HC Deb 01 July 1998 vol 315 cc359-66 3.31 pm
Mr. Archy Kirkwood (Roxburgh and Berwickshire)

(by private notice): To ask the Secretary of State for Scotland if he will make a statement on the 720 redundancies announced yesterday by Dawson International Ltd. and the Government's plans to support the economy of the central Borders.

The Secretary of State for Scotland (Mr. Donald Dewar)

I can well understand why the hon. Gentleman put down this private notice question. I have every sympathy with him and other hon. Members in the areas affected, and with their constituents. I recognise and understand the seriousness of the position. This is indeed bad news, although problems had been expected since Dawson announced its financial results some time ago. The news follows disappointing information about Viasystems, the printed circuit board manufacturers at Selkirk, where 200 redundancies were announced in May.

Although the unemployment rate in the Borders has been lower than that in the rest of Scotland for some years, there is no doubt that the Borders economy is heavily dependent on the textile industry, and these announcements have come as a particularly heavy blow.

I share the desire of many in the area to see the Borders economy diversify and modernise. The local enterprise company, Scottish Borders Enterprise, is at the heart of that effort, working with the local authority and other partners. Scottish Borders Enterprise has a budget of some £8.2 million in the current year, which, in per capita terms, is a comparatively generous allocation.

An extra £500,000 was added last year in recognition of problems in Hawick, which was appreciated in a tight and difficult year. The area was designated as a 5b area under European structural funds, with a programme worth around £21 million between 1994 and 1999. That makes it eligible for a whole range of grants to help to develop economic diversity.

I want to stress that the Government stand ready to play their part in further economic development plans for the area. My hon. Friend the Minister for Education and Industry, Scottish Office, has been discussing the situation in the Borders with the hon. Gentleman and others. He will visit the Borders tomorrow to continue those discussions with the economic development agencies, the local authority and, indeed, the public.

As the hon. Gentleman knows, my hon. Friend was especially anxious to have contact with the public, and he volunteered for what might be seen as quite a difficult engagement. He will listen carefully to what I hope and expect will be constructive proposals for the future of the Borders economy, but I am sure that the hon. Gentleman would not expect me to anticipate that at the moment.

I cannot pretend to the hon. Gentleman or to the House that problems such as these can be solved overnight—indeed, it would be irresponsible to do so. However, my hon. Friend the Minister of State and the Government will respond positively in the course of discussions tomorrow, and ensure that the House is informed of any further developments.

Mr. Kirkwood

I am grateful for that answer. I acknowledge the work that has already been done by the Minister for Education and Industry, and we look forward to his visit tomorrow. However, does the Secretary of State understand that the scale of the redundancies—720 job losses, in contrast with what the Prime Minister has just been saying, in prime manufacturing, full-time, knitwear jobs—is a shock to the whole economy of south-east Scotland? The most recent estimate I have been able to get, with the assistance of the Library of the House of Commons, is that £6.5 million of purchasing power will be taken out of the central Borders economy, starting in August. That is a severe blow, which needs an urgent response.

The Minister for Education and Industry has been doing what he can, and we look forward to what might flow from his visit tomorrow, but it will take more than the Scottish Office Education and Industry Department to attend to this matter. Will the Secretary of State give the House an undertaking that he will involve local government Ministers and farming Ministers at the Scottish Office, and take a broader look at the whole Borders economy after the Minister for Education and Industry returns from his visit?

This is far and away the biggest economic blow that the region has suffered in living memory, and, if the Secretary of State does not take urgent steps to stem the haemorrhage of economic activity, the future for the Scottish Borders economy is extremely bleak indeed.

Mr. Dewar

I very much hope that the future is not bleak—I think that the Borders region has many advantages and many strengths, and we want to build on them. I entirely accept that the decision by Dawson's to shed 720 jobs is a real and significant blow. As the hon. Gentleman knows, 280 are in Berwick, but the whole area will suffer from this sad event.

The firm has major trading links with the far east, and perhaps some instability has resulted from that, but it is clear there have been long-standing problems in the textile industry of the Borders for some time. Ministers have talked to Mr. Finlay, the chairman of Dawson's, about the situation. We have made clear our anxiety to help if specific requests and proposals are made, although they would have to be considered on their merits. Dawson's still employs 1,500 people in the Borders, so it is still an important employer. Its redevelopment and restructuring, and its future success, are matters in which we all have a stake, and we have that very much in mind.

I accept that we have to look in a broad way at the problems of the area, and that that does not involve only one department of the Scottish Office. I have made it clear that we want to play our part, and implicit in that is that we are prepared to look in a broad sense at what strategic advances can be made and what can be done to help. However, it will not be a matter of an instant solution to what is a serious problem.

Mr. Dennis Canavan (Falkirk, West)

Is my right hon. Friend aware that concern about the redundancies is not confined to the Opposition Benches? I fully understand the deep concern felt within the Borders community and by the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) about the devastating effect that the redundancies will have in the region.

Is my right hon. Friend aware that, only a few months ago, there were several hundred redundancies at the Wrangler jeans factory in Camelon in my constituency? There seems to be a common complaint in the textiles and clothing industries that part of the problem is the pound being too strong. Will my right hon. Friend have a word with the Chancellor of the Exchequer to try to bring about a situation in which the textile and clothing industries in Scotland can be more competitive?

Mr. Dewar

I accept that concern about the situation is widespread. I made it clear that it was shared by the Government, as I am sure it is by many of my right hon. and hon. Friends on the Benches behind me. I assure my hon. Friend that we take the matter seriously. Textiles is a particularly difficult sector at the moment. While other parts of the Scottish economy are doing well and flourishing, that sector certainly has its problems, which are not easy of solution, but we are prepared to consider anything that can be done.

On the pound, self-evidently a good deal of the increase in its value was completed more than a year ago, and, in fairness, a collapsing pound might be a more embarrassing problem than a strong one. For Scottish and, indeed, United Kingdom industry, above all we want stability, sustainable growth and low inflation. We want to ensure that we do not return to boom and bust and the stop-go cycles of the past. The Government are achieving all those aims to a fair measure, and they are important aspects of our economic policy.

Dr. Liam Fox (Woodspring)

To understand the impact that the job losses will have in Hawick, Jedburgh, Galashiels and Selkirk, the House must understand how heavily reliant that area is on textiles. Also, it is worth noting that there are job losses on both sides of the border, and that any help will have to be on a United Kingdom-wide basis.

The greatest help that the Secretary of State could give, if he wants to help, would be to ask the Treasury to change its economic policy. We have an overvalued pound, rising interest rates, rising mortgage rates, a manufacturing recession, falling exports, a huge balance of payments deficit, and, now, rising unemployment. Are the Secretary of State and the Prime Minister living in some sort of economic wonderland—do they not understand the realities of what is going on out there? Under this Chancellor of the Exchequer and this Prime Minister, Labour is bad for business, and if the Secretary of State is correct and the Government are avoiding the boom and bust cycle, it is only because we are going to get the bust without the boom.

Mr. Dewar

That is a somewhat excitable summary from the Opposition—or I hope it is. Of course we recognise that there is a downside to the strong upside of stability and sustainable growth that we are trying to achieve. Dawson's has talked directly to the Treasury about the matter, and I think that my hon. Friend the Economic Secretary met the company recently to discuss it, so the Treasury is well aware of those points. The hon. Gentleman's line was a convenient one to take, particularly in these unfortunate circumstances. I do not think that the views he has expressed would be shared widely throughout industry—certainly not in the form in which he put them.

Ms Rachel Squire (Dunfermline, West)

First I must tell the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) and the hundreds of men and women and their families who are facing redundancy that I am confident that they have the deep sympathy of the people of Dunfermline, where at one time 6,000 people were employed in the textile industry—now, it is only 120. As my hon. Friends will be aware, we have also lost thousands of jobs in other traditional industries in the past few years, and recently our hopes were dashed by Hyundai mothballing its development.

Does my right hon. Friend agree that, in such depressing circumstances, it is vital that all sections of the community work together, and that there is a strong public and private partnership at local and national level to overcome the problems and bring some hope to the community that things can improve?

Mr. Dewar

Of course I recognise that; it is a difficult situation, as I said. It is unusual, because the unemployment rate in the Borders is around or just under 4 per cent., so, superficially, it does not seem to be a particularly hard-hit area, but I recognise that the figures can be misleading. I mention that fact as a corrective against despair for the future.

I accept that all parts of the community must come together. I was, for totally unconnected reasons, in the Borders only a week or two ago, when I had the opportunity—very briefly—to meet some of the local political representatives and the local enterprise company. My Department has been in fairly constant touch with them over the past few worried weeks, and we want to play our part, as I said, and take account not only of a narrow spectrum of Borders opinion, but of the community as a whole.

Mr. Michael Moore (Tweeddale, Ettrick and Lauderdale)

I welcome the Secretary of State's acknowledgment of the problems in the Borders, especially as yesterday's hammer blow to the local economy follows a series of grim announcements in the past few months and years. He mentioned an increase in funding for the local enterprise company, but will he acknowledge that that merely reinstated the previous year's cut, which was imposed by the previous Administration? Does he accept that the low unemployment rate is a result of the fact that, when there are so few opportunities for other jobs, people leave—they do not hang around to be unemployed in the Borders?

Does the Secretary of State seriously believe that the Government's economic policy, particularly on the exchange rate—I welcome the fact that the Economic Secretary to the Treasury is in the Chamber—is sustainable? If Government policy does not change, there will be more job losses, not only in the knitwear industry but across Scottish and, indeed, United Kingdom manufacturing.

Mr. Dewar

I understand the hon. Gentleman's points, and I do not want simply to repeat what I have said, but we believe that certainty and stability are extremely important, particularly for those who trade across exchange rates. We also believe that sustainable growth is a major prize, and that low inflation is enormously important not only to industry, but to the community as a whole. We would not follow our economic policy if we did not think it sustainable. I appreciate that, in almost all economic circumstances, there is likely to be a less easy outcome for some—a balance must always be struck.

The £8.2 million given to Scottish Borders Enterprise is not, in per capita terms—I accept that that is only one measurement—out of line with moneys given in the rest of Scotland; indeed, it is probably above average. As I mentioned, we tried—modestly—with the additional £500,000 to recognise some of the problems that had arisen in Hawick. We are not inflexible, but obviously our budget is not unlimited—we must be certain that we are responding to practical aims, and solutions to what we accept are general problems. If such practical solutions and ways forward are charted in the discussions that I know will take place, we shall certainly do what we can to respond to them.

Mr. John Home Robertson (East Lothian)

The news is indeed desperate for the Scottish Borders and all surrounding areas. Will my right hon. Friend do everything to ensure that Dawson's and public agencies take all possible steps to look after the people who are facing redundancy, and their communities? Will he take this opportunity to comment on the conspicuous failure of the industry to develop, let alone maintain, the market for high-quality knitwear products? Will he urge all agencies to concentrate on whatever scope there is for developing the potential of the high-quality, high-skill sector of the Scottish textile industry?

Mr. Dewar

I have made it clear that the Scottish Office believes, as I certainly do, that there is a future for textiles. We accept that things are difficult, and that there have been pressures both at the top and, for rather different reasons, at the bottom of the market. I am conscious of the difficulties that Dawson's has suffered, as anyone who has read the financial pages recently will be. The company is attempting to restructure and to refocus. As it is, even after these events, a very important employer in the Borders, it is obviously in our interests that it should succeed—and be helped if at all possible—in doing so.

It is also important—I think that there is unanimity on this—that we look beyond the one sector facing these problems, and try to diversify and broaden the range of economic activity in the Borders. It may be a small beginning, but BT's upgrading of its infrastructure in the area will, I hope, pay dividends in the longer term. We must look for such developments on which we can build and from which, we hope, we can get back the rather broader base that we all want.

Mr. Robert Maclennan (Caithness, Sutherland and Easter Ross)

Does the Secretary of State recognise that the textile industry generally, and not only a particular company in the Borders, is facing a period not of stability, to which he would aspire, but of collapse, and that tens of thousands of jobs are threatened? People will take no comfort from reading today that the purchasers manufacturing index shows a record fall over two years. The Government's policy on exchange rates is widely considered to be a major contributory factor.

Will the Secretary of State exercise his influence in the Government to seek to rectify the problems that have arisen from their uncertainties about the future of sterling and its relation to the euro, and recognise that it was a mistake to put taxation on businesses instead of on consumers?

Mr. Dewar

I do not accept that analysis, and I would dispute many of the right hon. Gentleman's assumptions. I remind him that the latest exports survey from the Scottish Council for Development and Industry shows a slightly improved performance in the textile sector for the first quarter of this year, which does not encourage total doom and gloom about the industry's future, although I freely concede that there are substantial difficulties.

We need to pursue an economic policy that is in the interests of the economy as a whole. We must recognise that the textile industry, with its heavy connection with the far east, has had a particularly difficult time. That is why we are talking about diversification, and considering a way forward. The right hon. Gentleman's criticisms are not justified and will not hold water.

Mr. Ian Davidson (Glasgow, Pollok)

As one of only a couple of Labour Members who were born and brought up in the Borders, I urge my right hon. Friend to take into account the enormous cultural and social impact of the textile and knitwear industry on that part of Scotland. It is a matter not only of jobs but of the way in which the area identifies itself to the outside world.

The Borders area is a relatively threatened habitat in cultural and social terms. I would certainly not want it to become merely a commuter suburb of Edinburgh, so I hope that my right hon. Friend can not only bring in other jobs but try to preserve the cultural habitat that is the Scottish textile industry.

Mr. Dewar

I am not sure that people would appreciate the term "cultural habitat"—it sounds somewhat off-putting—but I accept entirely the point about the individual character of the Borders. Perhaps I should confess, although that may not be the right word, that, when I was younger, I lived for a period in the Borders, just outside Hawick—but I do not want to blame Hawick for anything—and I greatly appreciate the charm and the quality of life offered by the area. We are trying to ensure that there is an economic infrastructure to support the communities and allow them to flourish. I think that everyone in the House is united on that.

Mr. Andrew Welsh (Angus)

Has the Secretary of State read the latest Bank of Scotland survey of manufacturing and service industries, which shows that the problems experienced by Dawson International are being repeated throughout the 300 companies surveyed? What steps is he taking on interest rates and the strong pound, and to repair the damage done to the Borders and other regional economies?

Mr. Dewar

I have already tried to answer that question, but obviously not to the hon. Gentleman's satisfaction. It is important to have a stable economic framework within which industry and commerce can operate. Low inflation is certainly important, although there is a tendency for people to pick on one indicator and ignore all others, when there is often a trade-off for a change in policy.

Sustainable growth is also important, to allow people to plan ahead, whether they are selling overseas or in the British market, which is so important to most industries in Scotland. It is not helpful to pick one indicator in isolation and say that we should change it, without concentrating on the overall pattern of the outcome of economic policy.

Dr. Norman A. Godman (Greenock and Inverclyde)

All Labour Members sympathise with the constituents of Members from the Borders, especially those who now face the breadline. May I remind them, however, that no Labour Member has been able to avoid this kind of thing? Thousands of jobs have slipped away from Inverclyde, because of the decline of the shipbuilding industry. My right hon. Friend the Secretary of State is right: there are no easy and quick solutions. That is why we can do without excitable outbursts from the so-called official Opposition spokesman.

May I tell my right hon. Friend, however, that Scottish Enterprise—and, indeed, local enterprise companies—must do much more to help indigenous industries and companies to prosper? Inward investment is important, but let us try to look after our own companies and industries, and let us try to avoid the traditional Scottish response to employment—migration, to which the hon. Member for Tweeddale, Ettrick and Lauderdale (Mr. Moore) referred.

Mr. Dewar

I think I can assure my hon. Friend—I suspect that I can speak for Scottish Borders Enterprise as well—that that organisation is extremely anxious to encourage the growth of small businesses, and existing businesses, in the area. I mentioned its own funding; I also mentioned European structural funds under heading 5b, which have generated significant additional money in the Borders. All these matters will be considered, but we are particularly anxious to see growth and stability within our boundaries as a result of our own efforts.

It is a cliché in debates of this kind, but it is often forgotten, that small firms supply the mass of employment opportunities. I imagine that that is as true in the Borders as it is in other parts of Scotland. We give a good deal of thought to trying to give people there the impetus, and the confidence, that will allow them to pursue their trade and commerce successfully.

Mr. Nicholas Winterton (Macclesfield)

As vice-chairman of the all-party parliamentary clothing and textile group, may I ask whether the Secretary of State is aware that Dawson International, and the clothing and textile industries, are strategic concerns that are important not just to the Borders and Scotland but to the United Kingdom as a whole? There is not always an alternative employer to put in their place if, because of unfair competition and the monetary policy that is being followed, they have to declare substantial redundancies and leave large sectors of manufacturing.

Does the Secretary of State accept that using monetary policy and interest rates affects the exchange rate? Does he accept that interest rates are themselves inflationary, and are making it more difficult for manufacturing industry not only to invest but to compete? Will he intercede with the Chancellor of the Exchequer, and ask him to review the high interest rate policy that his Government are following? It is inflationary in itself, and seeks to defeat the very policy that he wants to succeed.

Mr. Dewar

In a sense, I cannot charge the hon. Gentleman with the sins of the last Government, whom he would probably have criticised with similar vigour.

Mr. Winterton

I did.

Mr. Dewar

I thought that the hon. Gentleman had. I thought that I had heard familiar tones from the past.

Let me repeat that these are economic policies in the round. It is important to get the balance right. The hon. Gentleman knows full well the Chancellor's policy, and the present arrangements for managing interest rates, which were widely welcomed when they were introduced.

Of course the textile industry is an important sector of our economy, particularly—and still—in the Borders; but all British industry must cope with the present interest rates and the present circumstances. The textile industry has problems, possibly because of its connections with the far east, but also, perhaps, because marketing has not been as effective at the higher end of the market as it has been in other areas. It is certainly disappointing to note the number of redundancies at Pringle's, for example. It is sad that it has not been possible for the management of an up-market and respected brand name, given its product range, to compete as effectively as it might have done.

Mr. Ian Bruce (South Dorset)

Will the right hon. Gentleman reflect on what he has said? Anyone who reads Hansard will assume that the Government's policy is to have a stable pound at DM3 or above. I once ran an electronics factory in Galashiels, at which a skilled and brilliant Borders work force of textile workers were trained as electronics workers. At the rate of DM3 to the pound, the electronics industry cannot expand, and it is losing jobs. The additional 1,500 jobs at Dawson International will not be sustainable at that exchange rate.

Will the right hon. Gentleman tell the Chancellor of that situation? Will he please not ask the Chancellor for a stable pound, as manufacturers who want to go into the euro tell me that they want to go in at a rate of DM2.40 or DM2.60, but certainly not at DM3?

Mr. Dewar

I recognise the hon. Gentleman's point; it has been made about 15 times in the past half hour. It may not surprise the hon. Gentleman to know that the Chancellor is aware of that argument. I am happy to emphasise, although I do not know that it will help the hon. Gentleman, that we believe in stability. We also believe that the economy should be competitive, and that we should be in a position to earn enough revenue to generate profits to reinvest for a successful economy in future.

Mr. Martin O'Neill (Ochil)

rose—

Madam Speaker

It is my impression that the hon. Gentleman came into the Chamber after the statement. Is that correct?

Mr. O'Neill

Yes, it is.

Madam Speaker

Then I am sorry, but I cannot call him.