
That review will not solve but should have an impact on some key issues that need addressing, including the need to improve productivity, as my hon. Friend said, not just in Greater Manchester but right across the country, and to improve economic growth across the sub-region, particularly in the northern part of the conurbation around Rochdale and Oldham and perhaps into Tameside. The review could also help to reduce benefit dependency. It needs to address the “hourglass economy” that the UK Commission for Employment and Skills has described, in which we have too many low-level skills and some highly skilled workers but we do not have enough people with middle-level skills. I hope that the area review will go some way to helping to address that.
I like the ideas in the review of looking for economies of scale—that is positive—realising real savings so money can be redirected to funding real priorities rather than structures, and devolving to and involving local authorities. However, I have some concerns about whether the review genuinely addresses problems with the curriculum offer in Greater Manchester. Will it reduce duplication of courses? Are the right courses being offered in the right places for the right people and the right companies? I am also concerned about the review’s scope. As my hon. Friend said, it does not include 11-to-18 schools or university technical colleges. That said, the process has been more positive than negative. Let me say also that the combined authority has done good work in bringing the review together and acknowledging that there are gaps in the work that has been done, not least on the curriculum but also on how FE connects with transport and on quality and the estates. That must surely be the next stage of what follows from the review.
Let me turn to Rochdale. Rochdale Sixth Form College and Hopwood Hall College both perform very well and are highly regarded by both their respective sectors and, most importantly, the learners themselves. I was at Hopwood Hall’s awards ceremony just last week, and was extremely impressed by the diversity of learners and the progress that they are making. I am relaxed about the sixth-form college. It performs very well, is very well run and is beginning to go down the road of acquiring academy status. Although I am also exceptionally happy with the performance of Hopwood Hall College, I am a little worried that it is currently looking like it will remain an autonomous and independent college, which means that it will not merge with any other colleges. I think that the management and leadership of the college will be happy with that, but I have concerns on two levels. First, it is a missed opportunity for the college’s leadership and expertise to be fed into helping underperforming institutions. Secondly, I am worried that the college will be squeezed between the bigger beasts that are being created. Although it looks attractive to remain independent—I am not making a Brexit argument in this instance—and it would be positive for the college solely to serve the precise needs of Rochdale, the truth is that the larger establishments will have better and bigger lobbying power.
Let me conclude my remarks with some points that the Minister may want to consider addressing. First, if several colleges remain independent, how will we guard against that squeeze? Secondly, what further scope is there to address the curriculum offer? Thirdly, will it be possible for the combined authority to reshape the proposals during implementation if they appear to be inappropriate?
It is a pleasure to see you in the Chair, Ms Ryan. I pay tribute to my hon. Friend the Member for Wythenshawe and Sale East (Mike Kane) for securing this most timely and pertinent of debates. I think we can all agree that we like to talk about this subject, but to have 90 minutes in which we are not discussing the European referendum is extremely welcome.
I put it to colleagues that Greater Manchester is of course the greatest city region in the country. Anywhere we go in the world, people know who we are. We are a great city region that is, through devolution, on the verge of even further greatness. With more autonomy over long-term investment, infrastructure and innovation, we have a once in a generation opportunity proactively to reshape our economy. We can encourage the growth of specific industries, build proper communities, not just lists of houses, and attract better paid and better quality jobs; but to be ready for all that, we must first build a robust platform for educational attainment and significantly improve our population’s skillset. I share the aspirations that have already been expressed for even further local control and devolution in this area.
Further education is the bridge between schools and the world beyond. It is the link between education and the workplace. It is the sector through which life chances are enhanced, horizons are broadened and second chances are realised. Further education is a stepping stone. It is a leg up. It is a place where ambitions are fostered, new interests are cultivated and barriers are broken down. It is a vital chapter in my own story and in thousands of British success stories. Yet too often FE remains the poor relation in Britain’s education sector. It is undervalued, under-resourced and too often a political football.
I would like to join colleagues in taking the opportunity to reverse that position by making four brief points: first, that the skills revolution that we need in Greater Manchester depends upon a reasonably resourced and strategically valued FE sector; secondly, that we must improve our ability to predict what skills our economy and businesses will need in future; thirdly, that political interference and goalpost moving must be stopped for the sake of our local economy; and finally, that there needs to be a radical rethinking of FE provision for people with special educational needs in Greater Manchester to ensure that wider life chances are truly accessible to all.
Let me start with the need for resources and investment. As it stands, nearly half of the population of my borough of Tameside hold no qualifications beyond level 2. An enormous 48% of residents are only qualified to GCSE level or equivalent. Just 17% hold traditional degree-level qualifications and only 1% are qualified to postgraduate level. To boost wages, attract better jobs and reduce the local welfare bill, it is self-evident that we must urgently upskill the local economy.
It has long been my view that the most effective way to increase educational attainment is to invest heavily in early-years education. Interventions from birth will make the greatest difference to an individual’s life chances and provide the greatest return on investment to the taxpayer for every pound spent. However, to fail to invest adequately in further education is to write off successive generations of young people who did not benefit from the intensive early-years opportunities that we all want to see.
GCSE results have improved strongly in Tameside recently, but there are still significant legacy problems. It is imperative that an ambitious skills strategy forms part of the Greater Manchester devolution strategy and named funds are earmarked within that to support quality local FE institutions. It is also imperative that funds are directed to where they are needed most. I do not think that I am ever described as a parochial MP, and I absolutely understand that a strong Greater Manchester is essential to a strong Stalybridge and Hyde, but I am concerned that local FE leaders tell me that they simply cannot access capital funding and perceive a bias towards central Manchester in the funding of projects that they know the neediest people in our local population will not be able to access.
Tameside has shown that even in these times of quite painful austerity, local investment really works. Through the bold Vision Tameside project, which is a collaboration between Tameside Council and Tameside College, a newly built college in the centre of Ashton is bringing learning into the heart of our local economy. I can share the great news that Vision Tameside is already showing signs of success. Historically, one of the biggest problems in our borough has been an exodus of young learners to FE establishments elsewhere, but this morning the new principal of Tameside College confirmed to me that admissions to the newly built college in Ashton for this September are up on last year by a quite phenomenal 500 places. Students will now learn in an exciting environment that is fit for purpose, with local shops and cafés benefiting from their custom and Tameside becoming a net importer of FE students—not a net exporter. I cannot recommend that vision highly enough.
My second point is that we must diversify our local skills mix. We must get better at predicting what skills the economy in Greater Manchester will really need. As it stands, the skills base in Tameside is unequivocally too narrow. The latest labour market data that I have for this debate suggest that I have more individuals employed in health, social care and education in my constituency than in all other occupations put together. That is clearly not a sufficiently diverse employment base.
I also have, however, twice the national average number of constituents employed in the manufacturing industry, with thriving employers such as the Hyde Group, Smurfit Kappa and Kerry Foods. Even though I said I would not mention the EU, I cannot resist praying for a remain vote next week to protect jobs in the manufacturing sector. Although I will always value public sector jobs and will fight to defend the role of manufacturers and producers, we also need to understand what Tameside’s and Greater Manchester’s role might be in a future, more knowledge-based, economy.
Quality apprenticeships in relevant areas, like the creative and digital training opportunities, are being provided locally by Brother UK, and that is an excellent start. I would also like to see a focus on future roles in emerging sectors such as green and low carbon technologies. We need to work more closely with our existing employers to map their likely medium-term needs while we try to attract other employers and steer our economy’s longer term needs.
My third point is that political interference is actively harming the success of further education in Greater Manchester. Just as primary school teachers have seen SATs altered at the last minute and secondary teachers have seen GCSE requirements amended without sufficient warning, so educators in the further education sector have seen goalposts moved counterproductively by the Government with their heavy-handed approach to remodelling qualifications. The most acute example of this is perhaps the reforms to functional maths and functional English assessments. Such courses provide the opportunity for those who have missed out on essential GCSE-level qualifications to have a second chance at acquiring those core credentials. The Government have now introduced external testing to replace teacher assessment, which has moved the goalposts so dramatically that pass rates in Tameside have halved, and in many places have fallen to single figures. If we make it impossible for people to acquire basic level numeracy and literacy skills, we effectively consign them to the scrapheap, and there will be no winners from this approach.
Finally, as the parent of a child at a special educational needs school, I cannot contribute to a debate such as this without mentioning the dire need to improve further education opportunities for those with special and complex needs. Take autism, for example. It was my great privilege to help Ambitious about Autism’s youth patrons to develop their employ autism campaign, which highlights that although 99% of young people with autism want to work, only 15% of adults with autism are in work. That is a shocking one in four young people with autism not accessing education beyond school.
The employ autism campaign asks for more opportunities to develop skills post-16. As part of my drive to see Greater Manchester become an autism-friendly city, I want us to take a lead on this agenda with more specialist courses and more specialist day colleges, and with no young person left behind through a lack of post-school opportunities.
Ms Ryan, thank you for the opportunity to contribute to today’s debate and to re-establish further education in Greater Manchester as a top priority. Let us invest where it is needed and build a competitive sector that makes our region’s labour market fit for the future.
It is a great pleasure to serve under you as Chair, Ms Ryan. I congratulate my hon. Friend the Member for Wythenshawe and Sale East (Mike Kane) on securing this debate and on the way he comprehensively set out the context in the education landscape. It was an excellent introduction.
I want to make a few short remarks about the process and scope of the area review, and about the effect on my constituents in south Manchester. Further education plays a vital role in our local economies and our communities. It can boost growth and drive personal achievement and social mobility. The best FE colleges are adaptable to local needs and provide skills and training where local areas need them most, and they can design courses according to local needs, such as the innovative higher education/further education hybrid courses offered at the Fielden campus of Manchester College in my constituency, so I welcome the chance to discuss FE and skills in Greater Manchester today.
We have a mission in Greater Manchester to skill up our communities to meet the challenge of the modern economy and to give them the flexibility and adaptability to thrive. We need to match our economic success with educational success, so there are questions about how we change our system to educate our young people, and how we deal with adult retraining and skilling up an underqualified population. These are big challenges. Overshadowing any discussion about FE and skills in Greater Manchester is the area review. Some would say that the area review has overshadowed the sector itself in recent months. The view among some people I have spoken to in the sector is that it has come at the wrong time, has the wrong focus and has distracted people from getting on with the job of improving standards in the sector. Certainly the delay in the process has not helped anyone.
There are merits, as my colleagues have mentioned, in some of the aims of the area reviews, but there is certainly a feeling that the area reviews are more about saving money than improving access for students or raising standards, which is not helped by the fact that the initial guidance on the review was about cutting costs, not meeting learner needs. The Greater Manchester area review is a process that should serve the needs of students and the local economy, not the need of the Government to cut budgets.
There is a wider problem about the scope of the review. People in the sector feel that the review has not addressed the real problem, which is the skills shortage that we have heard about and how we design a whole sector to meet the challenge. The Library has confirmed that the most popular reason given by employers in Greater Manchester for having hard-to-fill vacancies was,
“Low number of applicants with the required skills.”
There is an argument that the area reviews have been too focused on structures and governance, rather than tackling the challenge. The review falls short of tackling the long-term reforms that Greater Manchester needs, and it may turn out to be a missed opportunity to properly review post-16 provision across the system.
Does my hon. Friend share my concern that the Greater Manchester Combined Authority has spoken of its dissatisfaction with the proposals made by the 10 FE and 11 sixth-form colleges involved in the steering group? The GMCA is concerned that only two mergers have so far been proposed involving five colleges. Is my hon. Friend going to talk about that in his speech?
I will certainly refer to that. Such concerns are legitimate and the combined authority is right to raise them. They certainly need to be addressed.
The process needs to look at further education provision as a whole and should consult all post-16 providers. The Association of Colleges, Unison, the University and College Union and others have all pointed out the dangers of a narrow review process that ignores large numbers of FE providers. In its review of post-16 Government policy, the Public Accounts Committee argued:
“It is unclear how area-based reviews of post-16 education, which are limited in scope, will deliver a more robust and sustainable further education sector.”
I believe that is the case in Greater Manchester.
The area review, as we have heard, has not encompassed university technical colleges or the 50 school sixth forms in Greater Manchester, in which more than 8,000 young people are taught. There are 11 sixth-form colleges included in the Greater Manchester area review, of which 100% are judged good or outstanding. They are already doing a really good job for the students they serve. I have no problem with including them in a review of further education and skills in the region, but they do not work in isolation. The system needs to work together. I do not see how we can design a system for the future without looking at the whole system in the present.
The review also does not deal with the key issue of devolved funding. As we know, the Government have already moved to devolve £6 billion of health and social care funding to Greater Manchester, and there are plans of course for a wide package of devolution of resources that we in Greater Manchester have long argued for. I echo the comments made earlier about the need to have oversight of school improvement on a local and regional basis. The devolution of the adult skills budgets was announced in March, but there is no real sign of the same for 16 to 19 and apprenticeship funding. There is a question to be answered here. This inconsistency of devolution of funding arguably prevents the Greater Manchester Combined Authority from shaping the reviews according to the real demands of the region and the various parts of the sector that are trying to deliver the change that we need.
The needs of Manchester’s students are changing. There is higher demand than ever for English and maths courses; more students are choosing work-based learning over traditional FE pathways; and there are big increases in demand for English for speakers of other languages—ESOL—courses at a time when there has been a cut in Government funding. Giving the Greater Manchester Combined Authority the power to manage and distribute funding according to need could help colleges to be more flexible in such developments. That feeds into the wider agenda. If we are going to devolve responsibility we need to give the combined authority the proper means to deliver it.
Finally, I want to highlight some specific concerns about the proposed Tameside, Oldham and Stockport merger that will particularly affect my constituents in south Manchester. The various merger possibilities have been described as shotgun weddings, and it does feel a little like that. I wonder how much consideration was given to the idea of some of the less successful colleges working with a variety of the more successful ones, rather than being forced into mergers that may not be appropriate. What appears to be happening on the east side of the conurbation is a merger of three less successful colleges into, potentially, one larger less successful college. I hope that that is not what will happen: we need to learn lessons from successful colleges.
Leaving aside the estimated £50 million of taxpayers’ money that may be needed to make the mergers viable, I am concerned about the effect on learners—particularly the nearly 400 constituents of mine who attend Stockport College. I am concerned about what the new arrangements may mean for them in terms of their courses and access to institutions. There is a worry that my constituents currently studying at Stockport and the other colleges will suffer reductions in the number of courses, increases in journey times or other disadvantages as a result of the proposed mergers. I seek reassurance that my constituents will not be detrimentally affected.
It appears to many people that the review has not yet dealt properly with issues of quality. It has simply looked at college mergers to address financial concerns. It has not dealt with retraining and reskilling and has not yet come up with a convincing plan that will give us the confidence that we have an FE sector fit for the job of equipping our residents for the future. Greater Manchester residents deserve better.
It is a pleasure to serve under your chairmanship, Mrs Ryan, and a great pleasure to be present at this debate. I congratulate all my colleagues who have spoken. My hon. Friend the Member for Wythenshawe and Sale East (Mike Kane) gave a speech that was a tour de force, covering the whole area. That does not always happen in such debates; sometimes cobblers stick to their narrow lasts, but my hon. Friend should be congratulated, as should my hon. Friends the Members for Stockport (Ann Coffey), for Manchester, Withington (Jeff Smith), for Stalybridge and Hyde (Jonathan Reynolds), for Heywood and Middleton (Liz McInnes) and for Rochdale (Simon Danczuk).
My hon. Friend the Member for Wythenshawe and Sale East introduced a personal point at the beginning of his speech, and rightly so, because the event he referred to was a seminal moment in the history of Greater Manchester. I hope I may be forgiven for saying that it gives me particular pleasure to be here today to hear the things that have been said, because I was born in St Mary’s hospital in the centre of Manchester. My parents came from Didsbury and Burnage, and I spent my first years—until I left school—in Levenshulme and Stockport, so the places and names that I have heard today have a lot of personal resonance for me, as well as their strategic resonance.
It is right to think of Greater Manchester as an organic area that had a long period of emergence and evolution. As a historian I am tempted to give a paean to the role of Greater Manchester in the history of the industrial revolution. [Hon. Members: “Go on!”] We do not have the time. People talk about the northern powerhouse and other such things, and how to replicate them elsewhere; I have on occasion said that the Minister should remember that the Construction Industry Training Board apprenticeship levy took a long time to get together, and in the same way we need to recognise that Greater Manchester’s cohesiveness and forwardness has not come about in a period of two or three years. It came about over 30 or 40 years, going back to the mid-70s when the Greater Manchester county was created, and the 10 boroughs entered it. The Government in the 1980s negatively and vandalistically got rid of that, with consequences that remain today in the area of transport. At the same time, that period was of seminal importance, because the 10 boroughs of Greater Manchester came together in particular to defend their municipal ownership of Manchester airport. In a way that started the process of cohering and evolving to the point where we are today.
My hon. Friend the Member for Wythenshawe and Sale East particularly talked about the fact that the Greater Manchester districts have for a long time been initiators, cheerleaders and co-ordinators for apprenticeships. When my hon. Friend the Member for City of Durham (Dr Blackman-Woods) and I compiled a pamphlet for the Smith Institute in 2013 about the work of local councils on apprenticeships, we highlighted the work of a number of Greater Manchester councils. That is something to remember in the context of my hon. Friends’ comments about the fact that, with regard to skills, the current devolution process is but half-formed. Without that involvement in apprenticeships, there is much that needs to be done about skills shortages that cannot currently be done through area reviews or by Ministers, however well-meaning.
My hon. Friend the Member for Wythenshawe and Sale East made a huge number of salient points and referred to the skills shortages in key areas. He was right to quote, as other hon. Members have, the concerns of the University and College Union. One of the things that is missing, by and large, from the area review process is involvement and consultation. That is a frequent issue extending through government. I see it when I am wearing my other hat, in higher education, where we await a major Bill. It is not just a question of getting things right with college principals or vice-chancellors. It is also a matter of getting things right with the skilled people under their remit: the junior lecturers and assistants, and all the people who keep those colleges, universities and campuses going. That is too often missed out of the process.
As I have said, colleges have done great work to support young people, but also older people, in gaining skills. They are vital to sub-regional economies. We cannot afford damage to the link between colleges and businesses or the many decent networks of colleges and schools in the area, through errors and failures in the Government’s area review programme, even if it is an unintended consequence. That is why one of the first things I said when I took on my role on the Front Bench in October was that FE is all about getting local people into work, with skills, in the local economy. That is not just a pious plea. It is very necessary to think about it now. In January 2015 Professor Alison Wolf, who as the Minister will know was the author of the Wolf review of vocational education—which has been praised and much quoted by the Government—said that Britain’s supply of skilled workers could “vanish into history”. We cannot afford to let talented and skilled young people—and older ones—fall by the wayside because colleges have closed and the funding is not there to develop the skills needed to boost sub-regional economies. To that I would add the vital role of FE colleges in the community in working with local authorities and local enterprise partnerships.
We have heard a lot today about the working out of the devo max process—the devolution process in the Greater Manchester area. I particularly emphasise the point that my colleagues made to the Minister about the potential for combined authorities to take on skills, education and training powers. Over-centralised Whitehall-led area decisions that are taken now could hamper their ability to do that effectively. That is particularly the case for utilisation of the adult skills and community learning budgets that are being devolved under the relevant part of the settlement.
I want now to talk about some of the particular issues that have been touched on today in the Greater Manchester context. One hon. Friend—I cannot remember which one—referred to the Public Accounts Committee December report, which mentioned the absolute necessity of delivering “robust and sustainable” FE solutions. At the time that was said, we saw two things in the Greater Manchester process. First, the timescale that the Government set out—this is true across the country—was ludicrously optimistic. We know that there have been problems, delays, and everything that has gone with that.
The second point that has come out of what has been said today is the tension between what my hon. Friends are talking about doing—taking on more powers—and the clear frustration of the Greater Manchester Combined Authority that it is waiting in the wings, almost as a shadow boxer, while the process is going forward. I refer again to the points made by the Greater Manchester Combined Authority in the FE Week article, which came after the fifth steering group meeting on 25 May. The Minister needs to take account of this:
“The GMCA said it ‘remains to be convinced’ that the proposed outcomes will ‘deliver the integrated learning infrastructure that is needed, taking Greater Manchester as a whole rather than focusing institution by institution’.”
It also said that it
“wants to ask the Secretary of State to award it the ‘power to make further changes to these proposals, should it become clear that the current options cannot deliver a Greater Manchester-wide learning infrastructure that meets needs’.”
I do not want to rain on the commissioner’s parade and echo what my hon. Friends have said about the significant amount of co-operation that is needed to go forward in a sensible way, and I know that the commissioners are constrained by the narrow remit the Government gave them, which has been quite clear in some of the things that have been said publicly and even more clear in some of the things that have been said privately. This is an iterative process, and I ask the Minister what he proposes to do to widen that remit and to give more of that ability to his commissioners and others to be flexible. The Greater Manchester area-based review progress report, which went to the leaders of the town councils, says:
“As Leaders will recall, the options chosen are not the decision of the GMCA, they are up to FE Commissioner, Secretary of State and College Boards…which are still incorporated bodies which no one has the right to close at present”.
That is the factual state of play, and it is therefore important that it is taken into account.
The Minister will know that there have been massive funding pressures in further education for several years, which have led to a £1.5 billion deficit across institutions nationally. The report that Bury College put forward stating why it wanted, or felt it needed, to enter into this process, said:
“The Further Education Sector has been subject to five successive years of funding cuts and fiscal restraints, which has weakened the financial stability of Colleges across the sector. No college has been immune to this impact and many colleges have already sought to mitigate the impact by exploring different structural arrangements such as federation, merger or shared services.”
I could go on about our critique of the way in which the Government have, while promoting apprenticeships funding, treated them rather as a one-trick pony and have not looked at other serious cuts, such as in adult skills, retraining and so on, but I will not. FE colleges have often been very adaptable, but that statement from Bury College demonstrates that even adaptable organisations need to have a bit of framework to breathe.
As my hon. Friend the Member for Manchester, Withington said, this process seems to be a shotgun marriage. There would have been more confidence in the process if those broader institutions had been brought into the equation. Greater Manchester is a particularly sharp example of that. Figures were quoted of the numbers of sixth forms in schools and the number of sixth-form colleges. Comparative to the number of sixth-form colleges countrywide, there is a very high proportion. It is therefore particularly important that some of the particular needs are met, both of sixth-form colleges that are included in the process, but also of schools and academy sixth forms.
James Kewin, the deputy chief executive of the Sixth Form Colleges Association, has talked about some of the flaws in the process in not including school and academy sixth forms. That, too, has been a problem. I ask the Minister again whether there is any prospect, even at this late stage, of taking account of that broader framework in the remaining reviews. When he or whoever comes to decide on the recommendations, will they bear that in mind when accepting or modifying the recommendations the Secretary of State receives?
We have also heard about the impact on students. As I reminded the Minister when we had a debate on the north-east FE situation at the beginning of the year, mergers between colleges can be particularly harmful to the social fabric and social mobility of young people in rural and suburban areas. Suburban areas are an issue in Greater Manchester, and the observations of my hon. Friend the Member for Manchester, Withington about how his students will be affected by what happens at Stockport College are a very good example. However, it is not just about the mass of students; it is also about some of the particular groups of students who may be affected. At the University and College Union’s recent conference, Elane Heffernan, a member of its disabled members standing committee, made that point, saying that FE is
“one of the most integrated places where you can be”
as a learner. I am conscious of what my hon. Friend the Member for Stalybridge and Hyde said about the need to beef up the role and position of students with special educational needs in FE, which is part of the point.
Another point I want to make is that the process will affect not just FE, but higher education. Literally thousands of people in the HE sector get their qualifications at FE colleges. Because of that, what happens to those FE colleges in the context of mergers will have a significant impact on the provision of HE in the areas concerned. I do not want to comment on the merits or demerits of individual proposals, but I am thinking particularly about the potential merger of the University of Bolton with Bury College and Bolton College. The Minister needs to think about that process as well, and I would like him specifically to address what will happen to higher education under this set of reviews.
To put this into the broader context, the Government’s Sainsbury review, which is very important, is about to come out, and hopefully a skills White Paper will come along with it. It seems bizarre to many of us that what is actually the higher skills issue is likely to be dealt with not in the new Higher Education and Research Bill, but in the schools-for-all Bill. I am not particularly concerned about where things turn up—it could be in one Bill or another—but I am concerned about the apparent lack of co-ordination and co-operation between the Department for Education and the Department for Business, Innovation and Skills. I am even more concerned because, at the end of the day—this comes back to the points that my hon. Friends made—if we are to be successful in driving forward skills for older people as well as younger people in Greater Manchester and elsewhere, there has to be a strong engagement between that process and the process of job creation which, of course, also involves the Department for Work and Pensions. If it all goes wrong, the Government will have a lot to answer for, not simply because the structure process has sometimes been untimely, but because of the way in which they have framed it.
My hon. Friend the Member for Manchester, Withington referred to many people having felt that, in this process, they were part of a shotgun wedding. Many of the processes may have been shotgun weddings, but we need to see what sort of baby they produce. The baby that they produce will be firmly the responsibility of this Government and those two Departments. I hope they will take on board what has been said about the combined authority, and think positively and creatively about widening its powers and allowing it, and the boroughs concerned, to have a real say in the final outcome.
I am going to call the Minister now, but may I ask him to be sure to leave just a couple of minutes at the end, so that I can go back to the Member who moved the motion?
I will be very happy to, Ms Ryan. It is a pleasure to serve under your chairmanship, and to respond to what has been a really interesting and constructive debate. I congratulate the hon. Member for Wythenshawe and Sale East (Mike Kane) on securing the debate and on approaching it in such a thoughtful and constructive fashion.
The area review is taking place in the northern powerhouse, in the Greater Manchester authority. I am sure that we would all be happy to admit that the co-operation between the Manchester authorities has been long standing and has many mothers and fathers. Nevertheless, I hope that hon. Members will recognise that on the northern powerhouse’s birth certificate the name George Osborne is there as “father”. The delivery of the vision of the northern powerhouse is what the area review and devolution of skills to the Greater Manchester combined authority are critically designed to achieve.
The shadow Minister, my hon. Friend the Member for Blackpool South (Mr Marsden), is the historian, but I just want to point out to the Minister that it was Daniel Adamson who built the ship canal in 1860 and who coined the phrase “northern powerhouse” when he envisaged a single market from the banks of the Mersey estuary to the banks of the Humber estuary—but carry on.
I am always happy to be corrected on a point of history; I am sure that there is room for Mr Adamson’s name on the birth certificate as well.
It is a great pleasure to respond, because normally I find in these debates that, when the fundamental purpose of the Government’s policy has been attacked, I have to spend so much time explaining and defending it that I cannot actually address any of the more detailed questions of implementation that have been raised. Today, given that there seems to be a general acceptance that, at least in principle, the area review has the potential to create a stronger and more sustainable system of further education in Greater Manchester, I hope that I can actually spend the time available addressing some of the particular points.
I will start with the points made by the hon. Member for Wythenshawe and Sale East. As his hon. Friends have said, he gave a brilliant exposition of the skills challenges facing the Greater Manchester area. He specifically asked about concerns raised by the UCU. I want to reassure him that last week I met the union’s general secretary to discuss some of those concerns and how we can ensure that, where possible, we consult trade unions and their members on some of the ideas emerging from the area reviews. I have asked the union’s general secretary to come back with some specific ideas about how that might work. I hope that will satisfy some of the hon. Gentleman’s concerns.
The hon. Gentleman asked an important question about break clauses on bank loans—I have been asked it before in the House but have never had long enough to go into detail. I know that this has caused people some concern. We do not yet have a specific example of a college that is facing a very substantial payment that it was surprised by and that it does not want to enter into. The first point to make is that in the restructuring of bank facilities it may be, in a merger or some other kind of transaction, that the bank will have the technical right to impose certain charges. It is a matter of negotiation. They may have the right to, but if they see that the overall new construction or group is actually going to be a better borrowing risk for them, and make it more likely that they will get their money back or be able to lend more money, which is what banks are in the business of after all, then they can novate loans—to use the jargon—without break costs when the new loan is lower risk.
The critical point, which will apply not only to break clauses but to everything in a sense, is that although we will be strongly encouraging colleges to undertake the changes and mergers when that is what is recommended, ultimately that will be a decision for them. They are independent institutions and they will be able to take into account the full range of costs and benefits. There may be costs, to some extent, or bank charges, but they will need to go ahead only if the benefits of other cost savings or advantages are greater than those charges. As I said, I hope that in reality those charges will not prove to be as much of a problem as the hon. Gentleman perhaps feared.
The hon. Gentleman raised a very interesting question that we will not be able to go into in great detail now. However, I hear him and have some sympathy with his point that adult learner loans are not available for short courses. Although we have career development loans, their terms of repayment are less attractive to students than those of adult learner loans.
May I just finish my sentence and then I will be happy to give way? I understand the point. I think we need to learn from some past mistakes. If we start having the taxpayer subsidising loan provision for very short courses, which is not something I want to rule out in principle, one has to ask how the Government and the taxpayer will be reassured that those short courses are genuinely valuable—as well as being valuable to the individual and their employer, they have to have some transferrable skills value. That is so that taxpayers’ money is not subsidising activity that is beneficial only to that narrow employer in that narrow job. That is something we are wrestling with, and I would be happy to hear ideas from the hon. Member for Wythenshawe and Sale East and other hon. Members on the subject.
I am grateful to the Minister for giving way and entirely take his point about not wanting to subsidise—if I can put it that way—short-term courses that are not going anywhere. That might lead us into a broader discussion about credit accumulation processes and the rest, but I do not want to touch on that now. The point I want to make is that at the moment, as the Minister will be well aware, the take-up of those adult learner loans was somewhat less than 50% at the last count. It might be—dare I say it?—in his interests, or in the future interests of any person occupying his post, when negotiating with the Treasury, to make the point that there is this demand in the way that my hon. Friends have described, and that it could be valuable if a reasonable construction of it could be made.
I hear that, and I assure the hon. Gentleman that the Treasury is very much aware of the issue. We have obviously expanded the application of advanced learner loans to a broader age group and a broader range of levels, but he is right that we nevertheless have more budget than is currently being utilised and there may be a way safely to extend its use. There are also issues with the Student Loans Company, which has a pretty big administrative burden at the moment, as he will be well aware. It manages those loans, so there are also technical implications. I would be very happy to discuss detailed ideas about that with hon. Members in future.
I want to move on to the question, which a number of hon. Members raised, about the involvement of schools in the area reviews, the request by Greater Manchester Combined Authority for greater power over schools and—the hon. Member for Stockport (Ann Coffey) raised this—whether what is going on in those schools is going to be considered as part of the area review. There are a couple of things to say. First, the regional schools commissioners are required to contribute to the underlying analysis for the area review and to be closely involved. The Greater Manchester Combined Authority is absolutely encouraged to have a very close relationship with the regional schools commissioner, as are individual MPs. I know that Government Members have started meeting the regional schools commissioners, as we have encouraged, and have found the meetings to be incredibly useful. Regional schools commissioners are available to meet hon. Members to discuss any concerns they might have.
On integration, in the sense of the programme of study that leads people and makes it more likely that they are going to succeed when they move into college and post-16 education, I hope that hon. Members will be willing to wait until the Sainsbury review and the skills plan are published. I can promise them that it will be very soon after the referendum, so it will give us something rather more interesting to talk about. I hope that will give a more complete picture of how we are looking at the curriculum, how people, including people with special educational needs, as the hon. Member for Stalybridge and Hyde (Jonathan Reynolds) said, can be best placed to succeed in that curriculum, and how we can ensure better access and a better step up into further education programmes than is currently the case. That will all be addressed in the skills plan and the Sainsbury review. We are keen to discuss that with hon. Members in time.
The hon. Member for Heywood and Middleton (Liz McInnes) intervened to raise a number of concerns—the hon. Member for Wythenshawe and Sale East also referred to them—about whether the area review specifically in Greater Manchester is ambitious enough and whether it is taking too long. Theresa Grant, who is chairing the review, is one of the most impressive public officials I have come across in my time in government. I am strongly inclined to agree with anything she says about any subject. As the representative of the combined authority, she does not believe that the colleges are being sufficiently ambitious. Concerns were raised that those that are hanging on to their independence, for understandable reasons—perhaps they are already good or outstanding—may not be looking far enough out and should think about the future landscape and opportunities, not just about rifts and threats.
I strongly encourage the colleges that are part of the review to take on board Theresa Grant’s comments and to work with her in further meetings—I believe that there will be another one next week—to try to see whether there is a way to grasp the opportunities more boldly than the initial proposals were grasped. That is my comment about her comments as chair, because ultimately it is for the review and the individual colleges within it to decide what recommendations they will adopt and to implement them.
I understand that there have been questions, not least by the shadow Minister, about whether we could give the Greater Manchester combined authority more power to enforce some of the recommendations. If we render colleges no longer independent, their whole balance sheet will suddenly come into the public sector balance sheet. I am not sure that Greater Manchester combined authority wants all the liabilities of the Greater Manchester college sector on its balance sheet as it starts life as a combined authority, and nor do we in Government. We must be a little prudent.
Having said that, those colleges will understand that the Greater Manchester combined authority will shortly control the entire adult skills budget. It will form outcome agreements with different colleges and will be able to move money around, as they can do already with capital, as has been noted. If we are in the business of pleasing our customers, I hope that all the colleges in the area review understand that the Greater Manchester combined authority will be a tremendously important one and take on board its recommendations on how the review should unfold.
I think I have addressed everything I had noted. If no one wants to intervene before I sit down, I am happy to hand over to the hon. Gentleman who introduced the debate.
It has been good to have the time and space to debate this matter and I thank everyone who has contributed. My hon. Friend the Member for Stockport (Ann Coffey) was right to highlight inequality within boroughs and not just between boroughs, as I did in my speech. We must reflect more on that in the review process. She continues to champion the cause of carers, people in care and their further education, which she does brilliantly in this House.
I could not agree more with my hon. friend the Member for Rochdale (Simon Danczuk), or rather I sort of agree and disagree. Level 2 to level 4 skills are missing. I believe, although I do not have empirical evidence, that globalisation and the advance of technology is sucking out some jobs as we go to advanced manufacturing in our economy. We must address that. People now in their 40s and 50s who did apprenticeships when they were young are being hit hard by globalisation and sometimes blame the wrong people politically. We as politicians must all think more about that.
My hon. Friend the Member for Stalybridge and Hyde (Jonathan Reynolds) is right that we must have strong local colleges. They are doing amazing things in Tameside. Agglomeration and specialism are the way forward, but it must be remembered that that is easier in the south-east where there is fantastic transport. There must always be a strong local element.
My neighbour and hon. Friend the Member for Manchester, Withington (Jeff Smith) is right that there is a feeling that this is more about form than function. It must concentrate on what the outcomes are for young people rather than protecting institutions as they stand.
The shadow Minister is an historian, and he does not have to prove his Mancunian roots to me. We have been talking about this ever since Arkwright, who powered his mill in Miller Street in 1792, and the industrial revolution—I will match my hon. Friend history for history. He is right to highlight the concerns of the UCU.
It is good that the Minister is talking to the trade unions. I will take his word about the break clauses and we will try to find specific examples to help the Government work this through. I will take him up on his offer to provide ideas for learner loans. I agree with him that Theresa Grant is one of the finest local government officers in the conurbation. She is leading on this and we wish her all the very best in the review.
Question put and agreed to.
I beg to move,
That this House has considered support for social investment.
It is a great pleasure to serve under your chairmanship, Mr Chope. I think it was the former New York governor Mario Cuomo who liked to repeat this quote:
“You campaign in poetry; you govern in prose.”
I apologise in advance because many of the practicalities relating to social investment and social enterprises are technical by their very nature, so most of my speech will be in prose, and pretty dry prose at that, but just for a moment I want a word of poetry, or at least a word of vision, to remind us what social investment and social enterprises are all about. As Social Enterprise UK, the national body for social enterprises, puts it:
“Social enterprises trade to tackle social problems”
“improve communities, people’s life chances, or the environment. They make their money from selling goods and services in the open market, but they reinvest their profits back into the business or the local community. And so when they profit, society profits.”
As a Labour Member of Parliament, I was interested to learn that it was the great social activist and researcher the late Lord Michael Young, author of my party’s 1945 manifesto, who 53 years later, in 1998, founded the School for Social Entrepreneurs. That perhaps reflects the fact that some of the best ideas for social improvement today come from the social enterprise sector.
Social enterprises are everywhere and can do almost anything. They are coffee shops, cinemas, pubs, banks and bus companies, to give but a few examples. Allow me, Mr Chope, to use the example of a social enterprise in my constituency: Splash Community Trust, which runs Splash Magic. That social enterprise was formed to reopen Plas Madoc leisure centre after Wrexham County Borough Council decided to close it in April 2014. The local community came together to save the facility, which the Splash Community Trust now runs for the benefit of the community. Splash Magic provides not only swimming and leisure facilities for the local community, but employment for local people, tackling health, employment and social problems. It is a great success story. This debate is about Splash Magic and every other social enterprise in our country, and how best we can support them.
I thank the hon. Lady for raising this very important issue. She has outlined one example of how social enterprises can make a difference. Some 2 million people have been employed through social investment, and it contributes £55 billion to the economy and has helped many social ventures. Does the hon. Lady agree that more community groups and small charities need to be aware of the help that there is in accessing funds, such as the Big Lottery Fund and other charitable funds, and that they should not be put off by long, complex forms and in-depth requirements, and be left feeling unable even to apply for community-changing grants?
I agree totally with what the hon. Gentleman says and the importance that he attaches to social investment—but now back to the prose. In 2012, according to ICF GHK’s report, “Growing the Social Investment Market”, which was commissioned by the Government, there were 68,000 social enterprises in the UK and they contributed at least £24 billion to the economy. Subsequent estimates suggest that the economic contribution could be far higher than that.
Social investment is of course the enabler of social enterprise. It is the use of finance to achieve a social as well as a financial return. The social investment market assists voluntary, community and social enterprises to raise capital that they may not be able to secure from conventional investment sources. It also helps investors to find organisations that will deliver for them a social as well as a financial return. The Charities (Protection and Social Investment) Act 2016, with which the Minister will be very familiar, gave charities the power to make social investments. I welcome that.
As it is often difficult for social enterprises to secure conventional bank loans, social investment is often a more suitable way for social enterprises to finance their activities. A significant reduction in grant funding in the voluntary sector and a move towards a dominance of contracts are two reasons for the increase in the popularity of social investment. Although social investors do expect a financial return, that often decreases in inverse proportion to the level of social return that investors wish to see. As a report for the Big Lottery Fund found, that means that social investors are often willing to accept lower financial returns if the social impact is greater.
Last year, a significant report was published. The “State of Social Enterprise Survey 2015”, supported by Santander, is the most comprehensive research undertaken into the state of the sector. It told of some great successes, such as how the proportion of social enterprises that grew their turnover in the 12 months prior to the report was 52%, well above the comparative figure of 40% for small and medium-sized enterprises. It also revealed that 31% of social enterprises are working in the top 20% most deprived communities in the UK. That is in itself an interesting figure and a sign of the social enterprises’ success.
However, the same research also stated that 39% of social enterprises believe that the lack of availability of funding or finance is a barrier to their sustainability, and although there was widespread support for the Public Services (Social Value) Act 2012, there was concern about its practical implementation. Both points need careful consideration and action.
I am sure that the Minister will want to praise Big Society Capital Ltd, which came about because people such as Martyn Jones, my predecessor as MP, campaigned on dormant bank accounts. Big Society Capital Ltd was set up under the Dormant Bank and Building Society Accounts Act 2008, which defined Big Society Capital as an organisation that exists
“to…enable other bodies to give financial or other support to third sector organisations”.
It was established by the Cabinet Office and launched as an independent organisation with a £600 million investment fund in April 2012. The investment fund comes from dormant bank accounts via the independent Reclaim Fund and four leading UK high street banks. Both my party and the Minister’s are rightly proud of Big Society Capital.
As co-chair of the all-party parliamentary group on charities and volunteering, I was privileged to chair a meeting recently on social investments. An interesting range of opinions were expressed, many by practitioners who deal with social investments and individuals who run social investment funds. There were many excellent contributions at the meeting. I pay particular tribute to John Smart of the transport industry social enterprise HCT Group, with whom I discussed some ideas in greater depth. In the light of the ideas raised at the all-party parliamentary group meeting, I will make the following proposals, and I would be grateful if the Minister responded to them in turn. First, I would be grateful if the Minister considered a change in accounting regulations to allow quasi-equity to be disclosed as equity rather than debt. It is often inappropriate and/or difficult for a social enterprise to take out loans. That is particularly true during their start-up phase, when they need capital for growth.
Under Charity Commission regulations, charities are unable to raise equity—that is, sell shares—or distribute reserves by way of dividend. That poses the question of how a social enterprise or charity can raise money for its development or growth. Quasi-equity investment allows an investor to benefit from the future revenues of an organisation. Under a quasi-equity agreement, an investor would receive a percentage of a social enterprise’s future earnings, which means that if the organisation performs well, the investor receives a good return. Conversely, if the organisation does not do well, the investor will receive little or no return.
In a typical social loan, the investor is investing in the organisation to help it to grow, taking the risk that the growth will occur. That is similar to a conventional equity investment, but the organisation does not issue shares. However, under current regulations, quasi-equity must be disclosed as debt on an organisation’s balance sheet. That can lead to the balance sheet looking over-geared, which is a particular problem when bidding for contracts, especially as commercial organisations tend to raise equity to fund expansion, and so do not face the same issues with their balance sheets.
A change in accounting regulations to allow quasi-equity to be disclosed as equity rather than debt would improve the social investment market. The change would be of great help to social enterprises that work with local authorities. When the social enterprise has the opportunity for open dialogue with commissioning authorities, it can explain its position and balance sheet. However, online portals are increasingly used as the method of bidding for local authority contracts, which provides no opportunity to explain the balance sheet position. Allowing quasi-equity to be disclosed as equity would go some way towards creating a level playing field between social enterprises and their mainstream commercial competitors. It would also be beneficial if contracting authorities could recognise that social enterprises, as not-for-profit entities, have different balance sheets from their commercial competitors.
Secondly, will the Minister consider an increase in the level of social investment tax relief? Individuals making an eligible investment can deduct 30% of the cost of their investment from their income tax liability, but only up to about £290,000 over three years. I know that there are many technical and legal issues, but change would attract more inward investment to the sector and allow social enterprises to expand and build on the good work that they are already doing to benefit society.
Thirdly, will the Minister further discuss the role of social impact bonds? There is clearly a wide range of different views on the subject, and I suspect that the Minister has heard many of them. The National Council for Voluntary Organisations, for example, is concerned about the fact that such a high proportion of the Cabinet Office’s spending—somewhere between £80 million and £105 million, I believe—is being committed to social impact bonds, which it sees as largely untested and as having a costly commissioning model. Although the organisation welcomes opportunities to learn more about how that model could be used to deliver social outcomes, it questioned whether SIBs should be such a high priority for the Cabinet Office, at the expense of other projects, until there is a better evidence base for their efficacy.
Some of us see social impact bonds as an effective way of de-risking contracts for the delivering social enterprise and the commissioning body, and as a good way for social enterprises to tap into available funds and have a social impact without the cost and commitment of loan or quasi-equity structures.
I am delighted to have had the opportunity to make my points today, and I look forward to hearing the Minister’s response.
It is always a pleasure to serve under your chairmanship, Mr Chope. I begin in the traditional fashion by congratulating the hon. Member for Clwyd South (Susan Elan Jones) on securing the debate. I welcome her interest in a very inspiring sector. She said it was quite dry, but I found her comments very interesting and I will come back to some of her ideas in due course. Her comments should not have been unexpected because, as she said, she chairs the APPG on charities and volunteering. The group recently held a session on social investment, which obviously proved to be interesting and has generated a number of ideas.
Social investment can drive innovation in the sector, as we heard from the example of Splash Magic in the hon. Lady’s constituency. It is a powerful tool to tackle some of the biggest challenges in society today and, in the case of her constituency, to tackle jobs and growth issues. Social investment helps economic growth by supporting the UK’s thriving social economy. It also supports social innovation by channelling funding towards entrepreneurial solutions to longstanding social problems, and helps public services by delivering better outcomes and, in some cases, savings to the taxpayers.
I have embarked on an ambitious reform programme for charities and social enterprises because it is my aim to deliver a sector that is more independent, resilient and sustainable over the long term, and much better able to meet the challenges that it faces. Since the general election, the Office for Civil Society has supported the creation of a new fundraising self-regulator. I know that is not directly relevant to social investment, but it is still important to raising money for charities, in particular. The new self-regulator is being led by Lord Grade, as the hon. Lady will know. It has the legislative powers needed to give the public confidence that fundraising scandals are a thing of the past, and is a chance to restore the public trust and confidence needed so that a generous public continue to donate to the causes that matter most to them.
The new Charities (Protection and Social Investment) Act 2016 gives the Charity Commission tougher powers to enable it to regulate the charity sector much more effectively. As the hon. Lady said, the new Act also clarifies the law on social investment, enabling smaller charities to have the confidence to get involved in this hugely beneficial area.
The UK is now recognised as a world leader in social investment. For example, we set up the world’s first social investment bank, Big Society Capital—the hon. Lady went into some of its history—and the first social investment tax relief, which I will talk about further. The first ever social impact bond was also in this country, so we have a lot to be proud of.
We also created Access, the Foundation for Social Investment, to which the hon. Lady did not refer. That has £100 million to support more organisations to take on and get ready for investment, helping to stimulate the pipeline of social investment deals over the next 10 or 15 years. We have made money available through the local sustainability fund, which was created to help organisations to secure a more sustainable way of working by providing funding and support to help them to review and transform their operating models.
In addition to what the hon. Member for Clwyd South (Susan Elan Jones) said in her speech, we also recognise the good work of the Big Lottery Fund. It is always good to recognise organisations that make a significant contribution to social investment, and the Big Lottery Fund enables that to happen. Does the Minister feel it is important to encourage and support that?
The Big Lottery Fund has some £700 million of grants at its disposal each year, and it is an important part of the funding landscape in this country. It does an awful lot of great work, and I encourage organisations that perhaps have not made funding proposals to the Big Lottery Fund in the past to do so now. The Big Lottery Fund is trying to do a lot to make it easier for organisations to get hold of grants and to ensure that it is focusing on some of the more disadvantaged areas across the United Kingdom.
Returning to my previous comments, I want the leadership that the Government have shown on social investment to continue. The Government are therefore supporting social impact bonds, as the hon. Member for Clwyd South said, and so far we have created 32 social impact bonds, which is more than the rest of the world put together. We have enormous experience of social impact bonds and the social impact bond market. SIBs work on the principle that the Government pay only for the outcomes that we want to see and that we agree should be delivered. Social investors provide the up-front investment to scale up innovative services and are repaid by the Government based on the outcomes delivered.
SIBs are being deployed to get to the heart of some of the biggest challenges that we face as a country. They often focus on things such as early intervention, which will help us to contain the ever-expanding demands on our public services. I recently visited the AIMS—accommodation, intense mentoring, skills—project of the Local Solutions organisation in Liverpool, which is supporting young homeless people into accommodation, training and employment. The programme allocates a trusted mentor to each young person to provide a single contact point, delivering personalised support across multiple services. The programme is financed via a SIB and is a great example of how commissioning for outcomes can give social sector organisations the freedom to do what is needed, when it is needed. SIBs help to foster genuine partnership between the Government, social sector organisations and social investors, supporting organisations that can innovate in ways that big government finds difficult. Perhaps most importantly, SIBs focus on delivering meaningful outcomes for people, and there is more to come.
As the hon. Lady will probably have picked up, the Prime Minister recently announced our new £80 million life chances fund, which is an important next step on the journey and will show how social investment can transform local public services. The fund is a down payment on a social impact bond market that I hope and expect to be worth £1 billion by the end of this Parliament. I want to see more social impact bonds and to support those who want to use this innovative source of capital, which is why we are working with the University of Oxford to create a new centre for excellence that will develop world-leading research in social impact bonds and innovative Government commissioning and will provide the practical support that local commissioners need as part of that process, but there is more to the market than social impact bonds.
The Minister is making some interesting points about SIBs, and the debate will clearly continue among organisations, but may I draw him on to the issues of quasi-equity and of equity and debt, please?
The hon. Lady made three specific proposals. The first was a change to the accounting rules, which she believes will help social investment by disclosing equity, rather than debt. I understand that, and I am happy to look at it. The second was an increase in the level of tax relief. Obviously I will need to discuss that with Treasury colleagues. Again, I am happy to look at it, but I cannot give her any commitments. Thirdly, she wanted to discuss further the whole investment in SIBs, which I have been trying to address.
I will talk about some other issues, too. Alongside charities and conventional social enterprises, new kinds of businesses are committed to making a social impact through their business without having constraints on how they distribute profits. Such businesses are part of the UK’s already diverse and growing social economy, and an independent review is currently considering how to increase the economic and social impact of mission-led businesses in the UK.
The hon. Lady mentioned dormant assets, which is another area that offers real opportunity. I believe there is a host of such assets that belong, in aggregate, to the public and should therefore be used to benefit society, not specific firms that may be sitting, unwittingly or not, on these stores of potential public value. I have set up an independent commission on dormant assets to explore what additional assets could be released to good causes, potentially transforming the way we support the sector.
We have done, and are doing, a lot to support social investment, but I do not plan to be complacent. There is more that we can do, and I will continue to drive the agenda forward. The breadth and innovation of our social sector in the UK is truly inspiring, as the hon. Lady will have witnessed. We are surrounded by incredible organisations that deliver life-changing services and reach all corners of our society. For example, I visited the social enterprise Clarity, which has been providing employment for blind and disabled people for 160 years. Employment in manufacturing a range of beauty and household products enables Clarity’s staff to develop their independence, build their confidence and play a full part in society. Such organisations demonstrate exactly why I am so committed to the sector, which is why I am determined to build their resilience and sustainability so that they can thrive and grow.
Again, that is where social investment comes in. I want to make it easier for anyone to be a social investor, from individuals to foundations to corporate organisations. I want to help investors to connect, through their investments, with the causes that matter the most to them. I would like to see pension providers offer products in which a percentage of their members’ money goes to social investments. We are seeing that work successfully in the French pension system, in which billions of euros have been channelled to social impact investments. Product providers in this country have so far made limited progress on developing social investment offerings for retail investors, so that area has real potential.
Some organisations are pioneering retail products. Threadneedle, for example, has a UK social bond fund with tens of millions of pounds under management that can be accessed by individual investors. That is just the tip of the iceberg for retail fund offerings. Millennials will be the beneficiaries of the largest intergenerational wealth transfer in our history, and in the future successful investment managers and product providers will need to cater for their preferences. They are more interested in values-based lifestyles than previous generations, which includes consumption choices but also the way they want to invest. The Government want to back those people in the choices they want to make, as well as supporting the incredible social enterprises and mission-led businesses we have in the UK to grow in scale to make an even bigger impact on the lives of beneficiaries and communities that they are changing every day.
I am delighted to have had the opportunity to discuss social investment in Westminster Hall today. Social investment is important because it is part of the long-term future of civil society in this country. We have a truly inspiring social sector here in the UK that contributes not only to the lives of our citizens but to the economy at large. We have all seen at first hand the impact that such organisations are having and the difference that they make to people who need them the most. We all want to ensure that the sector can thrive, which is why I am focused on delivering a sector that is more independent, more resilient and more sustainable over the long term. We can see that social investment is working. There is demand from social enterprises and investors alike, which is why I know that social investment is here to stay and will continue to grow and drive this vital sector.
Question put and agreed to.
I beg to move,
That this House has considered the ceramic and brick industries.
It is a great pleasure to serve under your chairmanship today, Mr Chope, and to see Members from both sides of the Chamber here in Westminster Hall. As vice-chairman of the all-party group on ceramics, and because the brick industry is in my constituency, I felt that it was important to raise this issue with the Minister.
The ceramics industry employs around 20,000 people in the UK, generating £2 billion in sales and exporting products all over the world. It is undoubtedly an industry of huge importance to our country.
In my constituency of Aldridge-Brownhills, there has been a large ceramics presence in the area since the early 19th century, when clay and coal mining boomed in the district. The availability of jobs in mining resulted in a population surge in Aldridge, to 2,478 by 1901, and by 1906 two of the mines—known locally as Drybread, which is near Coppice Road, and Bare Bones, at Leighswood—employed nearly 1,500 people between them. There is also the Brownhills Miner. If anyone is travelling through Brownhills or is on the A5, please make a detour to see Jigger, a 40-foot statue standing at the end of Brownhills High Street. It is a wonderful reflection of a proud industrial heritage.
Aldridge-Brownhills is now home to four companies working in the ceramics industry, which directly employ around 300 people across five sites. Some of the most famous clay products in the world originate in Aldridge, from the beautifully hand-crafted Imperial Bathrooms products, which are exported all over the world, to the bricks made at the Ibstock and Wienerberger sites, which are used to build new housing stock in the UK. Recently, some of the clay for the stunning art installation by Paul Cummins called “Blood Swept Lands and Seas of Red”—the poppies, as many will know, that were installed at the Tower of London—came from the Potclays quarry in Brownhills.
I congratulate the hon. Lady on securing this debate. May I ask her to say a word not only for the fantastic ceramics industry itself—I am truly blessed in Stoke-on-Trent South with some wonderful businesses that are directly involved in ceramics—but all the ancillary businesses, which do related work such as designing or maintaining kilns?
Absolutely. The hon. Gentleman makes a very valuable point. In any discussion about business, it is always worth reminding ourselves that it is not only the one business that matters but all the other businesses that feed into it, be it businesses that work with kilns, businesses that provide paint brushes or businesses that do a whole host of other things. Also, there are all the other businesses, which are often family businesses, around the area, which perhaps provide sandwiches or other things for the people working in all these companies.
However, the ceramics industry is approaching a worrying period of uncertainty. The European Commission published its legislative proposals for the emissions trading system phase 4 in July 2015. These proposals cover the period from 2021 to 2030 and propose a target of achieving at least a 40% reduction in EU greenhouse gas emissions by 2030. The key issue for ceramics within the EU ETS proposals is carbon leakage, notably the evaluation of industries so that they are deemed either at risk or not at risk of it. Some sectors are likely to meet the proposed carbon leakage quantitative threshold, but the situation for other sectors, mainly the heavy clay industries and particularly those that produce bricks, clay roof tiles and clay pipes, is less clearcut, which is why I felt there was a need for this debate.
The UK Government recently announced their position on the EU ETS phase 4 and suggested that free allowances should be focused on only a handful of sectors, with other sectors receiving a lower-tiered proportion. The ceramics industry is extremely concerned by this tiering proposal, as ceramic manufacturing sites would need to purchase significantly more allowances. Indeed, it is predicted that heavy clay producers such as those in my constituency would have to buy all their carbon allowance after 2027. A number of ceramic manufacturers have said that that charge alone is likely to exceed their profits.
As part of its Ceramic EARTH campaign, the British Ceramic Confederation has used figures from the Department of Energy and Climate Change to estimate that UK heavy clay construction product manufacturers will pay more than £40 million by 2030 under this proposal, which equates to almost £1 million per year per factory on average.
Clearly this situation concerns me and many other people, because businesses, jobs and investment are at stake. Therefore, I ask the Minister to continue to look at this proposal, which is for a system that supports only a few energy-intensive industries at the expense of many others. I genuinely fear that the UK proposal will burden businesses with very high extra costs. In fact, energy costs and climate-related taxes already make up around 30% of a brick maker’s production costs, and I fear that this proposal will only add to the issues that they face.
I am sure that others in Westminster Hall today are aware that there is a growing demand for housing in this country—we often discuss and debate it in the Chamber. Construction of houses is at an eight-year high and therefore the demand for materials is growing too. Brick is the most popular cladding material for building walls, with over 80% of new homes using bricks. Brick is unmatched for its durability, low maintenance costs, aesthetics and lifetime sustainability.
I recently had the pleasure of visiting one of the brick factories in my constituency and it was an inspiration to follow the production of bricks, from the clay pit behind the factory all the way through to the finished product at the end. It was only when I stood on top of the huge kiln that I really appreciated just how much energy goes into such large kilns to produce bricks for us.
The point that the hon. Lady made about the sustainability of the industry is a good one, and she made it well. Clay pipe making is very prominent in my constituency—90% of the UK’s production of clay pipes takes place in my constituency. Of course, clay pipes are very sustainable and very long-lasting, with a life of well over a hundred years. Does she agree that, although other forms of production are of course valid and important, we ought not to forget the importance of such manufacturing capacity?
The hon. Lady makes a very valuable point. I will focus more on bricks, because they are produced in my constituency, but I appreciate and understand that this issue is not only about bricks but about clay pipes. When we look around the country, we often hear stories about, for example, the sewers under London. They have been in place probably for centuries, using British-manufactured clay products, pipes, bricks and lots of other things as well. I thank her for making that point.
To meet the UK demand for new housing, we will need a 60% uplift in clay products for over a decade. Unfortunately, rising demand for bricks and clay roof tiles has been met by unprecedented levels of imports. We need to encourage and focus on investment here in the UK, and consider future innovation. In 2014, brick imports accounted for 25% of sales in this country, representing a direct loss of around £80 million per year for the UK economy. The rising rate of imports of heavy clay from outside Europe shows how the EU ETS phase 4 will not really work if the industry loses its full carbon leakage status.
The hon. Lady is setting a very important scene. I do not have any clay making or ceramics works in my constituency, but I see the issue that she is raising. Surely there is a very simple solution. On 23 June, vote no and get out, and we will not have to be under the regulations that she has referred to.
I am grateful to the hon. Gentleman for his intervention. I happen to disagree with him in terms of this debate. In fact, I have yet to declare my position on Europe, but it will become clearer later today.
The UK has some of the most energy-efficient manufacturing plants in the world. Specific energy consumption—in other words, energy efficiency—in the entire ceramics sector has improved by around 30% in just over a decade. To do this, hundreds of millions of pounds have been invested to make many UK plants as energy-efficient as is currently possible, and yet they could all be forced to buy all of their carbon allowance if the tiering proposal is accepted. I ask the Minister this simple question: is that fair?
The uncertainty in the industry caused by the proposals and the rise of imports means that future investment is becoming difficult and unsteady. It will make the UK even more vulnerable to higher carbon non-EU imports. We need stability and continuity. As someone who comes from a business background, I know how important that is for businesses from all sectors. It is only through stability and continuity that they feel safe and secure in investing in the future.
I also congratulate my hon. Friend the Member for Aldridge-Brownhills (Wendy Morton) on securing this important debate. Michelmersh in my constituency is a fantastic local brick maker. It would always make the point that it wants continuity and certainty so that it can make investment decisions that ultimately mean that jobs stay in the UK and do not disappear to China.
My hon. Friend makes an important point. The subject of the debate is important, because behind it are jobs and our local economy. I do not wish to see de-industrialisation. The UK has a proud industrial history. We should also recognise that importing products from outside the EU would defeat the point of the emissions trading system. Overall, manufacturers outside the EU are not as well regulated. The electricity generation and the fuels used are more carbon-intensive, and the transportation of goods to market emits additional carbon.
As I said, the matter of housing is frequently raised in the House. The British Ceramic Confederation estimates that the Government’s programme of house building has the potential to create more than 3,000 direct ceramic manufacturing jobs in the UK and give a big boost to the sector and GDP. However, that is not being realised because of the threat of carbon leakage loss and the uncertainty that brings.
Turning to energy costs, brick makers in the UK pay about 80% more for their electricity than the EU average price, according to Eurostat. Despite much mention of the renewables compensation scheme for energy-intensive industries, brick makers are not compensated at all in the UK for renewables costs. I am sure my right hon. Friend the Minister will know that seven ceramic manufacturers in the UK are likely to receive renewables compensation, in contrast to more than 100 German ceramic and clay sites. Clearly we do not have a level playing field, and we need one.
Given that a lot of the players in this market that have factories in the UK also have factories in such places as Germany, surely one pressure comes from saying to those companies, “You can get compensated in Germany. Put your production in Germany, not the UK.”
The hon. Gentleman is absolutely right. At the end of the day, I want a level playing field for our industries in the UK so that we can compete. We need to extend the number of companies that the compensation covers. I am pleased to note that the hon. Member for Stoke-on-Trent North (Ruth Smeeth) is here today. She is chair of the all-party group on ceramics. I am sure she will make reference to and, I hope, welcome the Chancellor’s announcement of the ceramic valley enterprise zone status in her constituency. That is welcome news, and I am sure she will have more to say on that, but we need the right energy and carbon policies to unlock investment at this critical time when we continue to secure the country’s economic recovery.
The Government have set a key target in their construction strategy of a 50% reduction by 2025 in the trade gap between total exports and total imports for construction products and materials. Ceramics and bricks can make a real contribution to that target, but that will happen only if we have a level playing field that enables us to compete.
The ceramics industry does not just face issues within Europe. As a result of dumped imports, between 2006 and 2011 a huge number of direct jobs were lost in the ceramic tableware and kitchenware industry within the EU as Chinese exports tripled. Since the EU anti-dumping measures were introduced in 2011 for tiles and in 2013 for tableware, the industry has stabilised its production, brought manufacturing processes back to the EU and created jobs and investment opportunities, including with clay and other materials suppliers.
The ceramics industry is, I fear, one of the most vulnerable to overcapacity in the Chinese economy. If market economy status is conferred on China by the EU, despite it only meeting one of the five necessary criteria, it will make the maintenance of adequate and meaningful anti-dumping measures, which currently protect tiles and tableware, impossible, the progress the industry has made since 2011 will be lost, and the industry will once again be put at risk. It would also further add to the uncertainty the sector is facing. What assessments have the Government and the Minister made of the impact of market economy status for China on the ceramics industry? Will they continue to listen to the views of the industry? Colleagues in the European Parliament recently rejected MES for China in a plenary vote.
I come from a business background. I believe in manufacturing. Businesses need continuity and stability to invest, innovate and thrive. As a country, we cannot decarbonise by de-industrialising and shifting our carbon emissions to another part of the world. Will the Minister look seriously at this issue? I want our industries to prosper and thrive. The ceramics industry needs competitive energy prices and the rejection of market economy status for China, but above all it needs a level playing field. That is why I am asking the Government to recognise the strategic importance of the ceramics industry and, in particular, bricks, pipes and roof tiles. I am sure that other Members will mention other products, too, and I leave that to them. We need the Government to look at today’s industries to see how they can be best be supported to thrive in tomorrow’s markets.
It is a pleasure to serve under your chairmanship, Mr Chope. I thank the hon. Member for Aldridge-Brownhills (Wendy Morton) for securing such an important debate. I agree wholeheartedly with all her comments, with the exception that I think the priority should always be tableware.
I am the chair of the new all-party group on ceramics, and am proud to represent the Potteries—the historic centre of our country’s ceramics industry—so it will come as no surprise that I consider the sector to be of great importance. Across Stoke-on-Trent, more than 7,000 people are still directly employed in ceramics—more than in any other industry. With the ceramic valley enterprise zone, the future of the industry is clear; there is huge opportunity for development and huge potential. We need to ensure the level playing field that the hon. Lady spoke about so articulately.
I was saddened in our last debate to hear that the Minister so rarely finds the time to eat a proper meal from our excellent Stoke-on-Trent tableware, or even from the less-than-excellent Chinese tableware utilised by her Department, but that lack of familiarity with the craftsmanship of Dudson, Churchill or Steelite need not concern her in today’s debate. There is so much more to the ceramics industry than just tableware, important though that is. It is those other applications that I wish to focus on today.
In my constituency, we are proud to be home to Johnson Tiles, the UK’s leading tile manufacturer and pioneers in the field of ceramic design. Like the brick factories in the constituency of the hon. Member for Aldridge-Brownhills, it is a major employer and a big contributor to our national economy. Bricks and tiles are not just important to the livelihoods of our constituents, however; they are key strategic industries in their own right, providing the raw materials that our country needs to build and to grow. The Government have repeatedly stated their commitment to a major programme of house building, which I very much support. We cannot build new homes without the raw materials for construction, and the Government’s ambitions, if fulfilled, could be an incredible opportunity for our brick and tile industries.
And pipe industry.
Indeed. My hon. Friend will undoubtedly highlight that later. I am concerned that under the Government’s policies on these sectors, the benefits will not be felt as keenly as they should or could be. Indeed, if we do not support the industries appropriately, the benefits of any construction boom will be reaped not by our businesses, but by brick factories in north Africa, Turkey and elsewhere, where costs of production are lower and future risks less pronounced.
Despite their importance in the supply chain for house building and construction, and despite the wide range of high-tech applications, I fear that the brick and ceramic industries are being treated as poor relations by the Government. I can only hope that this debate will help to persuade the Government that more can and must be done to support the industry, which sets the benchmark for innovation and for commitment to sustainable manufacturing.
The British Ceramic Confederation’s EARTH campaign is doing valuable work in highlighting some of the major issues affecting the brick and ceramic industries. One such issue concerns China’s ongoing bid for market economy status. I have spoken before in this hall about the threat that MES for China would pose to British industry, and I have also raised the Government’s apparent acquiescence to China’s demands. Nevertheless, the ceramics industry’s concerns on this matter are significant and bear repeating. Granting market economy status to China would leave us with no defence against unfair Chinese dumping practices, and would allow our domestic market to be flooded with inferior goods at prices that are simply not achievable without the state intervention and rock-bottom labour costs that Chinese industries take advantage of—or exploit.
It is well established that China has, to date, met only one of the five criteria required for market economy status. It is also recognised that the impact on the British economy of granting China such a status would be severe, with a potential cost of 3.5 million jobs across the UK—jobs we can ill afford to lose.
I would, of course, mention wonderful firms such as Mantec, Wedgwood and Cromartie, but I do not want to go through the list because you will not allow me, Mr Chope. In addition to the “legitimate” importation, or dumping, of Chinese goods in the UK, there is still a massive problem with counterfeiting—including with dangerous chemicals and materials—and intellectual property theft by companies in China. That is being dumped on our market as well.
I totally agree with my hon. Friend and neighbour in Stoke-on-Trent South. I am dealing with one such case in my constituency, in which a company has, unfortunately, been a target of infringement. We have to look seriously at what we can do to provide support. There is no easy answer, but we have to deal with these problems at every level.
And not give China MES.
And not give China MES to make the situation even worse. Let us be clear: these fears are not baseless. They have been raised time and again by all the major employers in the sector, including those in my constituency, and by GMB, the trade union that represents the sector, and which has done an incredible job in both the UK and Europe to highlight the challenges that MES would pose.
In the European Parliament, these concerns have been widely recognised. A recent vote against granting market economy status to China was overwhelming: 546 votes in favour of not granting MES, and just 77 against not doing so. Furthermore, the motion received support from British MEPs from across the whole political spectrum—Labour and Conservative—who were united, as I hope we are today. Does the Minister agree that that demonstrates just how valuable our EU membership is to the protection of British industry? Will she confirm whether the Government will listen to their European representatives and work with our EU partners to help block China’s bid?
It is heartening to see so many Members from both sides of the House here today; it is a sign, I hope, of the depth of feeling on the issue. We all want our excellent brick and ceramic industries to continue to grow, thrive and prosper; all we are asking for is a level playing field, so that those ambitions can be fulfilled.
It is a pleasure to serve under your chairmanship, Mr Chope. I congratulate my hon. Friend the Member for Aldridge-Brownhills (Wendy Morton) on securing this debate.
I shall focus on the EU emissions trading system policy, which has already been highlighted but is of particular concern to Wienerberger, a brick manufacturer based in Kingsbury in my constituency. Like my hon. Friend the Member for Aldridge-Brownhills, I had the chance to stand on top of the kiln when I visited the company recently, which was quite exciting. Wienerberger has 13 factories throughout the country that produce bricks and roof tiles. It is employs 1,165 people in the UK. Its Kingsbury factory alone produces 40 million bricks per annum, which is enough to build 5,000 new homes.
Wienerberger’s specific problem is the proposal concerning the future carbon leakage policy. As has already been pointed out, and as I know the Minister is aware, carbon leakage in this sense refers to the relocation of UK production to locations where it is cheaper to manufacture because of environmental policies and/or lower energy costs. The direct result is a loss of investment and jobs from the UK economy. In EU ETS phase 3, ceramic sector installations, which include brick and clay roof tile factories, are deemed to be at risk of carbon leakage. As a result, factories receive a proportion of allowances based on the average of the top 10 performers across the EU in that sector, free of charge. If, as has been proposed by the UK and France, a tiered approach to carbon leakage risk is adopted in phase 4, it is likely that the ceramic sector will be reclassified as no or low risk and will thus receive significantly less free allocation.
Does my hon. Friend agree that with the increased demand for housing, we should be looking at ways to support the brick manufacturing industry?
My hon. Friend pre-empted part of my speech. She is absolutely right that we need more houses, and that it makes absolute sense for the bricks for those houses to come from local businesses in the UK.
The loss of the free allocation I have described will, when combined with an escalating market price for carbon allowances, significantly increase the cost of production. Meanwhile, competing construction materials, such as cement, will retain free allocation, creating market distortion. The situation is particularly acute in the UK as the carbon price floor, a UK-only policy instrument, adds further costs to the EU ETS carbon price for power producers. That additional cost is being passed on to businesses via electricity prices, with manufacturers being unable to pass them on to customers. Countries such as Germany and Italy are compensating for renewable electricity charges, but the UK is not. That further reduces the competitiveness of the UK brick and clay roof tile industry.
Wienerberger has factories across Europe, including in countries with significantly lower electricity costs than the UK. Any increase in UK production costs makes future investment in its UK factories far less attractive than investment in other European countries.
On that very point, the family-owned Hinton Perry & Davenhill brickworks in my constituency has recently invested £5 million in new energy and production efficiency measures. Does my hon. Friend agree that undermining the business model on which such brickworks operate reduces investment in energy efficiency, thereby worsening the situation, rather than helping?
I cannot say much more than that my hon. Friend is absolutely right. That is the nub of the problem. It is about investment as much as anything else.
Given the Government’s commitment to delivering 400,000 affordable housing starts by 2021, and the Construction 2025 strategy, which seeks to achieve a 50% reduction in the trade gap between total exports and imports of construction products and materials, it is essential that we maintain a UK manufacturing base of bricks and clay roof tiles. In order to achieve that, we must support local manufacturers in the UK, which will ultimately reduce the need for imported materials.
Competing construction materials such as cement and steel are set to retain carbon leakage status, creating distortions in the UK market. Importing construction products will have a negative effect on the UK trade balance and increase the UK’s consumption-based emissions. I should add that it is not only the brick and ceramics industries that raise these concerns; there is also support from other energy-intensive sectors, such as paper and glass industries.
In summary, my asks of the Minister are that the Government support these very important industries by ensuring that no tiered approach is applied, and that ceramic installations retain full carbon leakage mitigation; by maximising the provision of free allowances to preserve the UK’s competitiveness; and, finally, by allowing the current qualitative assessment process to continue. I look forward to hearing my right hon. Friend the Minister’s response.
It is a pleasure to serve under your chairmanship, Mr Chope. I am pleased to have the opportunity to speak in this debate, and I congratulate my hon. Friend the Member for Aldridge-Brownhills (Wendy Morton) on securing it.
As Members know, in the autumn statement the Government committed to building 400,000 new homes in this Parliament. I am pleased that brick manufacturers want to play their part in achieving the Government’s ambitious goal. Yet with that ambition comes a need for the steady production and supply of building materials for Britain’s new homes. When Britain last built 200,000 new houses a year, it required stocks of more than 1 billion bricks and the production of almost twice that number to fulfil orders and keep the prices of basic construction materials stable. Although I am pleased that figures from the Department for Business, Innovation and Skills show an increase in brick production, and that the Office for National Statistics and the chair of the Brick Development Association agree with those figures, we need to ensure that the brick manufacturing industry and the other elements that go into building our homes are recognised. They must be appreciated as an important staple for house building and increasing market values.
Does my hon. Friend agree that, as we seek to build more houses, the construction industry needs a continuity of construction materials? That includes bricks, roof tiles, pipes and everything else that is required for constructing a home.
I totally agree. We need exactly that package if we are to achieve this ambitious target.
I welcome the British Ceramic Confederation’s ceramic EARTH campaign, which aims to raise the profile of the industry’s important contribution to the UK economy. To be able to compete internationally and secure jobs, we must ensure that all sub-sectors receive mitigation measures to fully guard against the leakage of carbon investment and jobs outside the EU, and there must be action to lighten the cost of UK/EU energy, climate and environmental policies, which harm the sector’s ability to remain competitive on the international stage.
I share an interest with my hon. Friends the Members for Aldridge-Brownhills and for North Warwickshire (Craig Tracey): my constituency is home to the national headquarters of Wienerberger, the UK’s third largest brick manufacturer. Wienerberger is responsible for producing all the elements of construction. It is the only multinational producer of clay block for walls, clay roof tiles, ceramic pipe systems, and concrete and clay pavers. It provides what the firm calls a “whole building envelope”.
My hon. Friend is talking about one of her local companies that produces bricks. Does she accept that the many companies across the country that manufacture such products, from small family-run companies to the much bigger national and international companies, are all affected by the EU ETS and the market economy status?
That is exactly right. They have an all-pervasive influence.
Innovation and speed are important in meeting the Government’s targets. Innovation can drive down construction time. For instance, Porotherm—Wienerberger’s clay block walling system—has been used to build an apartment block complex in South Harrow, which is currently being finished. It has reduced the construction time by 20% from 15 to 12 months. One floor is rising every eight days, readying the roof for installation within 10 weeks. That new method of brick production has reduced overall construction time and speeded up access to home ownership. Therefore, where there is demand for good-quality housing, and where there are brownfield sites with appropriate planning permission for construction, we should recognise that developments in the brick industry enable quicker construction and allow properties to be released much sooner than the market is currently used to.
It is clear from Members’ contributions that investment in new capacity is needed to help the industry with the production of bricks. That should be at the forefront of our concerns. As Members have mentioned, in the EU ETS phase 3, all ceramic sectors and sub-sectors are deemed at risk of carbon leakage for direct carbon costs, but they will not be compensated for indirect carbon costs. The key issue for phase 4 legislation is to guard against the leakage associated with indirect and direct costs. However, there are shortcomings to those proposals—most notably, an insufficient number of free allowances for the industry. Thus there would be a uniform percentage reduction, known as the cross-sectoral correction factor, to keep within the minimum. To avoid the CSCF, the introduction of a tiered approach, although helping a limited number of sectors, could be damaging to other sectors. Under this tiering, ceramic installations would see a significant reduction in the level of free allocation received. That is worrying for the firms that are involved in the production of bricks, roof tiles and drainage pipes, which may cease to receive free allowances. That will make investment in UK operations challenging and undermine much needed investment in capacity.
The UK ceramic industry is steeped in heritage. Now more than ever it is vital to Britain’s growth. As we seek to build more homes, we should remember that good homes are built on strong foundations, and we should do all we can to ensure that those foundations are built on a strong brick and ceramic manufacturing industry.
It is an honour to serve under your chairmanship, Mr Chope. I congratulate the hon. Member for Aldridge-Brownhills (Wendy Morton) on bringing forward this very important debate. She spoke of the 20,000 people employed in these heavy industries, which generate £2 billion-worth of sales and exports worldwide. Interestingly, she said that ceramics, clay and coal mining have been in her constituency since the 19th century.
I, too, have a ceramics business based in my constituency. Having visited to Raeburn Brick and listened to its concerns, I feel obliged to speak up for it in this place. It is Scotland’s only remaining clay brick company, and makes 15% of the bricks used in Scotland. When I was doing some research earlier, I noted some of the names of the bricks, including Jacobite, Livingstone, MacKintosh Smooth, Holyrood Buff and Orkney Buff—very interesting. It uses clays won locally in west central Scotland.
I am familiar with many of the issues that the industry faces. As a member of the Scottish steel taskforce, I have listened to a wealth of evidence from many different sources about the problems that our energy-intensive industries face. We all recognise that the road ahead is not easy, and the industries acknowledge that there are serious and significant challenges. The ceramics and brickmaking industry is an important part of Scotland’s manufacturing heritage.
The hon. Member for Stoke-on-Trent North (Ruth Smeeth) raised the issue of EU support and funding during Prime Minister’s questions, and it is important that we recognise the vital role that the European Union plays.
Throughout the steel crisis, the Scottish National party consistently called on the UK business sector to bring forward a comprehensive and revised industrial strategy for heavy industry in the UK. That is more crucial than ever if we are to guarantee the long-term sustainability of the ceramics industry and other heavy industries in the UK.
Although the SNP Government in Scotland support energy-intensive industries, they recognise that energy efficiency and clean energy are the key to meeting our ambitious climate change targets and contributing to long-term and sustainable economic growth. We are well on our way. In fact, this week it was announced that Scotland has exceeded our 2020 target to reduce greenhouse gas emissions by 42% six years early. The transition to a lower-carbon economy is not easy. The challenge is that the payback on such investments is often achieved in the long term, so we need strong leadership, technical expertise and access to appropriate finance. We also need to support manufacturers that are taking a lead by adopting and investing in energy-saving measures, as Raeburn Brick is doing. We need a proactive response that engages constructively with the industry. Ceramics cannot be allowed to slump into crisis before the Government are willing to respond.
Many Members made very interesting points. The hon. Member for Aldridge-Brownhills said that we have to achieve a 40% reduction in greenhouse gases by 2030. That means companies in her constituency will have to purchase more allowances, at a cost of £40 million between now and 2027, which equates to £1 million per year per factory, she said.
It is important to support all heavy industry. The hon. Member for Sheffield, Hillsborough spoke up for clay pipe making in her constituency—
Penistone and Stocksbridge.
Sorry about that—I mean the hon. Member for Penistone and Stocksbridge (Angela Smith). I should have known that, because we have met many times to talk about heavy industry—my apologies.
The hon. Member for Stoke-on-Trent South (Robert Flello) spoke about ancillary firms also being important, and kiln production. He spoke kindly about Wedgwood, to mention it again, and that we have to be careful about market economy status for China, which has counterfeiting and dangerous chemicals in some products.
The hon. Lady always speaks with such passion about the industries in her constituency. Does she agree that we need to look not only at the EU emissions trading scheme, but at market economy status for China? Only by having a level playing field can we encourage businesses to do their bit, which is to invest and innovate for the future.
The hon. Lady makes a good point. We will hear from the Minister in her response to all our points. We have heard many times that market economy status will not mean that we cannot bring anti-dumping cases, so I am interested to hear how she will respond to everyone’s concerns.
We heard from the hon. Member for Stoke-on-Trent North (Ruth Smeeth) that there is more to ceramics than brick alone; it includes tableware. A tile manufacturer is a big employer in her constituency, and it has major concerns. The brick and tile industry has bases in north Africa and Turkey, where production costs are much lower, so we have to support our ceramics in the UK. She also made mention of labour costs, which are lower in those countries, although employees there can be exploited.
The hon. Member for North Warwickshire (Craig Tracey), which includes Bedworth, spoke about his brick and tile manufacturer in Kingsbury, which employs 1,100—
Order. I am sorry to interrupt the hon. Lady, but by convention the time available is split between the Opposition spokesmen. I have to call the Minister at 20 past, so if the time is to be split equally, the hon. Lady’s time is up.
I apologise, Mr Chope, and will conclude by saying that we have heard many concerns from Members in all parts of the House. We look forward to hearing the Minister’s response.
I congratulate everyone on their contributions to the debate, in particular the hon. Member for Aldridge-Brownhills (Wendy Morton)—I was going to call her the hon. Member for brick, because she was such an advocate for her brick makers, but I realised others might claim the title. However, she rightly celebrated the industry in her constituency, and pointed out her concerns about the uncertainties caused by some of the issues mentioned, which I will return to in my remarks.
I congratulate my hon. Friend the Member for Stoke-on-Trent North (Ruth Smeeth), or the hon. Member for ceramic tableware, as we might call her. She said that the industry is treated as a poor relation, and referred to the industry’s EARTH campaign, as well as market economy status, which is a thread running through the debate.
I congratulate the hon. Member for North Warwickshire (Craig Tracey), and for Bedworth, on his contribution—the hon. Member for tile and brick perhaps. He spoke about the potential negative interest of the Government proposal on the emissions trading scheme. I also congratulate the hon. Member for Cheadle (Mary Robinson), who spoke about bricks, pipes and pavers—so she, too, introduced a new product into our debate.
The debate was very informative, as they always are in Westminster Hall. We all learn a lot from hon. Members and their experiences in their own constituencies. Some of the debates are among the best seminars that we can get anywhere.
As hon. Members have said, the industry is important, and I want to praise it for taking the initiative with its EARTH campaign, which has been mentioned. The campaign raises the key issues that the Government need to address in order to secure the future of the industry. The industry employs many thousands of people, and there are 480 ceramic and brick manufacturing businesses in Great Britain, although that number has fallen from 640 in 2009. They are a key part of a modern UK economy.
The highly regarded new extension of Tate Modern is an example of a resurgence in the use of brick in construction and British architecture. The high-profile use of brick in an iconic building, combined with the strong growth figures forecast for the housing industry, which we have heard about, mean that there is a glowing future for the brick industry in the UK, which is renowned globally for its excellent design and architecture expertise and the innovative materials that make that possible.
Recently, the energy-intensive industries have made common requests to the Government, many of which have been mentioned. I will reiterate briefly that the cost of compliance under the renewables obligation compensation package must be looked at, and a level playing field is needed across Europe. We welcome the consultation that the Department for Business, Innovation and Skills is conducting, but action is required.
Carbon emissions can be massively reduced by undertaking research and development into energy saving and efficiencies, new innovations in fuel and energy efficiency, heat recovery, and furnace design. As hon. Members have said, we also need to be protected from cheaper Chinese products, otherwise we have the dumping of goods being produced for less than the cost of production, as we have seen in the steel industry. That is one of the key demands of the EARTH campaign.
The housing industry needs to be primed to create homes for millions of UK citizens awaiting decent housing, which will help to create demand in many UK materials products, including ceramics, bricks, steel and glass. The UK is pioneering new approaches in the brick and ceramics industry, with research in areas such as kiln firing and energy efficiency. I pay tribute to the work of the industry and to ceramics research centred in Stoke-on-Trent. Research and development in the brick and ceramics industry needs to be systematically spread across the whole of the materials industry.
We have not heard mention of this so far today, but a proposal is with the Government for the creation of a materials catapult, which could bring about the upscaling and commercialisation of relentless, continuous innovation in the materials sector, taking new science from the discovery stage to the practical stage, ready to be picked up by business. However, the brick and ceramic industries, in common with the rest of the UK materials sector, do not benefit from the support of an innovation catapult.
In developing the UK catapults, Professor Hermann Hauser outlined the foreign criteria for a new catapult to flourish: a large global market to exploit; a UK global lead in research capability; and the necessary absorptive capacity to exploit commercially in the UK. The UK materials sector clearly meets those guidelines, so I am interested to hear from the Minister what the latest thinking is on the establishment of a catapult in this field, and whether that could bring the UK into line with other advanced nations, including our competitors in the European Union, which I know the Minister is a strong supporter of, as I am.
The advanced materials catapult is exactly the right thing to do, for the reasons given by my hon. Friend, but would it not be tragic if, at the same time as developing it, we lost the production to other countries?
My hon. Friend is absolutely right, which is why the issues that have been identified in the debate are so important and why it is very important that the Minister responds to each of the asks in the EARTH campaign, with particular reference to the Government’s slight obsession with pushing through market economy status for China. It is clear from the recent vote in the European Parliament—it was cross-party, cross-sector and an overwhelming result—that there are strong feelings about that matter, yet the Government seem intent on pushing ahead, despite such a strong expression of opinion. I would be grateful if the Minister could update us on whether that is having any influence on the thinking and whether the Government are listening seriously to the voice of industry with regard to that.
I do not want to take up any more time because we want to hear from the Minister, but I urge her to listen to the requests from hon. Members and the demands from the industry, and tell us what she is doing about the proposal to create a materials catapult for the UK sector, with bricks and ceramics at the heart of that research and development, together with steel, aluminium, glass and those sorts of materials. That could give the sort of assurance to those great British industries that secures their continuity well into the 21st century.
It is an absolute pleasure to serve under your chairmanship, Mr Chope. May I begin by congratulating my hon. Friend the Member for Aldridge-Brownhills (Wendy Morton) on securing this excellent debate and everybody who has contributed to it? It is indeed a fascinating subject. Such is my interest in all the sectors in my brief—especially ceramics, because of the breadth and depth of the sector—I am getting to the stage now where I could bore for Britain on the different technologies and techniques and how exciting it is. Yes, it relies on many traditional methods. I am helpfully reminded that brick making is some 5,000 years old, but it pretty much has not changed over those years.
I always have to pay tribute to my excellent Parliamentary Private Secretary, my hon. Friend the Member for Rugby (Mark Pawsey), who, within his constituency has Morgan Advanced Ceramics—actually, this is a serious point. I quickly looked at its website, and when we see the astonishing high value products it makes, it is almost difficult to believe that they all fall within the wonderful broad category of ceramics, which, of course, includes clay pipes.
As I said, brick has been used by people for building for at least 5,000 years for good reason: it is a durable and it is energy efficient. It is to be commended and, if I may say, it should be used at every opportunity. The sector is very diverse, including electronics, aerospace, automotive and healthcare.
After a prolonged and painful restructuring in recent decades, some parts of the brick and ceramic sector have seen a revival in past years. Strong demand from house builders has meant that previously mothballed brick factories have reopened and substantial investment has been made in others, such as the Ibstock Brick Ltd facilities at Chesterton and Ibstock in Leicestershire. Unfortunately there is nobody here from Leicestershire, but that is an outstanding company. In ceramics there has been new investment in both technology and factories, with distinguished names such as Waterford, Wedgwood, Royal Doulton, Wade and Steelite leading the way.
In response to the hon. Member for Stoke-on-Trent North (Ruth Smeeth), I want to put the record straight. I do eat when I can—I enjoy eating, in fact. However, I think her point was in relation to the fact that in BIS, apparently, we do not use crockery that has been made in this country.
It is absolutely shameful—I could not agree more. When we last debated this issue, I have to confess that I did not know Steelite, which is a disgraceful admission from the Minister responsible for ceramics. By a happy chance, that very weekend I happened to be staying somewhere in Scotland—I will not name it—where they used Steelite. It is an outstanding ceramic because it is incredibly durable. It has many other qualities, too—it can be very fashionable and traditional—and I could go on. It has outstanding British quality and it has stamped on its back proudly that it is all made in Britain. I know that the industry has been keen to overcome some of the difficulties it has had. Frankly, we know that some companies have imported products and then, because they will slip them and perhaps finish them off, they then put “made in England” on them. Anyway, Steelite is made here in Britain and it is brilliant.
The business environment has been tough, and it still is tough for many parts of the sector, especially those businesses that are caught up in the supply chains for sectors such as steel. We all know the difficulties they have been suffering. However, we are getting the fundamentals of the economy right. By way of example, we are cutting corporation tax to 18% by 2020, which is important to support the sector and indeed all manufacturing. We are cutting red tape and investing £6.9 billion. Again, all of that is important, as is our work creating apprenticeships so that we keep our skills base up.
In relation to Stoke-on-Trent in particular, the Stoke-on-Trent and Staffordshire local enterprise partnership has achieved many things. For example, there was £159,000 for Keeling and Walker, Fairey Technical got £159,000, Hygan Products got £30,000 and Siak Transfers got another £10,000 to help them with new jobs and new investment, looking to the future. The Ceramic Valley enterprise zone along the A500 corridor was announced in the autumn statement to help the United Kingdom to compete with the growing technical ceramics sectors in the United States, Germany and Italy. The Government’s city deal with the LEP includes a flagship proposal for the UK’s first at-scale, low-carbon heat network system, which will support the region’s world famous advanced manufacturing and applied materials sectors, including ceramics.
I turn to the sometimes controversial—understandably so—EU emissions trading scheme and reform. We are a strong supporter of the EU ETS as a cornerstone of EU climate and energy policy. It can help industry decarbonise in a cost-effective way in the transition to the low-carbon economy we all want, but the United Kingdom Government believe that improvements to the EU ETS in phase 4 can help it function more effectively and target carbon leakage support at those sectors at greatest risk. What we do not want is for us to be exporting jobs and importing carbon, so we have to get that absolutely right.
We favour a tiered approach that would focus a limited supply of free allocation on those sectors that need it most. Our recent joint non-paper with France sets out a number of potential approaches to tiering. It is important to note that, at this stage, we do not favour any one particular approach. We acknowledge that parts of the ceramics industry are at risk of carbon leakage and we are engaging proactively with the ceramics industry to discuss its concerns. It is always a pleasure for me to meet with it.
We are keen to see more simplified procedures and a potential increase in scope for the small emitter opt-out and to ensure that innovation funding is available for industry. All of those measures can help installations in the ceramics sector. The really important point, which was made by my hon. Friend the Member for Aldridge-Brownhills, who so ably represents her constituency, is that, like all sectors, this sector asks for nothing more than that level playing field. She is right that, as other hon. Members mentioned, it is only right and fair that, as a Government, we do or do not do stuff to ensure a level playing field. That is a proper and right ask to make.
Turning quickly to EII compensation and what we call the 2050 road maps, the industrial energy costs in this country are higher than in other European countries. We know that we face a genuine and serious challenge in our country, but in answer to my hon. Friend the Member for North Warwickshire (Craig Tracey), who made a very good contribution, eligible ceramics companies can apply for compensation for the indirect costs of the renewables obligation and the small-scale feed-in tariffs scheme. We have been working closely with the British Ceramic Confederation and ceramics companies to help them to apply for that. We have worked closely with the sector to develop a 2050 road map to help it to reduce greenhouse gas emissions and increase its energy efficiency while remaining competitive. We all agree that we now need to see some real action to ensure that our energy costs are cheaper, in particular for the benefit of our manufacturing sector.
I know that MES for China is controversial and I am aware of the vote. The Government of course continue to listen, but we should not get overly hung up on market economy status. Russia has it and the Commission is still able to act to put on tariffs, for example, and so on. Of course, the Government continue to listen.
There were some excellent contributions from all hon. Members. My hon. Friends the Members for Cheadle (Mary Robinson) and for North Warwickshire mentioned Wienerberger, an excellent brick company. It does not just make traditional bricks, as the hon. Member for Motherwell—I have the wrong constituency again. I apologise.
Rutherglen and Hamilton West.
I thank my PPS for that help. The hon. Member for Rutherglen and Hamilton West (Margaret Ferrier) also made the point that it is not just traditional bricks that are proving so popular. A modern approach to bricks, based on traditional methods, means that bricks are now being seen as a beautiful design and feature in themselves in any work that is undertaken.
Because I am going to run out of time, let me say that I am happy to look at procurement. Perhaps we could do some work in persuading local authorities to do more in the procurement of British bricks.
In the short time that I have, I thank you, Mr Chope, for keeping us in good order this afternoon, and I thank the Minister for coming along and listening to us. I was pleased to hear that she is engaging proactively on some of the issues, and I urge her to continue to listen to the sector. I thank all the Members from across the country who have participated in the debate.
Wednesday 15 June 2016
[Mrs madeleine moon in the Chair]
Developing Countries: Jobs and Livelihoods
Electric and Low-emission Vehicles
Further Education Colleges: Greater Manchester
[Joan Ryan in the Chair]
[Mr Christopher Chope in the Chair]
Ceramic and Brick Industries
Motion lapsed, and sitting adjourned without Question put (Standing Order No. 10(14)).