Industrial Policy and Manufacturing

Jonathan Reynolds Excerpts

Thursday 22nd November 2012 Commons Chamber

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

I beg to move,

That this House has considered the matter of industrial policy and UK manufacturing industries.

I thank the Backbench Business Committee for allocating time for today’s debate.

A debate on industrial policy, particularly with regard to manufacturing, is overdue. It is also extremely timely, given the recent publication of Lord Heseltine’s review, “No stone unturned in pursuit of growth” and a number of recent developments, including Ford’s announcement of the closure of its plants in Southampton and Dagenham, and what we saw earlier in the year with the Coryton oil refinery. It is also an opportunity to highlight some of the excellent work being undertaken by the all-party associate manufacturing group, of which I am an officer, along with the hon. Members for Warwick and Leamington (Chris White) and for Burnley (Gordon Birtwistle), my hon. Friend the Member for Huddersfield (Mr Sheerman) and several others. I know they will all make contributions today.

I believe that the UK has an incredibly important manufacturing sector—one that has huge potential, but one that needs a successful industrial strategy that would contain a number of elements and could carry widespread support across this House. One factor common to countries that have successful industrial polices is that the fundamentals of the strategies are widely shared. Businesses can invest for the long term, knowing that the rug will not be pulled from under them. Lord Heseltine makes that point on page 8 of his report, when he asks for the “maximum political consensus possible”. I would like the work of the all-party group, as well debates such as this, to become the basis of precisely that.

Let me say at the outset what a debate about industrial policy is not. It is not misty-eyed romanticism for a return to the 1970s. This is forward looking, not backward looking. I believe there is a case for a modern industrial strategy that allows for our manufacturing sector to be a driver of prosperity for many years ahead. When people from across the political spectrum, such as Lord Mandelson and Lord Heseltine, seem to be coming to a consensus behind this, too, there definitely appears to be some momentum building for it.

One part of Lord Heseltine’s report jumped out at me—not the lovely picture of Manchester town hall on the back cover, welcome though that is in any Government report, but paragraph 10 on page 5, where Lord Heseltine says:

“Whether we look at the well established mature economies such as the United States or the new thrusters of the BRICs, there is one clear message we overlook at our peril: the public and private sectors are interdependent. Only by working together and learning to understand each others’ strengths and capabilities will we succeed.”

I firmly agree, and I want to mention a number of areas where our industrial strategy should reflect that—in skills, investment, procurement and the image of manufacturing as well employer-employee relations.

The battle to attract and retain a skilled work force is a constant issue for industry. All major economies face it, and there is no magic bullet. However, the age profile of our skilled work force in the UK, which creeps ever upwards, should be of huge concern to us all. Every company I visit tells me that the skills pipeline does not work as it should. I believe we should be looking at two things here. First, we should be looking at ways to devolve skills funding more directly to business itself, and in exchange business should guarantee that they will provide the high-quality apprenticeships we all want to see.

[Gordon Birtwistle (Burnley) (LD)]

Does the hon. Gentleman agree that one of the biggest problems is the careers advice offered to young people in schools from the age of 12 onwards? The careers advice is normally given by teachers who have only ever been teachers and have no concept of industry outside school. Would it not be better if we had dedicated and qualified careers advisers in every secondary school in the country?

[Jonathan Reynolds]

The hon. Gentleman makes some good points. Careers advice is variable. As I understand it, we are moving away from face-to-face interactions and more towards website-based and telephone-based careers advice services. Whether that will have the effect we would want is probably a matter of concern to us all.

We need to make apprenticeships work for the long term. I know Government Members are always well armed with statistics on new apprenticeships, but I would say to the Minister that there is a quantity versus quality debate to be addressed here, and an issue to do with how many apprenticeships are effectively developing the skills of our next generation. This is an area where more needs to happen.

When I visit manufacturing businesses in my constituency, I am always struck by just how many skilled people started off at British Aerospace. Whether we meant it or not, it seems to me that in the past British Aerospace acted to all intents and purposes as an active industrial intervention, but with that role diminishing we do not have anything that really fills the gap.

As for investment, I am sure that nearly every Member in the Chamber could report the same conversation with local businesses about the banks’ lack of interest in what they do. Businesses say that funding halved overnight during the financial crisis, but that it was never that good beforehand. It seems that, as banks nationalised their business operations and their heads were turned by sectors of the economy that may have been more lucrative in the short term, they were no longer interested in the steady success of their manufacturing clients.

We must find a way of securing for our manufacturing businesses the investment that they need. It seems to me that there is a growing consensus on the need for a British investment bank, whether it is modelled on Germany’s KfW or on France’s Financial Stability Institute, and I am attracted by the idea of a regional or sectoral structure. The proposed green investment bank could form part of a wider strategic investment bank, with a remit to generate long-term returns based on investment in infrastructure and businesses across strategic sectors.

When it comes to procurement, I could simply use the word Bombardier, but there is plainly a view throughout industry that the United Kingdom’s current attitude to procurement represents a wasted opportunity for British business. Let me make it clear that I do not endorse protectionism. Some of the local firms in my constituency have been extremely successful in the export markets, particularly the aerospace businesses, and I think that talk of protectionism at home fails to recognise their achievements. A company delivering a contract here in the UK does not have to be British, but it should be possible to consider how we might be able to make procurement policy work for the UK economy in an intelligent way while still honouring our commitments to the single European market.

I was recently made aware of the problems of Manganese Bronze in Coventry, which could lead to the disappearance of iconic British cabs from the streets of London. The Mayor’s clean air strategy means that as many as 2,000 cabs may have to be replaced in December this year. With Manganese Bronze in administration, the market is now wide open for Mercedes vehicles manufactured in Germany. Surely there could have been a better way.

Another problem is the image of manufacturing. Modern manufacturing is clean and safe, but that does not seem to be widely understood. In fact, at a recent event held by the all-party group in Rochdale, some businesses reported struggling to convey the message that it was also well paid. I did not consider the problem to be particularly significant until I listened to the evidence that industry leaders gave to the group. If we are to try to increase the share of the economy that manufacturing represents, we will need to tackle that. I am not thinking of short-term rebranding or anything that smacks of a gimmick; I am thinking of a long-term campaign—similar to that requested by the hon. Member for Burnley—to get the message across to schools and make them understand what modern British industry is really like.

Finally, I want to say something about employer-employee relations and employment law in the UK. I have deliberately left that subject until the end of my speech, because I suspect that it is the one on which there will be the least consensus. Let me explain my view by giving an example from my constituency.

Kerry Foods, in Hyde, is the largest private sector employer in Tameside. It makes, among other things, Richmond and Walls sausages. Food manufacturing, incidentally, is a much undervalued part of British industry. A few years ago, Kerry needed to adopt the principles of lean manufacturing. It needed to be able to scale its production up and down much more quickly in order to remain competitive, and it therefore needed to consider moving from a five-days-a-week to a seven-days-a-week working pattern. That had big implications for the work force, who were strongly unionised, so Kerry decided to work with them and with Unite, the recognised trade union, to deliver it. In effect, Kerry told the union what it needed, and the union asked the work force to design a shift system that worked for them.

The staff knew that the company’s bottom line was staying profitable, and the company knew that there had to be something in it for the staff. They agreed on the new shift system and a 3.5% wage rise for two successive years, dropping to 2.5% in the third year. That is more than most of our constituents are getting at the moment. My constituents who work for the company have told me that they felt that the consultation process had been extremely sincere, inclusive and open to recommendations, and that input from the union had made it into the final proposals. Unite also sent its reps at Kerry Foods to “change at work” courses which would help them to understand the company’s objectives and deliver the agreement of the work force to the new system. I should add that the company pays for a full-time convenor at the site through facility time, in line with a great deal of best practice.

I gave that example in order to demonstrate that trade unions are not in themselves anti-competitive, and do not constitute a blockage to our economic prosperity. Given the right approach, they can make a very significant contribution to British industry. They should not be demonised. The Ford work forces in Dagenham and Southampton were given very little notification of the recent announcement, let alone a chance to serve as part of a solution to the problem. That was a missed opportunity.

[Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)]

It is the trade union involvement with Jaguar Land Rover that has done so much to secure investment in the west midlands in new models and the new i54 development and, to an extent, the new Vauxhall Motors development at Ellesmere Port. Perhaps they could serve as a model for industrial communication for the purpose of promoting investment.

[Jonathan Reynolds]

Those are powerful and timely examples, which illustrate the positive role that trade unions can play in an industrial strategy.

There are many other issues with which I could deal if I had time, including our relationship with Europe and the devolution of power and spending from Whitehall in the UK. I hope that other Members will refer to those. Let me end by saying how pleased I am that we are having this debate. I hope that it constitutes the beginning rather than the end of a conversation in the House about the future successful operation of the country’s industrial policy.