SPEECH

Introduction

Thank you for the welcome – and thank you to IPPR North for inviting me to attend this important and timely conference, in what is a truly magnificent building.

Indeed, I understand that the construction of Leeds Civic Hall was effectively used as a job creation scheme during the 1930s…and I’m quite sure there’s a message for us in there somewhere!

The significant changes we saw in many of our great Northern cities and towns over the last decade or so – whether Leeds, Newcastle, Manchester, Liverpool or Sheffield – demonstrated just what can be achieved by the combination of vision, ambition, private sector backing often kick-started by public sector investment, and a genuine and proactive strategy for making change happen.

Despite all the challenges we continue to face, we need to send out a powerful message to Government that we in the North are not prepared to abandon that ambition for our future, which sees a dynamic and thriving region competing on equal terms with other European economies.

That’s why I’m delighted IPPR asked me to join you today for the launch of the Northern Economic Futures Commission report, which sets out a bold vision of a North of England that isn’t pleading – but leading; that doesn’t expect hand-outs, but wants the balance of investment to be fairly redressed; and most definitely is in no way ‘grim’!

I’m also pleased to have this opportunity to hear from the FSB, and audience members here today, how you think a future Government could work with you to create and nurture the complex balance of conditions needed to deliver small business creation and growth in the North – thereby supporting the prosperity of the rest of UK plc.

Because there is no doubt in mind – speaking both as a Newcastle MP and as a member of Labour’s Shadow Treasury team – that ‘Northern prosperity is national prosperity’, and that SMEs have an absolutely pivotal role to play in future economic growth in the North.

Current economic outlook

So how do we get to that point – where the North is competing on equal terms with its European counterparts?

Today’s report provides a useful roadmap and illustration of what could, and should, be possible for the North of England if our economy and the way in which Government policy supports it is genuinely rebalanced.

But I don’t need to tell anyone here today about the immense challenges still facing us.

This week’s revised growth figures confirmed the long-awaited end to the double dip recession – with a 1% growth in the economy in the third quarter of 2012. However, this still means that our economy contracted by 0.1% over the last 12 months.

The most recent unemployment figures showed a welcome overall fall in the number of people out of work, but the trends behind the headlines are increasingly worrying with long-term unemployment, long-term youth unemployment and female unemployment rising yet again. 

Half of the jobs created since 2010 are part-time, and unemployment rates of 9.8% in the North East, 9.1% in Yorkshire & Humber and 8.4% North West – compared with 6.5% in the South East – speak for themselves.

Only this week, we’ve heard that the Government’s flagship policy for tackling long-term unemployment – the Work Programme – isn’t working as intended nationally, and certainly isn’t delivering for the North.

And is it any wonder? Latest job figures for the North East show that 13,579 vacancies are being chased by 93,695 jobseekers. That’s almost seven jobseekers for every vacancy available.

With our economy flatlining and long-term unemployment increasing, borrowing is up by £5billion – or 7.4% – so far this year, to pay for this economic failure. And in October, we saw corporation tax receipts fall by nearly 10%.

All of which led the IFS to warn this week of squeezes on public spending until 2018 if the recent deterioration in growth prospects and tax receipts turns out to be permanent.

Labour policy

So what would Labour do differently?

The FSB’s Chairman, John Walker, said only this week that the Government’s policymaking for small business has been ‘subject to a range of confusing patchwork approaches that have often had minimal impact on the ground’.

I would share this view – not just in relation to SMEs but with regard to the lack of a coherent, hands-on approach to growth as a whole.

At the very point at which we need an active industrial strategy, the Government appears to be abdicating its responsibility with a hotchpotch of measures – many of which, such as the Regional Growth Fund with minimum bids of £1million, simply out of reach for most small firms. 

It is clear that one of the key issues facing SMEs, and the economy as a whole, is a lack of confidence and therefore a lack of demand.  There is little point in working out how to address supply-side shortcomings in our economy over the longer term, if a lack of domestic demand now is putting businesses at immediate risk.

That’s why Labour put forward its 5-point plan for jobs and growth last year, to get the economy moving again.

And, last month, Ed Balls proposed that the £4billion windfall from the sale of the 4G mobile phone spectrum should be used to build 100,000 affordable new homes over the next 2 years, and support a stamp duty holiday for first time buyers on homes up to £250,000.

But what about the long-term?

Labour believes we should be backing business with a modern, proactive industrial strategy and I am pleased to see the Commission’s report coming to a similar conclusion today.

This does not mean excessive public spending, and our approach to an industrial strategy would rest upon macroeconomic stability and balanced public finances in the long term.

It’s also not about ‘picking winners’ and focussing all our efforts on big business and larger firms in the hope that their success will ‘trickle down’ to the smaller companies, which actually make up the vast majority of Britain’s business base.

But it does mean looking at the sectors where we have an emerging comparative advantage and use active, intelligent Government – working in partnership with business – to support those sectors of the future and ensure matters like regulation, public procurement, innovation, training and education, and supply chain development are aligned to provide the best competitive environment for British firms – of all sizes.

As outlined in today’s report, we know that in the North we have the potential to be – and indeed already are – world-leaders in a number of key sectors, whether new knowledge and digital, advanced manufacturing, low carbon technologies, chemicals and pharmaceuticals, biohealth or education.

But it is vital that Ministers stop dithering and sending out mixed messages – and instead set out a reliable policy framework to ensure the business confidence and investment that is required to seize these opportunities.

A One Nation industrial strategy also means ensuring the banking system recognises it has a fundamental responsibility to serve the real economy by supporting small businesses and helping address the UK’s infrastructure needs.

We all know that access to finance remains one of the key – if not the main – issues facing SMEs, and this problem has historically impacted the North more.

That’s why Ed Miliband has pledged to ensure a more competitive banking sector by breaking up the banks if they fail to reform themselves. And it’s why Labour is now using its policy review to look at how we create a proper British Investment Bank – fully backed by the Treasury – to ensure that SMEs have access to finance they need.

In tightened financial times, an active industrial strategy also means using public procurement much more smartly to back British business as Governments do across the world.

So, Labour’s frontbench teams are working closely together to consider how we can get the most from the billions of pounds the Government already spends on public procurement – how it can be used to create apprenticeships, spur innovation, develop capacity in key industries and support British businesses of all sizes across the whole of the country.

And an active industrial strategy means recognising the pivotal role played by small firms in reducing unemployment and driving the UK’s economy forward – whether by:

• signing up big business to a ‘Prompt Payment Code’ which would assist the more than one million SMEs currently being affected by late payment, or by

• ensuring that the NI contributions holiday is extended to all small businesses across the country – which FSB research indicates would create around 45,000 jobs and add £1.3billion to GDP.

These are just two of the SME-specific issues on which Labour’s Shadow Treasury and Business teams have been campaigning very hard.

Of course, a proper industrial and economic growth strategy also means ensuring that the institutions you expect to support and deliver it on the ground have the capacity to do so. 

Labour does not wish to repeat the mistakes of this Government and spend time, energy and scarce resources on abolishing institutions for the sake of it, simply because they were not of our own creation.

So, the next Labour Government would bolster the work of Local Enterprise Partnerships, not abolish them and I believe SMEs must play a pivotal role in deciding how LEPs should work going forward.

In the meantime, Labour’s Shadow Business Secretary Chuka Umunna has asked Lord Adonis to lead a review of how the machinery of government can better support business, create policy certainty and deliver a modern industrial strategy.

The much-maligned lack of coordination of Government business policy – described by Vince Cable himself as ‘frankly, rather piecemeal’ – requires a radical review of the Department for Business, Innovation and Skills’ structure, to ensure that it is ‘fit for purpose’ and can genuinely work intelligently and strategically in support of enterprise.

Given the fundamental role played by SMEs in our economy, and the critical role which should be played by the North in driving economic growth – we must ensure that all of this work focuses carefully on how BIS and Government policy becomes ‘fit for purpose’, not just for businesses of all sizes but for firms right across the country.

Exports / Foreign Direct Investment

Finally, a key area of potential identified by today’s report is the growth of our export capacity and the ability to secure business investment from overseas resources.  This has been a particular area of interest for me in my role as a Newcastle MP.

With the North East having a positive balance of trade, I know that there are many local SMEs trading well abroad – such as family-owned Hart Doors in my constituency which is selling its cutting-edge roller shutters across the world to prestigious clients including the Dubai Metro.

But I want this success to be built upon and I know that many more companies in the North could be exploring new markets and opportunities abroad, whilst the region could also benefit more from overseas business investment.

Indeed, earlier this week I was part of an All-Party Parliamentary Delegation visit to the United Arab Emirates – much of which was spent trying to better understand how I, as a local MP, can support SMEs from the region to do business in that part of the world whilst also encouraging their investment in ours.

I am therefore particularly encouraged by the Commission’s recommendation for a Northern Investment and Trade Board as it is clear to me that the current Government’s one-size-fits-all approach to promoting the UK is not working as it should – and we must move back to promoting the strengths of key localities and regions rather just UK sectors as a whole.

Of course this is particularly pertinent given the North’s proximity to Scotland, which is investing significantly more in its growth and economic development strategy that we are able to – with tools to attract inward investment that the North no longer has.

Only last year, Amazon took almost 900 jobs originally meant for North Tyneside to Edinburgh after the Scottish development agency was able to offer a £1.8million grant.

Conclusion

In conclusion, whilst we continue to face many challenges, I believe the North of England has a proud success story to tell of manufacturing, innovation and exports.

We are a ripe resource upon which the UK can draw to power the economy back to prosperity, and upon which the UK must draw if that prosperity is to be a more balanced, sustainable and long-term one.

But it is evident that the current Government’s one-size-fits-all approach to economic policy is letting down the regions, which in turn is letting down the UK as a whole.

The Northern Economic Futures Commission report adds significant value to this debate, clearly outlining among many other things the pivotal role that SMEs should play in driving the North forward and particularly in their ability to reduce our high levels of unemployment.

I hope it is taken seriously and properly addressed by Government, and not simply shelved alongside Lord Heseltine!

Indeed, the Chancellor has the opportunity next week in his Autumn statement to outline a genuine plan for growth, and I hope that he takes the concerns expressed here today on board.

Thank you.