17 December 2008
Geoffrey Clifton-Brown winds up a debate on the motor industry and the packages the Government may offer to help this important sector beat the recession.
Mr. Geoffrey Clifton-Brown (Cotswold) (Con): I am grateful to serve under your chairmanship, Mr. Cook. I pay tribute to the hon. Member for Romsey (Sandra Gidley) for securing this important debate.
We all agree that this afternoon we are trying to ensure that the automotive industry survives so that when the recession ends and the upturn comes, we are in the best and most competitive state possible. As a word of caution, although this is an extremely important sector that accounts for 11 per cent. of our exports, manufacturing as a whole makes up more than half our exports. We are looking to the Government to see how the manufacturing sector as a whole can survive the recession and move towards the upturn, not only the automotive sector.
As the hon. Lady has said, the automotive sector is extremely important. It provides 200,000 jobs in manufacturing and 600,000 in associated industries such as the garage industry, the parts industry and Formula 1, which has been mentioned. As has been mentioned by Labour Members, for every one job directly in the automotive industry that is affected, about two or three indirect jobs will also be affected. Any downturn in the industry is hugely important.
We are looking to hear from the Government what sort of package they are likely to come up with. In particular, we would like to hear how that will relate to what our friends across the pond are doing for their automotive sector. What they do will affect us. The automotive industries across the world are interrelated. I have seen how competitive Hyundai is in South Korea. I was in China the other day and saw its emerging automotive industry, which is also very competitive. One thing that we must do is produce higher and higher-tech vehicles. As was mentioned by Labour Members, we must maintain our spending on R and D and our university research. It is critical to our future.
I think that everybody here can unite in agreeing that we need to ensure that we keep credit flowing to both the major manufacturers and the second and third-tier supply chain components. If we lose the skills in those supply chain components, it will be difficult to get them back. That is why the Government’s role is critical.
The hon. Member for Coventry, South (Mr. Cunningham) made a good speech about how critical the industry is to his constituency, and the 193 firms involved. He also made the point that critical mass is important. We have critical mass in this country at the moment. If we lose it, it will be much more difficult to get the industry back when the upturn comes.
The hon. Member for Ellesmere Port and Neston (Andrew Miller) made the most important point that I have ever heard him make. We must look to the next generation of vehicles. If we are not looking for high-tech vehicles, we will not be competitive globally. The hon. Member for Houghton and Washington, East (Mr. Kemp) has a high concentration of Nissan manufacturing in his constituency. It is an important part of the automotive chain. The hon. Member for Birmingham, Northfield (Richard Burden) also spoke. The automotive sector is very important to the Birmingham area. My hon. Friend the Member for Bromsgrove (Miss Kirkbride) and other Members from Birmingham are also here.
What has gone wrong, what can be done and what will the Government do about it? Unfortunately, so far, the Government have moved in the wrong direction. The pre-Budget report increased vehicle excise duty regulations to reclaim £100 million more in unused car tax discs. The Government take £33 billion in VAT, road fuel tax and fuel duty but give back only £8 billion to the transport sector. The rate of corporation tax for small firms went up from 19 per cent. in 2006 to 20 per cent. in 2007 and 21 per cent. in 2008. That is going in the wrong direction.
Several other changes in tax policy included in the PBR will have a negative effect on manufacturers. For example, individual firms face up to £2,250 in costs to relabel all their stock as a result of a pitiful change in VAT from 17.5 to 15 per cent., which will be reversed in a year’s time. I have received numerous representations from firms getting ready for Christmas about the cost and difficulty involved. That money could be much better spent in other directions, as I will explain in a moment.
Mr. Kemp: Will the hon. Gentleman give way?
Mr. Clifton-Brown: Yes, but the hon. Gentleman is the only Member to whom I will give way, because of the time.
Mr. Kemp: Many Members will be concerned to hear that the reduction in VAT is pitiful. When it comes to car manufacturing it represents hundreds and hundreds of pounds. It is not a pitiful amount to people looking to buy a new car. I can understand that it will be pitiful for small items, but not when it is worth hundreds of pounds.
Mr. Clifton-Brown: Ask one of the retail component manufacturers that have had to reprice hundreds or thousands of products just before Christmas what they think about the VAT changes. I can tell the hon. Gentleman that they are not very amused by them.
Miss Julie Kirkbride (Bromsgrove) (Con): My hon. Friend might want to point out that there have been many good deals on new cars, whose prices have been slashed by far more than 2.5 per cent. of late.
Mr. Clifton-Brown: I am grateful to my hon. Friend. That is the way to do it. If car retailers can give really good deals, that is the way that we ought to go. Somebody mentioned a scrappage package suggested by the Society of Motor Manufacturers and Traders and the Retail Motor Industry Federation. That is a thoroughly good idea: get rid of the old polluting cars and encourage people to buy new clean technology cars. Incentives for people to do so could be offset by VAT on the new cars. It is a thoroughly good and worthwhile package to consider.
What would the Conservatives do about it? We would introduce a national loan guarantee scheme to underwrite debts and ensure that banks lend to small businesses. [Interruption.] Hon. Members may groan, but everybody in this debate has agreed.
Chris Huhne: Will the hon. Gentleman give way?
Mr. Clifton-Brown: No. I said that I would give way only once. Everybody in this debate has agreed. We do not need to be political about it; we need to ensure that the banks lend to businesses so that they are there when the upturn comes.
The Conservatives would give tax breaks to businesses that hire workers who have been unemployed for three months or more, which would be revenue-neutral, as it would be funded by lower spending on unemployment benefits. We would cut corporation tax rates, reducing large corporation tax from 28p to 25p and small corporation tax from 22p to 20p. Those measures would help business to get more cash flow now. We would allow businesses to defer VAT for up to a year. We want to get cash flow into small businesses in particular, here and now.
I have one question for the Minister before I finish. The noble Lord Mandelson has been in serious talks with the automotive industry. We need to know what package is likely to emerge from those talks so that we can help safeguard those 800,000 jobs. When it comes, we will evaluate it to see whether we can support it, but we want some real information from the Minister.
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Mr. Geoffrey Clifton-Brown (Cotswold) (Con): I am grateful to serve under your chairmanship, Mr. Cook. I pay tribute to the hon. Member for Romsey (Sandra Gidley) for securing this important debate.
We all agree that this afternoon we are trying to ensure that the automotive industry survives so that when the recession ends and the upturn comes, we are in the best and most competitive state possible. As a word of caution, although this is an extremely important sector that accounts for 11 per cent. of our exports, manufacturing as a whole makes up more than half our exports. We are looking to the Government to see how the manufacturing sector as a whole can survive the recession and move towards the upturn, not only the automotive sector.
As the hon. Lady has said, the automotive sector is extremely important. It provides 200,000 jobs in manufacturing and 600,000 in associated industries such as the garage industry, the parts industry and Formula 1, which has been mentioned. As has been mentioned by Labour Members, for every one job directly in the automotive industry that is affected, about two or three indirect jobs will also be affected. Any downturn in the industry is hugely important.
We are looking to hear from the Government what sort of package they are likely to come up with. In particular, we would like to hear how that will relate to what our friends across the pond are doing for their automotive sector. What they do will affect us. The automotive industries across the world are interrelated. I have seen how competitive Hyundai is in South Korea. I was in China the other day and saw its emerging automotive industry, which is also very competitive. One thing that we must do is produce higher and higher-tech vehicles. As was mentioned by Labour Members, we must maintain our spending on R and D and our university research. It is critical to our future.
I think that everybody here can unite in agreeing that we need to ensure that we keep credit flowing to both the major manufacturers and the second and third-tier supply chain components. If we lose the skills in those supply chain components, it will be difficult to get them back. That is why the Government’s role is critical.
The hon. Member for Coventry, South (Mr. Cunningham) made a good speech about how critical the industry is to his constituency, and the 193 firms involved. He also made the point that critical mass is important. We have critical mass in this country at the moment. If we lose it, it will be much more difficult to get the industry back when the upturn comes.
The hon. Member for Ellesmere Port and Neston (Andrew Miller) made the most important point that I have ever heard him make. We must look to the next generation of vehicles. If we are not looking for high-tech vehicles, we will not be competitive globally. The hon. Member for Houghton and Washington, East (Mr. Kemp) has a high concentration of Nissan manufacturing in his constituency. It is an important part of the automotive chain. The hon. Member for Birmingham, Northfield (Richard Burden) also spoke. The automotive sector is very important to the Birmingham area. My hon. Friend the Member for Bromsgrove (Miss Kirkbride) and other Members from Birmingham are also here.
What has gone wrong, what can be done and what will the Government do about it? Unfortunately, so far, the Government have moved in the wrong direction. The pre-Budget report increased vehicle excise duty regulations to reclaim £100 million more in unused car tax discs. The Government take £33 billion in VAT, road fuel tax and fuel duty but give back only £8 billion to the transport sector. The rate of corporation tax for small firms went up from 19 per cent. in 2006 to 20 per cent. in 2007 and 21 per cent. in 2008. That is going in the wrong direction.
Several other changes in tax policy included in the PBR will have a negative effect on manufacturers. For example, individual firms face up to £2,250 in costs to relabel all their stock as a result of a pitiful change in VAT from 17.5 to 15 per cent., which will be reversed in a year’s time. I have received numerous representations from firms getting ready for Christmas about the cost and difficulty involved. That money could be much better spent in other directions, as I will explain in a moment.
Mr. Kemp: Will the hon. Gentleman give way?
Mr. Clifton-Brown: Yes, but the hon. Gentleman is the only Member to whom I will give way, because of the time.
Mr. Kemp: Many Members will be concerned to hear that the reduction in VAT is pitiful. When it comes to car manufacturing it represents hundreds and hundreds of pounds. It is not a pitiful amount to people looking to buy a new car. I can understand that it will be pitiful for small items, but not when it is worth hundreds of pounds.
Mr. Clifton-Brown: Ask one of the retail component manufacturers that have had to reprice hundreds or thousands of products just before Christmas what they think about the VAT changes. I can tell the hon. Gentleman that they are not very amused by them.
Miss Julie Kirkbride (Bromsgrove) (Con): My hon. Friend might want to point out that there have been many good deals on new cars, whose prices have been slashed by far more than 2.5 per cent. of late.
Mr. Clifton-Brown: I am grateful to my hon. Friend. That is the way to do it. If car retailers can give really good deals, that is the way that we ought to go. Somebody mentioned a scrappage package suggested by the Society of Motor Manufacturers and Traders and the Retail Motor Industry Federation. That is a thoroughly good idea: get rid of the old polluting cars and encourage people to buy new clean technology cars. Incentives for people to do so could be offset by VAT on the new cars. It is a thoroughly good and worthwhile package to consider.
What would the Conservatives do about it? We would introduce a national loan guarantee scheme to underwrite debts and ensure that banks lend to small businesses. [Interruption.] Hon. Members may groan, but everybody in this debate has agreed.
Chris Huhne: Will the hon. Gentleman give way?
Mr. Clifton-Brown: No. I said that I would give way only once. Everybody in this debate has agreed. We do not need to be political about it; we need to ensure that the banks lend to businesses so that they are there when the upturn comes.
The Conservatives would give tax breaks to businesses that hire workers who have been unemployed for three months or more, which would be revenue-neutral, as it would be funded by lower spending on unemployment benefits. We would cut corporation tax rates, reducing large corporation tax from 28p to 25p and small corporation tax from 22p to 20p. Those measures would help business to get more cash flow now. We would allow businesses to defer VAT for up to a year. We want to get cash flow into small businesses in particular, here and now.
I have one question for the Minister before I finish. The noble Lord Mandelson has been in serious talks with the automotive industry. We need to know what package is likely to emerge from those talks so that we can help safeguard those 800,000 jobs. When it comes, we will evaluate it to see whether we can support it, but we want some real information from the Minister.
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