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Bridget Phillipson (Houghton and Sunderland South) (Lab)
It is a pleasure to serve under your chairmanship for the first time, Mr Weir. I am grateful for the opportunity to hold the debate. I take a keen interest in the UK software industry, and I am proud that Sunderland Software City, which is a centre of excellence, covers my constituency.
I thank the Minister for coming to the Chamber to put the case for the Government—I am sure that we are all eager to hear what he has to say. I would like to extend to him and his colleagues an invitation to meet me after the debate to address any points that we might be unable fully to thrash out in the time available to us.
The UK software sector has compound growth of 5.6% and is now worth £100 billion to the UK economy—almost as much as the financial services sector. The industry benefits from low capital costs, and its products are instantly exportable. Its technology can also make non-software companies more efficient, further adding to its worth to our economy. Figures from the UK’s Technology Strategy Board show that 29% of the $3.4 trillion of worldwide spending on information and communications technology in 2007 was spent on ICT software. Such spending is expected to reach some £2.6 trillion in 2011. I am sure we can all agree that Britain needs to be at the heart of that new wave of ICT innovation and investment.
The US is currently the world’s largest software market. We are all familiar with some of its major exports. We all use Microsoft operating systems and office software in our parliamentary offices, and I am sure that we all know of the success of Apple’s iPhone and iPad. However, I am proud that behind that American muscle is British innovation. Specifically, the technology of Britain’s chip maker ARM Holdings—including firmware, which is a subset of software—is in 95% of the world’s mobile handsets, including products such as the iPhone and BlackBerry, and in more than a quarter of all electronic devices.
The Labour Government left Britain in a good position to become the world’s leading exporter of ICT software and services. From the story of ARM, it is clear that Britain has what it takes to compete in the global market, as long as the Government provide the tools and support that the industry requires.
According to “Resilience amid turmoil: Benchmarking IT industry competitiveness 2009”, the Economist Intelligence Unit’s third annual study into information technology sector competitiveness, Britain was ranked third for human capital in the world, and fourth for support for the IT industry as a whole. However, I want Britain to do even better. The report found that access to broadband networks, investment in skills and business support, and an adequate legal framework that strikes the right balance between promoting technology and allowing market forces to work were vital for the industry to prosper.
It was the Labour Government who developed the framework that pushed Britain to become the fifth largest ICT market behind the United States, Japan, China and Germany. However, I fear that the actions of the coalition Government since the election will jeopardise that. I hope that the Minister can alleviate some of my fears in his reply.
Let us consider the record of the coalition Government so far. Labour promised universal access to broadband by 2012, but the coalition has scrapped that pledge. A joint report by the Boston Consulting Group and Google showed that the internet economy in the UK represented 7.2% of our gross domestic product, and that we led the world in e-commerce, exporting nearly £3 for every £1 imported. The report also found that 250,000 jobs were dependent on the internet. The future of the software industry in Sunderland will rely on the ability to communicate digitally, and a strong broadband network is at the heart of that. It is estimated that it would cost more than £500 million to bring superfast broadband to the north-east. Without it, creative industries could move their business elsewhere. Will the Minister tell me his plans for broadband, particularly in the north-east?
The coalition has announced a review of our intellectual property laws with the aim of relaxing the rules, but that could leave Britain’s intellectual property exposed and unprotected. What assurances can the Minister give me, as well as UK software and new media industries, that that will not happen?
The Tories and Liberal Democrats previously committed to providing tax breaks to the computer games sector. I know that many of my colleagues have spoken about that in this Chamber and on the Floor of the House on many occasions, and that there are strong feelings about it. I support their views on the need for tax breaks for the industry. The industry body states that, without them, the UK will be at a disadvantage compared with foreign competitors. What is the coalition’s justification for reneging on that promise?
On education and training, instead of incentivising software development as a viable career, the coalition will increase tuition fees for students taking mathematics and ICT-related degrees, despite pledges to the contrary from some of coalition Members before the election. It has even cut the body tasked with buying computer equipment for schools. Will the Minister tell me how children in this country can be expected to use ICT in the school environment and go on to become a future Steve Jobs, Paul Callaghan or Chris Curry without any co-ordinated approach on ICT provision?
Support for the software industry is about not just investment in business and education, but a whole package of measures. Another consideration of businesses that I wish to draw to the Minister’s attention is the availability of conventional transportation: road and rail. He might not be aware that two large capital transport projects in Sunderland—the central route and the strategic transport corridor—are in jeopardy. The success of those projects is vital for the north-east to access the rest of the UK, but also for the UK to access the north-east. Does the Minister agree that if we make the north-east as interconnected to the rest of the UK as possible, we will have a more balanced economy?
I wish to dedicate the concluding part of my speech to a success story: Sunderland’s developing software industry. Thanks to some remarkable people, Sunderland has more tech start-ups than any other region in the UK, with the exception of London. Almost 50 software companies operate in Sunderland, and almost 300 across the north-east, and the number grows every week. One North East estimates that the annual size of the north-east’s new media, games and software industry is more than £250 million. Sunderland city council’s business team has opened the e-volve centre in my constituency, which provides start-ups with vital tools for their development such as office and server space, and a bespoke package of advice and support. It also works with Sunderland university to offer internships to ICT students. It is vital that the region can offer highly skilled jobs to graduates, particularly to allow our young people to remain in the area rather than feel that they have to move elsewhere, often after they have studied at our world-renowned universities.
The software industry provides an ideal opportunity for growth to provide the highly skilled jobs that the north-east needs to continue to attract investment and develop. However, that potential for growth and development faces significant challenges. The coalition has cut One North East, the region’s hugely successful development agency, but let me tell the Minister what One North East achieved for the UK software sector and the region.
Fifth Generation Technologies, an Indian company that produces business intelligence tools for companies, came to Sunderland thanks to One North East. Codeworks, a centre for digital innovation based in the north-east, and DigitalCity, a successful and self-sustaining digital media, digital technology and creative supercluster based on Teesside, are what they are today thanks to One North East.
The best example of the success of One North East, however, is Sunderland Software City. This innovation was developed in partnership with Sunderland city council, the university of Sunderland and private sector partners. It inspires and supports the growth of the software industry across the north-east, and makes the region the location of choice for software businesses.
From a single, easily accessible point that local companies have found invaluable, Software City provides local companies of all sizes, from the smallest start-up to firms with multimillion pound turnovers, with the support that they need to succeed. It helps companies to raise capital and find investors and customers, provides one-to-one business and technical support, and helps with access to foreign markets such as India, China and the US. More than 80% of participants in its student placement scheme have gone on to permanent jobs with the companies to which they were assigned. Since Software City started in 2008, it has helped almost 200 companies, including Test Factory, Raise a Tree, and Guroo, which has managed to get almost 500 clients in just two years.
I shall conclude by offering the Minister an opportunity to recognise the software industry and to invest in the north-east. Software City was made possible by One North East, but its £6.5 million grant will run out in March 2011. I welcomed the Government’s announcement last week of a £200 million fund to invest in high-tech hubs. Will he support the use of part of that fund to secure funding for Software City up to and including 2015?
Dr John Pugh (Southport) (LD)
It is a pleasure to serve under your chairmanship, Mr Weir. I congratulate the hon. Member for Houghton and Sunderland South (Bridget Phillipson) on having started an important debate on an important theme. She will understand that I cannot comment on the situation in the north-east, so I shall concentrate my remarks on the contentious issue of video games—that has been the matter of some parliamentary discussion—and on Government procurement, which is an issue that interests me even more.
I am not especially interested in video games per se. I have not played them since the days when I had a Commodore 64 and played a game called “Pesky Painter”, which unfortunately I have not been able to obtain since. If anyone listening to this debate has a copy, I would be pleased if they wrote to me so that I could have access to the game again. Gaming is an addictive pursuit that takes up a lot of time, and someone who has other interests in IT—as I do—finds other things to do. There is, however, an argument in favour of Government support.
There are basically two extreme views on Government support. One is that the Government should always support successful and/or sometimes failing industries, and the other is that the Government should never interfere in the market. A friend of mine who is a software engineer alleges that any IT company that needs Government investment ought not to be backed in the first place, because there is enough venture capital out there and IT is a progressive and successful market.
I do not think that anyone seriously believes in either of those extreme positions. People who do not believe in state intervention at all are a bit like the people who do not believe in censorship at all. A case in which censorship was needed can always be cited, as can a case in which the state needed to intervene. The arguments usually centre on not the principle of state intervention, but the degree of it and the method used. I think everyone accepts, including the video games industry and all other branches of the software industry, that there is a role for the Government in incentivising economically useful behaviour. The video games industry supports the continuing policy of research and development credits, and of such credits that are specifically aimed at smaller businesses, presumably smaller software houses and the like. New starts are plentiful in the industry, and new starts can often become very big companies.
All the companies that we are talking about, including all those in the north-east, favour a sensible regime of business taxation. We can all talk about that, and about levels of corporation tax and the like. I guess that everyone nowadays accepts that tax incentives and breaks are better than direct subsidies, because they are a more effective way of encouraging winners and of getting the kind of behavioural impact that people want. I accept that a tax incentive is a form of sectoral subsidy, as essentially an amount that is due is not being paid, but the issue here seems to centre on whether a sectoral subsidy is, on the face of it, justifiable and necessary. It has to be necessary to be justifiable. On the face of it, there seems to be a pretty good case. I think we all accept that the industry has huge potential. The hon. Lady laid out very well what kind of potential it can offer, not only for the country as a whole but in areas of substantial deprivation. An area such as Sunderland is not necessarily associated, in the way that California is, with the IT industry, but the association is certainly helpful to Sunderland.
There is obviously a huge native skill-base in this country. I was surprised when, during the general election, individual constituents of mine e-mailed me to say that they were very much involved in a video games or software business, and they made representations on behalf of the industry. I was surprised at how many of them there were, and I was also surprised, in these days of the internet, that they did not know one another very well. I felt that after the election I could perform the useful function of putting them all in touch with each other. The hon. Member for Liverpool, Wavertree (Luciana Berger)—who has just arrived—is well aware that Liverpool has a burgeoning software industry involving a lot of small companies. We should support that industry emphatically, because it is very green, forward-looking and progressive.
Luciana Berger (Liverpool, Wavertree) (Lab/Co-op)
Does the hon. Gentleman agree that we should introduce some kind of domestic tax incentives and support not only to boost the industry, but so that we can compete on an equal playing field? Other countries across the world that produce software and video games have additional incentives for the industry, in both research and development and in the wages of people who come from abroad. Because we do not, we have dropped from sixth to fourth place in the world in video games production. We have so many people leaving the UK to go to other countries, such as Canada, the United States—
Mr Mike Weir (in the Chair)
Order. I remind the hon. Lady that interventions should be brief.
Dr Pugh
I am not sure that the causal chain is as emphatic and clear-cut as the hon. Lady represents it, but later I shall come to the business of a level playing field.
It could be argued, could it not, that the indicators for what the industry offers and its potential are so good that the case for state investment is almost being undermined? If it is that good and there is that much potential, why would the Government be needed? Why should venture capital not be there; why would it not be there? I suppose there are some answers to those questions. It could be argued that this country’s financial sector is notoriously short term, which indeed it is. It is somewhat tax averse, and we have seen plenty evidence of companies preferring to go to places where the tax burden is less. The companies are certainly not patriotic and if they have scope elsewhere in places such as Canada, they might well decide that they want to place their funds there.
There are other strong arguments against the state getting too heavily involved in managing the industry. One is that the IT industry is notoriously volatile and unpredictable. One only has to look at the giants of the past that have crashed in the night—the IBMs, the Lotus Notes and the strange fall and rise of the Mac. One need only consider what would have happened had they put their money into floppy disc manufacture a few years ago, or into CD-ROM manufacture in the past five years. When someone puts money into the software industry or the IT industry more generally, they do so at an appreciable risk.
It cannot be in the long-term interest of the nation—of all nations—to base national taxation, for any sector, on the lowest common denominator of international taxation. Although the video games industry has said a lot about Canada, I would like to see what is happening in other areas where the software industry is also thriving and is competitive with Canada. I shall not rehearse the arguments that we could have about state aid and protectionism. I do not understand, however—the Minister can help me here—the argument presented by the Chancellor for not giving tax relief to the video games industry. He said that it could not be well targeted. I do not grasp that, and some evidence in the notes that have been provided makes it less than clear what is being said, meant or agreed by the Treasury.
Jim McGovern (Dundee West) (Lab)
I think the Chancellor actually said that the tax breaks were poorly targeted, rather than not well targeted. I have since had meetings with Ministers who have said that it is Government policy no longer to target any industry for tax breaks. Does the hon. Gentleman have a view on that?
Dr Pugh
The second answer that the hon. Gentleman was provided with seems to possess greater clarity than the first, because the first is, I guess, contestable. We can have a long discussion about how we can and cannot target breaks. A rational argument can quite decently be made that the software industry, given its potential for the capital venture market, is a lower priority than some other industries in a context of scarce resources; or it could be said that a break would be an unnecessary fiscal discount. The Minister can perhaps explain later exactly what is meant by the poverty of targeting in this case.
It is true that under our existing taxation policy some industries have failed, but even some of those mentioned in the notes we have been provided with have failed not because of the taxation policy, but because other things have gone wrong in the software development world and the product simply has not taken off. It is an intrinsically risky market, and the state ventures into it with some caution.
Just to extend the debate, there are other things that we should be talking about. I do not think the Government’s role in encouraging the software industry simply starts and finishes with tax breaks. They have a definite role in education. The hon. Member for Houghton and Sunderland South underplayed the continuity of British education between one Government and the next with regard to developing the software engineers of the future. In that context, I have a general worry about how the curriculum shapes up. In the initial phases of IT education, children were taught about programming and so on, but a great deal of recent IT education is simply about how to use applications. The people who are going to produce the applications of the future will not be the British: they will be Indian, Chinese and possibly American. There is a decline in IT education in this country—or, rather, it is not what it could be.
On the Government’s role, there is a further aspect to consider. The Government are probably the biggest customer for IT. Some 40% of all IT products, software included, are ordered by Departments. Government procurement is extraordinarily difficult for small software companies to work with, the process often being so prolonged that they cannot sustain their interest in applying for work, which the big companies ultimately get. The Cabinet Office and the Department for Culture, Media and Sport should consider how that process operates.
Labour Members must forgive me for going in this direction, but I have to say that huge software projects that were going to be embraced in the Building Schools for the Future programmes were, by and large, built by allowing the biggest players—the big American software firms—to engage with the process. Small British software firms found it difficult to get on the British Educational Communications and Technology Agency list. I have complained about BECTA in this Chamber in the past and I am glad that, as a result of my representations, it has been abolished.
There is a close and unattractive relationship between big government and big IT. We are blessed with the Connecting for Health project, with all its problems, ramifications and extra costs, largely because of close connections and conversations between the previous Prime Minister and Bill Gates. There has been a slow commitment to interoperability, open standards and open source in IT procurement in this country—particularly state and government IT procurement—all of which has effectively shut out the burgeoning British software engineering companies and favoured the large players, including Microsoft and Oracle.
I noted the Chancellor’s suggestion before the election—I am sure the Minister can comment on this—that by adopting a more favourable position towards open source and open standards, the country would save £500 million. I have not seen that in the comprehensive spending review so far. I can provide the press releases if any hon. Member doubts it, but I am sure we would all want to follow that up. That must surely be better than falling for the trick, as has happened in the past, where we receive memorandums of understanding and order shed-loads of products from big software houses abroad, simply because they give us the licenses at slightly less than the exorbitant prices they would charge a private customer.
The Government can do a huge amount in monitoring how taxation policy plays out. If there is a case, and serious empirical evidence is produced, showing that the video games industry is deserting the UK purely off the back of current taxation policy because the Government are reluctant to follow through on some suggestions made prior to the election, they will need to look at that. We cannot afford to stand by and let the industry go, because that would be a serious loss to the country.
We need to keep an open mind on fiscal measures and what will work, and to take a hard, prolonged look at both our education—
Jim McGovern
Before the general election, the Conservative and Lib Dem spokesmen on this subject both said unequivocally that they would support tax breaks for the video games industry. Why has that changed?
Dr Pugh
I am not party to the discussions that have led to that change. Clearly, there were opportunities for previous Governments to do precisely that.
The opportunities for the British software industry are huge. The Government just need to make the right move. Some of the right moves are plain and obvious, and I hope they will make them.
Mike Weatherley (Hove) (Con)
I congratulate the hon. Member for Houghton and Sunderland South (Bridget Phillipson) on securing this debate.
The Government have made a number of announcements in the past weeks emphasising the importance of innovation to the UK economy. In particular, I welcome the Prime Minister’s “Blueprint for Technology” and the specific measures set out to support technology-based innovation. The UK software industry is at the heart of such innovation, and none more so than the video games and interactive entertainment industry.
The UK video games industry—the fastest-growing creative industry in Britain—is one of the biggest in the world. More video games than ever before are being played on an ever-growing range of platforms: consoles, online, mobile phones and interactive TV, to name a few. One in three voters consider themselves gamers. My hon. Friend the Member for Southport (Dr Pugh) mentioned his preferred game; mine is “Command and Conquer: Red Alert 2”.
A large part of the industry’s strength lies in its development of original intellectual property. The UK video games industry excels in innovation and research and development. It is anticipated that the growth in mobile and online gaming in particular will provide new opportunities for original IP development. Sussex is home to a number of content creators and digital media companies, poised to play their part in the UK’s economic recovery. In my constituency—Hove and Portslade—and in the wider Brighton and Hove area, companies such as Black Rock Studios, NCsoft, Eurogamer and Futurlab are meeting demand from a thriving home and export market.
Government support is needed to ensure that the UK remains at the forefront of this thriving industry and to ensure that it continues to grow. IP protection is crucial in that regard. I am sure that I do not have to remind hon. Members of the importance of intellectual property rights, particularly in the online space. I welcome, and I hope other hon. Members do, the Government’s commitment to IP and the Gowers report, and to pursuing infringers through the Digital Economy Act 2010, although it is not perfect in respect of the appeals procedure. It is right that the Government continue this good work, making the IP framework more conducive to innovation.
As the Prime Minister reflected this week, IP is not just about protecting the end result; it is also about ensuring originality in creation. Will the hon. Lady join me in welcoming innovations in the video games sector that are allowing the UK to harness its talents and exploit its advantage? For example, the university of Abertay Dundee, is achieving great things with Government support. With support from the Department for Business, Innovation and Skills and from the European regional development fund, Abertay university is establishing a video games centre of excellence and a prototyping fund, allowing small games developers throughout the UK to apply for grants of up to £25,000 to support the development of fully working prototypes.
Jim McGovern
When will a member of the coalition Government visit Abertay university?
Jim McGovern
The Secretary of State for Scotland has visited, but no Conservative Member has done so.
Mike Weatherley
I thank the Minister for his intervention.
Commercialisation and project management support will also be provided from Abertay’s business and computer games experts, giving each successful applicant the best chance of establishing or developing a thriving business. The spill-over effects into other areas are plain. For example, talented students and graduates will gain important work experience opportunities on project teams, working in the same studio environment as computer games companies. Overall the project can be described as a pipeline for the creation of new intellectual property and it is expected to stimulate the economy by attracting private sector investment.
Similarly, a partnership between Cardiff schools of creative and cultural industries at the university of Glamorgan and Swansea Metropolitan university will support companies holding creative IP in exploiting that resource through identifying routes to market and developing capacity. The DigiLab will ensure that games prototypes for further investment are generated, and that subsequent end products reach the key games publishers quickly to the benefit of participating companies and sponsors.
I call on hon. Members to support those and other initiatives, which are providing crucial commercial and intellectual partnerships to spur innovation and sustain a sector that is at the heart of our economic recovery. I welcome recent announcements about the Government’s intention to establish technology and innovation centres and to use Intellectual Property Office savings to support UK business, helping companies to develop new technologies and offer advice in developing their intellectual property. I look forward to seeing how those projects develop in the coming months.
Finally, the Government have signalled that they will consult business later this autumn on the taxation of IP, and the support that research and development tax credits provide for innovation. That area is of vital importance to the software industry, and I urge my hon. Friends to engage with industry bodies such as the Association for UK Interactive Entertainment, and provide a framework for the industry to flourish.
Justin Tomlinson (North Swindon) (Con)
I rise to support the principle of this excellent debate secured by the hon. Member for Houghton and Sunderland South (Bridget Phillipson). Let me provide a little context on why I have come to support the debate. At midnight on Monday, “Call of Duty: Black Ops” was launched as the latest product in a series of the world’s best-selling computer game. More than 100 HMV stores were open, and queues of people were waiting to get hold of the game. About £1.5 million of sales were expected on the first day, and worldwide sales are expected to exceed £1 billion, which will make it the best-selling computer game ever. It was my birthday on Friday, and I am hopeful that when I return from Westminster at the end of the week, a copy of the game, along with “Football Manager 2011”, will be waiting for me. I must, however, confess that I am exceedingly average at both games.
I have spoken to a lot of hon. Members about this debate, and the average level of knowledge about computer games among MPs is not fantastic. I have done a little research, and found that Positech Games has launched games called “Democracy” and “Democracy 2”, where there is the opportunity to be the Prime Minister. I am sure that the Leader of the Opposition will soon be ordering a copy.
I have taken part in many debates in which we sought to identify new markets to allow the UK economy to expand and diversify. The information and technology market is happening now. As has been mentioned, the worldwide ICT market is expected to reach $4.3 trillion in 2011. UK studios already generate global sales of £1.7 billion a year, with the UK market in the region of £3.5 billion a year. It is essential that we are best placed to benefit from that.
Interestingly, the market is changing and in many ways it is going full circle. Although big budget games can cost around £25 million to develop and are therefore dominated by the big players, many of the early software industries in the ’80s initially expanded from a bedroom industry to become the multi-million pound industries of today; for example, Codemasters, which was set up in 1986 by Richard and David Darling. With iPads, iPhones and Facebook applications, once again, new players can enter the market. We should encourage and support that.
My constituency can play a part in helping the UK to benefit from that growing market. The head office of the Technology Strategy Board is based in Swindon, and I had the pleasure of meeting its chief executive a couple of weeks ago. Part of the company’s remit is to invest in stimulating business innovation in ICT, and its primary role is to work with e-skills UK, professional societies, and research councils—many of which are based in Swindon—the Department for Business, Innovation and Skills and the Department for Education. Through its co-ordination, expertise and funding, the UK should, and can, fully benefit from that crucial market.
I extend an invitation to the Minister to meet the Technology Strategy Board. As an incentive, Swindon—in its second role in the industry—is home to the Museum of Computing, which I support. All hon. Members who have referred to computer games, or to their original computers, can go and see those things proudly on display, and the museum would be delighted to welcome them.
Ian Lucas (Wrexham) (Lab)
It is a pleasure to serve under your chairmanship once more, Mr Weir, and to have listened to the various hon. Members who have contributed to our debate about an extremely important industry for the United Kingdom. The ICT industry has developed hugely over recent years. I remember that when I was a bright-eyed, bushy-tailed candidate in 1997—I was one of the few Labour candidates to lose—we talked about giving computer internet access, as we then called it, to schools. Now, 13 years later, much of that optimism and much of the commitment made by the previous Government to putting schools online and introducing computers into schools has been realised. We easily forget the scale of the change that has taken place in our schools as a result of investment over the past 13 years.
There is no doubt that when the Labour party left office, the British software industry was strong on the national stage with 1.2 million people working in it to service the 22 million people throughout the UK who access IT and use computers every day in their work. We must try to ensure the continuation of our competitive advantage and knowledge base that has enabled the success of the international UK computer industry.
Today, thousands of students are marching in London in response to the Government’s proposals for university tuition fees. That is relevant to today’s debate, because over the past 13 years, there has been major investment in higher education and an increase in the number of students going to university. If one industry is knowledge-based, it is the IT and software industry. Those students who went to university and were attracted by all the games—of which hon. Members know much, and I know very little—have grown our IT industry. Many imaginative and successful small companies in the UK have come out of universities. My fear is that as we go forward, given that it is proposed that student tuition fees will rise to £9,000 a year, many people similar to those who went to university over the past 13 years will be discouraged from attending university and therefore from going into an educational, innovative atmosphere that could lead them into that innovative industry.
Dr Pugh
The hon. Gentleman will recall that he voted for tuition fees in the last Parliament and I did not. I say nothing about the current policy, but at the time I said that the introduction of tuition fees and top-up fees would reduce the number of people applying to university. As a matter of empirical detail, I turned out to be wrong. There is an outside chance that, regardless of the merits of this policy, the hon. Gentleman could also turn out to be wrong, as I was.
Ian Lucas
The hon. Gentleman is wrong to state that I voted in favour of tuition fees—I did not. I have always opposed tuition fees. There is a difference in kind between the tuition fees introduced through legislation in 2003-04 and the present position. The fees introduced in 2003-04 were supported by a generous bursary scheme that the Government put in place, which was the main reason why the proposals went through. We now have a situation in which fees of £9,000 a year are being proposed. Before the introduction of those fees, when Parliament will be asked to increase the cap to £9,000, we will not have any discussion about the bursaries that will be put in place. The White Paper on higher education—one of the most important subjects for our nation—will not be produced until after we have voted on the cap, and that is a matter of profound concern. I have always shown a great interest in this issue and, for the benefit of the hon. Member for Southport (Dr Pugh), I can say that it is one of two occasions when I voted against the Labour Government. The matter goes to the heart of whether the UK software industry succeeds in the future.
Of all the countries that compete with us, we are alone in cutting back on investment in higher education. Teaching grants for most of the subjects that will lead to people studying IT at university will be removed. That cannot make us more competitive as a nation, because it will make our students less knowledgeable. It is therefore necessary that we say that the removal of those teaching grants will have profound effects.
In its 2008 “Developing the Future” report, Microsoft stressed explicitly the importance of industry placements for students. When talking about the lower level of tuition fees, it stated:
“The introduction of tuition fees may have created a deterrent to students considering taking up a placement as they are likely to be more anxious to finish their studies as soon as possible in order to repay their loans and avoid further debt.”
How much greater will that deterrent be as tuition fees are set to triple?
That is not the only area of uncertainty created by the present Government. Labour made a clear commitment to universal broadband by 2012, but it has been scrapped by the Tory-Lib Dem Government. That will create a competitive disadvantage for many companies away from the south-east of England and centres of population in general. It will inhibit the development of innovative small businesses, which are so evident in the software industry. Even more serious is the uncertainty about the expansion of high-speed broadband services, which are key to the development of software companies. We all know that the £530 million docked from the licence fee will be insufficient to pay for universal high-speed broadband across the UK. Will the Minister please tell us where the Government believe the money for that will come from?
The Government have set their face against support for the video games industry by scrapping Labour’s games tax relief. We heard today that we need a clearer explanation of why the Government believe that that step—it contradicts the Conservatives’ pre-election stance, although we have come to expect that from the present Government—should be taken. My hon. Friend the Member for Dundee West (Jim McGovern) has been doggedly pursuing the matter for as long as I can remember, but he is still to receive straight answers to the straight questions that he has been putting. Why is an industry that we know is successful and that is in a very competitive environment not receiving the support from the Government that the Conservatives stated before the election that they would provide?
Justin Tomlinson
Will the hon. Gentleman clarify whether it is still Opposition policy to support those tax incentives? If so, how would they be funded and where would that funding come from?
Ian Lucas
Let me give the hon. Gentleman one example of what the Government whom he supports have chosen to do. They have chosen to reduce corporation tax rates year by year, and they are paying for that by taking away tax incentives for industry to make capital investment. The Labour party believes that that approach is wrong, because lower corporation tax has a huge effect on banks’ income, and the approach detrimentally affects investment and manufacturing in this country. We want to support investment and manufacturing in this country, so we favour tax incentives and relief for investment made by business. That is the line that we are taking. We took it in government, and we believe that it is correct.
Luciana Berger
Is my hon. Friend aware that the Red Book cites the amount involved in not introducing the video games tax relief as £200 million, but that that does not take into account the net benefit of introducing a video games tax relief, which conservative estimates have put at an additional £200 million?
Ian Lucas
I am very grateful to my hon. Friend. That sounds like a good deal to me, so perhaps such an approach that should be followed. We have a successful industry. We should be encouraging it to prosper, not taking away its advantages.
Last week, the Prime Minister made a speech about information technology. Interestingly, he chose to make it in east London. I note that this debate was secured by my hon. Friend the Member for Houghton and Sunderland South (Bridget Phillipson). We want innovative companies throughout the UK—in England, including the north-east of England, in Scotland, in Wales and in Northern Ireland.
My hon. Friend made the excellent point that the north-east had one of the best regional development agencies in the country in One North East. She talked about Sunderland, its Software City and its computer city-approach. We all know about the success of the investment levered into the UK from Nissan by One North East, working with Her Majesty’s Government. That £400 million of investment came at a cost of £20 million. That is the type of work that has been going on in the north-east to bring innovative new companies and investors from abroad to the UK. Unfortunately, One North East has gone and, as we speak, Sunderland does not have a local enterprise partnership.
We heard the Prime Minister talk last week about a fund of £200 million for new technology and innovation centres, so I would like some information from the Minister about the money. Is that sum separate from the regional growth fund? If so, who will administer it and how does one access it? If part of the country, such as Sunderland, does not have a local enterprise partnership, how will it access finance from the fund? Is the fund intended to be solely for the benefit of east London or is it a national fund? [Interruption.] The Minister chuckles, but it tells us something that the Prime Minister shuttles across to the east of London to make such an announcement instead of going, for example, to the north-east of England, which has many great industrial stories to tell.
I would also like to pick up the point that the hon. Member for Southport made about Microsoft having a close relationship with the previous Prime Minister—or was it the Prime Minister before? There was evidence in last week’s announcements of another close relationship between a Prime Minister and a major multinational software company—Google. Strangely, however, the hon. Gentleman did not refer to that. In particular, there was an announcement of a review of the intellectual property system, which the Prime Minister himself said frustrated Google in this country. It is interesting that on the very day the Prime Minister announced that there would be a review of intellectual property rights in the UK, Google announced that it would be taking part in the east London high-tech city project.
Ian Lucas
We do indeed, but the hon. Gentleman raised the issue initially—specifically in connection with the Labour party and Labour Prime Ministers. I thought it only fair to illuminate the debate by highlighting the announcements that were made only last week.
When examining issues such as intellectual property, which is extremely important and does need to be examined, we need to be conscious of not only freedom of expression and access to information, which are of course vital and needed to make our nation competitive, but the rights of those who create original material, who are often the small people in all this and do not have access to Prime Ministers, and sometimes have difficulty gaining access to MPs. Their rights concerning their intellectual property need to be retained. I shall therefore be watching the review with great interest. It is important that there is broad input into the review and I encourage anyone who has interest in this area to contribute. We are at a positive stage for the UK software industry. We have great talent, great innovation and great originality. My contention is that much of that arises from the positive intellectual atmosphere that has been fostered generally in the UK, and specifically in our universities. I am worried that that atmosphere might disappear because of the environment in which we operate.
Jim McGovern
I thank my hon. Friend for giving way; I went to my usual seat in the Chamber over here, so I seem to have split from the Opposition.
On the subject of access to MPs, prior to the previous Labour Government’s March Budget statement, numerous Ministers—the Chancellor, the Secretary of State for Scotland, and Ministers from the Department for Business, Innovation and Skills and the Department for Culture, Media and Sport—visited Abertay university. They saw for themselves just how important the industry was to Dundee and, on the back of that, the Chancellor announced a tax break for computer games. However, since the general election, there has been not one visit to Dundee.
Jim McGovern
Prior to the withdrawal of tax breaks for the computer games industry, not one Minister visited Dundee. Does my hon. Friend the Member for Wrexham (Ian Lucas) agree that that was unfair, at the very least?
Ian Lucas
We all benefit from close contact with not only our constituents but, for example, universities. I am delighted that the Minister will be visiting the university in Aberdeen—[Interruption.] Dundee; I am corrected. I am sure that he, like all of us, would benefit from such a visit. It is important that we understand how different universities are from when some of us attended university.
As I mentioned, another area about which I have particular concern is high-speed broadband. I speak as a Member of Parliament for Wrexham and for Wales, and I am worried that uncertainty around the proposals for developing high-speed broadband, and indeed universal broadband before that, is leading to an atmosphere in which businesses away from the south-east of England will suffer a competitive disadvantage. In an area such as software, that will be crucially important.
Justin Tomlinson
Will the hon. Gentleman clarify what speed he would classify as high-speed broadband?
Ian Lucas
Speeds of 10 megabits-plus are commonly perceived as high speed, although figures of up to 50 megabits are valued in some areas of the computer industry. Those are the sorts of speed that I would like to see. The problem is that there are many parts of the country—rural areas, which are not normally represented by Labour MPs—that do not as yet have even 2 megabits. Under this Government, there is no commitment to ensure that individuals from these areas will receive such support for broadband services in the future.
YouView will be introduced into this environment next year and demand for broadband services will increase as a result. This important area is at present below the radar—if I may mix all my metaphors and technological expressions—but it will become more evident in the next year or so because of the expansion of such services. If we are to maintain a broad-based industry across the country, it is important that we focus hard on this and also that we get some detail and certainty about how the investment will be delivered right across the United Kingdom.
The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Mr Edward Vaizey)
I am grateful, Mr Weir, to be serving under your chairmanship today, instead of serving with you in Committee as we were yesterday, and will be again tomorrow.
I congratulate the hon. Member for Houghton and Sunderland South (Bridget Phillipson) on securing this important debate. May I give her one quick, straight answer, which is that I would be delighted to meet her at a later date if she finds my speech unsatisfactory? I can make a safe prediction that because I am a Minister and she is member of the Opposition, my speech will almost certainly fall short in some respects of what she wishes.
I would also be only too delighted to visit Sunderland and see some of the innovation and technology happening in that city. The hon. Lady used her speech to highlight brilliantly the sort of technology expertise that now exists in Sunderland. In fact, as pointed out, in the north-east alone it is said that the software and IT industry is worth something like £800 million; there are almost 2,200 businesses, 27,000 people and companies such as 5G, which she mentioned, and, in other parts of the north-east, Sage, Reflections and Eutechnyx. Sunderland is a hub of high-tech industry.
I am grateful to some of the other hon. Members who have contributed to the debate. The hon. Member for Southport (Dr Pugh) made a thoughtful speech, which was not partisan but reflected on many of the issues that affect the software industry. He effectively turned the debate, for a moment, into one on the video games industry. Another point, which I shall return to, and which I absolutely support him on, was his reflection that in schools children today are learning how to use applications rather than how to programme.
In fact, the hon. Gentleman might have shared with me some of the anecdotal experiences of talking to some of our top games developers, many of whom learned their trade, as it were, on the BBC Acorn computer in the ’80s. We simply do not have such access to the nuts and bolts of technology. One of the things that I want to work on, in a big society kind of way—I am one of those Ministers who fully understands what the big society is—is some sort of after-school club where children can sit down with developers and learn how to programme. I also took on board the hon. Gentleman’s points about big IT and big government. He will be well aware that many members of the new Government, particularly the Chancellor, are keen supporters of open source software. The Government are very focused on ensuring that small and medium-sized enterprises get a fair share of the cake from the Government.
I was pleased that the hon. Gentleman took a realistic view about the fate of BECTA—we should not always focus on the quango as the be-all and end-all of Government policy. I am sure that schools will continue to access excellent high-tech IT equipment for their children, not least from RM plc, one of the foremost educational technology providers in this country, based in my constituency, at Milton park in Didcot.
It was good to hear the speech of my hon. Friend the Member for Hove (Mike Weatherley), whose soon-to-be constituency I visited during the election. I am not sure whether I made a big impact; I suspect it was his hard work and dedication to his now constituents that secured him the seat. He has already made a name for himself in the House with his passionate support for the creative industries. He used to work in the film and music industry. His focus is on piracy, to ensure that there is a balanced debate and that we remember that rights holders deserve to make money from their creations. I take on board his points about the R and D tax credits.
I am delighted to see my hon. Friend the Member for North Swindon (Justin Tomlinson) in the Chamber, having won his seat at the election. His remarks reflected the change of tone in the House on video games. When I was an Opposition spokesman and talked about the importance of video games, the only Labour Member who would talk about video games was the right hon. Member for Leicester East (Keith Vaz), who regularly criticised them for their violence and their effects on society—he alleged. It is good that my hon. Friends are now standing up and saying proudly that they are players of video games.
Jim McGovern
Does the Minister accept that “video games” is perhaps the wrong title for the subject? Anyone who has visited Abertay university would see that what are called video or computer games can be applied to construction, architecture or medical science. It is wrong to say that “video games” just involve young lads sitting at a computer playing “APB” or “Grand Theft Auto”.
Mr Vaizey
Obviously, the software industry is far wider than simply video games. We tend to call it the video games industry in the vernacular, although some people call it the interactive entertainment industry. However, I have said consistently over many years that what one loosely calls the video games industry is at the heart of a whole range of technologies in defence, education, health and the wider creative industries, such as architecture. That is why it is so important to support the core skills and companies in the industry.
My hon. Friend the Member for North Swindon invited me to meet the Technology Strategy Board. I have done so. It is incredibly important to the debate about the future of the software industry, as well as across a range of other areas. I am delighted that it is in Swindon, just down the road from my constituency; indeed, several of its employees are constituents, so they are clearly people of great judgment. Let me take this opportunity to wish my hon. Friend a happy birthday for last Friday.
Last but not least, I welcome to our Benches the hon. Member for Dundee West (Jim McGovern). I cannot work out why he is sitting where he is, and I had better tread carefully in making an analogy, but he resembles one of those soldiers from the last war who was so dedicated to his craft in taking on the enemy that he dug deep, burrowed down, hid and covered himself in camouflage. In coming to his usual seat, he is as yet unaware that the last war has concluded, victory has been declared and there is a new Government. Alternatively, his choice might simply reflect the huge success of the coalition’s policies over the past six months, particularly pertaining to the software industry, to which I am about to turn.
Jim McGovern
Let me say in response that I might be the first, but I will certainly not be the last, to split this coalition.
Mr Vaizey
The hon. Gentleman indicates that he is simply acting as a buffer between Conservative and Liberal Democrat members of the coalition. I wonder what other conflict spots we could send him to, given that he is doing such an excellent job this morning.
I have mentioned the huge importance and success of the software industry in Sunderland. The hon. Member for Wrexham (Ian Lucas) talked of the success of the UK software industry, and I heartily endorse what he said. More than 500,000 people work in it, and there are more than 100,000 enterprises, generating more than £39 billion of gross value added. The UK market for software products and services is the largest in the European Union and has sophisticated leading-edge consumers in sectors such as logistics and financial services. As a result, almost all the world’s major software businesses have a substantial presence in this country, whether in research and development, logistics or sales and marketing.
The software industry is not immune to the pressures being felt across the UK economy. In the longer term, globalisation will create additional pressures, as routine tasks and activities continue to be relocated to lower-cost economies. However, there are also tremendous opportunities for the sector, and I am certainly from the school that sees the glass as half full, rather than half empty. Innovative software technologies will underpin many of the fundamental shifts that we see in our society and our economy—everything from how we shop and access entertainment such as television and video to how we improve our transport networks and manage our scarce natural resources. In all those areas, new software systems will be the key enabler and driver of growth and innovation. As a result, the sector’s importance extends far beyond its direct contribution to UK GDP and employment, vital though that is. The sector will be in the vanguard of our broader economic renewal.
The coalition Government are absolutely committed to creating the right conditions to allow software and other UK technology companies to flourish. That means responding to the sector’s distinct requirements to ensure that the software businesses of tomorrow are nurtured today. Last week, the Prime Minister launched “Blueprint for Technology”, which clearly stated the Government’s ambition to make the UK the No. 1 place in the world to start and invest in a technology company, as well as our ambition to be the most technology-friendly Government in the world.
The hon. Member for Wrexham took huge exception to the fact that the blueprint was launched in Shoreditch, not Sunderland, and I assure him that I will be writing to the hon. Member for Hackney South and Shoreditch (Meg Hillier) to tell her that one of her party’s spokesmen deems her constituency unworthy of the prime ministerial launch of a technology blueprint. The hon. Gentleman gave no reason, but if he wants to clarify why he has a downer on Shoreditch, he has only to intervene.
Ian Lucas
I would be delighted to intervene. I made it absolutely clear to the Minister, who clearly was not listening to my speech, that a commitment to the regions, which is so important to the future of the software industry across the UK, is lacking. I am sorry that Her Majesty’s Government, and particularly the Prime Minister, have not, for example, put in place a local enterprise partnership in Sunderland, which is an extremely important industrial city in the north-east, where one of the world’s most important automotive companies is based. I was illustrating the fact that the Prime Minister’s priorities appear to be focused on the south-east, which is where he launched the blueprint.
Mr Vaizey
The hon. Gentleman might as well say that the fact that we are having this debate in Westminster indicates that the Opposition’s priorities are focused on the south-east, rather than on Sunderland. It is slightly crass to rubbish the technology blueprint on the basis of where it was launched. It was launched in a Labour constituency, and the Government were absolutely adamant that it would be, to show our support for the Opposition.
As for the LEP, the hon. Gentleman well knows that individual local authorities and areas were invited to bid for an LEP. Sunderland’s bid did not get through the first phase, and it is now part of a wider bid for the Tees valley. I am certain that it will be constructively listened to and will progress. The idea that the north-east is somehow not getting LEPs is another complete myth; indeed, the hon. Gentleman’s speech was full of myths, to which I will return from time to time in my remarks.
For example, if the hon. Gentleman wishes to intervene again, perhaps he could elaborate on his remark that Google was rewarded for coming on board the east London project—along, I have to say, with important British companies such as Vodafone and BT—with a review of intellectual property. Is it his allegation that there is some corrupt deal between Google and the Government? If it is, he is free to intervene to make that point. I notice that he is not going to.
Software companies have said that their top priority is the ability to access the right skills in the right place at the right time. Those skills range from specialist capabilities in science and engineering through to practical know-how in systems maintenance. The relevant sector skills councils, including e-skills UK—the sector skills council for business and information technology—are working closely with software employers and the Government. The aim is to bring together the education system and workplace training to create the pool of skilled workers needed to generate and exploit innovative technologies. It is important to note that the Government announced early in their time in office the Livingstone-Hope review of skills for the video games industry, which is progressing extremely well and has generated enormous support from the sector. It will no doubt complement the other review that I mentioned.
The Government recognise that the software and technology sectors are globalised and highly mobile. We will therefore ensure that investors and entrepreneurs who want to operate in the UK can enter, while we are reducing the overall level of immigration to a manageable level. That is why the technology blueprint introduces a new entrepreneur visa to make sure that someone with a great business idea who receives serious investment from a leading investor can base their business in the UK.
Mr Vaizey
The hon. Gentleman shakes his head. We all know the Labour party’s record on talking about immigration, and we have been only too interested to see the leaflets that it was putting out during the election. Our policy takes a slightly more sober and reasonable approach to what can sometimes be an emotive issue.
Bridget Phillipson
The Minister may be aware that the Select Committee on Home Affairs, of which I am a member, gave careful consideration to the immigration cap. Some of the concerns that were raised, particularly from ICT companies, were about how it would work and whether it would be a deterrent for business investment, particularly in relation to highly skilled jobs such as those in scientific industries. I know that the Minister is making a party political point, but there are serious issues for the Government to consider about the working of the cap and the impact that it may have on the UK software industry.
Mr Vaizey
I should love the hon. Lady to point out what party political point I made. I was simply setting out our policy and the fact that we responded to the concerns in question with an entrepreneur visa. I noted that the hon. Member for Wrexham was shaking his head. Clearly, he simply opposes the policy for the sake of it, rather than considering what it does.
The blueprint also announces a review of the intellectual property framework, to ensure that its design will support the growth of both new and existing businesses. That review is incredibly important, because it will focus on the needs of small and medium-sized enterprises. We want to give our full backing to the high-growth, innovative companies of the future, whether they specialise in software or other disciplines. Part of preparing for the future is looking critically at the frameworks that we have in place to protect innovators. The review will focus on identifying and dismantling barriers to growth in the IP system, and will look at how the IP framework could better support new business models as they develop.
The third important element of our blueprint is the framework for supporting future technological innovation in software and other disciplines. We are now pledged to establish a network of elite technology and innovation centres, based on the model proposed by Hermann Hauser and James Dyson, to commercialise new and emerging technologies in areas where there are large global market opportunities and a critical mass of existing UK capability. The recent comprehensive spending review has provided £200 million of funding for the technology centres over the next four years. The network will be overseen—in answer to the questions of the hon. Member for Wrexham—by the Technology Strategy Board. Individual centres will operate with a high degree of autonomy, to give them the flexibility to respond to business needs and emerging opportunities, but the board will provide the overarching framework.
Our vision for technology and innovation centres is that they should help industry sectors to exploit new and emerging technologies, and bridge the gap between original research and technology commercialisation, reducing some of the attendant risks to business. I am aware of the issue from my constituency where there are several high-tech companies that can benefit from spin-off research. Each idea appears to me to be potentially world-changing, but the struggle they have to take that research to market and commercialise it cannot be underestimated. The centres will support projects that businesses and universities often cannot undertake, or that they do not have sufficient incentive to undertake on their own. They will help new technologies get to investment readiness so that they are a viable proposition for venture capital or other forms of investment, and will help, we hope, to accelerate their journey to market.
We want to get the network up and running as soon as possible, so the Technology Strategy Board will work closely with industry, stakeholders, and the Government to identify the priority sectors, the scale of initial investment required and the governance structure for the network of centres by April 2011. I urge the hon. Member for Houghton and Sunderland South and any other hon. Members who are interested in the issue to contact the board to discuss it.
The Technology Strategy Board plays an important role in supporting the software sector. It already supports innovation among software-intensive firms in a number of ways, either through sector-specific programmes or through cross-sector projects designed to deal with a particular challenge, such as low carbon. It also backs the software sector via initiatives such as knowledge transfer partnerships. Several of the Technology Strategy Board’s programmes routinely invest in initiatives where more than 90% of the business activities are software-related. That is true of its information technology programme, as well as its creative industries, intelligent transport and network security programmes. In addition, the board has identified its recently formed digital programme as one of its five strategic priorities in the period ahead. In total, over the past year the board has launched 13 software-intensive competitions for projects with a combined value of around £100 million, including £50 million of private investment.
Some other issues were raised, including broadband. Again, some myths were propagated by the Opposition. I think that we all agree that superfast broadband and that kind of infrastructure is essential to the future of the economy. However, I find it odd that the Opposition seem to believe that we have reneged on a promise, or that we do not share their view of its importance. The previous Government had a very poor ambition, which was simply to get universal broadband of 2 megabits at the end of 2012. They proposed to pay for that with a telephone tax that would have hit some of the poorest in society, as well as being a disincentive.
Jim McGovern
On the subject of promises, prior to the general election, the Minister was quoted—I shall have to paraphrase—as saying that his party unequivocally supported tax breaks for the computer games industry. What has changed his and the Chancellor’s mind?
Mr Vaizey
As to promises, the hon. Gentleman’s party said in, I think, the 2001 election manifesto, that they would not introduce tuition fees. So if the hon. Gentleman wants to accuse me of broken promises, perhaps he should look to his own party’s huge record of broken promises, not the least of which is leaving the British people with the biggest deficit in peacetime history, having promised to end boom and bust.
As I said, the telephone tax would have been a huge disincentive to investment. It would have hit small businesses and the poor—all for the paltry ambition of 2 megabits universal broadband.
Mr Mike Weir (in the Chair)
It seems to me that that is a matter for debate, not for the Chair.
Mr Vaizey
Thank you, Mr Weir, for reminding the hon. Gentleman that he has plenty of opportunities to make his point. It is a bit rich for a Labour politician to talk about the misrepresentation of other parties’ policies, given what we have seen in the news this week, after the first election court for almost a century was called on the basis of Labour party leaflets in the general election. Sheer brass neck does not even begin to describe it.
This is a debate in which I have an opportunity to set out our policy on broadband in response to the comments of the hon. Member for Houghton and Sunderland South about its importance. That is what I intend to do.
As I said, we want the best superfast broadband in Europe by 2015. We have secured the funding for it—£530 million to the end of the spending review, and a further £300 million after that. We have launched four super-fast broadband pilot projects, in the highlands and islands, Herefordshire, Cumbria and North Yorkshire, so that we can identify early lessons and work out how to proceed in the most cost-effective way. We shall also launch in more detail at the end of the year our policy on broadband, setting out some of the nuts and bolts issues. We have made huge progress on regulatory issues, such as duct access for competitors to BT and the opportunity to roll out broadband on telegraph poles.
Justin Tomlinson
On new developments, are there any thoughts about treating broadband in the same way as utilities such as gas, electricity and water? Having been a councillor representing new developments that have waited years for broadband access, I know that the introduction of that would be welcome.
Ian Lucas
I want to correct the Minister simply on a point of fact. The change to 2-megabit broadband was to be funded out of the money that he is using from the BBC licence fee—money that was left over from the digital switchover. The telephone tax was for the development of high-speed broadband. That was the position, and if the Minister wishes to, he can read about it in “Digital Britain”.
Mr Vaizey
I have read that report, and I am happy to stand corrected. We are in a similar position, except for the fact that the Government are not imposing a tax; we plan to get superfast broadband to as many people as possible by 2015, while the Labour party remains stuck in the slow lane at 2 megabits.
I now tackle the thorny issue of video games and tax breaks. Again, I shall try to knock down a few of the myths that have been propagated. To hear Labour Members speak, one would have thought that the land of milk and honey had arrived with the last Labour Government. When I was Opposition spokesman, I sometimes felt like a lone voice when talking about the success of the video games industry over the last three or four years. However, I pay tribute to the hon. Member for West Bromwich East (Mr Watson), who has been a fantastic advocate of the video games industry.
I remember that the Labour Government ruled out a video games tax break. When in opposition, we mentioned competition from Canada, and were told that the Government were going to refer the matter to the World Trade Organisation. However, a chance conversation with an insider revealed that that was a red herring. When I tabled a parliamentary question about it, the Government were forced to perform a U-turn and reveal that the reference to the WTO was an excuse for inaction. Finally, they were converted to a video games tax break.
At what point did that amazing conversion come? Was it at the beginning of a Parliament, when the Government had a strong majority and a lot of energy? No; it came with the last Budget of a discredited Government who were about to lose an election. They knew that they would not have to implement that tax break—and it was not implemented. It was an extraordinary U-turn; despite the comprehensive spending review of October the year before, that decision would still have had to go to Brussels for approval. The sound of Labour MPs clambering on to bandwagons now that they have no public policy responsibility for the matter is quite extraordinary.
Jim McGovern
I resent the Minister’s comment that Labour Members are jumping on a bandwagon. I have supported the computer games industry in Dundee for a number of years, and several Ministers have visited us. Why did Ministers not visit Dundee prior to withdrawing the tax break?
Mr Vaizey
Dundee is an incredibly important part of the video games sector in the UK. We have invested £2 million in the university of Abertay to support video games, but video games do exist in other parts of the country, and it is not essential to visit Dundee to decide whether we should have a tax break. But I intend to visit because it is a pioneering area with a world-class university. I am raring to get up there. Indeed, given the austere times that we live in, I hope that the hon. Gentleman will put me up for the night. It is a bit odd for Labour MPs to claim that if you cut them open, “video games tax relief” will be written on their hearts; the relief was a political ploy to win support from the industry in the run-up to the election, and they knew full well that they would not have to implement the policy.
Let us be clear about it: people want a video games tax break because of the competition that we face from Canada. A tax break is not a panacea; France has a tax break, but we have a more successful video games industry. Canada does not have a national tax break for video games. It has two strong regional Governments who actively compete for the video games industry; they made that decision 10 or 15 years ago and they are throwing money at the industry. They are handing over millions of dollars—there is nothing wrong with that—to tempt developers and publishers to base themselves in Canada, and that means salary holidays, rent holidays and other kinds of support.
I want to put in place a strategy for the video games industry—for example, so that it can access the regional growth fund that we announced, and can take advantage of the numerous funds that I have discovered in the Department for Business, Innovation and Skills. Partly because of exchange rates, we are close to Canada, even without a tax break. One company that has invested in Canada showed me the numbers; without breaking commercial confidentiality, I can say that there was a difference of about 10 or 15% in costs per employee. However, as the hon. Member for Southport mentioned, we have a fantastic skills base, and that is another important reason to invest here.
This has been a good-natured and good-humoured debate in which we have found a great deal of common ground, huge support for the software industry and a passion for the video games industry. There has been recognition of the pioneering role of the north-east and Sunderland in ensuring that the UK remains a world leader in this important industry. I set out our policies—the technology blueprint, our plans for technology innovation centres and entrepreneur visas, and our plans to review intellectual property law. However, there is broader support, too.
I was disappointed to hear that it is now the Labour party’s policy to push up corporation tax. Under this Government, corporation tax will fall year on year; that is an important point to make. We have also increased entrepreneurs’ relief for capital gains tax. Our tuition fees policy is progressive, and it will mean people paying back their debt when they are at a higher income level than applied under the Labour Government. We have made significant progress in empowering our universities. As the hon. Member for Southport pointed out, despite Labour’s U-turn on tuition fees, their introduction did not stop people wanting to go to university.
I was privileged to be at the graduation of four apprentices at Culham Science Centre in the constituency of my hon. Friend the Member for Henley (John Howell). It is worth remembering that we have a fantastic Minister for Further Education, Skills and Lifelong Learning in this Government; he has put together a national apprenticeship policy, which is important for high-tech industry. People leave school and go on to be apprentices, and the four whom I met were formidable. As the head of the Culham Science Centre said, they are as qualified as any graduate, but have been paid for four years and have no debt. Many will be going on to do higher degrees. They will be at the heart of a high-tech industry in Culham. Thanks to that Minister, this Government, unlike the last, have—at long last—a clear policy to promote apprenticeships and skills, which are important to both the IT and software industries.
I cannot read the face of the hon. Member for Houghton and Sunderland South, and I am not sure whether I have allayed all her fears, but she seems to be in a slightly happier mood than when the debate began. I am happy to sit down with her and talk through the issues at a later date, and to visit her in Sunderland.