Financial Assistance to Industry

The Committee consisted of the following Members:

Chair: † Sir Desmond Swayne

† Campbell, Juliet (Broxtowe) (Lab)

Cooper, Daisy (St Albans) (LD)

† Darling, Steve (Torbay) (LD)

† Duncan-Jordan, Neil (Poole) (Lab)

† Francis, Daniel (Bexleyheath and Crayford) (Lab)

† Gill, Preet Kaur (Birmingham Edgbaston) (Lab/Co-op)

† Griffiths, Alison (Bognor Regis and Littlehampton) (Con)

† Holden, Mr Richard (Basildon and Billericay) (Con)

† Khan, Afzal (Manchester Rusholme) (Lab)

† McMorrin, Anna (Cardiff North) (Lab)

† Madders, Justin (Parliamentary Under-Secretary of State for Business and Trade)

† Midgley, Anneliese (Knowsley) (Lab)

† Paul, Rebecca (Reigate) (Con)

† Smith, Greg (Mid Buckinghamshire) (Con)

Sullivan, Dr Lauren (Gravesham) (Lab)

† Thomas, Fred (Plymouth Moor View) (Lab)

† Woodcock, Sean (Banbury) (Lab)

Emily Pullen, Jonathan Finlay, Committee Clerks

† attended the Committee

Third Delegated Legislation Committee

[Sir Desmond Swayne in the Chair]

Financial Assistance to Industry

18:00:00

I beg to move, That the Committee has considered the motion, That this House authorises the Secretary of State to undertake, during the period beginning with the date of approval of this motion and ending on 31 July 2030, to pay, by way of financial assistance under section 8 of the Industrial Development Act 1982, grants to businesses as part of His Majesty’s Government’s project to support zero-emission vehicle manufacturing in the UK and the UK’s automotive supply chain, including to support the creation of jobs, private investment into the UK, the development of the automotive industry and emission reductions, up to an overall limit of £1 billion, and to pay during or after that period the grants that are undertaken to be paid.  As hon. Members will be aware, I am not the Minister for Industry, my hon. Friend the Member for Croydon West (Sarah Jones), but she has duly authorised me to move and speak to the motion. I hope hon. Members agree that the UK boasts a dynamic, diverse and fast-developing automotive sector, built on a rich industrial heritage. The sector is a significant driver of economic growth, contributing £21.4 billion in gross value added to our economy last year alone, and it proudly employs a workforce of 132,000 people. Those jobs are spread across the UK, mostly outside London and the south-east, with notable car plants and auto businesses in the west midlands, the north-east and Wales—and, I will add, because my officials have not put this in, in the north-west. Despite our many well-established strengths, the UK and indeed the global automotive sectors are facing real economic pressure while also transitioning to a zero emission vehicle future. With those challenges come a wealth of opportunities, however. Last month, the Government fulfilled a promise to publish our long-term, modern industrial strategy. That plan unites the whole of Government behind a single purpose, tackling issues across skills, regulation, energy prices and infrastructure. Crucially, the strategy will promote investment and growth in advanced manufacturing sectors, at the heart of which is UK automotive. Targeting ambitious growth requires strong Government action to support businesses and guide that progress. The advanced manufacturing sector plan sets a vision for the UK automotive sector. In addition to a range of other growth driving measures, it commits £2.5 billion via the new DRIVE35 programme to accelerate research and investment in vehicle electrification through to 2035. As part of DRIVE35, we propose today to commit £1 billion through section 8 of the Industrial Development Act 1982 to support zero emission vehicle manufacturing in the UK. This will be an inclusive and wide-ranging support offer for our automotive sector, and it will be available for businesses of all stages, sizes and maturity, supporting growth in every corner of the UK. DRIVE35 will serve a broad spectrum of technologies, from established high-volume vehicle manufacturing and multibillion-pound gigafactories all the way to start-ups, prototypes and cutting-edge automotive innovation. It will build on the successes of the automotive transformation fund and Advanced Propulsion Centre research and development competitions, which have unlocked more than £6 billion in private investment. This intervention will ensure that the UK automotive industry can grow and thrive. It will provide the resources for it to move from strength to strength and remain the high-innovation, high-productivity sector that it is today. By cementing strategic technologies and bolstering regional manufacturing clusters, we will seek to leverage a minimum of £6.6 billion of private investment.  This really matters, because without new investment, the sector risks losing out to fierce competition from abroad. That in turn means fewer car sales, a loss of economic activity and a risk to jobs in parts of the country.  That is why we are taking a strategic approach to UK automotive investment. The Government and our delivery partner, the Advanced Propulsion Centre, will engage proactively with potential investors. This comprehensive support will help businesses with all aspects, ranging from expertise on technologies and scale-up to site selection, planning and energy infrastructure, and facilitating introductions with trade bodies and other businesses. Of course, we will also consult vehicle manufacturers directly to identify their supply chain needs and preferences for local sourcing. These insights will guide our approach and remain aligned with the evolving automotive landscape. To summarise, the Government seek authority to make this intervention, because it will secure the UK automotive sector’s position as a leader in the clean energy transition. It will help us to protect jobs and create new ones in our car plants across our manufacturing heartlands. The intervention also directly supports our plan for change and our mission to kickstart economic growth by backing the industries of the future. It will help us to deliver a new decade of national renewal for both our automotive sector and our wider economy. I am grateful for the support of hon. Members from across the House in this endeavour.

18:05:00

It is a pleasure to serve under your chairmanship, Sir Desmond. I begin by drawing the Committee’s attention to my entry in the Register of Members’ Financial Interests. I have spoken at length on this subject, in the last Parliament as a member of the Transport Committee and from the then Government Back Benches, and since the last general election as a shadow Minister. I begin with a simple concept: politicians should never ask someone to do something they are not willing to do themselves. I will put on the record that I am not willing to buy an electric car, and therefore anything that essentially uses taxpayers’ money to produce electric vehicles that so few people in the United Kingdom actually wish to buy—including, it seems from the weekend’s media, the Transport Secretary—is something that we cannot support. With fleet sales removed, new EV registrations prove that this is just not a technology that people trust, desire or are willing to spend their hard-earned money on. The Conservatives previously pushed the zero-emission vehicle mandate transition date back to 2035, but this Government have brought it forward to 2030. The need for this subsidy––let us call it what it is––is a clear indication that the Government are struggling to persuade consumers to switch to electric vehicles. That failure stems from two fundamental issues: the high cost of electric cars and their lack of reliability in terms of both range and charging infrastructure. The Government will say, I am sure, that we formerly had a subsidy scheme—and that is true: we did, but it was used to create an EV industry in Britain, supporting it to overcome the barriers of entry into the UK market. When that EV industry was created, we ended the subsidy. But now, to cover their mistakes and the unrealistic nature of their targets, Ministers have been forced into using taxpayers’ money to pay for EV adoption and to mask the consequences of their own policy failures. In effect, taxpayers’ money is being used to subsidise a transition that the public are not willing to make. We warned the Government that that would be the outcome. However, driven by an ideological approach to net zero, they ignored those warnings. This is yet another example of how the Government’s unrealistic climate targets are contributing to the rising cost of living for ordinary British families. Many other countries have opted for a 2035 target, recognising the economic and logistical challenges of any earlier deadline. In contrast, the UK’s 2030 mandate risks placing an undue financial burden on families here, forcing them to purchase more expensive vehicles while others abroad can wait and benefit from falling prices. We on the Opposition side believe in a demand-led transition to cleaner vehicles, one that respects consumer choice and understands the whole range of technologies available, following a genuine whole-system analysis—not just the tailpipe. Families should have the freedom to choose whether they want to drive petrol, diesel, hybrid, electric or other new technologies, and to make that transition when the market and infrastructure are ready, and when prices are more affordable. The Government’s approach has already had real-world consequences. We have seen the closure of Stellantis in Luton, in part due to insufficient demand for electric vehicles. That should serve as a warning.

I should declare that Ford’s UK headquarters is in my constituency. Will my hon. Friend also reflect that there is a real issue here for not just cars, but commercial vehicles? I am thinking particularly of the Transit, Ford’s best-selling international medium-sized van, which is known the world over and is a real staple of the UK. Is it not the case that we need to look at this issue in the round and that, when it is down to tradesmen what they want to buy, they need to be confident and comfortable in purchasing the product? At the moment, that is the only element providing significant profitability for Ford in the UK; removing that and essentially replacing it with a subsidy seems the wrong way around.

My right hon. Friend is absolutely right. If we look at the marketplace out there for both private and commercial vehicles—particularly vans, heavy goods vehicles and larger vehicles—those who have to take a personal financial risk on them are not choosing to do so. Particularly in the HGV sector, they prefer to look at transitional fuels such as hydrotreated vegetable oil to keep their fleets on the road. That choice genuinely cleaner, but does not cost them two, three or maybe even four times the price for the same vehicle in an electric format—which, of course, comes with a lower payload, because the batteries are so heavy that it cannot legally take the same weight of goods. Those choices that real people in the real world are making should drive what the Government do to ensure that they get the transition to a greener form of transport right, rather than just flogging the dead horse of a failing technology that nobody seems willing to buy unless heavily bribed to do so with their own taxpayers’ money through fleet sales and the like—and, in this case, through this motion that seeks to spend even more of that taxpayers’ money on propping up a product that just does not have the consumer demand underneath it. It is for those reasons that the Conservatives will oppose this motion.

18:12:00

I acknowledge the shadow Minister’s consistency: he opposed his own Government’s policies in this area and now he is opposing ours. Clearly he disagrees vehemently with the direction of travel of the drive—pardon the pun—for electric vehicles. He rightly referred to some of the challenges, such as range, but I disagree with his analysis that this is a failing market. EV sales in the UK last year were the highest in Europe and the third highest in the world, a 20% increase on the previous year. There is a capacity and an appetite for moving to cleaner and greener modes of transportation. We have responded to some of the concerns raised by industry about the rigidity of the previous target and there have been flexibilities added in as a result of discussions with the automotive sector. This is about levering in private investment; it is about £1 billion of public money supporting the automotive sector. Although the shadow Minister might disagree with the overall policy intent, voting against this motion does not change that—all it will do is to prevent £1 billion of support to the automotive sector, with the effect that that will have on jobs, on investment in R&D and on the confidence that we need to send to the industry about our support for the sector. The Society of Motor Manufacturers and Traders is very supportive of our policies and wants us to get on with DRIVE35, which underpins this motion. I understand why the shadow Minister is not happy with this motion, but his vote against it, if carried, would have a direct impact on jobs and investment in manufacturing in this country, and that is something the Government cannot support. Question put.

1|0|10|4|The Committee divided:| Question accordingly agreed to.||0|0

18:17:00