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North-East England: Socio-Economic Prospects

My Lords, I am grateful for this opportunity to speak about the north-east of England. In initiating this debate, I refer noble Lords to my interests listed in the Register. The purpose of this debate is, first, to celebrate the rich social and economic history of the region, to consider the facts of our recent economic performance and then to offer some advice on how the Government could help the region in these challenging economic times. The north-east is a very special region of this country. It is blessed with areas of outstanding natural beauty bordering the North Yorkshire moors in the south, the matchless Northumbrian coastline in the east and the glorious Lake District to the west. The region is a region of contrasts, being voted home to the most tranquil county in England—Northumberland—and the party capital of Europe—the city of Newcastle. It is home to the Roman Wall and was the cradle of Christianity in England in Lindisfarne and Holy Island. The north-east was the home to some of the greatest minds of the industrial revolution: George Stephenson, "father of the modern railways"; Joseph Swan, inventor of the electric light bulb; Charles Parsons, developer of the first steam turbine that transformed maritime transport; Sir William Armstrong, who harnessed hydraulic power for cranes and power generation; and Cleveland Bridge and Dorman Long who built many of the world’s iconic bridges, including the Sydney Harbour Bridge. Until the early 20th century, north-east shipyards were responsible for building one-third of the world's shipping. The coalfields of Durham and Northumberland were literally the powerhouse of the industrial revolution. While the Tyne and the Wear dominated trade in coal and shipbuilding, the Tees soon came to dominate in steelmaking and chemicals. The first trading estate in the world was built on the Team Valley in Gateshead. More recently in the 1980s, Sir John Hall pioneered the out-of-town shopping centres based on the Metro Centre in Gateshead. Sir Lawrie Barratt changed the face of suburban Britain through development of modern housing estates. Sir Peter Vardy's innovation in car finance made cars affordable for the first time for millions of hardworking families. Moving right up to date: Greggs, the national chain of food outlets based in Newcastle employs 19,000 people and exports the great, legendary ham and pease pudding stottie to the discerning culinary audience around the country. Sage business management software is now used by 5.8 million businesses worldwide. It is headquartered in Newcastle and employs more than 14,000 highly skilled people in the north-east and California. Kilfrost started off life de-icing football pitches and is now a world leader in aviation de-icing technology with substantial operations in North America and Asia. SMD, CDC Marine and Tomkins form a cluster of companies leading the world in sea bed engineering, now in demand around the world for the construction of offshore wind farms. Today, a third of all UK pharmaceutical production happens in the north-east at operations such as GlaxoSmithKline Beecham’s Barnard Castle plant. Teesside hosts the largest polyethylene plant in the world operated by SABIC. The Biofuels Corporation operates the world's largest biodiesel plant at Seal Sands. The largest bio-ethanol plant is operated by Ensus. All in all, the north-east process industry cluster employs more than 40,000 people directly, most of them in highly skilled engineering posts. The future development of electric vehicles is one in which the north-east has a sustained and historic competitive advantage. It is already host to Smith Electric Vehicles, which manufactures milk floats. Indeed, it is the largest manufacturer of electric vehicles in the world, based in Washington, which is also, coincidentally, or perhaps strategically appropriately, the home of the largest and most productive car plant in Europe—Nissan. The ports of the Tyne and the Tees remain vibrant and Seaham, Blyth and the Wear are receiving significant new investment. PD Ports is planning a £300 million deep sea container port called Northern Gateway, which could employ 5,500 people. The Tyne & Wear passenger transport metro is the only underground public transport system in England outside London, serving more than 40 million passenger journeys a year. Overall, the ability to take the innate skills and discipline of engineering, which were first honed in the industrial revolution, and apply them to the challenges of the modern era, particularly as regards low-carbon and renewable energies, offers great opportunities to the north-east. We have two world-class research universities in Newcastle and Durham. We have three cutting edge centres of excellence established by the regional development agency: the Centre for Process Innovation on Teesside; the Centre for Nanotechnology, Microtechnology and Photonics (Cenamps) in Newcastle; and the New and Renewable Energy Centre at Blyth. The inspired slogan developed by the regional development agency One North East is "passionate people, passionate places", and this perfectly captures the essence of the region. Recognising that no region can be adequately summed up in a range of economic indicators, but that no society can be sustained in the long-term by ignoring them, I offer some pause for thought. The north-east’s GVA per capita, at £15,688, is the lowest of any region in England. The unemployment rate at 8.3 per cent is second only to the West Midlands. The proportion of workless households, at 23.7 per cent, is the highest proportion in Britain. On the positive side, the north-east is the only region in the country which exports more per head than it imports. The level of business failures is a cause for concern. According to Equifax, the north-east saw a 41.2 per cent year-on-year increase in the level of business failures. What makes this more concerning is that the north-east already has the smallest business stock in the UK and the lowest number of start-ups in the country. The contribution of the public sector to the north-east economy, according to the CEBR is 57 per cent and rising. This is of concern simply because it exposes us to potential downturns in the recession, which may come with inevitable reductions in public expenditure. This dependence is illustrated by employment. Over the past eight years, public services employment in the north-east has increased by 47,000, while manufacturing employment has fallen by 58,000. I do not want to indulge in point scoring. I recognise that the Government care deeply about the region, and many good things are happening. However, my criticism is that they have often failed to present the north-east with the realities of the economic situation until it is too late and we are left with a series of abrupt social upheavals, rather than gradual adjustments to the new realities. The truth is that we need to ratchet up our productivity as a region, and that can only be done through: skills, especially apprenticeships and the development of science graduates; enterprise—shaking the culture through schools and the careers service whereby the option of leaving education to create a job rather than getting a job is positively encouraged; investment in physical capital, which is being held back by the lack of liquidity in the capital markets, but is desperately needed for a region that depends so heavily on manufacturing and engineering; and embracing competition as a driver of innovation and efficiency. I suggest a number of areas in which the Government could do more to increase our competitiveness as a region. The north-east already suffers in terms of public expenditure on transport per head of the population, which has been only £577 per head from 2001 to the present time, compared with £1,637 per head in London. The most important element needed is the upgrading of the western bypass of the Al(M) at Gateshead, and moving to a systematic enhancement by dualling the A1 north of Newcastle. The Government should give every possible support to working with the Hitachi team as they consider the options for awarding a contract to build 1,400 high-speed train carriages in Gateshead, which would return train manufacturing to the home of the railways. The Government should seek a meeting with Tata, the parent group of Corus, to see what could be done for Teesside Cast Products, where 2,000 jobs are under threat. This is a profitable business, and is a strategic plant and asset. It has been undermined because of the scurrilous way in which two steel manufacturers—one Italian and another South Korean—have reneged on their contracts. The Government should be robust in searching for those contracts to be honoured and for a buyer for the plant. Strategic air links are very important for a peripheral region such as the north-east—nowhere more so than on Teesside. The air link from London Heathrow to Teesside was ended in March of this year. In 1995, Heathrow served 21 domestic destinations. Today it serves only six. For an area such as Teesside, which depends deeply upon the petrochemical and processing industries, it is vital that that link is reinstated. Only 660 new social homes were constructed in the region, and that issue should be focused on. The Government should ensure that Northern Rock is returned to the private sector as soon as possible. The management team of Gary Hoffman has done a phenomenal job of turning around the bank. In conclusion, we can celebrate a huge number of good things about the north-east of England. If we are honest about our problems, strategic about our investment and our actions, and, inevitably, proud of our history, we can ensure that the socio-economic future for the north-east is not only good, it is great.