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Lord Henley
That this House takes note of Her Majesty’s Government’s Industrial Strategy and of the case for boosting earning power and productivity across the United Kingdom with investment in the skills, businesses and infrastructure of the future.
The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Henley) (Con)
My Lords, we are at a critical moment for the United Kingdom. The world is changing and we have to ensure that we are building the type of economy that gives us a global competitive edge. New technology is creating new industries, changing existing ones and transforming the way we live our lives. We need to ensure that we are well prepared to prosper in this future. The decision to leave the European Union makes that even more important.
The United Kingdom has significant economic strengths on which we will build, but we also need to make the most of our untapped potential right across the country. In the Industrial Strategy White Paper, we have set out a long-term plan to help boost the productivity and earning power of people throughout the UK by focusing on five foundations of productivity.
Our first foundation is “Ideas”. Innovation and ideas are at the heart of increasing productivity. Our ability to come up with new ideas and to develop and deploy them is one of the United Kingdom’s historic strengths. We are building on these strengths and taking action to ensure that we are generating, and making the most of, new ideas, new ways of doing things, new goods and services, and new technologies. We want to be the world’s most innovative economy and we have announced a major step towards achieving this: increasing investment in research and development to 2.4% of GDP—an extra £80 billion over 10 years.
Our second foundation is “People”: ensuring access to good jobs and greater earning power for all, with a strong focus on technical skills, maths and engineering, and retraining throughout careers. An effectively skilled population is pivotal to a modern and productive economy. We will deliver a dynamic country that has high levels of skills in science, technology, engineering, mathematics, digital and social sciences. Our strategy also takes action to address regional disparities in education and skill levels so that we build on local strengths and deliver opportunities for people wherever they live. Creating a balanced economy that boosts the earning power of everyone means reaching out to underrepresented groups in the labour market: older workers, women, disabled people and black and minority ethnic workers. It is vital not just for them and for our communities but for the productivity of the United Kingdom economy as a whole that everyone has the opportunity to realise their full potential.
Our third foundation is “Infrastructure”. We have committed to a major upgrade to our digital and physical infrastructure, including increasing the national productivity investment fund to £31 billion. High-quality infrastructure is vital for economic growth and prosperity across all regions of the United Kingdom. We are ensuring that our infrastructure investments actively support our long-term productivity as well as providing greater certainty and clear strategic direction to investors and businesses. We will ensure that our country is one of the best in the world in terms of digital connectivity, with high-speed fixed and mobile access available in all areas. Trials in road and rail digital connectivity will prepare us for the future and the potential for the adoption and deployment of autonomous vehicles.
Our fourth foundation is supporting our “Business Environment”, by driving more than £20 billion of investment in innovative and high-potential businesses. The United Kingdom has an excellent reputation in the business world. Our industrial strategy aims to build on this and make it the very best place to start and grow a business and a real draw for the most innovative and successful companies. We have world-class companies and we will do more to support them, spreading their best practice and creating a more balanced and thriving economy.
Our fifth foundation is “Places”, in which our ideas, people, infrastructure and business environment happen. The United Kingdom has a rich heritage, with world-leading businesses located in every region. Our cities, towns and rural areas are essential to shaping our economic future. We will ensure that the entire country is in a position to fulfil its potential. We have created a £1.7 billion transforming cities fund to improve transport between city centres and suburbs. We are investing in innovation, including through our £115 million a year strength in places fund. We are investing in skills, including through our investment in teachers’ professional development in parts of the country where education attainment is lower. Local areas know their own strengths and weaknesses best. That is why we have also committed to developing local industrial strategies, with Greater Manchester and the West Midlands already developing early versions. We need to create a nation where every region is thriving.
Transforming these five foundations of productivity is vital, but we know that, on its own, it is not sufficient, so we have also identified four grand challenges, based on the advice of our leading scientists and technologists, to put the United Kingdom at the forefront of the industries of the future. These areas represent long-term, complex trends which will shape the global economy, creating both opportunities and challenges for the United Kingdom. If we act now we can lead from the front, but if we wait and see other countries will seize the initiative.
For each of these challenges, our industrial strategy sets out how we can seize the opportunity. These grand challenges will be supported by investment from the industrial strategy challenge fund, matched by commercial investment. The four grand challenges are: first, artificial intelligence and the data-driven economy; secondly, clean growth; thirdly, the future of mobility; and, fourthly, meeting the needs of an ageing society. I shall speak on each of these challenges in more detail, and set out, based on our analysis of current evidence and future trends, our priority areas for each grand challenge.
Artificial intelligence and machine learning are general purpose technologies .They can be seen as new industries in their own right. By one estimate, artificial intelligence could add £232 billion to the United Kingdom economy by 2030. To ensure our success in this area, we will make the United Kingdom a global centre for artificial intelligence and data-driven innovation. We will support sectors to boost their productivity through AI and data analytic technologies. We will lead the world in the safe and ethical use of data and AI and help people develop the skills needed for those jobs of the future.
The move to cleaner economic growth is another of the greatest industrial opportunities of our time. The Paris Agreement of 2015 commits countries to revolutionising power, transport, heating and cooling, industrial processes and agriculture. The effect of these changes will be felt across the economy and will involve the reallocation of trillions of pounds of public and private finance towards the pursuit of cleaner growth. We will take advantage of these trends by developing smart systems for cheap and clean energy across power, heating and transport; by transforming construction to dramatically improve efficiency; by making our energy-intensive industries competitive in the clean economy; by putting the United Kingdom at the forefront of high-efficiency agriculture; by making the United Kingdom the global standard setter for green finance; and, finally, by developing United Kingdom leadership in low-carbon transport across road, rail, aviation and maritime.
Mobility and transport are on the cusp of a profound change in how people, goods and services are moved around our towns, cities and countryside. This is driven by extraordinary innovation in engineering, technology and business models. Our mobility grand challenge will establish a flexible regulatory framework to encourage new modes of transport and business models; seize the opportunities and address the challenges of moving from hydrocarbon to zero-emission vehicles; prepare for a future of new mobility services, increased autonomy, journey sharing and a blurring of the distinctions between private and public transport; and explore ways to use data to accelerate development of new mobility services and enable the more effective operation of our transport system.
Finally, our grand challenge on ageing recognises our obligation to help older citizens lead independent, fulfilled lives. Our population is ageing, creating new demands for technologies, products and services, including new care technologies, new housing models and savings products for retirement. It is important that we get this right. To do so, we will encourage new products and services for the growing global population of older people, meeting important social needs and realising the business opportunity for the United Kingdom; we will support care providers to adapt their business models to changing demands, encouraging new models of care to develop and flourish; we will support sectors to adapt to a changing and ageing workforce; and, finally, we will explore the application of our health data to improve health outcomes and UK leadership in life sciences.
In addition to the work we are doing on the foundations of our productivity and our grand challenges, we are finding new ways of partnering with businesses. In the Green Paper we asked businesses if they would like to agree sector deals—strategic, long-term partnerships between industry and the Government, backed by sizeable private sector co-investment. The answer was an emphatic yes. We have already published deals in construction and life sciences, and in the coming weeks we will publish deals with the artificial intelligence and automotive industries. We set out our criteria for future deals in the White Paper and look forward to continuing our conversations with different sectors about their proposals.
The scale of ambition in our industrial strategy is clear and we can deliver on this only if we work in partnership. We will use the framework set out in the strategy to work with industry, academia and civil society in the years ahead to build on the United Kingdom’s strengths, make more of our untapped potential, and create a more productive economy that works for everyone across the UK. We believe that by acting now, the United Kingdom can lead from the front. Our strategy is all about seizing opportunities to put the United Kingdom at the forefront of the industries of the future. Our vision is that the United Kingdom will have good jobs and greater earning power for all, make a major upgrade to our infrastructure, be the best place in which to start and grow a business, and have prosperous communities across the country.
As I said, in the next month we hope to be concluding sector deals with the automotive, artificial intelligence and construction sectors. Alongside this, we are in ongoing negotiations to create nuclear, industrial digitalisation and creative industries sector deals. We will also be making progress in other areas, including setting up the industrial strategy council; developing our four grand challenges and appointing business champions for each of those challenges; and making further allocations of the industrial strategy challenge fund. Other departments—I emphasise that this is a government-wide White Paper—will also be setting out strategies designed to support the industrial strategy, such as Defra’s upcoming 25-year environment plan.
This is a strategy for the long term, involving all of government, which will evolve and adapt to respond to the challenges of the future. But, as set out, it is also taking action now to ensure that we make the most of our strengths, opportunities and untapped potential. I beg to move.
Lord Mandelson (Lab)
My Lords, I am very glad to follow the Minister, who set out the vision of the White Paper rather well. I hope noble Lords will forgive me if I do not dwell at any length on Brexit. That will at least allow me to agree with the Prime Minister on one thing—that the UK is facing much deeper economic challenges than simply its poor cyclical economic growth or squeezed living standards, bad as these are.
In the Prime Minister’s words—and, incidentally, Jeremy Corbyn’s—we need,
“an economy that works for everyone, not just the privileged few”.
We do not have that at the moment in our country.
For me, progressive politics is about demonstrating that we can advance as a country by mobilising the strengths and disciplines of the market, and by using the unique capacity of the Government in tandem. Those things go together, stimulating enterprise with a sense of responsibility and having rewards with fairness. Industrial strategy, in my view, has an important part to play in achieving these things by helping ensure that all parts of the country are able to benefit from economic growth. We need industrial policy working hand in hand with actions to achieve more fairness in society including, importantly, across the generations so that, for example, owning your own home again becomes a real prospect for most people in their 30s. At the top, we need a lot fewer pay awards being given that are out of line with the rest of society and with business performance. A tweak of the policy dial will simply not be enough to address these challenges. We really have to adapt our economy, our whole economic model, so as to restore faith in it. That is why industrial strategy is important.
The White Paper we are debating today is a good start and I come here to praise Greg Clark, not to bury him. I very much hope that the Prime Minister feels similarly. Greg Clark and his officials have actually produced a very thorough piece of work. He is right to focus on the Government’s role in promoting investment, in business fundamentals, in ideas, place and people and in infrastructure, as the Minister said. But we also have to get other fundamentals right, such as the free flow of talent into and out of our country and having high-quality vocational as well as higher education—including, I might say, pioneering design education. It is the design of how we use and apply technology to how we live that is central to what we will produce and market in the future, and to our whole competitive advantage as a country.
Your Lordships can see the global industrial trends which Britain has to make a national mission to participate in. As the Minister said, they include artificial intelligence and data analytics, clean growth, medical science in the context of the ageing society and the transformation of mobility. Britain is present in these trends but it is not present enough. In the FTSE 100, oil, mining, finance and retail companies dominate; few advanced technology companies and businesses are emerging to scale. Yet we have huge opportunities all around us. The National Health Service, for example, will eventually be transformed by the use of artificial intelligence and data. We should be market leaders in this, investing now in the businesses that will drive it and then exporting their knowledge, expertise and success in the rest of the world.
The point is that it is the Government’s job to use their unique power in the economy—as they do in relation to the NHS, for example—to help create such new markets, making it worth while to commercialise and to grow our know-how here in Britain rather than seeing it transfer abroad when it reaches a certain point of development. That is what our industrial future depends on in this country. It is not about substituting business decisions for those made by Ministers, but about Ministers helping to make a reality of those business decisions, including occasionally by facilitating long-term commercial finance. Government has to think of itself, in other words, as literally a partner with business, networked into the country’s science and technology base, spotting potential for market development and growth, leveraging the Government’s role as purchaser, as customer, as regulator, as market maker.
In this context, the Government’s commitment to raise spending on research and innovation is highly desirable in order to raise productivity and move on from an old economy to an advanced-technology one. But spending in itself is not a panacea. Innovation does not in itself create business growth, regardless of what else is going on in the economy. You need businesses to be sufficiently confident of new market growth and opportunities in Britain, and of their ability to cross borders easily in supply and value chains and to trade freely in the large markets nearby.
It is no accident that the biggest sustained post-war growth in Britain’s productivity came from our joining the then European Community in the 1970s, followed of course by the single market in the 1990s and thereafter. The liberalisation of our trade with Europe brought huge market opportunities and a tremendous spur to competition after decades of relative protection and sluggish reliance on Commonwealth markets. As a result, flows of cross-border investment and international R&D spending in Britain were greatly stimulated, bringing with them innovation and higher productivity, buoyed by confidence among businesses about their ability to supply both our own and our largest, closest market. That is why, if we leave the European Union, our highest priority should be to remain in the European Economic Area.
This year is the 20th anniversary of the publication of my first industrial strategy White Paper at the DTI, Building the Knowledge Driven Economy—I have form. It will be 24 years since the publication of the first competitiveness White Paper, published by the grandfather of modern industrial strategy—by whom of course I mean not Tony Benn but the noble Lord, Lord Heseltine. More recently, I pursued five drivers of productivity in my second White Paper, New Industry, New Jobs, and this was followed by the industrial sectors approach of Vince Cable.
One central thing that has not been properly resolved in any of this litany of strategies is the tension between a national, centrally planned approach and doing the job instead through devolution of power and resources to regions and communities, notably but not only in respect of skills and mobility.
In my view, the northern powerhouse initiative was an attempt to combine industrial strategy with devolution, but it was an incomplete one and it now seems to have been discarded in a fit of vindictiveness towards the previous Chancellor, George Osborne. I think that is a great mistake. We cannot rely on Whitehall knowing best or policy being revised on the basis of every Whitehall-based ministerial fad, fashion or passing reshuffle, as I hope the Prime Minister is bearing in mind as we debate.
This leads me to three concluding remarks based on my experience of industrial strategy. First, it is vital that Ministers collectively—not just in the business department—take ownership of the strategy. When Michael Gove talks about the future of food and farming, that industrial future is the responsibility of his department, not of BEIS. The research budgets, procurement plans and regulatory frameworks of all departments need to be used to build the markets and competitive advantages of businesses based in Britain. The Prime Minister needs to take some responsibility in driving this, otherwise it will not happen.
Secondly, publishing a White Paper is not a job done. It requires painstaking, practical and detailed follow-up; that is when the real slog begins. Let us face it, most Ministers are not natural business people or entrepreneurs, so they must use actual hard evidence, not wishful thinking, in implementation. The chief economist that I had in the business department, the inimitable Vicky Pryce, would ask at some point in almost every policy discussion that I had: “What is the evidence base for this proposal, Secretary of State?”. I must say that this got rather irritating, but you have to be careful that through either ignorance or naivety you do not end up with a lot of industrial losers finding the Government rather than the Government finding winners.
My third remark is about continuity of policy. To be effective, industrial policy has to be sustained through political cycles, not just through one Government. It is one thing having a long time horizon—this White Paper’s horizon is 2030—but quite another to develop a genuinely long-term approach, one that will take us well beyond 2030, which is not actually very far away. Look at Germany and France. There is continuity in their systems when it comes to business and investment policies, which permits long-term planning and the development of competitive advantage over many decades.
Theresa May and Jeremy Corbyn may sometimes use different language but there are clearly points of agreement between the contents of this White Paper and Labour’s plans drawn up by Rebecca Long Bailey, Greg Clark’s shadow. I have read both and am struck by the overlap between them, which is rather encouraging. There needs to be mutual understanding and convergence of policy wherever we can achieve it.
I realise that this flies in the face of adversarial, zero-sum-game modern politics, but I hope that the Government will work hard, as I believe has already been started, to take the Opposition with them on the White Paper, and I hope that my party fully reciprocates. In these very troubled and divisive times, frankly, we need to take any consensus where we can find it, however difficult Brexit makes that.
Baroness Randerson (LD)
My Lords, when I heard that we were to have an industrial strategy, I very much welcomed the news because I felt that it built on foundations laid during the coalition, not least by Vince Cable in his work at the Department for Business, Innovation and Skills, and because industrial strategies—for example, the one produced by the noble Lord, Lord Heseltine—have a good name among business. It was a hint of long-termism in the Government’s view at a time when inevitably, because of the Brexit challenges, the Government were taken up with fighting day-to-day issues.
However, when I came to read the Industrial Strategy, although it was very thorough in the number of words used to cover it, I felt that it lacked that sense of purpose and unique commitment that Governments must have if a strategy is to be workable in practice—if it is to turn out to be more than, yes, another document.
The Minister referred in his introduction to the Government’s commitment to new transport technology and to transport and future technology in general, but I am firmly of the view that if we are to heal our broken economy, we need, first, to tackle the problems of today. I make no apology for concentrating in my speech on transport and transport technology, because if we do not get transport infrastructure right, the rest will not follow.
When I travel abroad, I get an immediate impression when I arrive back on these shores of the intense traffic congestion, outdated infrastructure and sheer unreliability of travelling long distances in the UK, whether by road or rail. My sense chimes with that of other people who have talked to me about this issue—the contrast between Britain and neighbouring countries in the stage we are at in solving these problems. All this fundamentally undermines our economy. To put it right, there are no quick fixes: it requires long-term investment and farsighted political commitment.
We could argue that we would not be in this Brexit mess if successive Governments had not paid too little attention to areas outside the south-east of England. That lack of attention has gone on for many decades. When you analyse the anti-EU vote of the year before last, you see that the heaviest vote to leave the EU was in those areas where the economy had declined furthest and where people were poorest. That is fundamentally linked with the issue of transport infrastructure. Putting this right depends to a large extent on improving those transport links. Tackling economic imbalances and driving growth more evenly across the whole country will not be simple, and I see nothing in the Government’s industrial strategy to convince me that they accept the radical challenge that they face or the amount of money that it will cost to fix it. It is important to remember that our transport infrastructure has relied over many decades on EU regeneration funding. It is important that the Government urgently reassure local authorities and businesses that there will be a firm and reliable replacement for that funding, and how it will be provided.
I would argue that there is a need for a number of things. First, we need close working relationships with local authorities, which have too often been seen by the Government almost as competitors, with a lack of trust. They obviously hold a key role in terms of planning and infrastructure development. The issue of devolution, which I welcomed strongly, has been linked by the Government to the existence of mayoral authorities. I have never understood why elected mayors are regarded as the key to all political problems and why other authorities cannot be treated on a par. There is a key role on these issues for universities and, of course, business. The Government have to develop real and trusted partnerships with universities as a source of inspiration and research that provides skills for the future and a real partnership with business.
Then, of course, there is the unsolved problem of how to deal with the free movement of people in the future, on which our economy has relied for hundreds of years. The Local Government Association calculated that by 2024 we will have 4 million too few highly skilled workers in comparison with our needs. That is equivalent to affecting 4% of economic growth. That skills gap must be dealt with in one way or another. I welcome the Government’s commitment to increasing the national productivity investment fund to £31 billion, but I fear that even that will not be adequate. I welcome the Government’s commitment to new technologies in transport as I am an enthusiast for new technologies. I welcome their comments on developing electric vehicles and their take-up, but I looked in vain for the clarity that we need on the long-term issues in relation to this. For example, how will the recharging of electric vehicles be provided in a way that works within the market? It is one thing to say that all local authorities will set up charging points but another to ensure that they are maintained properly. The devil is in the detail.
I fear that if too much funding is going into local infrastructure projects that are reliant on short-term competitive funding, we will not get certainty for the future of transport investment. In England, 97% of roads are classified as local roads, so the Government deal with a very small percentage of the total. Local roads suffer from terrible congestion as much as the long-distance links.
There is a massive maintenance backlog on our roads in general, but it amounts to £12 billion worth on our local roads. We need a much more coherent, co-ordinated and cohesive approach to maintaining and developing our roads. There is, of course, an urgent need for investment in public transport infrastructure to reduce air pollution. The Liberal Democrats always prefer rail and road public transport to be developed rather than private transport because of air pollution. However, the Government have not yet produced any adequate detailed plans on how to tackle the air pollution problems.
As a Liberal Democrat, I looked for something very ambitious in the Secretary of State’s railways strategy; instead, I saw a miserable lack of ambition. The decision to abandon the electrification of the Great Western line beyond Cardiff and the trans-Pennine line sends the wrong message if we are to solve the problem of overcrowded railways. Last week’s 3.4% increase in rail fares did not send out the message that the Government are committed to improving the country’s transport and linking up our cities. We need HS2 but it should not soak up all the investment; it should be just one part of the jigsaw. We need a much more ambitious approach to bus services. There is a dwindling number of bus services, especially in rural areas, which leads to increased congestion. There is the danger that the Government’s announcement on clean air zones might drive buses off the road as local authorities choose to impose much higher standards on buses than on cars in this respect. However, buses are the solution to the transport problem.
Finally, the challenge the Government face is that the industrial strategy, if it is to work, needs to face up to the fact that after Brexit we will need more than fine ambitions. We need to look at the reality—namely, we cannot lead the world in new technologies by tinkering at the edges and spraying around a handful of pilot projects, sprinkled with a little seed corn money. We cannot be a world leader in this field simply by constantly claiming that we are already, as we hear so often from this Government. We cannot be a world leader by cutting ourselves off from our main market within the EU and discouraging the skills and the immigrants who bring them, on whom we have relied for so long. I do not see in this industrial strategy the answers to those serious challenges that our country faces at this time.
Lord Kakkar (CB)
My Lords, I thank the Minister for the thoughtful way in which he introduced the debate and Her Majesty’s Government’s industrial strategy. I remind noble Lords of my interests as professor of surgery at University College London, chair of University College London Partners, business ambassador for healthcare and life sciences, and a member of your Lordships’ Science and Technology Committee, which is undertaking an inquiry on the life sciences industrial strategy.
It is quite right that there is a very acute focus on the question of life sciences, because they have played, and will continue to play in future, a vital role for our country and its economy. After financial services, the life sciences sector is one of the most important, and it is built on a substantial and impressive ecosystem that has been developed over many decades. We have four of the top 10 biomedical universities in the world; the published output from the research activity in those universities accounts annually for some 10% of citations globally and some 15% of the most highly cited papers published. Much of that research is undertaken with impressive collaboration with institutions in the United States, the European Union and the rest of the world.
We have two of the top 10 pharmaceutical companies based here in the United Kingdom. They represent a vital part of our economy, providing some £21 billion a year in exports. Consistently over the last 15 years, every year, they have contributed more than £1 billion in surpluses to the economy. The impressive large pharma sector is supported by more than 3,500 small and medium-sized enterprises in the medtech and biotech spheres; of those 3,500 companies, some 500 are actively exporting. They have seen substantial growth in the period 2009-14. For the medtech sector it is a 5.8% growth in revenue per annum; in the biotechnology sector it is 4% per annum in that period.
All that demonstrates that we have a fundamental and strong base but, in addition, we have something quite unique—the National Health Service, which provides care free at the point of delivery to all our citizens, and a wide range of care, and which has provided a unique opportunity over many decades to develop the base for our medical research, which in many areas leads the world.
What is striking is how the opportunities and the needs will grow, needs that will have to be addressed by the life sciences sector. The global value of the life sciences industries is some $1.6 trillion; by 2023, that will grow to over $2 trillion. With regard to healthcare expenditure and revenue, in the period between 2014 and 2027 it is estimated that expenditure on healthcare globally will grow by 5.8% per annum, but in certain markets, where we already have a very strong relationship and affinity, it will grow at an even greater rate—in India by some 15% per annum over that period, in China by 12% and in the Middle East and the Gulf by 8% per annum. So there are very big opportunities for the life sciences industrial base to make important contributions to our own economy. At the moment, some 300,000 people are employed in the science and technology sectors, in highly skilled jobs. The potential for that to grow over time to provide economic benefit and employment is quite obvious.
It is for that reason that there is so much focus on the life sciences strategy authored by Sir John Bell and presented along with its first set of sector deals before the Christmas Recess. In that strategy there is a focus on five important areas: to ensure that the science base in our country, to drive the innovation and discovery essential for life sciences, is properly invested in and maintained, not only in the public sector but through private sector investment through the sector deals; to ensure that the innovative companies that result from that discovery can grow in our country; and to ensure that the patient capital essential to allow them to grow over time to become substantial entities is provided in our own country, rather than those small enterprises having to look abroad and, potentially, move abroad, when they require greater investment. We need to provide the opportunity for an appropriate manufacturing base, with the skills required for those highly innovative industries to prosper and succeed in our country.
There are two elements that are vitally dependent on the National Health Service. The first is the adoption of these innovations at scale and pace within the NHS. This is critically important for a number of reasons. First, the delivery of healthcare in our country is not going to be sustainable unless we are able not only to adopt innovation to make the delivery of healthcare more effective in improving clinical outcomes but to use in the most efficient fashion the vital and valuable resource that the state makes available for the delivery of healthcare, providing true value for each of the health economies and institutions where that delivery takes place. Secondly, as we have heard from the noble Lord, Lord Mandelson, there is the need to harness the ability to use the unique data generated in the National Health Service through the care of countless millions of patients, day after day, month after month and year after year. This longitudinal database is unique in the delivery of healthcare anywhere in the world. It can inform research, development and innovation to develop new therapies and technologies and improve the way that we deliver care. All this has huge value in improving the health of our nation and in providing a remarkable opportunity to generate wealth. As the House has already heard, using the technologies that we develop, and the companies that have developed as a result of them, to export globally will transform healthcare throughout the world and, therefore, also ensure and enhance the standing of our country as a leader in healthcare and life sciences.
The life sciences industrial strategy makes a number of important proposals. One is the health advanced research programme, developed to mirror the very impressive programme established some decades ago by the Department of Defense in the United States to ensure that high-risk proposals—the so-called moonshot strategies—can be properly invested, developing transformational technologies and innovations that will have a profound impact, in this case on human health. It has worked so well in the area of defence in the United States because that department has such a huge expenditure budget. This brings me to the question of the vital role that the life sciences strategy envisages for the National Health Service. It must be able to adopt innovation at scale and pace and to provide confidence to those who are going to invest in high-risk strategies that if they are successful there is the opportunity for the home market—the remarkable National Health Service—to adopt those innovations for the benefit of patients and our fellow citizens.
In this regard, there is some concern. The strategy is excellent, but it is unclear how the Government are going to secure the role that the NHS must play in ensuring that the life sciences strategy can be a success. I have three questions for the Minister. First, how do the Government envisage securing the critical role which the National Health Service must play in the broader life sciences industrial strategy? How will funding be made available to ensure the adoption of innovation at a local level, which is vitally important to support the industries that are envisaged as part of the life sciences strategy? How can the Government aid in transforming the culture in the National Health Service, to ensure that what needs to be done by way of adoption of innovation, beyond its funding, will be practicable and possible in terms of developing the remarkable staff who work in the service, ensuring they have the skills to interact with the innovations that are going to be available and overcoming the culture which is sometimes resistant to adopting innovation?
Finally, how will they ensure that lessons are learned from previous attempts at a life sciences strategy? Will the important lessons from the 2011 announcement of a life sciences strategy by the Prime Minister of the time and the subsequent innovation, health and wealth strategy, announced by Sir David Nicholson when he was leading the NHS, be properly adopted to ensure the success of this strategy?
Lord Maude of Horsham (Con)
My Lords, I draw attention to my entry in the register of interests. It is a pleasure to follow the noble Lord, Lord Kakkar, who has a deep knowledge of life sciences and the medical world and gave a powerful exposition of the opportunities for Britain to be a world leader in this sphere. I am conscious that I am speaking before my noble friend Lord Heseltine, described by the noble Lord, Lord Mandelson, as the grandfather of the industrial strategy. If my noble friend is the grandfather, maybe the noble Lord, Lord Mandelson, is the godfather, so I am in an uncomfortable position.
It is good that we are having this debate, and I congratulate the Minister on his excellent exposition of the strategy. There is much in the industrial strategy to agree with and very little to disagree with. If I had a criticism, it would be that it has turned into something of a compendium of all the Government’s economic policies. There is always a temptation in government to try to wrap together as much as possible into one document. To pick up a point made by the noble Lord, Lord Kakkar, I would have preferred something a little more focused on action and what the Government will actually do. As a Minister, I became an advocate of what became known as the JFDI—“just do it”—school of government. While the strategy document contains much on digital that is welcome, the process that led to its publication felt somewhat analogue. There was a time-honoured process of creating a Green Paper, which was put out to consultation for many months. One knows from experience that much of that consultation—this is not a criticism; it is just the very nature of it—will have been with large companies because smaller ones are getting on with running their businesses rather than engaging with such exercises.
I will focus my remarks on the kind of intervention that would normally be regarded as part of an industrial strategy. Obviously, much of this document concerns an issue in which the Government, inevitably, have always had a central role: the provision of infrastructure. It is in the nature of things that the Government’s role is central to that. We can debate how and when it is done and how much is spent, but it is indisputable that the Government must be at the heart of it. Similarly, the Government’s role will always be pretty central to skills, as it obviously is to creating the right regulatory and taxation fiscal environment for business to flourish. However, today I will focus on more sectoral issues. That approach was developed in the coalition Government, looking at how the Government can use their ability as a convener of business interests, as a funder in some circumstances and as a customer in many circumstances to make different things happen in the business world, perhaps creating a new opportunity or building for the future on some specific skills and strengths in the economy.
I will focus on three areas, the first of which is digital and data. I wholly support what is set out in the industrial strategy about digital. Although the implementation of the fast broadband programme may be slow—certainly in my part of the world—that commitment is welcome; it needs to be implemented effectively and swiftly.
London has become a focal point in Europe for the whole world of digital and technology. Berlin is a competitor but London is a long way ahead. Tech City is now not just a cluster; it goes much wider. At the last count, there were 24 or 25 different tech clusters around the UK, which is enormously important. The role of government in supporting that is huge but its role as a customer barely appears in the industrial strategy. When I became Minister for the Cabinet Office in 2010, 87% of government spend on IT was with seven multinational providers.
Procurement at that stage looked as though it was deliberately intended to freeze out newer, younger, more innovative UK-based suppliers. There was an almost universal requirement, even to bid for a contract, to show three years’ audited accounts. That would have ruled out most of Tech City—most of Silicon Valley, in fact. There was a requirement for turnover thresholds, for performance bonds and for a bidder to show that it had insurance in place to cover the total value of a contract, even before bidding for it. Endlessly complicated pre-qualification questionnaires, which were standard practice but different in each example, simply made it impossible and unattractive for small and newer businesses to compete. Mainly culture rather than regulation led to that, and we struggled to open up procurement to many more businesses. BIS was a big support to the growth of the start-up tech sector in the UK. By the end of the coalition Government, the map of suppliers of IT and digital services consisted of dots sprinkled across the entire UK, instead of seven dots predominating in London or the south-east of England. So the role of government in promoting the development and vitality of this sector is absolutely crucial.
It is clear that start-ups—indeed, the whole world of development of technology—depend heavily on overseas talent, and in the new world we are entering, it is essential that we remain open to talent. Taking back control of immigration absolutely allows us to give access to the right talent at the right time, but my concern—the Government need to be very alert to this—is the tendency of the Home Office to coat a lot of the processes with a heavy dose of bureaucracy. The ability of companies to get consent quickly for people to come here and make the commitment to work in the UK will be hugely important; the Civil Service needs to be galvanised into dealing with that effectively and swiftly.
The Government’s role in the world of data is hugely important, because they own a lot of data. Historically, they have guarded it closely, but of course it is not the Government’s property but the public’s. This data has been accreted over the years through the spending of taxpayers’ money, and much of it has come directly from the citizenry and the world of business. In the first Industrial Revolution, the raw materials were coal, iron and steel; in this industrial revolution, the raw material is data, and government can make much more of it available.
By the end of the coalition, the UK Government were ranked top in the world for open government, and a big part of that was a very aggressive programme of releasing government datasets, particularly but not exclusively in the geospatial field. However, we started to lag behind—Ordnance Survey in particular was very reluctant to release data. The French Government were much more aggressive than us, and that is where some of the geospatial development talent and enterprise started to gravitate towards. I urge the Government, as the industrial strategy permits them to, to pursue aggressively a continuing programme of open data and releasing data as raw material for this new industrial revolution.
The second area I want to focus on is nuclear, which barely gets a reference in the industrial strategy. Historically, Britain has had a huge stake and capability in civil nuclear, but much of large nuclear has disappeared from the UK, and we have had the creaking, tortuous process of getting to the point at which Hinkley is contracted for. I urge the Government to look more enthusiastically at the world of small modular nuclear reactors, for which we do have capability in this country. The advanced nuclear research centre based around the University of Sheffield—which may have been set up under the coalition Government, or possibly before then—is one of the research centres developing that capability. However, intensive government intervention is required to make all this happen.
The Government have the power to convene the different nuclear industrial interests and to work with them to make this happen. This technology could be a serious export activity for this country. Small modular nuclear reactors that can be built in the factory rather than painstakingly constructed on site, as large nuclear requires, are exportable pieces of equipment and could become a commodity product. There is a huge opportunity in developing countries, such as large parts of Africa, where this technology is very useable. I again urge the Government to look at this issue, which requires intensive and co-ordinated activity across government.
The third area is one of the grand challenges rightly identified in the industrial strategy: an ageing population. We know that the population is ageing, and I suppose in this Chamber I am preaching to the converted when I say that that is a very good thing. However, it does have its challenges. It is a truism that probably the single most significant factor in deciding whether a society will succeed in the decades ahead is how successful it is at keeping people living well and independently at home. Technology such as distance monitoring is absolutely central to that.
I want to pick up a point that the noble Lord, Lord Kakkar, made in his excellent remarks about the culture of the NHS. The role of the NHS in this is central, but far too often I have found its culture to be innovation averse. There is a tendency to believe that anything new is simply a cost, but we know that what really costs money in the NHS is people going into hospital and staying there. Technology that enables people to be kept well independently, at home, is not a cost but a saving. It is an essential part of any industrial strategy building on our strengths.
I commend the Government for bringing forward the strategy and hope that it will be taken forward with a strong focus on action and implementation.
Lord Hollick (Lab)
My Lords, successive Governments have energetically committed themselves to boost growth by improving industrial performance. After all, growth secures and improves the public finances and promotes a feeling of well-being and confidence—two sentiments which have been notably in short supply since the 2008 financial crisis.
In the 1960s, Harold Macmillan created the National Economic Development Council to inaugurate indicative sectoral planning. Backed by Treasury funds to support a big infrastructure investment programme, the country then set off on a dash for growth to achieve 4% per annum. Harold Wilson went further and published a national plan to capitalise on the white heat of the scientific revolution. The target 4% growth rate was achieved, but not for long as the Government became distracted by the troublesome behaviour of the pound. Edward Heath concluded that the best way to help Britain recover from being the sick man of Europe was to join the European Economic Community, with its large addressable market and bracing competition from other nations with more successful manufacturing sectors.
And so to today, where many of these themes find an echo. The economy is in austerity mode, weighed down by the cost of the financial crisis. We are now on the brink of leaving the EU or contriving to find a semi-detached relationship. Wage levels, unless you are in the FTSE boardroom, are trending flat and confidence, as measured by the depressed state of corporate investment, is at a low ebb. George Osborne decided to double down on austerity and thus failed to take advantage of historic low interest rates to invest in fixed and human capital. He coined some snappy phrases, such as the march of the makers and the northern powerhouse, but failed to take steps to make them take root.
In contrast, Mrs May has brought planning back to centre stage and added industrial strategy to the title of her business department. The detailed industrial strategy that has been published is to be commended, but can it be delivered? The plan’s analysis of the UK’s shortcomings is wearily familiar, but no less important for that. Labour productivity has declined faster in the UK than in any other OECD country; total investment in science and innovation is 1.7% compared with the OECD average of 2.4%; our workforce is inadequately skilled; investment in our infrastructure is far too low; and we have a long tail of low productivity firms. Crucially, we fail to translate our brilliant research into successful businesses and, if we do—we do sometimes—they are often snapped up by overseas investors with funds which will help fill the trade deficit, which continues to deteriorate despite the strong growth in services. The industrial strategy unflinchingly acknowledges these deficiencies and offers a wide range of initiatives backed by a measure of funding too often deferred.
However, against the backdrop of the deteriorating macroeconomic outlook and the complete unknown of life outside the EU, I doubt that these sensible, but modest, initiatives and the level and timing of the funding will suffice. To work, a strategic plan must set clear, prioritised targets and ensure that all are adequately funded and resourced. Above all, the focus must be on outcome not on a long list of activities. This strategic plan has few measurable targets, and the funding is thinly spread across a frankly confusing blizzard of microinterventions. Crucially, there is insufficient thinking and planning to boost the demand side, where the UK’s economy is chronically deficient. Will the proposed governance structure, headed by an independent industrial strategy council comprising business people, investors, academics and economists, have the resources to evaluate the effectiveness of all the initiatives? Will its work be supported by an expanded OBR? I ask this because the Government have poor form on independent accountability. The National Infrastructure Commission was initially to be a statutory body to monitor and make independent reports to Parliament on all major projects, but after pushback from the departments whose projects would be exposed to the cold light of independent scrutiny, the Treasury quietly dropped the potentially inconvenient statutory status.
The commitment to devolve the implementation of the planned initiatives to the regions is welcome, but it must be backed up by hard cash transfers from Whitehall and must allow the regions to work out for themselves and select which of the policy initiatives they wish to implement. This will help to rebalance government funding away from London and the south-east and will introduce a necessary element of competition.
Housebuilding would be a major beneficiary of a move to devolved responsibility, but only if local authorities are allowed to borrow to build and, in particular, to build much-needed social housing. The Economic Affairs Committee of this House, which included two former Chancellors and three Treasury mandarins, last year recommended a target of 300,000 new homes a year. That target is included in the strategy. The committee also crucially called upon the Government to lift the limits on local authority borrowing for housebuilding. The UK should adopt the accounting convention of most OECD countries and exclude public loans to build houses, which are, after all, income generating, from the public sector borrowing calculation. This change would allow local authorities to fund themselves and to partner housing associations and private sector builders to deliver the homes which are so desperately needed.
The Budget promise to increase funding for housebuilding is helpful but is estimated to deliver only an additional 30,000 homes over the next five years. Bolder action is required, but finance is not the only constraint. The housebuilding industry estimates that an additional 500,000 workers are needed to build 300,000 homes each year. Where are they to be found? Surely it is time that the Government came clean and explained how immigration restrictions will be managed to ensure that the workforce will be available to build the homes the country needs and that other sectors of the economy are adequately staffed. A strategic plan without the provision of the skills to implement it is a sham.
The strategy is right to plan to capitalise on the UK’s strong position in artificial intelligence. To do this the tech sector needs to be able to continue to attract the best talent from around the world. The Government should use public sector procurement to boost the development of AI by ensuring that it is deployed throughout the public sector. Government funding for research and development should be provided on a partnership basis with industry so that the risks and rewards are shared proportionately and so that the Government receives a fair share of the profits on successful AI products. A vibrant AI sector can also promote digital adoption by companies large and small to the great benefit of national productivity—but there is a but. Our digital infrastructure is second rate. We rank 54th in the world for fibre connections to premises. The commitment to spend £1 billion to beef up mobile and broadband is wholly inadequate to build a universal fibre and 5G network. The Government’s response that the market will take care of it is dangerously complacent. They must produce a comprehensive and costed plan in partnership with industry to provide this crucial infrastructure if they are to achieve the objective set out in their plans. If they can find £70 billion for HS2 to make 19th century infrastructure go faster, surely they can find a lesser sum to fund the essential digital infrastructure of the 21st century which, unlike HS2, will pay its way.
An AI turbo-charged economy is expected to bring significant disruption to the workplace. Some roles will be enhanced and new roles will be created, but many will disappear. There is likely to be a prolonged period of turbulence and uncertainty which will call for far-reaching changes in education and training and, in particular, in retraining throughout a lifetime. This means an increase in funding and a rebalancing to boost skills and vocational training.
The overall macroeconomic outlook for the UK continues to be very challenging. Leaving the EU brings uncertainty, disruption and confusion, which are all enemies of growth. The industrial strategy sets out clearly the deep-seated and persistent problems the country faces. The combination of these three challenges demands a bold and radical response which can build on many of the proposals included in the strategy. Now is not the time for unfocused half-measures or for funding deferrals. To meet the challenge the strategy should be radically reworked to prioritise key elements, set clear and verifiable targets and ensure that the proper levels of funding are in place. Borrowing to invest in a long-term growth plan is now a national priority.
Lord Addington (LD)
My Lords, when you speak in a debate such as this it is quite odd to discover that you want to take a slight deviation in approach. So far all the speeches have, understandably, concentrated on the macro situation—the broader picture. In doing so they have covered the variety of subjects in the strategy’s structure. I think it was the noble Lord, Lord Maude, who suggested that it is a compendium of policies brought together. I will focus on the second—people—and on one specific area.
I have for many years—I thought about it and discovered that it has been over four Parliaments and three Governments—been talking about the role of apprenticeships and how they are, or are not, allowing those with certain disabilities to take advantage of them. This an appropriate point to remind the House of my declared interests, particularly in dyslexia and assisted technology. We have moved on from a situation where you had to pass an English test to get into the apprenticeship system, which I think the noble Lord, Lord Nash, eventually dealt with by saying that it was ridiculous to have this for somebody who was dyslexic or had one of the other hidden conditions. It means that you have problems with writing, or indeed doing an online test. Therefore, a change was made.
We have now moved on to doing something that is equally stupid. Indeed, the cock-up school of history seems to have come back to us in apprenticeships. In a component part of skilling up people’s skill set, we have found yet another little example of where, if you take your eye off the minutiae of what is going on, you will make a change. We have said that we will help only those with an education, health and care plan. For those who have not been immersed in the education system for quite as long as I have, the education, health and care plan identifies that you have a disability at a fairly high level. The problem is that it is at a fairly high level. Just under 3% of the school population are recognised as having this. Some 12% are regarded as having a disability. We have a nine percentage-point gap of people who may have problems that may mean they cannot access the written word very well.
In the modern world there is no reason why that should block you, for the simple reason that voice technology is now so common. Voice-to-text or voice-to-voice technology for taking and passing assessments is incredibly common. It is old technology. Dyslexics going through the education system would probably have been the first big group to use it. I have been using it for nearly 20 years. It was introduced to me by the computer department of the House of Lords, when we still had one. I met a group of RAF pilots for whom it was developed because they had run out of fingers when flying jets. It is a very practical form of technology. But if we help only the group with the highest level of identification, all those in the other group will not get the support they need to get a qualification.
We have moved to a world where we need qualified people and we expect to have them organised and structured. If we put artificial barriers in place, such as having to pass an English test if you have been identified as having a disability, while not allowing people to take it in the way they will probably access it in their lives, when you can write a note to somebody that appears on a screen by talking to a computer—every single computer has that capacity; your phone has that capacity—we are excluding a block of people from higher levels of training. I ask the Minister to go back and make sure that those in the skills sector start to address these problems correctly and deal with the absurdity of taking a group away and saying, “No, we’ll restrict our skills base; we’ll restrict your earning power and leave you there”.
This is a good example of one of the problems we have. When we looked at the Government’s recent Statement about health and disability, it became quite clear that they had not taken on board people in jobs who are often unidentified as having a disability. I cited that 12% figure. Everything shows that many people have been unidentified in the past and currently, particularly at the edges, those who are struggling or underachieving do not expand their jobs or take on further qualifications. When we try to get the best out of our workforce, can we make sure that we start to identify these groups and help get qualifications for them through?
It is often said that to be a successful disabled person in our society, you need one fundamental bit of luck and that is your parents. The “tiger” parent is the person who has that plan, the person who has the identification that allows you to go forward. I have not even talked about the university sector, where exactly the same principle applies. The problem is that many people in the apprenticeship sector are late-diagnosis or undiagnosed. Those training them are still undertrained. However, we have a far greater incentive to make sure that we find and identify these groups if we can get them through the qualifications—if there was incentive in the institutions they are in to identify them, train them and get them through. If the Government insist on setting such an incredibly high barrier for giving help, they will exclude most of the people who have been identified as needing it. They would be helping those who have the greatest problems in later life and not those who would probably succeed with a smaller degree of intervention. Even if we regard people only as economic units, it is idiocy. Will the Government make sure that the appropriate levels of support are available, meaning that you will be able to access the structure and with easier transfer of information and data analysis between bodies? If we do not do that, we will create a block and a drag factor on any structure and any plan for industrial development. Unless we can bring this group into the trained world and world of work generally at a high enough level, we will always have those who slow us down. It is not very difficult. I am talking only about using information that is already out there and the existing structure, and about the existing pattern of development whereby we are told, “You will now talk to your computer as opposed to tapping the keyboard”.
Can we please have some more development here and some indication that the Government are looking at how those in the disabilities sector will be helped and supported to make them productive members of society? I have not many met of them who do not want to join that group.