Live Debate: Business and Trade Committee - 8th Sep 2026

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Business and Trade Committee

Tuesday 8th September 2026

(began 3 weeks, 1 day ago)

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This debate has concluded

13:57

Sarah Edwards

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Welcome to the Business and Trade newly formed committee, as we now also take in the innovation into our remit. Today, we are continuing our investigation into the Industrial Strategy and particularly its sectors. And today we're going to be looking at defence. We are looking at the sectors of concern but also issues that might be cross-cutting. And so we are also to in this session this afternoon, going to be looking at how that potentially impacts in to the devolution agenda that the government has.

So welcome to our witnesses today. You are from the defence and finance industry, so we're very keen to hear what you have to say. The government has announced a £15 billion extra on on defence in this Parliament, with the intention to raise spending to 3% by the next Parliament. So if I could ask the witnesses to introduce themselves and just say where they come from and what their angle is, that would be very, very helpful.

John, would you like to start?

13:57

Speaker 1

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Yes, I'm John Godfrey, I'm the MD for Policy and Public affairs at the city UK. The city UK is a member organisation representing banks, insurers, asset managers and related professional services. One of the things I do there is look after our Defence and Resilience group, which has about 70 firms in membership, and its aim is to improve the flow of finance into the defence and resilience sectors.

13:58

Sarah Edwards

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Thank you Nathan.

13:58

Speaker 2

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Hi, Nathan. Matteo. I'm director of policy and public affairs at Adds. We're UK trade association for civil aerospace, defence, security and space companies across manufacturing and services. And around two thirds of our members have a primary interest in defence. So approximately as a whole we have about 1000 defence SMEs, if you count it in certain ways. So significant industrial footprint that we represent.

13:58

Sarah Edwards

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13:58

Speaker 3

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Mike and Mike Smith. I'm the co-founder and chief operating officer of Aqua Ocean. We're a Plymouth based dual use technology company, so very much founded both for the commercial offshore sector and for the defence and security sector. So we're building long endurance robotic systems designed for the deployment of surface subsurface aerial assets out at sea, North Sea, those types of operating environments. So we're a team of 30. We're classed as a growth business.

And we were one of the companies that presented to the former defence secretary as one of potential future unicorns in the UK as well.

13:59

Sarah Edwards

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Brilliant. Thank you very much. We have obviously a certain amount of time to get through, so if we could be as concise with our answers, if we have follow up questions, we will do that. We want to get through the whole of the panel and get as much information from you as possible. That would be very helpful. So the first thing that the committee is quite interested in, in the Defence Investment Plan, it talks about these different platforms and obviously the new direction that we're going to take.

And I just wondered, Nathan, if you could sort of expand on whether you think that what's described in there, are these the right platforms? Are we going in the right direction? And do you have concerns or are you actually taking some comfort from from what is contained within the plan? Thank you.

14:00

Speaker 2

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I think what we see in the defence investment plan is a shift actually slightly away from purely platform centric thinking towards thinking about the systems. And what I mean by that is rather than just the warship, but it's the, the data, the, the, the AI systems that might be on there. It might be the autonomous vehicles that are accompanying it. And that's the same. So the Navy has looked at moving towards a hybrid Navy, and it's made some platform decisions to reflect that both where it's going to buy new things, but it's also chosen not to go ahead with some.

Similarly, in the for the Royal Air Force, there's a significant commitment or recommitment to the Global Combat Air programme, as well as commitments to collaborative combat aircraft, which again, are going to be autonomous accompanying aircraft to support that. So I think it's a slightly wider focus. I think the the shift towards autonomous systems as a whole, while not losing sight of the sort of traditional platforms that anchor an overall sort of full spectrum military offer, is probably the right one in broad terms.

I mean, if you only look at what's happening in the East or in the Middle East as well, you can see quite clearly the direction of of travel. So overall, I think trending in the right direction.

14:01

Sarah Edwards

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Brilliant. Mike, what's your view on this and how does it affect your your company?

14:01

Speaker 3

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It's good news for companies like Echo Ocean. We in the UK are a world leader when it comes to robotics and automation. When it comes to the ability to scale in the times of conflict, that's only going to be achieved through smaller, more autonomous platforms. You can't spend ten, 15 years building big, complicated warships. What you need is that ability to, at speed and scale produce these. So we were very pleasantly surprised by the direction of travel.

What it also, I think recognises is that there's going to be no one size fits all. There's not going to be a silver bullet solution that solves all problems. This is going to be a multi domain multi environment solution. So what you're going to do is you're going to have a selection of smaller assets, larger assets that are operating aerial surface subsurface working together. And I think that's the point when it comes to software and robotics is it's that interoperability between different solutions.

And we hope a direction of sovereign capability where more of those systems are built here in the UK off of a sovereign operating system that will enable us to retain the skills, knowledge control here in the UK.

14:02

Sarah Edwards

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Do you think when we talk about that sort of sovereign capability, obviously it's very, very important and we know that there is almost it feels like a time limit on how far we need to come in a very short amount of time to feel prepared. Do you think that we have enough time to get there, based on your experience of the development time and the work that you do?

14:03

Speaker 3

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We are a world leader. We will not be if we do not invest in UK companies. So the clock is ticking and the advantage is one that is slipping away to better funded nations, both friendly and and foe. So I think from from our position we see advantages. We think this is the only direction of travel, but it needs to be backed by cash and contracts and programs really rapidly to capitalise on our position.

14:03

Sarah Edwards

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Brilliant. Thank you. So coming to you, John, we've just obviously had a mention there about the finances. What's your view about both the platforms and how you look at investment right across the industry?

14:03

Speaker 1

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Well, I agree that the the reform of the platforms is likely to be helpful if it adds greater nimbleness, more interoperability. That's very helpful indeed. But the most important thing is if it enables the procurement process to move faster, because this is the absolute problem for financiers, the lack of a demand signal for the last two years almost, has meant that the companies one might like to lend to or invest in have in many cases mothballed or given up.

And there isn't anything to lend against or to invest into. So speed is absolutely of the essence here for working capital and subsequently for capital CapEx.

14:04

Sarah Edwards

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That's very helpful. Thank you.

14:04

Leigh Ingham

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Very much, sir. I did just want to follow up. You said something, and it's really quick question about the UK losing out to better organised, funded nations. I just was interested. Which nations do you think are getting it right?

14:04

Speaker 3

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Sure. Right now countries like Germany are putting their cash where their mouth is, so they are in the process of writing big checks. The UK has always been very, very good at doing little £100,000, 200 zero zero £0 contracts to lots of SMEs. Germany has taken a different approach. They've tried to understand where is the future capability they need, and they're writing the five, ten, 20, £30 million programmes that are the ones that investors finance want to see because once they've got those demand signals from the market that there are contracts, there's revenue to be made that unlocks the growth capital that the industry requires.

So we're falling behind European allies right now. The US has always been leagues ahead in terms of spend, but we're absolutely seeing. And the knock on impact of that is when you look at where Europe's growth . Unicorns and acorns. Only recently in the last couple of weeks with Cambridge Aerospace and Kraken Robotics, have we started to see UK sovereign unicorns, whereas Germany asks Robotics, quantum Systems, Hellsing Stark for years or over the last 2 or 3 years, Germany have been producing them at scale because they've been backed by the big contracts that help them win and unlock that capital.

14:06

Sarah Edwards

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That's very helpful. And John, did you have anything to add? I noticed that you were nodding along there when talking about the investment that Germany was making. What's your sort of take on on perhaps other countries and the way that they're financing.

14:06

Speaker 1

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The the, the only thing I would add to that is that it sort of goes without saying that private capital is globally mobile, and it's not going to sit in the UK waiting for something to happen when there are opportunities in other markets. And, you know, we can come on to that perhaps later about, you know, how that might be accelerated. But, you know, capital will not sit on its hands basically waiting for things to happen here.

14:06

Sarah Edwards

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That's great. Thank you Allison.

14:06

Alison Griffiths

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Thank you. Chair. So we've talked already about some of the reforms that have taken place after the Ministry of Defence announced its reform programme in 2024. But for each of you, what do you think are the most important changes that have happened, if any have happened and what hasn't happened? Shall I start with you, John?

14:07

Speaker 1

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Yes, I, I think what has worked in the reform process is still, to quite a large degree kind of theoretical, because partly those reforms weren't all implemented instantly. There's been a little bit of a time taken to, to get around to, to building them in. And also there's been this lack of a demand signal. So, you know, how do you know if the new system is going to work when you don't know if there's any significant amount of money behind it at this point, but in theory at least, and hopefully beginning to work in practice, you know, I think the creation of a national armaments director and the staffing up of that function, and it's taking a little longer than one would like.

But the, the equipping that function with sufficient financial knowledge and commercial knowledge to be able to engage with our end of, of town, as it were, I think has significant potential. So I think, you know, what would make all this work much, much better would be a closer engagement between mod, both the diag and the National Armaments directors offices and the city broadly defined. So in fact, that just involves either side getting on a tube and travelling five stops to go and engage with the other side.

14:08

John Cooper

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Can I just jump in there very quickly? Sorry to interrupt. That's really important. That interface between the mod, you've got the knowledge about the platforms and the kit and the things that go bang and you are providing the finance. That interface is absolutely critical , and we aren't at the stage yet of you actually getting together. Do you know.

14:08

Speaker 1

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There are there are meetings which take place? What what we find is that it's quite straightforward in relative terms to engage with the military part of the Mod. In fact, we have a series of events which we're running in the city called How We Fight. And we've had combined services. We're going to have the Army, the Navy, the Air Force coming down. And these are very popular. You know, the city wants to know more about about these these subjects.

We've had less engagement, I would say, with the financial parts of the mod. And that's really because for all the time we were waiting for the dip, you know, the national armaments director and colleagues said, well, we can't come out and meet you because we don't know what we need to talk about. Thank you . Nathan.

14:09

Speaker 2

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I think we've seen some real progress across the board. I mean, there's there's several different components to this. There's the defence reform agenda that John was just touching on with the creation of the NAD, the military strategic headquarters, the formation of the quad. This is all like internal structure stuff, how Mod governs itself. And that's sort of reasonably well embedded, even if not completely there. Then there's the delivery of the defence industrial strategy.

Today is the one year anniversary of it, of course, and we've had the five defence growth deals launched, five defence technical excellence colleges, the establishment of the office for Small Business Growth. There's sort of lots of interesting bits and pieces, as well as with UK defence innovation. It's starting. Can I

14:10

Alison Griffiths

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ask questions to what you've just said? There has anything actually changed as a consequence?

14:10

Speaker 2

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I think so, but not necessarily enough. If we want to achieve the ultimate effect, which is really in big picture about achieving sufficient deterrence and and sort of meeting our NATO commitments. But the defence investment plan was an important plank in that. I think where we're now at is that was great to have a sense of the funding allocations. Currently, there's a question about the funding roadmap. That's a very live one in the media right now as we go to the budget and spending review, but actually it's just translating that existing set of aspirations into a funded pipeline where I think we hear from our members a degree of frustration, but I suppose you could say it's only been a few months since that was actually released.

14:11

Alison Griffiths

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14:11

Speaker 3

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Yeah, just to echo those comments, I think commercial speed has been the thing that's been been really lacking. When you've spent the best part of two years waiting for the announcement of defence investment plan, there is an expectation that thereafter the purse strings will be sort of loosened and there'll be a flow of cash. And I think whilst there have been some very, very positive examples, that has not been universal and there are still programmes now, one of the challenges we see, and I think this is to the restructuring part of the conversation, is we've actually seen funding allocated to programmes, but they're not able to be delivered because there are not enough commercial personnel in position to deliver them.

So they're now receiving delays of 2 or 3 months while the restructuring where you recruit in whilst you restructure, you rebuild teams, etc.. And that's one of the changes and challenges of ongoing sort of change is all of the back office stuff needs to catch up and fall in place. So definitely positive signs. I would also sort of echo in terms of positive progress being made is the setting up of organisations such as NCF, the UK Sovereign Defence Fund, which is an excellent source of venture funding into early stage businesses, particularly dual use companies as well.

Those are steps in the right direction, very well received, knowledgeable, located in Mod can act as that gatekeeper towards future funding and investment, as well as into the Mod and requirements. So there are some real positive signs. But speed, I think in terms of the commercial readiness and delivery of contracts remains the biggest challenge.

14:12

Sarah Edwards

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Thank you Antonia.

14:12

Leigh Ingham

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Thank you very much, chair. So I wanted to ask whether you think the Defence.

14:13

Speaker 4

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Investment plan has put enough emphasis on supply chain resilience. Nathan, would you start?

14:13

Speaker 1

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14:13

Speaker 2

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I think fundamentally there is. There's a balancing act that's taken place within the Strategic Defence Review, the Defence Industrial Strategy and Defence Investment Plan between how to achieve military readiness, how to dial up production capacity while also sustaining industrial readiness as a sort of an integral lever of that. I think there's there is a bit of a gap there. And thinking through from an economic security perspective, what levers are available to the Ministry of Defence and then the wider government and conscious, so that you've got a sort of cross-section of speakers later to sort of explore this in more detail.

So the supply of materials, for example, which in a sense is not really the business that Mod has historically been involved in, but it has taken more of an interest taking over steel production, for example, in more recent years. So I think there's there's something there for me where there is a bit of a gap, but I can sort of understand to some extent the primary focus on production capacity. At the heart of all of these initiatives.

14:14

Speaker 4

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John, and comments.

14:14

Speaker 1

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Just from a purely financial perspective, the problem that we identified in our group, and probably top of our list of challenges, is the funding of SMEs who sit in the supply chains of the bigger primes. And you're thinking here typically of 2 to £10 million companies, and it is difficult sometimes to to finance those companies for lack of demand signal. And because there's an expectation of guarantee , partial or full.

But there's also a problem with those companies because of the procurement process. And if, if, if the procurement process is not visible to the financier in any way because the product is so sensitive, then there has to be a way to develop a better way of joining those up, whether it's through technology, through Anonymisation. You know, there are mechanisms to do this because that would enable us to finance much quicker because at the moment, company goes off, wins a contract, everything goes dark.

Eventually you're expected to lend against something that you're not allowed to know what it is or how much of it there's going to be. It's really difficult. So this, you know, there are there are ways to work through that. But that I think would make that aspect of the supply chain much more resilient.

14:15

Speaker 4

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Thank you very much, Mike. Any comments?

14:15

Speaker 3

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Yeah. To echo both those comments to also expand it. So supply chain again to sovereign capability and to get on my soapbox, this is one of the things that British businesses are brilliant at, is working with local supply chains, working with local small businesses. When we were developing our uncrewed surface vessel, it's a 25 tonne, 14 metre, you know, fully capable vessel to go out. We about 94% of our spend was with UK businesses.

That's something we're really, really proud of because that maintains small businesses skills in local communities. But where we're lacking is across the wider supply chain. Everybody is looking for those contracts. We also need to be investing in not just the resilience of the supply chain, but also things like manufacturing. You know, down in Plymouth, where we're based home to the UK's National Maritime Autonomy Centre, fantastic location of world leading location. But all of our manufacturing, all of our waterfront warehouses have been turned into townhouses with beautiful views of the ocean, which is fantastic for people wanting to live in a in a nice area, but it means we don't have the capability, the capacity to build things where we need to build it.

And so I think that supply chain needs to look across the entire manufacturing sort of lifecycle as well.

14:16

Speaker 2

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Can I add just one further point? I think just to build on John's point, I mean, fundamentally, we're not going to see businesses investing in effectively spare capacity if there is a lack of confidence in that future demand. And it may be that where there's a strategic sort of dependency or concern that government should think about minimum demand offer or sort of support for warm production, so that we're not sort of turning around in a crisis and expecting that to suddenly ramp up.

There's a bit of skin in the game, because what often happens in defence is this kind of peaks and troughs, and then you have an issue with the workforce going into other sectors, etc. and then when the time comes where there's not really the sort of workforce and support to answer.

14:17

Speaker 3

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Could I just add to that? Because that's an excellent point. What we're seeing, and this is where we're seeing dual use being absolutely critical, is because dual use can flatten the peaks and troughs of defence spending. There will ultimately be sort of peace dividends where defence spending sort of reduces in time. And that's where being able to build and develop with the commercial sector. It also means that in the event of conflict, you've already got an already on capacity.

You are not building from scratch. You are able to build, to grow and scale up from that with the skills. So I think that's an excellent point and why dual use and investing in dual use is really key.

14:18

Speaker 4

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Okay. Thank you. And I wanted to add an additional question, if I may, Nathan, probably to you, which was one of the aspects of supply chain resilience that has been causing a lot of concern in recent months, has been related to the new steel safeguards. And I wondered if you had any comment to make about any implications that you're seeing. I think we're three months into the new steel safeguards being in place. As an MP representing a lot of downstream industry.

I know what I think, but I'd appreciate hearing what you think.

14:18

Speaker 2

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Yeah, no, it is a challenge. The introduction of the steel trade measure in in July. We understand what the government was trying to achieve, the influx of cheap commodity grade steel into the UK. Clearly, we want a vibrant steel industrial base here for a variety of reasons. And unfortunately, we've been caught in the crosshairs from an aerospace and defence perspective with specialist alloys that where there simply isn't the industrial base and there's a whole host of issues to do with OEM specifications.

You can't just change from one mill to another. We are working intensely with, particularly the Department for business, Innovation, science, trade on potential mitigations or exemptions. We're talking to the steel industry colleagues as well. We will see what the government feels able to do, while not undermining the understandable reason of its first sort of bringing in the trade measure.

14:19

Speaker 4

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You're hopeful of tweaks at the review point.

14:19

Speaker 2

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Of course. Maybe too strong a word, but we are in a live conversation and I give credit. The government has been open to a conversation, to receiving our evidence. We what? The thing is, the shoe hasn't fully dropped yet because the quotas haven't actually been all used up. So we are anticipating a problem. But we can see already by the volumes. We know that our use by our members across aerospace and defence and the allocated quotas, we're going to hit the buffers at some point.

So thank you.

14:20

Sarah Edwards

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Thank you, Joshua.

14:20

Joshua Reynolds

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Thank you, chair Mike. I suppose very similar to part of the question that Antonio asked, how easy do you think it is today for defence firms to access the capital that they need in order to grow?

14:20

Speaker 3

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Very difficult, particularly here in the UK? So we have got a relatively immature defence venture capital when you compare it to places like Germany. So most of the growth capital is coming from us always historically. What we've also traditionally and this is where Ancef starts to break the model because of the role it plays in interfacing with the mod. But what we're also seeing is a lot of generalist venture capital firms moving into this space who do not have the, the background and sort of access in terms of knowledge of defence, typically they themselves.

So there's a stat that I always sort of use. In the US, about 56% of venture capitalists are former founders of businesses themselves. They've been on the coalface. They've built a business in the UK. It's 13%. So we've got this immature market. We've got a lot of people who are very smart, come from management consulting, and the likes are accountants who look at businesses and go, what's the risk profile of that? Defence doesn't fit dual use, doesn't even really fit maritime robotics, building giant ocean robots to go out and protect critical infrastructure.

That sounds risky, sounds lucrative and exciting, but it sounds risky. So there's a real challenge. And that's where access to product market fit to contracts is absolutely key, because that is the big de-risking for growth. There are a lot of people who want to dive in with money when you've got it, but and when you've got all the contracts, but actually at that critical stage where SMEs need to grow, it is very, very difficult. And as a result of that, brilliant British businesses are starting to move abroad.

Just yesterday I was at a DS and heard that one of our peers in the market is relocating to the United States, because that's where the capital sits and we are still struggling with that. Organizations like MSF are bridging that, but there is a huge, huge gap in the UK is falling behind.

14:22

Joshua Reynolds

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So obviously, you've said already that this UK is diagnosed. Part of the problem, the fact that businesses can't disclose what it is they're building, the costs, the money and the finance necessarily is needed. Have you as UK, got any ideas of what you would like to see the Mod tweak to be able to help ease that conversation with the city?

14:22

Speaker 1

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Yes, we have a couple of practical ideas that we've been working on. The first one, just to pick up on the capital point, is that we have been working to secure some changes in the standard form of documentation that is used in the venture capital world, which sounds very dull, but actually is quite important because some of that standard, you know, agreement to fund language still carried an awful lot of leftover ESG content, which basically excluded whole swathes of defence.

And what we've managed to change is that the standard documentation will now exclude UN controversial weapons, but the rest of defence will be explicitly included. So you are allowed to invest in these other things. We think, as these new style contracts replace the old ones that will help. So that is that is one thing that we've been doing, I think. Well, as I said, the solution to the joining finance and procurement more closely together is really a technology solution.

It has to be a super secure. The banks and funders that are involved have to be cleared to the right levels. The data has to be anonymized. And but this is not beyond the reach of technology to do. And then there's one other thing which I would put on the agenda around this. And that is about areas where regulation overlaps. And so, you know, one would assume as a financier that when you see a contract, a company and it's won a contract with the Mod, the Mod have done massive diligence to make sure you know that Mike is who he says he is and all the rest of it.

When they come to, to, to raise finance, the financiers have to do the same thing all over again with anti-money laundering, with know Your client, all of that. And I think there is a solution which would be to have a effectively a compliance passport that once you've passed the test at the Mod, that should be good enough to at least accelerate the process in the financing. And it's my sense that the Financial Conduct Authority would be supportive in trying to develop something of that sort.

14:24

Joshua Reynolds

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On, on, on that point. Then , in terms of the Non-disclosures and all those other pieces, is there an idea about what number, how much finance, private finance you think that defence firms are missing out on because they're not able to secure that finance from disclosing customers and contracts?

14:25

Speaker 1

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It's very hard to to come down to a number, but just to give you a sense of the scale and the enthusiasm that exists, you know, east of here in the city for, for funding. If you just look at one bank, albeit a very big one, JP Morgan you know, they have a fund globally for defence and resilience, which is $1.5 trillion. So 5% of that, if it landed in the UK, would be pretty much three times the new money in the dip.

So I think, you know, the scale depends precisely on the demand signal, but it is large.

14:25

Sarah Edwards

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Thank you John.

14:25

John Cooper

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Thank you. Chair John, back to you. You indicated earlier that there was a lot of interest from the city in the kit and having a look at it and perhaps even have a little, you know, play with it hands on and all of that. But how is that translating into an appetite to actually invest? Has that changed? Has the mood changed? Has are people actually willing to put money up now?

14:26

Speaker 1

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Well, I think the appetite is changing. And let's take first the kind of cultural appetite, if you like, you know, five, ten years ago, it was all felt that, well, this is all a little bit sensitive and our staff won't like it. And some of our shareholders might not like it. And it's not part of ESG. The Russian invasion of Ukraine has absolutely changed that. And so, you know, there is, to my way of thinking, barely any more a question of kind of woke fund managers, so to speak, who, who won't put their money in it is it is it is now the case that investing in defence and resilience is a positive part of the s of ESG.

So, so I think there's that. Then you come down to the slightly sort of harder edged bit of this. So am I going to write a cheque for it? And that, I'm afraid, has ever brings us right back around to where's the demand signal? You know, I do need to take a hard edged commercial decision, but I don't have any kind of moral issues with it. Do

14:27

John Cooper

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you think it's less a moral thing and much more a simple, straightforward, hard headed business decision? You're not seeing the demand signal, then you're you're judging those businesses that are in defence like any other business then.

14:27

Speaker 1

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Absolutely. And as Mike said, you know, people will lend against a contract. But if you don't know if there's going to be a contract, it's very difficult to lend.

14:27

Sarah Edwards

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Brilliant. Thank you Lee.

14:27

Leigh Ingham

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Thank you very much. Chair. Last week, the Prime Minister confirmed in the chamber that the UK is considering joining the Defence, Security and Resilience Bank. I'd be keen to hear from your perspective what your thoughts are around the UK joining that. So if I could start with you, Mike.

14:27

Speaker 3

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I'm absolutely all in favour of it. So it's access to more capital. It's access to more markets, more joined up thinking. So we see there being a very much pan European, pan Western allied aligned nations approach. And that's where we think the growth opportunities sit for British businesses that are looking to export. And we think it's where international capital, where there is a lack of UK capital, where we see international capital coming in.

So we strongly support that. It is worth noting, though, that particularly focuses more on growth stage businesses. So there will still be a gap for earlier stage businesses, but we're fully in support.

14:28

Leigh Ingham

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Brilliant. Thank you very much, Nathan.

14:28

Speaker 2

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Yeah, I think that was a welcome sort of comment by the Prime Minister. I think fundamentally I agree mostly with what Mike was saying there. DSB has, I think, an important role to play potentially in terms of capital mobilisation. I don't think we've ever felt it's necessarily a silver bullet, because part of the wider thing that we've all been rabbiting on about, but for a good reason, is there's potentially there are opportunities to earn sources of capital available.

The central problem is the customer demand signal that the harder things. And that's where with the multilateral defence mechanism that the UK until now has been quite sort of invested in, in the piece around sort of demand aggregation, I think is still part of the equation, actually. I think it's a two part solution. So the more the merrier in some senses broadly in support.

14:29

Leigh Ingham

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Thank you John.

14:29

Speaker 1

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You'd expect me to say this from the financial sector, but obviously it depends. What are the terms and conditions of joining and how much capital do you subscribe. And you know, what is the cost benefit essentially. But in principle, I'm absolutely in agreement with with with my two colleagues here. It it would send quite a strong signal of financial interoperability as well as operational interoperability, if that's not a hideous mangling of the English language.

But but it if it adds to the guarantee capacity that exists in the market, that is a big tick . If it helps us with exports, which I believe it would. That is also a big tick, and it may well be that it increases both the volume of funds available and helps with the pricing. So supportive at the right terms and conditions.

14:30

Leigh Ingham

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Just a very quick follow up there. You mentioned the MDM as well. Very briefly, I didn't know if either of you wanted to add anything about where you see the gaps are with the SRB versus MDM, whether it needs to be amalgamated, any of those.

14:30

Speaker 1

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My sense of it is, is that they they perform different functions, but they could be complementary to one another. I personally would would keep them at arm's length from one another, frankly.

14:30

Sarah Edwards

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Thank you. I was just interested in sort of returning to something that you mentioned at the beginning, John, just around the. We did discuss this a little bit in. Panellists spoke about the sort of mobility of capital, the flight of capital to some places. But I just wondered, John, if you if you felt that there was less of that happening, so that whilst there is the ability for capital to move to, to where have we got a strong enough demand signal now that we have things like the Defence Investment plan and other such announcement from the government or not? Where do you think do you think it's do you think it's strong? Obviously, you've sort of mentioned that potentially joining the the defence, Security and Resilience Bank would be another signal that would be strengthening that.

John, what's your take on on that in terms of of where the capital wants to go and how we retain it and invest that?

14:31

Speaker 1

-

I don't think I don't think we've done enough to keep the capital here at this point. The dip is one type of signal, the type of signal that my markets are really waiting for is supposedly coming in the the deficit, the defence, finance and investment strategy. We're waiting for that still, you know, we always want more detail. So we have that still to come that may strengthen the signal. I think, you know, it would be enormously helpful if the Chancellor could do a few things around here to help with the signalling.

The first one would be to make sure that there is a meaningful part of the budget content, which covers defence. I think then there is a potentially the publication of the deficit. There is then potentially a large defence investor summit coming up. We hear either November or December, but that is an opportunity to send a very powerful message. And I think the other half of that about is about co-investment.

And I think more needs to be made of co-investment alongside public finance institutions. So whether that's B b b, UK wealth fund, it could even be the the housing bank. Basically, if you're talking about dealing with some of the lower hanging cost items, including military housing and of course its UK export finance. So these things all have to to sing in a chorus, as it were.

14:33

Sarah Edwards

- -

That's really helpful. Thank you John, we've run out of time now, but thank you very much for all of the evidence that you've provided to the committee and for for your time today. That concludes this panel order.

14:36

Liam Byrne

- -

Today's second panel of the Business and Trade Committee hearings into industrial policy. Thank you very much indeed to our officials for joining us from the Ministry of Defence today. We're really grateful to you for making time today. When I know your ministers are elsewhere. I'd like to just sort of kick off, though, on the point that we concluded the last panel with, which is about how strong the demand signal is. We know that if we are to rearm successfully, then we're going to need to crowd in significant amounts of private sector investment, both from the financial community but also from industry itself.

And the message that we get from them is that the demand signal isn't very clear. So what I'd like to do is just sort of start with getting some basic facts. And Jim Carter, I'm going to come to you to kick off, but others do come in. So we've now got from His Majesty's government a ramp up in defence spending from 62.2 billion this year, rising by about 18% to 73.3 billion by the end of the forecast period.

What is happening to the procurement budget? We can't get detailed breakdown numbers on what is happening to procurement budget. We've got some top line defence numbers. Jim, what's happened to the procurement budget over this period?

14:37

Speaker 5

-

So we've set that out really in the defence investment plan that sets out the 298 billion of investment over the next four years. And clearly, the capabilities we want from there, from that overall figure, clearly will then be issuing, you know, the procurement, sort of more detailed procurement pipeline that sits sits underneath that.

14:38

Liam Byrne

- -

So we don't have a year by year breakdown of that very large number. And I remember I'm so old and I've been around for so long. I remember the standard trick at budget time when Gordon Brown was the chancellor, was to basically take a very long run of years, roll it all up into one package and present it as a big number without giving a year by year breakdown. When I look at the breakdown of the defence budget, I can see a 4.8% increase next year, a 4% rise the year after, followed by a 1.21.1.

How do we understand what the year by year breakdown of that defence of that procurement budget looks like?

14:38

Speaker 5

-

I think we'll need to come back to you in writing on that exactly how that's broken down. Okay. Yeah.

14:38

Liam Byrne

- -

You're telling us today there is a breakdown.

14:38

Speaker 5

-

Well, I need to I need to return in, in, in writing. Right.

14:39

Liam Byrne

- -

Okay. That's a mystifying statement. The latest figures we've got is that about 40 to 45% of procurement budget is spent in the UK or on UK headquartered companies. Do you have a sense by 2030, what fraction of this mysterious procurement budget will be spent on UK headquartered companies?

14:39

Speaker 5

-

So I would recognize a different figure to that 45%. So 85% of our spend in the last financial year was was with UK based organizations.

14:39

Liam Byrne

- -

85%.

14:39

Speaker 5

-

Yeah, 85%. Yeah. And clearly and clearly as part of the back British work we're doing. And Ben can speak a bit about that and our changes to the social value model. We're looking to increase that. And it's also, you know, we're, we're , we're very busy clearly implementing the industrial strategy. And our work with SMEs in the UK is also going to drive that that number. We see that driving that number north.

14:40

Liam Byrne

- -

Right north of 85%.

14:40

Speaker 5

-

Yeah.

14:40

Liam Byrne

- -

Okay. And the second big complaint we obviously get is about the speed of procurement. So I think last year, the Defence Secretary promised the biggest overhaul of Ministry of Defence procurement for 50 years. That is a bold statement at the moment. I think the last figures were something like six years to procure major platforms, three years for upgrades, and the goal is to drive that down to two years for major platforms, one year for upgrades, three months for commercial systems like drones.

Can you tell us what the average is today in terms of the procurement cycle for major platforms and upgrades?

14:40

Speaker 5

-

So the specific numbers of those averages I haven't got with me today. This is a really critical part of the changes we're making under the industrial strategy. And that and that transformation of the acquisition system is something we're we're working very hard on. So the as set out in the strategy, the implementation of the the, the segments, the procurement segmentation model and the going live with our accelerated commercial pathways, we have. Seven live more to come.

And they're things like to, you know, pathways for urgent spiral SMEs, data and digital. And what we are definitely seeing through that implementation is the acceleration of those specific work and the number of our live procurements that are adopting a pathway is around 70% based on figures in May. So I'm giving you, I'm giving you some examples of where I can really see accelerating. And another if I if I can give you just another very quick example.

So commercial X is one of our, it's a small program that's delivering really innovative capability. Their average time to contract is around 50 days, down from 57 last year. So . And they've delivered about 1000 contracts in the last two years. So, you know, we've got lots of examples of critical capability equipping the warfighters being delivered really fast. The reason why I hesitate on giving you overall figures for those large segments is that I really want to make sure that the data that I'm giving you is 100% accurate.

I have seen trending that indicates those are going in the right direction, and a bit like turning a supertanker with a lot of live procurements. Some have been delayed, but the things that we're letting now the new requirements coming in are being done at real pace. So I think I think that trend will continue. And I think there's, you know, there's a number of other things we're doing to streamline that process. So that time to contract target, I'm confident will be continue to be trending towards those targets.

And

14:42

Liam Byrne

- -

you think you'll be able to give us a snapshot of where we are on that journey. If I wrote to you.

14:42

Speaker 5

-

14:42

Liam Byrne

- -

nodding. Thank you very much indeed. You'll accept that the old defence equipment plans provided quite a lot more detail about the packages that were being procured. So I think from memory, we used to be able to look at defence equipment plan and say, right, they want 623 boxes. And you'd accept that within this kind of large, mysterious procurement budget that we can't break down year by year, it's quite hard for industry to see into what the precise packages are.

Do you have a sense of when the Ministry of Defence will begin to specify what those packages are?

14:43

Speaker 5

-

So I think the investment plan is obviously a different sort of beast to some of those equipment plans and includes, you know, other sort of infrastructure people, all these other pieces. I mean, it's interesting because I, I, I speak to industry clearly regularly about the investment plan. I was at a, I was at a defence security resilience conference in Newport last week. And actually I'm getting a very positive response to the investment plan in terms of us setting out our capabilities and.

progress and, and what we're after because it enables, I mean, a industry are really desperate for that demand signal, which they now they now have and their ability then obviously, to invest in production skills. Resources are kind of can be off the back of that. So I think it will, I

14:44

Speaker 1

-

I think it will. I think in answer specific answer to your question, I think from the autumn we will say, you know, soon we will be seeing those. packages coming out. And my colleague in the National Director. Paul Marshall, is in our plans and. portfolios team is, you know, at the . Front of

14:44

Liam Byrne

- -

that work to to deliver those those packages you'd accept. It's a little blurry at the moment. So if I look at the numbers for air, it grows from 27.8 billion to 70 billion between 2030 and 2035. But it doesn't really say exactly what is going to be in that uplift or when. Between 2030 to 2035. We

14:45

Speaker 1

-

will hit the 70 billion number. Yeah, I mean, I, I mean, I do, I do know. conversations so clearly the, you know, the investment plan was published. And then as you can imagine, very quickly, we mobilised to get underneath that with our with our strategic partners and our, and our wider defence ecosystem to, to explain and . To

14:45

Liam Byrne

- -

add clarity at a, at a deeper, deeper level with the. So what you're saying is that from the autumn,

14:45

Speaker 1

-

We will begin to see . Clarity over

14:45

Liam Byrne

- -

some of those packages that make up these new numbers. That is my understanding. Okay. And just finally from me then on the challenger bid rigging. So you will have seen the Ft reporting today about the CMA looking for a bit more granularity on procurement data from your department and the CMA alleging that we are falling behind other countries in really understanding our procurement data inside out and having a strong handle on bid .

Rigging its bid, rigging a

14:45

Speaker 1

-

department, a problem in Mod procurement today. So interestingly, I was at the all party parliamentary group this morning with the chief executive of the CMA, Sarah Cardell, at her promoting those two reports. We're working with Sarah's organisation, which is really good. So they're in we've got joint Workstreams that we're working together on, one of which is bid rigging. And, you know, we clearly take very, very seriously, I think one of the.

One of the one of the sort of advantages, a bit of the defence market is that a, a proportion of our spend is under the single source contract regulations. And those regulations give us as a the sort of sole buyer. significant access to the cost drivers and the information that are making up bids so that that ability to really scrutinise, to get underneath the data means that the things that Sarah is raising, where there is.

collusion and you get this sort of. artificial increase in in bids, we . Think for

14:46

Liam Byrne

- -

that proportion.

14:47

Speaker 1

-

You know, we can really get underneath. Is it a problem you're worried about? It is a it is a problem I'm worried about and it's one I will continue to pursue. So under the Defence Investment Plan, we had a specific target for the National Armaments Director Group and my. organisation to identify. £250 million of procurement error or fraud. And we've. And we've appeared at . The

14:47

Liam Byrne

- -

Public Accounts Committee on that early,

14:47

Speaker 1

-

Early in the year, target is to take on £250 million.

14:47

Liam Byrne

- -

So to realise .

14:47

Speaker 1

-

Realise that target Treasury efficiency targets by the sound of it. Yeah. So so we take it seriously. We want to make sure we use technology effectively.

14:47

Liam Byrne

- -

So digitalisation.

14:47

Speaker 1

-

AI can help here. But this is also about, you know, rolling sleeves up and doing really good contract management.

14:47

Liam Byrne

- -

So there's a I'm excited to . Sort of get

14:47

Sarah Edwards

- -

after that number. Okay. Thank you. Sarah Edwards Thank you, chair. The committee is quite interested in, obviously, how we define some of the terms that are used. And we know that the Defence Investment plan obviously sets out a nice vision. Great, lovely. But some of it is not perhaps as clear as we think it should be. The increasing sovereign and asymmetric capabilities.

For example, just one of those phrases. We made. recommendations in the Economic Security report to to the government to publish a list of what it meant by sovereign capability. So. And that was rejected. There are other. countries that have done this type of thing. Canada, and we visited them last year to learn about what they were doing around defence. They have, for example, and Japan also take a slightly different.

But they do actually list types of technologies that they want to pursue to make sure that that that again, as we heard in our previous session, that demand signal is clearer. So I want to know what it is that perhaps you think and other members of the committee as well. So perhaps you can start what what is it that we mean when we say sovereign capabilities?

14:49

Speaker 2

-

And what is . It that

14:49

Speaker 1

-

we're trying to develop? So I think if I start and then, Ben, maybe come to you, and certainly in some of the sort of the back British work and the work we're doing under the Defence Industrial Joint Council, which I think is getting after this, I mean, the. There are two if I think about the two lenses of the Defence Investment plan and the Defence Industrial Strategy, they work together to sort of bring into. clarity the sovereign.

capabilities that defence needs to equip the warfighter to win the sort of the war of tomorrow and the tilt that's described in the investment plan, particularly around sort of autonomous vehicle autonomous systems, uncrewed systems, sort of point to point to that. It doesn't go into the into the there's a point. The chair made the real. detail of the of those at a at a more granular level.

But we've been working hard around sort of.

14:49

Liam Byrne

- -

14:49

Speaker 1

-

As I said, with our with our in the Defence Industrial Joint Council. So Ben, would you would you mind just . contributing to that, please? Thank you. So we absolutely recognise the challenge of committees set out. So as part of our back British work, we've got five steps that we're undertaking. The first is to be clear about our definition and to publish that definition of what we mean by British and sovereignty. That work is, is, has been done jointly with .

14:50

Sarah Edwards

- -

Industry and with Aids, who I understand were in with you earlier today. Is there any any time frame on that as a you're working out the definition . Of of

14:50

Speaker 1

-

what British is and what is sovereign. Do we know when that's going to happen? So this whole package of work I'm going to describe runs from September to, to. February next year. So it's a six month programme. The advice still has to go to ministers before it can be .

14:50

Sarah Edwards

- -

Published and set out. So I'm unable to give you a specific . Date

14:50

Speaker 1

-

14:50

Liam Byrne

- -

14:50

Speaker 1

-

But six months time we should know within the next six months this whole package of work ought to have been delivered. And the definition piece is foundational to this whole package of work. It's really important because it drives things like the defence, finance and investment strategy. It underpins everything we're doing on the industrial base. So , so definition is one part. The second part is mapping out the subsectors. So you saw in the defence industrial strategy that we we touched on that.

We agree with you that much more specificity is required. That's what we're going to do over this period , working with our analysts and industry to define them. We're then going to take that work and we're going to put it into our.

14:51

Liam Byrne

- -

Procurement processes. So

14:51

Speaker 1

-

what can we do to amend our procurement. processes in order to buy British and to show that long term sustainable demand signal, which I think you expect from us. The next package is offsets and having an offset capability, because we won't always be able to buy British. Some capabilities just won't be produced here. We'll have to buy overseas. So having a mechanism by which those. suppliers invest back into the UK economy is really important.

And again, we've been through a consultation. process with industry and advice will be going out to ministers shortly. And then the final step is the support package, which goes around this to make it . Easy for

14:52

Sarah Edwards

- -

industry to operate with us on this back British policy. And so can I just come back to so you said that you're going to map the. subsectors and look at procurement processes. Could you explain how what you're doing is, is, is not listing the sovereign capabilities as the committee asked you to do as a government, how is what . You're

14:52

Speaker 1

-

doing not doing that and how is it getting anywhere near it? Well, our intention is to be much more clear about to everybody so published, which subsectors are important to us, where and where we require sovereignty. So whether we're happy to build, buy, partner or grow in order to get these capabilities. So I think what we're going to do is paint a picture of the defence industrial base of the future and give a much clearer demand signal, not only to .

Help

14:53

Sarah Edwards

- -

SMEs and primes in the UK, but also to international partners as well. Does that mean you . Are

14:53

Speaker 2

-

14:53

Speaker 1

-

accepting our. recommendation to map sovereign capabilities? So it's for ministers to to determine whether they accept the policy advice going up. But for work going forward, which they have . Commissioned

14:53

Speaker 2

-

14:53

Liam Byrne

- -

is, is to to do the policy generation. Thank you.

14:53

Joshua Reynolds

- -

That sounds suspiciously like progress, but Joshua Reynolds thank you, chair, just very briefly, and please do correct me if I'm wrong, because it sounds like you just told the committee it's going to take the Ministry of Defence six months to understand what the words British and sovereign mean.

14:53

Liam Byrne

- -

14:53

Joshua Reynolds

- -

hope that's not the case. But my my main question.

14:53

Speaker 1

-

Just pause for a moment there. Is that true? Is that what you've just told us? So what I'm saying, I can't get ahead of the policy advice ministers. So what I'm saying is there's a package of work. We aim to deliver all of that in the next six months.

14:53

Liam Byrne

- -

14:53

Speaker 1

-

One of the first order items is going to be defining sovereignty. We already have a candidate definition . Which has

14:54

Speaker 2

-

been developed with.

14:54

Liam Byrne

- -

Industry, but it has to go to ministers first. Okay. You'll understand that some people .

14:54

Speaker 1

-

Will wonder how the Ministry of Defence can't define what is British. I understand that, so . I mean, it's

14:54

Joshua Reynolds

- -

quite nuanced and . Everyone has taken

14:54

Speaker 2

-

. A

14:54

Speaker 1

-

different approach. So we obviously have also . Wants to

14:54

Speaker 2

-

define the . Word

14:54

Speaker 1

-

British. So in terms of well, the nuance. Yeah. So if the Canadians, for example, have defined it by if you pay taxes in Canada, if you employ a workforce in Canada and so on. So we've got that that approach, other countries have adopted different approaches. What we're trying to do is understand how we do that without. disadvantaging critical. companies who operate in the UK and. supply into UK.

So there are there are different ways you could look at it. And we're trying to you know, the work we're looking at is how do you take a tiered approach in order to make sure that companies which have holdings overseas, for example, tireless.

14:55

Liam Byrne

- -

14:55

Speaker 1

-

But also have very big .

14:55

Speaker 2

-

Investment . And

14:55

Liam Byrne

- -

commitment in the . UK,

14:55

Joshua Reynolds

- -

are catered for in our definition? That's right. That's right. We're taking a tiered approach to the word British from what I. Okay. As part of the Defence Industrial Strategy. committed to setting out a. strategy in regards to crowding in funding. Now the Defence Industrial Strategy was launched this time last year, 8th September last year. It's been .

A

14:55

Speaker 2

-

year. When is that strategy going to be published?

14:55

Speaker 3

-

Can I suggest I turn to to Sharon who's been working on this to. Yeah, sure. So this was both in the SDR and the Defence Industrial Strategy. And we refer to it again in the Defence Investors plan as well.

14:55

Liam Byrne

- -

So effectively.

14:55

Speaker 3

-

We are hoping that the defence Finance and investment strategy will be out this autumn after the budget and the process by which we've got there is we have talked to over.

14:56

Liam Byrne

- -

150 stakeholders. both investors, SMEs.

14:56

Speaker 3

-

Places like EDS and city UK, which we've had a number of roundtables with and worked. They've worked with us on our recommendations. We've particularly also worked with regulators such as the Financial Conduct.

14:56

Liam Byrne

- -

14:56

Speaker 3

-

The puffins like the British Business Bank and the National Wealth Fund.

14:56

Liam Byrne

- -

And effectively.

14:56

Speaker 3

-

If the Dipp sets out the signal, the. defence is. translating that for. investors and external capital. So what does that mean. effectively is it's in three tranches.

14:56

Liam Byrne

- -

14:56

Speaker 3

-

To do with looking at access to capital, which is obviously a concern, but also then practical measures in terms of finance models that we've been working with Treasury and. Mr.. On in terms of how you can bring in capital much quicker than you can now and then, we're also be working on an investable. opportunities pipeline. So some of the things that you have referred to in terms of the dip, so we can actually go to investors and say, these are the kind of things that we are going to, to, to crowding capital.

The other. point of that is in terms of the investable.

14:57

Liam Byrne

- -

14:57

Speaker 3

-

Is that we know from all the feedback that we've got, and I'm sure you would say the same to me is we need a single front door. So we are launching the Defence Investment Unit within Mod as well. So and that is currently being set up in terms of having a single front door, but also working with the wider Whitehall apparatus here. So office for investment, BBC National Wealth Fund within our own place UK and the office for Small Business Growth.

But to channel it through one front door. So it's not confusing for investors. Okay, am I supposed to go to this place or to that place? So it's actually making that a lot simpler as well. And then finally, we are hoping before the end of this year to have the Defence. Investment Summit, where we will bring in. investors and actually announce and talk .

14:58

Liam Byrne

- -

About exactly what we are going to be doing. Would you recognise the city UK's analysis that private . Capital could

14:58

Speaker 3

-

multiply government spending by . 2 to 3

14:58

Speaker 2

-

14:58

Liam Byrne

- -

That's why we're doing this work. So we've actually had two roundtables.

14:58

Speaker 3

-

That's not that's not a crazy estimate from the city UK. I mean, it's so what I would say is it will build up on day one. It's not going to double or triple. But I feel that if we do this well and we need to set up a. So what are we working on at the moment is metrics and what. What constitutes success for us is we need what we call pipe cleaner deals to actually show the city that we are serious about what we're doing.

And we can do this quickly, and then we can make this bigger. So in time, in the medium term, this could, you know, Treasury rules, etc..

14:59

Liam Byrne

- -

Notwithstanding.

14:59

Speaker 3

-

14:59

Liam Byrne

- -

Significantly multiply.

14:59

Speaker 3

-

What we're doing. And that's also for. accelerating how. quickly we can then bring in military.

14:59

Liam Byrne

- -

14:59

Speaker 3

-

But also help in terms of investment and growth. Everything we talk about in the .

14:59

Liam Byrne

- -

Dis, in terms of around country. Yeah. Okay. You recognise two of the issues that have come up in some of the evidence we've heard. So one is that it is smaller businesses that are really struggling with banking and other forms of finance, because demand signals are especially important for them and they lack those. And second, the point that John Godfrey was making about the travails small business had to go through to get through the various compliance loops.

He's got some practical proposals . For

14:59

Speaker 3

-

solving that problem. I've personally two issues on your radar. Absolutely. So I've personally spoken to John. We've had a number of conversations about it and also Aids who did their ESG charter recently. So we are working on a package of measures within the DFS on access to finance for SMEs . And

15:00

Speaker 2

-

15:00

Liam Byrne

- -

with the . Financial

15:00

Speaker 2

-

Conduct . Authority, as well

15:00

Liam Byrne

- -

as with the B-bbee.

15:00

Speaker 2

-

Can I just build on Mr. Carter and then I'll come to. So very quickly, I mean, we clearly attracting SMEs, you know, utilizing their innovation is critical. And that finance point is, is in fact, we've done a we did a recent webinar with NatWest actually talking to 600 of their bankers about how they could support their SM clients. We also have in to. supplement Sharon's point, the Office of Small Business Growth and our SME action plan that was published in July, which are are great at sort of signposting SMEs how they can, you know, navigate defense and obviously .

Gain

15:00

Liam Byrne

- -

access to that, that finance that Sharon mentioned. That sounds good. I mean, we obviously see that the number associated with things like the accelerated contract fund is very small, 20 million. And obviously, we haven't joined the SDR, which was specifically focused in .

15:01

Speaker 3

-

Unlocking . Bank

15:01

Liam Byrne

- -

.

15:01

Speaker 3

-

Finance for small defense contractors. Is

15:01

Liam Byrne

- -

that the SRB? Yeah. Do you want me to talk a little bit about that? Would that

15:01

Speaker 3

-

be helpful? You . Might as

15:01

Liam Byrne

- -

15:01

Speaker 3

-

might as this opportunity. So we've been working with the Treasury on both MDM and DSB. I think one of the important. things to say is not sort of black and white is, you know, we're doing this and not doing that. We've had a number of discussions with Canadian colleagues, and I think it's really important to note the. complementarity of the two models. So obviously, as you say, DSB is.

particularly focused on. financing and particularly in terms of small businesses, which makes it attractive to a number of people. MDM is focused on procurement, which Jim was talking is a critical part of what we do in Mod, but also joint procurement that can bring in efficiencies. Look at looking at joint.

15:01

Liam Byrne

- -

Stockpiling. Which

15:01

Speaker 3

-

is really important for our commitments to NATO, but also in terms of working with other nations. What we are looking at at the moment is how these models can work together or potentially be brought together. And that's a piece of work that is .

15:02

Liam Byrne

- -

Happening live at this moment in time, with a view to .

15:02

Speaker 3

-

Announcing something when, as I said, it's a live piece of work. And as you can imagine, there's a lot of international relations and discussions . That are

15:02

Liam Byrne

- -

currently literally at stake. So I can't I can't give you a date because we're publishing correspondence from the Chancellor today, which underlines the ambition to try and find ways to bring these things together. And you're telling the committee today that those negotiations, those conversations are .

15:02

Leigh Ingham

- -

Underway at the moment. Thank you very much, chair. I just wanted to follow up on something you said a moment ago, which I thought was quite interesting about the. Dfis and how if we get this right, we can get it done quickly and move things forward. I just wanted to counter the point that you just made, Ben, that it's going to take you six months to define British. I appreciate that's a maybe an.

15:02

Liam Byrne

- -

Oversimplification. But

15:03

Leigh Ingham

- -

I don't understand how those two things are .

15:03

Liam Byrne

- -

15:03

Leigh Ingham

- -

Because if we're doing this, surely we need to have an understanding of what British women are looking to fund things. So I'm a bit concerned that you're publishing something in the autumn, which isn't going to have the definitions and the guidance that you need to move things forward. So I'm just interested in how you're dealing with that issue in terms of the pace of movement, really, because . That's

15:03

Speaker 4

-

the one thing we have . Heard a lot of

15:03

Speaker 1

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is things have been quite slow. Yeah. So what I've said is the whole package of work will take six months to deliver. I haven't been specific about when the definition will be delivered. I have said that the DFS is dependent on a. definition in order to to support its work. So obviously what we have to do behind the scenes is just work on . The

15:03

Speaker 2

-

sequencing and the ministerial. approvals before we can announce them. The one if I can quickly as well, just to your general point around pace. So one of the things I'm really pleased about in the way we're implementing this industrial strategy is the collaborative way, both across , across the department, wider government and the defence. ecosystem that are getting behind the plans to implement the Dis. So the Defence Industrial Joint Council that I spoke about has kind of investors.

It has primes.

15:04

Liam Byrne

- -

SMEs. trade associations.

15:04

Speaker 2

-

And there are really clear and. ambitious kind of. plans delivering activity to deliver the industrial strategy. Those are sort of set out and they are tracked and we are programmatically getting after it. So I just wanted to sort of counter, you know, this isn't what I see isn't isn't sort of delay. It's about really . Motivated

15:04

Liam Byrne

- -

people getting after this agenda at pace.

15:04

Joshua Reynolds

- -

Let's just round out the conversation on Dzbb. Mr. Reynolds, anything further on this? Thank you. Chair. Yes. So I think there's the question, obviously, seeing the joint UK Canada statement on.

15:04

Liam Byrne

- -

the 8th of July.

15:04

Joshua Reynolds

- -

Things the Chancellor said, and meetings with both. Treasury and Ministry of Defence since that 8th of July statement. Can you point to any. solid concrete. instances of cooperation and collaboration . Between

15:05

Speaker 3

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the DSB and the work that's going on for the MDM? I think, as you'll appreciate, and as I said earlier, these are two. organizations that have been developing over the past roughly a year and a half. There are a number of complexities. And as I said, because I wouldn't have made it up, is that there have been numerous.

15:05

Liam Byrne

- -

15:05

Speaker 3

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Both within the DSB group, which was the initial group that set up the DSB, and of course, Canada, which has been the main proponent of it, and ourselves in the UK as well as our partners in the MDM. I think, as you'll probably know much better than me in terms of when you have. negotiations with multiple. countries over something that is. complex and relatively niche, like a defence.

15:05

Liam Byrne

- -

Financing structure.

15:05

Speaker 3

-

These can take . Longer

15:05

Liam Byrne

- -

than probably some of us would like in terms of reaching a conclusion. I think if we're honest, the obstacles that we came across were a bit more fundamental than that. The obstacles we came across was the Treasury basically saying, we haven't got enough money to endow both of these with tier one capital, which they could then leverage. So it was a much more philosophical fiscal constraint than . Some of

15:06

Speaker 3

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the than perhaps you've alluded to there. I think this is, you know, a case for Treasury. And as we know, that defence spending has been in the. headlines for us when we're speaking with Treasury. And Treasury's view at the time was, you know, the procurement would deliver greater. efficiencies to defence than something that could be dealt with in other ways. But I think the thing to focus on at the. moment is not necessarily history, but what is happening at the present .

15:06

Liam Byrne

- -

Time in terms of our discussions with Canada and what the future holds. The view we picked up is that Treasury would much prefer the British Business Bank to deal with small business supply chain problems, or small business leverage .

15:06

Speaker 3

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Problems, than joining a multilateral institution designed to fix the same problem. One of the things that I'm sure will be examined over the weeks to come is, you know what? And I think what we want, and I'm sure what this committee wants, is really what is best for British businesses. The BBC already does offer support to SMEs, not necessarily just defence ones, but across the board. And you . Know,

15:07

Liam Byrne

- -

that's got to be reviewed as part of the overall package. So you think there's . Going to be

15:07

Speaker 3

-

a new philosophical freedom that's going to come to some of this over the next. As I . Said, I can

15:07

Speaker 4

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assure you that conversations are taking . Place, and

15:07

Liam Byrne

- -

15:07

Speaker 4

-

. There'll be an

15:07

Speaker 2

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announcement soon, I think. Sorry, Mr. Carter. Well, I was going to say, I think Sharon, when she talks about the I mean, the prize as well, the prize of crowding in this financing, the way the industrial defence Finance and investment strategy will set out is also around the export opportunities. And we think that can be a real you know, this idea of defence being an engine for growth. We think there's tremendous opportunity for UK .

Suppliers

15:07

Joshua Reynolds

- -

to to benefit from that export potential. On that specific point. Then when we met with the chief negotiator for the DSB, one of the points that she made very clear to us was that if we weren't part of the.

15:08

Liam Byrne

- -

DSB.

15:08

Joshua Reynolds

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When sovereign lending happens specifically to Ukraine, it would not be that money would not be able to go to British defence firms.

15:08

Speaker 3

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So on that point, how how can you square those two circles? Can I just come in on that? So we're already part of the UK Ukraine loan agreement. So . We're

15:08

Joshua Reynolds

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already linked in with Ukraine. So I think that just must have been an error.

15:08

Liam Byrne

- -

No it wasn't. It definitely was not. Part of the DSB was sovereign follow up on write to you on that point because we do benefit from . Clarity

15:08

Speaker 5

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on that. Anything further, Tony, thank you for your patience. Turning now to defence as an engine of growth, particularly in. de-industrialized regions, many of us were very interested to see the announcement in the Strategic Defence Review that there will be six new. munitions and.

15:08

Liam Byrne

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Energetics factories.

15:09

Speaker 5

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That was early autumn 2020 5th November 2025. We have 13. locations being talked about. When are we going to hear where these six factories are going to be? There are. de-industrialized communities across the country that are . Waiting for these jobs to

15:09

Speaker 2

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turn up. So I would I'll have to kind of write to the committee with a specific details about around the timing of that. I mean, more more.

15:09

Liam Byrne

- -

15:09

Speaker 2

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mean, I think the spend that we have around the UK, the defence spend that is growing clearly is a is a positive story. The, you know. 66% outside of the South East. And I and I get around the country a lot sort of talking to suppliers and those.

15:09

Liam Byrne

- -

15:09

Speaker 2

-

Thinking about sort of, you know, Barrow or Scotland or elsewhere that are really benefiting from the defence pound because we know that it comes with highly skilled jobs, well paid, well paid jobs in terms of I mean, it might be helpful if if you'd allow just just a minute on the defence growth deals as well, which you really see being a bit of . An engine

15:10

Speaker 6

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for growth. I . Don't know.

15:10

Speaker 3

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Sharon, would you mind just picking up on the growth deals? So we have launched five growth deals across the country since the launch of the Defence Industrial Strategy that is in South Yorkshire, in Plymouth, in Wales, Northern Ireland and Scotland. And we have. ambitions to expand that across the country as. resources allow and link more. widely with other parts of the country. So in terms of what we're looking at, this also links with academia and our Defence Universities Alliance and the Defence Technical Excellence colleges as well.

So we. particularly are focusing on certain themes in each area.

15:10

Liam Byrne

- -

15:10

Speaker 3

-

On what those areas strengths are and what their interests are in the sort of early business cases that they have shared with us. And we're now very much entering the delivery phase of getting details of the. projects and giving out the . funding . For

15:11

Liam Byrne

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real so that these . Projects

15:11

Speaker 5

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can happen. But you'll. understand from the perspective of industrial.

15:11

Liam Byrne

- -

15:11

Speaker 5

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The key one of the key. drivers is spreading growth to every.

15:11

Liam Byrne

- -

15:11

Speaker 5

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And it has felt that a number of the defence investment decisions have been driven by building on. places that already have.

15:11

Liam Byrne

- -

Significant manufacturing capabilities.

15:11

Speaker 5

-

And what many of us who represent areas that desperately need good new jobs are waiting for is the. moment when the deals go. beyond the cluster around.

15:11

Liam Byrne

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Rolls-Royce. The

15:11

Speaker 5

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cluster in Plymouth, to reach out to those areas of the country that are crying out after 40 years of. deindustrialisation for the good jobs that are to be brought by this defence dividend, which for the moment has not . Turned

15:12

Speaker 2

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up for communities like many of those that we .

15:12

Liam Byrne

- -

15:12

Speaker 2

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I we track it very carefully. We understand where the defence pound is spent. I mean, one of the ambitions we have clearly to draw in non-traditional suppliers into defence, dual use suppliers, and massively increase our use of SMEs, will help us get out to those postcodes that we we don't we don't currently hit. So yeah, a. £2.5 billion increase in spending with SMEs, a 50% increase by.

15:12

Liam Byrne

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2028.

15:12

Speaker 2

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Which is part of our industrial strategy commitments, will I . Think will

15:12

Speaker 6

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help,

15:12

Speaker 3

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Will help. address that point that you're making. And just to add quickly, I mean, what we are thinking about is working with the regional defence and security clusters and some of the new mayoral strategic. authorities to say how we can actually expand what we've. already announced in the past few months. So .

15:13

Speaker 5

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Hopefully, if you have us back next time around, we can tell you about that. Well, and I appreciate the offer to write to us, particularly on the munitions factories. I'd be I'd appreciate a more. granular regional. breakdown of where defence money is being spent. We are particularly. interested in the aspirations for more good jobs in . Lots of

15:13

Liam Byrne

- -

areas of the country where where they don't exist currently. And can we just check something while we're on procurement and sovereignty, just on Chinese supply chains? So we've obviously we're bound to have some Chinese components, not least rare earth in the supply chains that's going to show up in a report we're about to publish on critical minerals. Are there particular supply chains, particular lines of armaments or supplies where you think there's a priority to decouple from China? Are we using .

15:14

Speaker 2

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China for our uniforms, for example? Not to the best of my knowledge. Yeah. I mean, we in addition to acquisition reform, particularly going after the pace of.

15:14

Liam Byrne

- -

15:14

Speaker 2

-

The improvements in our. understanding and management of our supply chain, the resilience of our supply chain is an absolute priority. My organisation. So I have a I have a supply chain team that is.

15:14

Liam Byrne

- -

15:14

Speaker 2

-

You know, programmes of sort of, you know, deep understanding and illumination of our supply chain, as well as working closely with industry around sort of. wargaming and, you know, scenario planning for eventualities with the aim of us being kind of, you know, already by, by 2030. So working back from that, that date and these programmes are building our. capability and enabling us to. identify in our supply chains. Where are they, you know, where there might be foreign interests, where we need to need to intervene.

Of course, we're doing that in a, you know, we're doing that in a prioritised way in the areas of criticality. But it is bringing it's it's it's bringing real sort of, you know, a data rich. Approach to, to that challenge. Once you've identified that you have these challenges, it's not just, I mean, I talk about sort of foreign ownership, but there's also other fragility points or single points of failure. It enables us to then act upon that, you know, how do we create that dual source or, or move out.

suppliers from our from our supply chain? So it is something we actively manage and we. understand to, you know,

15:15

Liam Byrne

- -

Who is in those even at the sub tier in our . Supply

15:15

John Cooper

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chain. Okay. I think we've covered most things. But. Mr. Cooper, did you want to. Yes, it was just one very quick thing. So in our economic security report, we. recommended a trusted marketplace for people who wanted to invest. I think we've heard consistently throughout today the importance of getting private capital in into this, not to do ourselves down, but it wasn't an original idea.

The Americans already do this. And we heard that the much delayed defence finance investment strategy is going to have a kind of pipeline of investable projects. Is the decision to reject our. recommendation on that trusted group? Is that

15:16

Speaker 6

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going to be . Reversed, do you

15:16

Speaker 3

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think is that likely? Is that going to be part of that going hand in hand with that? So one of the things we are looking at, I think two of the things that are linked to what you are saying, and then correct me if I'm wrong, is we're just finalising some work on trusted capital. So that also links partly to what Ben was talking about in terms of the British definitions. There is a link through.

So that's that's being finalised in terms of, you know, what kind of capital is suitable for what types of investments and what types of asset classes. And then we're looking more. broadly at the. option of looking at the compliance requirements. So it is like a trusted group that, you know, you go through compliance requirements, which . Could actually

15:17

Speaker 7

-

15:17

Liam Byrne

- -

process quicker. Could be helpful. Right. I think that's our lot. Thank you very much indeed. That's been very enriching. And we will certainly invite . You

15:17

Speaker 8

-

back to your ministers back in the country. But for now, that's it.

15:19

Liam Byrne

- -

Welcome to today's third panel, the Business and Trade Committee hearings on industrial policy. We're looking in this panel and the next on devolution. It's something the new Prime Minister has put centre stage in his premiership. But before we get into some of the details, Mayor Richard Parker, we're especially grateful to you for joining us at what we know is an incredibly difficult and busy time . In the light of the Jaguar Land Rover announcements, about 4000 redundancies.

Could you just give the committee your sense of whether you . Know

15:19

Speaker 9

-

yet what the wider impact is likely to be? No, thank thank you. Thank you very much. JLR are a very important. business which have HQ global HQ in the West Midlands, support tens of thousands of jobs directly and through the supply chain. I was made aware late on Friday evening that there was an announcement due and we had a very busy weekend. Speaking to a number of members of the government, I spoke to Sharon Graham, the General Secretary of unite, and had a private conversation with senior folks at JLR too, albeit at that time, we didn't have clarity over the precise announcement and the numbers that were mentioned yesterday.

What I did following those. conversations I had was speak to the officials that worked for me, particularly around the skills and skills support agenda that combined authority to put together a package of support that we could make available. When we had firmer news, we announced that package of support yesterday of half.

15:20

Liam Byrne

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15:20

Speaker 9

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Which I'm really, really pleased because this is. about doing as much as we can to, to help those people that may lose their jobs and are still a bit of. uncertainty on the precise timing of those jobs and the skills of those those people that lose their jobs. But I do understand the aim of the business is that most of them will be will be through voluntary redundancy. Well, let's see how that that evolves.

But our programme support is largely about doing as much as we can to retain some very highly skilled workers. In our West Midlands. There is enormous demand for the sort of skills that senior people at JLR have, not just through the automotive industry, which is still substantial in the West Midlands but through defence and aerospace sectors. And indeed many of the businesses that I've met over recent months that have decided to.

locate or relocate to the West Midlands have done so because of the skills. ecosystem around advanced engineering and. manufacturing that we have here. So our priority at the moment is doing as much as we can to ensure that those that . Lose their

15:22

Liam Byrne

- -

jobs can be matched to other opportunities in the region. At this stage, do you think there will be a . Knock

15:22

Speaker 9

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on impact on the JLR supply chain, or is it too early to tell? It is. I think it is too early to tell, but based on conversations I've had and I have gone beyond, you know, political. conversations to those that. understand the sector, that this is all about JLR protecting the levels of production and making production more, more efficient. So they are not taking capacity out of their production line. It is .

Around some

15:22

Liam Byrne

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15:22

Speaker 9

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So I'm hopeful that may augur well for the supply chain. Indeed, I am hopeful and. optimistic that by doing that , they'll protecting production and. protecting their supply chain and jobs that are related to businesses and supply chain, that's really important because half the jobs in the automotive sector in the West Midlands are part of JLR supply chain, and those jobs stretch from Coventry through Birmingham up into the heart of the Black Country.

So that's where we are at the moment. And I chair, and I do hope that that is a. position that will that will crystallise, albeit every job that's lost is a lost job that we need to replace. But if JLR, the work, the the, the work that JLR are going to protects the supply chain and is being done to protect production levels . And the supply

15:23

Liam Byrne

- -

chain, that is something that, of course, is very welcome. Now, you've mobilised half £1 million already yesterday.

15:23

Speaker 9

-

Is that enough? Are you prepared to go further if more is needed?

15:23

Liam Byrne

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15:23

Speaker 9

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more is needed, we need to go further. We put together an emergency package that has actually supported by quite a lot of work, and I'm very grateful for the team that worked for me for the work they did over the weekend on that. But further discussions we'll have to take place with the business. secretary and the Secretary of State for Work and Pensions. If if further support is needed, the precise nature of that support will depend.

And of course, the numbers that are ultimately involved and the skills levels they've got. But at the bare minimum, we must be matching the. opportunities that currently exist in the region for those skilled jobs, with those workers that . May

15:24

Liam Byrne

- -

lose their jobs at JLR. And

15:24

Speaker 9

-

that's the immediate priority right now. Are you getting what you need from ministers at the moment? I think at the. moment I think we've made the first move and we wanted to we wanted to demonstrate that as mayor, as a mayor, that we could be responsive, agile, incisive and decisive. That was my priority over the weekend to support, you know, support those jobs and particularly the families that will be affected, I think over the course of the next week or so, further discussions will need to take place with.

15:24

Liam Byrne

- -

15:24

Speaker 9

-

And at that point, I'll probably be better able to say whether or not we're able to work effectively with government to get the support in place that we need. But at the moment. conversations have been positive with both the . Unions and

15:24

Liam Byrne

- -

particularly Sharon Graham at Unite and with and with ministers. Are you able to tell at this stage whether there are wider lessons to learn from this shock? For the way in which we set about reindustrializing the country, because Jaguar Land Rover, from what I can make out, have put their finger on everything from the cyber attacks to the quotas in the United States, others have highlighted the very fast growth in over subsidised Chinese competition.

This committee has obviously highlighted the challenge of super high energy costs in the past. We know that there are still . Challenges

15:25

Speaker 9

-

to. I mean, is it too early to tell what some of the broader lessons might be? I think it is too early to sort of go through the academic academic analysis. But the comments you've made and those made by JLR were certain support the issues around around China. I've been to China twice over the last 12 months. You know, the scale of their.

15:26

Liam Byrne

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15:26

Speaker 9

-

The pace of which they are.

15:26

Liam Byrne

- -

15:26

Speaker 9

-

You know, cars from conceptual design into into delivery is rapid and often twice as fast as, you know, we can do it in the UK. Other pressures. We know that JLR were particularly damaged by the tariff situation, particularly the US.

15:26

Liam Byrne

- -

15:26

Speaker 9

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course, by the cyber attack and and the wider.

15:26

Liam Byrne

- -

Uncertainty. You

15:26

Speaker 9

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know. geopolitically is also affecting them. What they are doing, I think, is trying to do what they can do do now to secure the future. But it does raise I think it does raise some some lessons going forward or raise some questions about how as a as a government here, what we can do to help protect. businesses in the best way so they can get through and survive in a very resilient way.

Some of the particularly the, the geopolitical challenges that many. businesses in advanced. manufacturing . And

15:27

Liam Byrne

- -

automotive that work at scale currently face. Yeah, I want to broaden this out . To

15:27

Speaker 5

-

15:27

Liam Byrne

- -

ask you about growth plans, but anything further on JLR at this stage? Not for me. Okay. David, thanks very much indeed for joining us. As I said at the top, the Prime Minister has put some emphasis on a grand plan for devolution. That's got to be devolution for something, a local growth plan. Can you just give us a sense of what do you think are good local growth plan looks like, and what is it that you need as .

The

15:27

Speaker 10

-

mayor to put things like this together? I think from our perspective, the clue is really in the title. It has to be local. It has to represent the local needs and demands of each area, which is why having each area, having a local growth plan really sets that out. And because each area has such, its unique challenges but unique opportunities. So an area like ours, which is very strong in rail innovation, the bio industry, food and farming.

15:27

Liam Byrne

- -

15:27

Speaker 10

-

These are things that we can really highlight and transfer and push forward on where other areas in the country may not have those as their key growth sectors, but for us, it is really, really vital. The other piece that adds on to that is actually getting that wider buying as well. So from, from from from industries, from expertise and actually from. universities and our colleges and training providers as well. Because having that wider buy in is really going to add weight behind what we're trying to do in the region.

And you're going to get many more. organisations and many more pillars and a lot more people pushing in the same direction. So whatever we want to do around our local growth plan, be it, you know, growing sectors such as rail innovation, for example, we need the colleges, we need the train providers, we need the universities on that same page because we need that workforce as well. That is going to come through it. So getting that shared vision and that shared buying, and certainly the conversations when we've had with government, they've really emphasized and really pressed the importance of having that wider buying from.

15:28

Liam Byrne

- -

15:28

Speaker 10

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From businesses, from those big sectors behind as well. So it's not looking like we're just going off and leading on this piece of work ourselves. Having that stronger buying from those other areas has been and critical for us. And again, just to a point around newer combined authorities like mine is just over two years old now, actually having areas like ours which have not been traditionally represented through devolution. It's been born out of the big city areas, the Londons, the Manchester's, the Birmingham's, the.

Liverpool's actually having those smaller, more rural and coastal areas like mine represented now as well. And which is the direction of where devolution is going, having areas like ours which may not have those traditional expertise areas, maybe in finance or insurance, whatever it may be, but we actually can offer something different. Let's say again, for us coming back to that food and farming industries, anything to do with .

15:29

Liam Byrne

- -

Offshore, we can actually present those now and how we can grow those sectors as well. In a sense, it's about leveraging your comparative advantages and then but also leveraging the . The

15:29

Speaker 10

-

assets in particular, the institutions that you've got locally. Yeah. I mean, when we were coming up with our local growth plan, there was no there wasn't really anything shocking in there, should I say, you know, the fact that we were very strong in food and farming, for example, was not unusual to anyone. The fact we have over 7000 farms in York and North Yorkshire, we have a very strong food system. We have places like Fera Science at the University of York, Askham Bryan College, who do loads of work around crop.

15:30

Liam Byrne

- -

15:30

Speaker 10

-

Who do lots of work around green jobs and food and farming and industry specialists. But also we've got the highest concentration of of food manufacturing businesses in York and North Yorkshire. Food manufacturing is the largest manufacturing sector in the country. So when we've got people like Nestlé and McCains and tailors and huge food manufacturers in our patch as well. So for us to present that as one of our growth areas was not going to be unusual to anyone.

15:30

Liam Byrne

- -

But it is harnessing, harnessing and leveraging our strengths we have in our region that's incredibly useful, and that is going to help us tease out a question that's going to come. But . Judith

15:30

Speaker 7

-

Barker, I mean, you were nodding, listening to Mayor Scaife there. Yes, absolutely. Because obviously, like York and North Yorkshire, Cambridgeshire and Peterborough is also a rural area with real diversity within that area. And I think that's one of the important things to. remember that within our local growth plan, we've got the growth and exceptional growth around Cambridge and life science and deep tech, but we've also got some real. challenges and some very diverse industries.

Again, agritech and food.

15:31

Liam Byrne

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15:31

Speaker 7

-

As well as advanced manufacturing being based in Peterborough. And I think one of the really important things that the local growth plans need to do is pick up that. diversity and, you know, make that. distinctive offer that it's relevant to different places. So one of the things that our local growth plan does is consider those sectors and really the sectors that are going to drive growth across Cambridgeshire and Peterborough. And there's six of those from the eight within the National Industrial Strategy.

But in addition to that, we're looking at how those play in place. So we've got four opportunity zones in Peterborough Global, Cambridge, the Fens and North. Huntingdon and are saying how does the local growth plan come together in those. places and how do we make growth happen there? And obviously that's a. combination of both how that place, those . Relevant

15:32

Liam Byrne

- -

sectors and the infrastructure we need to enable that growth to happen. Basic analysis that David Keith has given us about what a local growth plan needs to unlock. You'd agree with that. Okay. So Councillor Wright, how help us think about non mayoral areas, which is, as we know, quite a significant part of the country.

15:32

Speaker 11

-

How how are you kind of wrestling with this dilemma? Well, we are wrestling because obviously the formal growth plans are for mayoral strategic authorities. And what we're saying is that growth isn't just in a rural area. And the growth is, you know, local authorities have been the drivers of growth for quite a considerable amount of time. And we know our areas. We don't need to be in a in a mayoral strategic, although that can help.

And it's a different sort of formal plan. We don't want other areas to lose out. So, you know, with what's happening with devolution at the moment, different pace in different parts of the country, we don't see that it's right that there should be just a. concentration on strategic authorities, that actually growth should be . Allowed

15:33

Liam Byrne

- -

elsewhere, and that other areas need to . Be

15:33

Speaker 11

-

considered as being very good at it. So what's the risk that we're running here by not . Left

15:33

Liam Byrne

- -

behind. You know, if we if we only if we only look to . Certain

15:33

Speaker 11

-

areas, I mean, I mean, 40% of England that's not covered by. Exactly. And we don't know when we will actually have this this universal coverage that the government foresee. So in that time, we don't want growth to stall. We've got some very good areas that are really performing, you know, places like Bristol that managed to bring. £500 million of investment into area over time. Coventry and Warwickshire, that brought.

15:33

Liam Byrne

- -

53.

15:33

Speaker 11

-

53 different direct foreign investments in. 2324 with. So investment is taking place, growth is taking place. What we want to make sure is it's not stifled because it's only looked at in a certain context of being in certain formal plans. So it needs we need to make sure that the whole country is . Given

15:33

Liam Byrne

- -

the ability and the authorisation. To,

15:33

Speaker 11

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to grow. It's confident that's going to come or not confident. We're confident if people are given the opportunity, and it's about not pigeonholing as well, because, you know, quite often growth is looked at sort of major infrastructure or it's seen in urban areas. I represent a rural area, rural area of Lincolnshire. And yet one of my biggest growth industries is defence. You know, I chaired a meeting for the LGA this year at the conference.

And for 50 minutes out of an hour, three areas talked about rural economies. And we didn't get around to agriculture until the last ten minutes. You know. So rural doesn't mean farmyards. It doesn't mean it doesn't mean just. agricultural businesses. It

15:34

Liam Byrne

- -

means that actually we've got economies that are very diverse. Yeah. You're obviously further down the road than many colleagues. What . Do you

15:34

Speaker 9

-

think a local growth plan needs to look good. Well, firstly, consistent with David is about how we build on our competitive strengths as a region to drive growth and prosperity. And then, of course, ensuring that we bring together the necessary. assets and investment to drive it. So for me, you know, the sectors we're focusing on, the West Midlands, the ones that traditionally have driven our economy, advanced. manufacturing and engineering, but also looking to the future.

So we're moving from the everyday to the future day, if you like, from now looking at life sciences, digital and tech, indeed creative industries where I'm very pleased. The latest data suggests that we are the fastest growing region in the country, which is fantastic. But for me, it's about how we knit together that holy trinity of factors that drive growth, investing in skills so we get better paid jobs. Those better paid jobs improve productivity. That drives our regional competitiveness.

And of course, when we get that right, it drives investment that drives growth. So those those are the things for me that we really focus on. What I would say is we need to move quicker. We need to be braver, we need to be bolder. And, you know, given, you know, the global situation we've referred to already, I plan to be and government needs to be fearless, not reckless in its approach. We need to back some winners. We need to be entrepreneurial.

And we need we need to be decisive. And I think and we need to move a lot more quickly, the pace of. change and the development in.

15:36

Liam Byrne

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15:36

Speaker 9

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In countries that are now competing for us for economic space is such that we we need to move, I think, a lot quicker. And my view is that that, you know. devolution and the role of mayors are a key .

15:36

Liam Byrne

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Attribute . To delivering

15:36

Speaker 5

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that that rapidity. Thank you. Thank you very much, chair. We're just over a year into having an industrial strategy for the country. Again, something many of us have called for for a very long time. I want to. understand what. difference having an industrial strategy makes to you in the work that you do in your region or area. And obviously, Richard, speaking for the LGA, how it works for the non mayoral areas as well.

Richard, we'll start with you. How does the .

15:37

Speaker 9

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Industrial strategy help you deliver what you need to do in the West Midlands? Well, firstly, on its own it's I think it's a big statement about the priorities for the country and the sectors that are going to drive our growth and prosperity. So that that message, both within the UK, across our businesses and internationally, is really, really important. Real clear statement about not just where we see our competitive strengths in the future, but where we want to build them.

The the bit that's really important is about how we. dovetail our regional approach to growth with what the government is seeking to do. And I'm really pleased that the key areas that we've got competitive strength in across our whole region are really quite closely aligned to the. government's approach. But what that that drives.

15:37

Liam Byrne

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Investment. it drives.

15:38

Speaker 9

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It drives a relationship with our universities and R&D. And it also gives us a clear platform to go forward on. So I've made some big decisions recently about investing in creative. industries to, to, to drive growth. They're supported by funds from DCMs. The approach we're taking to investing, the very generous sums the government have given us on. transport is, is now going to be driven by our platform.

We want to create for growth. So what it's doing, it's unifying. It's giving us a very. legitimate way to unify our approach to skills, to investing in transport and indeed , housing around our growth priorities and where we want that growth to be. It also, you know, is a great mechanism. And a very important role of mayors is convening is a great. mechanism for. convening a partners that we need to work with on the growth agenda.

There's a great example in Coventry, where we've got a green power park, a centre for for to support, you know, battery production. That is an agreement between the combined. authority to local authorities. But we're working very closely with our university partners and the. sector about how we create or attract the investment there. We want to drive our economy forward, but having all those key.

15:39

Liam Byrne

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Partners coalescing.

15:39

Speaker 9

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Around a really clear sense of. priority and purpose is. certainly not just necessary, but actually it's I think that would have been really difficult unless we had the clarity and purpose set out both in the . Government's

15:39

Speaker 5

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industrial strategy, but with our own. regional regional growth plan. Okay. Same question for you, David. How does the industrial strategy . Help you

15:39

Speaker 10

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deliver growth in York and North Yorkshire? Yeah, just to pick up on Richard's point there is that real direction of travel. It's a real confidence, a strong message from government. I know that as soon as, you know, when government started, you know, pressing on with industrial strategy and announcements around this, the confidence that we got from businesses and universities, those. relationships really helped to support us because we saw really strong direction of travel.

What I would just say one bit as a cautionary note, maybe is making sure that the two do speak together. It was felt like at the time that because industrial strategy was being created almost at the same time as our local growth plans, were, that making sure that how well they speak together and not that areas weren't going after a certain sector just because there was potentially investment in that.

15:40

Liam Byrne

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15:40

Speaker 10

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though that sector might not be a sector that is strong in that area. So it's not something that I'm necessarily saying that any area went after, but I just think it's a cautionary tale of making sure that coming back to the first question, the local growth plan does really represent your local area and your strengths, your opportunity, and has alignment with sectors and your and your areas of strength and your skills, strategy, everything else, and making sure that you don't just all of a sudden.

shoehorn a certain area into your growth plan because it fits a national message, even though that might not be your area of strength. So I think there is a slight cautionary element of it there. And making sure that you kind of do go after what you're good at in a way, if that makes sense, rather than just going after like the money pot. Because again, just going back to one of the earlier points made is that each area will have their areas of strength.

We're not going to go chasing certain. We're not going to go, say, start chasing car manufacturing in York and North Yorkshire compared to what Richard can do, because it's just not an air of strength of ours. So you kind of have to behold to what you are strong in your area. Don't get led . Down the

15:41

Speaker 12

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industrial . Strategy saying

15:41

Speaker 5

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this. Therefore your growth plan needs to say this.

15:41

Speaker 7

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And Judith, yes, the industrial strategy help you. Absolutely. And I'll give you a couple of different examples just to test that, just to sort of demonstrate that. So in terms of our work, it's allowed us to. identify six key sectors. And then, as people have described, work with the chamber on the local skills improvement. strategy to ensure that the universities, the training providers, the colleges are all aligned in terms of delivering what those sector need.

And I think the fact it has been felt like a national local. collaboration has really empowered those.

15:42

Liam Byrne

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15:42

Speaker 7

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And off the back of that allowed us to develop a refreshed business board, which is really critical as a voice into the mayor. I think the other thing it's allowed us to do is kind of knit things together and kind of join the dots between things. So one of the really key things with the Strategic Transport.

15:42

Liam Byrne

- -

15:42

Speaker 7

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we've been able to look at the strategic. transport work. alongside that work of the local growth plan and think about how those things fit together and how, for instance, our Tiger Pass, which allows travel for a pound for people under 25 across Cambridgeshire and Peterborough, has been able to allow people to go, you know, to reach training, to reach jobs and employment opportunities and perhaps go to places they wouldn't otherwise have gone to really realize those opportunities.

So I think it's allowed us that. collaboration with national government, which is demonstrated to stakeholders, how committed we are nationally and locally. And it's . Also

15:42

Liam Byrne

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allowed us to bring other areas of business in to focus on .

15:43

Joshua Reynolds

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Growth, kept us running slightly behind time. So I'm going to come to Mr. Reynolds. Thank you, chair. David, obviously, the government have are going to be devolving many more services out to regions over the next few years. What do you think should be the government's priorities when it comes to . Devolving

15:43

Speaker 10

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services? What services do you want to see them devolve to you in terms of business services and support? I mean, for us in particular, we find some of it is slightly fragmented. So if you look at the innovate UK support as an example, is there's a lot of great support there around the early stage of business development and that kind of start up type element. But what we're finding is a lot of that then drops off quite quickly before it becomes a very commercialized element.

And what we're finding, York and North Yorkshire is we have lost a few businesses, have looked elsewhere financially, actually looked overseas financially. So for us, it's not necessarily always about devolving more funding, but it's those levers to actually have that have that whole process through the support of a business. So not just at that very early. incubator start up phase, it's actually what levers can we have in terms of building sort of packages and support.

15:44

Liam Byrne

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15:44

Speaker 10

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Right the way through the development of that business. So again, an area like ours which has a very strong link into the university, we have a very strong sector. And so that sort of small micro business, something like. 98% of businesses in York and North Yorkshire are those small micro. businesses employing less than 10 or 15 people. We're very good at that. What we need is that support for that next stage of how we can then harness and keep those businesses in that element, in that phase to grow, and then to stay in a place like York and North Yorkshire.

If not, we will continue to lose them either to areas that have higher, well, much deeper pockets in terms of funding, which is again gets drawn into the big urban areas or elsewhere, they do actually leave the region. So what we're doing now with our growth hub in particular, is we're looking to rewire how our growth hub delivers. services and actually has a much more conveyor belt of support along the journey. So if you are a small micro.

15:45

Liam Byrne

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Business. How we

15:45

Speaker 10

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can support you at that phase, but then how we can support you into that sort of growth and spin out element of it as well, and help to harness and keep those businesses in the region, and particularly the ones that are aligned to our growth plan, because that's where we want to see that growth from. So I think it's more just the whole process through the business as it develops through. It's not necessarily just a funding ask, because we know there's only so much funding around.

It's that whole process and support that currently hasn't been devolved. And just touched on one of the points raised earlier on about how some areas are much more established. It may seem as like they get more support or much more established, and being able to develop their plans and ideas and other areas might be left behind. Before my area became established status only a few months back, we were missing out on funding pots in and around these, these, these, these kind of funding elements to support businesses.

Now we've got established status. Hopefully we'll be around that table. We'll be able to get further funding .

15:45

Liam Byrne

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Packages to be able to support those businesses long term. Right. What other powers do you need? When we had Mr. Burnham in this position last year, he launched a vicious attack on the Department for education and demanded the devolution of radically more education funding. So you . Heard feel

15:46

Speaker 9

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free to ruthlessly attack any member of the cabinet at this stage. I would say, look, there's a big ambition. I think the new prime ministers are, you know, been committed to this. I think the post 16 skills agenda is really, really important. Important because we need to use every pound of that funding really effectively. We've got enormous challenge of NEETs, and we know that

15:46

Speaker 1

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Tonight. We know that not just in the West Midlands, elsewhere, and we let down too many of our young people in two ways. Too many leave school without basic qualifications. We often then put them into training courses that don't result in jobs, and we've got to bring that together far more effectively.

15:46

Liam Byrne

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Mayors, training providers, colleges, employers working more quickly. I'm so old, I'm now on my seventh round of three year DWP funding in Hodge Hill, which has failed to move unemployment at all. I mean,

15:47

Speaker 1

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So are you saying that you'd like to be able to kind of break out of that kind of abyss? Absolutely. And be braver. I went to a fantastic skills hub. We put together with DWP and University College Birmingham and Chelmsley Wood, where we've taken up a college course for catering and developing chef skills and hospitality into a shopping centre in order to reach into part of the community that we previously hadn't reached.

We need to do more of that stuff. We need to get closer to those communities. If we're going to address this problem, and we need the resources to do some of that differently. So

15:47

Liam Byrne

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15:47

Speaker 1

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And we've got to do things differently. Chair, because as you've said, we spent a lot of money on this billions of pounds, and they've not turned the dial at all. And, and the and this issue now is the biggest challenges we face, certainly in the West Midlands. And it's blighting the lives of millions of our young people. I'd also like HCA funding. The housing fund devolved to the region. Yes, because I'd like to drive.

I'd like to drive housing. development more quickly in places like Friar Park in in Tipton and Wednesbury and, and other places. And, and, and I think we can again, use those resources more agile. It's not just about using those resources, delivering them more quickly. Every time there's a multiplier model of two and a half times the economic benefit, when we spend, you know, a pound, we spend £1 billion.

It's a lot of money going into our regional economies. I'd also say. Building on where we started this conversation today, I think there's we need to relook at some of the funds that the Department of Business Trade have put together for programme support in the car industry, particularly the drive 35 programme. And it's not just me that believing there's now a case for having those funds devolved. They they've the the model around them.

The paradigm is too narrow. The money's not being spent. It's not just me saying that. Every part of the automotive supply chain and indeed JLR, who I believe will be writing in ahead of the the budget or the Chancellor's autumn statement on that issue. I think we need to think more radically about some of the funds that are locked up in government departments that are not getting where they.

15:49

Liam Byrne

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Some of them are not where they need to get to at all, and some are . Certainly not

15:49

Speaker 2

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fast enough. Okay. That's incredibly helpful. Ju very quickly. Anything to add? I would just add a plea for. consistency between government departments. So devolution kind of feels and looks the same for us as the recipients. So that, you know, we've got that. And the other thing I would ask is. capacity for . The

15:49

Liam Byrne

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devolved authorities to actually be able to manage some . Of these

15:49

Sarah Edwards

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challenges. Yeah. Perfect. Sarah Edwards, thank you, chair. Richard, good to see you. Thank you. I was interested in what you were talking about around housing. Obviously for the whole of the combined authority, Tamworth is a non-voting constituent. So you also have the ability to to build houses in our area and look at some of the challenges that we have around, around that. But I'm actually interested in, in what I'm hearing from the industry.

So I chair the Appg for SME housebuilders. And a lot of what I hear from them is the challenges around the.

15:50

Liam Byrne

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15:50

Sarah Edwards

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Particularly north of London. The Midlands is doing okay, but actually also the problem that a lot of the PLCs seem to be doing share buybacks, and they're not actually seeing building houses as being worthy of their business. And so I was wondering how you're approaching some of these challenges. I know you have a housing.

15:50

Liam Byrne

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15:50

Sarah Edwards

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Cornerstone partnership in my patch or one of those members, which is great, but how do you think you can overcome some of this challenge about we want to say we want to build houses, but the financial.

15:50

Liam Byrne

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15:50

Speaker 1

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The the economy right now is actually saying a very different story.

15:50

Liam Byrne

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15:50

Speaker 1

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The use of homes, well, the home HCA money in our region will help. Yep. That will help us underpin lots of development, help de-risk them and deliver the social affordable homes that West Midlands and my region needs. And if we do that, we start investing, we start creating jobs, we start getting those 12,000 apprentices funding in the construction industry into work, and we start to build that confidence back. No doubt about that.

And we need schemes that are also mixed use, and I think that will drive the private sector homes to my taskforce are, by the way, also looking at other products we might deliver locally to attract and support home ownership for young people, and I'm confident we can do that. But it's difficult to do that unless have a greater stake in, say, in the way that Homes England's funds are being used, even in one fairly small part of the geography I represent, where we've created a mayoral development corporation, we are planning.

20,000 homes in that across that that geography in the centre of Birmingham. We need government support to do it. We've got the investors there already. We could just do with some additional funding on your constituency. It is outside mind, of course, but I'm looking in the process of building new economic investment. relationships with our Non-constituent boroughs, including.

15:52

Liam Byrne

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15:52

Speaker 1

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Because, you know. people don't run their lives according to administrative boundaries. And many people in Tamworth commute to the West Midlands for work and vice versa. So I want a far closer economic. relationship with the surrounding authorities because I think that's good for growth and I don't want to exclude the people from Tamworth from benefiting the growth we want to create. But indeed I think the West Midlands needs needs the homes to be built and many of those homes .

Can be

15:52

Liam Byrne

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built beyond the boundaries of the West Midlands themselves. Thank

15:52

Speaker 3

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you. On money and Tony events. Thank you very much, chair. So if you are granted the power to retain local tax.

15:52

Liam Byrne

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15:52

Speaker 3

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Doesn't that risk making rich regions richer while leaving poorer. areas further behind? Judith, I . Imagine

15:53

Speaker 2

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this is pretty live in your area. I appreciate your thoughts.

15:53

Liam Byrne

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15:53

Speaker 2

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And obviously our mayor is very much engaged in the. discussions about how the devolution of business rates, income tax, etc. would work, and we understand that is going to include some. equalisation measures, and that clearly needs to be considered and thought out. So we. recognise that. Absolutely there are some challenges. We also recognise that within our. area we have.

15:53

Liam Byrne

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Considerable deprivation.

15:53

Speaker 2

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As well. There is some very deprived wards within Cambridge and within the Fens and Peterborough and so on, and we need to make sure that we allow all the businesses and communities of Cambridgeshire and Peterborough to benefit from the growth. And we also need to recognise that actually, if. businesses are able to invest in. Cambridge and around Cambridgeshire and Peterborough, and that generates growth for UK plc, that is a very good thing for the tax revenues and the ability to.

equalise economic growth across the country. So we're really committed to working with government to try and find solutions that assist our . Economy to

15:54

Speaker 3

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grow, as well as the wider community and the wider UK. So I'm going to assume that colleague mayors also believe that there would need to be some sort of. equalisation measures to even things out, but I'm going to ask Councillor . Wright for

15:54

Liam Byrne

- -

views on tax devolution. Thank you. Because growth doesn't stop like people move across local authority lines. So does growth. It doesn't stop on lines. And so the mechanism that was used last year, which was redistribution of business rates, was rather crude and didn't really achieve what it was meant to, because that money was never ring fenced when it went out and was redistributed. So therefore, areas such as mine that have growth, we've generated growth.

There's no incentive to carry on doing that. If actually what you're doing, the money you normally invest back into that growth, which will grow into the next area, it'll generate that confidence. We've actually lost out on that. So it's we've got to be very careful. So when we're looking at distribution schemes and redistribution and equalisation, we've got to make sure that actually it's not counterproductive. And that just because an area is seen as deprivation, another area isn't doesn't mean that you will actually encourage growth by just giving the money directly to a deprived area.

It doesn't it doesn't work that way. You know, we all know this. If people are going to invest, they need investor confidence and they need to know that actually the right facilities are going to be there for them to grow. And so we need to be very, very careful of that. It's not just a very clear, deprived area rich area. That's not that's not how we work. And that's not how employment growth works at all. So going forward, it needs to be co-produced with the local areas.

You know, I don't I don't agree that just saying we're just going to top slice that money away from that area will do anything at all for deprived area unless it's invested correctly. So we need to make sure that the government's strategy is correct on this, and it needs to be . Rethought

15:55

Leigh Ingham

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of on what took place last year. Okay. Thank you, Mr. Chair. Richard, I'm going to speak to you directly, if that's okay. Oh, sorry, Richard. Both. Richard's lovely to see you, Richard. Right. On this occasion, I represent an area that isn't a mayoralty as others on the panel. And it's interesting the conversation we've had earlier speaking particularly about NEETs. So the area in the country that's one of the worst for NEETs is Blackpool, which also isn't represented by a mayoralty.

And in fact, a lot of the funding that's been announced for skills and needs there wouldn't be eligible for it, which means the worst place in the country we're not currently able to tackle. The biggest problem that we've got, as you've.

15:56

Liam Byrne

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15:56

Leigh Ingham

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You mentioned as well the funding for local tax raising powers, how some of that can be kept, how do you ensure that areas that have. previously been left behind? We've seen real, you know, let down by governments historically. How do you ensure that if they're not covered by a mayoralty, they're not going to fall further behind areas that have mayoralties right now? And the other example I wanted to speak to quickly is give you is Stoke.

So Stoke are desperate to build houses. I don't represent Stoke. I represent Stafford, but Stoke are desperate to build houses. They don't have a housing corporation because they're not represented by a mayoralty. So again, what we're going to see is areas that aren't able to proceed in the against the areas that do have mayoralties. So what's the LGA, I suppose, advising. government to do in those cases where you can see very stark. examples .

Where you

15:57

Liam Byrne

- -

could have a left behind area due to government policy? One thing is trust in local government. You know, we work together. We don't need to be forced to join. We don't always need a formal framework to do that. And actually, no, I don't know of any council leader that ever wants to see another council area stay deprived or lose out on funding. And so we work that way. You know, I work in a rural area.

We've got different areas of deprivation, you know, so we work together to make sure we equalize that that out. And that's I think that's the way that's the way forward and that's the way it's got to be. And we need some of those devolved powers and we need some of that trust from government. So we're not. Well, I actually am in a mayoral area now, but prior to that. Yeah. But other parts of the country aren't.

And you know, to, to be able to work with universities, work with Jobcentre, that doesn't always need to be a mayoral area to do that. And in fact, it isn't. And we're seeing that in other parts of the country with regards to housebuilding. Again, it's not just about the deprivation in the area. We need government to unblock the levers with the barriers, so we need to actually get the infrastructure providers to actually provide infrastructure. If I was to say to you, I know an area where there should be a developer building out a sustainable urban extension that was asked to wait for a year for drinking water, went on, got on site, blocks out the ground, no meeting, no phone call, a letter in the post.

By the way, we're going to delay your drinking water for another year. That business case is destroyed, and that doesn't matter whether that's a deprived area or an affluent area. That's what we're facing at the moment there. The barriers, some of the barriers to actually to house building. So as I say, it doesn't it doesn't matter which part of the country you're living in. We're now seeing this across great . Swathes of the

15:58

Speaker 4

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country. So that needs to be unlocked.

15:58

Leigh Ingham

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We need we need these. The message sounds like powers for all. Yeah, that's what you're trying to decouple. Then you're decoupling those powers. You don't think they need to be attached to a . Mayoralty or

15:59

Liam Byrne

- -

a combined authority. The Lga's message is it can be any authority. We recognise that there are strengths in mayoral authorities, but there are also strengths. And we need to make sure those other areas that aren't going to see that for a while don't lose out. So how do we make sure that we can make we can actually provide some of those powers, not on the same level , because we understand the government's drive for mayoral authorities, but it's got to unlock some of those powers for everybody, because otherwise we will have huge, huge parts of the country just sat waiting.

And to say that we're waiting for strategic authority to arrive, to actually start to grow, or to actually deal with deprivation, or deal with joblessness or deal with lack of housing. That's a ridiculous situation to be in. So we need to make sure that . Those

15:59

Speaker 4

-

15:59

Leigh Ingham

- -

outside of strategic areas are given the powers to be able to deal . With that, like an

15:59

Speaker 4

-

interim measure, then an interim package of powers. Yeah. Okay. Right. Super quickly, let's ask you . About

16:00

Joshua Reynolds

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number ten North. Yes. New start up , Joshua Reynolds. Thank you. Chair, how should Whitehall better coordinate with mayoral areas and local .

16:00

Speaker 4

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Authorities to be able to deliver growth? Judith, do you want to very quickly start.

16:00

Speaker 2

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We're well over time. So just give us a short punchy very quick. So I think it's understanding that all regions are different, both in terms of capability. capacity and the issues that we face. I think it's about not pitching regions one against the other so that there's a competition. I think it's about building partnerships between. And I think finally, it's that discussion we've been having about strategic partnerships with.

organizations like Homes England . National

16:01

Speaker 4

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Wealth Fund and allowing . Those

16:01

Speaker 2

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relationships to develop early days. But how's it going? Our relationship with Homes England has really. strengthened .

16:01

Speaker 4

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Over the last two years.

16:01

Liam Byrne

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It's transformational.

16:01

Speaker 2

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In terms of what we've been . Able to

16:01

Speaker 4

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do over the last . 49

16:01

Speaker 2

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days, over the last. 49 days. Change the tone. Yeah. Well, yes, absolutely. Day one of established mayoral . Status

16:01

Speaker 4

-

conversation changed. Yes.

16:01

Speaker 5

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Very positive. David Mayor David Skaith yeah, for me, what we've seen and it does need to continue, but it has seen a marked change in the last few weeks or months or so. Is that. cross-departmental working? So like a couple of things. We've been touched on their our ability to build houses, not. necessarily the ability to actually physically build the house. It's the infrastructure, it's the skills.

It's all the other pieces that come together, getting government departments to work much stronger across those government departments. So things aren't being blocked by one department because one area is saying yes and one area saying no. We've seen a marked difference in that in the last few weeks, where those government departments are speaking much better together. And when we're talking about growth, it's each area is about growth. So housing is also a growth agenda. If we're building houses that is creating jobs, that's creating places for people to live and stay in your region.

So all government departments understanding their role . In growth, but

16:03

Speaker 4

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they're all speaking together. We've seen a marked difference in that in hopeful, but as we know, it's the . Hope that

16:03

Liam Byrne

- -

kills you. Councillor. Right. Well, if we're going to see a change of strategy with number ten North being outside of the of the London area and understanding of the parts of the country, then we see that as beneficial, but they still have to understand the local areas, the need, the trust in local authorities to deliver, the need to understand that it's okay having powers in Whitehall and moving them to number ten North, but those powers need to be devolved out.

We need to move away from the the parent child scenario of Whitehall and local government to understand that we should actually be co-producing producers of policy. And actually that's the only way we're going to deliver. It won't work if we've . Just

16:04

Speaker 4

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created . Another

16:04

Speaker 1

-

another Whitehall. But in Manchester. Parker final word very quickly. Look, I've said this before, it felt until 49 days ago, so that as mayors wanting more. devolution and taking the case for that to government, we were sort of a couple of laps ahead of where the government at the time was. Since then, frankly, we're playing catch up, which is good. And and it's moving fast. It's a very different setup.

I think a very different mindset. And today, you know, I would nothing but applaud them. In fact, we've number ten north of visiting me tomorrow. So that's, I think also very encouraging that they're not just, you know, sitting where they are,

16:06

Speaker 4

-

But they're also getting about . Better

16:06

Speaker 3

-

16:06

Speaker 4

-

you know, what we need to do. Reynolds, anything further on that? Perfect. That brings us to time. Thank you so much. Indeed. This is an agenda that is very dear to our hearts. It's something that we will pursue, and we're very grateful for you helping . Us

16:06

Speaker 6

-

ask the right questions of ministers. And it is ministers to which we turn now.

16:09

Speaker 4

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The final panel in today's scrutiny session on industrial policy. Blair McDougall, thank you very much indeed for joining us. Congratulations on the reappointment to your role and to the new. responsibilities with which you have been blessed. On behalf of His Majesty's Government, you've brought some officials with you. Thank you very much indeed. Do you want to kick us off, Mr. . McDougall,

16:09

Speaker 7

-

and tell us, just what does. Reindustrialisation actually mean? So the Prime Minister, when he talked about.

16:10

Liam Byrne

- -

Reindustrialisation.

16:10

Speaker 7

-

Spoke about creating cutting edge.

16:10

Speaker 4

-

Manufacturing and.

16:10

Speaker 7

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Services which manufacturing and and services. Yeah. Where that use of technology enabled us to export to the world. I would sort of sort of expand on that by saying I think it's about. Maximising tradable sectors in every tradable, every part of the country through innovation. That in turn builds wealth in. communities and. creates more larger. companies and. provides secure jobs and the pathways for young people for the future.

I would. recognise that. Reindustrialisation has been characterised a little bit as being perhaps. nostalgic or backward looking, and I think it would be important to say that's very much not the case. This is about the industries in the future. But what I think it does. recognise is that those old. traditional primes that. dominated whole regions and. communities not only provided a sense of economic purpose to people, it provided a sense of community and identity to them, and it spilled over into the wider.

cohesion of society and community. And so I think that is where I . Think.

16:12

Speaker 4

-

reindustrialisation yes, it's primarily . Economic, but

16:12

Speaker 7

-

it has those wider. It doesn't necessarily mean manufacturing. No, no. Absolutely not. It means. increasing the amount of production. Certainly it means increasing the amount of.

16:13

Liam Byrne

- -

16:13

Speaker 4

-

But it means both. manufacturing and services. Okay. We had this. conversation with President Trump's advisers at the beginning of his tenure because they, too, talked a lot about manufacturing. And we were. unsure whether that meant manufacturing output rising as a fraction of GDP, manufacturing exports. manufacturing jobs, manufacturing share of the economy. How what are the metrics that we are going to need to use to judge .

16:13

Speaker 7

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Whether you're. Reindustrialisation drive has been a success? Well, I would point to the metrics we're already reporting on as part of the industrial strategy. So looking at business.

16:14

Liam Byrne

- -

16:14

Speaker 7

-

Looking at GVA, at the value of.

16:14

Liam Byrne

- -

16:14

Speaker 7

-

At labour market outcomes, both in terms of number of jobs and.

16:14

Liam Byrne

- -

16:14

Speaker 7

-

The number of. larger home grown. businesses as well. Where I think, I think the, the focus on. place from the new prime Minister is important is that I think it places on top of what we've been measuring.

16:15

Liam Byrne

- -

Already. a responsibility. To

16:15

Speaker 7

-

look at those measurements through that prism of of .

16:15

Speaker 4

-

Geography and place as well, and a more, a more mindful way. So you've given us about five different metrics there and then added a sixth one of place on, on top. But these are metrics associated with tradable businesses, not .

16:15

Speaker 7

-

Manufacturing businesses. Is that how I should be thinking about this? I'm not I'm not sure which which way.

16:16

Speaker 4

-

They're not applicable to. manufacturing businesses. Well,

16:16

Speaker 7

-

You are suggesting that I think the definition goes broader than simply manufacturing. Yes. Yes. Manufacturing and services. Yes. So the for example, creating the more large . Businesses would

16:16

Speaker 4

-

obviously include large service businesses that were creating in the UK as well. Yeah. I mean, that doesn't sound like reindustrialisation. That just sounds like economic growth is.

16:17

Speaker 7

-

Reindustrialisation effectively a synonym for economic growth? I don't think so, no, I don't think so. I think it is a recognition that you want to have high. quality jobs that are productive, not just.

16:17

Speaker 4

-

Not just not . Just

16:17

Speaker 7

-

any, not just any employment with a high quality call centre count. I think you could have high quality call centres that were adding value, certainly. And I wouldn't I wouldn't wish to .

16:18

Speaker 4

-

Denigrate the work that people do. That kind of . Customer

16:18

Speaker 7

-

service is incredibly important inside your definition of reindustrialisation. Well, what we're aiming for is, as I say, jobs with an element . Of

16:18

Speaker 4

-

innovation behind them, new industries with an element of. innovation . Behind

16:18

Speaker 7

-

call centre using AI is that reindustrialisation. So I think that would certainly help. I think you're pointing to a tension within the modern economy where and sometimes. investment in. innovation will give you productivity gains, but not necessarily employment gains gains. We're seeing that today, I think, a little bit with Jaguar Land Rover as well. So we would acknowledge that tension there. But what we're aiming for within the ES eight is those .

Higher.

16:19

Speaker 4

-

value jobs that we are, we are pushing for. Yeah. Okay. We've obviously had a blow to the. Reindustrialisation drive yesterday, in. particular in our region of the West Midlands. I mean, do you think that there are lessons to learn from Jlr's 4000 . Redundancies

16:20

Speaker 7

-

programmes for the development of your. Reindustrialisation policy? I think there are I think some of the some of the lessons were sort of ahead of. So I would sort of point out that the very difficult situation at JLR finds itself in is those. global factors in terms of the difficulties they've got with markets, the global.

16:20

Liam Byrne

- -

Instability. the challenges.

16:21

Speaker 7

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Of adapting to the. complications and costs of of EV vehicle manufacturing. Those are exactly the reasons why through DRI.

16:21

Liam Byrne

- -

35.

16:21

Speaker 7

-

16:21

Liam Byrne

- -

Purchasing incentives.

16:21

Speaker 7

-

We're trying to get get ahead of it. But, you know, we have been in constant contact with with JLR over the last couple of . Days

16:21

Speaker 4

-

to, to find out exactly what lessons we can learn from this. Okay. The mayor's put half £1 million on the table to help those people get back to work if they've been affected.

16:21

Speaker 7

-

Are you prepared to help the mayor go further if further help is needed? Yeah. So we are talking to the mayor and to local authorities about that . As as come of course, we'll look at them in terms of funding. I would also point to, for.

16:22

Liam Byrne

- -

16:22

Speaker 7

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I think what. £380 million put into Agoritsas. I mean, we are. already investing. heavily into JLR and their supply chain to help them become more productive and more . Resilient

16:22

Speaker 4

-

in this pretty tough international environment. Now, JLR hasn't really talked about the cost base in the UK. They've talked about cyber attacks, they've talked about quotas, they've talked about China, they've talked about EVs. But the Chancellor has talked about costs. And he has said the cost to make anything to build anything here has soared. And he. highlighted energy.

16:23

Liam Byrne

- -

16:23

Speaker 4

-

Labour costs. And so planning constraints. So if we're looking at that. menu of costs that the Chancellor.

16:24

Liam Byrne

- -

16:24

Speaker 7

-

Which of those costs are going to be lower next year for business. So energy costs will certainly be lower. We next month will open up applications for Bics, which for those 10,000. manufacturers will lower energy costs by about. 25% for them. So that will be lower planning. The planning changes that we're making, partly through the. legislation that's already gone through.

But also you've seen the sort of mood music around going further will make things cheaper and quicker. The Chancellor's speech yesterday, the legislation that I was working on before the change in. portfolios on. sandboxing will make it cheaper and easier for innovative companies to get on . With

16:25

Speaker 4

-

.

16:25

Liam Byrne

- -

Inventing . And creating

16:25

Speaker 7

-

new industries in this country.

16:25

Speaker 4

-

Regulation. The sandboxing. Yeah. Within regulation. Okay. It's a big, bold target to cut regulation, which I have to say I . Don't

16:26

Speaker 7

-

understand, because it says something like, we're going to reduce regulation by 25% or something. It's reducing the.

16:26

Speaker 4

-

Administrative burden of.

16:26

Speaker 7

-

16:26

Liam Byrne

- -

16:26

Speaker 7

-

same as reducing the cost by 25%. It's reducing the cost of the regulatory administrative burden. And we define it like that because we're not looking to get rid of. regulation that is. protective . Of

16:26

Speaker 4

-

people. We're trying to to, to make it easier and simpler. Okay. The American quotas need renegotiating. I mean, this is something that JLR has identified its. 100,000 at the moment. We've thought actually that jlr's exports to the . US

16:27

Speaker 7

-

are quite snugly within that quota. But do you think quotas need to go up? I think that's part of the issue is that it does fit snugly within the quota, in the sense that it doesn't allow for a huge amount of of growth for the company. Outside of that. Look, we've we've. achieved an outcome in terms of those trade negotiations that no other country has. We are in constant contact with them.

We have we do continue to push and we do continue to ask. It's fair to say. We are not we are not meeting with . A

16:28

Speaker 4

-

response that would suggest that there's a lot of room to go further than that. Yeah. Okay. What about the Chinese imports? Chinese manufactured vehicle sales in the UK have gone up by. 121% over the last year. This committee has seen evidence that shows that Chinese. manufacturing is subsidised by about six times more than it is in this country. Plans coming out of the French ministry for strategy and Plan suggest that we should be thinking about tariffs on Chinese products which are produced in such an over .

Subsidised

16:29

Speaker 7

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way. Is it now time to start thinking about tariffs on Chinese manufacturing? So from from speaking to to JLR, for example, last week, there is that feeling that they and other manufacturers get hit in two ways. You have highly.

16:29

Liam Byrne

- -

Subsidised manufacturing.

16:29

Speaker 7

-

Within the Chinese market itself and slightly unequal terms of entry into the market in terms of our own ability to, to, to, to sell there, which means you're not able to, to grow into that market. And then, as you say, on the other side of it, having a very cheap vehicles coming into the to the UK market, that's good for consumers. We've got about 15% of the market. We reckon at the moment.

This is something we're looking at very carefully. And I say carefully, not just in the sense of looking at the detail of of this, but in terms of going to be very careful about the consequences of any decisions we make on this. Either way, the UK car manufacturing sector is highly reliant on.

16:31

Liam Byrne

- -

16:31

Speaker 7

-

Which is why I think, you see perhaps not the response you would expect from industry themselves. because they are trying to make judgments about the ability to access the Chinese. market . And would be

16:31

Speaker 4

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worried about any .

16:31

Speaker 7

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Consequences and any.

16:31

Liam Byrne

- -

16:31

Speaker 7

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Not telling the committee that you've ruled it out. We're not we're not ruling it out, but we have to be very, very careful whether response there because we are. And it's, you know, this is this is the conversation across tariffs, right? Where we are an open trading economy. We do very well out of that. In some ways, there are negative. consequences in some. circumstances as well.

But as I say, for a sector which is which is so reliant on. international . Exports,

16:32

Speaker 4

-

particularly some of the .

16:32

Speaker 3

-

Smaller automotive companies, we've got to be very careful. Tony events. Thank you very much, chair. One of the questions we consistently put to ministers when they come to us to talk about industrial. strategy is the extent to which the industrial.

16:33

Liam Byrne

- -

16:33

Speaker 3

-

We believe, will be judged for its success or failure on whether it preserves what we've got. And yet we have an industrial strategy that. consistently looks to grow more and to grow new and to innovate. And yet, if you ask people the loss of.

16:33

Liam Byrne

- -

Stellantis. The

16:33

Speaker 3

-

losses at Grangemouth, the losses at.

16:33

Liam Byrne

- -

16:33

Speaker 3

-

Losses in communities across the Port Talbot, across the. country are the basis on which industrial strategy is judged. So perhaps you'll be the minister that will come to us and say you have a clear risk register that you are thinking about the proposal put forward by the trade union movement to have that open. dialogue about where we know there are plants at risk, what action the UK government is going to. preemptively .

Take

16:34

Speaker 4

-

.

16:34

Speaker 7

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To avoid future industrial disasters. I would go further than that and say that I think our job is to get ahead of that. Often, by the time someone's corporate HQ, somewhere else in the world, is making an investment.

16:34

Liam Byrne

- -

16:34

Speaker 7

-

becomes a risk and government scurries around trying to put some package together. Often that's too late. I think the trick for myself and ministers across government is to get ahead of that. So you mention we talk about JLR there. There is a company that is making very difficult decisions to get there. What sort of match fit for changes to the economy? The judgment we are making in terms of our support is how could we make sure that we are making.

investments so that on the other side of that.

16:36

Liam Byrne

- -

16:36

Speaker 7

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The brilliance, the technical excellence, the innovation that that company has, the great products they have are still intact and still available. You mentioned Port Talbot as well. There's another example of investing. heavily to make sure that a very traditional site that had deep seated issues has a. modern future. So I think look, the door, the door is always open. And when when unions or others see a flashing red light for us to be there.

But as I say, I think I think often you've missed the boat. If that's the point at which you start to engage. And that's where through the industrial strategy, things like the sector plans that we've been working through, the jobs plans that are that are coming in short order after that, that sense of. collaboration with industry is really important. So you get . To

16:37

Speaker 4

-

those . Challenges and those

16:37

Speaker 8

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threats long before they ever become a crisis at this point. Mr. Maynard Yeah, thank you chair. So getting ahead, I completely agree. But, you know, we've got goods exports from the UK down by 13% in the last four years. We are being whacked because we introduce much more friction going across our borders. So that makes it really hard for . A

16:38

Charlie Maynard

- -

. Car

16:38

Speaker 8

-

manufacturer like JLR to move stuff backwards and forwards across the border. We are playing in the market, which is now six times smaller than . It

16:38

Charlie Maynard

- -

was.

16:38

Speaker 8

-

16:38

Charlie Maynard

- -

16:38

Speaker 8

-

Extraordinarily as . Well as the

16:38

Charlie Maynard

- -

Lib Dem. You know, these are flashing lights. When are we going to it doesn't cost any money. When are we going to get over those red lines? Because the very manufacturing heartlands which are being whacked by this. You know, we can you know, it's within the government's power to solve that by fixing things like the customs union. And .

16:39

Speaker 7

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It is completely depressing to sit and see it. Well, look, you're right to point to the impact of Brexit. I think we have to recognise that Brexit is one element of an international order. That's that's sort of sliding towards protectionism in all sorts of markets. And that's something we have to deal with for, again, the car industry and again. conversations with JLR, but with other automotive. companies in the West Midlands last week, the focus on us putting a lot of diplomatic.

capital into making sure that we get a good outcome from Made in Europe, that we are part of that, that we put the effort as we are, into the issues around rules of origin. So we are we are engaging very heavily on that. I think you and I would both regret the situation with Europe that we find ourselves in. But just to. reassure on that, that list of things, particularly for for advanced manufacturing.

16:41

Liam Byrne

- -

16:41

Speaker 7

-

That we're prioritizing . Those

16:41

Speaker 4

-

international deals and market access is a huge issue through a . Few

16:41

Leigh Ingham

- -

associated issues. And lithium is going to kick it off. Yeah. So good growth in every postcode is something I think is really important. And I want to see. procurement that all the levers of government use to help drive that. I would make the point on manufacturing that manufacturing employment is twice that in towns than it is in cities. So actually, if you are looking sure, looking to make sure that we have growth in every postcode, including our towns.

manufacturing is key to that in those sectors. Completely agree. I just did want to pick one slight thing up as well with the. Reindustrialisation point. There's some people who recommend that right now the government doesn't have a target around Reindustrialisation. What that could look like for jobs in the future. Would that be something the government could consider? So looking at maybe a target of a million extra jobs, particularly in the production side of things, to to .

Liam's

16:43

Speaker 7

-

16:43

Liam Byrne

- -

16:43

Speaker 7

-

think that's something we could consider? So the skills plans that I mentioned a moment ago that we're working on at the moment, the thing that they're aiming at is that Skills England reckon there's about. 1.5 million jobs coming down the track in those Isa sectors, plus ICT plus construction. I think that figure is. So we are we are aiming at that and we are. That's it's difficult to have it as a target because obviously we are.

A lot of this is within our control. All of this would be global economic factors and all the rest of it. But that is that is the thing in sort of headlights for us as we work on.

16:44

Liam Byrne

- -

Improving apprenticeships.

16:44

Speaker 7

-

16:44

Liam Byrne

- -

Education colleges.

16:44

Leigh Ingham

- -

And all the other work we're doing to improve skills. Brilliant. And so in terms of driving growth in every postcode, because a lot of the things we've heard talked about before today, before this session, but is also around developing.

16:45

Liam Byrne

- -

16:45

Leigh Ingham

- -

Money to like combine authorities. You've got 48% of England that aren't covered by combined authorities, which are areas which haven't had the same level of investment. How do you how do you guarantee growth in every. postcode without having . An

16:45

Speaker 7

-

agenda to get those skilled jobs through in those spaces? Yeah. So I think I think part of it is incumbent on us

16:45

Speaker 1

-

Is incumbent on us at sort of ministerial level, department level, doing what I referred to earlier on, which is looking for where those where those gaps, where do we think there are. areas that are at risk of, of, of being left behind, but running all the way through the industrial strategy as a sense of place? And it isn't just limited to those areas with with mayoral and strategic authorities. So we talk about clusters. We talk about sectors where they are more.

distributed around the country and not. necessarily clustered together, but it's a it's a fair challenge because you get going back to my original point about, you know, what is what is that more expansive definition of reindustrialisation? Part of that is a recognition that, you know, when we look at town centres and feel that there not what we would like them to be when we see empty shops and that sense of decay that started when the works at the edge of town closed.

So we have to have that .

16:47

Leigh Ingham

- -

Certainty that we are offering something everywhere within the country. Just one follow up on that as well. Just in terms of growth in every postcode, we've talked about procurement being a really strong lever that government can pull, and I'm really keen to see the skills link that we've talked about moving forwards. The government spends around. 450 billion a year ish. I think that's about right. Yeah, and we've accounted for 90 of it when we've said we're going to change direct procurement.

One of the issues you've got is that arm's length bodies aren't following government direction in this. So I've got specific experiences in my constituency, which I'm happy to speak to you about elsewhere. How do we ensure that that further.

16:48

Liam Byrne

- -

360 billion. Which

16:48

Leigh Ingham

- -

is an incredible lever to pull to shift the outcomes of people in this country, are going to be included? Because if arm's length bodies aren't doing the same kind of things that we're directing government departments to do, you've got a real. significant gap there. And . Ultimately,

16:49

Speaker 1

-

arm's length bodies spend government money, albeit arm's length. So I'll say a few things. I think some you'll begin to see some of the structural changes we're making. So as a matter of days ago, announcing the changes to how we weight social value, which allows us to account more for for skills and the money that we spend. Similarly, we've seen new guidance on using the national security exemption so that we have a more broader.

understanding that national security doesn't just mean issues of defence, it also means your wider resilience as an economy. But then I think you have individual government.

16:50

Liam Byrne

- -

Department initiatives.

16:50

Speaker 1

-

As well. So we see lots of work going on in defence, for example, to make procurement more open to innovative and smaller companies. We see the NHS Innovation Passport so that smaller, innovative companies in particular are not dissuaded from bidding for something because they have to they have to go through an agreement with every single health.

16:51

Liam Byrne

- -

16:51

Speaker 1

-

If I may, with with within the steel. Field. I think there's a really good example of how to do this now, where those who are procuring are. required to judge what they are procuring against the. digital catalogue of all the steel that's available within the UK, they're required to do that.

16:52

Liam Byrne

- -

16:52

Speaker 1

-

We give to the. producers the pipeline of what's coming. So they are able to plan for that when people. Come knocking. And also you can look at things like clean energy bonus and things like that. So I think there are structural things we can do. But I think like a lot of things in the industrial strategy, it's about trying to find where are the particular. blockages and as well as trying to create that structural change, sort of slightly kind of Eye of Sauron approach to focusing on those .

16:53

Liam Byrne

- -

Areas and trying to improve the way it works. Okay. We've had two chancellors talk about this. I think the last Chancellor talked about buying British not if possible, but by design. And the new Chancellor has said public procurement is a strategic tool. How far are you prepared to go within the WTO rules and the agreements . With the

16:54

Speaker 1

-

European Union . In

16:54

Liam Byrne

- -

pushing domestic content?

16:54

Speaker 1

-

I think we want to insisting on domestic content, I should say. So. I think I think you can see from the changes we've made that we do we do want to go further. We're sort of unapologetic by always bookending that with within our.

16:54

Liam Byrne

- -

International obligations. And this is where the previous conversation links, links. Do you think that your instructions have basically pushed to the absolute max of what . International

16:54

Speaker 1

-

obligations allow, or is there still some pushing to do? I think to go back to to to Lee's question, I think in central government departments, that message has got through, and I think people are are pushing on it. I . Think it will

16:55

Liam Byrne

- -

take take some . Time and

16:55

Speaker 1

-

effort to cascade that . All the way

16:55

Liam Byrne

- -

16:55

Speaker 1

-

public sector. Right. How long?

16:55

Liam Byrne

- -

I. Well, look, we will work hard on it . If I take Rolls-Royce and the SMR program. So government's put £2.6 billion behind this programme. And Rolls-Royce has said that the reactor pressure vessels are amongst the capabilities that Britain can't currently supply. And so they're being, I think, supplied by Doosan in South Korea and Skoda in the Czech Republic. I mean, do you think that is exactly the . Kind of

16:56

Speaker 1

-

scenario . That we

16:56

Liam Byrne

- -

. Should be trying to

16:56

Speaker 1

-

avoid in the future? I, I wouldn't I wouldn't want to point to those particular examples because there's a benefit to us with the relationship with the Czech Republic on that as well, in terms of getting SMRs in into Czechia as well. But I think where we have. So we are we are running at pace towards the SMR issue. Had we had a ten year run in to that, then absolutely.

You would look to . Have a more

16:57

Liam Byrne

- -

strategic . View

16:57

Speaker 1

-

16:57

Liam Byrne

- -

supply chain and make sure that we can see the issue. 2.6 no, no, of course, lots of public money .

16:57

Speaker 1

-

Capabilities we need in this country. Contracts go abroad. No, absolutely. Absolutely. But the. industry . For

16:57

Liam Byrne

- -

SMRs as a whole will . Be

16:57

Joshua Reynolds

- -

firmly rooted within the UK. Joshua Reynolds thank you, chair Minister, it's been just over a year now since the industrial strategy was published. Yet in a make UK report published.

16:58

Liam Byrne

- -

16:58

Joshua Reynolds

- -

They say that. 91% of manufacturers have experienced no benefits from the . Government's

16:58

Speaker 1

-

industrial strategy. Is the industrial strategy failed so far? Well, the May report that they've had no no benefits from that. In my . Experience,

16:58

Joshua Reynolds

- -

that's not always the same . As

16:58

Speaker 1

-

having had no benefits. So they say they've experienced no benefit experience. So I so many of those manufacturers will have. experienced benefits through lending. That's underwritten by the huge extension of guarantees from the British Business Bank. They will have benefited from supply chains that have been boosted from either innovation funding, national wealth funding from us as well. But it's a fair it's a fair challenge that we need to do more, Mr.

Reynolds and that's why, for example, as I mentioned, the Industrial Competitiveness Scheme, which will reduce energy . Costs for

16:59

Liam Byrne

- -

16:59

Joshua Reynolds

- -

16:59

Liam Byrne

- -

16:59

Joshua Reynolds

- -

Is just around the corner. Moving on slightly to the Industrial Strategy Advisory Council, which also fits in your role. The chair of the Industrial Strategy Advisory Council told this committee that it was incredibly important or very important that it went onto a statutory footing, and it was part of why she accepted the job as chair. Now, on.

17:00

Liam Byrne

- -

the 7th of July.

17:00

Joshua Reynolds

- -

Then Secretary of State told us that he had not been able to find a legislative vehicle to .

17:00

Speaker 1

-

Put it on a statutory footing. When are you going to find a statutory vehicle? I have to give you that awful answer of as soon as parliamentary time allows, what I would say in the meantime, before it's put on a statutory footing, I think the value of the. Industrial Strategy Advisory Council is really being seen. The research that they're putting in place, the advice they're giving. I've been at events with two members of the.

council over the course of the last week, as I've been out and about in the country. They are a really. important sort of umbilical link. between the strategy that we as political leaders pursue and . That

17:01

Joshua Reynolds

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industrial consensus that we've built around the industrial strategy. Do you really want to see the advisory council go onto a statutory footing? Because in evidence, the chair again said to us in April that they haven't had anything to say. They're not going to do it. It's probably more of a . Matter of

17:01

Speaker 1

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time and priorities right now, which perhaps say something in itself. Yeah, I know, I know that when people say when politicians say as time allows, it often means kicked into the long grass.

17:02

Joshua Reynolds

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We really do. We really do want to do this.

17:02

Speaker 1

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And again, will it be by the end of this Parliament? I can't I can't answer that because that will be a matter for future King's speeches. But as I say, we view it as a really important part of. cementing that.

17:02

Joshua Reynolds

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Sense of a long term consensus behind the ten year strategy. I understand that obviously you don't want to commit necessarily here, but I am going to push you that. It's a really important part. It was in the industrial strategy, which was flagship of this government. Yet you can't tell me today, and you can't tell this committee today that it will be in statute by . The end of

17:03

Speaker 1

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this Parliament. That's two and a half years away. Well, I mean, no, no, no, no minister can sit and say what will be in.

17:03

Liam Byrne

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Future legislative.

17:03

Speaker 1

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Programmes because it's not in my gift. What I can say, if you look at the way we're backing the council with the.

17:03

Liam Byrne

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17:03

Speaker 1

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If you look at the way we're engaging with them and working with them on the research that they produce and pursuing the. recommendations that they come forward with, I think you can hopefully see from our our day to day actions, if not yet from our legislative .

17:04

Liam Byrne

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Actions, that this is a this is a body that we really value. Weird for a Prime minister committed to Reindustrialisation not to put it on a . Statutory

17:04

Leigh Ingham

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basis, I would have thought. Massingham. Thank you very much, chair. So I wanted to come back a little bit if.

17:04

Liam Byrne

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17:04

Leigh Ingham

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Just to going the relationship between devolution and strategic authorities and also the National Industrial Strategy. So what is . That

17:05

Speaker 1

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relationship I suppose initially. And then I'll follow if that's okay. Well, I'd begin by saying I think the industrial strategy itself and the development of it was a good example of how you do this type of work in a way that respects and responds to devolution. So the the strategy itself was developed with mayors. It was developed in a way that was.

17:05

Liam Byrne

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Intentionally overlapping.

17:05

Speaker 1

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With their own ten year local growth.

17:05

Liam Byrne

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17:05

Speaker 1

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And it also, as I mentioned earlier on, running all the way through, it has that sense of place and. clusters and that sense of the closer we can take decision making and those those strategic. choices around the development of those clusters and those sectors,

17:06

Leigh Ingham

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The more we'll take advantage of the local intelligence. So fundamentally, the one thing I would say there is you just said it was developed in . Coordination with

17:06

Speaker 1

-

17:06

Leigh Ingham

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What about the 48% of England that aren't covered by that? No, absolutely. So that we're talking about half the country. Obviously, I know that the the national governments were involved as well. But I think I think it's a really significant gap, and I'm not sure it's been grasped yet by any the answers we've had on on any of that issue. So what do you think as well in terms of like having a national industrial strategy? Are there any trade offs in terms of .

17:07

Speaker 1

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Devolution by default? And the strategy is that there are just to say, I mean, my department and the industrial strategy team are working very closely on the devolution bill and the rewiring the state proposals around devolution. And that's certainly something we are working on, is how do you make sure that those that don't have mayors are taken into account? So I think I think we've got a really good example within the automotive industry of the sort of how do you do both the strategic and the local at the same time? Where we are, we are looking at what do you do with the devolution of some of the research and innovation funding around automotives? We have to have that national view of the sector.

What are the sovereign capacities we want to support? But you you've begun to see through, for example, within drive.

17:09

Liam Byrne

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35.

17:09

Speaker 1

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The . £5,050 million pilots around supply chains that we've devolved to to mayors in the North East and the Midlands. I know that mayors, again, are, but we are we're sort of not waiting to do that. And the other thing I'd say, and this is this is partly as being a kind of a kind of. Scott and having having this sort of longer and deeper experience of.

17:10

Liam Byrne

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17:10

Speaker 1

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We have to be careful and always remember that. devolution is. not an end in itself. It's a means to an end, and the end is better government and better, better decision making. And we don't always have to wait. And again, I think the industrial strategy is really a good example of it for formal institutions and structures to . Be set

17:10

Liam Byrne

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up, you can just get on and work together and make things happen. Do you recognise the fear that there is . This whacking

17:10

Speaker 1

-

great governance gap, and you've got half the country about to be left behind? Yeah, and that's something we're looking at as we prepare our own response to the rewiring the state.

17:11

Liam Byrne

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Sorry if you want . To move

17:11

Sarah Edwards

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on, I'm going to move us on just because I'm conscious of the minister's time. Sarah Edwards Thank you, chair, some good news that I can obviously share, which is.

17:11

Liam Byrne

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17:11

Sarah Edwards

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Minister, is that Alcorn, in my.

17:11

Liam Byrne

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Constituency. received £878,000. In

17:11

Sarah Edwards

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research and development grants, which is great for advanced.

17:11

Liam Byrne

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17:11

Sarah Edwards

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Which is wonderful and to be.

17:12

Liam Byrne

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17:12

Sarah Edwards

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And I'll be visiting them next month to to find out how they're going to be using that and why that's so important. And obviously, as part of the automotive supply chain, they're very important within Staffordshire and the West Midlands. So it's a well placed there. But I'm wondering how you intend to sort of use that R&D spend to drive the industrial strategy. particularly now that in your remit you've obviously got science and innovation much more clearly defined with the with the re.

reorganisation of the department. So have you got a sort of idea of how you're going to lay that out? Because at the moment I think that's probably coming a national way. Is that overlaying sort of with regions and how how money is going to be dispersed? I mean, obviously we've had a little bit of a discussion about this challenge that Staffordshire, for example, is in limbo about where it's going to sit going forwards.

So could you give us a bit of a flavour of of what you think that looks like, and especially for businesses out there who really want to, to get this research and development funding and be able to know how to get it and how they fit into this story that that I think you and the government want to tell about how this. reindustrialisation and the industrial strategy is going to . Benefit

17:12

Speaker 1

-

people, but specifically relating to that research and development funding. So you have even prior to the sort of. reuniting of the of the.

17:12

Liam Byrne

- -

17:12

Speaker 1

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You already had Ukri. reserving significant proportion of their funding specifically for the IS8. I think your point on similar to the earlier point about the. How do you keep the strategic in the national. How are you able to put, for example, innovation funding into sovereign AI. capabilities and things of that that sort while taking. advantage through the devolution of more research funds and innovation funding on that local expertise.

And we've you know, we've already have a fairly successful, I think, model with that , with local innovation. partnerships where we put the money in and then it's. designed by local local government and our mayors in their area to, to react to local local links. But . Again, I think

17:12

Speaker 2

-

this is something that we're going to be looking at as part part of that. I don't know if you yeah, I mean, the Local Innovation Partnership Fund is a great example because it isn't exclusively for mayors. It's spread across the four nations. And there were two types of ways you could get the money. So some of the money was hypothecated for particular regions, and then some of it was completed. So that kind of gave an opportunity for everyone to play.

And then the government, even before July, has committed to exploring how to devolve that funding further. So while that was only, I'd say only a half.

17:12

Liam Byrne

- -

17:12

Speaker 2

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It's an example of how we can work in partnership. And it's not just . Mayors,

17:12

Sarah Edwards

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it's universities, it's local authorities. It's devolved governments. Yeah. Can I just ask a quick follow up question on that, which is sometimes companies sort of feel like the same, the same companies get that money or they get access to it. And others outside of that don't really know where to turn to, how to get it, what to do? Is there going to be some work on that? You know, as a committee, we've talked about this idea of having that that sort of front door for business, that single one stop shop where they can go to find the answers to their queries.

Is that being worked into that? Is there plans for that? Are there regional teams that are responsible for this, and how can a business that's listening to our committee now. engage with the. department or, you know, the innovation innovation . Teams

17:12

Speaker 2

-

to be able to say, I've got a great idea. I want to contribute. Yeah, I can answer that quickly. So not just bears, but there are growth growth hubs around the country. So as the business department, we support those growth hubs, but they're also a match funded locally by local authorities and others. They tend to operate as a kind of front of house. So it's not just innovation funding. It might be sort of scale up support.

It might be sort of investment. It could be anything. It could be help to export. So there is a front of house, local to many businesses around the country. Just to give the example of the local Innovation Partnership fund, because I think it's important. It's the example I have here isn't just giving a big firm some money to go and do something. It's about investing in an AI materials hub. Why is that important? Because it creates infrastructure for small firms, whoever they are in the region, to use it.

And that's what the growth hub then can do. It

17:12

Speaker 1

-

can provide access to those small firms there that need to use it. And if I could just briefly just add to that, if you look at the example of made smarter as well, I think it's really important, yes, that smaller companies get. access to innovation funding. We have to recognise that will also need advice and support in itself as well, because a lot of that innovation, particularly we spoke about in the last session we had together, AI is something, for example, which will feel such a huge bar .

For

17:12

Liam Byrne

- -

people to clear. So you have to you have to match the accessibility with advice. There's been a fair bit in that set of answers about this is something we're looking at. I mean, I'm assuming that basically you've got some machinery of government changes. You're working out how to wire what you've just got . Into

17:12

Speaker 1

-

existing strategies, and you're going to come back to Parliament and tell us how it's all going to work. I mean, we were we were fairly connected to to start with in . Terms of the

17:12

Liam Byrne

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prioritisation. Of

17:12

Speaker 1

-

innovation funding. And through some of those fighting back, what you've said to us. Yeah, yeah, yeah, no, maybe maybe it's a variable tech, but certainly in terms of the future of those funds. So for example, we've made a commitment to devolve more later stage innovation. funding .

17:12

Liam Byrne

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To local areas. So those are the types of things that we're studying.

17:12

Charlie Maynard

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Let's exchange correspondence on exactly how that's going to work. Mr. Maynard. Yes, sure. Thank you. Chair. So there's I'm looking at a list of national sector skills packages. So get Britain working plan construction skills, mission board, clean energy jobs plan, post 16 education skills and white paper. We've got that now. We've got kind of devolution by by default as well. And you know so you've got lots of national ambitions now devolution coming in.

How is that actually going to work in practice. And is there a clear roadmap that you can go okay, you know, Committee, have a look at this. This is how that's going to fit together. Or if there isn't one now, will there be one soon? Because it's it's complicated. And, you know, I'm happy with, with the concept, but,

17:12

Speaker 1

-

But actually making it happen is quite how are you going to make sure that happens? So I think I think there's an inevitability sometimes when you're working with different layers of government, different funding councils, that it's complicated. The people, we don't want it to be complicated for us industry. And that's the that's the biggest .

17:12

Liam Byrne

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17:12

Speaker 1

-

I think running through what we're already doing in a lot of the skills work is that sense of both local and sectoral collaboration. So you have mayors already delivering elements of of our skills offer. We have the technical excellence colleges, which are very linked to local clusters as well. So another example of that kind of linkage between place and the .

17:12

Liam Byrne

- -

17:12

Speaker 1

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Well over. £1 billion committed to that. What is coming very.

17:12

Liam Byrne

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17:12

Speaker 1

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Which is doing a huge amount of work with across.

17:12

Liam Byrne

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17:12

Speaker 1

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Is the remainder of the skills plans that are the sort of further. unpacking of the industrial strategy. So we've seen already the the jobs plan for the clean energy sector, which I think is. exemplary example of how you knit together all the complex things you're talking about , place unions. industry together, working on that alongside government. You'll see more of those coming very shortly, which will begin to map out that otherwise slightly .

Complicated

17:12

Liam Byrne

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picture that . You're, you're, you're, you're setting out

17:12

Leigh Ingham

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on that. You mentioned briefly in passing the British Industrial. Competitiveness Scheme and energy prices earlier.

17:12

Liam Byrne

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10,000 manufacturing.

17:12

Leigh Ingham

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Businesses going to be supported. Lots of the people in my area will be helped by that. Lots of them are spending a lot of money on. consultants to make sure they get it, and I could. I think we could really have done with making it short, making it clear that it was easy to apply for so that people weren't spending the first year's worth of the money on the consultant to make sure they got it.

And it desperately needs to be bigger than 10,000 manufacturing businesses. So are you going to go . Away and

17:12

Speaker 1

-

ask through the Treasury to give us some more . Money so

17:12

Leigh Ingham

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that it's . Bigger next year?

17:12

Speaker 1

-

Well, we already have. So the okay, you've already . Asked for more

17:12

Leigh Ingham

- -

17:12

Speaker 1

-

Well, the scheme is bigger than it was initially 7000 to 10. And that is thanks to some generous Treasury funding. So I will not I will not bite the hand that feeds me. Okay. From that point of view, look, we would both of my secretaries of state have not made a secret of the fact they'd like to see that type of support rolled out to an even bigger group of.

17:12

Liam Byrne

- -

17:12

Speaker 1

-

But it's got to be affordable. These things are. necessarily very expensive. On your point about.

17:12

Liam Byrne

- -

17:12

Speaker 1

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I think you'll see with the sign up coming next month for a scheme that I think it's fair to say has been very complex to, to, to stitch together and .

17:12

Leigh Ingham

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Deliver for the user. It is a fairly simple process. And so I will say energy costs are.

17:12

Liam Byrne

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Absolutely existential. So

17:12

Speaker 1

-

if there were one thing . I could

17:12

Leigh Ingham

- -

put at the top of the list, it is energy costs is at the top of our list. Okay. Yeah. Elsewhere on the list and perhaps slightly something for one of your new colleagues, Lord Sarwar. But the. impact of the steel safeguards regime on manufacturing businesses in the downstream steel industry is.

17:12

Liam Byrne

- -

Absolutely monumental.

17:12

Leigh Ingham

- -

We are less than four months in, I think, to having the new tariffs quotas regime. I every time I go and see downstream steel, they are telling me of immediate impacts. They're telling. And I mean, we're in a situation where the run overs are not exhausted yet, where quotas haven't been met yet, but huge worries about what's going to happen later in the year. Stockholders are telling me they are trying to prepare their customers for a jump in prices later in the year, but obviously loads of my SMEs who buy from.

intermediaries are not aware of this looming coming towards them. And as for.

17:12

Liam Byrne

- -

Fabricated fabricators.

17:12

Leigh Ingham

- -

There are no. protections at all. And so they are seeing increased imports of fabricated steel coming into the United Kingdom. undermining what they are doing. We cannot have an industrial strategy that says we're going to. reindustrialize and then, almost by.

17:12

Liam Byrne

- -

17:12

Leigh Ingham

- -

Lose our downstream steel industry. Please tell us you're going to do a proper review as soon as you possibly can, get some of the . Details

17:12

Speaker 3

-

right, and finally, bring in some .

17:12

Leigh Ingham

- -

Protection for.

17:12

Speaker 1

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Fabricators inside the customs union single market. Well, there is that. So I, I, as I, as I always do, I agree with everything you've just said, and I've heard much of much of what. you've said. I think it's first to acknowledge this was this was something we did out of necessity rather than rather than choice. And it would have been catastrophic for sort of large scale steel making had we not.

I think you saw during the process of. Looking at the quotas and the different types of.

17:12

Liam Byrne

- -

17:12

Speaker 1

-

We did move significantly from the original proposals. I think we took nine separate categories out of it because of the. concerns that have been heard. We've said we're going to review this, but in the meantime, we are in close. contact with everyone that you have. described to keep keep abreast of, of, of, of what the impact is. I end up saying there's also an opportunity here for, for British manufacturers.

And we've got to make sure, yes, we have a commitment to review this, but we also kind of want to send a market signal to them that there's an opportunity for them to manufacture more within the UK as well. And I'm working . Very

17:12

Liam Byrne

- -

hard with my new steel hat on to make sure that that's happening as well. Thank you very much. Final question from me then. So in one of the replies to our reports, you've agreed with us that health and defence are two big departments that really need to get their procurement act sorted. If we're to deliver on the industrial strategy ambitions that you've got, and we've heard evidence this afternoon that the Ministry of Defence cannot break down the £298 billion procurement budget.

They can't define what British means and therefore , how much of that money will be spent on capabilities here at home. And they can't tell us how much progress they've made in accelerating their procurement speed.

17:12

Speaker 1

-

Is every other part of government as bad as this? Well, I'll look back at the evidence and raise the issues raised with my colleague, the Minister for Defence Procurement. I can't give an overall assessment for every part of government. I think what you can see is with the focus, as I mentioned earlier on on defence and the NHS, we are starting with the big spenders in the hope that that creates a. culture change that flows throughout the rest of the of the public sector.

How's it going? But it's very it is very hard to change culture and procurement. We. We as ministers have to. And it's similar with to so many.

17:12

Liam Byrne

- -

17:12

Speaker 1

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Say over and over again that we are serious about backing people when they take slightly more risky decisions, when they innovate, when they choose a .

17:12

Liam Byrne

- -

Supplier that isn't a supplier who's been . Chosen

17:12

Speaker 1

-

over and over again, when are we going to start firing people who don't get the message? Well, rather than firing, I would talk about hiring. So we have innovation leads in each of the departments on procurement now, whose job it is to, to try and make this easier for, particularly for.

17:12

Liam Byrne

- -

Challengers within procurement, given the journey that you've got ahead of you changing the culture. If ten is like you've got it absolutely nailed and one is you haven't really .

17:12

Speaker 1

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Started, just give us a sense of where you are on that spectrum.

17:12

Liam Byrne

- -

I would say I would put it at four, headed to five. Okay. We'll keep a very close eye on this. That concludes this session.

17:12

Speaker 4

-

Thank you very much indeed. Blair, to you and to your officials.

This debate has concluded

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