The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Prior of Brampton) (Con)
My Lords, with the leave of the House, I shall now repeat a Statement made in another place by my right honourable friend the Secretary of State for Business, Energy and Industrial Strategy. The Statement is as follows:
“Mr Speaker, this is a hugely important moment for the United Kingdom: a moment when we must prepare a new strategy to earn a prosperous living in the years ahead. Leaving the European Union allows—and requires—Britain to make long-term decisions about our economic future. We will, of course, be ambitious in the upcoming negotiations and will secure the best possible access for firms to trade with and operate in the European market.
While the terms of trade with other economies are important, so is the competitiveness of our own economy. That is why the Government are committed to a modern industrial strategy. Its objective is to improve living standards and economic growth by increasing productivity and driving growth across the whole country. Today’s Green Paper is part of an open dialogue to develop this strategy as the enduring foundation of an economy that works for everyone.
We start from a position of considerable strength. We are the fifth biggest economy in the world despite having the 22nd highest population. We have achieved higher levels of employment than ever before in our history—in fact, 2.7 million more than in 2010. We have businesses, research institutions and cultural achievements at the very forefront of global excellence. For all these reasons, we attract investment and talented individuals from around the world.
However, there are challenges that Britain must face up to now and in the years ahead. The first is to build on our strengths and extend excellence into the future. British excellence in key technologies, professions, research disciplines and institutions provides us with crucial competitive advantages, but we cannot take it for granted. If other countries invest more in research and development and we do not, we cannot expect to keep, let alone extend, our technological lead in key sectors or the world-beating performance of our universities. The same goes for our record as Europe’s leading destination for inward investment or our position as a centre of international finance. Our competitors are not standing still. They are upgrading infrastructure networks and reforming systems of governance. Therefore, we, too, must strive for improvement.
In industrial sectors—from automotive and aerospace to financial and professional services and the creative industries—the UK has built a global reputation, but the competition for new investment is fierce and unending. The conditions that have allowed UK investment destinations to succeed include the availability of supportive research programmes, relevant skills in local labour markets, and capable supply chains. For continuing success, these foundations must be maintained and strengthened.
The second challenge is to ensure that every place meets its potential by working to close the gap between our best-performing companies, industries, places and people and those which are less productive. For all the global excellence of the UK’s best companies, industries and places, we have too many that lie too far behind the leaders. That is why, on average, workers in France, Germany and the USA produce around as much in four days as UK workers do in five. It is also why despite having the most prosperous local economy in northern Europe—in central London—we also have 12 of the 20 poorest among our closest neighbours. We must address these long tails of underperformance if we are to build a strong economy and ensure sustainable growth in living standards. To do so is a huge opportunity for the whole nation to benefit from improved productivity —that is, earning power—in all parts of the country.
The third challenge is to make the UK one of the most competitive places in the world to start or to grow a business. A fatal flaw of 1970s-style industrial strategies was their dominant focus on existing industries and the companies within them—and then mostly the biggest firms. Too often they became the strategies of incumbency. It is worth noting that many of the most important companies in the world today did not even exist 25 years ago. Unlike in the past, industrial strategy must be about creating the right conditions for new and growing enterprise to thrive, not protecting the position of incumbents.
To meet these challenges, we have identified 10 pillars around which the strategy is structured—10 areas of action to drive growth right across the economy and in every part of the country. They are: investing in science, research and innovation; developing skills; upgrading infrastructure; supporting businesses to start and grow; improving procurement; encouraging trade and inward investment; delivering affordable energy and clean growth; cultivating world-leading sectors; driving growth across the whole country; and creating the right institutions to bring together sectors and places. Across all these areas, the Government are already taking strategic decisions to keep British industry on the front foot; for instance, the go-ahead for major upgrades to our infrastructure, such as Hinkley Point C, Heathrow and High Speed 2, and, in the Autumn Statement, the biggest increase in research and development spending since 1979.
In conjunction with today’s Green Paper, we are launching a range of further measures. These include: a new approach to enabling existing and emerging sectors to grow through sector deals, with reviews taking place regarding life sciences, ultra-low-emission vehicles, industrial digitalisation, nuclear, and the creative industries; deciding on the priority challenges and technologies for the new Industrial Strategy Challenge Fund to focus on and the other opportunities we can address using the £4.7 billion increase in research and development funding; and an overhaul of technical education, including £170 million of capital funding to set up institutes of technology to deliver education in science, technology, engineering and mathematics subjects.
In a world containing so much uncertainty, public policy should aim to be a countervailing force for stability, not an additional source of unpredictability. So our aim is to establish an industrial strategy for the long term, to provide a policy framework against which major public and private sector investment decisions can be made with confidence. It is therefore vital that the full development of our industrial strategy should take place with—and not just for—British enterprise. The full involvement of innovators, investors, job creators, workers and consumers in England, Scotland, Wales and Northern Ireland is the only basis on which we can produce an enduring programme of action. That is why this is a Green Paper—a set of proposals for discussion and consideration, and an invitation to all to contribute collaboratively to their development. I commend this Statement to the House”.
Lord Fox (LD)
My Lords, the Prime Minister’s decision to adopt a new active role for Government in industry is welcomed on these Benches. The Green Paper’s 10 pillars have most of the right words, and they identify many of the areas of concern that have been voiced in many debates over the past few years. I trust that we will have an opportunity to debate some of those aspects in more detail. I shall focus on just two of those elements—skills and cultivating world-leading sectors. I remind your Lordships of my published interests.
First, the Green Paper is right to identify skills as a central issue to future prosperity and productivity for the country, and a cash boost for technical and STEM education is, of course, welcome. However, it should be put into the context of a 7.5% reduction in schools’ per-pupil funding by 2020 and the cash-freezing of the adult skills budget until 2020—a £30 million real-terms cut next year. Thus, £170 million for new institutes of technology is all very fine but irrelevant given some of the wider cuts affecting all our young people. Therefore, can the Minister please tell us whether the Government plan to reverse their cuts to the education budgets for four to 19 year-olds? Also on skills, the Government continue to ignore the benefit and value that we gain from workers and scientists from the European Union working in this country. They continue to treat these people and their families as a bargaining chip. Could the Minister at least acknowledge the personal anguish being caused to these people, many of whom are already contributing greatly to the success of the industrial sectors that he seeks to bolster?
Secondly, the Green Paper’s support for the coalition’s sector strategy is very welcome. Here I disagree with the noble Lord, Lord Mendelsohn, in that a bit of cut and paste is actually a good thing as these strategies have to span more than one Parliament to be successful and take root. Therefore, they depend on a long-term approach. It is good news that the Government are continuing to run those strategies through. However, the idea that any Government can have a reasonable strategy for British industry while recklessly withdrawing from the single market is not credible.
Last week, the Prime Minister confirmed her intention to exit the single market, yet, extraordinarily, the Green Paper fails to refer to either the single market or the customs union, although a few euphemisms such as “turbulent times” creep in. The Government’s idea seems to be to negotiate individual sectoral agreements for “frictionless trade”—their term. Not every sector can benefit from this, or we would still be in the single market, and not every sector can expect the negotiations to succeed. Therefore, as these negotiations start, the Government will have to decide which sectors will be top of their list for trade deals. Conversely, some will be at the bottom. The Prime Minister has said that the industrial strategy is not about picking winners, but the Brexit negotiations will inevitably pick losers. Can the Minister please tell the House which sectors will win and which will lose?
Lord Prior of Brampton
I thank both noble Lords for their interesting comments. I agree with the noble Lord, Lord Fox, that if this industrial strategy is to have real strength, it will have to be spread across Parliaments. As part of the consultation process it will be interesting to hear whether noble Lords have any ideas on how we can do that and how we can institutionalise some cross-party agreement around productivity. I do not know whether anyone else read the speech given by Andy Haldane from the Bank of England in the north-east a month or so ago, which I think was entitled Red Car, Blue Car. He reminded us that the US economist, Paul Krugman, noted:
“Productivity isn’t everything, but in the long run it is almost everything”.
I think that most people would agree with that. Particularly in an economy such as ours with high levels of employment, if you want to increase wealth, you have to increase productivity.
It is true that we are building on the past. I pay tribute to the work done by previous Governments in this field. But despite what has been done in the past we have to accept that productivity levels in this country are low; worse than that, they are much lower in some parts of the country than in others. Although productivity may be just an economic concept, the consequence of that is that wage levels are much lower in some parts of the country than in others. In the East Midlands, for example, the average wage is £480 a week, whereas in the south-east it is £670 a week. No one, on either side of the House, can be happy with that degree of inequality. If we are to address that, we have to address productivity. Therefore, if there is a familiar feel to our Green Paper, I make no apologies for that. We are building on the past but we must do a lot better.
I think that both noble Lords support the very significant growth in R&D spending, and that there will be broad support across the House for the two horizontal parts of this industrial strategy: R&D and innovation spending, and the focus on technical skills. That is not to say that we are not doing anything now but we could do a lot more. We have huge strengths in our university sector, but we are less strong on how we commercialise some of that research. I was horrified to learn that 14 to 16 year-olds today are no more literate or numerate than people aged between 45 and 55. There has been no real improvement in teaching basic literacy and numeracy for 20 or 30 years, which is quite an indictment of our education system. Therefore, putting more resource into education at all levels—primary school as well as later on—particularly into the STEM subjects, is extremely important. Skills are very important.
Reference was made to coming out of the single market. I do not think that is a debate we can usefully have at this point. Of course, we will do everything we can to retain as much frictionless access to the single market as possible. It is a very important market for many industries. However, other markets are important as well and we need to develop them. That is very much a part of the industrial strategy.
The noble Lord, Lord Mendelsohn, referred to life sciences. I absolutely confirm that they are important. The pharmaceutical, med tech and biotech industries are extremely important. British research is absolutely at the forefront of world research in cell and gene therapy. As far as Japanese investment is concerned, we will do everything we can to encourage inward investment from Japan and other parts of the world. The automotive industry would be only a pale shadow, were it not for the big Japanese investments that came here in the 1980s. We fully recognise that and are working very closely with Toyota, Nissan and Honda to ensure that they remain and continue to invest in the UK. The advanced manufacturing unit at Warwick is doing extraordinary work in automotive and advanced manufacturing, and the Green Paper contains a commitment to develop an institute for battery technology. Finding a way to store energy economically and efficiently would give us a huge competitive advantage as we develop the industrial strategy. However, this is a Green Paper; it is out for discussion for the next three months. I was asked about the timing. The consultation period will last for three months. The plan is to produce a White Paper by September, which will feed into the Autumn Statement. That is the broad timing. I look forward to engaging with many noble Lords as we develop the Green Paper into a White Paper over the next six months.
Lord Howell of Guildford (Con)
My Lords, if this is feedback time, as I gather it is, will my noble friend accept from me the feedback that our energy policy is in a terrible mess and certainly not working for everyone? Our energy costs are still much too high compared with those of our competitors. Our costs of carbon reduction per tonne are much too high and reliability is severely compromised, certainly in the next two or three years. Therefore, will he take back to the authors of the Green Paper that if we can get an energy policy that is far more efficient, works for everyone and combines affordability, reliability and low-carbon targets much more effectively than now, we will make some progress with this strategy?
Lord Prior of Brampton
I completely agree with that. It is made very clear in the Green Paper that we must have a low carbon energy policy, but an affordable energy policy. Affordability is critical. It is no good going to Port Talbot or Scunthorpe and telling steel workers there that they must bear the cost of a green energy policy with their jobs. We have to be able to put high energy industries into a competitive position, particularly within Europe.
Lord Kinnock (Lab)
My Lords, I commend the relatively short, three-month consultation on the Green Paper. Do Government intend to take responsive rapid action to that consultation, not so much in the form of a White Paper, but with effective implemented action? That is a matter of the greatest possible urgency, given the seriousness of the situation in our manufacturing industries particularly. For instance, will the Government heed today’s all-party report on forging a future for the British steel industry, emulate the examples shown by other European Governments, and act effectively on energy costs, business rates, and procurement, to ensure a real, new vitality for the steel industry, avoiding the possibility of a lingering death for this crucial British foundation industry and its 575 companies? Without effective steel, a strategy is much more a hope than the prospect of a reality. I would greatly regret that, but I hope that is a point of urgency in the mind of the whole Government.
Lord Prior of Brampton
I am pleased that the noble Lord thinks that three months is a good short time for the consultation to take place. We are not standing still over that time; we are going ahead, as he knows, at Hinkley, with the new runway at Heathrow, and with the £170 million committed to institutes of technology.
I entirely agree with the noble Lord. I have a long- standing and emotional commitment to the British steel industry. When I joined British Steel in 1980, I think we were producing 17 million tonnes of steel per year, so times have changed over the past 20 or 30 years. We are not in the business of propping up failing industries, but we are certainly in the business of supporting competitive industries like the steel business.
Lord Ashdown of Norton-sub-Hamdon (LD)
My Lords, there is no point in having skills if we give away industrial capacity. The Government will know very well, because I have raised it several times, that there is deep concern about the lack of Government commitment to maintain Britain’s only standalone helicopter production facility in Yeovil. I have asked the Government repeatedly, here and elsewhere, to use the opportunity of the industrial strategy to make it clear that they wish to see that preserved. Everything else is mentioned here: Airbus, Rolls-Royce, Bombardier, Boeing, BAE Systems, GE Aviation, GKM, Solihull, Loughborough—all points north and east, but not a word about helicopters, or the commitment that we now need. Does the Minister realise how much disappointment, and indeed anger, there will be in the Yeovil community for that? Will he give a commitment that in the so-called refresher industrial defence policy that is about to be published this very dangerous omission will be corrected?
Lord Prior of Brampton
My Lords, I was not aware of the omission to which the noble Lord has drawn my attention. I think I am meeting someone from Yeovil in the helicopter business tomorrow, as it happens. Certainly, we will be using procurement. One area in which we have not been as clever as they have been in America, for example, is using defence procurement and other parts of government procurement to support competitive British industries. I will investigate the omission to which he has drawn my attention with regards to helicopter manufacture at Yeovil, and will try to understand why that is the case.
Lord Elystan-Morgan (CB)
My Lords, for many years successive Governments assiduously and conscientiously pursued what they called policies of regional development. Will the Minister undertake, despite all the difficulties and complications that now exist, that such policies will not be ruled out of court in the situation in which we now find ourselves?
Lord Prior of Brampton
My Lords, the current jargon is to use “place” instead of “regional policy”, and place plays a large part in this industrial strategy. The issue was raised by the noble Lord opposite about the objectives. It is a very good point, and one I should have addressed earlier on. What are the objectives of the industrial strategy? I have in mind a decent working man in a place like Hartlepool, who ought to be commanding a decent wage of £30,000 to £35,000 a year, who is currently working for £7.50 an hour picking stock in a warehouse. That will be the true measure of whether this industrial strategy is a success—whether we can bring back decent, well-paid, skilled jobs to all parts of the country.
Lord Kirkhope of Harrogate (Con)
My Lords, I thank my noble friend very much for that presentation. I welcome this Green Paper, and I bear witness as someone from the north-east of England originally, and now from Yorkshire, to how the north of England has had to adapt to technology and to the changes in de-industrialisation and engineering over many years. I ask my noble friend about the support of the Government, not only in financial terms, which is suggested by their contribution to technology institutes of £170 million, as he has mentioned, but also in their enthusiasm, which has often been lacking in many Governments, towards those who pursue careers in engineering, innovation and new technology. That is what we need—more encouragement and acceptance, as other European countries do to a lot of their own subjects. Let us be more enthusiastic while we work on this Green Paper in the consultation process. That would be most helpful. Does my noble friend agree?
Lord Prior of Brampton
I agree 110% with that. For generations we have downgraded people who do technology, engineering, and the like; whereas we have paraded people who do PPE at Oxford, and the like. We have got it slightly wrong. We should do anything we can to encourage young people to go into technology, engineering, natural sciences and the like. Of course, the changes in technology that we are witnessing now, and will continue to witness over the next 10 years, will fundamentally change our society, whether in artificial intelligence, in robotics, in cell and gene therapy, or in battery technology—this is the future. The more we can encourage people to go into these technological areas and also encourage them to be entrepreneurial at the same time, that will be good not just for them but for our economy as a whole.
Lord Soley (Lab)
I welcome the further endorsement of Heathrow’s expansion. As the Minister will know, the Government keep saying it quietly, so I hope it will happen. But my question really relates to the wider aerospace industry. It is an incredibly important part of British industry, with very advanced technology—the second most advanced in the world, and still the second or third largest in the world generally. What troubles me, and what troubles me about other industries such as the car industry, is that increasingly parts are exported and re-exported. I wonder how much thought in this Green Paper is going to be given to the complexity of arrangements not just with Europe—but obviously with Europe at the moment—in terms of exports and re-exports in order to produce a finished product.
Lord Prior of Brampton
The noble Lord is referring, I think, to the integration of supply chains, which have now become very global. Certainly, that is particularly true in areas such as satellite technology. Having easy ways of trading with other countries with non-tariff barriers is critical to that. Space technology is exactly the kind of industry that the UK should be fully a part of. It is interesting—you look around the world, and the USA is clearly leading in many of these areas, but if you look at other countries you often find that our technology is very strong. That is not to be complacent. Look at Israel, Switzerland, or Singapore—and look at Ireland, which has done a fantastic job in attracting many of the world’s best companies. If they can do it in southern Ireland, why can we not do it in Northern Ireland, or in the north-east, or the north-west?
Lord Hennessy of Nympsfield (CB)
I add my welcome to this, the ninth industrial strategy since I have been on this earth. In the debate on the Autumn Statement that we had before Christmas I suggested that we were waiting for the eighth, but the noble Lord, Lord Mandelson, got in touch with me and said that I had forgotten his, for which I profoundly apologise. I read them all recently, in the build-up for this great day, and worries about productivity, which the Minister has stressed already, are at the heart of all of them. Can the Minister identify—in his own view, not a collective one—where the magic is in this Green Paper that was absent from all the others? What is there in this Green Paper that will bedazzle economic historians in the 2050s at the foresight the Government showed this day?
Lord Prior of Brampton
That is a good question, and I am sure that the answer will emerge over the next three months of consultation. To be realistic, there is no magic in these things. If you look around the world at countries which have got their industrial strategy right, whether it is Germany and technical education, Singapore and advanced manufacturing, or Switzerland and advanced pharmaceuticals, I am not sure that there is any magic. It is a combination of great research, great technical skills, efficient capital markets and an efficient competition policy. Actually, the UK has not done that badly. Let us not do ourselves down too much. If you look at science, between Oxford, Cambridge and London it is fantastic—absolutely world-class—and we do world-class things in many parts of the UK. However, on the noble Lord’s point, we need to refine this industrial strategy over the next three months, and the six months until the White Paper comes out, so that we are absolutely clear about what really makes a difference. That takes us back to the objectives that the noble Lord, Lord Mendelsohn, mentioned earlier on. We must have very clear objectives.
Lord Scriven (LD)
My Lords, pillar 9 is about driving growth across the whole country, which is welcome. However, it will take more than words—it will take actions. What change will be made in infrastructure investment where, at present, on the DfT figures, investment in transport infrastructure right up until 2021 will be £1,870 per head in London and only £280 per head in the whole of the north? Based on this strategy, how will this change?
Lord Prior of Brampton
I cannot answer that directly now, but if I can, I will consider it and write to the noble Lord. However, the total commitments for rail infrastructure investment—I cannot tell him exactly which part of the country relates to—is £88 billion, for example, so we are looking at a massive infrastructure investment in rail. I hope that I do not have the decimal point wrong on that figure but, if I have, I will write to him. We are looking at a massive investment in physical and digital infrastructure. The critical thing is that we use that purchasing power to direct it towards great British companies which are investing in quality and in their workforce.
Lord Cormack (Con)
My Lords, does my noble friend agree that any industrial strategy that is to be successful must not neglect the rural economy—farming, horticulture, and the service industries? Would it therefore not be deeply unfortunate if, during the next six months, as we develop our strategy, we inadvertently undermine many of our rural industries by the swingeing increase in business rates that threatens them? Will my noble friend please bear that carefully in mind?
Lord Prior of Brampton
We will certainly bear that in mind. Clearly, the rates of tax, whether that is corporation tax, business rates or any other costs to business, are critically important. I take on board his comments about the importance of the rural economy.
Baroness Donaghy (Lab)
My Lords, I am glad that the Minister seems to be enjoying his new brief, and I welcome the new Green Paper and its wish list. However, I am a bit concerned about research and development. The same announcement as that in the Green Paper was made last autumn—they are identical—and that is in the context of a 50% cut in research and development since 2010. Therefore, to announce an increase when there has been a real cut over a period of five years seems to be not a good start to the discussion on research and development. The Minister himself has said how important research and development is. Will this be a real increase, and will it be sustainable?
Lord Prior of Brampton
My Lords, that is a very good question. My own view is that it is one of the great, long-term, sustainable, competitive advantages we have. When John Kenneth Galbraith went to India in 1948 to give advice on setting up a pharmaceutical industry there, he was asked, “How do we do it?”. He replied, “Build a university and wait for 200 years”. There is some truth in that. We have some great universities here, which are a source of huge, long-term, competitive strength.
Lord Stoddart of Swindon (Ind Lab)
My Lords, there may be nothing magical about industrial strategy, but it is important that that strategy is not obstructed by bureaucracy. I hope that we can be assured that there will be no bureaucratic obstruction of the plans.
To return to the question of electricity, if we are to have a successful strategy, it is essential to have cheap electricity for industry. At the moment, we are faced with the building of a power station at Hinkley Point, which will charge £95 per megawatt, and the Swansea Bay scheme, which will cost £90 per megawatt. What will the Government do to ensure that these prices do not affect industrial ability?
Lord Prior of Brampton
I hope that I can assure the noble Lord that we will not obstruct—or rather, we will try not to obstruct—the industrial strategy. I am reminded of that old lie, “I’m from the Government—I’m here to help you”. I keep in mind that we will try not to build in too much bureaucracy. We have an ambition to reduce the cost of red tape by £10 billion over the course of this Parliament. Of course, electricity prices are critically important, particularly to industries such as the steel industry and indeed to all energy-intensive industries, so that will be very much part of the industrial strategy, as it emerges over the next three months.
Lord Marlesford (Con)
To follow on from what my noble friend Lord Howell and the noble Lord, Lord Stoddart, said about energy policy, how can the Government quote Hinkley Point as an example of affordable energy policy when it will cost £20 billion to construct but with a level of subsidy for its output which, at the end of its 40 years of life, will raise that £20 billion to £100 billion? That is paid by the consumer, whether industrial or domestic, and the cost of a gas-fired station with the equivalent output over the same period would be £3 billion.
Lord Prior of Brampton
I should make it clear that I was not quoting Hinkley as an example of our affordable energy policy but as an example of our infrastructure policy. We need to have a mix of different energy sources.