Below is the text of the speech made by Ian Lang, the then Parliamentary Under-Secretary of State for Employment, in the House of Commons on 26 February 1986.
My hon. Friend the Member for Nuneaton (Mr. Stevens) has described in great detail the problems which his constituency faces and how they will be exacerbated if Sterling Metals, one of Nuneaton’s major employers, closes its iron foundry. I fully accept the seriousness of Nuneaton’s unemployment problem and I sympathise with my hon. Friend’s genuine concern. I have listened carefully to the points that he has made and I shall try to answer as many of them as possible. I, too, welcome the presence of my hon. Friend the Member for Warwickshire, North (Mr. Maude) in view of the close interest that he also has been taking in this matter.
My hon. Friends’ concern about Sterling Metals is entirely understandable. The Sterling Metals iron foundry employs 700 of their constituents and near neighbours and is the only independent United Kingdom foundry producing cylinder blocks for high-speed diesel engines. I understand that Birmid Qualcast has re-appraised its operations and has decided that the market outlook does not justify the investment needed to enable the foundry to survive and meet the requirements of new diesel engine designs.
Demand for castings has fallen sharply over recent years and the diesel engine sector has been particularly hard hit. The downturn in demand for castings reflects the general downturn in the principal customers, especially automobiles and construction, and is being felt by other component producers such as the drop forging companies. I understand that Birmid Qualcast expects demand for the Sterling foundry’s cylinder blocks to fall by 5,000 tonnes to 30,000 tonnes a year by the end of 1986.
My hon. Friend the Member for Nuneaton mentioned competition from Spain and Brazil. I do not dispute that imports from countries such as Spain and Brazil have had a detrimental effect on Sterling Metals, but they are not solely to blame. My hon. Friend will doubtless be aware that we cannot prevent the Brazilian Government from subsidising their foundry industry as they wish.
However, foundries, like any other industrial sector, have recourse to the anti-dumping procedures, where imports from non-EC countries are concerned. My right hon. Friend the Secretary of State for Trade and Industry can provide guidance on how complaints might be made to the Commission. My hon. Friend might like to raise that with him.
As far as Spain is concerned, it is now an EC member state and from 1 January 1986 became subject to new disciplines regarding state aids to industry. The state aids provisions of the Treaty of Rome give the Commission powers to investigate and, if appropriate, require the withdrawal of state aids which distort competition in intra-Community trade.
Spain has now altered her turnover tax system to remove the element of export subsidy. If there are other forms of subsidy involved the industry will need to present some evidence of them in order to give the Commission grounds to investigate. We have pressed the Commission to ensure that Spain complies with the state aid rules from the outset. If the United Kingdom foundry industry produces evidence of state aids being granted since 1 January 1986, we shall consider pursuing the question with the Commission. The loss of 700 jobs at Sterling Metals is very regrettable, but I have to say that that decision is a matter for the commercial judgment of the company based on its view of the market outlook.
As I think my hon. Friend knows from his recent meeting with my hon. Friend the Minister of State, Department of Trade and Industry, we made an offer of £600,000 assistance under the Industrial Development Act towards the modernisation of the foundry. However, Birmid Qualcast decided not to proceed with the investment.
Further discussions could be held if a way could be found of maintaining the operation—for example, by way of a buy-out. Again, this is, of course, a matter for the Department of Trade and Industry, but I understand that it would be willing to consider providing assistance for a buy-out providing a commercially viable plan were put forward.
If the management and/or the work force at Sterling Metals are considering a buy-out, I would urge them to consult the West Midlands regional office of DTI—which would be willing to help and advise—at the earliest opportunity.
I realise that in the event of redundancy, some of the work force may have difficulty in finding new jobs, and I can assure them through my hon. Friend that all the facilities of the Manpower Services Commission will be available to help them in their search for work or retraining. When I refer to work, I include self-employment.
But apart from the immediate effects on the work force, I acknowledge that the closure will represent a further reduction of job opportunities in Nuneaton, and I know the area already has high unemployment. I was in the West Midlands myself earlier this week. The problem of unemployment is one of the most serious facing not only this country, but the whole industrialised world.
Unemployment in Britain has been rising for 20 years and the west midlands—our industrial heartland—has been especially hard hit by the recent recession and by market shifts. The historical reasons are well known. Our industries were overmanned, our work force was undertrained. We were slow to adapt to market changes and to new production methods. We became steadily less competitive, with the result that firms throughout the country which could not sell their goods had to close down or shed jobs. We have had to undergo a change from the old industrial pattern to new technologies and advanced manufacturing.
In the case of Nuneaton, the traditional manufacturing industries of textiles and metal bashing have declined, and the town has had to adapt to a more service-orientated economy. Nuneaton enjoys a good location at the centre of the Midlands motorway network, and its position has aready been exploited by several distribution companies. The M42 link road which has recently opened on the outskirts of Nuneaton could generate further interest.
I am not suggesting that my hon. Friend is overstating Nuneaton’s problems. It is not easy to adjust to major changes in market conditions. However, we must not constantly look on the black side. Companies in Nuneaton are winning contracts and new jobs are being created there.
The Galliford group, a local construction company, won contracts worth £35 million throughout the country during the latter half of 1985. Sainsburys intends to replace its existing supermarket with a superstore next year. Creating 200 new jobs, and ASDA is also planning a superstore in Nuneaton which could bring over 300 jobs.
Despite the difficult times. People are finding work: 3,000 people have been placed in jobs through Nuneaton jobcentre alone since April last year, and many more will have found jobs by other means. Unemployment in my hon. Friend’s constituency fell between January 1985 and January 1986. These are welcome and encouraging signs which go some way to offset the bad news.
Clearly, much more needs to be done, and the Government have a role in encouraging positive change. One of the ways in which we can help is by providing incentives to attract investment to areas with severe economic problems. Nuneaton is part of the Coventry travel-to-work area which received assisted area status in November 1984. Since then, companies moving into Nuneaton or expanding their existing operations have received offers of over £1 million in regional aid. This money has helped to create some 200 new jobs and safeguard 500 existing ones.
This is a sizeable amount of Government assistance, which is focused directly on job creation. The review of regional policy in 1984 led to a new system of regional aid focused on job creation rather than encouraging capital-intensive investment, and some service sector activities became eligible for regional aid for the first time. We cannot create the jobs that are needed in Nuneaton. But through regional aid we can, and do, help those areas worst affected by unemployment to attract the investment that does.
I mentioned self-employment earlier. I hope that my hon. Friend will agree that it is important that we do all that we can to encourage people to think beyond “who will employ me?” We set up the enterprise allowance scheme to help unemployed people who wished to start their own businesses by providing a weekly allowance in the difficult initial period. The scheme has been expanded by 15,000 places nationally this year, and the qualifying period of unemployment is to be reduced from 13 to eight weeks.
As a result of the expansion, the MSC will he able to provide support to nearly 1,000 people in Coventry and Warwickshire in 1985–86–8 per cent. more than last year. Some 70 people are currently receiving the allowance in Nuneaton, and ample funds are available to meet demand. One small engineering company in Nuneaton, which my hon. Friend might know, which began with help from the scheme now employs 17 people and has a £500,000 turnover. The Manpower Services Commission would welcome increased participation in the scheme throughout Coventry and Warwickshire.
We are deeply conscious of the potential of the small firms sector in creating employment opportunities, and we have done a great deal to encourage the growth of small firms by reducing the burden of form filling and simplifying planning procedures. We announced further measures to help small firms last November, including £2·5 million next year in support of local enterprise agencies. We run small firms centres, which provide the advice of experienced businessmen to potential and established small firms, and the centres have close links with local enterprise agencies and small business clubs.
I understand that Warwickshire county council is building starter units at the Hammond business centre in Nuneaton, and that some private sector firms are also building and refurbishing units for small businesses. These, and the presence of the Warwickshire enterprise agency, are encouraging signs of new initiatives in the local economy with significant job creation potential.
Enthusiasm and effort are essential if enterprise is to succeed, but advice and training are also vital. My hon. Friend was right to emphasise that. The Manpower Services Commission is funding a wide range of courses designed to meet the needs of small businesses through the training for enterprise programme.
The adult training strategy, on which we are spending £260 million this year, is intended to make training more widespread, more flexible, and more relevant to labour market needs. We are living in a time of change—indeed, another industrial revolution—and people at all levels need access to training and retraining. We are helping more than 3,000 people in Coventry and Warwickshire through our locally delivered training programmes this year, compared with under 2,000 last year.
Training is particularly important for young people. They, and the long-term unemployed, have been hard hit by the recession. Young people straight from school or college have no proven work skills or experience to help them find jobs and it is this problem which YTS—one of our most successful measures—addresses. The £835 million that we are spending on YTS this year represents a massive investment in young people’s future.
The extension of YTS to two years from April is a major step towards ensuring that all young people under 18 are either in jobs, in full-time education, or receiving high-quality training. In other words, unemployment need not be an option for them. There is a good deal of enthusiasm for the two-year scheme, in Nuneaton and throughout the west midlands, and the MSC does not envisage any major difficulties in providing enough places.
Another of my Department’s priorities is helping the long-term unemployed. The unemployment rate in the Coventry travel-to-work area is too high—although, as my hon. Friend knows, it is lower than the average for the west midlands region, and it will take time for it to come down. Steps need to be taken now to deal with the worrying problem of long-term unemployment, however.
The community programme, our major scheme to help the long-term unemployed, has been expanded by 100,000 places nationally this year, and the MSC is providing 3,400 places in Coventry and Warwickshire this year—over 1,000 more than last year. The Nuneaton and Bedworth borough council and North Warwickshire Projects (1985) Ltd. are only two of the managing agents providing quality places in Nuneaton and the surrounding area. My hon. Friend will recall that projects funded by the community programme benefit local communities as well as the people employed on them.
Nuneaton, like many communities in the midlands and elsewhere, is indeed facing problems arising from the decline of its traditional industries. The Government have shown their concern in many practical ways, and I have talked briefly about regional aid and our employment and training measures. This all represents a significant commitment to the regeneration of this part of the country.
Adapting to change is never easy but, with the Government’s support, the efforts of the people of Nuneaton are beginning to pay off. We have done a great deal to help Nuneaton, and we shall continue to do all that we can.