Better Regulation

Debate between Lord Mendelsohn and Lord Henley

Thursday 7th December 2017 Lords Chamber

[Lord Henley]

The noble Lord is correct that the new regime is in place, but that does not mean that all proposals are finalised; these matters can always be considered in the light of representations made, even by the noble Lord. He and I were in the coalition Government together; we worked together in the past. I am sure we can take account of comments made here, and I would be more than happy to listen to him.

I want to make it clear—not commenting on leaked documents—that our proposals actually increase scrutiny by bringing significant deregulation measures into scope. They focus the system on measures with large impacts. This brings me to the Public Accounts Committee, whose recommendations it is worth commenting on. The 2016 report said:

“The Better Regulation Executive’s rules for assessing and validating the expected impact of a regulation are the same, regardless of the scale of the regulation’s impact. The Better Regulation Executive … has established a complex bureaucracy across Whitehall that diverts departments’ resources away from potentially more productive efforts … Of the 95 regulations that the Regulatory Policy Committee has scrutinised during this Parliament, 64 of them have an individual expected net impact of less than £5 million”.


The committee then recommended that we should change the rules to allow a more proportionate approach whereby significantly more effort can be applied to the assessment and validation of the small number of regulations with the greatest impact. That is what we are doing with the de minimis rule.

That is why we took this action and why I wrote to the Public Accounts Committee only last month to inform it that we intended to follow its recommendations and adopt a more proportionate and efficient better regulation system by introducing that threshold. Obviously, we can always reconsider those matters, but that is why I wrote. It will allow the RPC to focus on the measures that matter most. If it had been in force in the last Parliament, 90% of the costs would still be subject to independent scrutiny.

It is only right that regulation should be kept under constant review as products and technology change. Where regulatory requirements are not clear or easily understood, it can lead to confusion and potentially an increased risk to the public. Over the last 20 years, Governments have been working on getting the delicate balance or proportionality right and the costs and benefits of regulation right. That has included the establishment of the Regulatory Policy Committee, as I mentioned earlier, which gives independent scrutiny of the evidence for regulatory changes when they are debated in Parliament.

There were previous government initiatives to review the stock of legislation. Going back to the beginning of the coalition Government, which the noble Lords, Lord Stoneham and Lord Stunnell, will remember, there were the Red Tape Challenge and the cutting red tape reviews. The noble Lord, Lord Stunnell, took credit for introducing the one-in, one-out measure, which I think he accepted served a useful purpose in encouraging the process, even if another noble Lord—I think it was the noble Lord, Lord Whitty—did not like the idea and said that it led to getting rid of something purely for the sake of it. But it encouraged the others and served a useful purpose.

Those reviews sought views from the public to help identify outdated, unnecessary or overly complex legislation and led in due course, as both noble Lords and others will remember, to the Small Business, Enterprise and Employment Act 2015. My noble friend will remember that because she took the legislation through the House. It introduced a requirement for the Government to set a business impact target, focused on the economic impact of regulatory change on business activities, and the need to report annually on its achievements against that target.

These initiatives have delivered some real improvements in how people, businesses and public bodies are regulated, and have also encouraged a cultural shift in government departments towards more appropriate and smarter regulation. The one-in, one-out or one-in, two-out proposals played a part in that. For example, my own department’s business perceptions survey last year showed a decline in the proportion of businesses that believed that the overall level of regulation in the UK was an obstacle to their success. It went down to 49% in 2016, from 62% in 2009.

As I said earlier, the Public Accounts Committee produced a number of recommendations about how we can further improve our regulation system, following the report from the National Audit Office last year. We have been reflecting on those conclusions, including ideas about how to make our approach more proportionate.

[Lord Mendelsohn]

Will the Minister clarify the changes to the RPC that are in effect? Is he suggesting that the change to the regime is more permissive, less permissive or exactly the same as what stood before? To be clear on the purpose, is he saying that the changes were directly as a result of those suggestions from other committees? Were some of the changes requested by departments to have freedom and flexibility, or were they in any way related to the pressures in the system as a result of the EU exit?

[Lord Henley]

My Lords, I do not accept that the EU exit has led to those changes. I said that the Public Accounts Committee had made some recommendations. We considered those and brought in the de minimis rule. We are not bound to keep that. We could change it if necessary, but it gives the RPC a freer hand in what it does and allows it to focus its efforts more appropriately on the job that it does very well.

I can also give an assurance, since there was some criticism of our attitude to the RPC, that we are still committed to it and its work. We are making sure that it has the appropriate number of members. It currently has eight members and it will continue to have eight members. Announcements will be made in due course as to whether some members have been reappointed, or where necessary new members will be brought in, so that it can continue to do its work.

I am beginning to run out of time and I do not want to deprive my noble friend of the chance to say a few words at the end of the debate. However, I should like to deal with one or two of the other questions that have been raised.

I think I have more or less touched on it, but the noble Lord, Lord Haskel, referred to the letter from my noble friend Lord Trefgarne, the chair of his committee, about the threshold. We acknowledge the good work of the committee and I am aware of the letter from my noble friend. I think that it was received in the department on 28 November and I intend to respond to it shortly. I can reassure the noble Lord that the department will continue to provide appropriate analysis of its policies to the committee.

Perhaps I may also give an assurance to my noble friend Lord Altmann on pensions auto-enrolment. As a former member of the Department for Work and Pensions, where I have also served, she will know that auto-enrolment has been a great success. Some 8 million people have now enrolled and the Government are conducting a review to build on this success and make sure that the programme works in the long term. The review will be led by the Department for Work and Pensions supported by an external advisory body. I am told that it will report by the end of 2017, so my noble friend does not have to wait for long because that really does mean pretty soon.

Concern was expressed by my noble friend Lady Neville-Rolfe and the noble Baroness, Lady Andrews, about the RPC’s processing not applying to tax or the national minimum wage. I can give them an assurance that HMRC has a separate body, known as the Administrative Burdens Advisory Body, to consider reducing the burden of tax administration, so there is a role for it which provides scrutiny.

Lastly, the noble Lord, Lord Stoneham, was concerned about what plans we have for EU exit. This is a concern that comes up in every Question and debate in the House. We have made it quite clear that the withdrawal Bill will be designed to ensure that EU exit will take place with certainty and that we maintain continuity and control. The Bill will help to maximise certainty for business on what regulation will apply on exit and to maintain important protections for consumers.

As always, I apologise for the fact that I have not been able to address every point that has been put before me, but again as always I promise to write to noble Lords on any issues that I have not addressed. I end by thanking my noble friend once more for introducing this debate.

Small Business Commissioner (Scope and Scheme) Regulations 2017

Debate between Lord Mendelsohn and Lord Henley

Wednesday 6th December 2017 Grand Committee

[Lord Mendelsohn (Lab)]

My Lords, I am absolutely crestfallen that the noble Lord, Lord Cope, has found the thing that I was going to start my contribution with, which is the phrase in the notes that the regulations will not affect business. My fear is that this is not a statutory instrument that will do the job in the way we hope it will. I want to preface my remarks by saying how nice it is to see the noble Baroness, Lady Neville-Rolfe, in her place. During the passage of the relevant provisions for the Small Business Commissioner in the Bill, she said at one point that she might even consider the role herself. I am pleased that she is still in this House campaigning on many issues, and I have to say that she has been saved by the appointment of an excellent candidate. I welcome Paul Uppal to his role as the Small Business Commissioner. He will make an excellent commissioner because he has great attributes for the role, given his background and approach. I congratulate the Government on securing such a person.

My only fear is that this statutory instrument is an illustration of why the Government are humbling the role before it has a chance of success. No matter what the quality of the person, I see tremendous difficulties ahead in being able to make any meaningful change. Yet again we have gone for a system where we have decided to invent a wheel that has four sides. My concern is that this does not work in any established model or precedent. It does not have any behavioural testing or pilots to demonstrate that it can achieve any of the outcomes. I will go through some of the policy issues and then through the statutory instrument.

First, I was really impressed with the department for its policy background in the Explanatory Notes because this is a huge exercise. The department is to be given huge credit for finding the lowest possible estimation of late-payment debt available in this country. It is certainly true that the BACS survey has far and away the lowest estimates of it for small businesses, by saying that it is just over £14 billion. In fact the average of all the surveys which I found was the Zurich survey, which had £44 billion for SMEs. Why have the Government therefore chosen the veracity of the BACS report? Would the Minister like to tell me, for example, the survey size of that report? I happen to know the answer but I would be keen to hear it from him. Of all the 14 available surveys that I found of late payments, none had a figure as absurd as that. Where does the survey fit in on a sample size—is it at the top, the middle or the end? Can he also tell me for how many years BACS has conducted a survey and what was the methodological change this year to have come out with such a figure? Seeing this figure alone, my concern is that I do not feel that the Government are taking this problem seriously. This will also affect the estimates to come thereafter of what the Government think will be necessary to do this.

Secondly, yet again, I understand the Government’s desperate desire not to do too much and to believe that cultural change, in and of itself, will make a huge difference. I know they will say that the Prompt Payment Code is causing all sorts of wonderful cultural changes that are making a huge difference. We may have that code but I would like to ask a few questions. Can the Minister give me any evidential base whatever to suggest that the Prompt Payment Code has made any change, apart from a Minister who I have found saying, “I’ve spoken to some people and they say they like it”? Can he give me anything with any independent foundation for doing it? Can he demonstrate any example, among the many identified in government reports or in the press, where a company that is a problem late payer and a member of the Prompt Payment Code has been disciplined, chucked out or taken to task for anything that it has done? It is a pretty hard case to make but I would be interested to hear his reflections on that.

It is a shame that the public sector is not included in this provision. I understand that there is a different commissioner and that the argument has always been that because there are definable terms of 30 days, it is not necessary because there is a different mechanism. But I think the overall success of the Small Business Commissioner will be through its ability to get underneath the issues that lie behind problems of late payments. That includes issues around the public sector and its suppliers, where there is a supply chain. It should be able to make the right sort of assessments of that sector. Taking the sector away humbles the Small Business Commissioner’s capacity to take an overall view of late payments. Those are all significant concerns.

I return to the issue about size because it is relevant. I think it is anticipated that the Small Business Commissioner will have establishment costs of £1.1 million and is meant to have a running cost of £1.4 million. I would be grateful to have a breakdown of the staff who comprise that £1.4 million and therefore how many hours of investigative time we think we will have. I also understand that the Government—on the basis of an utterly ridiculous figure of £14.4 billion, but that is another matter—say that the estimate is that 70,000 companies will be referring just under 400,000 disputes, of which 500 will result in full-blown complaints. While I am tempted to ask the Minister what percentage of the overall disputes will therefore result in a full-blown complaint, I can tell him for the benefit of time that it is 0.125%. Can he explain how the Government match that level of complaint to the staffing and what they are required to carry out through the statutory instrument? I have tried on the back of an envelope—in fact, multiple envelopes because it took so long to do the maths—to see how you can spend the amount of money involved in the establishment of it and end up with that number, and I just cannot do it. I would be very grateful if the Minister, on the basis of the bogus number, will tell us how this is meant to operate, how much time is allocated to each dispute, and how that will work. That would be very helpful indeed.

Unfortunately, I have some other issues with the actual drafting of the statutory instrument. I agree with the noble Baroness, Lady Neville-Rolfe, that brevity and simplicity are wonderful. There is nothing like brevity and simplicity and this statutory instrument is nothing like brevity and simplicity. I am tempted to say that I worry when a Government overregulate. This is an example of overregulation, when better regulation would be much more judicious.

The biggest problem I have with the statutory instrument is that fundamentally it regulates the size, not the activity. I talked this through with a lawyer and said, “If I am a big company, how do I change this? I just move the dispute that I have to a small company and I am no longer on the hook for it”. The ability to drive a coach and horses through this and to avoid any form of dispute or mediation or any cost by changing the structure or who holds the debt or who holds the activity is easy within these terms. Which lawyers reviewed this? Which scenarios did they plan for? Did they understand the opportunity to game it? This is important. As we have seen with the application of the role of the Pubs Code Adjudicator, a coach and horses has been driven through that one and absolutely nothing has happened. I would rather the Government were realistic at the very beginning about what was likely to happen.

As we all know, there is always the law of unintended consequences in these matters. In relation to the size, does the Minister think there will be any unintended consequences of setting a number? Will that exclude certain disputes that should be part of it? Should there be provision for the Small Business Commissioner to be able to apply discretion in certain circumstances, rather than it being as prescriptive as it is?

Then we move to the issue in Regulation 3, which is titled, “Requirements before presenting a complaint to the Commissioner”. It says that in order to pursue a complaint,

“the person making the complaint must … communicate the substance of the complaint to the person against whom the complaint is made; and … give that person a reasonable opportunity to deal with it”.

The definition of “a reasonable opportunity” is quite difficult. In truth, it is a payment that is late. We say that we have a condition for late payment, rather similar to that in the public sector, of days on which you can apply interest, and we then specify a reasonable opportunity to deal with it. If it is late, it is late. Again, we have created a huge opportunity for a sense in which a complaint can now be a reasonable complaint and you can probably delay to the average number of days. Whether you believe the bogus BACS survey which said it was 72 days, I think, or the other average that most others identify, which is 90 days, you can still extend much further on the basis of what is a definably reasonable opportunity to deal with it.

Then we have the wonderful paragraph (2). This is always the issue. The Minister correctly identified the problem of a company which may face adverse commercial consequences from raising the issue. It says here:

“The specified circumstances are where the Commissioner considers for this particular complaint, there is sufficient information to suggest that communicating it to the person against whom it is made would have a significant detrimental effect on the commercial interests of the person making it”.


Will the Minister please define for me in detail what this “sufficient information to suggest” is? I think that is a remarkable thing to put down and, again, it fetters the Small Business Commissioner’s scope.

I could go on but I will cut out a few comments because the point is being made. I could go on about the time limit for presenting a complaint. For example, when you are dealing with a company such as Amazon, which many of our small businesses do, it has a procedure which takes a year in the first place. Are we out of scope from the time you make a complaint to when it is defined? Again, it fetters the Small Business Commissioner in a much more serious way. In particular, Regulation 5(4) says:

“Where the complaint or part of the complaint is not made within the time limit set out in paragraph (1), the Commissioner must not entertain the complaint”.


By the way, in this context I am absolutely shocked to see—having had many a debate with the noble Baroness, Lady Neville-Rolfe, on this matter, with huge arguments over “may” or “must”—the remarkable number of times “must” appears in relation to the Small Business Commissioner. Again, he,

“must not entertain the complaint”.

That is also a huge mistake.

On the power of the commissioner to fix time limits, again, we have here perhaps the best powers given to the Small Business Commissioner, which are discretionary. I would like to see an awful lot more of those. On the power of the commissioner to dismiss a complaint, again a charter is given for people to be able to suggest that the complaint can be reasonably dismissed, and there are now eight headings that qualify the decision of the Small Business Commissioner on whether to dismiss a complaint. I spent time with my lawyer, and as a big company you could pull a case together on pretty much half of these anyway, on almost any circumstance. Therefore the Government have now given an ability to argue the case and to create a legal obstacle for the Small Business Commissioner to take up the issue in the first place.

These are huge mistakes. I could go on about the notifications and how overly problematic they are. My basic point is that we will have to pass these things—that is the natural course of things in this place—because we need the Small Business Commissioner up and running. But they are deeply flawed, as they were from the time we tried to raise these issues during the passage of the Act up to now, when they are being put forward in a statutory instrument. The only assurance we can get, apart from some reasonable answers to not unreasonable questions, is on what the mechanisms will be to review it early—not late, as we faced with the Pubs Code Adjudicator, where problems are now faced because we have a restrictive three years for review—more seriously, quickly and appropriately, to ensure that we can adjust the scope and role of the Small Business Commissioner to adequately deal with these issues. I hope that that may mean that there is a new role for the noble Baroness, Lady Neville-Rolfe.

[Lord Henley]

The noble Lord throws a bit of a dampener on the proceedings, which were going quite well before that stage. I will comment on what other noble Lords had to say before I deal with some of his complaints. I am not sure that I will deal with all of them; I will probably write to him in greater detail afterwards. Since he accepted that these regulations will go through, that the Small Business Commissioner has a role and that we have to get him on the move, the sooner we can do that, the better. I will go back to those noble Lords who at least welcomed the regulations—I think he did, but he then took them to pieces and, as I said, threw something of a dampener on the proceedings.

I will start off with the noble Lord’s friend, the noble Lord, Lord Jones, who, as I said, was much politer and kinder about the regulations. I am grateful for that, and I give him an assurance that we have now appointed Mr Paul Uppal—the announcement was made a few days ago—who is a former Member of another place. The post was advertised in the usual way and will be salaried. I am afraid that if my noble friend Lady Neville-Rolfe was looking to get that job, she will have to wait a little while before it is vacant again. As I said, it was advertised in the usual way. I cannot specify exactly why he was chosen as opposed to any others, as that would be invidious and not right, but he was selected after due process and we are grateful to him.

My noble friend Lady Neville-Rolfe also regrets the length of this regulation; it is always difficult to get these matters right. On many other occasions I have moved that various orders be agreed and people have complained that there is not the detail in them. Unfortunately, the point behind regulations of this sort is that one can get into the details that one cannot get in the parent legislation. My noble friend is aware of the parent legislation; she took it through this House, and the noble Lord, Lord Mendelsohn, dealt with it from the Opposition Benches. They know full well that it is not right and proper to get that sort of detail into the original primary legislation, and the point behind these regulations is to get the detail in. I hope that we normally get it about right, but my noble friend Lord Cope teased me over the fact that the Explanatory Memorandum—which I stress is not, I think, part of the regulations, although I can never quite remember what its status is—states that the regulations will have no effect on business. We would obviously all like to make sure that it has an effect on business—and a beneficial effect.

I turn to the comments of the noble Baroness, Lady Golding. I am grateful for her welcome, but one cannot think of passing the Enterprise Act and creating a commissioner as a magic wand that will solve all problems. This is also the general remark I would make to the noble Lord, Lord Mendelsohn, in relation to his various comments, one or two of which I will deal with in greater detail. I can think of very few occasions when legislation can solve problems overnight. There was one Bill with which I had some involvement, the Scrap Metal Dealers Bill, which did quite a lot of what it was targeted to do in the area of metal theft.

In the main, legislation can only do so much. We hope that the Enterprise Act and these regulations will make a big difference. As with so many of these things, however, it is a matter of changing people’s behaviour and the culture of the bigger businesses so that they realise what damage they are doing to others. Legislation can do a certain amount and we have provided the appropriate resources for the commissioner; at least, I think they are appropriate. The figures I have—I think these are the figures that the noble Lord, Lord Mendelsohn, asked to be confirmed—are that the set-up costs are in the order of £1 million and the annual running costs will be roughly £1.4 million, most of that going on staff costs. These must be guesses but it is estimated that there may be 390,000 enquiries and 500 complaints. We think that is adequate for the commissioner at the moment but there is scope for the Secretary of State to increase the resources available to the commissioner if appropriate. He will obviously take advice from the commissioner about what he does and try to make sure he gets it right.

I make one more remark on the commissioner and the work he has already done. My noble friend Lord Cope commented on the website, suggesting that it was not clear enough and should do more, including cross-referencing with other bodies. I am sure that the commissioner will be grateful for my noble friend’s suggestion and that it will be looked at in due course. It is always difficult to get your website exactly right; some are better than others. One can take advice, and I am sure that the advice of my noble friends will be listened to by the commissioner in due course.

[Lord Henley]

I can give my noble friend an assurance that I was not about to sit down—unless others are desperate to get on to the other instruments—because I still had a certain amount to deal with from the noble Lord, Lord Mendelsohn, who would probably be upset if I left him at this early stage. I can, however, assure my noble friend that we will keep this under review. As I made clear, we are thinking of about £1.4 million as the budget being given to the commissioner for the annual running costs. My right honourable friend can keep that, and the size of it, under review. It is not just about money but about how they are getting on. The department will continue to keep these matters under review.

The noble Lord, Lord Mendelsohn, started off his throwing-a-dampener-on-it speech by questioning why we would use the BACS survey and saying that we should have used another survey that gave a higher figure. I will not go into details about which survey will be the best and which had the largest number of people involved in it to get the right figure. I do not know whether there is necessarily a right figure. All we can agree on is that £14.2 billion is a very high figure. The figures that the noble Lord quoted from other surveys are equally high and worrying. The important point is that something ought to be done to assist small businesses to ensure they do this properly. It is clear that the Government are taking this issue seriously from the fact that we sought parliamentary approval for the Enterprise Act and that, under that Act, we are now doing various things, of which the Small Business Commissioner and his staff are one small part. I do not think the noble Lord can accuse the Government of not taking this seriously. The important point is: we have put some resources in; we have appointed a good person to be that commissioner; and he will continue to pursue the appropriate measures available to him.

The noble Lord made the usual complaints people do about the drafting. He said it was too detailed and then that there was not enough—I was rather lost on that. The drafting went through the usual process. We consulted on it as we should. Generally, other than from the noble Lord, we have had a fairly favourable response to the drafting. I am sorry if he finds it overly legalistic. That is just the way things are drafted.

The noble Lord then asked me a rather extraordinary question: what are the unintended consequences of these regulations? If I knew what any unintended consequences were and that they would be detrimental to one or other person, or to the small business sector as a whole, I would not be moving them. I am afraid the noble Lord will have to accept that I do not have the wisdom of prophecy that he seems to think Ministers should have. I will try to improve. If I knew what the unintended consequences were, I would do something about them. We feel that the regulations will have a good effect and be one small step in helping small businesses. They will try to improve their lot and cut down the very large figure of £14.2 billion, or whatever larger figure the noble Lord would like to have.

Turning to another matter that I suppose is faintly relevant to what we are dealing with, the noble Lord asked about the evidence of the impact of the Prompt Payment Code. I can tell him that we actively monitor and enforce it. It has been successful in assisting business to recover debt, but also in highlighting best practice. That again is important as part of the necessity for the change of culture.

I appreciate that the noble Lord had other questions and that he would like further details on why we wanted BACS—

[Lord Mendelsohn]

I will now try to give the Minister some sense of why I invested in him the powers of prophecy, as well as suggesting that rather than my being a complete dampener on this, he should look to scale the heights to deal with this issue. My question about unintended consequences comes down to this simple point. If there are 500 cases, you are talking about dealing with £35 million-worth of disputes, tops. Does he believe that the figure is £14.2 billion? The sample size was 304, which is below the statistical level on which we are meant to judge any survey with any certainty; in any serious form, no one would ever consider anything under 500. This is good enough for a press release, but why the Government suddenly believe that it is worth putting in a policy framework is another matter. From surveys that are robust, £44 billion is the SME number. Does he think that trying to tackle disputes relating to £35 million is sufficient to create cultural change? The unintended consequence of this statutory instrument is that late payments will get higher if you do not have the resource to challenge the right level and number of disputes. When I said “unintended consequence” it was all about that.

With his hand on his heart, is the Minister able to say that he feels that this statutory instrument has sufficient scale to make a meaningful difference in culture or any other practice? That is the key.

[Lord Henley]

Genuinely, hand on my heart, in every possible way I honestly think this will make a difference. Changing that culture is the most important part of what we need to do. A commissioner himself can by his actions do a certain amount, by dealing with those 500 complaints a year, or however many there are; as I said, that is just an estimate, and we can increase resources if we need more. However, it is the existence of a commissioner—of the website and everything else —that can make the biggest change. That is why I gave assurances to my noble friend Lord Cope about getting the website and the advice right, which is so important.

Hand on heart, I believe that we can make a difference. I hope that that will be the case and that, in a year’s time—perhaps privately outside somewhere, or in debate on some other matter—the noble Lord, Lord Mendelsohn, will be kind enough to join his noble friends and say how well we are doing on this. We occasionally get praise from him, and I look forward to that. An unintended consequence of this debate would be his coming back to me with a degree of thanks.

Businesses: Start-ups

Debate between Lord Mendelsohn and Lord Henley

Monday 20th November 2017 Lords Chamber

[Lord Henley]

I welcome what my noble friend has to say and I hope that noble Lords on the other side of the House take note of it.

[Lord Mendelsohn (Lab)]

My Lords, as welcome as the rise in numbers is, is it not the case that under close examination the data shows some very worrying trends? Professor Mark Hart of the Enterprise Research Centre, one of Britain’s leading academics on this matter, points out:

“Too many of these businesses do not create jobs or do anything for UK productivity”,


and that our entrenched problem is,

“turning start-ups into high growth companies”.

Can the Minister confirm what proportion or number of start-ups in these figures was for structuring purposes—holding companies, special purpose vehicles, personal service companies and partnerships—and can he set out the Government’s plans to reverse the decline in the three-year company survival rate, the falling number of high-growth companies and the proportion of start-ups that scale?

[Lord Henley]

The noble Lord asked quite a number of questions and I will restrict my answers to two. He is right to express concern about productivity. This is something that we will want to address, and I hope that he will be ready for the Statement on the industrial strategy that I hope will come out later this month. He also expressed concern about companies progressing from small to medium and medium to large. That is why we made an announcement in last year’s Autumn Statement about patient capital and why we announced a review into it. We are waiting to respond to that in due course.

Fourth Industrial Revolution

Debate between Lord Mendelsohn and Lord Henley

Wednesday 15th November 2017 Lords Chamber

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

My Lords, we recognise the huge benefits of the fourth industrial revolution and are working across government to exploit them. The digital strategy outlines ways to make Britain the best place to start and grow a digital business, trial new technology or undertake advanced research. We are working closely with industry, considering the recommendations of two major government and industry reviews on digitalisation and artificial intelligence.

[Lord Mendelsohn (Lab)]

My Lords—

[Lord Holmes of Richmond (Con)]

My Lords, I thank my noble friend for that response. There are some excellent initiatives in various departments, not least the use of blockchain in the Department for Work and Pensions to greatly empower benefits recipients. Does my noble friend agree that all the advantages of the fourth industrial revolution will be realised only through a connected, collaborative approach across the whole of Whitehall? Otherwise, the opportunities before us will not be fully utilised and realised and we will fail, fast.

[Lord Henley]

My noble friend is right to say that there are great opportunities ahead of us. He is right to stress the need to work across government. There will be no silos in government, as far as we can make clear. BEIS and all other departments will work together on this. I merely mention BEIS because that is where I happen to be at the moment—I am sorry; I could have expressed that better. The other point to make to my noble friend is that we want to work with industry and all those outside to make sure we receive the benefits of the change we are seeing with the fourth industrial revolution.

[Lord Mendelsohn]

My Lords, I apologise to the House for my enthusiasm. I also apologise to the noble Lord, Lord Holmes—a great ally on many issues—for getting up far too early.

Although the fourth industrial revolution is a recognisable force that promises great GDP growth and the transformation of the world of work and production, the greatest risk to economic efficiency is that income and wealth will be ever more skewed. A weight of reports, including an excellent one by UBS Investment Bank, warn that inequality will be greater and the benefits will accrue to fewer and fewer people. As part of their work on the fourth industrial revolution, will the Government establish not only new measures to track this issue, but appropriate targets to ensure that its economic benefits fall to all in society?

[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.