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North-East England: Socio-Economic Prospects

My Lords, like other noble Lords, I am most grateful to my noble friend Lord Bates for bringing forward this debate today on a region that he knows so well—a fascinating, rugged and, as he said, beautiful part of our country. Its people, of which he is such an excellent example, are resilient and generous and reflect its countryside, which also contains some of our vital natural resources. It is a diverse region. Its urban areas clearly have very different characteristics from its rural areas. There are key differences, too, between each of its major urban areas. It is a spectacularly keen and capable sporting region. As we have heard this evening, not least from the right reverend Prelate the Bishop of Newcastle and the noble Baroness, Lady Quin, it is a region that has been through decades of structural change. Your Lordships will also well remember the tragedy, as the noble Lord, Lord Foster, said, of Northern Rock. The automotive and construction sectors have recently been particularly hard hit. It saw the largest increase in business failures of all regions in the UK last year, at over 40 per cent, rising at the end to nearly 60 per cent. Nissan and Corus, among others, have had well publicised problems and have laid off large numbers of people, adding to the hardship being suffered. Unemployment in the region is among the highest in the country, despite which many of the region’s manufacturing businesses have trouble attracting higher-skilled engineers. The critical links in the supply chain—for example, in the auto-manufacturing sector—are especially vulnerable. Transport infrastructure, especially for freight, has also come in for criticism. My noble friends Lord Bates and Lord Patten, the noble Baroness, Lady Maddock, and others have spoken of road transport. This is particularly worrying if the north-east is expected to maintain its exciting emerging pre-eminence in exports. A key challenge facing the region is its overreliance on the public sector. As government finances become ever more stretched, as the right reverend Prelate said, this will place it at considerable risk. Furthermore, while the Budget promises emphasis on infrastructure and green investment, as Simon Hanson of the FSB said to the North East Regional Committee of the other place on 5 June, not much of the promised investment is filtering down through the RDA to business. Tony Sarginson of the Engineering Employers’ Federation says that such help as is available is confusing, complicated and difficult to access. However, it is not all bad news. Although the north-east has subsequently taken a knock, in the year to last September the region showed the highest growth in exports in the country. As the noble Baroness, Lady Quin, said, it was the only region with a positive balance of trade. Employers and unions are working together to maintain skills in businesses. As the noble Lord, Lord Foster, told us, the region has five universities, with respected excellence as a knowledge base, which will be essential to lifting us out of the recession. My noble friend Lord Eccles spoke of the importance of creativity. The presence of Sage, of which my noble friend Lord Bates spoke, shows that the region can produce the necessary highly technically literate people. The region is well placed to benefit from a national shift of emphasis from financial services in favour of manufacturing and there are early signs of promise in its green economy, to which my noble friend Lord Patten referred. We on these Benches recognise the region’s potential and, as shown by the fact that we have three senior shadow Ministers responsible for different areas within it, we are 100 per cent committed to it. We believe that we must rebalance the region's economy, so that it does not rely proportionately so much on the public sector. We must revolutionise support for small businesses—ever more crucial in a recession. Across the country, 33 per cent of funding intended for them is lost in operating costs on its way through the RDAs and their organs. We would incentivise local government to encourage the start-up and expansion of local businesses, reform the business rates system and overhaul the hugely centralised system of bureaucracy. Noble Lords will be aware that we on these Benches are sceptical of too much national and regional government. We would focus the RDAs much more clearly on economic development—something that, in fairness, One North East has been better at than others—and demand improved delivery. We recognise, too, that life is not just about economics. The social advantages that my noble friend Lord Bates referred to are also important. Last but by no means least, as the noble Baroness, Lady Maddock, said, education and skills are crucial to the future of the north-east. As we have said in our debates on it, the apprenticeships Bill is so far a wasted opportunity. We look forward to another day in Committee on it on Thursday, when we will continue the process of trying to improve it to the benefit of all regions, not least the north-east.