AI and Creative Technologies (Communications and Digital Committee Report)

Lord Hamilton of Epsom Excerpts

Friday 13th June 2025 Lords Chamber

[Baroness Stowell of Beeston (Con)]

My Lords, this is the Communications and Digital Committee’s final report from my time as chair, so I not only thank the committee staff and my fellow committee members for all their work and contributions to this inquiry but extend my sincere thanks to all colleagues with whom I worked over the past three years for everything they have done so that, collectively, we have been able to produce some high-quality work that has had impact. Likewise, I am hugely grateful to the witnesses who appeared before us and submitted written evidence to all our inquiries. That is particularly relevant to this report on scaling up AI and creative tech, because we drew so much on the work we did in preceding inquiries, especially those on large language models, the creative industries and digital markets.

This debate comes at the end of London Tech Week, where so many of the UK’s fantastic tech founders have spoken or been in attendance. We have so much tech and entrepreneurial talent to celebrate in this country. From the off, I emphasise how proud I am of the innovators and risk-takers who set up on their own to establish a business and go on to thrive and achieve great success, even if they have had to experience more than one failure along the way, because if there is one message that landed powerfully with me during this inquiry it is that we do not say or do enough as political leaders to celebrate and support our risk-takers and wealth generators. They do not just generate wealth for themselves; they help our economy grow, create jobs and provide products and services that are valued by consumers and other businesses alike.

I cannot speak for Oxford Ionics, which was just this week acquired by a US rival—I offer my sincere congratulations to its founders on their success and all they have achieved—but I am genuinely sorry about its loss to the UK as a British business, even if, under new ownership, it continues to operate here. As I shall come on to explain, what we have seen this week is another example of a worrying trend. Our report described the UK as an “incubator economy”: a great place to begin, but too often it is other countries that get to cash in. If we are serious about growth and retaining our position as a global leader in the tech sector, this situation has to change.

Our inquiry on scaling up looked at the causes of this problem and what steps the Government must take to support innovative technology companies to grow into thriving British businesses that want to stay here in the UK. We focused on AI and creative tech because these are two areas in which the UK has strong foundations and significant potential, but many of our findings apply to innovative tech scale-ups more broadly.

This failure to scale is not a static problem. It is a dynamic and damaging cycle. When our most promising firms exit early or scale overseas, we do not simply lose their immediate economic value; we also hamper the formation of the kind of ecosystem that drives sustainable innovation. In the United States, successful founders reinvest their capital and experience into the next generation of start-ups. This creates a powerful flywheel of talent, mentorship and capital. In the UK, existing gaps in funding, expertise and confidence will only widen if we do not retain and champion our top entrepreneurial talent.

This is playing out already. London, I am sad to report, is no longer Europe’s leading technology hub, according to Dealroom’s latest Global Tech Ecosystem Index. A recent survey of founders by Tech Nation found that 43% were actively considering leaving Britain. We are also struggling to hold on to the few British tech companies that have scaled domestically. This week’s unicorn is not the only one galloping overseas. Alphawave, Wise and Deliveroo have departed to the US by way of acquisition or relisting this year. Unless we act decisively, we will continue to erode the foundations required for long-term global competitiveness. As much as the Minister will not welcome me saying so, the day-one rights and other measures in the Employment Rights Bill will only deter further UK tech firms from scaling and staying here.

We received the Government’s response to our report in April. While it was supportive of our findings, it was thin, pointing to a series of policy announcements due in the spring. It is now summer, and while the Government have shed light on some issues through their announcements this week, we are still in the dark on several others. I will address each of these in turn, and I have several questions for the Minister.

I start with funding. The UK’s lack of scale-up capital is the most important barrier that needs to be tackled. The Council for Science and Technology has highlighted improvements in early-stage investment, such as seed funding and start-up investment, but it has stressed that UK companies have been “starved” by a lack of scale-up funding. The Capital Markets Industry Taskforce identified a $30 billion gap between the UK and Silicon Valley for funding rounds of more than $100 million.

A lack of domestic institutional investment is part of the problem. Just 10% of Britain’s venture capital pool comes from pension funds. In the US it is more than 70%, and Canadian pension funds invest 15 times what UK pension funds invest in private equity and VC. The Government acknowledged this funding gap for scale-ups and pointed to ongoing pension reforms, such as the new Mansion House accord. That is welcome in principle. However, the push-back from pension funds against a mandate to invest in UK-based assets suggests that these reforms may not be a silver bullet. Personally, I am very nervous about mandating, but I also know that we cannot afford to wait years for pension reforms to trickle through. We must actively crowd in capital now. When will the Government’s initiatives result in tangible improvements in capital access for our most innovative firms? How are the Government making sure that voluntary commitments translate into real action from institutional investors?

The committee heard that another source of confusion for businesses looking to scale is the plethora of disconnected programmes and government grants available to them. This has arisen over many years and is not a new problem, but I have described it in the past as a kind of bowl of spaghetti drowned in alphabet soup. In our report, we recommended that the Government evaluate the impact and join-up of initiatives administered by UKRI and the British Business Bank in particular. I was therefore pleased to hear Tom Adeyoola, Innovate UK’s new chair, acknowledge that the current system is a hindrance rather than an enabler, and I welcome his ambition to bring greater focus to the agency because it is really needed. I was also relieved to discover, since our report, that the British Business Bank has retired its various sub-brands. This is a step in the right direction towards simplifying the schemes that were previously on offer, but the Chancellor’s welcome decision this week to increase the BBB’s financing capacity makes the need for a clearer strategy and a more coherent offer for scale-ups even more important. Can the Minister provide an update on UKRI’s review of its portfolio of funding and support to SMEs, which was due this spring? Can she offer examples of how the memorandum of understanding between UKRI and the BBB is creating a clearer pathway of support for scale-ups?

The Government promised us that their new business growth service will

“ensure a joined-up, coherent approach to the government’s suite of business support programmes”.

That would indeed be welcome, but I have concerns that this will instead become yet another thread in an already tangled web, and that is before we take account of the new sovereign AI unit announced this week. Can the Minister clarify how the business growth service will streamline the journey for innovative firms? Can she reassure me that the partnership between the BBB and the sovereign AI unit will truly put boosters on our emerging AI champions?

Our evidence was clear about the strategic importance of AI in driving innovation and growth across multiple sectors. The AI Opportunities Action Plan, which the Government published in January, was a good start. It set out ambitious proposals that match the scale of AI’s transformative potential, which have now been backed up by funding for delivery in this week’s spending review.

However, a plan is only the start. The Government must be laser-focused on removing obstacles to growth for home-grown AI companies. For example, access to compute was consistently raised in our evidence as a critical enabler for AI scale-ups. We heard that the Government’s decision last August to cancel investment in the Edinburgh exascale supercomputer left the entrepreneurial community deeply unimpressed. It was therefore good to hear this week that it will now receive £750 million of government funding, but the Government’s hokey-cokey on this issue has been damaging and means that we have lost valuable time. The Government promised in their action plan to expand public compute infrastructure 20-fold by 2030, with a long-term strategy published by the spring, but that strategy has yet to materialise. Can the Minister confirm whether it will be published before the Summer Recess?

Our report also emphasised that effective and agile regulation is crucial if we are to support innovation. However, we heard widespread concerns about confusion in the current regulatory landscape, particularly in relation to AI. We need proportionate oversight that gives confidence without stifling innovation or creating new barriers to entry. It is home-grown AI companies, not big tech incumbents, that will drive the innovation needed to realise the UK’s AI potential.

Open markets and open competition are essential to ensure that they have a fighting chance, which is why successful implementation of the Digital Markets, Competition and Consumers Act is vital. We welcomed the creation of the Regulatory Innovation Office, which has been nicknamed RIO, but we emphasised the importance of clarifying its remit and its interrelationship with other regulatory bodies. Unfortunately, those concerns have not yet been addressed, and the extent of its powers over other regulators remains unclear. I am pleased that the Government were wise enough to appoint my noble friend Lord Willetts as the chair of RIO, and I am delighted that he is speaking in today’s debate. None the less, as the person accountable to Parliament, can the Minister provide detail on how she expects RIO to drive behavioural change to boost innovation across sectors?

I turn to the createch sector, where two UK strengths—creativity and technological innovation—meet. For those not familiar with createch, it covers gaming but also visual effects and that sort of thing. The think-tank Erskine Analysis estimates that createch companies could generate up to £18 billion in additional gross value added over the next decade, with the right support. We found that the wider issues of funding and co-ordination are particularly acute for createch firms. The creative sector has suffered from poor investor understanding and a lack of specialised investment vehicles. In addition, various schemes administered across DCMS and UKRI have paused and restarted, leading to confusion and duplication. As I said before, that is not a new problem; it has been the case over a period of time. It is worth noting that, while the Government tout the creative industries as one of their eight key sectors, it was not mentioned once in the Chancellor’s spending review speech on Wednesday.

Let me add that I would never criticise Ministers, or indeed the Prime Minister, for meeting tech founders. That is good; it is when Ministers do not pay regard to other important sectors that trouble is caused.

In their response to us, the Government promised that all would be revealed in an industrial strategy sector plan for the creative industries and told us that UKRI would develop a new strategy for the creative sector. So when will either of those be published?

I cannot not mention the issue of AI and copyright. Unfortunately, despite admirable efforts by many noble Lords—I am pleased to see that the noble Baroness, Lady Kidron, will be speaking shortly—progress remains elusive. Now that Parliament has dispatched the Data (Use and Access) Bill, focus turns to the Government’s commitment to host industry roundtables. Clearly, these must be successful, but, for me, when they were announced, they elicited a horrible sense of déjà vu. I worry that the Government’s mishandling will have made the prospect of negotiations even harder. I hope I am wrong, because our inquiry made it clear, as did every inquiry through which the committee examined the issue of copyright in an AI world over the last three years, that innovation and creativity must go hand in hand, not toe to toe. The one thing all parties can agree on is that resolution of this issue is urgent.

In conclusion, the Government’s tone on many of the issues covered in our report is encouraging, but warm words do not scale companies and time is not on our side. While the Government consult and reorganise, the global market races ahead. Other countries are acting boldly, and we must do the same. We are doing a disservice to our strong start-up ecosystem and our brightest AI and createch companies if we do not support them to achieve their full potential and become world leaders on a global stage. And, my God, do we have the talent: GBx, a group that brings together Brits in Silicon Valley, is calling the British talent that dominates so much of the big tech based over there “power Brits”. We need those power Brits to want to be here in the UK.

The committee’s message was clear: we have many of the ingredients needed to make the UK a home for scale-up success stories. What we lack is action, and if we do not act soon we will be left only to dream of unicorns, never mind bemoan the ones that gallop away. I look forward to the contributions of all noble Lords during this debate. Some illustrious speakers are going to follow me, and I wish both maiden speakers all the very best.

[Lord Hamilton of Epsom (Con)]

Before my noble friend sits down, the problem with AI is that it uses astronomical amounts of electricity, and we have some of the highest electricity prices in the developed world. Does she think electricity prices are going to inhibit the growth of AI in this country?

[Baroness Stowell of Beeston (Con)]

My noble friend is right that the cost of energy in the UK is very much a deterrent to a lot of inward investment. It is not deterring them completely, but I was talking only yesterday to a very senior figure at Amazon and, as you would expect, he was drawing comparisons between us and France. I said earlier that London is no longer the leading tech hub, and according to one of these analysts the country that is really champing at our heels is France.

I beg to move.

Environmental Targets (Public Authorities) Bill [HL]

Lord Hamilton of Epsom Excerpts

Committee stage
Friday 13th June 2025 Lords Chamber

Moved by

[Lord Hamilton of Epsom]

1: Clause 1, page 1, line 6, leave out from “2008” to end of line 11

[Lord Hamilton of Epsom (Con)]

My Lords, I start by thanking the noble Lord, Lord Clement-Jones, for pointing out that I am actually here. I intervened on my noble friend Lady Stowell to make the point that we all support the introduction of AI, but AI is going to be tremendously consumptive of electricity. Electricity prices are actually very high in this country, and I attribute that to the targets we have set for reaching net zero, which I think we should be ignoring. We should not ignore net zero, but we should ignore the targets, which are too short and are damaging the British economy. That is the reason for my amendment.

The noble Lord, Lord McNally, suggested my intervention was motivated by some tradition in the other House of intervening very early on in the debate and then catching the next train to the country. So I am grateful to the noble Lord, Lord Clement-Jones, for pointing out that I am still here.

Things have changed tremendously since I first tabled this amendment. Initially, the noble Lord, Lord Krebs, was rather hoping that I might withdraw my amendment. I think he hoped the Bill would go through without any debate and on the nod. That should not happen. The whole world of energy is now changing quite substantially, and we have got to be very wary of setting extremely arbitrary targets for reaching net zero, which have been damaging our economy and have led to extraordinarily high energy prices.

Since I tabled the amendment, we have had the report from the Tony Blair Institute, which is interesting because one the main things it pointed is that there is absolutely no way we are going to reach these global targets, for the simple reason that a very large number of developing countries are producing their own energy and want to produce it as cheaply as they possibly can. They are going to go on using fossil fuels for the indefinite future. Therefore, is it sensible for us, producing less than 1% of the world’s emissions, to set ourselves a net-zero target, when China, for instance, is producing 60% of its electricity from coal-fired power stations? Not only are the Chinese using probably the most efficient fossil fuel for producing electricity, they are also massively polluting the atmosphere in which their people have to live.

At the same time, we have stopped producing any form of electricity through coal. We have no more coal-burning power stations. When this started, the great theory was that somehow we were going to be leaders in the world; we would set an example and others would follow. Quite clearly, the Chinese are not following our example: they are merely taking massive advantage of the fact they can produce manufactures much more cheaply than we can here. The drain of manufacturing industry continues from this country, and that is driven, among other things, by the fact that our electricity prices are so much higher than those in the rest of the world. I admire the Government for having the ambition to reindustrialise this country, but it is not going to happen if our electricity prices are so much higher than everybody else’s in the world. This is one of the problems we are living with today: we are not competitive, and many other countries are taking advantage of us in this way.

I know the noble Lord, Lord Krebs, has had association with the Drax power station. I have the most enormous reservations about a so-called green power station, which is supposed to be fulfilling all the requirements of net zero but is polluting the atmosphere through every conceivable stage of its process of feeding fuel into that power station.

It is supposed to be dealing with wooden pellets that come from North America. There is a suggestion that quite a lot of trees have been cut down in North America as well to produce these wooden pellets. When the wooden pellets are eventually burned, they must be almost as contaminating as a coal-fired power station, if not quite. At the end of the day, we should not be contributing to CO₂ emissions through generating power, even if it is under the auspices that somehow this is a renewable source, because I do not think that it makes any sense at all.

--- Later in debate ---

[Lord Krebs (CB)]

I thank the noble Baroness for pointing that out, and I accept her comment.

To summarise, my three asks of the Government are: first, to tighten the guidance where appropriate, following the interjection of the noble Baroness, Lady Coffey, on the existing initiatives aimed at protecting nature and tackling climate change; secondly, to ensure that the environmental improvement plan includes the role of public authorities in meeting the specific time-bound targets in the Environment Act and the Climate Change Act, a point made by the noble Baroness, Lady Young of Old Scone; and, thirdly, in line with Corry and Cunliffe, to modernise and simplify the legislation, as proposed by my Bill. In the meantime, I very much hope that the noble Lord, Lord Hamilton of Epsom, having had a good debate about his amendment, will agree to withdraw it.

[Lord Hamilton of Epsom (Con)]

My Lords, I started this debate by saying that my real concern about all these green initiatives is that they are adding to costs and are one of the reasons why our electricity prices are some of the highest in the G7 and make this country very uncompetitive, particularly when it comes to manufacturing industry, which continues to leach from this country to other countries in the world. The chances of restoring our manufacturing sector seem to me to be pretty faint as long as we have these astronomically high prices. I noticed during the debate that a lot of people have gone on about the duties of all the authorities listed here to adapt to green initiatives, but on the other hand, nobody talks about the cost of doing that. That is really my concern, right across the board.

The green initiatives that we have under net-zero legislation are actually leading to customers paying more for services. I am surprised that the Local Government Association says that it approves of the Bill, because it will mean that community charge payers will be paying more money to enact all of this stuff. But I think we have had an interesting debate and I am more than happy to withdraw my amendment.

Amendment 1 withdrawn.

Northern Ireland

Lord Hamilton of Epsom Excerpts

Monday 7th February 2022 Lords Chamber

[Lord Caine (Con)]

The noble Lord might be aware that, more than two years ago, when the protocol was being negotiated, I asked questions from the Back Benches. Those are a matter of record. Rather than dwelling on how we got into this situation, I would rather focus on how we get out of it. As I said in my earlier answer, the Government are working intensively with Vice-President Šefčovič to try to find a way forward. The noble Lord will know that there is a meeting of the EU-UK joint committee pencilled in for later this month.

[Lord Hamilton of Epsom (Con)]

My Lords, is it not right that, under the protocol, the tariffs on imports into Northern Ireland are a devolved matter?

Climate Change: COP 26 and Civil Society

Lord Hamilton of Epsom Excerpts

Wednesday 15th January 2020 Lords Chamber

[Lord Duncan of Springbank]

The noble Lord will be aware that very soon after that was announced, there was an election, and shortly after the election there was Christmas. Unfortunately, the cabinet committee has not yet met, but it will meet this month, very shortly. I will report back to this House on what has been discussed at that meeting.

[Lord Hamilton of Epsom (Con)]

I congratulate my noble friend on the United Kingdom lowering its CO₂ emissions from 2% to 1% of the world’s output, but meanwhile, worldwide net emissions of CO₂ have gone up. Are we not in great danger of meeting 2050 with no net CO₂ emissions only for worldwide CO₂ emissions to have gone up, because the Chinese and Indians will have continued to build coal-burning power stations?

[Lord Duncan of Springbank]

My noble friend is right to express that simple point: carbon emissions have gone up year on year since the beginning of the COP process, and some significant emitters are doing too little to address this. The United Kingdom has been powerful in its advocacy of decarbonising, while still growing the economy. If we can continue to grow the economy and secure jobs while decarbonising, that is a model that the world should follow.

Net Zero Carbon Emissions

Lord Hamilton of Epsom Excerpts

Tuesday 29th October 2019 Lords Chamber

[Lord Duncan of Springbank]

The answer to the point raised by the noble Baroness is that we need to invest very carefully and very substantially. There will be impacts across our entire economy—all will have to do their part. The Government will examine this report very carefully indeed, along with the terms of reference going forward.

[Lord Hamilton of Epsom (Con)]

My Lords, will much of the cost of net zero emissions by 2050 be transferred on to energy prices? If that is the case, will that not make us increasingly uncompetitive in the world and wipe out what remains of our heavy industries?

[Lord Duncan of Springbank]

We face a challenge going forward to achieve the net zero target by 2050. We have to remember that this is not all about energy regeneration itself because there are other areas that we need to consider, not least the decarbonisation of our transport network. Each of these elements will have a cost that, whether we like it or not, will eventually fall on taxpayers or individual consumers. That is where the money will ultimately come from.

Frequent Flyer Airmiles Schemes

Lord Hamilton of Epsom Excerpts

Monday 21st October 2019 Lords Chamber

[Lord Duncan of Springbank]

To be very clear, the UK has an air passenger duty which raises £3.6 billion a year. It is the highest such tax in Europe—many countries in Europe do not have such a tax—and that money goes a long way to address climate change issues, which are of importance to the Government.

[Lord Hamilton of Epsom (Con)]

My Lords, surely a customer loyalty scheme is what it says on the tin: it is trying to persuade people to fly with one airline rather than another. There is no evidence that if you discriminate against these schemes, people will fly less; they will just choose between one airline and another.

[Lord Duncan of Springbank]

It is not the policy of the Government to intervene in these commercial decisions. It is also important to recognise that this is a regressive step in many respects.

Nuclear Power Stations

Lord Hamilton of Epsom Excerpts

Monday 9th September 2019 Lords Chamber

[Lord Duncan of Springbank]

It was our Government. We will have an updated clean growth strategy because it is absolutely vital. We will need to be bold about taking ourselves forward to net zero by 2050, because our present initiatives are not adequate to deliver that. There will need to be a significant refresh not just of the wider clean growth strategy but of all aspects of this covering all government departments.

[Lord Hamilton of Epsom (Con)]

My Lords, taking up the point made by the noble Baroness, Lady Meacher, on banishing CO₂ altogether, surely we will have to stop breathing out.

[Lord Duncan of Springbank]

I strongly discourage my noble friend not to stop breathing out.