Industrial Strategy

Lord Fox Excerpts

Monday 27th November 2017 Lords Chamber

[Lord Mendelsohn (Lab)]

My Lords, I draw attention to my interests as listed in the register.

I thank the Minister for repeating the Statement and I give a warm welcome to much of the industrial strategy White Paper, the warmest welcome being for its existence. There is much in it to be applauded and many important aspects. It is, like the Green Paper, quite a compendium of what we are familiar with and what we have already heard, but there are some very useful illustrations of collaboration across government, business, trade unions and science. The test is whether, joined together, it has the capacity to make a powerful difference.

The White Paper encompasses the old, the current and the new. The old—that is, what is already established—has been addressed through the sector deals. What is most welcome is that much, although not all, of what has been drifting now has a process to come to a conclusion. The present is in the grand challenges, but we also have to address the more chronic problems of regional imbalances, low wage growth, service sector imbalances and weakness in skills, as well as competition, markets and finance. The ONS statistics published last week show a stinging decline in capital stock, which shows that businesses are relying on cheap labour rather than investing in system upgrades to improve efficiency.

I had noticed that the Green Paper was 132 pages long, whereas the White Paper weighs in at 254. It is so much larger that it has already started to be part of the growth story of the industrial strategy. However, given that the font size is up by around 25%, with more pictures, tables and illustrations than the Green Paper, that is in and of itself a good way to start evaluating whether it is more productive.

Reading the previous Government’s press release launching the effort to help to reposition the UK’s independent capability in the post-Brexit world, the word “productivity” did not even get a mention. However, it got a mention from one trade body, which said that it hoped that the strategy could help with productivity in its sector.

Today, the White Paper is all about productivity. This is different from the post-Brexit world and, I think, weaker for it; nevertheless, it is essential that we address it. Performance over the last decade has been the worst for any decade since the 19th century. In fact, since the predecessor document on the productivity plan was launched in 2015, we have seen the worst quarter performance recorded in the last 200 years. So this may not equip us over the horizon that we originally looked at but, as the OBR report illustrated, this is a pressing target now.

There are now five drivers of productivity and four grand challenges—nine items, not 10. By my reckoning, the last 10 pillars could probably fall into the first five and the challenges have been elevated to grand challenges. To my mind, these are more matters of presentation, so I would like to ask some questions on three major areas which I think are fundamental.

The first concerns institutions. The report announces the establishment of the industrial strategy council. This is to be welcomed and it comes in a section which has my favourite phrase of the entire report. It says that the strategy,

“needs to combine agility with patience”,

and that the industrial strategy council will be there to help consistency and adaptability. However, we will be concerned if it becomes the same as the OBR. Will the Minister confirm that its make-up will demonstrate independence and what that might be? What independent powers will it have? Will it be able to talk to departments outside the Treasury? Will it have to take the political assumptions of Ministers and departments for its measurements? Will it publish independently of ministerial and departmental input, especially the Budget? Will it be accountable to Parliament, and will its head have to go through a confirmation process? Without those assurances, it may not have the necessary long-term cross-party support that this sort of strategy needs in order to succeed.

The White Paper adds some extra institutions and has a welcome review of SME productivity, but it does not address institutions such as NESTA which look like they are in need of a refresh, or even the newly established Small Business Commissioner, who, if he could unlock the problem of late payments, would create the recycling and velocity of cash that makes a measurable and meaningful difference to output per worker.

We do not address the weaknesses of our venture capital sector, which is much more reliant—despite our tax arrangements for VC through the SEIS and the British Business Bank—on the European Investment Fund than we are prepared to face up to. So is there a wider review of all the agencies and current arrangements, and will they too be considered over time within the context of the industrial strategy report?

Secondly, there is the crucial question of funding. The White Paper indicates that we are going to try to do more with less. I am a great fan of efficiency but surely additional investment is required. Why is Germany streets ahead of us in preparation for the so-called fourth Industrial Revolution? It is because it has a €40 billion agency. Why did a small country such as Israel steal a march on us in the volume of VC tech and cybersecurity investment? It was because it established a well-funded agency called Yozma and dedicated 8% of all government IT departments’ expenditure to it.

So will the Minister please tell us how much new—not previously announced—money there is in here or in the sector deals? Of the money that has already been announced, such as the Industrial Strategy Challenge Fund and all other announcements, how much is left unallocated?

I have always given great credit to the Government for increasing R&D spend, although much now has to go to make up for the loss that we face from Brexit. I welcomed the first place that R&D received in the Green Paper but I am not sure that it is there with the same force now. There is much to welcome but we are still aiming to be behind the OECD average and well behind all the pace-setter nations, even when we hit 2.4%. Can the Minister assure us that this is not the end of the science story in the UK’s industrial strategy?

Finally, the report remains weak on identifiable, quantifiable and operable ambition and targets. DARPA, which is cited in the report, is clear about its mission and objectives. It is essentially and critically to ensure that the US military maintains overwhelming technological superiority over any rival. The clarity of the mission makes it clear how its challenges and structure can be overcome. The industrial strategy challenge fund needs to be similarly clear. Can the Minister provide us with what he considers to be the most concrete objectives, targets and outcomes we can measure it against; and what specific goals any of the measures are set to achieve?

I would have preferred a stronger call to action. It is said that you have to set goals that are almost out of reach. If you set a goal that is attainable without too much work or thought, you are stuck with something below your true talent and potential. Discipline is the bridge between goals and accomplishment. Without that, as good as this White Paper is, it can never truly be great.

[Lord Fox (LD)]

My Lords, I draw attention to the interests registered in my name. Like the noble Lord who has just spoken, I am pleased that the words “industrial strategy” are coming from the Government’s lips. In the life-cycle of an industrial strategy, we are perhaps at the most optimistic bit before cynicism and despair begin to set in. I shall try not to hasten us down that curve but there are some points that we should perhaps bring out today. It behoves me most of all to point out that the reference to Brexit, made as an aside in the Statement, clearly indicates the effect that the Government believe it will have on our industrial capability—and it is not positive.

This should be set into the context of the OBR’s recent forecast which downgraded GDP by £45 billion by 2021. That is around £700 per person. We would have valued a sense of urgency in the report but there has not been any. It has been a long time in the making. The Minister pointed out that we have been through a long consultation and a long Green Paper, which was almost a year in the cooking. I acknowledge that we need a long-term strategy but, because it is a long-term strategy, that does not mean it needs such a long-term gestation.

For us, the most important part in this—it has received few column inches despite the font size and photographs, as pointed out earlier—is the implementation side. Without implementation, this is just another brochure; another tour of the industrial landscape. It is right that it falls to a Cabinet committee, chaired by the PM, to drive this issue forward. I would welcome the Minister’s comments on how often the committee meets, how much energy we can expect from it and how often Parliament will receive a progress report from it.

Like the previous speaker, we also welcome the establishment of the industrial strategy council—or we think we do because there is so little detail it is almost impossible to know what it is, what it is for, how it will be resourced, how it will be staffed and to whom it will be answerable. Like the previous speaker, we would welcome answers to those questions.

Then we come to the grand challenge. There are noble Lords on many Benches who think this is a rehash of picking winners. I know the Statement went out of its way to decry that view but, however one looks at it, there is an element of picking sectors that we think are needed and can be successful, and investing in them. One can call that something else or picking winners. I urge the Minister to ensure that we are not cutting out funding into the wider exploration and seeking of knowledge because, without investment in that kind of research, graphene would never have been discovered. We still need to seek out the unknown unknowns in order to advance our science and keep us moving forward.

Perhaps I may add another warning on DARPA. This is not a DARPA process for one important reason—there is not the money that DARPA has to throw at these challenges. There is not the huge industrial military complex that sits behind it, which has itself enormous US Government funding for these initiatives. We should be careful when we bandy the word DARPA around.

That said, overall the topics that have been chosen for the challenge are broadly welcome. I note the inclusion of clean growth, which was hardly mentioned in the Green Paper and not at all in the consultation. It was mentioned extensively in the Lib Dem response to the consultation so I shall claim that as a Lib Dem win. However, the Government’s record casts doubt on their commitment to clean growth. They have scrapped subsidies for solar and offshore wind and cut funding for carbon capture and storage—even though we know that kind of support works—and, further, they have sold off the Green Investment Bank. This announcement is either a damascene conversion or just more paper.

I have just one question on the life sciences strategy. The Government commit the NHS to its role in the life sciences strategy: what extra resources will be given to the NHS in order for it to take up the research role it has been set?

The Government want to increase research and development spending to 2.4% of GDP by 2027. That of course is only the average, as has been pointed out, and a more ambitious target would be more sensible. However, there is not very much new money. If you do the maths, you will find that it is about £0.4 billion on top of what has already been announced. Certainly that is what has been said in the other place. The £2.5 billion investment fund to be created by the British Business Bank was not costed in the Red Book, raising questions of where the money will come from. Perhaps the Minister can enlighten us. These commitments are inadequate compared to what is being lost—the £2 billion provided by the European Investment Fund for start-ups and the €3.6 from Horizon 2020, which will disappear after that time.

Catapults are important and I am pleased they have been mentioned. I have two points. The paper mentions that there are poorly performing catapults. Can the Minister enlighten us as to how many are performing well and how many are not? Secondly, I note that the highly-regarded CEO of Innovate has just stepped down. Perhaps we can hear what that is about.

We on these Benches have said before that we will need the right people to implement this strategy. There has to be a joined-up national skills strategy.

[Lord Henley]

I thank the noble Lords, Lord Fox and Lord Mendelsohn, for what I take to be their general welcome of the industrial strategy. The noble Lord, Lord Fox, claimed that parts of it were in response to comments from the Liberal Democrats in their response to the Green Paper. He claimed that there was a lack of urgency, but when one publishes a Green Paper in January, as we did, to produce a response of this kind by December is doing pretty well. If we had produced it any faster, the noble Lord would accuse the Government of hurrying their response. He cannot have it both ways and my right honourable friend has got it just right. I am grateful that I joined the department only four weeks ago, so came in at the tail end of the development of this response, but I can assure the noble Lord that we have been busy these last four weeks going through draft after draft of the White Paper to produce this document, which went to the printers only last night.

The noble Lord, Lord Mendelsohn, worried what the size of the document compared to the Green Paper indicated about productivity gains. He noted that it was so many pages longer than the original Green Paper but then said that the font was larger, although he did not point out that the pages were smaller. I will have to take advice on whether there are more words in this document, when the pictures are taken out, than there were in the Green Paper. All I can say to both noble Lords is that it has been a very considered process with, as I say, some 2,000 responses that had to be carefully considered. We had to talk to many people and develop our policies, as well as take it the whole way around the Government.

I am grateful to the noble Lord, Lord Fox, for emphasising the role of the Prime Minister. It is important to make it clear that the Prime Minister is fully committed to the strategy, as are all members of the Government. If this was a Business, Energy and Industrial Strategy document coming merely from the department, it would be nothing. The fact is that it reaches out to all other departments, which have all played their part and helped to produce it. As we implement the ideas behind it, other departments will contribute, be they the Department of Health, as mentioned by the noble Lord, or education and so on. The point is to get beyond the siloisation that we have seen on many occasions in different Governments of all persuasions; we want to bring a truly cross-government feel to this.

Both noble Lords asked a number of questions, which I will try to address. I hope I can provide responses that will satisfy them, but if not, I will be more than happy to write in due course. The first point made by the noble Lord, Lord Mendelsohn, was that he felt that the White Paper does not deal with regional imbalances. I assure him that this matter is of great concern to me more than most. He will know how activity can vary a great deal across the regions. If he looks at the north and the Midlands, he will find that productivity can be 9% to 14% below the United Kingdom average. We had quite a few speakers from Wales earlier today; productivity in Wales can be around 19% lower than the United Kingdom average. We want to reach out to the regions, to Wales and to Scotland, to ensure that we bring them up to higher levels of productivity. If we fail in that, we will have failed in all other ways.

Both noble Lords also asked about the industrial strategy council and wanted assurances that it would be independent. I can give that assurance and that it will include business leaders and experts. We will be able to give further details about the council in the coming months.

I was asked about British Business Bank investments. I can give an assurance that £2.5 billion of new funding is on offer and that further announcements will be made in due course. I was also asked about what further investment was required and how much new money there is. I have given the figures for what we are seeking to do on research and development so that we get that up to at least the OECD average by 2027. Importantly, that is just the initial target; we would like to get it up to 3% in the longer term. Going back to the question about infrastructure as a whole, we are looking at £31 billion in the pipeline for the future.

The noble Lord, Lord Mendelsohn, asked about measuring our goals and how we will seek to assess the success of the industrial strategy in due course. At the highest level we have a set of goals relating to productivity. We believe that it will be for the industrial strategy council to assess progress on those goals and the others outlined in the strategy.

I am beginning to feel that I am using up time that I should not, but perhaps I may turn to one or two of the questions asked by the noble Lord, Lord Fox, particularly on NHS funding. I refer him to what the Chancellor announced in the Budget when he referred to new funds. The noble Lord also asked about clean growth and whether the Government are cutting funding for renewables. I assure him that we have particularly fast growth in renewables and that we are still committed to a further £557 million for new contracts for different renewables such as offshore wind. We are seeing growth in that area.

As my right honourable friend said in another place, in the Statement and in response to questions, the industrial strategy sets out the long-term strategy that we hope to see. We hope to see developments continue in the manner made clear by my right honourable friend. I thank the noble Lords, Lord Mendelsohn and Lord Fox, for what I think was their cautious welcome. I hope that, as the strategy develops and we continue to bring it forward, that welcome will also continue.

Fourth Industrial Revolution

Lord Fox Excerpts

Wednesday 15th November 2017 Lords Chamber

[Lord Henley]

My Lords, I welcome the noble Lord’s enthusiasm for these matters. I think the House is grateful for his very prompt intervention.

The noble Lord recognises, as I do, that changes are coming and that we must accept them and work for them. He will have seen the Made Smarter Review that we commissioned, published only a week ago by the chairman of Siemens, and I think he would accept that we will see many more jobs; I think the review estimated this could create something in the order of 135,000 new jobs. In terms of what he was saying about greater inequality, which I do not accept, there are estimates that the fourth industrial revolution will not only create new jobs, but create them faster and create better-paid jobs. That is something we need to look at. I will certainly look at the other reviews he mentioned, but there are challenges that we must accept. These changes are happening and we must work to ensure that they happen to our best advantage.

[Lord Fox (LD)]

My Lords, I am delighted that the Minister has mentioned the Made Smarter Review, which highlights that the UK is slow in adopting digital technology compared with our industrial competitors. One of the things it proposes is to run an adoption pilot scheme and to use the north-west of England as the location for it. Does he agree that we need to hurry up the adoption of a digital strategy and that a pilot in the north-west of England would be a good way of moving that forward?

[Lord Henley]

My Lords, I shall not make any firm commitments about that review, which was published only at the beginning of the month. Noble Lords will know that we have already had a Question dealing with it. I confessed that I had not yet read the full 246 pages of the review, but I am making progress under the advice of the Leader of the Opposition, who recommended that I read it with a mug of cocoa. I will look at all recommendations. I will not make promises about the north-west of England but the noble Lord will know I have a particular interest there. I would welcome going back up there as often as possible.

Productivity

Lord Fox Excerpts

Tuesday 7th November 2017 Lords Chamber

[Lord Henley]

Perhaps I may correct one of the noble Lord’s statistics: it is only my fourth department since 2010. It is important to get these things correct. I am glad that the noble Lord, like the Government, welcomes the report; we will certainly take note of it. As I said, we are waiting for the industrial strategy to come out later this month, and I am grateful that he makes it clear that there are matters other than government spending which are important here, particularly in dealing with questions of productivity. We want to make sure that all levers that are available to the Government can be made use of. He mentioned purchasing. We will certainly make that clear, and I hope that other departments will do their bit. He mentioned purchasing within the health service, but there are other things that the Government can do as well, in relation to deregulation and trade policy, as well as procurement, which he mentioned.

[Lord Fox (LD)]

My Lords, I, too, welcome the Minister back to the Dispatch Box. His immediate predecessor gave those of us who are impatient for the industrial strategy White Paper a preview a couple of weeks ago. In that preview he identified three particular strands that will address the productivity issue that this commission has highlighted so well. One of those was skills, and in that he particularly highlighted apprenticeships. I am sure that the Minister has not had much time yet, but he will have noticed that the latest statistics from the manufacturing organisation, the EEF, show a 61% fall in the number of registrations for apprenticeships in the last quarter. Does he agree that this is not just disappointing, it is awful? Can he explain what the Government are doing to improve their lamentable performance over the apprentice levy, which is causing this problem?

[Lord Henley]

My Lords, I am not going to go into detail now but I am grateful that the noble Lord went to the meeting that my predecessor held and listened there. I agree that the figures are disappointing but again, if he can be patient and wait for the launch of the industrial strategy he will see what we are doing and what we are bringing together from all parts of the Government in this area.

Life Sciences Industrial Strategy

Lord Fox Excerpts

Monday 23rd October 2017 Lords Chamber

[Lord Prior of Brampton]

My Lords, there is a strong case for increasing the amount of resources that go into R&D in the UK. It is true that about 1.7% of GDP goes into research at the moment, whereas the OECD average is 2.4% and many countries are aiming at 3%—Germany is looking at 3.5%. We share that aspiration. As the noble Lord will know, we are increasing the amount of money that the Government spend on research by £2 billion a year from 2020-21 and an extra £4.7 billion over the lifetime of this Parliament, which is a very big increase. This is one of those areas where we can almost never spend enough.

[Lord Fox (LD)]

My Lords, the life sciences industrial strategy is a clear and comprehensive review of the biomedical and pharma sectors, but it misses out large swathes of the industry—namely, animal health and plant science. Was that narrow interpretation by the deliverers of the industrial strategy on the advice of the Government, or was it the interpretation of those making it? Can the Minister give us assurances that plant science and animal health will also be included in the industrial strategy sector deal when it emerges?

[Lord Prior of Brampton]

My Lords, it is true that the life sciences industrial strategy was largely based on humans rather than plants or animals. That does not mean to say that we will not be having a strategy for other sectors of the economy as well, including plants and animal science.

Science and Innovation Strategy

Lord Fox Excerpts

Monday 23rd October 2017 Lords Chamber

[Lord Fox (LD)]

My Lords, it is difficult to be innovative in this debate, having heard 10 such erudite and thorough speeches, and possibly because I have already left the creativity window that the noble Baroness, Lady Greenfield, has just ably described, but I will do my best. We should first congratulate the noble Lord, Lord Patel, as everybody has, on securing this debate and on the quality of his intervention. We should be optimistic that this debate is being had, and grateful that all sides of the House are doing so on relatively similar terms, because we will and do need a plan, leaving aside the implicit issues around Brexit—which will enable me not to be chippy or curmudgeonly at all when I talk about some of the other issues that face public life.

The world is changing fast. There is the rise of international competitors, particularly from the East, as the noble Lord, Lord Patel, pointed out. There is the emergence of global technology giants, which stand across borders and territories. The looming shadow of automation, machine learning, robotics and all that are also changing the game and we have to step up. But we should be optimistic that our science and technology background may set us up to do that.

We have an industrial strategy on the cards, yet I often get the impression that when we talk about that emerging strategy, we all say what we want it to be. That wish probably differs across the House, so I thought I might give your Lordships some perspective on how we will judge the industrial strategy when it emerges from its current form, in a White Paper. We need to understand whether it will develop the skills we need; I will come back to that. But will it create sustainable and green growth across the country? Will it deliver 21st-century infrastructure, physical and digital? Will it encourage and improve investment in research and development? Will it nurture excellence while supporting and understanding entrepreneurs and innovators? Does it deliver regional and diverse growth across the country and establish the best financial and regulatory framework? That is the kind of framing we need to bear in mind when we look at that industrial strategy.

Underpinning this are skills. The noble Baroness, Lady Morgan, ably set out the case for them. We need a society that can thrive, and we need that thriving to happen right across society. We are not in that position. As noble Lords will have seen, according to the OECD nearly one-third of 16 to 24 year-olds in the UK have weak basic skills. Mark Walport, when he was still leading the Government Office for Science, gave a similar, damning assessment. High-level skills are not equally distributed across the country. There are big gaps. The UK does not do well in ensuring that people are work ready. Even when they get to work, there has been a decline in lifelong learning, so we have a big skills challenge.

As the noble Lord, Lord Hennessy, pointed out, that challenge has faced many Governments over many years, and we do not appear to be overcoming it easily. The noble Baroness, Lady Morgan, set out the need for an overarching skills and learning strategy. The Liberal Democrats support that strategy and have been campaigning on those grounds. Apprenticeships and T-levels have been offered as a solution, but they are not a unique solution. Without a gear change in delivering the basic skills that people need as a starting point to drive them through to higher levels, we will not meet the challenge.

Turning briefly to research and innovation, we welcome the recognition in the last financial statement that research and innovation need investment to thrive. That was a good step, and we hope it is just one step in a more ambitious investment journey.

The creation of the new unified UKRI has been referred to by a number of noble Lords. I was grateful to hear that the noble Lord, Lord Freeman, sees positive effects from it, and the noble Lord, Lord Bhattacharyya, should be congratulated on his role in helping to bring that forward. There is an opportunity and a challenge in bringing the seven research councils and UKRI together. The opportunity is, in a sense, that UKRI infects the research councils with innovation. I think that was what my noble friend Lord Willis was referring to. The danger is that it is the other way around and we move somewhere down the TRLs, into 1 or 2, and UKRI is dragged into research rather than innovation and development. I would like the Minister’s view on how we keep the right side, if you like, of that continuum because we do not want to lose the innovation we have.

The industrial strategy challenge fund seems to be a good idea, and it would be useful to understand the timetable. I understand that the Faraday challenge will be heading out soon. I urge that we get an early assessment of how that process is working because we do not want to keep making the same mistakes. It looks as if this is a way of tackling big problems, but we would like the Government to keep us posted about how that moves forward. The Government have likened this to DARPA, just as they have likened catapults to Fraunhofers. There is an element of delusion in this. The challenge process is not DARPA. It is not big enough or wide enough and it does not have the support of huge industries. We have to be careful how we describe what catapults do. Catapults have been a welcome introduction into the innovation landscape, and we could benefit if the Government were to put more money in and perhaps declare a few more catapults, but we should be careful in the language we use.

Are we fit for purpose? Do we have an industrial strategy that embraces the challenge and delivers the skills and the landscape that we need because we are going to need it? Industry 4.0 will change everything we do. We will need the skills and we will need to maintain, and further, investment in research and innovation, substituting lost funding from the European Union and adding more. We need to step forward with an overarching sense that this is a mission. Here I agree with the noble Lord, Lord Hennessy, and with what he said in the nuclear debate a few days ago. The nation needs to find its momentum, its push and go, around science. We, as people in public life, should be part of that process of developing that energy.

International Investment

Lord Fox Excerpts

Tuesday 17th October 2017 Lords Chamber

[Lord Mendelsohn (Lab)]

My Lords, I thank the Minister for repeating the Statement in this House. I also thank him for his personal interest in these matters, not just in relation to Bombardier but for his deep involvement in shaping the Green Paper, which is shown through its pages.

I turn to the last part of the Statement, which is the very welcome news that Bombardier and Airbus have determined to create a joint venture to look at developing the C Series aircraft. The pairing of these two cutting-edge product lines is a very exciting prospect for the future of aerospace manufacturing and the excellent industry that we have here. We are hugely encouraged by such a step and what it means for the UK. I would be grateful to the Minister for some further information on what assurances or indications the Government have gained from both companies as to the likely investment or potential for jobs growth in this country as a result of such an excellent step. I reaffirm the broad consensus of the House, as demonstrated during the course of the last Statement, that we strongly support the Government’s actions in defending Bombardier’s position against a completely unjustified and unwarranted attack by Boeing, and a process which we are not convinced is as straightforward and clear as it could be. We urge the Government to do whatever they can and we support their continued efforts to try to ensure a swift and speedy resolution of these matters.

We warmly welcome the excellent and timely Green Paper National Security and Investment and Infrastructure Review. We are pleased that the Government have chosen to look at how we can update our structures to deal more effectively with changing times. As a general observation, this creates further changes to our merger regime, some of which the Minister has already mentioned, such as matters involving the Takeover Panel and the FCA and further reviews of corporate governance. Even some of the insolvency reforms have a bearing on how we look at this regime. I make a plea for a more holistic process in how we review these issues of industrial strategy. Especially as we face Brexit, it would be useful if the Government could come up with a more joined-up approach to how these different parts can achieve the outcomes that we want, rather than having conflicting and competing claims or unwelcome consequences.

In relation to the principles from which we approach this review, it is important to state—as the review itself does—that we have to ensure that the UK remains open for investment and participation. We still want to be a major global player in all these areas. Sometimes the indication that we are involved in a review creates a chill. We should be clear that, while it is entirely legitimate to protect the country’s interests, we will not create a large investment review. This also applies to how we address issues such as the clawback of funds and how those funds might be used for early development or other things for companies which might not be eligible. That provision would itself raise a series of questions. One has to assess things delicately and put them in sensible terms. The intention is clearly right, but we would not want it to have unwelcome consequences.

We are pleased with the short-term and long-term approach to ensuring that we have an adaptable and operational system. The review stresses our foreign direct investment position, which this House has discussed many times. We are mildly sceptical about the nature of some of this investment. The charts in the paper identify the level. If we subtract the gold transactions which take place in the UK as goods received—which effectively net each other out—I am not sure the position would be so flattering. Our FDI position is not as good as is suggested and we should be conscious that we have a long way to go in encouraging the right sort of job-creating investment. The review should be seen in that context, rather than giving the feeling that we are in a much stronger position than we are.

Will the Minister provide some thoughts on the following issues? First, what are our national security requirements? Are these strategic or are they direct security concerns? What balance will be in place on issues such as security of supply versus strategic control, as well as our own capacity to ensure that we have certain technologies? We welcome the important short-term measure of lower thresholds, which does plug gaps. On long-term measures, the review is right to look at mechanisms such as call-ins and notifications. However, these raise questions themselves, the first of which is the nature of acquisitions and security concerns as companies develop in the modern world. This is not always about the takeover of a company. As we have seen from the way in which companies acquire access to technology and other things, this can frequently be done through partnerships, joint ventures and other things which do not involve a complete and direct transfer of equity. Sometimes control changes due to debt, so we need to consider all these measures. I would be very grateful for the Minister’s observations on those points.

In relation to the nature of these companies, we have looked at lower tests on dual use in the military sector and those involved in the design of computer chips and quantum technology. Certainly, our security concerns can be identified in other high-tech sectors, including life sciences and even food technology, as well as other areas of science and research. I would be very grateful to be told how the Government decided which sectors to select.

In the context of the voluntary and mandatory reforms, what was the thinking behind the notion that you can divide those sectors into voluntary and mandatory? Certainly, the guidance the Minister talked about would be enhanced by giving a much clearer view on that.

Finally—I do not wish to sound too mischievous, but I will ask this question anyway—does our reviewing the matter at this stage suggest that we may well take a different view over the long term, as these companies already fell within the threshold, or that we might be open to taking a different view on what took place in relation to ARM or even Hinkley Point?

[Lord Fox (LD)]

My Lords, I draw your Lordships’ attention to the interests registered in my name. I, too, thank the Minister for repeating the Statement in this House. He is of course right to declare that the UK economy should be open. All of us on these Benches earnestly hope that that is the way the Government continue to play it and that we do not start to close down and become a little England.

The Minister also rightly highlighted the need for changes in appropriate safeguards. The world is changing very quickly, national security needs are changing and the Government are right to keep those under review, so this is a timely process.

The noble Lord, Lord Mendelsohn, asked for a holistic approach to the whole issue of mergers and acquisitions. En passant, I add pensions to that list, which he did not include, because increasingly pensions and the rights of pensioners are becoming a driver within the mergers and acquisitions section.

On the Statement, there is a powerful case for strengthening the public interest in takeovers, as, indeed our leader Vince Cable has argued regularly, most recently, I think, on the AstraZeneca case. However, while lowering the threshold is a welcome step, the Government’s proposals are narrow and do not add a great deal to the overall public interest element, which should be covered in a more holistic approach. In recent months we have seen several of the UK’s high-tech companies snapped up by foreign competitors. This has been exacerbated by the fall in the value of the pound. That is a regrettable outcome. Therefore, today’s inclusion of computer chips in the list of new technologies singled out is somewhat interesting given that it follows the much publicised acquisition of ARM, arguably the world’s best chip designer. That, again, was driven by the weakness of the pound. Perhaps the Minister agrees that there is an element of closing the stable door here. We wish that some of the measures we are discussing were in place at that time.

The addition of quantum technology raises the question: why only that? Again, the noble Lord, Lord Mendelsohn, opened up a list of other technologies. I had biosciences and some aspects of IT and encryption on my list. It seems to me a rather narrow list when you consider the potential threats to a range of technologies. In some technologies, the threats have not been thought of yet but they exist. In our view the scope should be widened to defend not just the science base from a security point of view but also the overall knowledge base of this country. Knowledge can leak out from this country through a variety of means, of which mergers and acquisitions is but one. Joint research projects are another. In many cases you often have competing aims where inward development exercises try to draw foreign investors into research projects where the IP driver in this country would be to exclude some of those investors. In many cases, therefore, we are creating a situation that is leaking out valuable information —whether it is for security interests or economically valuable—through actions that the Government or local government are driving. Perhaps this is something that the Minister could look at. At the heart of this is the narrow look at security needs. These Benches would widen that to cover more economic interests of this country, and we hope the Government will take that on board.

Turning to Bombardier, I am sure the whole House welcomes the announcement of this deal, which should protect the future of the plane-maker. Clearly, only a few days ago, we were discussing a very bleak future for the 4,000-plus workers and all of those indirectly involved in the economic area that it has created in Belfast, so this is good news. I said at the time that even though this is not a case that would, in the end, be won by Boeing, time was the issue that would kill off and affect Bombardier. This is a very effective way of trying to bridge that time and of negating that problem. We should all congratulate everybody who has been involved in expediting this so swiftly and effectively. I am sure there are “i”s to be dotted and “t”s to be crossed, and I hope the Minister will give assistance to all those who require it to make sure that happens. In that regard, will the Minister tell us what anti-trust hoops he expects this deal to have to jump through?

We would also welcome some clarity from the Minister on what assurances have been forthcoming, both on investment and on the public statement made by the CEO, Tom Enders, on the notion that operations will be more efficient. What will be the job implications in both Belfast and perhaps in Broughton? What assurances have been given, and how will he be able to uphold them? In many ways, the US Administration and Boeing might feel that they have got off the hook somewhat by this, but there are still huge tariffs outstanding on this aircraft. The actions of the US remain a salutary warning to this country that its relationship with the Trump Administration is, at best, strained and poses something of a black cloud.

In conclusion, today’s announcement on takeovers and mergers sets out steps in the right direction. We welcome greater breadth in scrutiny and the requirement for notification. I am sure that, as the consultation process goes through, the Government will look at the technologies, and at which elements of which technologies we should be concerned about. I hope they will also take on board the public interest aspect in mergers and acquisitions.

[Lord Prior of Brampton]

I thank both noble Lords for their broad welcome for the news on Bombardier and the Green Paper. Turning first to Bombardier, both noble Lords would like further information about jobs, growth and possible anti-trust implications, but it is too early to say at the moment. This joint venture has only just been announced. It is still subject to negotiations between the two parties. Rather than hazard a guess at where they will come out, perhaps we should report back to the House when further details become clear.

Turning to the Green Paper, both noble Lords would like a more holistic approach. The noble Lord was referring particularly to the takeover context, and he is absolutely right. Pensions are absolutely essential in that context, as are environmental obligations and the like. The noble Lord, Lord Mendelsohn, referred more to a holistic approach in the context of industrial strategy more generally, rather than specifically on takeovers. He will have to wait until later in November, when we will announce our industrial strategy. I hope he will agree, when that strategy is before him, that it is a holistic, joined-up approach to industrial strategy.

I will deal with some of the other issues that both noble Lords raised. Of course foreign direct investment is essential. There is a balance; we want to be open to foreign direct investment—the last thing we want to create is a chill, as the noble Lord put it, on investment coming into this country. Although it is absolutely true that a number of high-tech British companies have been sold over the last two or three years, particularly to American buyers, in the vast majority of cases those American companies have brought capital and support. I refer, for example, to Google’s acquisition of DeepMind; it has put huge resources behind that company which might not have been there had it remained a private British business. SoftBank’s acquisition of ARM falls into that category as well; it gave a number of important undertakings about research and keeping that research in the UK. Therefore, there is a balance to be struck in these areas and the last thing we want to do in this country is shut ourselves off from investment from the US and elsewhere. If one looks at how we support small tech companies, it raises a much broader issue about patient capital, spin-outs from universities and the like. I hope we will deal with those issues when we come to our industrial strategy in a few weeks’ time.

Both noble Lords raised whether the definitions of quantum computing chips and dual-use defence were too narrow. They will, no doubt, want to comment on that issue in the consultation. We have gone for quantum computing and chips in particular because they are often embedded into infrastructure and safety-critical areas. Quantum computing is precisely the area where cybersecurity is so important; we can use it to break complex encryption codes and the like. We felt, having done a lot of consultation, that those areas of chips and quantum computing were the critical ones. I understand the noble Lord’s point about life sciences; there may be other areas that he would like us to consider as part of the consultation. In general, however, this is a question of balance and where we draw the line. We can always argue about the balance, but I am reassured that we have not got it too far wrong when both noble Lords broadly support what we are doing.

Nuclear Research and Technology (Science and Technology Committee Report)

Lord Fox Excerpts

Tuesday 17th October 2017 Lords Chamber

[Lord Fox (LD)]

My Lords, it is always a pleasure to hear the noble Lord, Lord Hennessy, speak but it is also a challenge to follow him. I predict that there will be no swirling waters of the Pentland Firth in my speech.

Along with everyone else who has spoken, I thank the noble Earl, Lord Selborne, for his leadership on the report and during my early years on the committee, and join him in thanking the team that supported us in producing this report. I also thank my fellow members of the committee, many of whom were able to give a seminar on this subject at the drop of a hat, as noble Lords have heard.

This is a subject of great complexity, but I hope that the Minister has received some clear messages from what has been said today. The time for the Government to sit on their hands, if ever there was one, has gone. As the noble Lord, Lord Hennessy, said, the time for push and go is with us.

The report sets out three things that have to happen for us to see some action in this area. First, as my noble friend Lady Bowles, the noble Lord, Lord Oxburgh, and others set out, the Government need a strategic plan for the UK energy market—the road map which the noble Lord, Lord Broers, set out in detail on the kind of energy that we will need, how we will generate it and when we will need it. Without that master plan, it will be very difficult for us to fit this one technology into the wider picture. It is clear from the Clean Growth Strategy that some of the elements of that are in place. However, as the noble Lord, Lord Broers, very clearly set out, there is work to do before this becomes a clear and obvious road map. I hope that the Minister can tell us when and how this will be forthcoming and whether it follows on from the Dieter Helm review. If we are to have a nuclear section within the industrial strategy, surely it has to be based on something of this nature in the first place. In a sense, what is the chicken and what is the egg in the process of developing the industrial strategy?

Secondly, as other speakers, including my noble friend Lady Bowles, set out, the Government need to firmly establish what sort of nuclear industry we want to have. Are we a maker or a taker, as she said? Are we going to be a player in electricity generation technology or are we going to settle back and buy it off the shelf? If the answer is that we are going to be a player, time really is at a premium. For example, our position regarding Generation IV and SMR reactors needs to be clarified very swiftly. This report sets out those questions, but the Government’s response largely avoids giving us an answer to them. In the Government’s opinion, are we going to be fully in the generation technology business—because being half in and half out is an expensive way of not achieving that?

Looking at the committee’s report, the pedestrian nature of the Government’s response should not be a surprise. For a long time, we have had slow progress and, frankly, a lot of retracing of steps as well as shuffling forward. Yet, to be fair, some elements of that response were positive. It is good to see that a successor organisation to NIRAB is on the horizon. I found the language about its nature in the Government’s response somewhat sphinx-like, so if the Minister can set out when he thinks this organisation will emerge and what differences and similarities it will have in relation to NIRAB, that will be very helpful. It is also interesting to see that the NIC will soon meet. What outcomes does the Minister expect from the NIC, and when will these begin to flow?

I said that there are three conditions. Obviously, the third of those is funding. It was good to see set out in the Clean Growth Strategy that the Government are earmarking £460 million. Sadly, in the atmosphere of suspicion, I had exactly the same questions that the noble Earl, Lord Selborne, had. Is this new money? Is it coming out of the Challenge Fund, or where is this money coming from? Perhaps the Minister could fill that in.

Before closing, I would like to say a few words about SMRs—there has been a lot said already—and about Euratom. It is good news that, after stalling a year ago, the SMR competition is moving forward. The noble Lord, Lord Oxburgh, set out the situation very thoroughly. My understanding is that there are more than 30 entrants sitting in the in-box for this competition, and it is going to be a challenge to deselect these. The issue of comparing apples with pears is going to arise very quickly. Some of these bids will be finished for very highly developed concepts and designs; some will be merely front-end concepts. Some, I suspect, will be genuine light-water Generation III-style; some will border on Generation IV. How is that deselect process going to be embraced? It is a challenge, and it could happen that we will end up spending another year or two in that comparison process, so it would be very helpful to know how that technical comparison is going to be carried out.

In their response, the Government talk about the SMR market—“the market”—in abstract, but frankly, the Government are the market, and they need to take responsibility for being the market. Indeed, in some cases, or many cases, the UK alone will not be a sufficient market for the economics of these reactors, so the Government have to be in, in order for whoever wins this complicated down-select process to be able to step forward into the international market and gain purchase in that market to create an economic product. Therefore, I would welcome the Minister’s view on how the Government intend not just to encourage other people to be the market but to be the market themselves.

On Euratom, I associate us with all the comments that have been forthcoming, particularly those of the noble Earl, Lord Selborne. The Government are making reassuring noises about the post-Euratom environment in which we will find ourselves. We on these Benches still consider this to be an unnecessary burden that the Government have taken upon themselves. There is still an opportunity for the Government to buy themselves some more time. The Prime Minister is acknowledging that the ECJ will have a role in certain aspects of the transition process. Given that the major bugbear for the continuing relationship with Euratom is the role of the ECJ, it seems perfectly reasonable that, if the ECJ has a role in some aspects of the transition process, it could also continue to have a role with Euratom, and we would not have to leave Euratom until after the transition period. Can the Minister say what thoughts the Government have had on that point, so that, rather than leaving Euratom on leaving day, we would leave after the transition period? Perhaps that is what they are already planning, but it would be very helpful to have that information.

The noble Lord, Lord Hennessy, asked whether we had lost our national nerve; the noble Lord, Lord Hunt, pointed out that we need a nuclear vision for the United Kingdom. Now is the time for that clarity because, if the Government wait any longer, the corporate will and the people—the engineers, the people with the knowledge to deliver any vision—will be gone. I would welcome the Minister’s views on those points.

Industrial Strategy

Lord Fox Excerpts

Wednesday 19th July 2017 Lords Chamber

Asked by

[Lord Fox]

To ask Her Majesty’s Government what conclusions they have drawn from their consultation on the introduction of a new industrial strategy.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Prior of Brampton) (Con)]

My Lords, the responses to the consultation are broadly supportive of the proposals in the Green Paper and endorse the challenge of developing an ambitious and enduring industrial strategy that sets a clear long-term vision and works for all parts of the country. The responses will inform the development of the White Paper to be published later this year.

[Lord Fox (LD)]

I thank the noble Lord for his response and for the fact that the consultation is being heeded. I understand that sector discussions are under way and that the metaphor has moved from referring to 10 pillars down to four. Quite apart from that giving the department more time to spend on Brexit chaos, what is the rationale behind this change and which of the pillars have been jettisoned?

[Lord Prior of Brampton]

I think that the noble Lord is confusing two things. This is a question about how the White Paper is to be structured. It is clear from the feedback received during the consultation period that technical skills is probably the most important area we need to focus on, along with universities and science and innovation, infrastructure, and what we all call “place”. We cannot have an industrial strategy that does not reach out to other parts of the country beyond London.

Taylor Review of Modern Working Practices

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Tuesday 11th July 2017 Lords Chamber

[Baroness Hayter of Kentish Town (Lab)]

I thank the noble Lord for repeating the Statement on the review of modern working practices. We all look forward to studying it carefully and working with all concerned to respond to these new ways of working, as over time we have done with the invention of printing, photocopying, computers, mobiles and the internet. Working together we can make new technology and changing demands work for the whole of society.

However, I fear that the Government’s Statement looks only at two parts of the market: workers and business. There is in fact a vital third limb: the consumer or customer. I happen not to use Uber, one of the best known of the gig institutions, but many consumers do, including women, who often do not like to hang around on street corners trying to hail a taxi and who appreciate not having to carry cash in order to hire a cab. But it is not in their interest for a driver to be overtired, unwell or underinsured, and at work only because of pressing economic needs. Consumers need to feel safe, with a driver who is fit and healthy, awake and concentrating, and not worrying about their next fare; and they want to know that the driver is getting a fair day’s pay for a fair day’s work.

Other parts of the gig economy may not have face-to-face consumers in the same way, but all have customers of the firm’s business, who similarly need to be assured of the quality of the work, which is highly dependent on the motivation and decent conditions of what the report calls “dependent contractors”. It is true that contented workers make for higher-quality work. So as the Government digest the report, will they involve the consumers and customers of such services in addition to the other key players?

Will the Minister also undertake to involve trade unions fully in this work, which would help the Government as well as the people concerned? Traditionally, of course, vulnerable and exploited workers have had their standards raised and their rights protected through the intervention of trade unions. But as we know, for obvious reasons workers in these sectors are a real challenge to recruit. There have been other similar areas in the past where wages councils played an invaluable role. While I hope that the unions will seek to represent this group, we should be realistic and acknowledge how difficult that is and therefore we need other avenues for unions to be able to speak on behalf of these workers. The report calls for additional protections for gig workers and greater incentives for firms to treat them fairly, including through strong employment relations, but this will need trade union input. I hope that the Minister can give a clear assurance that this will happen.

I want to make one other point. The report does little to strengthen the ability of workers to enforce the rights they already have, beyond shifting the burden of proof in one case when determining the employment contract. The Minister and this House know that the level of employment tribunal fees is a real barrier to justice, so we will continue to press for the fees to be abolished. The Minister has repeated the commitment to workers’ rights, but without their ability to enforce them through tribunals, those rights are really just pieces of paper. It is in no one’s interest for this group to be exploited, but it will need a commitment on the part of the Government to ensure that that does not happen. This is an important area for the future of the economy, for the workers concerned, and for us as consumers.

At first read—and it is only a first read—the report does seem to be somewhat tame and appears to be a missed opportunity to grasp the challenge looking forward to the rest of this century of the contribution that the gig economy can make. The Government need to take up the challenge of grounding in the expectations of all employers the need to treat this group of workers fairly and preserve their rights. We will be looking to the Government to work with all stakeholders to ensure that the change in culture as well as regulation will ensure that this part of the economy is fair for all concerned.

[Lord Fox (LD)]

My Lords, this report is welcome as it frames the need to reconsider working conditions in a clear manner. I should like to quote from it that,

“while having employment is itself vital to people’s health and well-being, the quality of people’s work is also a major factor in helping people to stay healthy and happy, something which benefits them and serves the wider public interest”.

This is an important and true statement that we should bear in mind when considering not only this report but the wider realm of employment and industrial strategy. We are living in a time of huge change in the world of work, so the Prime Minister was right to ask Matthew Taylor to carry out an independent review and produce a report. As noble Lords will have noted when I dropped it just now, the resulting document is comprehensive and hard to absorb in the short time we have had to do so.

The Government’s Statement points out that the report highlights the need to deliver additional protection to the increasing number of people we describe as platform-based, or rather, what we know as the gig economy. The most important distinction to make is between the creation of a new group of workers or dependent contractors and those who are truly self-employed. While this may seem to be tame to some, it is starting to move down the road of classifying people in a way that enables them to have the rights they deserve. So it should be no surprise that the Liberal Democrats broadly welcome the recommendations in the Taylor review. The right to request fixed hours and employment rights for those who are now classified as dependent contractors was set out in the Lib Dem manifesto, so obviously we support that. If enacted, it will provide additional protections for this group as well as strong incentives for firms to treat these workers fairly. It is clear that these rules will have to be backed up by policing. That will improve workers’ rights in the gig economy while maintaining flexibility for those who want it, and that is the key. Some people want flexibility, but others have it thrust upon them. Noble Lords may remember that the Government opposed these proposals during the coalition Government.

We should also remember of course that workers’ rights are ultimately underpinned by EU law. This is backed up by the UK’s ability to create and protect high-quality jobs, which in itself is dependent on the UK being part of the single market. As noble Lords would expect me to say, under Theresa May’s Brexit plans we will continue to see falling real wages and slowing economic growth, and jobs will begin to fall back. This is bad for all workers but it is worse for these workers. Furthermore, there are some people—including on the Benches opposite—who will seek to use Brexit not to strengthen workers’ rights, but to weaken or even abolish some of them.

That is why it is important for the Government not to get bogged down in this report and to move swiftly. The Minister has pledged to respond by the end of the year. We look forward to the industrial strategy and how that will play into this. We believe it is important that the Government proceed rapidly to a conclusion that accepts the clear direction of this report and brings forward proposals that will enact its substance. The longer the Government delay, the longer this important and growing band of workers will be deprived of justified employment rights. The longer the Government delay, the more suspicions will be raised that Brexit will be used to water down people’s rights. As the report says:

“All work in the UK economy should be fair and decent with realistic scope for development and fulfilment”.


We hope the Government accept that point and bring forward rules and laws that help to bring it about.

[Lord Prior of Brampton]

My Lords, I shall first respond to the two asks from the noble Baroness, Lady Hayter, the first of which was that we should take into account the consumer. She is absolutely right. I read the report fairly rapidly myself and she is right about that. Thinking about it, it is very much focused on workers and businesses. We ought to look at it through the eyes of the consumer, such as the lady waiting for her Uber late at night who wants to know that the driver is indeed safe, healthy and wide awake. That is certainly something we will feed back into the consultation over the next few months.

Secondly, the noble Baroness raised the involvement of trade unions. They have been fully involved in this whole process. Matthew Taylor has been exemplary in reaching out to all kinds of people, not least the trade unions. As she knows, trade unions these days are very much focused on public services. Their representation not just in the gig economy but in the private sector as a whole is much diminished. In part that is because many companies in the private sector have exemplary employee relations and have done an extremely fine job. There is much the public sector can learn from the private sector in some of these areas. Nevertheless, I assure the noble Baroness that Matthew Taylor has indeed reached out to the trade unions.

The noble Baroness also raised employee tribunals. I have a note on that, but maybe, since it is a fairly narrow area, I will write to her about it. She knows we are consulting on this to reduce the threshold to enable help for industrial tribunal fees, but I will write on that point.

The noble Baroness ended by saying that she thought this was a slightly tame report—I think that is the word she used. I argue, as I think the noble Lord, Lord Fox, would, that it is a balanced and fair report. It is not sensational, in part because the system is working quite well. The statistic that really surprised me on reading the report was that there has not been nearly as much change in the labour market over the last 20 years as I thought. Actually, 63% of people in full-time employment are on a conventional employment contract, and 20 years ago the figure was 64.6%. I thought a bigger change had happened. Nevertheless, as the noble Lord, Lord Fox, commented, this is an important and growing part of the economy. It is quite right that we should look at this issue now and get the balance right between flexibility on the one hand and proper job security on the other. It is an extremely important balance to get right.

I assure the noble Lord that the Conservative Party and the Prime Minister are not using Brexit as any excuse for watering down employee rights. The Prime Minister has been absolutely clear that she wishes to maintain and even enhance employee rights, and this is an area where maybe we can enhance employee rights.

The noble Lord asked for a rapid response. Of course, that is tempting, because I think we all agree with the spirit of the report. It is easy to talk in generalisations today, but it may take a little longer to get some of the distinctions right between employee, self-employed, worker and dependent contractor, and nail them down so they have legal validity.

I think we all agree with the noble Lord that all employment should be fair and decent, with scope for fulfilment. It is easy to say that that is just motherhood and apple pie, but there is no doubt that companies that treat their employees fairly and decently and as proper colleagues have much better results.

Industrial Strategy

Lord Fox Excerpts

Wednesday 28th June 2017 Lords Chamber

[Lord Prior of Brampton]

I am very happy to give that assurance. As the noble Lord will know, UKRI will receive an additional £4.9 billion over the period to 2021. Much of that resource will go through UK Innovate into a number of productivity schemes. I hope that will be, as he says, a creative alternative to austerity.

[Lord Fox (LD)]

My Lords, the Minister is very well aware of the importance of catapult centres in the industrial strategy. Will he now say what his plans are for maintaining funding for the current level of catapult centres and for opening new centres?

[Lord Prior of Brampton]

My Lords, the catapult programme has, on the whole, been a huge success, but not all catapults are performing as well as others, so we are now undertaking a review of the catapults to identify those that have been performing well and those that have not. There is no intention that I am aware of to reduce the funding of all the catapults.