Exports: Government Support

Baroness Williams of Trafford Excerpts

Thursday 29th January 2015 Lords Chamber

[Lord Hunt of Chesterton (Lab)]

My Lords, I welcome this debate, introduced by the noble Baroness, Lady Wheatcroft, who was a distinguished editor of Wall Street Journal Europe. It is an innovative if rather right-wing paper, but it kindly published some of my articles on environmental policy.

I liked the noble Baroness’s remarks, but they reminded me slightly of a rather irate Minister in this Government at some meeting getting more and more heated and saying, “Well, the UK just should be the corner shop of the world”. My vision is that it should be somewhat bigger. A bit of corner shopping is all very well, as the noble Baroness, Lady Wheatcroft, said, but there are some big issues. We should also remember her remark about the Prime Minister going to Asia. As noble Lords will recall, when the Prime Minister went to China the word “Boeing” was above his head as he came down the steps of the aircraft. He should have gone in an Airbus, like all the leaders of Europe do.

I declare my interests as a director of a small, high-tech company. I had a much bigger role as head of the Met Office.

For the UK to increase its exports, which is vital for the economy, it requires collaboration between the Government, business and everyone who provides services to foreign customers, whether they are in the UK or abroad. The first job of government is not to make it more difficult for UK organisations to contribute to visible and invisible exports. A simple point that this Government have forgotten, of which Indian universities reminded the Prime Minister when he visited India, and as the noble Baroness, Lady Wheatcroft, just emphasised, is that enabling foreign students to come to the UK is a very important invisible export. It is also important for them to be able to work in the UK. I am glad that there are now schemes for that to happen, but they are not widely known. When one goes around the world and meets students, they say that they will not come to the UK to study because it is so difficult to get a job afterwards.

The Government’s second own goal that I would like to point out was in the Daily Telegraph—not my usual reading—in “Business Club”, which is even less so. It had an interesting online article yesterday on the uncertainty about the UK leaving the EU, which is damaging invisible and visible exports. The article says that that is making it more difficult for UK businesses to get contracts in Europe. This uncertainty also inhibits some inward manufacturing investment and is driving some businesses abroad.

What is extraordinary about this threat to leave Europe is that UK business and government will be much less able to influence the EU’s setting of technical standards of saleable products. I read the New York Times from time to time; these EU standards are regarded as the world standards and affect business the world over. If the UK is not to be in the EU but be like Switzerland or Norway, it would simply have to receive the standards that are set by committees and other countries in Europe. Doubtless helping UK business would not be first in their mind.

The UK science and technology sector has developed standards from its great experience. I have worked with EU institutions; they help European business. In future, the UK will be less able to have this influence. In the 1980s I helped set up a European network called Ercoftac—a rather funny name—to enable universities and industries to work in the aerospace and automobile sector. The way we have managed to get standards, data and test cases for industry is the envy of the world. Of course, we will still be able to participate if we leave the EU, but the way that this kind of network will be able to work with British industry will be diminished.

The previous Labour Government and this Government have introduced, through BIS, some new, greater support for science and technology, which contributes to UK exports. I endorse many of the remarks made by the noble Baroness, Lady Wheatcroft, on that. For example, last week I learned about the Satellite Applications Catapult, which provides extraordinary business opportunities. It is not just about business; being effective in business enables the provision of more information about health and well-being for communities around the world. We are talking about using business as an efficient method of providing services.

The difficulty facing the building up of UK exports is that many of the major world-leading high-tech companies are no longer here in the UK. This is something that happened over 20 or 30 years, but it was gratifying that one of our major high-tech companies, AstraZeneca, was not taken over by the United States company Pfizer. In fact, one might note that, despite the City of London gagging at the possibility of more M&A scavenging, that company is here thanks to our continental colleagues who are on the board of that company. As a result of those takeovers, large companies from Germany, the United States and Japan are operating in the UK, but their R&D is often done abroad. This has had an effect on UK employees. For example, there are fewer engineers in some big electrical companies in the UK than in their home countries.

This Government have done better than the Labour Government in improving manufacturing industry. That is to be welcomed. This has led to substantial imports, such as offshore wind and nuclear plant; we did not have this capacity before. The question is whether UK manufacturers can build themselves up so as to reduce the UK’s sizeable and growing balance of payments deficit. I look forward to hearing from the Minister on this point.

Of course, even the most successful countries import technology. It should be obvious that the UK needs to do that because we provide 8% of the world’s science, while 92% is abroad. I am pleased to see that BIS is now following the practice, well established in the United States, of employing staff to import commercial innovations. In the past I have been critical of the fact that there was no strong element of technical work on that area within BIS, but I believe that it is growing. For example, there was an advertising session at the London Olympics to bring foreign companies from abroad to demonstrate what they were doing. An Italian environmental company using social media came and we hope that it will be working in the UK.

Many small UK businesses complain about the lack of support that they receive from the UK Government, compared with that provided to competitor businesses by foreign Governments. Some British businessmen are quite demoralised by the unfairness of this competition. In principle, everybody should play cricket and follow the level playing field approach of the UK. However, this is not the case. Despite its propaganda about free and open competition, the United States is one of worst offenders in the way in which it restricts the import of foreign software and spends vast sums on technological support at its embassies. I have seen this in Beijing and in other countries. They are overtly using their technical knowledge to advise and support American consultancies and technologies.

Other European countries use their financial assistance to developing countries to promote their own basic exports. There is an article in a newspaper today about how this is happening through World Bank programmes. One hopes that high-tech companies in the UK may benefit from the Newton programme, introduced by the Prime Minister when he went to China. This should make some contribution, although I suspect that it is more about science and technology than about business.

Many business commentators have noted that one of the most effective ways in which the UK Government can help business is via the Government’s whole or partial ownership of exporting organisations. This started, of course, with Rolls-Royce. The Government rescued it from bankruptcy back in the glorious days of Ted Heath. It obtained City funding but the Government retained their golden share, so Rolls-Royce is still here. If that had not happened, one wonders whether it would still be here.

Recently, we have read ominous remarks in the newspapers about Rolls-Royce. Although it has been remarkably successful with its aerospace engines selling to about half the global wide jet market, typically, the moment there is the whiff of a problem, the City pages slaver at the possibility of more M&A scavengers breaking it up. I hope that the Minister will clarify the position. Rolls-Royce is still a top, world company and should have all the support that the Government can provide.

Many government agencies were set up as quasi-commercial organisations. It began under the Wilson Labour Government and continued strongly with the Thatcher Government. Such organisations have worked at the highest technological and commercial level and have greatly helped UK exports. As the noble Baroness, Lady Wheatcroft, said, more could be done to support British companies in overseas markets. The underfunded National Health Service is another example.

[Baroness Williams of Trafford (Con)]

My Lords, this is a time-limited debate. Speeches are limited to nine minutes. When the clock says nine, it means that noble Lords are into their 10th minute. Therefore, when the clock says 10, they are into their 11th minute. I would remind noble Lords to give the Minister sufficient time to respond.