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Manufacturing Industry Debate

19th January 2010

In a speech to Parliament, Jonathan Djanogly outlines Conservative plans to help manufacturing businesses out of recession.

Mr. Jonathan Djanogly (Huntingdon) (Con): I congratulate the hon. Member for Great Grimsby (Mr. Mitchell) on initiating this timely debate on the importance of supporting UK manufacturing. I shall refrain from opining for too long on the weak pound, other than to say that it reflects our weak economy.

The year 2009 was traumatic for many UK manufacturers. Investment in businesses dried up, production was down as demand in many sectors froze, and productivity weakened to the extent that hundreds of businesses were forced to close. The facts are that under Labour, since 1997, 10 per cent. of manufacturing businesses have closed and more than 1.5 million manufacturing jobs have been lost. Following the pre-Budget report in November 2008, the Government introduced a number of schemes designed to support businesses through the recession, but more than a year on from the announcement of those mainly loan guarantee schemes, a great cause for concern is the lack of progress from the present Government's approach to the challenges facing the UK manufacturing industry.

The Government were asked to support our industry-an industry that has lost 280,000 members of its work force in the past year alone. Businesses across the UK have experienced, and still are experiencing, acute shortages of finance and working capital, which the Government declared their intention to ease.

Chris Ruane
: Could the hon. Gentleman give the figures for the previous recession-the Conservative recession? How many manufacturing jobs were lost at the same point in that cycle? In north Wales 10 years ago, in the last recession, 29,000 people were unemployed; now, it is 14,000 people.

Mr. Djanogly
: It is not a question of bandying around statistics. I am simply saying what the situation is at the moment. What we hear from businesses today is that the Government designed their multitude of schemes in such a complicated and confusing fashion that third parties, initially including banks, often did not understand how to operate them or which one to operate. Indeed, it was not always clear on what terms support was being offered to business.

It is telling that the trade credit insurance scheme was quietly shelved by the Government in the most recent pre-Budget report. Announced in the 2009 Budget, the scheme was originally intended to provide up to £5 billion in the form of top-up insurance guarantees to help firms whose credit insurance cover had been reduced. Out of that £5 billion, which was ring-fenced, just £18 million of cover was provided, to just 72 businesses. A similar pattern can be seen with the Government's now withdrawn working capital scheme.

Even if a business was eligible for a scheme, it often elected not to take part, either because it did not understand the workings of the scheme or because it felt that it could get a better deal on the open market. Indeed, one gets the impression that many of the schemes were more about Government press releases than about delivering any real relief and support to UK manufacturing.

Tony Lloyd
: The hon. Gentleman is right to consider the relationship between Government and manufacturing, but I wonder, in that context and in the context specifically of discussions about policies of this Government and the alternative Government, what he makes of the comments of Jeegar Kakkad, the senior economist at the Engineering Employers Federation, which is not normally a supporter of this Government. He said of the Conservative party's plans:

"Reducing the level of capital allowances would be a big problem for manufacturers...cutting the rate to 12.5 per cent. would be a disaster".

Is he right?

Mr. Djanogly
: Well, if one looks at capital allowance alone, but of course one has to look at it in the context of our overall plans for taxation, which are to reduce the burden.

Conservatives believe that manufacturing should be at the heart of the economy if the UK is to achieve sustainable economic growth. Even given its present challenges, the UK still has the sixth largest manufacturing economy in the world. Manufacturing still produces more than half the UK's exports and it still constitutes more than 12 per cent. of our gross domestic product. The firms that emerge from the recession will be stronger and leaner for the experience and will be a key factor in UK economic growth. Conservatives want to support such firms. Rather than burdening UK business with more burdensome red tape and complex regulatory schemes as the present Government have done, a Conservative Government would provide simple practical solutions to help UK manufacturing businesses to recover from the economic crisis.

Last October, my hon. Friend the Member for Weston-super-Mare (John Penrose) published a paper setting out the Conservative vision entitled "Regulation In The Post-Bureaucratic Age". It outlined how excessive red tape and the innumerable quangos established by the present Government have undermined the UK's economic competitiveness and left business drowning in red tape. By sweeping away the present Government's ineffective system of bureaucracy, a Conservative Government will reform the approach to regulation, thereby allowing policy goals to be achieved in a less burdensome and less intrusive way.

The British Chambers of Commerce has warned that the burden of taxes and regulation on business under the present Government is set to reach £25.6 billion over the next four years. Only today, the director general of the BCC commented:

"The cost of employing people must be reduced if future governments are serious about giving businesses the freedom to create jobs and drive our economic recovery."

It is clear to Conservatives that this country needs urgent cuts in the regulation and red tape suffocating our industry and business. For example, under a Conservative Government, regulatory impact assessments will be followed up, three to five years after legislative changes, to ensure that any new regulation is not having a negative impact on UK business. A new Star Chamber Cabinet Committee would enforce a strict one-in, one-out policy on regulation, providing that any new laws must be associated with cuts in old laws, with a target of reducing the net regulatory burden by 5 per cent. Additionally, sunset clauses will be applied to regulations to ensure that their necessity is reviewed. Furthermore, during the first term of a Conservative Government, all regulators will be reassessed and their duties reviewed.

A prime concern of a Conservative Government would be to cut back the overwhelming amount of regulation facing employers in UK business. A good example is the Labour Government's attempt to suffocate the temporary agency worker market with their rushed proposals relating to the agency workers directive. Such is the red tape and bureaucracy attached to employment laws, albeit with the aim of protecting workers, that ironically many UK businesses are telling us that they do not even want to hire people any more. A Conservative Government would seek to roll back much of that redundant and counter-productive gold-plating of European legislation, with the intention of getting businesses employing people again.

To stimulate further growth, Conservatives aim to cut the rate of corporation tax from 28 to 25 per cent. and the small companies rate from 22 to 20 per cent., so that businesses have a chance to get back on their feet. We also want to reverse Labour's job-destroying increases in national insurance. A Conservative Government would further embark on a formal process of tax simplification to make it significantly easier for businesses to predict, calculate and pay their taxes. During the recession, Conservatives would have continued to press for the establishment of a straightforward and easy-to-use £50 billion national loan guarantee scheme that would directly underwrite lending from the banks to viable British businesses.

Conservatives are committed to taking rigorous action to tackle unemployment and help with the reskilling of the work force as part of our "Get Britain Working" plan. The "Work Programme" campaign-a new integrated welfare-to-work initiative-is based on four supplementary programmes. First, the "Work for Yourself" initiative would offer business mentors and other opportunities to would-be entrepreneurs and is designed to encourage people into self-employment. Secondly, the "Work Together" project connects people to volunteering opportunities in their area and will allow people to develop their skills in new areas of business. Thirdly, there will be work clubs-places for people to receive mentoring, skills training and help in finding local job opportunities. Fourthly, the "Youth Action for Work" campaign will provide a huge number of additional apprenticeships.

The Conservative party has set a target for the United Kingdom to overtake Germany and become Europe's leading exporter of high-tech products. To fulfil that goal, we need a long-term strategy based on increased investment in talent, technological innovation and raising the nation's skill base. That is why Sir James Dyson is leading a Conservative taskforce to set out a clear vision for boosting high-tech production in Britain. We are confident that by harnessing our resources, a Conservative Government could generate a major expansion of high-tech product development and renewable energy, address the capital gap and create real sustainable growth in the UK economy.

Mr. Hoyle
: The hon. Gentleman mentions Dyson, but does he not feel embarrassed that that was the man who moved his manufacturing to Malaysia at the expense of British jobs?

Mr. Djanogly
: Rather than hitting out at individuals, we should look at the reason why British manufacturers are moving their jobs overseas-that is what the next Conservative Government will do.

Manufacturing has an important future in the UK. It has doubtless faced a testing period, which has stretched the resources of many businesses to breaking point, but a Conservative Government will offer the hope of change and renewal. Only Conservatives can now give business access to the finance that it needs to grow and the skilled work force that it needs to compete with the best on the global stage.

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