Regional Growth Fund

Phil Wilson Excerpts

Tuesday 1st November 2011 Westminster Hall

[Angela Smith]

I think the hon. Gentleman overlooks the fact that the Labour Government were prepared to show what is called industrial activism. They worked hard for a long period to ensure that due diligence was in place, and that we invested in key sectors of our manufacturing economy. The hon. Gentleman’s comment is a bit rich, given that the production industries have gone into negative growth in the last quarter. Mining and quarrying took the productive part of the economy into negative growth in the last quarter, so I do not think that we need any comments from Government Members on manufacturing and support for manufacturing.

[Phil Wilson (Sedgefield) (Lab)]

I do not know whether my hon. Friend is aware of this, but the regional growth fund for north-east England will create some 8,500 jobs over three years. That is equivalent to the number of jobs lost in the north-east in the past three months.

[Angela Smith]

That is precisely the point. That underlines the fact that the Government are cutting too far and too fast. Their policies risk producing a double-dip recession.

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[Phil Wilson (Sedgefield) (Lab)]

It is a pleasure to serve under your chairmanship today, Mr Gray, and I congratulate my hon. Friend the Member for Penistone and Stocksbridge (Angela Smith) on securing this debate.

I will be brief because other Members wish to speak and we obviously want to hear contributions from the Front-Bench spokesmen. First, I would like to congratulate those firms in my constituency that have received money from the regional growth fund—Kromek Ltd, Permoid Industries Ltd, Carlton & Co., Hydram Engineering Ltd and ThyssenKrupp Tallent Ltd. Those highly-skilled organisations will produce jobs in the future. As I pointed out, however, although the regional growth fund will create around 8,500 jobs in the north-east of England, that is about the same as the number of jobs that have been lost in the north-east over the past three months.

[James Wharton (Stockton South) (Con)]

The hon. Gentleman is right to mention estimates that suggest that the current round of regional growth fund funding for the north-east will create 8,500 direct jobs. In addition, however, there will be 17,000 indirect jobs. The previous round of funding, in which our region did exceptionally well, is estimated to have created a further 5,200 direct jobs, and 8,400 indirect jobs. The figures are higher than one might believe if we listened only to the comments made by Opposition Members.

[Phil Wilson]

Those jobs will come on stream over the next few years. North-east England now has the highest unemployment in the country, and we are grateful for everything that we receive from the regional growth fund. We should not forget, however, that the fund for regional development is only one third of what it was under the previous Government. The problem with the regional growth fund is that it does not provide a strategy for the regions. A company applies for a grant, and if they get it that is fine, but if they do not, they do not. The fund is led not from the regions but from Whitehall; it should be renamed the Whitehall growth fund.

I have one or two questions for the Minister to which I hope he will reply. They concern the delay experienced by companies in receiving the money for which they applied in the first round—hopefully, they will not have the same problems this time round. The issue seems to concern the need for due diligence. Under the previous Administration, except in complex cases, the regional development agencies would be responsible for due diligence and absorb the cost. I have asked the Library to look into the matter, but as I understand it, under the present regime, due diligence has to be secured and paid for by the applicant out of the grant. Is that a reason for the delay in companies receiving their funding? Why are we asking applicants to find someone to look into issues of due diligence, and why does money for that come out of the grant? Under the old system, that was not the case.

In conclusion, one of my concerns as a north-east MP is that although the Scottish Development Agency exists north of the border, there is no similar body in the north-east. People say that regional development agencies are a waste of money and so on, but I would defend One North East, which has been very good. If something ain’t broke, don’t fix it—it was a major mistake of the Government to abolish that RDA in the north-east, especially when one exists north of the border. In the south of England, the number of companies in distress or facing bankruptcy are in decline, while in the north-east, they have increased by 20%. There are concerns in the north about the strategy. The second round of applications to the regional growth fund has finished. What will happen between now and the next election as far as regional development and regional grants are concerned? It seems that there is no strategy on that. I am especially concerned about the issue of due diligence because that may explain why delays are occurring, and I hope that the Minister will respond on that issue.

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[Esther McVey]

No, the hon. Gentleman will find that his party left the economy in so bad a situation that we not only had to say, “You will live within your means and spend what you have,” but we had to provide a growth structure so that we could rebalance the economy.

[Phil Wilson]

Will the hon. Lady give way?

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[Esther McVey]

I thank my hon. Friend for that intervention.

The purpose of the regional growth fund was to stimulate growth, secure jobs and increase the number of jobs. There was a consultation with the public: what did they think it would be best for the regional growth fund to do? The replies came back that they wanted flexibility and no duplication of funds. It was thought best that at least for stage 1—things will change over the next couple of years—there should be minimum bid thresholds of £1 million. It was also felt that guidance should be published. The first round allocated £2.7 billion, creating and safeguarding jobs. It created 27,000 jobs and a further 100,000 jobs in associated supply chains.

I want to talk specifically about Merseyside. In round 1, Pilkington’s in St Helens, Ames Goldsmith UK, Echo and Stobart were successful. I got in touch with Richard Butcher, Stobart Group deputy chief executive, to ask him about the regional growth fund. He says that the regional growth fund has been

“an important factor in Stobart Group’s commitment to the Halton region and will ensure the continued investment from us that the area needs to maintain economic regeneration and growth. The investment from Stobart, Prologis and Halton Borough Council has transformed the area and created many important new jobs—the support from the Regional Growth Fund will further enhance that regeneration.”

Stobart Group has already invested £100 million to date in the development of its Mersey multi-modal gateway logistics site in Widnes, but this new private-public partnership saw the regional growth fund as an ideal opportunity to push on with the development of a further 100 acres, eventually creating more than 5,000 additional jobs and £170 million in gross value added. With the £9 million received in round 1, it is moving forward on opening up 1 million square feet of warehousing space served by rail and road.

That is a perfect example of how the RGF can bring public and private bodies together to stimulate investment and boost the economy. Stobart illustrates the private partnership success and collaboration that has emerged from the RGF. It successfully forged a business partnership between itself, a road haulage operator, infrastructure developers Prologis and Halton borough council. As we know, the sum is always bigger than its parts. That example proves the case most effectively.

I want to refer to other significant developments. The regional growth fund was set up to make key links between private-private partnerships and private-public partnerships, and we are seeing that, but this is the start of a brand-new way of thinking. It is a way of focusing money that we have not seen before, and we will learn as we go along, so instead of the negativity that we have heard today—

[Phil Wilson]

Will the hon. Lady give way?

[Esther McVey]

No, not just yet; I will in a second. When we talk in Westminster Hall about the confidence that business needs—we all know that that cannot really be defined but is necessary—it helps for all parties to give confidence to business.

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[Richard Burden]

rose—

[Phil Wilson]

rose—

[Esther McVey]

I will give way first to the hon. Member for Birmingham, Northfield (Richard Burden).

[Esther McVey]

Let me correct that. I do not think that the RGF will be delivered more effectively, but that it will change along the way, as small and medium-sized enterprises link together and put in bids for £1 million. Everybody knows—I was slightly startled by some Members’ comments about this—that due diligence must be done and that money must be targeted at the right people. That is what people in business do—full stop. These things take some time.

[Phil Wilson]

Will the hon. Lady give way?

[Esther McVey]

I will carry on, because I have nearly finished.

Thirty-four companies and other organisations across the north-west made successful bids in round 2. My hon. Friend the Member for Crewe and Nantwich (Mr Timpson) mentioned Bentley, but there is also the university of Liverpool, Pirelli Tyres Ltd, Northwest Aerospace Alliance, Sefton council and Liverpool Vision—the list goes on and on. There are 34 companies and other organisations in total, and they have benefited from some of this £3.3 billion, which is safeguarding jobs, as well as creating 37,000 new jobs, with a further 164,000 jobs in related supply chains and local economies.

Specifically on Merseyside, there is GETRAG FORD Transmissions in Knowsley, which has won support to expand capacity for the production of transmissions at the Halewood plant. Another development I would raise with the Minister is groups of SMEs bidding for £1 million. Last week, I brought a group from the Wirral Invest Network to Westminster to speak to him about how that could best be done. So, yes, the regional growth fund has done a tremendous job so far, against all the odds, but I would like it to be stepped up to help SMEs.