Industrial Strategy

Iain Wright Excerpts

Thursday 20th October 2016 Commons Chamber

[Mr Iain Wright (Hartlepool) (Lab)]

Thank you for that guidance, Mr Deputy Speaker—I need to have a productivity improvement of about 20% immediately.

It is a real honour to follow the hon. Member for Warwick and Leamington (Chris White). I think we have exactly the same principles, motivations and objectives when it comes to having an industrial policy. He is a fantastic member of the Business, Energy and Industrial Strategy Committee. I thank him, other members of the Committee, and the Backbench Business Committee for allowing this important topic to be debated today.

I welcome the Prime Minister’s rhetoric about having a “proper” industrial strategy. We on the Committee have embarked on an inquiry into industrial strategy to assist with the development of policy. A number of fundamental questions need to be addressed to ensure that we have a modern, competitive, productive, sustainable and profitable business base in this country. What is the correct and optimum level of state intervention in economic and business policy? It would be ludicrous and naive to suggest that the Government do not intervene every single day through legislation and regulation that affect the prospects of hundreds of thousands of businesses.

How can that intervention be done in as strategic and co-ordinated a manner as possible? The primary consideration for business in any industrial strategy, or indeed any Government policy, is long-term certainty—something the hon. Gentleman has already mentioned. How can we ensure that the broad sweep of industrial policy transcends Parliaments and can withstand changes of Government? We have to acknowledge that there is a mismatch between the long-term requirements of business and short-term political pressures. Ministers of all Governments and of all persuasions are prone to the temptation of announcements, initiatives and reviews. Governments are keen to give the impression of action and activity, even if that is not often matched in reality. How better to give an impression of zeal and purpose than to announce a review of something?

[Richard Fuller (Bedford) (Con)]

The hon. Gentleman talks about the importance of the long term as he yet again stumbles into the same mistake that politicians make generation after generation—believing that they know what industrial strategy is but do not bother to ask their colleague for whom it might be something different. My experience of business has been in technology. The only long-term thing in technology was the knowledge that tomorrow will be different from today. How on earth are the Government, with their lumbering, slow way of manoeuvring, supposed to keep up with the entrepreneurs who have created so much progress in society?

[Mr Wright]

We can have many debates on industrial policy—we have and we will.

The hon. Gentleman touches on the second big theme of my speech, which is: What do we mean by picking winners? Let me go back to the notion of long-term business considerations and wishes for policy stability at the expense of short-term political culture. We have seen this already with the new Government. The new Prime Minister has announced that we need to have

“a proper industrial strategy”.

In doing so, she seems to have jettisoned much of what has gone before. In a letter to me this week, the Secretary of State said that there needs to be

“a much stronger relationship between Government and business. For that reason, now is not the time for the Government to set out its approach in detail”.

Although that provides clear blue water between the current Government and what went before when David Cameron was Prime Minister, it hardly provides the reassurance of certainty for business. At a time when the process of Brexit is leaving business with unprecedented uncertainty and giving pause to future inward investment into this country, greater detail should have been provided. It is a cause for concern that over three months after the new Department was formed, the Secretary of State is still insisting that he cannot set out the Government’s industrial strategy in any kind of detail. Equally, important steps on large strategic matters such as airport expansion and new energy generation are taking far too long, especially when Britain needs to demonstrate to the world that we remain open for business.

Another key principle of what we need for a successful industrial strategy is effective cross-Government co-ordination. Industrial strategy will be a failure if it merely resides in No. 1 Victoria Street. As previous Administrations have demonstrated, unless the relevant Department—the Business Department, the DTI, or whatever it is called—is headed by a big beast, whether a Heseltine or a Mandelson, the notion of effective co-ordination across Whitehall turns into dust. Early signs from the new Administration are encouraging. Most importantly, the new Cabinet Committee on Economy and Industrial Strategy is chaired by the Prime Minister herself. This should ensure co-ordination and effective leverage from No. 10 and demonstrate to other Departments that the Prime Minister is very interested in this issue and will be pushing to bang heads together if they do not demonstrate due respect to an industrial strategy.

That said, the Cabinet Committee still has to combat a silo-based and defensive approach from Departments. I think that the Secretary of State recognises that. As he said in his letter to me,

“to be successful, the industrial strategy will need to deliver an upgrade to our infrastructure”,

and yet the Treasury will not relinquish control over infrastructure spend. He also stated that a successful industrial strategy will need to

“improve our education and training system to provide the skilled workforce that will be needed in the future”,

and yet the Department has lost control over skills policy. Lord Heseltine, giving evidence to our Committee last week, said that

“industrial strategy starts in primary schools”,

and yet when we met the Permanent Secretary this week and asked, “To what extent does BEIS have influence over the design of primary school policy in order to link it with industrial policy?”, he conceded that the Department had no such influence. I am yet to be convinced, based on experience of successive Governments, and having had the privilege of serving as a Minister myself, that Whitehall Departments will have as a primary objective the effective implementation of an industrial strategy. I hope that the Minister can demonstrate otherwise.

A further key way in which effective Government co-ordination can be demonstrated is through smart procurement. There may often be a tension between Departments in securing goods and services at the cheapest cost, and in considering the use of British-based and British-made products, which may sometimes be more expensive. I would contend, however, that it is often a false economy to buy off the shelf from overseas at the long-term expense of an effective British manufacturing sector. This month’s announcement that the hulls of the replacement Trident submarines are to be built with French steel, at a time when the British steel industry has been pushed to the brink of extinction, shows vividly an acute failure of industrial policy. I am not for one moment endorsing the idea of protectionism. That approach insulates domestic companies from the harsh realities of having to compete in the global economy on cost, innovation and quality, and it ultimately dooms them to obsolescence. However, given the great success story of many parts of British manufacturing, why is not every single public organisation’s fleet using Nissan cars built in Sunderland or Vauxhall vans built in Luton? How is the procurement process nurturing British industry, and how will a proper industrial strategy ensure that that becomes the case?

[Richard Fuller]

I am grateful to the hon. Gentleman for giving way a second time. He said that he was not talking about protectionism, but then he outlined, chapter and verse, a protectionist position that we should buy British products. How is that not protectionism?

[Mr Wright]

I think that smart procurement can engineer proper prosperity, but I warn the hon. Gentleman that what I have to say next will give him spasms. It relates to the link between a proper industrial strategy and foreign takeovers, and how the state can intervene to perhaps limit the range of foreign takeovers.

In her speech launching her campaign to be Conservative party leader in July, the Prime Minister said:

“A proper industrial strategy wouldn’t automatically stop the sale of British firms to foreign ones, but it should be capable of stepping in to defend a sector that is as important as pharmaceuticals is to Britain.”

I welcome that approach. One of Britain’s virtues is its openness and the fact that that openness lends itself to dynamism and a willingness to consider new ideas and innovate new products. That ultimately leads to better competitiveness, yet there is a risk that this country will sell off the crown jewels, which would be detrimental to the long-term success of British business. We are at the heart of a dynamic and connected global economy, but we are at greater risk of investment in capital allocation decisions that affect British industry being made far away from these shores by parent boards headquartered overseas.

Indeed, within days of the Prime Minister entering No. 10, it was announced that SoftBank was buying Cambridge-based Arm Holdings for £24 billion. That was not an old-fashioned, obsolete, loss-making businesses, and it did not require a bail-out from the state. It was a successful British company in the growing global tech revolution. If the tests for stepping in to defend a sector that is important for Britain were not at work in that instance, it is difficult to see when they would be applied. Indeed, what would those tests be? For every instance of a welcome takeover, such as Tata’s purchase of Jaguar Land Rover, there are numerous examples of takeovers where industrial capacity was moved offshore, such as Kraft’s takeover of Cadbury. What are the criteria for stepping in and intervening?

[Mr Sheerman]

That is music to my ears. When I was a young man, I worked for Imperial Chemical Industries. These days it is called Syngenta and it has a big plant in my constituency. The leading agritech company in the world was taken over, including all its sites, not by a normal company, but by ChemChina, which is a part of the communist Government of China. That is not a normal takeover, but what are this Government doing about it? I have not heard anything.

[Mr Wright]

That is a fair point and it gets to the heart of what we mean by foreign takeovers and their link to industrial strategy.

I am conscious that colleagues want to make their own speeches, so I will finish. The Government have yet to articulate what is meant by picking winners, whether they be individual companies, sectors or technologies. There seems to be a move away from our previous sectoral approach, but there is no clarity with regard to the criteria. It is increasingly obvious that the Government are not entirely clear about what an industrial strategy looks like. Starting with a blank piece of paper gives the Select Committee a welcome opportunity to contribute meaningfully to the development of policy, but it does not provide much reassurance or certainty to the firms that are working hard to create wealth and prosperity for this country—and certainty is what they are crying out for at the moment.

--- Later in debate ---

[The Minister for Universities, Science, Research and Innovation (Joseph Johnson)]

By speaking relatively early in the debate rather than at the end, I want to signal that the Government do not intend at this stage to have the last word on the country’s industrial strategy. Such plans, which must command the support of successive Administrations, must be built on strong foundations of engagement, discussion and careful consultation across the Government and, indeed, across the country. As has been said, they should not be imposed from 1 Victoria Street or, indeed, anywhere else in Whitehall.

The industrial strategy is under development, as hon. Members have observed, so now is not the time to set out detailed plans for our approach. We expect to publish a discussion paper around the time of the autumn statement and then a response from the Government in the new year, 2017.

[Mr Iain Wright]

When?

[Joseph Johnson]

In the new year.

[Mr Wright]

And the paper?

[Joseph Johnson]

At the autumn statement this year.

Let me give Members a broad overview of the context in which we are developing the industrial strategy and a flavour for some of the principles guiding us as we do so. First, however, I want to thank my hon. Friend the Member for Warwick and Leamington (Chris White) and the hon. Members for Hove (Peter Kyle), for Edinburgh West (Michelle Thomson)—who is no longer in her place—and for Hartlepool (Mr Wright) for securing the debate and making such powerful contributions.

The UK economy has delivered a huge amount of growth and employment over recent years. Unemployment has been reduced from 8% in 2010 to 5% now, while full-time employment has climbed from 70% to 74% over the same period—a faster rate of employment growth than France, Germany or the USA. But, as the Prime Minster has made clear, our economy is not working perfectly. Gains are not always shared across the country and too many people are losing out. We want to deliver an economy that works for everyone.