Queen’s Speech

Lord Griffiths of Fforestfach Excerpts

Monday 16th May 2022 Lords Chamber

[Lord Griffiths of Fforestfach (Con)]

My Lords, it is a great pleasure to follow my Whip, especially when I agreed with almost everything they said. The Government’s priority in the gracious Speech—strengthening growth and easing the cost of living—is something I think we would all agree with. It means better housing, better public services, making a reality—not simply an aspiration—of levelling up, reducing inflation and helping the cost of living.

However, two requirements underline those noble objectives. The first is that we must bring inflation back down to 2% and endorse 2% as the Government’s target. We have all heard stories of so many families who are really struggling, trying to help their children and themselves just to bring food to the table because of inflation. Inflation is clearly painful, but it is more than just a painful economic shock. Inflation is a corrosive force in our society. It creates suspicion, distrust and social conflict. It creates a blame culture. People think that the local corner shop is just jacking prices to do them down. What about the electricity companies, Shell and BP and the supermarkets: why is Waitrose increasing prices more than Aldi and Lidl? It is a very bad culture if we go down that road.

The Bank of England has had something of a hammering today. Frankly, I have been surprised at the ferocity of the attack on it and, as a result, I have changed my speech. I believe the Bank was right in 2020 to slash interest rates to 0.1% and increase monetary growth to finance the furlough scheme, support the NHS and offer credit to business. Unfortunately, last year, the Bank made a policy error and continued with easy-money policy. Back in August 2020, I wrote an article in the public domain, “The Spectre of Inflation”. You could see then that we were creating too much money for the supply available. I followed it up last year with four articles criticising the Bank for not raising interest rates.

However, the Bank had a point in its reluctance to raise rates. The pandemic was an extraordinary event. The uncertainty over how much unemployment was disguised by furlough was important. Other central banks, such as the Fed, were advocating exactly what the Bank of England was, and hardly anyone on the Bank’s staff had lived through the inflation of the 1970s. The last thing we need at present is for monetary policy to be politicised and the governor and institution of the Bank of England to be kicked around like a political football. The Bank knows more than anyone else that it made a mistake last year and, in future, there will be an occasion to evaluate what went wrong. Now our attention should be focused on how we strengthen the resolve of the Bank to take the action necessary to get inflation down. As the saying goes, there is no gain without pain. Reducing inflation is not rocket science. The Bank has done it before. It did it in 2008 and 2011, and it did it in the 1970s, but reducing inflation will be painful. For this, the Treasury has responsibility to see that the burden is shared equitably and, frankly, that the burden is shared before inflation is under control.

My second point—I do not have the time to develop it—is that if we are to get growth, it cannot be engineered in 18 months; it is a longer-term challenge and requires lower taxes and reduced regulation. The Chancellor is clearly in a very difficult position—there are so many demands on public spending—but unless we can really get taxes down in the medium term to restore confidence, we will not see the priorities that the Government wish to see in the Queen’s Speech.

Science Research Funding in Universities (Science and Technology Committee Report)

Lord Griffiths of Fforestfach Excerpts

Wednesday 9th September 2020 Grand Committee

[Lord Griffiths of Fforestfach (Con) [V]]

As a member of the committee which produced the report, I pay tribute to the chairmanship of the noble Lord, Lord Patel. It was always fair, enthusiastic and intellectually rigorous. It had a light touch but nevertheless a strong hand. It was a pleasure to serve under him and with others on the committee. I declare my interests as a visiting professor at the City University and a senator of the University of St Gallen.

I wish to make only one point today about what I believe was the thrust of the whole report: that if government policy on science research funding in universities is to be successful, it must focus on making the case for its long-term benefits. I say this because the Government are under tremendous pressure to focus on the short term, because of Covid; so are universities. Clearly, the short term is important but the real benefits of investing in science research are long term, leading to increased productivity and sustained growth. They are crucial to job creation and prosperity for our children and grandchildren.

That is now abundantly clear, with scientific research being the basis of new technology and new ways of advancing healthcare, tackling climate change and making things—just think of lithium, graphite, new vaccines and electronic cars. As the noble Lord, Lord Rees, mentioned, these are also examples of fundamental research, which will raise productivity in a future decade. The report recognises that UK universities are some of the best in the world, but even those which are one rank below the best contain departments which are world class. We also have a tie-up between university research institutes and business, which provides a unique opportunity.

The report makes a strong case for increased funding. The Government have stated that they want to reach 2.4% of GDP by 2027. That is a huge aspiration. Raising a percentage point of GDP takes enormous commitment by government. At present, we are 11th among the European countries.

The report was published in 2019. Since then, universities have faced much greater uncertainty. Foreign students are a key source of income. The pensions deficit is huge for universities. In recent years, foreign students have subsidised research. The key test in terms of the Government’s commitment to universities will come in the October Budget and the economic review. We should all feel sympathy for Rishi Sunak, but what is needed at present is some sort of medium-term financial plan in the context of a long-running commitment. Only on that basis will universities feel that they can play a real part in contributing to future prosperity and jobs.

Industrial Strategy

Lord Griffiths of Fforestfach Excerpts

Monday 8th January 2018 Lords Chamber

[Lord Griffiths of Fforestfach (Con)]

My Lords, it is a great pleasure to take part in this debate on this very important subject. I thank the Minister for enabling us to take part in it. The Government’s White Paper was an important document, ambitious, strategic and long term. If it is implemented successfully, recognising all the comments that the noble Lord, Lord Hollick, made, it clearly will lead to the long-term creation of jobs, to prosperity and higher wages in the UK economy. Yet to economists of my generation, the term industrial strategy is associated with failure not success—and I shall explain why.

You could say that the first industrial strategy that we had in the post-Second World War UK was the nationalisation of whole swathes of industry by Attlee, which was done so that business could more clearly, as state-owned enterprises, focus on satisfying the consumer. As has already been mentioned by a number of speakers, Harold Macmillan’s Government set up Neddy specifically to bring together business, trade unions and government. Neddy survived until John Major closed it down in 1992. It has been mentioned that Harold Wilson set up the Department of Economic Affairs, with George Brown as Minister, and developed in 1966 a national plan. Something that has not been mentioned is that in Ted Heath’s Government the Industry Act 1972 was passed, enabling the Government to give grants and funding to industries, particularly those in difficulties, and especially shipbuilding. In 1975, Tony Benn argued that there should be a compulsory agreement between the top 100 companies in Britain and the Government but, to avoid that, Harold Wilson deflected things by issuing a White Paper entitled An Approach to Industrial Strategy. So there is a sense of déjà vu.

Frankly, none of those initiatives was a great success. The nationalised industries ultimately had to be privatised because of low productivity and overmanning, and the national plan was soon scrapped, a year after it was published. As to picking winners, we might mention the success of Rolls-Royce—but it is thought of primarily in terms of British Leyland and Upper Clyde Shipbuilders. Therefore, I have to say that when I first heard that the Government were about to announce an industrial strategy, I was sceptical.

I feel that I am open-minded, and the question that I ask is, “Why is it different this time?”. It is different for several reasons. The first is that lessons have been learned from the failures of past initiatives. The Government are not pinning their hopes on state ownership. It is about supporting viable private sector companies. Next, it is not about financial assistance to bail out failing firms; it is about how to support high-growth, innovative firms. It is not about backing state monopolies or cartels, but it is committed to competition being at the heart of the industrial strategy. On page 21 of the White Paper it states:

“We believe in the power of the competitive market—competition, open financial markets, and the profit motive are the foundations of the success of the UK. Indeed the best way to improve productivity is to increase exposure to competition”.


In addition, it is not about backing existing technologies but about supporting the development of new ones at the cutting edge which require basic science and innovation. Finally, it is about supporting companies that are not being hampered by overpowerful trade unions, which so restricted the ability of companies to manage as they wished to manage. These reasons are sufficient to say that lessons have been learned. Although I believe strongly in an enterprise, open, competitive economy, this Government’s approach has nevertheless learned lessons from the past.

Another reason is that the Government have thrown everything at the industrial strategy, as the noble Lord, Lord Hollick, mentioned. Any policy which has any implication for the economy is part of the industrial strategy. That can be seen as a weakness but, on the other hand, it is a strength. The Government are trying to harness resources from all aspects—and it is a vast area—in order to tackle the problem. In that sense, this strategy is not just about support for business. It is not about bringing management and trade unions together. It is about drawing on all the resources of government.

The final reason for feeling that it is different this time has to do with one aspect of the industrial strategy—sector deals. When I first read the paper, this was the part that I was most sceptical about. I have really changed my mind as a result of being, with the noble Lord, Lord Kakkar, and the noble Baroness, Lady Young of Old Scone, a member of the Select Committee on Science and Technology and taking evidence for our review of life sciences in the UK and industrial strategy. What impressed me about the sector deal announced just before Christmas was, first, that private sector firms such as Novo Nordisk, MSD—known as Merck in America—and QIAGEN were making significant commitments to build research facilities in Oxford, London and Manchester, to pioneer medicines, diagnostics and genomics. Secondly, medical charities such as the Wellcome Trust, Cancer Research UK and so on are also making a real commitment. Then there is the Government: we have already heard about the role of the NHS, but there is also basic university science research; the post-Brexit immigration policy commitment which has been made; the infrastructure in clusters; and the Government’s commitment to developing the Oxford-Milton Keynes-Cambridge corridor and, as has already been mentioned, to digital innovation hubs.

There is a story underlying this industrial strategy which marks it out from those of the past. However, there are still questions to be answered. Might the sector deal end up supporting, or even subsidising, weaker firms in that sector? What if shareholders feel that the commitment made to research has not been matched by the financial returns they expected? Will they demand a quid pro quo on what the NHS should be purchasing from them? What about the tariff of prices negotiated for their products which are bought by the NHS? At present, pricing policy is outside the sector deal. Can it remain so? The industrial strategy is clearly a work in progress but, nevertheless, there is everything to play for and it is worth backing.

I will make three final points. First, what came out very clearly when the Select Committee took evidence from business people running pharmaceutical companies and from people involved in research, as well as from Sir John Bell—and at the launch of the life sciences industrial strategy at No. 10 Downing Street—was that senior businessmen from the US and the continent value the fact that we have world-class institutions, such as universities and medical schools, and world-class hospitals where clinical research is done. That is important. The noble Lord, Lord Kakkar, eloquently made that point in his speech.

Secondly, and nearer to home, one of the constant complaints from business is the lack of long-term capital. Here there are two suggestions. The first is from the Treasury committee on patient capital, which looked at the problem. We have pension funds and insurance companies in Britain that have assets of over £3 trillion. They clearly have a long-term investment horizon and, obviously, they have to manage their risk carefully. However, they tend to be quite short term because they have to follow the prudent person principle whereby investment advisers have to approach such matters from the stance of how “a prudent person” would look at them. Interestingly, in two countries, the US and France, they ask themselves, “Could we not continue with a prudent person principle yet allow long-term funds such as pensions and insurance companies to put a slightly greater proportion of their investment into unquoted equities?”. The conclusion of the Treasury’s patient capital review is that that should be examined and the Pensions Regulator should be asked to give advice on it. That is a great idea, and if it could be done, it is the one thing that could transform the supply of capital to innovative companies which want to grow in the UK.

The second suggestion is to do with quantitative easing and the Bank of England’s interest rate policy. I am all in favour of the Bank of England’s managing interest rates to keep inflation down and ensure financial stability. However, quantitative easing has had some quite horrific side effects in terms of the growth of consumer credit, excess credit and inflation, and the misallocation of capital to zombie firms. The OECD did a major study of firms, covering the period 2003 to 2013, that it defined as 10 years of age-plus but with constant problems in meeting interest payments. It concluded that zombie firms are,

“a drag on productivity growth as they congest markets and divert credit, investment and skills from flowing to more productive and successful firms and contribute to slowing down the diffusion of best practices and new technologies across our economies”.

When the Bank of England recently raised interest rates, for the first time in 10 years, it said that in future the rises would be,

“at a gradual pace and to a limited extent”.

I feel that, like the US, we could try to get back to more normal interest rates. That would ease up capital that could go into innovative firms.

The third point concerns the future—this is not something that I will dwell on—and the governance of the industrial strategy. There is a Cabinet committee headed by the Prime Minister and an industrial strategy council with people from the private sector. Beyond that, however, there is a great haziness concerning delivery. As regards the implementation of new policies, during my five and a half years in No. 10 Downing Street I always felt that the design of a new policy was 10% of the problem whereas the implementation—the delivery—was 90%.

In conclusion, this policy is different from what we have seen over the last number of decades. We also live in a different world, with the digital revolution. The industrial strategy is still a work in progress. However, I believe that if it is implemented, as well as striving to lower taxes, it will offer us the best possible way for a successful post-Brexit UK.