Manufacturing Grants (Newark) (Hansard, 8 June 2000)

§ Mrs. Fiona Jones (Newark)

First, I congratulate the Minister for Competitiveness, who I understand is not here tonight because his wife has been safely delivered of a baby boy.

I welcome this opportunity to bring to the attention of the House a matter of some concern to my constituents. Newark is a historic market town—it is not, however, a sleepy market town. In common with many other east midlands town, for many years Newark relied for its employment on heavy engineering. Local engineering has now finished, but at its peak, businesses in the area might have employed at least 1,000 people.

Newark has moved with the times, however, and is now well known as a centre for food manufacturing. Everything from cream cakes to spring rolls are manufactured in Newark. We have a skilled work force who make products to the most stringent standards. Recently, one of the food companies in the town closed, with the loss of 700 jobs. In addition, the collapse of Coats Viyella, a company that supplied Marks & Spencer, has meant that 1,000 jobs were lost in Newark—a devastating blow to the town, which has a travel-to-work population of about 50,000.

The town has a great deal to commend it. Newark has railway links into the county; it also has the advantage of being on the Al. I need remind no one why the industrial revolution occurred in certain locations. Newark is surrounded by agriculture and horticulture—dairy produce and fruit could easily be transported to the area. The town has ideal communication links; it is set on the Al and the east coast main line runs through it. The work force are skilled in food manufacturing and the Labour-led district council understands the value of inward investment and is committed to providing work for local people.

One would think that the future was promising. However, I fear that it is not. There is one enormous stumbling block for Newark: it cannot offer new or relocating companies any significant grant aid. The north Nottinghamshire training and enterprise council and Nottinghamshire county council can offer some support, but nothing that is significant for large companies.

There has been much controversy over the new assisted area status maps—I was disappointed that several Newark wards were excluded. I know that my hon. Friend the Member for Burnley (Mr. Pike) has recently expressed similar concerns in the Chamber, and that they are shared by the Minister for Tourism, Film and Broadcasting and by my hon. Friend the Member for Hyndburn (Mr. Pope).

The allocation of European Union grants has never been without controversy, and I was also disappointed that Newark was not part of an objective 2 area. That was because the town was not close to a large urban area.

To make matters worse, grants available on the demise of the coalfields left Newark just outside the travel-to-work area, with no acknowledgement of the fact that, 535 as one of the towns nearest to pits in the south of the area, miners would have spent a great deal of their income in the town. Retailers in the area suffered quite badly.

Newark also suffers from its geographical location. Mansfield to the north-west offers significant assistance to new and relocating companies. I shall illustrate the problem by a comparison. If we consider the award of European regional funds and objective 1 status, we find that there is a yes in the cases of south Yorkshire and Mansfield, but a no for Newark. On assisted area status, the picture is: south Yorkshire, yes; Mansfield, yes; Newark, no. On coalfields, the picture is the same. I fully understand the criteria and why those areas have been awarded that status. The problem is that Newark does not yet fit the criteria, even though the town's economic balance has been disturbed. Companies may close, but new industries will not become part of Newark's economy.

I urge the Government to look carefully at that problem. There should be a mechanism to release some form of grant aid to areas such as Newark so that they are not disadvantaged in the long-term. Perhaps it is time to put a stop to what will inevitably be a merry-go-round of grants. I do not want Newark to become an industrial graveyard.

§ The Minister for Small Business and E-Commerce (Ms Patricia Hewitt)

I echo the congratulations offered by my hon. Friend the Member for Newark (Mrs. Jones) to my hon. Friend the Minister for Competitiveness and his wife on the happy news of the birth of their baby son.

I also congratulate my hon. Friend on securing the debate and on raising so movingly the real issues and difficulties facing her constituents in Newark. I myself have an east Midlands seat; I understand only too well the impact of closures such as those she described—especially in the textiles and engineering industries, which in the past have been the staple source of employment for our east midlands constituents. I certainly reassure her and, I hope, her constituents that the Government understand their needs and concerns. We seek to put into place the effective support measures that will enable towns such as Newark and their surrounding areas to move from the sectors of the economy that have been in decline, at least in employment terms, into those, such as the food manufacturing industry that she described, that are growing fast.

My hon. Friend asked about objective 1 and objective 2 status, and the availability or otherwise of regional selective assistance. The difficulty that we face is that under European Union state aid law—it is, rightly, pretty rigorous on such matters—RSA can be granted only within tiers 1 and 2 of the assisted areas. Our revised proposals for the new assisted areas map were published in April, and following a public consultation, they are now being discussed with the European Commission. However, the Commission must approve our proposals before we can pay any RSA under the new map to any applicant companies.

Our revised proposals for the new assisted areas map include Elkesley ward—I hope that I have pronounced that correctly—in my hon. Friend's constituency. The proposals were drawn up within the very tight constraints that, as she recognised, are set by the Commission. The 536 result of those constraints is that we have not been able to include many of the areas that we would have liked to include.

The other difficulty with the terms for drawing up the assisted areas map is that they do not provide a flexible instrument for responding to sudden changes in economic circumstances. As I understand it, at the point when the criteria for drawing up the map had to be fulfilled, the registered unemployment rate in the Newark travel-to-work area was 2.9 per cent., compared with a regional average of 3.6 per cent. and a UK rate of 4 per cent. Therefore the recent problems, the disruptions and the economic shock waves that my hon. Friend described have not been, and could not have been, taken into account in drawing up the map.

Instead, the systems of support are designed to deal with long-standing problems such as those faced in the east midlands coalfield. The new map, when approved by the Commission, will remain in place until the end of 2006 regardless of the changes that take place in the meantime. The frustrating fact is that we cannot include every area, and it is always particularly difficult for the urban areas that are next door to the areas that receive RSA to attract inward investment. I well understand the disappointment that my hon. Friend expressed on behalf of her constituents.

We recognise the need for a more flexible approach that can respond to sudden economic shocks and difficulties. My right hon. Friend the Secretary of State for Trade and Industry announced last July that he was introducing a new funding package worth £45 million over three years for a new discretionary enterprise grant scheme. That scheme targets small and medium-sized enterprises that could grow in the assisted areas, tiers 1 and 2, and in the new enterprise grant areas, tier 3.

As my hon. Friend will know, just over 20 per cent. of her constituency is eligible for the enterprise grant scheme. It is an important initiative to help areas of special need, and I am delighted that businesses in the east midlands have responded well to its introduction. Since the start of the year, when the scheme officially opened, we have received 34 applications for enterprise grants in the east midlands, seeking grants totalling £1.2 million.

I know that my hon. Friend would like us to extend the availability of the enterprise grant scheme to the whole of Newark. It is certainly the Government's intention—she will understand that I cannot make any promises—that we, together with regional partners, will consider the coverage of the enterprise grant areas to ensure that they meet regional and local needs.

That is not all that we are doing to ensure that new jobs are created, new businesses start up and inward investment continues to come into this country, which remains the No. 1 destination for inward investment into the European Union. There are specific sources of support, such as the highly successful SMART scheme, which helps companies to prototype new, often high-tech, developments. That support is available throughout England and is not confined as is regional selective assistance.

537 I must end, as I began, by thanking my hon. Friend and congratulating her on drawing to the attention of the House an extremely important issue, and in particular, the concerns and difficulties facing her constituents as a result of recent factory closures and job losses. I can assure her that we in the Department of Trade and Industry are doing everything that we can to ensure that new businesses start up, existing businesses grow and more jobs are created.

538 My right hon. Friend the Secretary of State for Education and Employment is doing his part to ensure that workers, such as those in the textiles industry, who are made redundant and who will probably not be re-employed in the same industry, are none the less rapidly offered the opportunity to seek the new skills that will enable them to move into the new jobs that are being created.