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North-East England: Socio-Economic Prospects

My Lords, I am grateful to the noble Lord, Lord Bates, for his informative history, as well as for giving us the opportunity to discuss the prospects of the north-east region. As the noble Lord said, it is very special in historic, cultural and economic terms. It is also a region that, as the right reverend Prelate the Bishop of Newcastle acknowledged, has transformed itself significantly in the past 10 years. In 1997, the north-east was at the bottom of the league table of English regions, in terms of gross value added and unemployment—a matter of great concern, in response to the question asked by the noble Lord, Lord Patten. It has since become the fastest growing of the nine English regions. The north-east economy has grown by 2.2 per cent a year in real terms since 1998, which compares with the average growth of just 1.1 per cent between 1990 and 1997. That has delivered a real change in the living standards and life chances of the people of the north-east. Traditional industries in the region have given way to new, knowledge-led enterprises based on innovation, entrepreneurship and international competitiveness. The region is gaining competitive advantage in sectors from healthcare to life sciences and process industries to renewable energy, many of which the noble Lord, Lord Bates, illustrated very effectively. That is in part a result of this Government’s policy of supporting and investing in economic development in the north-east to strengthen enterprise and support job creation—a somewhat different approach to that of the Leader of the Opposition's favourite think-tank, Policy Exchange, which called for the people of the north to move south. We have indeed funded the north-east RDA significantly. One North East receives funding of £98 per head, more than any other RDA, and well above the average in England of about £44 per head. Although, as the noble Viscount, Lord Eccles, says, it may not score on the creativity front, the RDA has a very successful track record. An independent evaluation found that, since 2002, One North East has generated £4.30 for every pound that it has spent and, in terms of the business support schemes, £11.60 for every pound that it has spent. I am very pleased that the noble Lord, Lord Bates, acknowledged the performance of One North East; it is of course a shame that his conviction is not shared by the noble Lord, Lord De Mauley. Indeed, the Opposition have often called for the abolition of the RDAs, although there is some confusion in that policy with regard to the north. My noble friend Lady Quin rightly asked about the impact of the global recession on the north-east over the past year. Our assessment is that its economy was first and hardest hit at the start of the recession in the last six months of 2008. While Northern Rock was of particular symbolic importance, it was the region’s continuing reliance on manufacturing that drove that early performance. Since then, while still contracting, the rate of decline has eased in comparison with other regions because of lower input costs, flexible working and competitive sterling. In addition to helping stabilise Northern Rock, our help to the north-east in the recession has allocated £46 million to frontline business support this year to ensure that viable companies can survive. This includes £6 million for its capacity fund to boost the skills supply in priority areas. The car scrappage scheme, which has 94,000 registered orders in the country, is directly supporting Nissan in the north-east, which has said that as a result of the scheme, it has resumed three-shift volume production and is recruiting extra workers. The car scrappage scheme will also increase demand for Corus steel. The Government have also offered Corus up to £5 million of funding for training to help protect jobs. The Government will never be complacent about the need to support businesses and individuals through the recession and to ensure that they recover in a way that allows them to compete in the global economy. The key to this recovery is a balanced economy that increases the productive base of every region, not relying on the south-east as the engine of growth. We are doing, and will continue to do, all we can in the north-east to combat the immediate effects of the recession, stimulate a sustainable recovery and improve its prosperity relative to other regions. As the noble Lord, Lord Bates, said, the key is to increase productivity based on skills, enterprise, innovation, exports and new industries, each of which I shall briefly comment on. There are significant challenges remaining in upgrading skills in the region, as the noble Baroness, Lady Maddock, pointed out, but we should also celebrate the fact that the north-east has moved from being the second worst in level two skills in England to being in fourth position, an increase of 41 per cent since 1998 and the largest rise seen in the English regions. While I recognise the problems that the noble Baroness pointed out, the Higher Education Funding Council’s university challenge has agreed to provide an extra £2.5 million to the region’s five universities to equip businesses and individuals with new skills. I also assure the noble Baroness that we made a commitment in the Digital Britain report on universal access to broadband that will affect the regions that were discussed. My noble friend Lord Foster rightly focused on the importance of small businesses and enterprise. There has been some progress in forging an enterprise culture within the region. Of course, there are fewer people in business or aspiring to start a business in the north-east, but the region has grown its business stock at a faster rate than the national average for the past five years, and its early stage entrepreneurial activity has increased from 3.2 per cent to 5.1 per cent, therefore closing its gap with the rest of the United Kingdom, which has increased to 5.5 per cent. The north-east scores highly on innovation, and we are reinforcing that position. It has the greatest average annual domestic expenditure on research and development, running at 2.4 per cent per year since 1998. In 2007-08, One North East, the RDA, invested £45 million in programmes directly attributable to science and innovation. The region is also very strong on exports and runs a trade surplus. Until September 2008, the north-east enjoyed eight successive quarters of export growth and outperformed every other region in the United Kingdom. Although that fell back in the early part of this year, exports to key markets, emerging markets and growth markets, such as Brazil, China and India, are still growing, and we are supporting that through UKTI. In addition to exploiting overseas markets, the region is also attracting foreign direct investment. It had 53 inward investments in 2008-09 from the US, India, Japan, China, Sweden and Norway in sectors including autoelectronics, energy, life sciences and digital media. They are worth over £200 million in capital investment, will create almost 2,900 new jobs and will safeguard 1,400 existing jobs over the next three years. Looking to the future, the region already has expertise in developing green technologies from offshore wind to bioprocessing and has had the particular foresight to establish a new and renewable energy centre in Blyth. The offshore wind market alone could generate £3 billion for the regional economy and create between 15,000 and 30,000 jobs. We will work with north-east businesses to ensure that they reap these commercial rewards. I have not been able to address all the questions that have been asked, but I have made a note of all of them and I will answer any outstanding ones in writing. I thank the noble Lord, Lord Bates, for the opportunity to showcase the north-east in this debate and to demonstrate the Government’s commitment to building its economic strength, to developing new areas of expertise and to enabling the region to return to the sustained economic growth that it has managed to achieve since 1997. Sitting suspended.