Industrial Strategy

Lord Prior of Brampton Excerpts

Monday 8th January 2018 Lords Chamber

[Lord Prior of Brampton (Con)]

My Lords, I am probably not the most objective commentator on this White Paper, having spent most of the past year working on it. However, I echo the words of the noble Lord, Lord Mandelson, who said he hoped that Greg Clark was at No. 10 today to be praised, not buried. I certainly hope that Greg Clark, my right honourable friend in the other place, is indeed back in the department.

[Noble Lords]

He is.

[Lord Prior of Brampton]

I am delighted to hear that.

In my view, the White Paper is more of an hors d’oeuvre than a main course: it acknowledges specifically that it is a work in progress and not the final result of our labours. We have not yet won the argument that an industrial strategy should be central to all government policy-making and that, if not addressed, low productivity and low earnings pose existential questions for our way of life.

Other countries have grasped this to a greater extent than we have. Look at China’s One Belt, One Road strategy, Germany’s Industrie 4.0 and Japan’s Society 5.0—they are at the core of those countries’ economic, social and industrial policies. They are central, transformational and driven from the top of government. You can hardly pick up a Japanese newspaper without seeing the Japanese Prime Minister expounding on artificial intelligence, drones or new industrial techniques. Contrary to public belief and much political rhetoric, the US too has a long history of industrial strategy, beginning back in 1945 with the seminal work Science: The Endless Frontier, produced for President Roosevelt by Vannevar Bush. It marked the beginning of a massive investment by the federal Government in research, and saw the creation of DARPA, the NIH and other government research bodies. You need look no further than the Manhattan Project or the Apollo programme, or the more recent orphan drugs programme, to see the power of government in the US.

Yet part of British politics is still fighting the sterile, hopeless, outdated battle between those on the left who believe that public ownership is the answer to all evils and those on the right who deride and caricature all government involvement in industrial strategy as picking winners—by which, of course, they mean picking losers. This White Paper makes it absolutely clear that the Government have a critical role working with the private sector, universities and local government in driving the industrial strategy. This role goes beyond creating the right market or competitive environment, and beyond correcting market failure. It encompasses a much deeper, long-term partnership between government, universities, business and local civic institutions.

The noble Lord, Lord Hennessy, suggested I read for inspiration the Beveridge report, arguably one of the most influential reports written in 20th-century Britain. Beveridge declared war on the five giant evils of want, squalor, ignorance, disease and idleness. He wrote, which I thought was interesting, that:

“A revolutionary moment in the world’s history is a time for revolutions, not for patching”.


We are at a similar time in our country today. There are two giant evils: low productivity and inequality. They not only have a direct impact on the five great evils identified by Beveridge but, if not addressed, pose an existential threat to our liberal democracy. Already their influence can be seen with the rise of extreme politics and simplistic populism in the US and western Europe.

Productivity has slowed and, consequently, earnings have stagnated. Paul Krugman, the Nobel laureate for economics, said that productivity is not everything but in the long run it is almost everything. Globalisation has enriched billions of people in Asia and beyond but it has been partly at the expense of the middle classes in the west, especially in traditional manufacturing areas. Demographic change has exacerbated the problem. In the US, real median earnings have hardly moved since 1990. In the UK, earnings have stagnated since 2007. Paul Johnson, the director of the IFS stated at the end of last year:

“After taking into account inflation, average earnings remain below where they were in 2008. That’s unique in at least 150 years”.


The outlook for the next 10 years is not much better. It is likely for the first time since the Industrial Revolution started at the end of the 18th century that the next generation will be less well off than the preceding one. Millions of people have been left behind. The American dream has for many become a nightmare.

This is a far cry from the perceived wisdom back in the 1990s when Francis Fukuyama wrote “The End of History?”, concluding that,

“we may have reached the end point of mankind’s ideological evolution and the universalisation of Western liberal democracy as the final form of human government”.

If liberal democracy cannot deliver improving living standards, one is tempted to ask: what is the point of it or, at the very least, how long can it last?

However, low productivity and stagnant earnings are only half the problem. The other half is rising inequality. Between 1980 and 2016 the richest 1% of the population of the US took as much as the bottom 88% of the increase in real income. In the UK the top 1% took as much as the bottom 51%. Overall, the poorest 50% of the population of western Europe, the US and Canada over this period—some 30 years—took only 9% of the increase in real income. This level of inequality is not justifiable morally, politically or economically. It is not fair. It is simply not sustainable over a long period of time in a democracy.

These are the twin evils—low earnings and growing inequality—that any industrial strategy has to address. This industrial strategy takes a long-term view over more than 10 years. It is cross-party in its approach, building on the works of the noble Lords, Lord Heseltine and Lord Mandelson, Vince Cable, my noble friend Lord Willetts and the noble Lord, Lord Sainsbury. It is about the future not the past; it is about new disruptive technologies not incumbents; it is mission-oriented with the four grand challenges; it is built on the remarkable competitive advantage of our universities and research institutes; it builds in a cross-government delivery and measurement mechanism through the Cabinet committee, chaired by the Prime Minister, and the creation of the industrial strategy council; and it explicitly recognises the crucial partnership between government and the private sector as a driver of strategy—if I can put it this way, more Mariana Mazzucato than Milton Friedman, more UCL than Chicago. Perhaps most important, it recognises that the productivity and inequality evils cannot be addressed solely in London, important though London is. The revival of the northern powerhouse, the Midlands engine and our great industrial cities outside the golden triangle of London, Cambridge and Oxford is fundamental to the success of industrial strategy.

One of the most influential things that happened to me in the past year was going to Pittsburgh. I used to spend a lot of time in Pittsburgh in the 1980s, when it was a declining steel town, the rivers were polluted and crime was high. If you go back to Pittsburgh today you will see that, through the revival of the Carnegie Mellon University, the development of robotics and the cleaning up of the environment, it has completely changed. This is because the revival of strong local civic institutions has driven an extraordinary change in Pittsburgh. You can see this in Chicago, Cleveland and other great old American cities where they have strong elected mayors. I agree 100% with the words of the noble Lord, Lord Heseltine, that we can have a strong industrial strategy only if it devolves more power to accountable local leaders.

We have a saying in Norfolk that fine words butter no parsnips. The White Paper has fine words and we now have to deliver.

Industrial Strategy

Lord Prior of Brampton Excerpts

Monday 27th November 2017 Lords Chamber

[Lord Henley]

My Lords, I am fully aware that a great many noble Lords want to come in with questions on this Statement, so I will try to keep my answers short. I am aware of what the noble Lord had to say, and I am certainly aware of the need to make sure we continue to talk to our colleagues in the Department for Education. I am also aware that those colleagues were present when the Statement was made in another place, as were colleagues from other departments. We will certainly make sure that they are aware of the noble Lord’s concerns and that they take appropriate action.

[Lord Prior of Brampton (Con)]

My Lords, the reports after the Budget by the IFS, the Resolution Foundation and the OBR posited or forecast stagnant productivity for the next 10 years, following the stagnation of the last 10 years, which is a truly frightening prospect. Only one other country in the world, Japan, has been able to cope with that level of stagnation for so long, and it has a very different society from ours. The industrial strategy should be seen in that context. If we do not move the dial on productivity, the implications for our society and the kind of democracy we have will be profound. In that context, does my noble friend agree that the four grand challenges we have identified are fundamental to getting ahead in the fourth industrial revolution? If we fail to do that, we will fail to address this underlying productivity problem. Does he agree that the DARPA-lite approach we are taking to these four grand challenges is fundamental?

[Lord Henley]

I am most grateful to my noble friend, who played a considerable part in helping to put this industrial strategy together. I am grateful to him for reminding the House of the need to move the dial on productivity, as he puts it, and for underlining the fundamental nature of those four grand challenges. That is repeated again and again in the White Paper, and the Government are committed to it.

European Union (Approvals) Bill

Lord Prior of Brampton Excerpts

2nd reading (Hansard): House of Lords
Wednesday 25th October 2017 Lords Chamber

Moved by

[Lord Prior of Brampton]

That the Bill be now read a second time.

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

The purpose of this Bill is to approve four draft decisions of the Council of the European Union. All four draft decisions rely on Article 352 of the Treaty on the Functioning of the EU. This allows the EU to take action to attain the objectives set out in the EU treaties, for which there is no specific power given. This can be done only with the approval of the European Parliament and the unanimous support of all EU member states.

Before the UK can agree these draft decisions at the Council, Parliament must first give its approval. Section 8 of the European Union Act 2011 provides that a Minister may vote in favour of an Article 352 decision only where the draft decision is approved by an Act of Parliament. The measures in the Bill have already been approved in another place, and I am pleased that noble Lords will also have the opportunity to scrutinise and decide whether to approve them.

The UK is leaving the EU and, until that process has concluded, the UK remains a full member of the EU and all the rights and obligations of EU membership remain in force. This includes exercising the UK’s vote in the Council of the European Union on these four draft decisions. Keeping that in mind, we are content that all four decisions are reasonable, proportionate, in keeping with our best interests and will not result in any additional financial burdens on the UK.

As I have said, Article 352 decisions must be agreed by all EU member states unanimously. When all member states are in a position to vote on the decision, the European Council will schedule a meeting of the Council of the European Union. If all member states vote to approve the draft decisions at that meeting, the European Parliament will be asked in turn to approve the draft decisions. If it does so, the decisions are adopted into EU law. All other member states, apart from the UK, have agreed the decisions. We do not believe that any of these draft decisions should be considered contentious in any way.

The first two decisions will enable two countries, the Republic of Albania and the Republic of Serbia, to be granted observer status in the EU’s Fundamental Rights Agency. The Fundamental Rights Agency was set up to support the European institutions and EU member states by improving the knowledge and awareness of fundamental rights issues in the EU, with a view to ensuring respect for fundamental rights. The agency does this through the collection and analysis of information and data. It can also formulate opinions on specific topics, either on its own initiative or at the request of EU institutions. It also has a role in communicating and raising awareness of fundamental rights, but it cannot hear individual complaints.

EU accession candidate countries can be given observer status at the Fundamental Rights Agency. This allows the agency to collect and analyse fundamental rights data from those countries, but does not allow them the right to vote in decisions as part of the agency’s management board. Albania was granted EU candidate status in June 2014. The UK supported the awarding of EU candidate status on the condition that Albania redoubled its reform efforts, with particular focus on justice and home affairs, especially tackling organised crime, corruption and illegal migration. The UK welcomed Albania’s progress in adopting legislation towards a judicial reform package in July 2016. Albania must now fully implement the judicial reform package as soon as possible so that this can underpin other reforms.

Serbia was granted EU candidate status in 2012 and accession negotiations were launched in January 2014, with the first four negotiating chapters opened during 2016. The UK continues to support Serbia on its reform path, including through funding projects in Serbia. Serbia has more work to do on anti-discrimination policies, to improve the situation of vulnerable people and to ensure freedom of expression. Observer status at the Fundamental Rights Agency should help Albania and Serbia to reform in the areas I have mentioned. Albania and Serbia should also be allowed to benefit from instances of good practice and evidence from other EU member states in relation to human rights. The Government are therefore satisfied of the need to support these two decisions.

The third and fourth decisions are necessary to implement a co-operation agreement between the EU and Canada on competition enforcement. The decisions will allow the agreement to be signed and allow conclusion of the agreement after it has been approved by the European Parliament. This competition co-operation agreement will replace an existing agreement that has been in place since 1999. It replicates and builds upon the provisions in the earlier agreement by allowing the European Commission and the Canadian Competition Bureau to exchange evidence obtained during investigations, including confidential information and personal data. The existing co-operation agreement with Canada dates from June 1999 and, at that time, the exchange of evidence between the parties was not regarded as needed. In the meantime, the bilateral co-operation between the European Commission and the Canadian Competition Bureau has become more frequent and deeper as concerns substance.

The absence of the possibility of exchanging information with the Canadian competition authority is regarded as a major impediment to effective co-operation. The proposed changes to the existing agreement will allow the European Commission and the Canadian Competition Bureau to exchange evidence which both sides have obtained in their investigations. This will, in particular, be useful in all cases where the alleged anti-competitive behaviour affects transatlantic or world markets. Many worldwide or transatlantic cartels include Canada, and, via Canada, the Commission will get a good opportunity to have access to additional information concerning these cartels.

Co-operation with third-country competition authorities is now standard practice in international competition investigations. In addition to the agreement with Canada, the European Union has concluded dedicated co-operation agreements with the US, Japan, Korea and Switzerland. The most advanced agreement is the one with Switzerland, which already contains provisions on the exchange of evidence, and the proposed update would bring the agreement with Canada to the same level as the one concluded with Switzerland.

I am sure that noble Lords will agree that the ability to share information for effective and efficient international competition enforcement is increasingly important. Access to information from other jurisdictions can be important in reaching a robust enforcement decision. Co-operation and information-sharing between jurisdictions can help ensure that enforcement bodies do not reach different decisions based on different sets of information.

The agreement contains general safeguards for the transfer of information and additional safeguards for the transfer of personal data. Personal data can be shared only with the express written consent of the person or company to which it relates. In the absence of consent, personal data can be shared only where both competition authorities are investigating the same related conduct or transaction. Furthermore, the transfer of personal data will be subject to independent oversight.

The agreement also contains safeguards for information provided by a company under the EU cartel immunity or leniency programme. This information cannot be shared without the express written consent of the individual or company that provided that information.

As I have noted, there are no financial implications for the UK from these decisions. I confirm that I do not consider that any of the Bill’s provisions engage the rights set out in the European Convention on Human Rights, so no issues arise about the Bill’s compatibility with those rights. It is intended that the Bill will come into force on the day of Royal Assent. For the reasons I have outlined, I commend the Bill to the House. I beg to move.

--- Later in debate ---

[Lord Prior of Brampton]

I thank the noble Baroness, Lady Ludford, and the noble Lord, Lord Mendelsohn, for their broad support for the Bill. I suspect that the noble Baroness knows more about the history of those treaties than I do. I do not know why we require primary legislation: she may have a better guess than I do. But I am glad that she agrees with the substance of the Bill, at any rate. I note the ironies to which she referred in her speech. I more than note them, but I will resist the temptation to respond to them, if she does not mind.

Both the noble Baroness and the noble Lord raised issues about the Competition and Markets Authority post Brexit. The CMA is not a party to the agreement, so the agreement cannot simply be transitioned without amendment. Any future competition co-operation between the UK and Canada will have to be negotiated and agreed with the Government of Canada, and I suspect that the same has to be true about the relationship between the CMA and the EU post Brexit. That will have to be part of the negotiation. I of course entirely agree with the noble Lord that that will have to be negotiated during the transition period so that there is no cliff edge in that respect.

As far as data is concerned, the agreement contains general safeguards for the transfer of information and additional safeguards for the transfer of personal data. Personal data can be shared only with the express written consent of the person or company to whom it relates. I hope that that is enough on data for the noble Baroness today. If she would like me to write to her in more detail, she can let me know and I will do so, but I hope I have given her enough reassurance in that regard.

I think I have responded to the points raised by both the noble Lord and the noble Baroness. On that basis, I commend the Bill to your Lordships and ask that it has a Second Reading.

[The Earl of Sandwich (CB)]

My Lords, I apologise for not intervening earlier, but I have a very brief question. The country called Kosovo is very dear in our hearts. It is situated between Albania and Serbia. Has the Minister’s department or the Foreign Office conducted any impact assessment? There will inevitably be consequences for Kosovo, which has a special status, as the noble Lord knows, because it is not fully recognised by all members of the European Union.

[Lord Prior of Brampton]

I cannot answer that question today; I will write to the noble Earl. Is the question about the impact on Kosovo of Albania and Serbia joining the EU at some future point?

[The Earl of Sandwich]

Particularly the impact of this legislation.

[Lord Prior of Brampton]

I will write to the noble Earl.

The noble Lord, Lord Mendelsohn, asked what our view would be if, between now and our leaving the EU, perhaps during the transition period, the EU decided it wanted to expand to cover, for example, Serbia, Albania and other countries. I think that our response is that we would not want to stand in the EU’s way in such circumstances. I am sure that if it wanted to go ahead, it would be curmudgeonly for us to stand in its way.

Bill read a second time and committed to a Committee of the Whole House.

Electricity Supplier Obligations (Amendment and Excluded Electricity) (Amendment) Regulations 2017

Lord Prior of Brampton Excerpts

Wednesday 25th October 2017 Lords Chamber

Moved by

[Lord Prior of Brampton]

That the draft Regulations laid before the House on 28 March be approved.

Relevant documents: 32nd Report, Session 2016–17, from the Secondary Legislation Scrutiny Committee, 27th Report, Session 2016–17, from the Joint Committee on Statutory Instruments

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

My Lords, these regulations amend the Electricity Supplier Obligations (Amendment & Excluded Electricity) Regulations 2015. They make provision for indirectly exempting eligible energy-intensive industries from part of the cost of funding the contracts for difference scheme. They aim to avoid putting these industries at a significant competitive disadvantage.

The transition to low-carbon—and the securing of our energy supplies—must be done in a way which minimises the cost to business and domestic consumers. Our industrial gas prices are internationally competitive but our industrial electricity prices have moved out of line with other European countries. The UK’s industrial electricity prices for large consumers in the EU 15 were the highest after Italy’s in 2016, as set out in The Clean Growth Strategy. This places UK electricity-intensive manufacturing industries at a competitive disadvantage and increases the risk of some deciding to relocate.

In order to meet our legally binding climate change and renewable energy targets, we have implemented a number of policies designed to incentivise generation of electricity from renewable resources. The costs of these policies are recovered through obligations and levies on suppliers, which pass these additional costs on to their customers. This results in electricity bills being higher than they otherwise would have been.

The CfD scheme is such a policy. It gives greater certainty and stability of revenues to electricity generators by reducing their exposure to volatile wholesale prices. The scheme is financed through a compulsory levy on electricity suppliers, which pass the costs on to domestic and business users through their electricity bills. The levy currently stands at almost £2.52 per megawatt hour. The funding costs of the CfD can reduce the attractiveness of the UK as an investment location and increase the risk that companies will invest or even move elsewhere. This is a scenario we wish to avoid, particularly as we exit the EU.

We intend to safeguard the competitiveness of those energy-intensive industries that are exposed to the additional costs arising from the CfD by exempting them from a proportion of these costs. An exemption scheme allows for real-time changes in energy use to be taken into account and provides certainty to business. The European Commission approved our state aid proposal to exempt certain EIIs from the cost of the CfD in December 2015.

The statutory instrument before us updates and improves the 2015 regulations. It brings them into line with the terms of our state aid approval, allowing us to commence the scheme. We recognise that the exemption will redistribute the cost of financing the CfD among other electricity consumers. We estimate that this will increase annual household electricity bills by around £1 between 2018-19 and 2023-24. None the less, we have taken steps to reduce consumer bills, which are now lower than they might otherwise be. Indeed, our energy efficiency policies reduced the average household energy bill by £161 in 2016. After taking account of the cost of policies for delivering cleaner energy, supporting vulnerable households and investing in upgrading our buildings, there was a net saving of £14 on the average household energy bill in 2016. Energy efficiency is the best long-term solution for tackling fuel poverty.

Since April, 70% of the £640 million per year energy company obligation has been focused on low-income households through the affordable warmth part of the scheme. This will upgrade the energy efficiency of more than 300,000 homes per year, tackling the root cause of fuel poverty. Certain households can also get £140 off their electricity bill for winter 2017-18 under the warm home discount scheme.

These regulations amend the original 2015 regulations. These amendments are necessary to bring those regulations into line with the Commission’s state aid approval. We are also making certain technical changes to the regulations to improve the administration of the scheme. The effects of the amendments include, among others: changes to eligibility; allowing new or restructured businesses to claim the benefit of the exemption; a requirement on beneficiaries to notify us, to help us ensure that they receive the exemption to the correct level and only if they are eligible; and allowing a company to apply for the exemption if it does not obtain electricity directly from a licensed electricity supplier.

The House of Lords Secondary Legislation Scrutiny Committee raised a number of points relating to consultation and timing, provision for direct competitors and the impact on consumer bills. I will summarise the main points. The policy to exempt eligible energy-intensive industries from a proportion of the costs of CfD had been subject to three previous consultations. The third consultation covered technical amendments to the regulations rather than policy changes, as the policy had already been consulted and agreed on previously. Our original intention was for these regulations to come into force at the end of February. However, some of the technical issues needed further consideration to ensure that the amended regulations achieve their aim. We involved stakeholders throughout the whole of this process.

Our original intention had been to provide relief to direct competitors—businesses which do not meet the eligibility criterion on electricity intensity but which manufacture the same product as eligible companies in the same sector. This was to create a level playing field and prevent market distortions within sectors. We submitted a state aid notification to the European Commission to address this issue. However, the Commission does not think our proposal is compatible with the relevant state aid guidelines. We are currently considering alternative options which may be open to us within the scope of these guidelines.

These draft regulations will make the necessary changes to the 2015 regulations to allow us to exempt eligible energy-intensive industries from up to 85% of the indirect costs of funding the CfD scheme. As well as providing these businesses with greater long-term certainty, the measures set out in these regulations will reduce the price differential between eligible energy-intensive industries and their international competitors, mitigating against the risk that these companies are put at a significant competitive disadvantage and might choose to move their production abroad. I commend these regulations to the House.

[Baroness Maddock (LD)]

I am grateful to the Minister for ranging a little wider than the regulation before us. I was going to ask him about how some of this fitted in with the Government’s wider policy aims, particularly on decarbonisation. I recognise that industries that are intensive users of energy find some of the decarbonising regulations quite difficult. I recognise that there is a balance to be struck, but I would be interested to know whether the department has looked carefully at or has any figures about what the balance will be on decarbonisation after this.

The Minister also replied a little to the criticisms of the Secondary Legislation Scrutiny Committee. I read with interest what it had to say because six weeks are recommended for consultation, but there were precisely five weeks, and it is rather bad practice to consult across the summer holiday period, which is what the Government did. That was pretty unfortunate. They were trying to get regulations in place by February 2017. In the end, they did not come until March, so I think something is not working quite right in the Minister’s department. He is fairly new there, so I challenge him to see whether in the next year it can have less criticism from the Secondary Legislation Scrutiny Committee when it brings forward matters such as this.

Apart from that, I recognise that the Government are trying to balance several things: how they can help industries that are intensive users, the regulations for decarbonisation and state aid rules from Europe. I recognise that that is not easy. I hope they have it right. I cannot profess to understand some of the very complicated matters in these types of regulations—I wish we had Lord Jenkin of Roding here as he would put us right if we had got it wrong. We are happy to support these regulations as far as they go. I hope we are not supporting something that we will regret in future.

[Lord Grantchester (Lab)]

I thank the Minister again for his clear introduction to the regulations before the House tonight. As on the previous regulations, the amendments to the 2015 regulations are largely technical, although in this case it is largely as a result of receiving state aid approval which requires these amendments. The Government have also brought forward other technical amendments to clarify the 2015 regulations and to improve their workings. I am content to approve the regulations as they reduce the disadvantages to energy-intensive industries, but they give rise to many serious questions concerning the impact of the policy and the relative effect on different businesses and their competitiveness.

The main contentious issue arises from the exclusion in these regulations of the intended extension of relief to energy-intensive businesses that do not qualify as having high energy costs as specified in the order. While the European Commission was happy to approve the 2015 regulations, subject to the alterations we are debating tonight, it was not happy to include the extension the Government sought for businesses other than those specified as being energy intensive.

In the 32nd report of your Lordships’ Secondary Legislation Scrutiny Committee, dated 27 April 2017, it seems the Government are happy to drop this altogether with the thought that the CFD exemption will not have a significant effect on competition within the UK after all. Can the Minister clarify what sort of businesses these are, what their response is to the change in the Government’s position and what the cost is of the competitive disadvantage that they no longer consider significant? Has the assessment changed following dialogue with the commission? The Government’s answer refers only to the UK. What is the competitive position of these excluded businesses internationally? On Brexit, perhaps the Minister could outline the Government’s intention regarding state aid provisions that are part of EU membership once we leave. Is it the Government’s intention merely to amend the regulations to include the original intention once the UK has indeed left the EU?

The Secondary Legislation Scrutiny Committee was also critical of the Government’s short consultation in summer 2016—the noble Baroness, Lady Maddock, drew attention to this feature of the department as well. Perhaps the complexity of the provisions and the adjustments in the Government’s response could entail further and more meaningful consultation regarding the numerous interactions between various government policies influencing renewables and the energy-intensive industries. There are also many questions around the costs of the exemptions for energy-intensive industries on other business and consumers.

One of the questions debated in the other place concerned the fall in the costs added by these regulations, from £1.80 to £1 a year on consumer bills. The Minister in the other place seemed unable to explain the significant drop. What is the grossed-up cost of this measure? Is that what has changed, or the estimates of the number of businesses in the intensive energy sector? How is the discrepancy to be explained? This highlights the complexity in analysing and understanding the impact on businesses and how they will react.

The Government have said they are developing a package of measures to support businesses to improve their energy use and efficiency. The Government are said to be revitalising the Green Deal. They are also considering the costs to the charitable sector. Could the Minister add to these statements tonight and give any indication of timescales? The Government have launched an independent review of the cost of energy, to be chaired by Professor Dieter Helm, in response to the report of your Lordships’ Economic Affairs Committee. Can the Minister update the House on this?

The costs to the consumer of the various government schemes are also subject to the levy control framework. This has also come in for severe criticisms from many sides, including the National Audit Office. Once again, the Government have realised they must have a rethink and start a review. How is that review progressing?

Although the regulations today can be approved in so far as they clarify various measures the Government are undertaking, nevertheless there are huge issues around the Government’s framework that demand swift resolution.

[Lord Prior of Brampton]

I thank the noble Baroness and the noble Lord for supporting these regulations. The noble Baroness referred to the balance in recognising that some industries are not able to compete on a level playing field if they are heavily penalised by their electricity costs and that can come into conflict with our decarbonisation policy. She is of course absolutely right that it is a very difficult balance. The steel industry is an example of a very energy-intensive industry where if we did not address this balance, we would have no industry at all. There is a balance to be had. After all, from the planet’s point of view, if all we succeed in doing is moving the steel industry from here to another country, we have not improved the lot of the planet at all in the process. She is quite right to say there is a balance, and it is a balance that we are constantly trying to get right. I note the noble Baroness’s criticisms—indeed, her strictures—about the way in which we conducted this consultation. I have taken them on board and I am sure the department will do so too.

The noble Lord, Lord Grantchester, raised the relative impact on competitors because the European Commission did not accept our argument. I think we have a serious argument here. It could be that there was a new process for making steel that was less energy-intensive and did not qualify for the exemption. That would put it at a competitive disadvantage in relation to the more energy-intensive process of making steel that did qualify, thereby achieving the reverse of what we intend to do, which is to move towards less energy-intensive methods of making steel, chemicals, glass, ceramics or, for that matter, anything else. So our argument to the Commission was a good one and we should carry on pursuing it.

The noble Lord then raised the issue of what we are going to do about the state aid provision programme post-Brexit. I can say only that that is part of the negotiations that are going on and it would not be for us to decide what to do about that post-Brexit although, depending on the trade agreements negotiated with Europe, there will be some understandings about that issue to avoid unfair competition between us and our European friends.

The noble Lord asked about the analysis behind why household bills changed from £1.80 to £1. The update from £1.80 to £1 was mainly because we reduced our estimate of the volume of electricity consumed by eligible energy-intensive industries. We have also updated our estimates of CfD policy costs and volumes of electricity sales to households and other consumers. I have to say I am just reading out my brief; I do not know whether or not it answers the question. I gather that it does. Excellent.

I believe the independent review by Dieter Helm is out tomorrow. I stress that it is an independent review, not a government one. I do not know what is in it but I think there will be lots that is of interest to the noble Lord when he reads it. If I have missed out any of the questions raised, I will write to noble Lords later. On that basis, I commend the draft regulations to the House.

Motion agreed.

Electricity Capacity (Amendment) Regulations 2017

Lord Prior of Brampton Excerpts

Wednesday 25th October 2017 Lords Chamber

Moved by

[Lord Prior of Brampton]

That the draft Regulations laid before the House on 23 March be approved.

Relevant documents: 27th Report, Session 2016–17, from the Joint Committee on Statutory Instruments

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

My Lords, the draft instrument seeks to amend two secondary legislation packages for the capacity market. The powers to make this implementing secondary legislation are found in the Energy Act 2013, which, following scrutiny in the House and the other place, received Royal Assent in December 2013, with cross-party support. The five changes contained in the draft instrument are essentially technical to improve fairness, ensure the competitiveness of auctions and provide important clarifications to scheme operations. They were supported by the majority of respondents in consultation.

Before I explain the changes in detail, it may be helpful as a reminder to noble Lords if I say a few words of background about the capacity market itself. Ensuring that families and businesses across the country have secure, affordable energy supplies that they can rely on is a top priority. We are facing challenges to electricity security of supply resulting from the closure of older plant and the move towards less polluting, but more intermittent and inflexible technologies, such as solar, wind and nuclear. That is why we have the capacity market; this scheme ensures that there will be sufficient electricity capacity in Great Britain for this winter and beyond. It gives generators confidence that they will receive the revenue they need to maintain, upgrade and refurbish their existing plant, and to finance and build new plant to come on stream as and when existing assets retire. It also ensures that those who are able to shift demand for electricity away from periods of greatest scarcity, without detriment to themselves and to the wider economy, are incentivised to do so.

It does this by offering capacity providers, who are successful in competitive auctions held four years and one year ahead of delivery, a steady, predictable revenue stream on which they can base their future investments. In return for these capacity payments, providers must meet their obligations to deliver electricity or reduce demand at times of system stress or face penalties.

The capacity market is working. Fierce competition between providers in the auctions held to date meant that we obtained the required capacity at prices below the levels many had expected. That is good for consumers as it translates to lower costs on bills. The capacity market is driving investment in new, flexible capacity. The most recent four-year-ahead auction secured over 3.4 gigawatts of new-build generating capacity, including combined-cycle gas turbines, open-cycle gas turbines, small flexible engines and battery storage, as well as 1.4 gigawatts of demand-side response.

The clear message from industry and investors is that the mechanism retains their confidence and is the best available approach for ensuring our long-term security of supply. Industry and investors also stress that regulatory stability is crucial but that the scheme, operating in a rapidly changing environment, must be regularly reviewed to ensure it remains fit for purpose. The changes set out in the instrument are the latest in a series of amendments that ensure the scheme is kept relevant and workable. I will briefly expand on the amendments.

First, the instrument amends the method by which the costs of the capacity market are recouped from suppliers. It was felt the current supplier charge arrangements potentially gave an unfair advantage to embedded generators—smaller generators connected to the lower voltage distribution network—and could distort the outcome of the capacity auctions. That arises because, under current arrangements, suppliers are charged according to their share of total demand at peak times, measured by the demand they place on the transmission grid. That is their net demand. By contracting with embedded generators to run over winter peaks, some suppliers are able to reduce their net demand and therefore their share of capacity market costs, with others having to pay more. With some of the savings inevitably being passed on to the embedded generators, such arrangements unintentionally risk giving them a double payment for what is essentially only one contribution to security of supply. The instrument addresses the issue by amending the basis of the capacity market supplier charge and settlement costs levy from net to gross demand. That is a fairer way of sharing costs between suppliers: it ensures suppliers’ costs reflect their overall demand and helps ensure a level playing field between different generators in the auctions.

Secondly, the instrument seeks to prevent new and refurbishing plants being overcompensated in the capacity market where they are also in receipt of aid through risk finance schemes such as the enterprise investment scheme, seed enterprise investment schemes and venture capital trusts. Currently, there is a risk of double subsidy, which would likely distort the outcome of the capacity auctions. To ensure fair competition and value for money for consumers, the instrument asserts that where a capacity provider has accessed investment through one of these risk finance schemes to fund capital expenditure, their capacity payments must be reduced until such a time as this has been off-set. These off-setting arrangements ensure that the total amount of aid is capped at the amount awarded in the capacity market auction.

Thirdly, the instrument seeks to remove an inconsistency in the way demand-side response capacity is de-rated relative to other capacity types. De-rating is the process by which the volume of a provider’s capacity is adjusted to reflect the reliability of the technologies being used. Unlike other participants, demand-side response providers can nominate a lower amount of capacity to bid into an auction than the capacity they estimated at pre-qualification stage, but that nominated amount is not currently subject to de-rating. The instrument addresses that by ensuring that the nominated value is de-rated, thereby improving the overall reliability of the capacity that is procured. I hope noble Lords have got that.

Fourthly, the instrument clarifies the requirement that capacity market participants maintain credit cover until they have fully discharged all the requirements against which the credit cover has been lodged. In addition, the instrument puts beyond doubt that a party’s credit cover will not be drawn down where a termination fee is due unless the termination fee is unpaid.

Finally, the instrument amends the name, but not the substance, of the capacity market warning—a notification that must be issued in specific circumstances under the scheme. Revision to the capacity market notice better reflects the nature of the notification and will be clearer for participants.

My department published two consultations on these changes during September and October last year. In total, 38 responses were received across the two consultations. There was significant support for the majority of the proposals raised. I look forward to hearing what noble Lords have to say about the proposed changes.

[Baroness Maddock (LD)]

My Lords, I am grateful to the Minister for reminding us of the long hours we spent on the primary legislation with the noble Lord, Lord Grantchester, who is in his place on the Labour Front Bench. We are sadly missing a previous Member of this House, Lord Jenkin of Roding, who understood absolutely all this very complicated legislation. Because it is so complicated it is not surprising that after a period of time we need to make some adjustments to it. It would appear that most people involved in this complicated market are in favour of the adjustments the Government wish to make to the previous legislation.

However, one of the areas in which I was involved in my early days in this House was the committee that looks at secondary legislation. In those days we looked quite carefully at the way government departments deal with these matters. There are rules laid down. Given that the way we deal with secondary legislation means we cannot really change it very much, it is important that government departments stick to the rules. I know that committee has highlighted this over the years. I draw the Minister’s attention to the fact that although they held consultations at the end of 2016, one of which closed in December, they did not respond to them until 22 March 2017. We will discuss another instrument in a moment and I will raise similar issues then.

I am happy to support what the Government are doing. It seems uncontroversial, but I charge the Minister, now he is in the department, with looking at the way they follow the rules on how we consult on and deal with secondary legislation.

[Lord Grantchester (Lab)]

My Lords, I also thank the Minister for his introduction to the regulations before your Lordships’ House. I agree with him that they are by and large technical in nature. I second the remark by my noble friend on the Liberal Democrat Front Bench that we miss Lord Jenkin for all the understanding he brought to the House on these quite technical matters.

We are in favour of the amendment regulations tonight because they introduce refinements, clarifications and new wording to manage the system around the operation of the capacity market. From my reading of the Explanatory Memorandum, which is excellent— I thank the Minister’s department for its clarity—I commend the Minister and his team for introducing these regulations to correct the imperfections in the original instrument, which could have led to double payments and loopholes that could have been exploited to the detriment of the consumer. However, that is not to say that there is universal approval for the capacity market. There is a debate to be had regarding whether it has achieved its objectives and whether it is good value for money. While strictly speaking the capacity market is not the subject of the regulations, I nevertheless have one or two questions to put to the Minister on how it is operating.

I liken the capacity market to a quasi-insurance policy. I agree that the lights going out would be a catastrophic event with severe consequences for the Minister, his Government and the nation. The capacity market is designed to ensure that this will never happen. This winter, 2017-18, is the start of the first delivery year and the date from which payments will start, even though there have been five capacity market auctions to date. The contracts for these auctions are for either one year or four years. What is the grossed-up value of these contracts, which I understand is somewhere near the total cost of the capacity market for availability of energy sources until 2021, excepting that there are also the one-year contracts to be awarded for the next three years? Is it useful to consider this figure in assessing the value-for-money aspects of the policy against achieving its objectives? The Minister in the other place suggested that the increase in customer bills amounted to £2 per customer per year. My question to the Minister is to understand the grossed-up figure that has been paid to generators and, from that, the size of the bill to the public.

The answer to the question regarding the success of this quasi-insurance is mixed. First, there will be no blackouts—I am sure that the Minister will be able to sleep well at night—but perhaps he could give some assurances regarding the “black start” that would be needed to re-energise the network following any blackout.

Secondly, has the certainty of return from the capacity market brought forward investments, especially in new gas build? Here, the policy does not seem entirely to be working. Do the plans to which the Minister drew attention in his opening remarks finally translate into certainty of new build being on the horizon?

Thirdly, is the cost to the consumer worth while, and has it been effective? I think that I can reply on the Minister’s behalf and say that to a certain extent it has already brought benefits in that the spikes in cost in marginal supplies to the grid have been reduced. Volatility has been lessened, which has already reduced net costs through bills to the consumer. Nevertheless, how likely would blackouts have been without the existence of the capacity market? That is the ultimate insurance question.

Lastly, has the capacity market brought flexibility and a diverse mix of energy sources to security of supply? On the demand-side response, the auctions are only for one-year contracts, which could hardly be described as bringing certainty. Can the Minister confirm whether there are plans to bring forward four-year auctions for DSR? Have the Government considered bringing forward the statutory review date of this policy from being four years into its operation? There could be other points along the way that are sooner than that at which some of these questions could bring forward further amendments.

[Lord Prior of Brampton]

My Lords, I think that I can thank both the noble Baroness and the noble Lord for supporting the regulations. They are pretty technical and complicated, but they correct perhaps inevitable imperfections in the original legislation passed in 2013.

The noble Lord, Lord Grantchester, raised a number of other more profound issues which I hope he will agree do not pertain directly to the matter in hand, but perhaps I may try to answer some of the questions that he raised. I think that his fundamental question was whether the capacity market is value for money. Using his analogy of the insurance market, the total gross premium that we have paid over the period to 2020-21 is £3.35 billion. That is the premium that we have paid to obviate the possibility of the lights going off over that period. Whether or not that is value for money, the noble Lord will have to draw his own conclusions. I think it is quite hard to assess that, except for the fact that if the lights did go off it would be a catastrophe. In the context of the British economy, that may be a premium worth paying. That is a subjective view, and he will have his own thoughts on that.

The noble Lord raised a number of other issues, to which I do not have a reply—at least, I cannot reply in the way that I would like to be able to. He asked four other questions. He answered one of them himself, fortunately, so that leaves me three other questions to address. One was: has this brought forward new investment in generation? The answer is that it has. I mentioned some in my speech. Whether it has brought forward enough is probably the question that he was asking, and he related that to the nuclear investment. I would like to think about that, if I may, and write to him afterwards. Related to that, he asked: has this brought forward new alternative capacity? I guess by that he meant wind, solar and the like. The answer has to be: yes, it has.

[Lord Grantchester]

I agree with a lot of what the Minister has said but nevertheless draw his attention to the fact that, as yet, onshore wind is not allowed to compete.

[Lord Prior of Brampton]

The noble Lord is absolutely right: because it is an intermittent source, it is not eligible for the capacity market. I will have to write to him about whether or not the capacity market itself has brought forward alternative capacity beyond that which I mentioned earlier.

Finally, he asked about the statutory review date in the primary legislation. Again, I will have to look and see when that date is and write to him.

I should also respond to the noble Baroness, Lady Maddock, who asked about how we responded to the consultation. I apologise if we did not follow the rules correctly. We will do better next time.

On the basis of that response and the letters I intend to write to the noble Lord, I commend these regulations to the House.

Motion agreed.

Life Sciences Industrial Strategy

Lord Prior of Brampton Excerpts

Monday 23rd October 2017 Lords Chamber

[Lord Crisp]

To ask Her Majesty’s Government what is their response to the life science industrial strategy, published on 30 August, with regard to its findings on making the United Kingdom the best place for life sciences businesses to grow and on collaboration with the National Health Service.

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

My Lords, the Government support the life sciences industrial strategy’s ambition to make the UK a global hub for clinical research and medical innovation, and are discussing the recommendations with industry and its key partners to agree a sector deal.

[Lord Crisp (CB)]

I thank the Minister for that helpful reply, and am delighted to know that active discussions are going on. I have two specific questions. First, as the Minister will know, manufacturing in life sciences is the most productive part of the most productive sector of the UK, so what are the Government doing to attract more investment in that area? Secondly, and rather differently, what are the Government’s plans to support start-ups in totally new healthcare businesses?

[Lord Prior of Brampton]

My Lords, manufacturing is extremely important. As the noble Lord says, it is a highly productive sector of the economy. In the first wave of the industrial strategy fund, we are investing £146 million in medicine and vaccine manufacturing. With regard to investing in smaller companies, SMEs, we have a number of schemes that we are introducing, including supporting the AHSNs—the academic health science networks—and setting up innovation exchanges.

[Lord Ribeiro (Con)]

My Lords, the Lancet commission highlighted deficiencies in surgical care across the globe. Recent investment by the National Institute for Health Research, charities and the research councils has increased the number of clinical trials in the UK, particularly in surgery. Does the Minister support investment in surgical and clinical research to improve care in the UK and across the globe?

[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.

[Lord Fox (LD)]

My Lords, the life sciences industrial strategy is a clear and comprehensive review of the biomedical and pharma sectors, but it misses out large swathes of the industry—namely, animal health and plant science. Was that narrow interpretation by the deliverers of the industrial strategy on the advice of the Government, or was it the interpretation of those making it? Can the Minister give us assurances that plant science and animal health will also be included in the industrial strategy sector deal when it emerges?

[Lord Prior of Brampton]

My Lords, it is true that the life sciences industrial strategy was largely based on humans rather than plants or animals. That does not mean to say that we will not be having a strategy for other sectors of the economy as well, including plants and animal science.

[Lord Patel (CB)]

My Lords, one of the key proposals in John Bell’s report on the life sciences industrial strategy is the use of NHS data. What is the Government’s view of business, particularly global business, using NHS data?

[Lord Prior of Brampton]

NHS data is potentially a hugely valuable resource, with the huge proviso that we must always respect patient confidentiality and privacy. On that basis, the data that we have in the NHS from primary and secondary care, given that it is the biggest universal healthcare service in the world, could be of huge benefit in developing new drugs.

[Viscount Ridley (Con)]

My Lords, in view of Sir John Bell’s recommendation that the Government should streamline the adoption of all new products into the NHS, is my noble friend aware that there is an explosion of new diagnostic tools using blood proteins and genetics, often led by British companies? These offer earlier and more accurate diagnoses, saving costs, yet these firms are finding that the NHS is very resistant to adopting new blood science diagnostics compared with other countries. Why is this?

[Lord Prior of Brampton]

My Lords, that is a good question that applies across the piece: companies find the NHS very difficult to sell into. The Government and NHS England are acutely conscious of that and we are, through our test bed, digital catalyst and EAMS programmes and our response to the accelerated access review, doing everything we can to improve the rate of adoption of new products into the NHS, but I have to say that it is not easy.

Science and Innovation Strategy

Lord Prior of Brampton Excerpts

Monday 23rd October 2017 Lords Chamber

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

My Lords, I find myself in the slightly odd situation of being able to agree 110% with what the noble Lord, Lord Mendelsohn, has just said; I do not think there is anything between us at all. I thank the noble Lord, Lord Patel, for tabling the debate today. It has been interesting, insightful and opportune, given that the White Paper is coming out in November.

I am afraid I shall disappoint the noble Baroness, Lady Morgan, and the noble Lord, Lord Fox: I am not going to address skills today. Clearly they are utterly critical, and the cultural divide that we have had between academic and technical education has been a disaster for this country since 1944 and probably earlier—I think we are all in agreement on that—but I shall talk more about science and innovation today, if I may.

When the Green Paper on the industrial strategy was launched earlier this year, the noble Lord, Lord Hennessy, asked with a customary rhetorical flourish, “Where is the magic?”. I think he had read eight previous versions of the industrial strategy and, quite rightly, was saying, “What is different about this one?”. I have thought about that a lot. It may lie in our culture, in our great institutions, in our legal system or in our national character. It may lie in the welcome that we have always given to people from different countries. It may lie in that very difficult and shifting balance between social justice and entrepreneurship. It may lie in all those things, but if I had to choose one—if I had to say where the magic was today—I would say our great universities and research institutes.

The story may be apocryphal—if it is, no doubt the noble Lords, Lord Bhattacharyya and Lord Patel, will tell me afterwards—but soon after India became independent in 1947, Nehru asked John Kenneth Galbraith, the great American economist, for advice on how to modernise the Indian economy. The great man is supposed to have replied, “Establish an independent flourishing university sector and wait for 800 years”. Of course you do not have to wait that long, and Warwick and Bath are two universities that are testament to that, but it is perhaps no coincidence that our two oldest universities, Oxford and Cambridge, are ranked first and second in the world. It has been said that in the Dark Ages the monastery kept alive learning, progress and civilisation; in the Middle Ages the centre of gravity moved to the castle; and in the industrial age the factory became the epicentre of economic growth and power. In today’s age, the age of information and knowledge, it is the university that stands centre stage—not some gleaming academic ivory tower but a seat of learning, driving ideas, innovation and science into a connected ecosystem. This is the magic that has created the world’s most powerful economic ecosystem in Silicon Valley, an alchemy that brought together great universities such as Stanford and Berkeley with great entrepreneurs, with enlightened government support—we have already talked about DARPA today—and with intelligent, long-term, patient capital, as my noble friend Lord Freeman stressed in his speech. As the noble Lord, Lord Willis, said, it is bringing together, fusing science and entrepreneurship, that makes Silicon Valley, Boston and those other great ecosystems around the world so successful.

In the UK, the first industrial revolution was ours. The second, the factory age, was ultimately won jointly by Germany, Japan and the US. The third industrial revolution was unquestionably won by the USA. The fourth industrial revolution, which is now upon us, based on AI, robotics, quantum computing and the like, is what we are now playing for. Clearly, the US and China will be at the table, but we must make sure that we are there, too.

Where are we? We have four universities that nearly always figure in the top 10: UCL, Imperial, Oxford and Cambridge. We have 31 in the top 200. The Elsevier report published last month shows that we account for 9.9% of downloaded academic articles, 10.7% of citations and 15.2% of the world’s most highly cited articles. The UK continues to rank number one by field-weighted citation impact.

If we look around the country, we can start with the Crick and the Turing Institutes at King’s Cross, move to Norwich, where I come from, where there are the John Innes and the Tyndall centres, and move up to York, with its extraordinary work on optics and digital infrastructure. Further north, there is Dundee, where the noble Lord, Lord Patel, was such a distinguished academic clinician. Look at its extraordinary record of drug discovery. We can come past Huddersfield, not a place associated with a great university, but it has an extraordinary hidden gem there in rail technology, and down to Warwick.

The noble Lord, Lord, Lord Bhattacharyya, mentioned the National Automotive Innovation Centre, a joint venture between Tata, JLR and the Warwick Manufacturing Group. It is an extraordinary success how Warwick, quite a young university, has developed that extraordinary technology. JLR invests £3 billion a year in research. That is one company with revenues of £25 billion or so. It is an extraordinary commitment to research, and we are very lucky that it does that.

If we come down from Warwick, we find what is possibly the most extraordinary research institute in the world: the Laboratory of Molecular Biology at Cambridge, the birthplace of modern molecular biology, with 11 Nobel prizes to its name. It is led, of course, by a Nobel prize winner, Venki Ramakrishnan, and, of course, we should pay tribute today to Richard Henderson for his Nobel prize this year for his work on electron cryo-microscopy. I note in passing that Richard Henderson shared his Nobel prize with a US and a Swiss researcher, and that Venki Ramakrishnan was born in Tamil Nadu in India and shared his Nobel prize with two scientists from the US and Israel. Science is international, and respects no boundaries. If we in our country do not accept that and welcome people from abroad, we are cutting off our nose to spite our face.

I turn now to the ecosystem, if you like—the innovation side of the equation. You can look at this through the lens of intellectual property, of royalties, of spinouts, of unicorns, or however you want to measure it. We all know what we mean. The question is: are we capturing for the UK the downstream value added of science, or are our universities instead still to some extent basking in the glory of academic excellence? This is not for one minute to downgrade the value of basic, fundamental blue-sky research, just to raise the question: are we making the most of it? As the noble Lord, Lord Patel asked: are we turning ideas into money?

Historically, the answer has to be a pretty emphatic no. I suppose the most egregious example that I have come across is that of monoclonal antibodies, discovered by two researchers at LMB and humanised by Greg Winter, who is today the Master of Trinity College. Monoclonal antibodies today comprise six out of the 10 best-selling drugs in the world. We hardly make a biologic in this country. Why could we not have just one Genentech in the UK? We have none. As the noble Lord, Lord Mendelsohn, mentioned, graphene was discovered at Manchester University in 2004, yet today we hold just 21 graphene patents out of a total of 2,224. It is now an area dominated by the US, China, South Korea and Japan. I could go on. The British consulate in Silicon Valley says that it fields inquiries from more than 300 companies a year looking to make the move to California. Illumina is based there, with a market cap of $30 billion, based on gene sequencing technology again developed at the LMB.

But that is looking backwards. We are getting much better. UK universities’ knowledge exchange income has increased by 27% between 2010 and 2016, to £4.2 billion. Universities are increasing engagement with businesses, with income from businesses increasing by 6% from 2014-15 to 2015-16, and with 71% of this coming from collaborative research, contract research and consultancy, but that is still nothing like enough.

The knowledge exchange framework announced by my honourable friend Jo Johnson two weeks ago is a start to try to address that issue. We are going to measure universities not just by teaching and research excellence but by how much added value they put into the community. In the US, the Bayh-Dole Act, which came in in the 1980s, fundamentally changed how universities in the United States commercialised their research. Economists say that it was probably the most significant Act passed in the US in the past 40 years. I hope that the knowledge exchange framework will do the same in the UK.

I was very struck by the comments of the noble Baroness, Lady Greenfield, about taking research out of universities. How right she is. Carnegie Mellon University, MIT in Boston or Stanford have a “5% and go in peace” policy. They encourage their scientists to set up spin-outs; if you are not doing that, you are not proper scientists in those places. They take 5% of the equity and go in peace; they do not hang on to all the intellectual property or royalties. A lot of British universities still keep between 40% and 60% of the equity, and they wonder why entrepreneurs find it hard to raise money in capital markets.

I have a much longer speech than I have time to give this evening. We are doing work with higher education innovation funding, the connecting capability fund and, of course, the industrial strategy challenge fund. So the Government are fully apprised of this; nothing has been said in this debate that the Government are not wholly in agreement with.

When it comes to the scale of investment, noble Lords are absolutely right in saying that we are way off the pace. We spend 1.7% of GDP on research and development. The average in the OECD is 2.4%, but Germany spends 3% and wants to spend 3.5%. Our aspiration is to get to the average of the OECD, of 2.4%. We must keep making the argument that returns on investment in this area are as good as you can find anywhere.

I have only one minute left, so I shall end with a point on long-term patient capital. We are making some progress: Neil Woodford has the Patient Capital Trust established in Oxford, but clearly this is an area—particularly in bioscience, where it takes 20 years to bring a new drug to the market—where there is an absence of intelligent long-term capital. I hope again that the industrial strategy will produce that in November and have something to say about that issue.

I thank the noble Lord, Lord Patel, for introducing a fascinating and useful debate, which will certainly help our thinking as we move to the White Paper in November.

[Baroness Warwick of Undercliffe]

Could the Minister comment briefly on the role of UKRI in ensuring that investment and funding is spread right around the country?

--- Later in debate ---

[Lord Prior of Brampton]

I have two quick comments on that. First, place is very important. We cannot address this fundamental productivity problem that has been mentioned in the south-east—if this is a golden triangle strategy, we have failed, so place is very important. Secondly, UKRI is bringing together Innovate UK with the research councils, and that is extremely important. I assure the noble Lords, Lord Willis and Lord Bhattacharyya, that Innovate UK is of fundamental importance to this; it would be a disaster if it got captured by the research councils.

House adjourned at 7.09 pm.

Fuel Poverty

Lord Prior of Brampton Excerpts

Thursday 19th October 2017 Lords Chamber

[Baroness Donaghy]

To ask Her Majesty’s Government what is their estimate of the number of households in fuel poverty; and what action they intend to take to reduce that number.

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

My Lords, the latest official statistics show that in 2015 there were 2.5 million households in England living in fuel poverty. Some 70% of the £640 million energy company obligation is focused on improving the energy efficiency of these households. We also propose to bring an end to high energy prices by putting in place a price cap on standard variable and default tariffs and retaining the warm home discount.

[Baroness Donaghy (Lab)]

I thank the Minister for his Answer. It appears ironical to me that a Question on fuel poverty is answered by saying that all consumers are being ripped off. The figures that we have been given may be the tip of the iceberg, as many older or infirm people need extra heating and do not appear in these statistics. The Minister will be aware, because of his previous responsibilities, of the premature deaths due to cold houses and the increase in childhood illnesses. The Government are missing their own targets and not fulfilling their legal obligations on this issue. Can the Government give us some information about what practical steps are being taken to eliminate the scourge of fuel poverty in the approaching winter?

[Lord Prior of Brampton]

I assure the noble Baroness that we take fuel poverty extremely seriously. Interestingly, there are 835,000 fewer fuel-poor homes within bands E, F and G than there were in 2010, so there are signs that targeting the energy company obligation more specifically at lower-income families is having an effect. With the Digital Economy Bill having gone through the House of Commons, I hope that we can target our resources more accurately to ensure that we meet the obligations set out in the sustainable growth paper that came out last week.

[Lord Hylton (CB)]

My Lords, will the Minister confirm that the delay in paying universal credit when it has been approved will be cut from six weeks to four weeks? What are the prospects of further reductions in that time delay?

[Lord Prior of Brampton]

My Lords, I am not able to answer that question. It is not specifically related to the Question in front of us, but it is none the less extremely important and I will write to the noble Lord later.

[Baroness Maddock (LD)]

My Lords, can the Minister tell us why the Government have extended from 12 months to 18 months the period in which the energy company obligation will operate, and why they have put a cap on boilers in that transition period? Could the Government use the upcoming Budget to make sure that emergency funding is available to the most vulnerable for boiler repairs and replacement?

[Lord Prior of Brampton]

My Lords, I believe that the ECO is there until 2028. I do not recognise the 18-month figure that the noble Baroness mentions, but I will check that afterwards. As for how we spend the money under the energy company obligation, there is clear evidence that it is better put towards longer-term improvements such as insulation than the short-term repair of boilers. However, part of the ECO is spent on boiler repair.

[Baroness Greengross (CB)]

My Lords, more than 6 million older people are very worried about this winter, and 14% go back to bed during the day because they are so worried about their fuel bills and doing so will keep the cost down. Will the Government commit to reforming the energy efficiency programme so that it is a national infrastructure priority? Will they also commit to bringing 2 million low-income homes up to the performance certificate standard band C by 2020 and all 6 million by 2025, as Age UK has requested?

[Lord Prior of Brampton]

The noble Baroness is right that fuel poverty is a desperate problem for many people. We have a target to bring everyone up to band C by 2030, to band D by 2025 and to band E by 2020. That was reiterated in the Conservative Party manifesto and we intend to keep to it.

[Baroness McIntosh of Pickering (Con)]

My Lords, I commend the Government on the work they are doing to make homes warmer; I speak as vice-president of the NEA. Will the Minister take the simple measure of encouraging private landlords to improve their property by replacing single-glazed windows with double glazing wherever they can?

[Lord Prior of Brampton]

My noble friend makes a good point. As she will know, we are putting an obligation on all private landlords so that if they rent out their properties in 2018, they must have at least a band E category certificate on them. That will begin to make the kind of difference to which my noble friend refers.

[Lord O’Neill of Clackmannan (Lab)]

My Lords, I draw attention to my interests as set out in the register. The Minister will be aware that some 850,000 households, or 35%, of the people in fuel poverty are in the privately rented sector. In 2011, the coalition Government introduced regulations which are to take effect next year, but as far as can be discerned, very little in the way of instructions have been given to private landlords to carry out the necessary improvements to change the dreadful conditions that prevail for so many people. They now have less than a year to do something about it. Will the Government give us a clear indication of what will be required of landlords and when that will be published, so that landlords can get on with the job, if they have the stomach and resources to do it?

[Lord Prior of Brampton]

The noble Lord raises a very important point. As he will know, from 2018 private landlords will not be able to let their property to new tenants unless the property is at least band E. The cost of getting to band E is an issue that is under negotiation at the moment with Claire Perry, the Minister responsible for green energy. I hope that we will make some serious progress in that area over the next few months.

[Lord Palmer (CB)]

My Lords, is it not a scandal that in 2017 any household should be living in fuel poverty?

[Lord Prior of Brampton]

My Lords, that is a question that should be directed at poverty as a whole. The fact of the matter is that successive Governments, on both sides of this House and the other House, have done what they can to reduce poverty and to create a just and fairer society. So long as there are people living in poverty, whether fuel poverty or any other form of poverty, we have clearly failed.

Nuclear Research and Technology (Science and Technology Committee Report)

Lord Prior of Brampton Excerpts

Tuesday 17th October 2017 Lords Chamber

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

My Lords, I begin by thanking my noble friend Lord Selborne and the members of his committee for an exceptionally good report. I would like to read out a paragraph from the summary at the beginning, because in a sense it underlies the big question behind this debate. It says:

“The decision the Government must make is whether the UK should be a designer, manufacturer and operator of nuclear generation technology or alternatively whether it should restrict its interest to being an operator of equipment supplied by others from overseas”.


That is the big question that we are talking about this evening. If I may put it slightly less eloquently than she did, the noble Baroness, Lady Bowles, asked whether we are going to be a maker or a taker.

The noble Lord, Lord Hennessy, asked whether we have lost our nerve. I may be wrong, but I do not think he was directing that question at the Government today but rather was looking at it historically. The truth of the matter is that we did lose our nerve in the 1980s. The incidents at Three Mile Island and Chernobyl did not help, and Fukushima since then has not helped. The noble Lord, Lord Hennessy, described the history of civil nuclear power in this country, and I will talk about that myself. It is true that we were a leader in this technology, but in the 1980s we lost our nerve—it goes without saying. And we lost our nerve for 30 years.

The question this evening is whether we have regained that nerve and to what extent, especially given that this is not a no-risk, zero-sum game. Civil nuclear power is fantastically expensive. As the noble Lord, Lord Broers, mentioned, the technology being used at Hinkley is not yet on stream in China or France; it is running four or six years late and over budget. Let us not pretend that this is an easy decision. When people say, “Make up your mind; make a decision”, let us at least be realistic. The sums of money we are talking about are massive—the budget for Hinkley is more than £20 billion.

Sometimes, especially at this time of night, our glass is half empty. Therefore, I thank the noble Lord, Lord Grantchester, for reminding us that carbon emissions are 42% lower than in 1990 at a time when we have had economic growth of 67%. That is a remarkable achievement. No one can say that our energy policy has been all bad over that time.

To start, I will talk a little about the history. We have long experience of working in the civil nuclear field going back to the 1940s, coming out of the Manhattan Project in 1945. The UK Atomic Energy Authority was set up in 1954 to oversee the development of nuclear power in the UK. The first reactor was Calder Hall in 1956. This led to the construction of the Magnox fleet of reactors in the 1950s and 1960s, followed by the AGRs in the 1960s and finally the PWR at Sizewell B, which began operating in the 1990s. As the noble Lord, Lord Hennessy, reminded us, the Dounreay Nuclear Power Development Establishment developed fast-breeder reactor technology. It is true that until the mid-1980s, we were at the forefront of nuclear research and development and were world leaders in many areas. Throughout that time and subsequently, nuclear power provided reliable, low-cost, base-loaded electricity to the UK, producing about one-fifth of all our electricity.

That brings us to the mid-1980s. Since then, publicly funded research and development, and the people working in the nuclear sector, have contracted as the UK facilities landscape was consolidated and global interest focused on the deployment of evolutions of existing light-water reactors. Since the early 2000s and the renaissance of interest in civil nuclear power, it has become apparent that those with the skills to take forward a nuclear programme in the UK are getting older and the R&D facilities and skills required would be lost unless we embark on a major reinvestment in nuclear. That is where we found ourselves in 2010 and 2011.

The UK’s nuclear research landscape and supply chain are increasing again due to the Government’s £180 million nuclear innovation programme to meet the challenges brought about by the national resurgence in interest in nuclear energy. In the wake of the House of Lords Science and Technology Committee’s reports of 2011 and 2017, and the 2013 nuclear industrial strategy, which set out the Government’s aims for a world-leading nuclear research landscape, the Government have also put in place the necessary advisory and co-operative frameworks to support such aims. The 2015 spending review followed this with an announcement of funding for,

“an ambitious nuclear research and development programme that will revive the UK’s nuclear expertise and position the UK as a global leader in innovative nuclear technologies”.

As some noble Lords have pointed out, last week we announced the clean growth strategy, which reiterated the Government’s commitment to nuclear and outlined our ongoing investment of £460 million in nuclear innovation, covering both fusion and fission. For the avoidance of doubt about where that money is coming from, £180 million is coming from BEIS for nuclear fission, £131 million for fusion, £61 million is coming from Innovate UK, £68.3 million comes from research councils and £20 million has come from the industrial strategy challenge fund. That is where the £460 million comes from.

BEIS launched the initial phase of its £180 million nuclear innovation programme in November 2016 with over £20 million of funding covering five areas of research on future fuels, fuel recycling, reactor design, materials and manufacturing and a strategic toolkit to underpin decisions on which emerging technologies are brought to market. The first £20 million tranche is progressing well and is providing evidence and information that will set the foundations for further funding to be announced in November.

The £180 million nuclear innovation programme was developed based on the recommendations of NIRAB, which ran from 2014 to 2016 as a three-year temporary advisory board comprising 26 experts, chaired by Dame Sue Ion. The Government are working in partnership with the Nuclear Innovation and Research Office to convene a new advisory structure, under the banner of NIRAB, to provide independent expert advice on research and innovation. A process of seeking people to join this board has commenced and we expect that to conclude in November.

In view of the central question posed by the committee’s report—and to ensure that there is no misunderstanding on this—we are not currently in the business of designing and building our own conventional reactors for new build. That is self-evidently the case. It is not a realistic short-term proposition. That said, the UK supply chain has a number of niche capabilities that makes it attractive to international partnerships. In particular, modular and advanced reactor technologies present an opportunity in future for the UK to build its capacity alongside international partners—and in the longer run, of course, there is fusion as well. Government research and innovation support targets a number of these opportunities, and we are investing in the capacity of our regulators to engage with their peers on the co-operation and harmonisation that will be essential to the deployment of any new technology on a global basis. As noble Lords have pointed out, this could never be a national strategy. Even SMRs, which are a cheaper alternative to conventional nuclear, would work efficiently or effectively only if there were an international market and not only a national market.

The Government have made good progress—I accept that it has been slow to date—in assessing the potential of small modular reactors. We will be closing the competition and publishing the detailed techno-economic assessment in the very near future. The techno-economic assessment used evidence gathered from 14 SMR vendors and the subsequent competition received eligible expressions of interest from more than 30 different companies across the nuclear industry, including 18 SMR vendors.

We recognise that the Government have a role to play in helping to establish the right market conditions to allow credible and investable modular reactor propositions to come forward. Only last week we announced £7 million investment to expand the capacity of the UK’s nuclear regulators to prepare them and the sector for the advanced technologies of tomorrow. The Government are now working with industry, through the industrial strategy nuclear sector deal, on a potential policy initiative to support the sector. That includes setting up a national college for nuclear to train 7,000 people by 2020, and Sellafield committing to achieve a workforce where 5% are apprentices, graduates or sponsored students within five years.

The nuclear industry, therefore, is in a position, from the point of view of technology, skills and regulation, to rebuild for the future the kind of leadership we had in the 1960s and 1970s. In response to the committee’s central question, the investments currently being made create the opportunity for the UK to be a,

“designer, manufacturer and operator of nuclear generation in the future”.

Nuclear power is a mature technology capable of providing secure, low-carbon affordable energy. The Government are committed to it playing a significant role in our future energy mix and being a key element in helping to meet our long-term climate change commitments. In terms of new nuclear, as all noble Lords know, the Government have signed a contract for Hinkley Point C, which is scheduled for completion in 2025. It will be the first new nuclear plant in the UK for more than 20 years. As existing plants come to the end of their lives over the coming decades, the Government believe that new nuclear will have a key role to play in meeting the demand.

[Lord Grantchester]

My Lords, perhaps I can press the Minister on one point. He was right to point in his analysis to the very expensive cost of this new technology coming on stream and the nuclear industry in general. A question that I hope he will be able to answer in his winding-up remarks is about the relative cost to the consumer of the new build. We have the example of Hinkley Point C in terms of one technology. If the noble Lord is looking to the future, it may be something which the UK could put an emphasis on. Is he able to say what the cost of the electricity is in his department’s analysis of power produced by small nuclear reactors?

[Lord Prior of Brampton]

As the noble Lord knows, the price for Hinkley is £92.50, which I think is indexed. The latest price in the auction for offshore wind was £57 and I think that the general figure I have heard for SMRs is around £60. Do not quote me on that, but it is a figure I have heard from people in the industry. Clearly, it depends on how much is produced and how economic it is in producing SMRs. The sum may come down below that. The fact is that the price of renewables is coming down. I know that the prices are variable and not baseload, but the industry does not stand still.

I am pleased to announce today that the Government intend to work with the secretariat and other members of the Generation IV International Forum in order to retake our place as an active and participating member of the forum in 2018. The GIF is the main grouping of countries interested in developing advanced nuclear technologies. Government can help to create the environment and frameworks to support nuclear development and deployment. We can also underpin the regulatory framework necessary to assess the safety, security and environmental aspects of new technologies. Ultimately, however, we must remember that the assessments and decisions on which technologies succeed rest not only with government but with the industry—and when I say the markets, I mean the price of the product.

We must remember that other industries are not standing still and waiting for nuclear to play catch-up. Renewables such as offshore wind and energy storage technologies are evolving at a pace. To maintain its place in the competitive low-carbon energy markets of the future, nuclear will need to provide additional value in terms of its flexibility, functionality or reduced costs to supplement its baseload availability. In a low-carbon green world, nuclear should have a big role to play, but it will have to be competitive with other low-carbon technologies.

International Investment

Lord Prior of Brampton Excerpts

Tuesday 17th October 2017 Lords Chamber

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

My Lords, with the leave of the House, I shall now repeat a Statement made by my right honourable friend the Secretary of State for Business, Energy and Industrial Strategy.

“Mr Speaker, the United Kingdom has a deserved reputation as one of the most open economies in the world; one which welcomes international investment and the benefits it brings. Our position as the fifth-largest economy in the world has been built on international trade and investment. Today’s Green Paper affirms our commitment to that approach and sets out proposed reforms to our scrutiny of foreign investment to ensure that our national security is protected.

An open approach to international investment must include appropriate safeguards. It is vital that the UK Government can deliver on our primary duty to safeguard national security and ensure that the interests of the British people are protected. It is important that the Government have both knowledge of potential national security risks to the UK and the ability to act where necessary.

Our review has highlighted that it needs to be updated to take into account the changing structure and size of companies in sectors critical to our national security. Our reforms will bring the UK into line with many major developed economies. We want to develop clear, consistent and proportionate rules which enable us to scrutinise the ownership of our infrastructure but which are also well understood and give international investors the clarity and transparency they require.

We propose a two-stage approach. First, I am now updating our current arrangements by consulting on amendments to the Enterprise Act 2002 to enable the Government, if necessary, to intervene in mergers which fall outside the current provisions. In most sectors, the thresholds in the Act allow the Government to intervene on public interest grounds only in mergers where the acquired company has a UK turnover of more than £70 million or the merger results in an increase in the UK share of supply to 25% or more. These thresholds are no longer appropriate for certain sectors, particularly those where smaller companies may hold technologies which are critical for national security. For these sectors, we propose to introduce amendments by secondary legislation which would lower the turnover threshold to £1 million and remove the requirement for the merger to increase the share of supply to 25% or more.

Specifically, I am consulting on amendments to the thresholds for the dual-use and military sector and certain parts of the advanced technology sectors. The first of these relates to items that are currently subject to export controls. Hostile actors should not be able to acquire these items, or the knowledge about how to make them, by buying UK-based businesses. The second relates to companies involved in the design of computer chips and quantum technology. Advanced technologies can create threats which are difficult to detect and may mean that devices could be directed remotely, should a hostile actor gain access.

The Green Paper also seeks public views about options for broader reforms to the way we scrutinise investment for national security purposes. In particular, we are seeking views on two proposals: broadening the range of transactions that the Government are able to review for national security purposes; and the introduction of mandatory notification of foreign investment into certain parts of the economy which are critical for national security, such as the civil nuclear and defence sectors.

The Government intend that any reforms should be firmly targeted at national security. While the national security assessment by its nature must remain confidential, we will also seek to provide greater certainty and clarity to businesses on the process itself. These proposals will ensure that our arrangements for protecting national security are aligned with the practices in other major countries and are more robust to the evolving nature of national security threats and technological change.

Let me say something about takeovers more generally, outside the area of national security. We have held discussions with stakeholders, including the Takeover Panel, about the current process for takeovers. These discussions have covered the need for more information and time to allow for assessment of takeover bids by interested parties, and how assurances given during the takeover process can be properly assessed and compliance scrutinised. We believe the recently proposed changes by the Takeover Panel would improve the UK’s takeover rules. We look forward to the conclusion of the consultation.

Alongside this, the Government will act, where appropriate, to ensure that public funds are protected in merger situations. In particular, we will take steps to ensure that government-funded research and development grants can be clawed back following a takeover if the new company would have been ineligible to receive the grant or the purpose for which the grant was made has changed.

I now turn to a particular international investment announcement made late last night. Last Tuesday, I briefed the House on the trade dispute brought by Boeing against Bombardier. Since the outset, I and my colleagues have been constantly engaged and this has included looking at alternatives.

I am pleased to tell the House that yesterday the boards of Bombardier and Airbus announced plans for a joint venture involving the C Series aircraft. The deal is expected to be completed by the second half of next year. I have spoken directly to Pierre Beaudoin, the chairman of Bombardier, and Tom Enders, the chief executive of Airbus, specifically about this joint venture. I have also discussed this with Chrystia Freeland, Canada’s Minister of Foreign Affairs. My top priority has been to emphasise the importance of giving certainty to Bombardier’s high-quality UK workforce now and in the future.

The Shorts factory in Belfast employs more than 4,200 skilled workers and supports a supply chain of hundreds of companies and many more jobs in the UK. Airbus also has a large presence in the UK, employing more than 15,000 people, and is firmly rooted in the UK’s advanced technology industrial base.

It is in all our interest that the C Series is successful. Both Bombardier and Airbus have made a number of important commitments to me, including that C Series wing manufacturing will continue in Belfast and that the strategy will be one of building on existing strengths and commitments. This announcement offers the potential to protect the interests of Bombardier’s Belfast workers and UK supply chain. The UK is already Airbus’s wing factory for the world and this announcement reinforces that position.

The trade dispute brought by Boeing against Bombardier’s C Series remains in place. We consider this action by Boeing to be totally unjustified, unwarranted and incompatible with the conduct we would expect of a company with a long-term business relationship with the United Kingdom. We refute entirely any suggestion that our support for Shorts contravenes international rules. We will continue to work to see it resolved while Bombardier and Airbus negotiations continue.

I remain in close contact with Airbus, Bombardier and the Canadian and US Governments. I will be speaking to the chairman of Bombardier and the chief executive of Airbus again later this week for an update on progress. I will, of course, continue to meet the representatives and Members of this House who have been assiduous in standing up for their constituents’ interests. I will do everything I can to secure the best possible future for Bombardier’s Belfast workforce and its UK-based suppliers. I commend this Statement to the House”.

--- Later in debate ---

[Lord Fox (LD)]

My Lords, I draw your Lordships’ attention to the interests registered in my name. I, too, thank the Minister for repeating the Statement in this House. He is of course right to declare that the UK economy should be open. All of us on these Benches earnestly hope that that is the way the Government continue to play it and that we do not start to close down and become a little England.

The Minister also rightly highlighted the need for changes in appropriate safeguards. The world is changing very quickly, national security needs are changing and the Government are right to keep those under review, so this is a timely process.

The noble Lord, Lord Mendelsohn, asked for a holistic approach to the whole issue of mergers and acquisitions. En passant, I add pensions to that list, which he did not include, because increasingly pensions and the rights of pensioners are becoming a driver within the mergers and acquisitions section.

On the Statement, there is a powerful case for strengthening the public interest in takeovers, as, indeed our leader Vince Cable has argued regularly, most recently, I think, on the AstraZeneca case. However, while lowering the threshold is a welcome step, the Government’s proposals are narrow and do not add a great deal to the overall public interest element, which should be covered in a more holistic approach. In recent months we have seen several of the UK’s high-tech companies snapped up by foreign competitors. This has been exacerbated by the fall in the value of the pound. That is a regrettable outcome. Therefore, today’s inclusion of computer chips in the list of new technologies singled out is somewhat interesting given that it follows the much publicised acquisition of ARM, arguably the world’s best chip designer. That, again, was driven by the weakness of the pound. Perhaps the Minister agrees that there is an element of closing the stable door here. We wish that some of the measures we are discussing were in place at that time.

The addition of quantum technology raises the question: why only that? Again, the noble Lord, Lord Mendelsohn, opened up a list of other technologies. I had biosciences and some aspects of IT and encryption on my list. It seems to me a rather narrow list when you consider the potential threats to a range of technologies. In some technologies, the threats have not been thought of yet but they exist. In our view the scope should be widened to defend not just the science base from a security point of view but also the overall knowledge base of this country. Knowledge can leak out from this country through a variety of means, of which mergers and acquisitions is but one. Joint research projects are another. In many cases you often have competing aims where inward development exercises try to draw foreign investors into research projects where the IP driver in this country would be to exclude some of those investors. In many cases, therefore, we are creating a situation that is leaking out valuable information —whether it is for security interests or economically valuable—through actions that the Government or local government are driving. Perhaps this is something that the Minister could look at. At the heart of this is the narrow look at security needs. These Benches would widen that to cover more economic interests of this country, and we hope the Government will take that on board.

Turning to Bombardier, I am sure the whole House welcomes the announcement of this deal, which should protect the future of the plane-maker. Clearly, only a few days ago, we were discussing a very bleak future for the 4,000-plus workers and all of those indirectly involved in the economic area that it has created in Belfast, so this is good news. I said at the time that even though this is not a case that would, in the end, be won by Boeing, time was the issue that would kill off and affect Bombardier. This is a very effective way of trying to bridge that time and of negating that problem. We should all congratulate everybody who has been involved in expediting this so swiftly and effectively. I am sure there are “i”s to be dotted and “t”s to be crossed, and I hope the Minister will give assistance to all those who require it to make sure that happens. In that regard, will the Minister tell us what anti-trust hoops he expects this deal to have to jump through?

We would also welcome some clarity from the Minister on what assurances have been forthcoming, both on investment and on the public statement made by the CEO, Tom Enders, on the notion that operations will be more efficient. What will be the job implications in both Belfast and perhaps in Broughton? What assurances have been given, and how will he be able to uphold them? In many ways, the US Administration and Boeing might feel that they have got off the hook somewhat by this, but there are still huge tariffs outstanding on this aircraft. The actions of the US remain a salutary warning to this country that its relationship with the Trump Administration is, at best, strained and poses something of a black cloud.

In conclusion, today’s announcement on takeovers and mergers sets out steps in the right direction. We welcome greater breadth in scrutiny and the requirement for notification. I am sure that, as the consultation process goes through, the Government will look at the technologies, and at which elements of which technologies we should be concerned about. I hope they will also take on board the public interest aspect in mergers and acquisitions.

[Lord Prior of Brampton]

I thank both noble Lords for their broad welcome for the news on Bombardier and the Green Paper. Turning first to Bombardier, both noble Lords would like further information about jobs, growth and possible anti-trust implications, but it is too early to say at the moment. This joint venture has only just been announced. It is still subject to negotiations between the two parties. Rather than hazard a guess at where they will come out, perhaps we should report back to the House when further details become clear.

Turning to the Green Paper, both noble Lords would like a more holistic approach. The noble Lord was referring particularly to the takeover context, and he is absolutely right. Pensions are absolutely essential in that context, as are environmental obligations and the like. The noble Lord, Lord Mendelsohn, referred more to a holistic approach in the context of industrial strategy more generally, rather than specifically on takeovers. He will have to wait until later in November, when we will announce our industrial strategy. I hope he will agree, when that strategy is before him, that it is a holistic, joined-up approach to industrial strategy.

I will deal with some of the other issues that both noble Lords raised. Of course foreign direct investment is essential. There is a balance; we want to be open to foreign direct investment—the last thing we want to create is a chill, as the noble Lord put it, on investment coming into this country. Although it is absolutely true that a number of high-tech British companies have been sold over the last two or three years, particularly to American buyers, in the vast majority of cases those American companies have brought capital and support. I refer, for example, to Google’s acquisition of DeepMind; it has put huge resources behind that company which might not have been there had it remained a private British business. SoftBank’s acquisition of ARM falls into that category as well; it gave a number of important undertakings about research and keeping that research in the UK. Therefore, there is a balance to be struck in these areas and the last thing we want to do in this country is shut ourselves off from investment from the US and elsewhere. If one looks at how we support small tech companies, it raises a much broader issue about patient capital, spin-outs from universities and the like. I hope we will deal with those issues when we come to our industrial strategy in a few weeks’ time.

Both noble Lords raised whether the definitions of quantum computing chips and dual-use defence were too narrow. They will, no doubt, want to comment on that issue in the consultation. We have gone for quantum computing and chips in particular because they are often embedded into infrastructure and safety-critical areas. Quantum computing is precisely the area where cybersecurity is so important; we can use it to break complex encryption codes and the like. We felt, having done a lot of consultation, that those areas of chips and quantum computing were the critical ones. I understand the noble Lord’s point about life sciences; there may be other areas that he would like us to consider as part of the consultation. In general, however, this is a question of balance and where we draw the line. We can always argue about the balance, but I am reassured that we have not got it too far wrong when both noble Lords broadly support what we are doing.

[Lord King of Bridgwater (Con)]

In general, I welcome my noble friend’s announcement that the Government intend to act in this area. However, I have one concern. In consulting on possible amendments to the international investment arrangements, we notice what happened when the pound suddenly weakened and overseas investors took the opportunity to take over UK companies. I worry about what will happen in the interim, before any new changes are made. I have felt for some time that these changes need to happen, and if companies see that the rules may change for them quite soon, we may find that it pre-empts people into taking action now.

I also note from his Statement that the Secretary of State has been busy, helpfully, talking on the telephone to Airbus and Bombardier. I suggest that he makes one more telephone call to the chairman of Boeing, to say that that great company, which we much admire and with which we in this country have had very good relationships hitherto, has not been helped at all by this unfortunate action it has taken. The best thing it could possibly do now, in recognition of the complications it has introduced, is to withdraw the action it has taken and enable the companies to go forward in this new arrangement, which I greatly welcome.

[Lord Prior of Brampton]

My noble friend makes two important points. On Boeing, I cannot swear to it, but I think the Prime Minister has spoken to Boeing directly about this issue. Certainly, my right honourable friend Greg Clark, in the other place, is also in touch with Boeing. Boeing has two big investments in this country, which relate to helicopters and to a new facility it has opened in Sheffield, so it is an important part of our economy. I assure my noble friend that we are having conversations of the kind that he describes with Boeing. I understand my noble friend’s point that this consultation might lead to some companies pre-empting this and coming forward to buy a British company now rather than later. We have considerable soft power in these areas, so we can use quite a lot of influence behind the scenes to prevent that happening. But we certainly need to bear that consideration in mind.

[Lord Spicer (Con)]

My Lords, if this is genuinely about defence, that is one thing, but if it is going to be part of some sort of more protectionist policy, that will not sit well with Brexit. I am not sure what the word “holistic” means in this context but I am suspicious of it. Actually, we should particularly encourage large-scale projects that people get worried about because, once you are into a large-scale project, you cannot get out of it.

[Lord Prior of Brampton]

My Lords, my noble friend is absolutely right that foreign direct investment into this country is essential. For example, Hinkley Point power station is funded largely by the French and the Chinese. We are absolutely open to investment from all over the world, so there is no intention at all of discouraging foreign direct investment coming into this country—on the contrary. I think that we are the third biggest end point for foreign direct investment after the Chinese and the Americans, and there is no intention of harming that. As far as the word “holistic” is concerned, I think that the noble Lord meant “joined-up government”; it was not in any way directed at some conspiracy to prevent investment coming into this country.

[Lord Howell of Guildford (Con)]

My Lords, I particularly welcome the better news about Bombardier. Having, ages ago, been the Minister responsible for inward investment into Northern Ireland, I can confirm that the engineering skills legacy of Belfast and indeed of Northern Ireland is colossal. From the days of Short Brothers and Harland and Wolff, when I was involved right down through the years, there has been a highly innovative and skilled operation, and I am very glad that it will be preserved and encouraged with further investment, as it should be.

On inward investment generally, I agree with my noble friend and the noble Lord, Lord Mendelsohn. We have to be a bit careful. We rely on heavy capital and inward investment to balance the books in this country and compensate for our colossal trade deficit, and we need to avoid any implication that we are somehow turning against being an open house for most inward investment, although there obviously have to be some safeguards. Can my noble friend reassure us about one area that he mentioned—civil nuclear power? The nuclear scene is dominated by both foreign ownership and foreign inward investment and support, not least for Hinkley Point C, which will survive and prosper only with heavy Chinese help and involvement. Can he assure us that nothing that has come out today will get in the way or cause further disruption of our already rather difficultly placed nuclear programme? It is not going well now and will go even worse if we cut out foreign investment.

[Lord Prior of Brampton]

My noble friend makes a number of very good points. First, as he rightly says, the 4,200 people who work at Short Brothers have some outstanding, world-class engineering skills, and the fact that Bombardier and Airbus have come to this agreement is extremely good news for all of them. Secondly, as far as civil nuclear power is concerned, he is absolutely right. Hinkley depends on Chinese investment, as indeed do many economies throughout the world. I think that it would be very foolish of us to be at all concerned about the Chinese investing in our civil nuclear power industry. The Chinese will probably build 150 nuclear power stations in their own country over the next 10 years, and they will unquestionably be among the world’s best when it comes to building and operating nuclear power plants. We should take the fact that they are investing in the UK as a very good thing.

[Lord Lea of Crondall (Lab)]

My Lords, does the Minister agree that Boeing has for many years been a classic example of indirect support of the military-industrial complex—to use General Eisenhower’s phrase—in the United States through defence expenditure, R&D and so on, and that the same applies to high-tech industries generally? Therefore, is it not a fact that we have to scrutinise matters very carefully and take a robust view of our long-term strategic interest when it comes to the arguments that keep flying around across the Atlantic?

[Lord Prior of Brampton]

The noble Lord is absolutely right. Boeing has been hugely supported by the American defence industry since the Second World War at least. He is right that we should vigorously defend any claims that Boeing has against the British Government’s support of Bombardier in Northern Ireland.

[Lord Lansley (Con)]

My Lords, I want to ask my noble friend about the extent to which the proposals in the Green Paper, which I confess I have not yet had the chance to read, are aligning the public interest test for national security purposes with the export control regime. My recollection from serving on the quadrilateral committee in another place is that national security was not the only consideration for export controls; other considerations also applied, including our international and human rights obligations. However, my noble friend’s Statement said that this is targeted firmly at national security. Do we intend to reinforce the export control regime in toto or simply the aspect of it that relates to national security?

Forgive me, but if I may, I will also ask: while the Government are pursuing amendments to the Enterprise Act on the public interest intervention, will they also make progress on updating the public interest test on media plurality, which was foreshadowed in the debate here on the Digital Economy Bill in the last Session? It needs to be substantially updated to reflect the changing media framework to which that media plurality is applied.

[Lord Prior of Brampton]

My noble friend has asked me two questions and I am not sure whether I can do them full justice. On his first question about the export control regime, it is true that the £70 million test will come down to £1 million for companies that are subject to the export control regime. I assume that those companies would, by definition, be concerned with national security issues. In so far as they are not, I will have to write to my noble friend on that point.

I will also have to take further advice on his second question. At the moment, there is no intention to extend the Green Paper consultation to media plurality, but I will double check that and write to my noble friend.