HL Deb 13 December 2000 vol 620 cc388-98

4.15 p.m.

The Minister for Science, Department of Trade and Industry (Lord Sainsbury of Turville)

My Lords, with the leave of the House, I shall now repeat a Statement on Vauxhall being made in another place by my right honourable friend the Secretary of State for Trade and Industry concerning yesterday's announcement by General Motors to end car production at its Vauxhall plant in Luton. The Statement is as follows:

"Over recent months, General Motors has been conducting a world-wide review of its operations. The results of this review were announced yesterday.

"The decision in relation to Luton is a bitter blow, with the prospect of 2,000 jobs being lost by this time next year. Our efforts must be directed towards assisting those individuals affected and the local community through what will be clearly a difficult period.

"In this Statement I want to outline the steps the Government will take. But before I do that, it is important that the House considers the reasons given by General Motors for this decision.

"It has made it clear that this is a part of a Europe-wide restructuring of its operations, which will result in over 5,000 job losses across Europe. Vauxhall has stated that this restructuring is a response to over-capacity in the car market and to rapidly changing European market conditions, with lower sales than expected and a shift in customer preferences towards smaller vehicles.

"Vauxhall's announcement is part of an overall restructuring by General Motors designed to reduce salaried employment levels by 10 per cent in North America and Europe over the next year, cutting 10,000 jobs world-wide.

"Despite yesterday's announcement, Vauxhall will remain an important manufacturer in the UK. Vauxhall has confirmed that it will continue with its investment plans for a new van to be manufactured at Luton and that planned production volumes for the project will be increased. This will secure over 2,000 jobs.

"Ellesmere Port will continue to produce Astra cars and V6 engines, employing over 4,000 people. Vauxhall also announced yesterday that a study is being made to possibly incorporate the next generation Vectra and to turn the Ellesmere Port plant into a two-model 'flex' plant.

"So it is clear that this is part of a world-wide restructuring by General Motors, resulting in job losses in North America and mainland Europe as well as Luton.

"The challenge is to provide new job opportunities for the future to replace those jobs lost as a result of Vauxhall's decision. That is why yesterday I announced, with my right honourable friend the Employment Minister, that the Government will be taking a number of steps to help those affected and to strengthen the local economy.

"The Employment Service, working closely with Vauxhall, local authorities and other relevant bodies, will provide a package of advice and assistance to those affected by the decision. This package will include rapid response units providing a personal service to help people find new jobs; an on-site Jobshop to offer vacancies, help with applications and fast-track benefits service; and retraining programmes which will offer guidance on further education and training opportunities.

"These rapid response units have a good record in finding new employment for people affected by major job losses. At Fujitsu in County Durham, a rapid response unit helped ensure around 94 per cent of the workforce found new jobs within 12 months. At Siemens in north Tyneside, the Employment Service played a major role in helping around 90 per cent of the workforce find new employment.

"Taken together, these measures will ensure that Vauxhall employees are given the best opportunity for a secure future and that the effects on the local economy are minimised.

"We have also asked the regional development agency to take the lead in identifying the action necessary to support the local economy and employment base. The RDA has already begun this task and this afternoon is meeting with the local authority and other relevant organisations. It will establish a planning partnership to identify the practical measures necessary to assist in economic regeneration and job creation.

"As a result of decisions taken by this Government, Luton is now part of our assisted areas map and as such qualifies for regional selective assistance.

"Of particular concern must be the position of those businesses that supply Vauxhall, for whom special support will be necessary. The RDA will help companies in the supply chain to diversify and find new business to minimise the impact on the wider local economy.

"It is clear that, at a time of globalisation, many sectors of industry are going through major restructuring. In these circumstances the role of government is to provide economic stability. That is what we are doing.

"The underlying strengths of our economy are clear, as two sets of figures published today demonstrate. Today's labour market statistics show that employment is 300,000 higher than at this time last year. Official figures published this morning show that the stock of foreign direct investment in the United Kingdom has risen by 21 per cent over the past year, from £188 billion to £227 billion. "But I am first to acknowledge that these figures will be of little comfort for thousands of workers in Luton. Many will understand that sense of anger they feel—in particular about the manner in which they learnt of their fate. This will be a bleak Christmas for those affected by Vauxhall's decision. We must do all we can to help them through the difficult months ahead. By working together, I am confident that we will be able to meet the challenges of the next 12 months".

My Lords, that concludes the Statement.

4.21 p.m.

Baroness Miller of Hendon

My Lords, I thank the Minister for repeating the Statement. Of course, this is a shattering blow to a town that is heavily dependent on this particular employer, to say nothing of the effect that the decision will have on other businesses around the country which are suppliers to General Motors. I know that the Minister agrees with me that, as was said in the Statement, the manner in which the cutbacks have been announced—particularly at this time of the year—is rather insensitive, not only as regards the employees but also as regards their families.

We are pleased to hear of the support and training that the Government intend to give to attempt to alleviate the problem. We certainly agree with that package of help and should not want to hold it up in any way. But as we know, this is not the only closure in the car manufacturing industry. We have had the sad announcement from Ford's at Dagenham and the problems at the Nissan plant in Sunderland, quite apart from the difficulties of Rover, where for some time the Government did not seem totally aware of what would happen.

When we were in government, BMW, Nissan and Toyota were pleased to invest in Britain. They were all attracted to this country because of its low regulatory burdens and low taxation. Indeed. Mr Pischetsrieder, the BMW chairman, said in 1995: Great Britain is currently the most attractive country among all European countries for producing cars". And yet today—a very sad day in the car manufacturing industry—the story is quite different.

In the Vauxhall statement today, reiterated in the Statement, General Motors has said that this is all part of a Europe-wide restructuring of its operations due to over-capacity in the car market. I do not wish to place any blame on the Government in regard to matters over which they can clearly have no control, overcapacity being one of those areas. However, if there has to be restructuring, we believe that businesses will still want to invest in those countries where regulation is low and the tax burden is light. Those are points on which we have warned the Government for some time.

According to the Geneva-based World Economic Forum, in terms of competitiveness, Britain has slipped from fourth position in 1999 to ninth in the year 2000, due mostly to the extra regulatory burdens placed on business. The forum is not talking merely about the motor industry but about other manufacturing business. Sadly, manufacturing in this country is doing badly at present. For example, 12,000 jobs have recently been lost at Coats Viyella, and 5,000 jobs are to go at British Steel, to give just a couple of examples.

There are large numbers of regulatory burdens. It is not appropriate to tire the House with a long list; the Statement was fairly short and I should like to make my response equally short. The Government know the regulations that they have placed on business. But as if that is not enough, sadly, they intend to introduce the new climate change levy next April, which will certainly ruin our competitiveness by imposing additional burdens.

According to the economic policy and statistics section of the House of Commons Library, since May 1997 206,000 jobs have been lost in manufacturing. That contrasts with the 69,000 increase in jobs in manufacturing during the years 1992–97.

I said that my response to the Statement would be brief. I merely want to put a few questions to the Minister. Can he help the House with some information regarding the grant offer of £40 million of regional selective assistance which is said to have been made to Nissan to secure production of the new Micra at the Sunderland plant? I understand that that is still being appraised—indeed stalled—by the European Commission. Perhaps the Minister can shed some light on that and say whether we are to hear some good news in the not-too-distant future.

Secondly, does the Minister recognise the figures that I gave of 206,000 manufacturing jobs lost? Does he agree with the TUC labour market briefing, dated November 2000, which commented on the downward trend of employment and on the fact that 20,000 jobs in manufacturing were lost in September compared with an average of 10,000 jobs lost in each of the preceding six months?

Thirdly, might the Government, on reflection, decide to reverse the climate levy tax?

Finally, in repeating the Statement, the noble Lord said that 2,000 jobs will be lost, which was part of the Vauxhall statement. He went on to say that despite that, the industry will go on to produce something else, which will secure another 2,000 jobs in Luton. Does that mean that there will be no net job loss? What does it mean?

4.27 p.m.

Lord Razzall

My Lords, like the noble Baroness, Lady Miller, we welcome the steps that the Government are taking in reaction to these unfortunate events and believe them to be entirely right. We deplore, as did the Minister, the bitter blow to those involved. It is not only the 2,000 jobs at Vauxhall that will be significantly affected as a result of this decision; the prospective effect on the suppliers of components, particularly those in the United Kingdom, is also a serious matter. The Minister may confirm the calculation that for every one job in the motor car manufacturing industry there are roughly 10 dependent jobs in the supply of components and related services. Clearly, as the Minister said, the work of the Government and in particular that of the RDA, needs to take account of those employees.

Does the Minister agree that this is a moment to reflect more widely on these issues? Perhaps I may touch on one or two points made by the noble Baroness. First, does he accept that there is a temptation and tendency for governments, of whatever persuasion, to view these issues in isolation? The 1990s were a period of significant investment in the mass market motor car industry in this country—not for any of the reasons described by the noble Baroness, but largely because the world-wide economic trends at that period were for significant growth in mass market motor car manufacture. Does the Minister further agree that we now face the possibility that this world-wide trend will decline over the next few years?

Further, if the noble Lord accepts that thesis, will he indicate whether the Government simply take the view that they will adopt a totally laissez-faire approach to the matter and react with the Band-Aid whenever a closure occurs? Alternatively, does the noble Lord think that the Government ought be proactive in such situations, though not in the sense of going back to the bad old days of investment of taxpayers' money into industries that taxpayers and the government do not know how to run? Does he agree with the line taken, for example, in the editorial of The Times newspaper this morning; namely, that the structure of the motor car industry in this country should move away from mass-market motor car manufacture into the area of specialised motor car manufacture, because that is the only future course for this country? If the noble Lord agrees that that is the case, can he say what the Government propose to do about it as regards the creation of the structures that I know are dear to the heart of the DTI as part of its current political control?

Secondly, perhaps I may touch on the point made by the noble Baroness. Can the Minister confirm—I am sure that he will—that these issues are nothing whatever to do with the question of over-bureaucracy, regulation or taxation in this country and that they are entirely to do with world-wide trends? The noble Baroness made a valiant attempt at suggesting that, in some way, all was rosy under the Tory government, but many of us remember that they actually decimated manufacturing industry in 1981 and 1982. 1 am sure that the Minister does not need me to give him a lesson on that subject; indeed, he can take it up himself.

The third point that I should like make is an interesting one. I suppose that it is also a comment on the current political position in this country. The one secret the noble Baroness dared not mention is the question of the currency. I have with me the submission that Vauxhall Motors gave to the inquiry of the House of Commons Treasury Select Committee into economic and monetary union. In that document the company said: The structure of General Motors Europe (GME) makes it vital that Vauxhall demonstrate competitiveness against sister operations in Europe when seeking new investment. Joining the euro would save Vauxhall millions of pounds annually on currency conversions and hedging costs… when competing with sister operations and competitors based in Europe, Vauxhall has the extra cost burden arising from currency transactions. Given that two-thirds of the value of component parts are drawn from euroland countries, Vauxhall finds itself needing to spend many millions of pounds per year on currency conversions and hedging costs. In an industry where margins are low, this has real downside potential for creating a significant impact on our level of competitiveness". I do not want to join the current euro fanaticism on the other side of the argument by suggesting that the question of currency is the only issue that has affected this decision. Indeed, to be fair to the other side of the argument, in its presentation to the Treasury Select Committee Vauxhall made the point that the currency issue is not in itself overriding. However, can the Minister confirm that the delay associated with going into the euro has been, at worst, a significant factor in this decision? Will he also agree that clearing up the doubts about the timing of our entry into the euro would be a significant factor in ensuring that we do not have more of these motor car manufacture closures?

4.34 p.m.

Lord Sainsbury of Turville

My Lords, perhaps I may begin by stressing the point that I made when repeating the Statement; namely, that this announcement being made just a week or so before Christmas, and in a situation where workers learned of the job losses by way of radio and television reports, is not an acceptable way to deal with such issues. I very much regret the way that this matter has been handled. However, we must judge such events in terms of the current situation in the car market in Europe.

I am glad that the noble Baroness accepts that the British Government are not able to control the oversupply in the European car market. Equally, I hope that the noble Baroness will accept that the fact that inward investment increased last year from £188 million to £227 million—an increase of 21 per cent—suggests that, far from people seeing this as an uncompetitive place in which to invest, other countries appear to believe that this is an absolutely ideal place for such investment. Frankly, the fact that money is being invested in this country is far more persuasive to me as proof of the competitiveness of the British economy than any ranking statistics. We are talking about people putting money into this country, which is a very clear indication of their thinking as regards the state of the British economy.

Perhaps I may also correct the impression that manufacturing production in this country is in a very parlous state. That is not true; in fact, manufacturing production has increased by slightly less than 1 per cent. Of course, job losses have taken place. However, the information that I have shows that since 1997 the figure is 250,000, which is about 80,000 a year. That contrasts with the situation in the years from 1979 to 1997—I take the whole period of the previous government, not a selective period—where there was a steady loss of manufacturing jobs of 150,000 every year. People should bear those facts in mind when considering the loss of manufacturing jobs in this country over the past two or three years. I should stress that in almost every European country there have been significant losses in manufacturing jobs over this period.

I can confirm that regional selective assistance has been offered to Nissan for the Micra. The matter is with the Commission, and we are pushing very hard to get the issue resolved as soon as possible. As regards the technical point about the number of job losses, we are, as I understand it, talking about 2,000 job losses after taking account of the fact that there will be increases at the IBC plant, which is also at Luton but not part of that manufacturing complex.

I turn to the points raised by the noble Lord, Lord Razzall. It is very difficult quickly to assess what the general impact will be on job losses in other companies, particularly in the supply chain. That will depend on their ability to supply other places, especially the new model of the Vectra that will be at Rũsselsheim and, perhaps, at Ellesmere Port.

As regards whether we should take a "proactive" or a "Band-Aid" approach, I do not believe that it would be accepted that specialised car manufacture is the only way forward for British car manufacturers. In fact, considerable investment has been gained in car manufacturing. Indeed, in 1999 car production reached the highest point since 1972. Sales were the fourth highest on record, and UK exports were the highest ever. Investment is going into a number of plants. Therefore, to approach such a situation by saying that specialised car manufacture is the only way forward would be to make the mistake of trying to pick winners. However, I accept the general principle that all manufacturing industry has constantly to be upgrading its performance in terms of value added if it is to compete with low wage countries, especially those in eastern Europe.

I also agree with the noble Lord that this is nothing to do with bureaucracy. Despite all that has been said on the issue, inward investment is flowing into this country. It is also true to say that Vauxhall made it very clear that this has nothing to do with the weakness of the euro. It is about over-supply in the European car market. We are talking about a very difficult situation: the fact that they have had to bear part of this burden has been a real body blow for the workers at Luton.

4.40 p.m.

Lord Howie of Troon

My Lords, is my noble friend aware—although I do not imagine that he will be——that I was a Member of Parliament for Luton 30 years ago in somewhat happier times for the motor industry and for the people who live there? Does he accept that I agree with the proposal he made to alleviate conditions there? I regret that the management have been acutely unsympathetic and insensitive at this time. In my recollection that is par for the course, but never mind. Does my noble friend also regret the tone adopted by the noble Baroness, Lady Miller, for whom I have affectionate feelings, as she well knows, in her attempt to utilise the misfortunes of the citizens and workers of Luton as a stick with which to beat the Government? It was not much of a stick.

Lord Sainsbury of Turville

My Lords, we shall do everything we can to help the transition of people to new jobs. On the many occasions that we have debated these issues, the noble Baroness, Lady Miller, has always shown enormous sympathy both for small businesses and for people who work in businesses. I do not hold against her the fact that she chose once again to take up the cause of over regulation. I have heard that point of view expressed many times. As I say, the noble Baroness has always supported small businesses and the reduction of regulations to a minimum. I share that view. As I say, on this occasion I do not hold against her the fact that she took up the cause of over regulation.

Lord Prior

My Lords, given that the decision that has been taken is regrettable, I thought that my noble friend on our Front Bench showed great restraint in her remarks. She was perfectly right to say that the competitive position of British industry has declined sharply. You do not have to go far at the moment to hear considerable and growing complaints about the burdens now being placed on British industry which are beginning to make it uncompetitive. The noble Lord refutes that by talking about inward investment, but he must realise, probably more than most people, that decisions on inward investment are probably made a year or two before that investment takes place. We must now consider what inward investment is likely to arise at a time when the Government are placing more and more burdens on industry. This is a serious matter. The way in which we on this side of the House have treated this difficult and regrettable decision by Vauxhall is in stark contrast to what, a few years ago, one might have expected if we had been in government and noble Lords opposite had been in opposition.

Lord Sainsbury of Turville

My Lords, I believe that we have already discussed burdens on industry in the debate on the Queen's Speech. I do not accept the theory that enormous burdens have been placed on British industry. We have pointed out again and again that the figures which purport to indicate burdens on British industry consist largely of the payments that have to be made in benefits under the minimum wage legislation or other legislation which the Government have introduced. I do not regard those as burdens but as necessary payments to give people a fair and decent wage and decent conditions. If noble Lords opposite want to suggest that those payments constitute intolerable burdens on British industry, they should have the courage to say that they would remove them and return to a situation where people are not paid a decent minimum wage and do not receive proper benefits. That is the only way for them to justify their complaint about burdens on British industry. I accept that decisions on inward investment are made prior to the investment taking place. However, there are no signs that investment is slowing down. There is every reason to think that the climate for British industry is as good as it has ever been.

I quote two newspapers which I would not normally quote on these occasions. The Daily Mail stated this morning, But what should offer hope is that Britain's economy is today the healthiest it has been in decades". Even the Sun stated: Britain's overall economy is in fine shape". That is the background but we are dealing with the specific situation of over supply in the car industry.

The Earl of Carnarvon

My Lords, I believe that the Minister said that the Government might help with applications. As chairman of SERPLAN I visited Luton not long ago. As everyone probably knows, Luton unitary authority is limited in terms of development. The local authority is hemmed in by areas of outstanding natural beauty and the airport. Apart from the Vauxhall works, few other brownfield sites are available. How can the Government help with planning applications to provide new job opportunities?

Lord Sainsbury of Turville

My Lords, as a result of action that we have taken, Luton forms part of the assisted areas map and therefore qualifies for regional selective assistance. We can help inward investment companies on that basis in terms of creating further jobs.

Lord Islwyn

My Lords, I thank the Minister for repeating the Statement. I appreciate the helpful steps that the Government propose to take to try to alleviate this difficult situation. Has the Minister noted the remarks of Mr Nick Reilly, the Vauxhall chairman, and other General Motors directors who stressed that the decision had little to do with sterling's strength against the euro, or the UK's failure to join the European currency, or poor factory or worker productivity, and that Britain remains a viable location for car production? Yet car production is to be ended on the Luton site after 95 years. Does not the Minister consider that a pretty soulless decision taken without any consideration of the car component suppliers or of our hard pressed steel industry? It is altogether a sad business.

Lord Sainsbury of Turville

My Lords, I agree with the comments of Mr Nick Reilly that the decision has little to do with euro weakness and has nothing to do with worker productivity or industrial relations. As I said earlier, it concerns over supply in the European car industry. It probably has much to do with the fact that General Motors has just suffered a loss of 181 million dollars in Europe and is thought by some analysts to face losses in the fourth quarter of 600 million dollars. I believe that the decision was taken in that hard commercial light.

Lord Brabazon of Tara

My Lords, when was the Government first informed of the decision by Vauxhall Motors to close Luton?

Lord Sainsbury of Turville

My Lords, we have been in contact with the company. On that basis we were able to respond to the announcement as quickly as we did.

Lord Faulkner of Worcester

My Lords, I declare an interest as a member of the Court of the University of Luton, a new university which prides itself on working hard at its relationships with local employers. I know that my noble friend appreciates the extent to which the General Motors announcement has been greeted with shock and disappointment in the town, given the fine record of the local management and the workforce in improving productivity and the quality of the cars they produce. Vauxhall has been a valued customer and partner of the university since the university was founded. Will the Minister give an assurance that the Government will do all they can to support the university in helping to retrain Vauxhall workers for new employment and to provide counselling and guidance if needed? Does the Minister also agree that it is now more important than ever that the economy in the region diversifies and the university is given every encouragement to help widen the local skills base?

Lord Sainsbury of Turville

My Lords, I would be happy to reinforce the argument. In these circumstances universities can play a major role in working with local businesses to upgrade the economy and to train workers for new industries. There are now some good examples across the country of universities performing that role. That is why we have introduced the higher education innovation fund which is directly focused on the relationship between universities and businesses and assisting them to upgrade.

Baroness Gibson of Market Rasen

My Lords, coming to this House, as I did, from the Manufacturing, Science and Finance union, your Lordships will appreciate what a shock the news from Vauxhall gave me. Is the Minister working closely with the trade unions which represent the workforce in Luton?

Lord Sainsbury of Turville

My Lords, in these circumstances we are working very closely with all the people who have an interest: the regional development agency, local authorities, trade unions and others so that we can co-ordinate our activities to help the workforce deal with this difficult situation. A meeting this afternoon at Luton Borough Council will involve the East of England Investment Agency, the Luton Borough Council, the East of England Development Agency, Regional Supply Office, South Bedford District Council and a number of other bodies all of which will be trying to help to deal with the situation.

Lord Chalfont

My Lords, will the Minister help me by clarifying one point of fact? There seems to be a suggestion that Luton is heavily dependent upon the car industry. I understand that Luton is a highly diversified town with a diverse economic structure. Although, as the noble Lord said, it is a body blow to the industry and a terrible blow to the workers and their families, is it true that it will not have a disproportionate effect upon Luton as a whole?

Lord Sainsbury of Turville

My Lords, I cannot give clear figures about the level of diversification. However, the fact that it is losing 2,000 jobs would be a blow to any town and is much to be regretted. The fact that it now qualifies for regional selective assistance is a clear indication that the economy in that local area is not strong. So I cannot agree that it is not a significant body blow to the town.

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