Lord Sharpe of Epsom (Con)
My Lords, I genuinely admire the intent of the industrial strategy. The sectors that it highlights are sensible. I like the aspiration to focus on all regions and to nurture clusters. All that is very good, but it is a list of aspirations; it is not a strategy. A strategy is a plan of action designed to achieve a long-term or overall aim, and this is not that. All the aspirations in it are good and no one could reasonably argue with them, but the economy and the growth we need will not be delivered by this, or by fine words and noble sentiments.
Growth is not a slogan, it is a result. Indeed, the introduction to the industrial strategy says that
“the Government’s priority mission is to deliver strong, secure, and sustainable economic growth”,
but the Government continue to mistake the former for the latter.
Despite the Chancellor’s triumphant declarations that growth is the number one priority, the harsh reality confronting British businesses tells a starkly different story. The Governor of the Bank of England has delivered a sobering assessment that should give this House pause. He has categorically dismissed the Chancellor’s claims that Britain’s economy has turned a corner, warning instead that growth is slowing precisely because high taxes are biting deep into our economic foundations.
The Governor’s analysis is both precise and damning. What the Chancellor has hailed as evidence of economic recovery is nothing more than a temporary blip driven by fleeting factors that will not be repeated. British businesses, rather than preparing for prosperity, must now brace themselves for an economic slowdown of this Government’s making.
The employment figures alone should shame any Administration who claim to champion working people. Unemployment has risen every single month—all nine months—since the Government took office. This is not coincidence; it is consequence.
Perhaps most telling is the collapse in Britain’s international standing as an investment destination. The number of foreign direct investment projects has plummeted to the lowest level since records began 18 years ago. According to EY, the Government have made the UK a less attractive place to do business than Oman, the Czech Republic and Saudi Arabia. Before the Chancellor’s Budget last year, a PwC survey ranked the United Kingdom as the second most attractive place for investment in the world. That is our record: their record is destroying that competitive advantage in less than a year.
The human cost of these policy failures is becoming increasingly apparent. The British Chambers of Commerce has revealed that almost one-third of small and medium-sized employers have made redundancies or are actively contemplating job cuts as a direct consequence of the Government’s decision to hike employers’ national insurance contributions. Its survey of over 570 member firms found that 13% had already wielded the axe, while 19% were sharpening it for future use.
In times of global uncertainty, businesses look to their own Governments for stability and support. Instead, this Government have chosen to pile domestic chaos upon international volatility. They have created a perfect storm of their own making. They speak eloquently of cutting energy costs while systematically pursuing policies that guarantee the opposite outcome. Their obsession with net zero has created an energy regime that punishes British businesses with costs five times higher than those faced by their American counterparts.
The introduction to the strategy says on page 33:
“There can be no plan for economic stability or sustainable growth that does not include a credible plan for net zero”.
That is obvious nonsense: of course there can. This is a choice, and publishing elegant explanations about how they are going to alleviate the worst effects of their own policies is simply baffling, but it is not strategy.
While pouring billions of pounds into subsidies for renewables, they steadfastly refuse to end the windfall tax on oil and gas companies or to issue new licences for drilling in the North Sea. They have turned their backs on our own North Sea resources, preferring instead to import energy from abroad rather than harness the secure—that word deserves repeating—and reliable supplies beneath our own waters. The result is an energy policy that reads like a masterclass in economic self-harm, and also puts us at a strategic disadvantage in a dangerous world.
It would be remiss of me if I did not acknowledge credit where it is due. The commitment to free trade principles offers a glimmer of hope, and recent trade agreements suggest that the Government have not entirely abandoned the opportunities that Brexit provides. However, if we are truly to harness these benefits, we need comprehensive free trade deals, not the minor economic agreements that currently pass for trade policy.
Their promise to reduce regulatory burdens by 25% reveals another layer of the Government’s duplicity. This sounds precisely like telling businesses what they want to hear, while doing the exact opposite in practice. The Employment Rights Bill alone, which they proudly champion, will impose £5 billion—the Government’s own impact assessment number—in administrative costs on British businesses and introduce a new agency, which is a regulator by any other name. How is that part of a strategy to reduce regulatory burdens?
I suspect that this £5 billionfigure will represent only the tip of the iceberg. What the Government have failed to factor into their calculations is the true cost of empowering trade unions to constantly disrupt business operations, of making it infinitely riskier and more expensive to hire workers, and of creating a labyrinth of legal obligations that will tie employers in knots for years to come. Small businesses, already struggling with the highest tax burden in a generation, will find themselves drowning in compliance costs that will inevitably dwarf the Government’s modest £5 billion estimate.
The impact on young people seeking employment is particularly troubling. At a time when youth unemployment demands urgent attention, the Government are making it more expensive and riskier for employers to take a chance on inexperienced workers. The Employment Rights Bill, whatever its intentions, will price young people out of the job market at the very moment they need opportunity most.
We have also witnessed a hat-trick of U-turns from the Prime Minister, including on welfare reform. We were told that these measures were necessary to get people back into work. I suspect that the Government are not that interested in that after all. What is the point of an industrial strategy if there is no industry left? Will the cost of this U-turn simply mean more taxes, or will the Minister unequivocally rule out further tax rises today?
The Government have shown they do not understand how wealth is created and how economies grow. You cannot tax your way to prosperity, you cannot regulate your way to competitiveness, and you certainly cannot lecture businesses about growth while systematically undermining the conditions that make growth possible. The question before us is simple: will the Government recognise that their approach is failing, or will they continue down a path that leads inevitably to economic decline? The evidence is mounting, the damage is spreading and time is running short.
Baroness Kramer (LD)
My Lords, we on these Benches remember how powerfully business welcomed the industrial strategy produced by Vince Cable during the coalition years, and the shock and dismay with which it greeted the Conservative decision, when that party was in government alone, first to weaken it and eventually to scrap it. Such a strategy is vital to drive business investment, good jobs and prosperity.
It was notable that the Conservatives not only scrapped the industrial strategy but sold off the Green Investment Bank. How different our energy position could have been today, had that not happened. They also readied the British Business Bank for sale; I remember direct conversations with Sajid Javid and his relief that it was to be done away with. It survived only because Covid struck and it was needed to distribute Covid loans.
Those constructive moves were pure ideology: in essence, it was private good, public bad. So I listened with interest to the Conservative Front Bench today and there is a change of tone but—my goodness—this country would have benefited had that change started a few years ago.
We find some common ground in one area. The Conservatives did not exactly name it, but we have talked about it in the past. Raising employers’ NICs, especially SME employers, was the wrong way to start the revival of business and enterprise.
We support core elements of the strategy, but we still have questions. My noble friend Lord Russell, if he has the opportunity to speak on this Statement, will talk much more about energy prices, because we welcome the help of a wider range of energy-intensive industries. But why would we wait another two years to find out who will qualify? What about the burden of electricity prices on service industries such as hospitality?
If the Government want to see a quantum growth in exports, the answer is surely to negotiate to rejoin the EU customs union. By comparison, everything else is small beer. Have the Government noticed today’s FT article charting the decline in productivity—especially in London, which is key to the economy—since Brexit? It played such a significant role, with its impact on business investment and the opportunity to participate in supply chains. This Government are keen on U-turns, so why not make a U-turn that would actually bring money into the country and the Treasury and work to find our way back into the EU customs union?
A business in rural England involved in agribusiness and farming would be asking, “Why does this strategy have so little for me?”, especially in an era of food insecurity, climate change and tariffs. Can the Minister elaborate and provide some reassurance? A business looking for skilled staff would welcome the funding boost for skills but ask, “Why not the fundamental reform of apprenticeships that we need, and where is lifelong learning?” Today’s report of a sharp drop in entry-level jobs surely underscores that need. Can they have a place in the strategy?
A creative reading the importance of data as an asset—in fact, the industrial strategy is quite good on the creative sector, but not on the importance of data as an asset—would ask why the Government have refused to strengthen copyright transparency rules to prevent the US mega-techs scraping intellectual property without recompense. Where is the logic and the justice, particularly when data is identified as critical?
An innovative small business would welcome the Government’s intention to use procurement to drive enterprise, but why do the rules still mean that the Government can then take the intellectual property of that small business and, on the grounds of transparency, give it to its competitors free of charge? This is an issue that my noble friend Lady Bowles raises often, and it still needs an answer.
One issue in particular grates with me. The Government have simply not grasped the need for access to finance for the whole breadth of small businesses, not just priority sectors such as high tech. To build our communities and make sure that good jobs and prospects are available everywhere, we cannot be in a position where small businesses grow from retained earnings only. We need a genuine community banking sector. The high street banks and most alternative finance is not interested in meeting the need. The British Business Bank has a small £150 million pot over the next two years to support community banking, but it is minimal compared, for example, to the $300 billion in community bank financing that is the backbone of small business finance and growth in the United States. Does the Minister understand that this is a missed opportunity?
In many ways, we see this industrial strategy as a positive and strong step forward, but we will not be in a full position to judge it until we see practical support and solutions. Implementation and delivery are key. I hope that, by the time we have such clarity, my noble friend Lord Fox, whose knowledge in this area is so much greater than mine, is back on these Benches. I can tell your Lordships that he will expect answers.
Lord Leong (Lab)
I thank the Lord for that question. He makes several very interesting observations. The reason we have published this industrial strategy is what I mentioned earlier about the global trading environment, but we also have a very clear goal. We want to drive growth. I know many noble Lords have mentioned it, but it is still the number one mission of this Government, and we can achieve that only by better and increased investment. The noble Lord is right. Previous Governments have published investment strategies, but why is this investment strategy different? Past growth plans have often been felt by businesses as being done for them, so it looks as though government knows better and this is what the industrial strategy is for, whereas with this industrial strategy, we work with businesses every step of the way. We have meetings with business representative organisations—in fact, I have learned a new word, “BROs”; we work with trade unions and investors so that this strategy is not only a government strategy but a whole-of-business strategy. That is the first difference. The second difference is that we have listened to the needs of businesses, the need for long-term certainty. Every business that I have spoken to wants three things: certainty, stability and less regulation. That is what the Government are trying to solve through their strategy to reduce regulation by 25%. This is still very much a work in progress, but it is what we are aiming for. We hope that this strategy is different from previous strategies.
Baroness Neville-Rolfe (Con)
My Lords, I want to ask the Minister about the apparently “Cinderella” areas of retail, hospitality and tourism, which have all been hit terribly hard by the Chancellor’s NICs hikes, especially the reduction in the NICs threshold to £5,000, which has led to shop and cafe closures in my home area of Wiltshire. There is barely a reference to their contribution in the industrial strategy, yet in the Conservative and Blair years there was an understanding of the innovation, growth and jobs for which retail, hospitality and tourism were responsible, with minimal cost to the Exchequer. Can the Minister explain why they have been abandoned?
Lord Leong (Lab)
We are not abandoning any industry or sector. This strategy identifies the top-growing sectors, the IS-8 as we call them, which make up 30% of the total business sector in this country but contribute some 60% of the national economy. Obviously, it is the Government’s position to support them. As for retail, hospitality and others, we have other support plans in place; for example, the business rates scheme.
Let us not beat around the bush: the high street is changing and people’s shopping habits have changed but, at the same time, we need to revitalise the high street. Hopefully, when we publish the small business strategy in due course, it will cover how we will revitalise the high street. In other parts of the hospitality sector, be it cafés, restaurants or pubs, it is a very mixed picture. Some pubs are closing down, but not because we have come into government; they were closing down way before then. In the case of the pub in my village—a very small village pub—a year ago it seemed only a matter of time before it closed down. It was sold to a young couple, they changed it and now it is flourishing; you cannot even get a table there. So, pubs need to change.
Lord Sharpe of Epsom (Con)
Wait until the Employment Rights Bill passes—then you will get a table.