Life Sciences Industrial Strategy

Debate between Lord Mendelsohn and Lord Prior of Brampton

Monday 23rd October 2017 Lords Chamber

[Lord Prior of Brampton]

My Lords, we have an extraordinary record on clinical research, particularly on trials. In 2016 just under 700,000 patients in the UK were recruited for clinical trials, and the UK accounted for 29% of all trials that took place in the EU. So the story on clinical trials is a very good one and the NIHR is much to be complimented.

[Lord Mendelsohn (Lab)]

My Lords, the excellent life sciences sector is dogged by uncertainty around Brexit. It is experiencing a chill in investment, has problems in attracting and retaining talent, is losing out on EU scientific grant funding and collaborations and has the potential loss of regulatory alignment with the European Medicines Agency to contend with. Does the Minister not therefore agree that that makes the case for the Government to adopt the target, set in Sir John Bell’s excellent report, to achieve an R&D spend of 2.6% of GDP from the 2015 level of 1.7%? That is the most available and crucial step that the Government can make. What is the case for not doing it today?

[Lord Prior of Brampton]

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

Industrial Strategy

Debate between Lord Mendelsohn and Lord Prior of Brampton

Wednesday 28th June 2017 Lords Chamber

[Lord Prior of Brampton]

My Lords, the sector strategies will be an important part of the industrial strategy and the life science strategy is probably one of the furthest forward. It will, I assure my noble friend, include proposals to improve access to the NHS.

[Lord Mendelsohn (Lab)]

My Lords, I am sure the Minister is aware of the Social Mobility Commission’s Time for Change report, which urges the Government to commit to speedy reform to avoid unsustainable social division, particularly with the regions being left behind with very uneven pay and skill levels, employment rates, job quality and access to high-level qualifications. Will the Government accept the commission’s call to use the industrial strategy to address this imbalance, which will, of course, show a more committed effort towards the regions than the fact that there have been three northern powerhouse Ministers in four years?

[Lord Prior of Brampton]

My Lords, I would say that probably the single most important objective of the industrial strategy is to address some of the regional imbalances that the noble Lord refers to. We have seen London and the south-east do extremely well over the last few years, and we will carry on supporting London and the south-east to continue doing well, but there is no doubt that many parts of the country have been left behind, with many people on stagnant and falling earnings. That is absolutely a key priority for the strategy.

Higher Education and Research Bill

Debate between Lord Mendelsohn and Lord Prior of Brampton

Report: 4th sitting (Hansard): House of Lords
Wednesday 15th March 2017 Lords Chamber

[Lord Mendelsohn (Lab)]

My Lords, in Committee certain clear governance gaps were identified which the Government have addressed in some measure, and we thank them for their positive response. Indeed, we have signed the government amendments and we are pleased that such a positive response has been forthcoming. We would like again to associate ourselves with Amendment 165A tabled in the name of the noble Lord, Lord Sharkey, which addresses the important point about the valuable contribution which can be made by lay members.

Amendments 164A and 166A tabled in my name propose that each council should comprise a senior independent member alongside an executive chair and the other council members. This would ensure an element of independence and balance in the governance of the council, complementing the role of ministerial appointees. We believe that there is still a weakness in the governance of the research councils with the establishment of executive chairs and the UKRI governance structure. We also feel that without a proper governance role, the membership of research council boards will be denuded of talent if they believe that they are not part of an effective operating board. In Committee we discussed whether appointing chairs to research councils might address this weakness, and Amendments 164A and 166A, as the noble Lord, Lord Broers, has just pointed out, mark an evolution in the debate.

We believe that this is a sympathetic and effective change which is consistent with the Government’s objectives and is likely to benefit the governance of research councils. The senior independent member is modelled on the practice in public companies of having a senior independent director. The title in this case is “member” specifically to ensure that the role is not confused with the duties of a director, which would raise structural issues that are not appropriate to the Bill. In the private sector, appreciation of the important role played by the senior independent director has grown in recent years. It was introduced in 2003 at the time of the Higgs review of the combined code, and the idea was that the senior independent director should be available to shareholders if they had reasons for concern that contact through the normal channels of the chairman and the chief executive had failed to resolve. Over time that remit has changed and the senior independent director is seen as a versatile intermediary who is in part ambassador, conciliator, counsellor, senior prefect and kingmaker. Most importantly, it establishes an address that stakeholders are able to go to and takes away the sometimes divisive politics of trying to find an appropriate address.

It is in this area that the role would be most useful in the context of UKRI. The senior independent member would ensure that there is a recognised channel to use from the level of the board of the research council to the board of UKRI to make sure that matters can be solved and conflicts and issues resolved. It is about not establishing new lines of management but creating a governance structure which is flexible enough to resolve issues as they arise. We have not set out a detailed role or job description, and certainly the latter is not appropriate for legislation, but there is flexible scope to ensure that such an individual can play a useful role in many different circumstances, from deputising in situations to leading aspects of succession processes to reviews of board effectiveness and other such matters. I hope that the Minister will see this amendment as a useful and flexible suggestion.

[Lord Prior of Brampton]

My Lords, first, I thank the noble Lord, Lord Mendelsohn, for not pressing his amendment requiring a shared OfS and UKRI board member with at least observer status. While I do not think that such arrangements need to be put on the face of the Bill, I recognise absolutely the value of establishing such a link between the OfS and UKRI boards. As such, I am pleased to be able to confirm that the chairs of both the OfS and UKRI would welcome an observer of each other’s organisations at their respective board meetings.

I turn now to Amendment 165A. The noble Lord, Lord Mendelsohn, and the noble Lord, Lord Willis, drawing on his experience as a member of the Natural Environment Research Council, have previously outlined the value of lay members, and they have been supported today by the noble Lords, Lord Sharkey and Lord Krebs. Although in the future appointments to councils will be a matter for UKRI, I should like to take this opportunity to make it clear that the Government have the full expectation that the current practice regarding lay member representation will continue and we will commit to reflecting this in guidance to UKRI. Perhaps I should add in passing that the number of 12—the Goldilocks solution—reflects best practice advice from the Cabinet Office. I cannot recall what the code says on numbers, but 12 is a manageable figure. If a board is much larger than 12 members, it becomes much more difficult for it to be effective.

The idea of a senior independent member was raised in Committee by the noble Lord, Lord Broers, and described just now by the noble Lord, Lord Mendelsohn. I really cannot add to his description of the sometimes critical role in acting as a very important channel, in this case to UKRI from council members. That could be extremely important. I have some words here about the senior independent council member, but given the way the noble Lord has set out the role, I feel that I no longer have to do so; I will simply agree with what he said.

Having discussed the issue with the chair and chief executive of the future UKRI, I am pleased to be able to confirm that a member of each council will be appointed as the senior independent council member. This does not need to be set out in the legislation, not least because the amendment would result in an additional member of each council beyond what I believe to be a reasonable and workable number. Instead, I can commit to making this a permanent feature of the organisation through setting the role out clearly in the governance documentation for UKRI. I therefore ask the noble Lord not to press his amendment.

Opel-Vauxhall: Sale to PSA Group

Debate between Lord Mendelsohn and Lord Prior of Brampton

Monday 6th March 2017 Lords Chamber

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

My Lords, I beg leave to repeat as a Statement an Answer to an Urgent Question given by my right honourable friend in another place:

“This morning the boards of General Motors and PSA Group announced plans for PSA to acquire GM’s Vauxhall-Opel operations. The proposed deal is expected to be completed by the end of this year.

The Prime Minister and I have been engaged in discussions with both GM and PSA, and with the French and German Governments, to ensure that the terms of the agreement can give confidence to Vauxhall’s UK workforce now and for the future. Vauxhall is an iconic, important and successful British car manufacturer. Vauxhall cars have been made in Britain for 113 years, and we are determined that that should continue to be the case for many years to come.

The car plants at Ellesmere Port and Luton have a proud record of being among the most efficient in Europe, with workforces that are skilled, committed and flexible. Both PSA and GM have confirmed to the Prime Minister and me a number of important commitments, including that the company will honour its agreements with the Vauxhall workforce; that Vauxhall pensioners will be in at least as good a position as they are today; that the treatment of the UK division will be equal to that of other countries in the Vauxhall-Opel group; that the identity of Vauxhall will continue to be distinct and prominent; that the strategy of the new company will be one of building on existing strengths and commitments, not on plant closures, taking opportunities to increase sales around the world; and that the company will work with me and the rest of the automotive sector to ensure that it can participate in a substantial programme of research and investment for innovation in areas such as electric vehicles and battery technology, which is part of our industrial strategy.

This morning I had a further conversation with my French counterpart, the industry Minister, and the Minister of State spoke again to his German counterpart to agree a consistent approach. I speak frequently with Len McCluskey, the general secretary of the largest trade union in Vauxhall and I have kept, and will keep, colleagues with particular constituency interests up to date at all times.

It is in everyone’s interests that Vauxhall can look forward to a successful future. A generation ago, the car industry was one that epitomised our economic woes. Today that industry is a beacon of success. Companies invest in Britain because our automotive sector has a high-quality workforce and world-class efficiency, and is part of one of the most exciting places for innovation and research in new technology anywhere in the world. The future of the motor industry is bright in Britain, and we will be active at all times in doing everything we can to make it brighter still”.

My Lords, that concludes the Statement.

[Lord Mendelsohn (Lab)]

I am obliged to the Minister for repeating the Statement from the Business Secretary. GM has shown great resilience over the years with the Opel and Vauxhall brands, and reported a loss of $257 million from its European operations in 2016. That is the 16th consecutive loss-making year for GM in Europe, bringing losses on the continent since 2000 to more than $15 billion.

GM chairman and chief executive Mary Barra said that the business would have broken even in 2016 had it not been for the UK’s vote to leave the European Union, which caused a sharp drop in the value of sterling. We should congratulate the excellent workers in the UK who have done a great job to turn around GM’s performance, but unfortunately they will gain little credit for it. The factories at Ellesmere Port and Luton employ about 4,500 people, and a supply chain of at least another 7,000. We hope that this transaction provides them with a secure future, restores growth to these brands and creates a long-term and growing future for Ellesmere Port and Luton.

I would be grateful if the Minister told us a little more about the nature of the assurances the Government received from the PSA group during their discussions. What specifically have they learned about safeguarding the plants? What have they learned about the PSA group’s plans to invest to upgrade capability to meet the specifications and scale of the facilities they have been committed to over recent times? What assurances have they received about the development of the Vauxhall brand and its sales in overseas markets beyond the EU? What assurances have they received about investment to retool the plants in the UK to develop other brands? Does the PSA group remain committed to the current Astra model in Ellesmere Port up to 2020-21 and the production of a new model there, and will Luton be able to fulfil its plans deep into the 2020s?

Secondly, I would be grateful if the Minister addressed the problem of the scale of the UK supply chain. Speaking after the announcement, the chairman of the PSA’s management board, Carlos Tavares said that tough terms for leaving the EU could be an opportunity for Vauxhall and PSA to develop a supplier base in the UK to give the whole operation a “pound cost structure”. Not only do they harbour concerns about the general state of the UK parts ecosystem; it is clear—and Vauxhall sales are 80% EU—that their consideration of how we handle not just the negotiation of withdrawal, the single market and the customs union but the industrial strategy will play a very important part.

This is a wider concern. In evidence to a Select Committee in the other place, Colin Lawther, Nissan’s senior vice-president of manufacturing supply chain, denied that the Government had agreed to any deal or received any particular assurances. He said that Nissan and the automotive industry had made a “strong request” for government support for £100 million to £140 million of investment for a supply development fund to “repower the supply base” and build an indigenous, high-tech car components sector in the UK. Nissan, too, is looking to increase content from British suppliers and says that this opportunity alone is worth £2 billion.

The future of PSA’s investment in Vauxhall and other parts of the car industry is about the importance of developing the supply chain, in addition to the measures the Government are already implementing. It is clear that the Government’s current approach is inadequate, so I would be grateful if the Minister assured us that a meaningful new strategy to develop the UK supply chain is under way.

[Lord Prior of Brampton]

I thank the noble Lord for those questions. To pick them up in turn, Carlos Tavares, the chief executive of PSA, has given assurances that he is keen to see this business develop and grow. He made the point that since becoming chief executive of PSA, he has not closed a single plant.

Regarding future models, post the Astra at Ellesmere Port, clearly, we will have to compete with other factories within the PSA group, as would have been the case had it remained part of General Motors. We are all very confident that we have the competitiveness and effective abilities, and the quality and brand at Ellesmere Port and Luton, to compete on a fair basis with any plant in Europe. PSA is absolutely committed to the Astra brand. There will be no need for a new model post 2020-21 for Ellesmere Port, and the Navara will continue to be produced at the Luton factory for longer still.

The noble Lord is absolutely right about the supply chain: it was an issue with Nissan as well as PSA. Carlos Tavares made the point that there are opportunities and risks on leaving the European Union. One of the opportunities will be to make the new models in the UK more of a sterling player, as the noble Lord put it. That means having a higher proportion of sterling-sourced components going into the Astra or indeed into any new model. We are committed to working with the automotive sector to try to boost the supply chain in the UK to ensure that more sterling-based components go into these cars.

Economic Growth (Regulatory Functions) Order 2017

Debate between Lord Mendelsohn and Lord Prior of Brampton

Tuesday 28th February 2017 Grand Committee

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

My Lords, in moving the Economic Growth (Regulatory Functions) Order 2017, I shall speak to the Business Impact Target (Relevant Regulators) Regulations 2017 and the Growth Duty Statutory Guidance 2017. The purpose of these statutory instruments is to support regulatory bodies in the UK to create a healthier business environment by making regulation more proportionate, transparent and accountable. The Government are committed to making sure that regulation supports growth and are doing all that they can to unlock productivity in the UK.

Better regulation is central to the Government’s desire to make the UK the best place in the world to start and grow a business and is a key part of our commitment to drive economic growth and boost productivity. During the previous Parliament, the Government made significant progress through programmes such as one in, two out and the Red Tape Challenge, which were instrumental in delivering savings of £10 billion to businesses over the lifetime of the Parliament. These programmes encouraged a cultural shift in government departments towards more proportionate and smarter regulation.

This approach was formalised through the Small Business, Enterprise and Employment Act 2015, which provides a transparent framework for assessing, managing and reporting on new regulatory impacts to business, known as the business impact target. Through the Enterprise Act, we extended the ambition of the target by expanding it so that it can include the activities of a wider range of regulators beyond those acting on behalf of UK Ministers. This will support us achieving a further £10 billion of deregulatory benefit for UK businesses in this Parliament.

Alongside the business impact target, the Government also introduced a duty through the Deregulation Act for regulators to have regard to the desirability of promoting economic growth. This is known as the growth duty, which will help to ensure that regulatory bodies contribute towards creating a healthier business environment by making regulation more proportionate, transparent and accountable. Together, the business impact target and growth duty will support a positive shift in the way regulation is delivered.

It is sometimes easy to caricature all regulation as negative. The Government recognise that proportionate and well-targeted regulation is important and provides vital protections. It can help markets work better, enables new business models and start-ups to compete and protects consumers. The Government have been clear in the industrial strategy that regulatory frameworks need to support business investment rather than distort markets. This does not mean deregulation at any cost. We have to avoid, for example, the combination of light-touch regulation and emphasis on short-term financial gain that contributed to the financial and banking crisis.

Better regulation recognises that regulation can impose costs on business. It can divert attention from more productive uses, such as growing into new markets, innovation and training. It also recognises that regulation can favour more established incumbent operators in a market. For example, it is estimated to cost small business 10 times more per employee, on average, to comply with regulations than it costs a large business. The Government’s better regulation system therefore seeks to minimise these burdens by ensuring that the likely impacts of regulation are fully assessed and by providing an incentive to reduce costs on business where possible. Indeed, there are numerous examples of good, proportionate regulation that is good for business and society as a whole.

Under the previous Government, we conducted a series of sector reviews into regulator enforcement practice. Reforms delivered as a result are now saving business millions of pounds, encouraging companies to grow, speeding up multibillion-pound investments and reducing burdens, all without weakening protections. These reforms have been welcomed by businesses and trade bodies across the country. These savings are being made by removing assessment and reporting requirements from more than a quarter of a million businesses where there was no scope for them to deliver the energy savings that the requirements were in place to deliver. This allows the regulator to focus on working with those businesses where real energy savings can be made.

However, there is still more to do. The regulations before the Committee today will be an important step towards creating a healthier business environment by making regulation more proportionate, transparent and accountable. The result will be to take another significant step forward to ensuring that regulation supports growth and that Britain is the best place in the world to start and grow a business.

I turn to the detail of the regulations. The Business Impact Target (Relevant Regulators) Regulations 2017 specify the individual regulators that will be brought within scope of the business impact target. The regulators listed within the scope of these regulations will be required to assess the economic impact on business of changes to their regulatory policies and practices that come into force, or cease to have effect, during the course of the Parliament. The assessments must be verified by the Regulatory Policy Committee and the savings or burdens imposed on business incorporated into the Government’s annual report outlining their performance against the target.

The rationale for this is clear. Businesses consistently tell the Government that the actions of regulators are as important as the content of legislation in determining their experience of regulation. So the costs to business of their regulatory activities should be actively assessed and transparently reported. These regulations deliver that. Where impacts are imposed on business by changes in regulatory activity, these should be transparent. In addition, business should have confidence in the estimates that the Government have made of that impact.

The changes do not in any way undermine the core purpose of regulators, which provide vital protections and help ensure that markets function effectively. Regulation has important economic, social and environmental goals. Regulation for those reasons should be proportionate and at the minimum cost to business necessary to achieve the outcome required. Including further regulators in the business impact target will help regulators to make the move to smarter regulation that delivers outcomes with the minimum overhead. This will be good for British business and will contribute to a more consistent regulatory process.

The Government consulted on the proposed list of regulators to be brought within scope of the business impact target from 11 February to 17 March 2016. We received responses from a range of stakeholders, including business, regulators, trade associations and other organisations. The majority of respondents were supportive of the proposal to bring the regulators specified in the consultation within the scope of the business impact target, with one respondent stating that the BIT would result in regulators,

“having to design their services, policies and procedures in a way that suits the needs of business”.

No further regulators were suggested to be brought within scope, while a handful of regulators questioned their own inclusion. We have reviewed these queries and are satisfied that it is appropriate to bring the regulators listed in this instrument within scope of the target. We have also paid close attention to issues raised around proportionality. The Government have been working collaboratively with a wide range of regulators to design a process for implementation that minimises burdens on regulators.

I turn to the growth duty regulations and guidance. The Deregulation Act 2015 introduced a legislative requirement for persons exercising a regulatory function to have regard to the desirability of promoting economic growth. The Economic Growth (Regulatory Functions) Order 2017 sets out the specific regulatory functions to which this duty applies. Alongside this instrument, the Growth Duty Statutory Guidance 2017 has been produced to assist regulators in fulfilling their new responsibilities, at both a strategic and operational level.

Proportionate delivery of regulation plays an important role in supporting competitive markets and improving social and environmental outcomes. Regulatory enforcement that is not proportionate and risk-based imposes unnecessary costs on business, creates uncertainty and undermines investment. The way in which regulation is enforced can have significant effects on businesses’ ability and willingness to invest and grow.

Although there is already a great deal of good, proportionate and effective regulation, there is evidence to suggest that some regulators fail to take sufficient account of the economic consequences of their actions and place unnecessary burdens on business in the exercise of their regulatory functions. To address this, the then Chancellor announced in the 2012 Autumn Statement several measures designed to create a healthier business environment by making regulation more proportionate, transparent and accountable. Although many regulators consider the impact of their actions on economic growth, there are those that do not. Indeed, some regulators think that they are unable to take account of growth as they do not have a statutory requirement to do so or their statutory objectives do not refer to growth.

Requiring regulators to have regard to economic growth in this way will address the uncertainty of regulators that feel that they cannot have regard for economic growth and will put the obligation on a statutory footing, thereby complementing regulators’ other legal obligations. This duty will help regulators to carry out their functions in a way that is conducive to economic growth and will ensure that regulatory action is taken only when it is needed and that any action that is taken is proportionate. The growth duty will therefore encourage regulators to develop more mature and productive relationships with the sectors and businesses that they regulate, driving up the accountability of regulators to the business community. This will help to deliver our aspirations for greater productivity and growth in our economy.

Public consultations on the growth duty were held in 2014 and 2015. A further consultation was held alongside the consultation on the scope of the business impact target, and responses were received from a broad cross-section of stakeholders. The majority of responses to the consultation on the growth duty agreed that regulators should have regard to economic growth and should be accountable for whether they have properly considered business growth in their decision-making.

There were a small number of objections to the inclusion of particular regulators in scope, in the main based on arguments related to the amount of regulatory activity undertaken or the fact that the organisation did not have any regulatory functions. Having considered these responses, the Government are satisfied that it is appropriate to bring the regulators listed in the instrument within scope of the growth duty. We also received a number of responses on the draft guidance, with the vast majority commenting positively on its content.

The business impact target and growth duty play a central role in the Government’s agenda to improve UK regulation. They support a positive shift in the way that regulation is delivered through reducing the regulatory burdens that hold businesses back and prevent them from getting on with business. The measures are an important step towards creating a healthier business environment by making regulation more proportionate, transparent and accountable and I commend them to the Committee.

[Lord Mendelsohn (Lab)]

My Lords, as I arrived this morning, I thought that the House of Lords had taken to Oscar fever and that the red carpet had given way for the red of the House of Lords. I saw the Annunciator, and it read, “One Order, Six Regulations and one Statutory Guidance” as the business of the day. It reminded me of “Four Weddings and a Funeral”. I see that we have not had quite the same box-office draw.

I thank the Minister for his introductory comments. There is a lot that we all agree on as to the eventual targets that we want to reach and the sort of improvements that can be made. In many ways, we agree on motherhood and apple pie being good things. Our concern that the wrong measures were adopted in the primary legislation to achieve them are reinforced by some of the weaknesses in the statutory instruments, the consultation processes before them and the conclusions drawn, and it is on those things that I raise a few issues and questions.

Part of this relates to the overall policy context, which is the attempt to have a target of £10 billion of reductions. Central Government are unable to do it on their own, so they now look to regulators to take up some of the heft in this colossal task. Without some detailed sense of what can be achieved—to which I shall come later—it is misguided to believe that the solution can be what we have now, which is essentially a cultural response: if we have a new culture, a new way of working, things will improve. I am a huge sceptic about the creation of culture as a strong driver in making these things move. I believe strongly that we have to build able business cultures, but I find frequently that the Government’s response is to provide measures that will impact the culture.

--- Later in debate ---

[Lord Prior of Brampton]

My Lords, I cut my speech down, but I rather wish that I had not—I could still be talking. The noble Lord, Lord Mendelsohn, has raised too many issues and I cannot answer them all. I got to 38 questions and I stopped counting—I had forgotten what the first one was. I will have to write to the noble Lord on a number of the points that he raised.

While it is still fresh in my mind, I will just deal with the Northern Lighthouse Board—the noble Lord, Lord Foster, gave me warning about it during the vote. The Northern Lighthouse Board and the Commissioners of Irish Lights provide advice to ports about navigational safety matters. Because that advice can affect the business of port operators and their customers, it is right that the bodies should have regard to growth in making regulatory decisions. In a sense, that illustrates another issue that he raised about whether we had gone through all these regulators carefully, talked to them and found out what impact they might have. I hope that that answers that question.

The noble Lord, Lord Mendelsohn, started off positively. He said that he agreed with our objectives and goals, but then he went on to qualify that by referring to them both as motherhood and apple pie. Nevertheless, I think that the noble Lord, Lord Foster, also agrees. Who can possibly argue with the objectives of reducing regulation and achieving economic growth? The noble Lord, Lord Mendelsohn, also quoted—I wish that I had written it down, but he spoke too quickly—Warren Buffett. I will give him back another quote from Warren Buffett, if I can. It is much shorter and more succinct: you get what you incent for. For me, in business, that is a pretty profound statement.

I would like to apply that, if I can, to regulation. The noble Lord was sceptical about culture. I am less sceptical about it. I think that the culture that exists within individual firms can be hugely powerful. I will give an illustration that quite neatly contrasts culture with regulation or law. RBS and HBOS had been in banking for 200 years in Edinburgh. They were absolutely conservative, traditional Scottish banks. In the space of 10 years, their culture completely changed. I do not know whether the noble Lord has read the reports, particularly into HBOS, by the Treasury Select Committee of the House of Commons. The culture in those two banks was deeply shocking. To some extent, it was set by the deregulation that his Government brought into the City after 2001, when Gordon Brown was Chancellor of the Exchequer, and subsequently. It may go back earlier to the deregulation of the City in the 1980s. Nevertheless, the culture within those two banks effectively destroyed them.

Culture is hugely important and very powerful. For example, there are laws about smoking now but there is also a culture around it: you feel bad about lighting up a cigarette in a car or in a building, irrespective of the law. When I was at the Care Quality Commission, we found that the leading indicator—

[Lord Mendelsohn]

We agree on culture and the capacity to destroy culture. The point that the noble Lord made, which I thought was very interesting, was about incentives. I am not clear about how this creates incentives as opposed to duties, which then have a numeric capacity to meddle and to change. Can he give me some idea?

[Lord Prior of Brampton]

May I finish off on a regulator that is not covered by BEIS, but is important none the less—the Care Quality Commission? We found there that the leading indicators of performance, whether you measure it in terms of patient safety, hitting waiting time targets or patient satisfaction, were around staff engagement, such as whether doctors and nurses enjoyed working in the hospital. A junior doctors survey done by the GMC was probably the single most predictive of all the indicators. Culture is hugely important.

The noble Lord referred to a duty to communicate, which plays into the point about culture. Putting that obligation to communicate on to regulators is important. In a sense, what we are trying to do by having a duty to promote growth is to change the culture and outlook of regulators. As the noble Lord, Lord Foster, said, they are not there to hit the target but miss the point —how often does that lead to unintended consequences? For example, we hit the waiting time target in an A&E department but the patient died. That is the kind of absurdity we can get into when targets become—

Deregulation Act 2015, the Small Business, Enterprise and Employment Act 2015 and the Insolvency (Amendment) Act (Northern Ireland) 2016 (Consequential Amendments and Transitional Provisions) Regulations 2017

Debate between Lord Mendelsohn and Lord Prior of Brampton

Tuesday 28th February 2017 Grand Committee

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

My Lords, in 2015 the Government introduced a series of reforms to modernise and streamline the insolvency process. The regulations we are debating make consequential amendments to the relevant special insolvency procedures for financial sector firms to take account of the reforms.

I will begin with a brief outline of the reforms to general insolvency law. The Deregulation Act 2015 separated out the authorisation of insolvency practitioners for personal and corporate insolvency. This reduces the cost of training for applicants who wish to specialise. The Small Business, Enterprise and Employment Act 2015 introduced a series of changes to streamline the insolvency process. This included an amendment to allow liquidators to exercise powers without court permission and an extension to the maximum term for an administration. In addition, the Insolvency (Amendment) Act (Northern Ireland) 2016 made similar reforms to insolvency legislation in Northern Ireland.

The purpose of these reforms was to reduce unnecessary regulation and therefore costs, improve public confidence in insolvency legislation, and make it clearer, more consistent, and modern. The Government carried out extensive consultations before bringing forward these reforms to the insolvency regime, which had the broad support of industry. The regulations make consequential amendments to the existing modified insolvency regimes for the financial sector. Modified insolvency regimes for the financial sector exist because general insolvency procedure is not always suitable for failed financial institutions. These modified insolvency regimes apply general insolvency law with modifications designed to address the special nature of some financial institutions—for example, the bank insolvency procedure. Because these special insolvency procedures for the financial sector are built on general insolvency law, they now need to be amended to reflect the reforms. The regulations are therefore important to ensure that the benefits of the reforms to general insolvency law are extended to the financial sector. They will also ensure that the modified insolvency regimes for the financial sector are compatible with general insolvency law. The proposed consequential amendments follow discussions with the regulatory authorities and the banking liaison panel.

In conclusion, the amendments are important to modernise and streamline modified insolvency regimes for the financial sector following the Government’s reforms to general insolvency. I beg to move.

[Lord Mendelsohn (Lab)]

My Lords, I thank the Minister for that explanation. We accept this as it is an effective codification of what was agreed during the passage of the legislation. The only questions that we wish to address relating to the provisions regard the Government’s evolving policy on insolvency. Other issues have of course emerged in the light of experience about how this process can be done more efficiently. There are consultations on moratoriums and other sorts of things in future that we are now looking at, and of course there will be adjustments when the next wave takes place, when there will be issues around pensions and other things.

Particularly on moratoriums and other sorts of reforms where there are consultations to improve the process, we would be grateful to have some indication of the Government’s thinking on whether they would bring this forward with the financial services industry and the companies that are covered. Would the provision that the Government are bringing forward encompass those along with all the other companies, or do they wish to have a separate procedure for financial companies?

[Lord Prior of Brampton]

I thank the noble Lord, Lord Mendelsohn, for his comments and his general support. I wonder if I could write to him to answer the question that he asked. On that basis, I commend the regulations to the Committee.

Higher Education and Research Bill

Debate between Lord Mendelsohn and Lord Prior of Brampton

Committee: 7th sitting (Hansard): House of Lords
Monday 30th January 2017 Lords Chamber

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

My Lords, I thank the noble Lord, Lord Mendelsohn, for his opening address, which was helpful in setting the context for this debate. The noble Lord is right: the context is partly Brexit and partly that many overseas countries are spending a lot more per capita on research than we do. It is also the fact that the British Government have committed to spending an extra £2 billion a year on research by 2020.

The noble Lord also raised the important issue of the evaluation of UKRI—this will come up later in the debate. One of the first things that the UKRI board will do after it is appointed is put together a strategic plan, which will be discussed in more detail in this House and government circles.

I welcome the opportunity to debate further the issue of joint working between UKRI and the OfS, which the Government—and the three noble Lords who have contributed to the debate so far—recognise as crucial to the success of both organisations. It was recently announced that the Government will be investing an extra £2 billion a year in R&D by the end of this Parliament. This investment is a clear vote of confidence in the new structures created by UKRI. It will play a key role in delivering the industrial strategy and in the success of our future knowledge economy.

On the issue of joint working, I sincerely appreciate the concerns raised by the noble Lord, Lord Mendelsohn, the noble Baroness, Lady Garden, my noble and learned friend Lord Mackay and others. However, an absolute requirement for UKRI and the OfS to work together in exercising their functions could well be counterproductive. For the areas where they should be working together, Clause 106 offers a mechanism for the Secretary of State to require the two organisations to do so, should they fail to co-operate of their own accord.

However, this is not the sole, nor the most important, means to drive joint working. There will be regular engagement and communication between the two government departments involved and both organisations at all levels of operation. Guidance will also be issued through a variety of means, including the Secretary of State’s annual grant letters. Furthermore, in addition to regular meetings between the Government and senior representatives from the OfS and UKRI, the Secretary of State will have the power, through the Bill, to send representatives to attend the board meetings of both organisations. In combination with the expectation that each organisation’s annual report will address areas where they work jointly, this will allow the Government to perform an ongoing assessment of the effectiveness of co-operation between the two organisations, and to respond quickly if this is not satisfactory.

On Amendment 509, as my noble friend Lord Younger said previously, UKRI will work closely with the OfS on matters related to research degree-awarding powers. Likewise, UKRI will work with the OfS at all levels to ensure there is a coherent approach to the research talent pipeline. While I agree that they should certainly take a joined-up approach on these two matters, joint decisions would not always be effective or efficient. For example, each year thousands of research students in the UK are supported by research council funding. It would not be practical or useful for the OfS to be involved in these funding decisions, just as HEFCE is not involved now.

On Amendment 508C, I do not believe that legislation is the right place to specify the particular areas that UKRI and the OfS should co-operate on. It is likely that such areas will change in the future, and there must be a degree of discretion to accommodate this. I hope noble Lords will agree that guidance is a better, more flexible mechanism, and this is what the Government intend to use.

On Amendment 471A, the noble Lord, Lord Mendelsohn, echoed by a number of other noble Lords, made the case for a shared board member between UKRI and the OfS. I can reassure the House that the Government have given this matter significant thought. Following in-depth consideration, the Government have concluded that a shared board member would not best serve its purpose. The responsibility laid on this member would be to encourage and facilitate effective communication between both organisations. However, this will need to happen at all levels, and covering the breadth of their remits. I do not believe that it is possible for a single individual to fulfil this role effectively. Responsibility for joint working and effective communication will be shared by all members of the UKRI and OfS boards, and involve many officials spread throughout the organisations.

Joint working and effective communication will be of the utmost importance, and I hope that I have provided reassurance that this Bill will put in place the appropriate measures to ensure this. Therefore, I ask the noble Lord to withdraw his amendment.

[Lord Mendelsohn]

I thank the Minister for that reply but wish to make a couple of points. Certainly, there is always a place for guidance. The question here is: what are we trying to achieve? There needs to be a level of not just mechanics but of culture where these organisations work together. My fear is that the Bill could have unintended consequences. When we met senior administrators of universities, they asked how the organisation and running of their operations would change and about the interface with the OfS and UKRI. For example, the once-a-year evaluation with HEFCE will now take place with two separate organisations. Will that change the way the leadership works or the way that institutions report? A series of potential unintended consequences could occur unless we specify and knit together the way in which these institutions will work. That is the nature of the problem we are talking about.

There are some very specific measures, such as the one raised by the noble and learned Lord, Lord Mackay of Clashfern, which is one that could be reasonably accommodated. However, in general, we need to establish the right culture and circumstances to ensure that these two institutions do not just have a sense of working together but see themselves as partners in a very important endeavour.

Finally, as regards the shared board member that I proposed, we are not placing a colossal, herculean task on one individual. For institutions that are meant to work together, it is important to have someone who is able to tell the temperature or the context of the debate, and be able to ensure that at the very top level both institutions are aware of the atmospherics and the sense of how an issue is approached. That level of understanding is important. Whatever the mechanics at the bottom, and whatever arrangements we have in place, if there is a dissonance in understanding at the very top, that is a major consideration. I hope that the Minister will provide some more developed thoughts on that at a later stage. I beg leave to withdraw the amendment.

Higher Education and Research Bill

Debate between Lord Mendelsohn and Lord Prior of Brampton

Committee: 7th sitting (Hansard - continued): House of Lords
Monday 30th January 2017 Lords Chamber

[Lord Mendelsohn]

My Lords, I shall speak to our amendments. The noble Baroness, Lady Garden, has made a very good case. The long and the short of how we see this is that we do not think it was a very good idea in the first place and time has passed on. Many of the comments that have been made will find an echo in our thoughts.

It is worth returning to the original Nurse review. The report states:

“In relation to Innovate UK, as stated earlier, the current delivery landscape is too complex and there should be a smoother pathway to more applied research. Integrating Innovate UK into the Research UK structure alongside the Research Councils could help such issues to be addressed However, Innovate UK has a different customer base as well as differences in delivery mechanisms, which Government needs to bear in mind in considering such an approach and which this review, according to its remit, has not looked at in depth”.


The noble Baroness, Lady Garden, made exactly that point: what evaluations were made when it went in?

I would suggest that both its target audience and the mechanisms that Innovate UK uses are so dramatically different that it is unlikely to be able to perform such an effective function within the context of UKRI. I think that it would be a terrible misfortune if Innovate UK, which has proved itself over some years to be a very effective body doing great things, were to come into UKRI with its current framework. That would not just be restrictive but could possibly be quite damaging for an institution that is following a good path.

I also think that this is a policy that was designed for a pre-Brexit world. In a post-Brexit world—which we are not in at the moment—we know that we are going to have to rely on research an awful lot more, and a great deal will be required of it. I cannot imagine that in such a situation we would ever put one of our most significant levers into this sort of environment; we would leave it to work independently. With the industrial strategy having now been published, it is absolutely clear that there is a massive hole in the delivery of its research objectives that would have been filled by Innovate UK. That is a mistake that the Government would be wise to take note of.

By the way, it is important to understand that Nurse himself recommended:

“At the very least, the Chief Executives of HEFCE and Innovate UK should be represented, on the Executive Committee of Research UK”,


or UKRI. And that was probably a very measured judgment.

My final very brief point is in relation to what it is necessary to do to make the best of our university sector and to be able to commercialise at both ends of the spectrum via big company investments and tracking what research is being done as well as smaller companies emerging as the result of venture capital. An awful lot is going on in this area. Recently I spent time with some of the companies at Cambridge Enterprise Limited. Innovate UK is not the only solution that is required, and I think that it would be a colossal mistake to expect UKRI to perform that role and to forget the other things we may need to do. To restrict UKRI in that situation has the potential to do great harm to the long-term needs of our country, especially in an environment where we need an effective industrial strategy.

[Lord Prior of Brampton]

My Lords, we could debate this issue for two or three hours, but we must restrain ourselves. I turn first to the two points raised by my noble friend Lord Willetts. I will indeed have to write to him about the powers the Secretary of State will be planning to delegate to Innovate UK. In a way that also answers his second question because he referred to “old think”, and indeed some of that could be construed in this Bill when comparing it with the requirements of the industrial strategy. But if the delegation to UKRI and Innovate UK from the Secretary of State is right, I think it will be perfectly possible to reconcile that with the industrial strategy.

I would actually take issue with the noble Lord, Lord Mendelsohn, because I think that Brexit has made the coming together of Innovate UK with the research councils within UKRI even more necessary, but I agree that Innovate UK is only a part of the answer. We have to have a competitive fiscal regime, long-term risk capital and a well-trained technical workforce among many other things. Innovate UK on its own is not going to shift the productivity dial for the country, although we believe that it has an important part to play.

The noble Baroness, Lady Garden, asked about an assessment of Innovate UK. A detailed business plan was made, although I am afraid that I cannot remember when it was published. I shall certainly endeavour to send her a copy of that report. The fact is that this is more of a judgment than something which can be proved with spreadsheets and the like. I think that the right judgment is to bring innovation together with research; that is the right thing to do because the reality is that one of our weaknesses, as other noble Lords have mentioned, is that we have a fantastic research base but have not been able to take maximum commercial advantage of it. That is a space which Innovate UK has filled and will continue to do so.

The extra investment being made by the Government in UKRI is a clear vote of confidence, and our support for the central role of Innovate UK in delivering our future knowledge economy will include a substantial increase in grant funding. The Bill seeks to name Innovate UK in legislation for the first time. It will retain its own individual funding stream and grow its support for business-led technology and innovation as a key part of the industrial strategy. I think it is worth quoting Ruth McKernan, the chief executive of Innovate UK:

“The establishment of UK Research and Innovation, including the research councils and Innovate UK, recognises the vital role innovation plays and further strengthens the UK’s ability to turn scientific excellence into economic impact”.


That is one of the 10 pillars of the industrial strategy referred to earlier by the noble Lord, Lord Mair. It is absolutely fundamental to our future and bringing these organisations together is critically important. Only by bringing Innovate UK into UKRI will we remove the remaining barriers to greater joint working between research and business at all levels. Businesses will be able to identify more readily possible research partners and will benefit from the better alignment of the outputs of research with business needs in, for example, technology and data skills. Researchers will benefit from greater exposure to business and commercialisation expertise so that they can achieve maximum impact. It will be simpler to find and form partnerships and there will be easier movement between academia and business. The UK will benefit from a more strategic, agile and impactful approach across UKRI’s portfolio which can respond to real-world challenges and opportunities.

The critical achievement is reaching the right balance between freedom and autonomy for Innovate UK while recognising at the same time that, ultimately, the Secretary of State has to be held financially accountable in Parliament for the money that is spent. With that, I hope that the noble Baroness will feel able to withdraw her amendment.

--- Later in debate ---

[Lord Prior of Brampton]

The noble Lord stopped me in full flow. I was just getting to a point raised by the noble Baroness, Lady Brown, regarding visa applications. As the research councils do now, we expect UKRI, as an employer, to have a role in sponsoring visa applications for international staff on its own payroll and, in some circumstances, for particular individuals with agreed posts in universities. However, it would not be practical to make UKRI responsible for visa sponsorship for the whole sector. I think we will probably have to come back later to discuss that issue in more detail. The Government do not agree—this, I am afraid, goes to the point made by the noble Lord, Lord Hannay—that the Bill should be amended as suggested, as UKRI will be an outward-looking organisation and will build on our current excellence. I therefore ask the noble Lord to withdraw the amendment.

[Lord Mendelsohn]

I thank the Minister for his reply. I shall not echo the sentiment of the noble Lord, Lord Hannay. I think more needs to be done, and I shall just make two points. We have to face up to a certain reality. While it is no doubt true that some people in the United States of America are considering their position, there it is a somewhat temporary measure. There it may be four years or eight years, but our exit from Europe will have much longer term implications. That is the issue we have to address.

While it is certainly true that things are coming to us—although some of the stuff that has been announced was being discussed well before Brexit, and people have taken a different view on risks—there is a human dimension here: making sure we are attracting talent. I have a corporate finance business. International companies that used to send people to the UK will now look elsewhere when trying to attract eastern European talent. London is not the only location they will now look at as the right sort of place to locate families.

It is important that we get this talent issue under control, and find a way to make sure that we fully express our ambitions and put the right sort of measures in the Bill. However, given the Minister’s comments—hopefully there will be some form of reflection—I beg leave to withdraw the amendment.