Silicon Valley Bank

Lord Fox Excerpts

Tuesday 14th March 2023 Lords Chamber

[Lord Tunnicliffe (Lab)]

My Lords, we recognise the indispensable role played by the UK life sciences and tech sectors. These drive growth and innovation across the economy, as well as creating and sustaining good jobs. We therefore welcome yesterday’s announcement that HSBC is buying the UK arm of Silicon Valley Bank.

As the Statement makes clear, this move protects SVB UK’s customers’ deposits, allowing them to bank as normal. That will allow a range of start-ups and scale-ups across the UK to continue their operations rather than having to deal with immediate financial and other pressures. We are grateful to officials at the Treasury, Bank of England and financial regulators for working at pace over the weekend to facilitate this agreement.

The collapse of SVB raises important questions about the risks taken by some financial institutions and their regulators. It is true that in the UK context the system established under the Banking Act 2009 has worked. However, my colleague Tulip Siddiq asked yesterday whether, at the time when SVB UK’s licence was granted, any assessment was made of the significant liquidity risks associated with SVB UK’s deposit base. I do not expect the Minister to answer that question today, but I should like an assurance that a review will be undertaken in due course or that Ministers will make themselves available to parliamentary committees for questioning.

Normal ring-fencing rules also had to be disapplied to allow HSBC’s acquisition. The Economic Secretary helpfully confirmed yesterday that this exemption will be permanent. Will the Minister go into more detail about any steps HSBC or SVB UK may be required to take in the future? If she is unable to do so today, perhaps she will write with further information prior to our debate on the “made affirmative” statutory instrument.

The Government are currently making significant changes to UK financial regulation. We support the broad thrust of this, as the financial services sector makes a significant contribution to the UK economy and its success will be key to future growth. However, as our many debates on the Financial Services and Markets Bill highlighted, we must balance risk and reward. Does the Minister have full confidence in all the regulatory changes proposed in that Bill and in the so-called Edinburgh reforms, which will come on stream later, or is it possible that the Treasury might wish to revisit some aspects of those initiatives in the light of recent events?

While the UK part of SVB’s collapse may have been addressed quickly, global markets have still been sliding as recent events are processed and questions are being asked about the risk level of similar institutions. Does the Minister agree that it is vital that we do everything possible to provide confidence in the UK’s financial system? With this in mind, and given the impacts of persistently high inflation and increasing interest rates on UK institutions, will the Government launch a systemic review of the risks facing the sector?

[Lord Fox (LD)]

My Lords, I thank the Minister for repeating the Statement, albeit in the graveyard shift: she could have got in a bit earlier. Having read through the details of the events of the last weekend, I can understand why the Statement veers towards the slightly triumphalist: the sale of Silicon Valley Bank to HSBC averted existential problems for a huge number of UK tech businesses, and I am sure the Minister and colleagues are pleased to have done this. We should congratulate the Treasury and the Bank of England, as well as Coadec, Tech London Advocates and BVCA on the industry side, all of which came together very swiftly over the weekend. But where do we go from here?

First, can the Minister confirm that there will be a full investigation, both to confirm how this happened and, more importantly, what lessons can be drawn? One lesson we can all observe is that bank runs in the social media age happen in hours rather than days: the speed with which the run on this bank happened points, I think, to future issues if we ever came to them. As we know, Silicon Valley Bank’s UK wing oversaw roughly £7 billion in deposits from 3,000 entities across the country’s important tech industries and, contrary to US reports, it was not ring-fenced from its US parent. My first specific question is how we ended up in a situation where a huge proportion of a vital sector of the UK economy was reliant on one regional US bank. I am sure the answer is not simple, but it is important. For example, accessing connections to venture capital may have led banks to SVB, but there is also evidence that the traditional UK banks just do not have the appetite to take up this kind of business. Where will the tech start-ups go now for funding, especially in an environment where capital is getting more scarce?

History tells us that, when interest rates rise as fast and by so much as they have during the past period, bad things nearly always happen. It is a near certainty that one of two outcomes will occur: recession or a bank crash—sometimes both. I am sure we all hope that the failure of SVB, the closure of Signature Bank and the Tory-created crisis in UK government bonds and the pension sector are just outliers and do not herald something worse. They may, indeed, be one-offs; however, it seems to me that the Government, the Treasury and the Bank of England have to err on the side of caution. Can the Minister assure us that the tone of this announcement does not indicate a sense in our financial institutions that their work is done?

The SVB crash epitomises the risks buried in our financial system as central banks rapidly lifted borrowing costs. SVB’s unhedged investments in long-term, fixed-rate, government-backed debt securities left it doubly exposed to rising interest rates because it reversed tech companies’ growth and hit the price of its securities. There may be other issues that unwind when investigation of this bank carries on—we will have to wait and see—but how did the US regulators miss the issue at the heart of SVB? Since the 2008 financial crisis, the focus has been on liquidity, although I would suggest that not even that has been particularly successful. Interest rates have grabbed little attention because they had not posed a significant threat in recent decades, but they do now.

Can the Minister confirm that the Government have asked the Bank of England to review the stress tests it conducts in order to take into consideration the rapid rise in interest rates? Can the Minister confirm that the tests will be extended into the so-called shadow banking sector, which is increasingly grabbing large slices of business traditionally carried out by banks? Can the Minister also assure your Lordships’ House that the necessary horizon scanning is under way?

I do not think anyone predicted the LDI issue in the autumn, and I do not think anyone pointed to a sector-focused regional bank like SVB being the source of a crisis. So where could the next crisis come from? I can offer three options in the current environment: insurance funds investing in illiquid assets; overvalued real estate; and private equity funds with opaque valuations. I am sure the big brains in the Treasury will be much better at navigating the complex and interwoven investment landscape and come up with a better list to enable them to avoid unpleasant surprises. Can the Minister confirm that there are people digging down into the systemic risks which are buried deep inside the highly complex finance systems and finance products that exist around the world today?

At the heart of this is also politics. Republicans have loosened US bank regulations in recent years and banks such as SVB had previously lobbied successfully to be excluded from the category of systemically important banks—that meant they faced lower capital and liquidity standards. We are not immune from the same political pressures in this country. The Edinburgh reforms announced late last year also point towards deregulation, not least in the plan to reform the ring-fencing regime for banks.

But more than that, and as the noble Lord, Lord Tunnicliffe, referred to, we can see this trend in the Financial Services and Markets Bill that is currently being debated by your Lordships. For example, Clause 24 in that Bill requires the FCA to help drive the international competitiveness of the economy of the United Kingdom, in particular the financial services sector—help drive the competitiveness of the economy. This creates a huge conflict of interest within the FCA, and in light of the SVB it looks at least questionable. Can the Minister confirm that this clause will be reviewed with a view to future amendment when the Bill comes back on Report?

Finally, after 2008 the Government and the financial sector all said “Never again”, and there were significant changes to the banking regulations; much of this was based on a report led by Sir John Vickers. Speaking today on the BBC, Sir John said that the country made advances in 2009 and we must not row back on these advances. He explicitly said that the Edinburgh reforms should be reviewed again and that ring-fencing should be maintained. I would remind the Minister that, failing anything better, the Government are the scrutiniser in chief, and the buck stops with the Government. Will the Minister listen to Sir John and halt the slide towards deregulation in this country?

[The Parliamentary Secretary, HM Treasury (Baroness Penn) (Con)]

My Lords, as noble Lords have recognised, the course of events over the weekend was a good outcome for the customers of Silicon Valley Bank in the UK and an example of the Bank of England, in consultation with the Treasury, using powers granted by the Banking Act 2009, as part of the post-crisis reforms, to safely manage the failure of a bank and, in this case, facilitate its sale, which has protected those customers and taxpayers. I add my thanks to both noble Lords’ to the officials in the Treasury and at the regulators who worked tirelessly through the weekend to grip the situation and prevent real jeopardy to hundreds of the UK’s most innovative companies.

The noble Lord, Lord Tunnicliffe, asked whether any assessment was made of the significant liquidity risks associated with SVB UK’s deposit base at the time its licence was granted. Those authorisation decisions are for the independent regulators to comment on. However, requiring SVB to subsidiarise meant that it was independently capitalised from its parent in the US and had its own liquidity buffers. That brought the firm into the scope of the UK’s resolution regime. Had SVB UK remained a branch, it would have been resolved by the US resolution authority as part of action taken with respect to SVB.

That distinction is important to make in relation to a few of the points from the noble Lord, Lord Fox, in looking at the potential differences between the regulation and the regime in the US and the regime in the UK. However, there is read-across between the two. That is why we have measures in place to ensure that banks that are of systemic risk to different jurisdictions have cross-jurisdiction oversight, and that regulators work together on these matters.

The noble Lord, Lord Tunnicliffe, also asked about the ring-fencing changes made to facilitate the sale. To ensure the sale could proceed, the Government used powers under the Banking Act to provide HSBC with an exemption to certain ring-fencing requirements. This was crucial to ensure that a successful transaction could be executed, that the bank had the liquidity it needs, and that deposits and public funds were protected. We broadened an existing exception in the ring-fencing regime, allowing HSBC’s ring-fenced bank to provide intragroup lending to SVB UK. This should facilitate the smooth operation of SVB UK. In addition, SVB UK, which is now a subsidiary of HSBC’s ring-fenced bank, is not subject to the ring-fencing rules.

Both noble Lords spoke about the importance of doing everything possible to ensure that there is confidence in the UK’s financial system. We absolutely agree with the importance of that, which is why the UK authorities took such swift and decisive action this weekend to facilitate the sale of the firm. The noble Lord, Lord Fox, noted how quickly events unfolded. It is certainly true that the timeline including the weekend gave the time and space for such a resolution to be found, but that only adds to the point about the speed at which these events can take place.

Both noble Lords also asked about the stress test system for banks and about launching a wider systemic review of the risks facing the financial sector, including non-bank risks. Of course, both noble Lords will know that that is the role of the Financial Policy Committee of the Bank of England, which is responsible for identifying, monitoring and addressing systemic risks to financial stability.

The FPC meets quarterly, following which a record of its discussions is published. It produces a biannual financial stability report setting out its assessment of the risks facing the financial system and its resilience. It looks at it for the non-banking sector, but also sets the scenarios and coverage used for stress tests within the banking sector. Those decisions remain with the Financial Policy Committee.

Both noble Lords also rightly pointed out that, while we reached a good resolution in this instance, it is of course right that we reflect on what happened and look at whether any lessons can be learned. I can confirm that the Treasury and the Bank of England are looking to work together to ensure that we reflect properly on the events in this case.

Finally, both noble Lords also referenced the reforms that we are currently taking through this House in the Financial Services and Markets Bill and through the wider Edinburgh reforms set out by the Chancellor in December. I assure all noble Lords that the Financial Services and Markets Bill introduces ambitious reforms for a financial services sector that will give the UK the ability to continue to grow and be internationally competitive with other markets, while adhering to the highest-quality regulatory standards. As my honourable friend the Economic Secretary to the Treasury said to the House of Commons yesterday, having good, healthy businesses that grow and are profitable is the best way to avoid jeopardy. The Bill and the Edinburgh reforms deliver that commitment. We are confident that our reforms will deliver a high-quality regulatory environment for our financial services sector in future.

[Lord Tunnicliffe (Lab)]

I know it is unconventional, but will the Minister advise us whether the lessons learned report is going to be published?

[Lord Fox (LD)]

The Minister is getting a job lot of questions. I was hoping to hear her say that the shift in danger has gone from being just about liquidity to being about a lot of things connected with interest rates. We saw that in the autumn and again this week. When I suggested that the Treasury talk to the Bank of England about stress tests, I was suggesting not that the Treasury did the stress testing but that we would all be much more comfortable if we knew that shift had been taken on board and would inculcate future stress tests.

[Baroness Penn (Con)]

The point I was trying to make is that I am sure the Financial Policy Committee of the Bank of England will want to consider that. It updates its approach to stress testing both for banks and in its wider assessment of the risks to the financial sector more broadly. The noble Lord is not wrong in painting a picture of a changed context. We can also look at it for LDI, for example. While that is something for the FPC to take forward, I recognise the noble Lord’s points about that changed context. I hope that the points I made about how it holds its meetings and provides transparency about its considerations will reassure noble Lords about that process.

I will have to come back to the noble Lord, Lord Tunnicliffe, about the lessons learned and whether this reflection will be published. I do not know what form it will take. With the LDI process, interim findings have already been made public for people to take forward, but there is also further work. I imagine that a similar process may be followed here, but I will confirm this to noble Lords.

IMF Economic Outlook

Lord Fox Excerpts

Tuesday 31st January 2023 Lords Chamber

[Baroness Penn (Con)]

I must correct the noble Lord on the cause of the disappointing figures for growth this year that we have seen. The IMF emphasises that Russia’s war in Ukraine continues to weigh on economic activity, and the UK’s relatively high dependence on natural gas and, simultaneously, a near-record tightness in our labour market are dampening our outlook.

The noble Lord asked why the UK economy had not recovered to pre-pandemic levels. If we exclude the public sector, the private sector has recovered to above its pre-pandemic level and is in line with other major European economies. There is a difference in the way that the UK estimates its public sector output compared to many other countries, and the ONS has said that international comparisons are difficult to make.

On the point about the optimism that my honourable friend expressed about the UK economy, the Government make no apologies for pointing out our underlying strengths. Last year’s growth rate was uprated by the IMF to one of the highest in Europe, and if we look over the cumulative period 2022 to 2024, growth is predicted to be higher than in Germany and Japan and similar to that of the US. That will happen if we stick to our plan for growth and tackle inflation.

[Lord Fox (LD)]

My Lords, there is no harm in people being optimistic if there are grounds for optimism. Rather than taking this report as a very worrying indicator, the Government are spending their energy downplaying and discounting the bad news in it. Let us look at another indicator that points in the same direction: the ONS statistics on company insolvencies. Its survey, published today, shows a 57% rise in the number of companies going bust; that is more than at any time since the 2009 crisis.

Will the Minister now acknowledge that, as well as the problems that our competitor countries have, with which the Government seek to associate us, there are other problems that are unique to us? The Minister acknowledged the extraordinary problems we are having with skills and the lack of people to work, and the fact that our exports to the European Union have plummeted. Will the Government acknowledge that there is a problem so that they can start solving it?

[Baroness Penn (Con)]

I made it clear that the number one problem facing the UK is our high level of inflation, and that is why the Government have put it at the heart of our economic plans. We are determined to get inflation down. That is why we remain steadfast in our support for the independent MPC of the Bank of England, why we have made difficult but responsible decisions on tax and spending so that we are not adding fuel to the fire, and why we are tackling high energy prices by holding down energy bills for households and businesses this year and next and investing in long-term energy security. I fully acknowledge the challenges the UK is facing, and that is why we have a plan to deal with them.

Alcohol Duty Bands

Lord Fox Excerpts

Thursday 12th January 2023 Lords Chamber

[Baroness Penn (Con)]

I reassure the noble Lord that if he looks at the consultation we did on the new duty rates, he will see that public health is at the heart of our approach. However, we need to balance public health objectives with, for example, the impact on businesses. For instance, Scotch whisky is an incredibly important industry in Scotland, and there are new breweries all across the country which are big economic success stories. We need to have a balance between those two approaches.

[Lord Fox (LD)]

My Lords, I am pleased that the Minister talked about business. Leaving aside the level of taxation—I have sympathy with my noble friend—this system is quite complicated. It is a sophisticated solution but it also makes it complicated for businesses to respond. So I ask that the Treasury, as well as looking at the level of taxation, looks at the number of different levels of taxation, because the more there are, the harder it is for small and medium-sized businesses to administer.

[Baroness Penn (Con)]

I appreciate the noble Lord’s point, but the reforms we have introduced simplify, for example, the number of different bands of duties that businesses pay. We have taken significant steps in that direction, and this Government always seek to simplify things for businesses where possible.

Russia: UK Companies

Lord Fox Excerpts

Thursday 8th December 2022 Lords Chamber

[The Parliamentary Secretary, HM Treasury (Baroness Penn) (Con)]

My Lords, my right honourable friend the Prime Minister, when Chancellor, called on and welcomed UK firms who had taken the decision to divest from Russia in the wake of the invasion of Ukraine and said that we would welcome further such decisions from those companies. In terms of the Government’s actions, we have imposed the widest set of sanctions in our history against Russia, which limits the space for companies to operate in Russia, targeted at degrading the Russian war machine and also more broadly degrading its economic ability to continue this war. The noble Lord mentioned the condition of Ukraine’s infrastructure and the attacks on it by Russia in recent weeks. My right honourable friend the Foreign Secretary announced that we are looking to support energy generation in Ukraine in response to those attacks.

[Lord Fox (LD)]

It is good to hear the Minister talk about strong sanctions. I ask her to direct her department to look at the relationship between OneWeb and Eutelsat. OneWeb was absorbed into Eutelsat in an all-share deal, except for one share, the special share that the Government retain. Eutelsat continues to broadcast Russian channels, including two of the largest Russian pay-for television channels. Is it appropriate, given the Government’s special shareholding in OneWeb, which is a part of Eutelsat, for this relationship to continue?

[Baroness Penn (Con)]

I hope the noble Lord will understand if I do not comment on the specific case in the Chamber, but if he writes to me, I will look at Hansard and get back to him in writing on that point.

Autumn Statement 2022

Lord Fox Excerpts

Tuesday 29th November 2022 Lords Chamber

[Lord Fox (LD)]

My Lords, this is my first chance to welcome the noble Baroness, Lady Penn, back to her position at the Dispatch Box, and obviously my first chance to welcome the noble Baroness, Lady Lea, to her position on the Conservative Benches. I draw attention to the fact that I am on the executive of both the All-Party Parliamentary Motor Group and the Chemical Industry All-Party Parliamentary Group.

For this debate to be so long after the Statement has given time for perspective to develop—that is perhaps putting a gloss on it. Reports have been published and analysis probing the implications of the numbers and projections is available, and I am sure that your Lordships will draw on that research in various ways. For example, the Institute for Fiscal Studies concluded that the Chancellor was

“hemmed in by rising interest payments and poor growth prospects”

and in this position

“decided to allow borrowing to rise, and to put off properly tough decisions”

until after the next election. For example, I note that the vast bulk of the projected cuts in the benefits budget are scheduled to start in 2024.

That means that borrowing will take the strain in the near term, with the great majority of the planned consolidation due only after the next election. Decisions like this indicate that the Financial Statement was informed not just by a lack of headroom but by fairly cynical politics. I would judge that Chancellor Hunt has adopted either a Micawber strategy—“Something might turn up”—or what I would call the advance Liam Byrne strategy: he has already left a note for the next incoming Chancellor that says, “There’s no money left”.

However, the serious side is what this is doing to people, and how hard it is hitting and will hit families. Paul Johnson of the IFS was very clear when he said:

“The truth is we just got a lot poorer. We are in for a long, hard, unpleasant journey; a journey that has been made more arduous than it might have been by a series of economic own goals.”


The Office for Budget Responsibility—the OBR—reports that living standards will be down by 7% over this year and the next. This is the biggest fall in living memory and off the back of very poor income growth for many years prior. The effects of this will be felt across the country. To quote Paul Johnson of the IFS again, he said:

“This will hit everyone. But perhaps it will be those on middling sorts of incomes who feel the biggest hit … Middle England is set for a shock.”


What is clear is that Chancellor Hunt, and whoever is in that role after the next election, will reap the costs of Conservative chaos and a long-term failure to grow the economy. Combined with this are the effects of an ageing population, hundreds of thousands—if not millions—of people unexpectedly stepping out of the economy, QE and high levels of past borrowing. On this latter point, we face simply huge levels of expected spend on debt interest. Interest is more or less double what had been forecast and will hit around £100 billion a year by the end of the forecast period.

Without growth, however, the situation will be even worse and the Chancellor’s projections rely on growth built into the OBR projections. Yet it is very hard to see how this Statement helps that growth. Indeed, it is very likely that it will contract the economy rather than grow it. This is not helped by at least one change that actually undermines future growth. I shall use the rest of my speech to explain.

The Chancellor used his Statement to make changes in the R&D tax credit scheme. The scheme currently provides tax incentives for companies to invest in innovation, which is considered key to growing the technology base of the country. Indeed, we should take no word other than the Government’s, who trumpeted it as such a measure. In his Autumn Statement, however, the Chancellor made the incentives much less generous for small and medium-sized businesses. This is a very misplaced change, which some people have described as disastrous. For example, Make UK points out that about two-thirds of private sector expenditure on R&D is made by manufacturing companies and a large number of those will be hit by this change.

Elsewhere, the BioIndustry Association, which represents life science companies, warned that the changes would result in promising innovations, ranging from vaccines to cancer treatments, moving overseas. In taking from smaller companies, the Chancellor seems to be giving back to the country’s bigger businesses via changes in the R&D expenditure credit—RDEC—scheme. But it is in SMEs that key innovations often start, and to hit them is not sensible. I am not decrying the RDEC system, which has been shown to yield very positive returns. Increasing the generosity of RDEC, however, should not come at the expense of support for SMEs.

The Chancellor’s justification for this very detrimental change is that, in the view of the Treasury, the “generosity” —its word—of the scheme had made it a target for fraud. First, we should point out that the Treasury’s record on fraud is not glorious, given the billions of pounds shelled out during Covid that will never be repaid. Secondly, if there is an acknowledged problem in the administration of the scheme, surely the sensible thing to do is to administer it better. Yet reducing the value of the scheme means that genuine claimants are being punished for a failure properly to police the scheme. It is a very blunt instrument. If the Treasury was concerned about fraud, perhaps it could have instigated a system that properly checked the validity of the claims. If it wanted to drive growth, it should look at other systems of support and take the CBI’s advice, such as to look more carefully at the definition of R&D and to improve complicated HMRC and BEIS tax credit guidance.

It is clear that the Chancellor had a tough job, especially given the wreckage created by his immediate predecessor. However, while we are all agreed that growth is the key to digging the nation out of this hole, the Chancellor is introducing measures that will reduce growth. This is not only practically damaging but a very clear indication that this Government do not understand innovation—and that is very worrying.

Economy: Balance of Payments and Industrial Productivity

Lord Fox Excerpts

Thursday 10th December 2015 Lords Chamber

[Lord O’Neill of Gatley]

My Lords, my noble friend is technically correct that the balance of payments current account reflects the difference between our national savings and our national investment performance—one is the reverse side of the other. The best way to improve it is by reducing our domestic savings rate but remaining as attractive as we are to overseas investments.

[Lord Fox (LD)]

My Lords, I draw attention to my interest in the register of Members’ interests. I am sure that the Minister has seen the verdicts of the EEF—the manufacturers’ association—on the current downbeat mood in manufacturing and of the respected OBR, which says that the apprentice levy is a workplace tax. Does he agree with those verdicts and can he explain how they will help with fixing the foundations and uplifting the mood of manufacturers?

[Lord O’Neill of Gatley]

My Lords, there were at least three questions there but I shall try to be brief. I speak frequently to the EEF and its survey unfortunately reflects similar and growing evidence from surveys all over the world of weakness in manufacturing. The UK’s most regular monthly survey of the degree of optimism, or otherwise, in business shows that it remains one of the strongest in the G7 countries.

Queen’s Speech

Lord Fox Excerpts

Thursday 4th June 2015 Lords Chamber

[Lord Fox (LD)]

My Lords, before I begin, I should draw attention to the Members’ register of interests and the fact that I am a member of the executive team of GKN plc and that I hold shares in Smiths Group plc, a former employer. They are both global engineering companies with a strong manufacturing footprint in the United Kingdom.

I feel very fortunate to participate in today’s debate, it having been graced by two such excellent maiden speakers. The noble Lords, Lord O’Neill and Lord King, should be congratulated, as indeed they have been, on those speeches. I feel less fortunate in coming in as speaker number 35 in this debate, not least because I am following some absolutely excellent speeches from other Members. However, I will try my best not to repeat what has been said and to add a few other points.

A large proportion of the debate has focused on productivity, as, I am afraid, I was intending to do. The diagnosis is agreed and it was set out by the noble Lord, Lord O’Neill, very clearly at the beginning: the UK is very much falling behind the G7 in productivity. So we agree on the diagnosis, although the noble Lord, Lord Desai, begged to differ a little and tried to split up the sector. There are statistics that to some extent support what he said. The manufacturing statistics and data put out by the Engineering Employers’ Federation, for example, show that manufacturing and advanced manufacturing are delivering productivity at a rate different from that of some of the other sectors, particularly the services sector. Therefore, perhaps it is not a one-pace economy and we have to think about these things in a number of different ways.

Then, the economic big guns were rolled out. In a way that is perhaps heartening, almost all of them have had a different suggestion as to the solution to the productivity problem. This kind of confirmed what I found when I started to really look at this. I went to the Bank of England’s writing on it and was even more heartened when I found that it confessed to being puzzled by the situation. It does worry me a little when the Bank of England is puzzled. It cited the position in the cycle, where we are in fact growing capacity ahead of the need for that capacity. It cited the redeployment of people from productive tasks to business development. It talked about lower investment—I will come back to lower investment in more detail in a minute—and the inefficient allocation of capital. For a scientist, not an economist, all these things seem feasible. However, at the end of it all, the Bank of England did say that it was puzzled. This illustrates, as this debate has illustrated, that more work is necessary if we are going to explain the issues around the productivity gap. I ask the Minister to confirm that her team, and perhaps the Treasury and DBIS together, are working on a better understanding of some of the key issues.

For us to work together on this, we have to have confidence in the statistics. A number of doubts have been expressed about those statistics. Sometimes, if the message is not what we want to hear, we throw doubt on statistics. It could not possibly be true, for example, that France is more productive than us—or is it? We need to start to have some focus on the key levers that we ought to be pulling in this area.

As an aside, I want to talk a little about investment. The availability of capital, particularly for SMEs, is a key issue. Finance for working capital, for expansion and for start-up is vital. It does seem that, during the recession, this had dried up. The tendency has been to blame banks and banks alone for this drying up. I suggest that banks are not necessarily the right sort of lender for many of these kinds of activities. Their risk profile, particularly of late, often does not match the sort of financial package that people are looking for. As noted today by several other speakers, we need to be in a position where we are fostering a more diverse source of capital and a broader pool of finance.

The Competition and Markets Authority is, to some extent, looking at SME banking. Its interim report is, I think, due some time in the autumn. I ask those in the ministerial team whether they would be able to bring back some of those interim findings. Perhaps using the expertise of the noble Lord, Lord O’Neill, in this area the team can lend some light to how we can put in place quite quickly some broader mechanisms to deliver finance to SMEs.

My second and much briefer point is around the industrial strategy, because I have not heard anything about it. There was nothing in the Queen’s Speech and nothing today. I am a little disappointed because it is very much an important centrepiece of what Government can do in conjunction with business. Noble Lords will be aware that, during the last Parliament, industrial strategies were established between Government and 11 key business sectors. I declare an interest that my own company was involved in two of those. There was a tremendous level of co-operation, discussion and exchange of shared ideals between the various segments involved. It should be acknowledged that that is really important work. The aim of industrial strategies is to establish the structures and relationships to give business the confidence to invest in the future, invest in the necessary R&D and capital, and to foster the development of the skills that we will need, not just in 10 years’ time but now.

I would like to take this opportunity to ask the Minister to assure us that these long-term initiatives—along with the work around Catapult and innovation centres, which is another important part of innovation fostering—and the focus on STEM skills will continue to be an important part of the work that goes ahead. We need continuity and a sense of certainty to encourage business to participate in investing in the long term in this country. I hope that the Minister can give business that sense of continuity.