Industrial Strategy

James Heappey Excerpts

Wednesday 18th April 2018 Commons Chamber

[Greg Clark]

I would not read too much into that. The defence industrial strategy is a very important part of our overall strategy. There are many references to industries—I mentioned aerospace—in which the innovation that comes from defence work can have important spillovers for the wider economy. We recognise that across the world that tends to be the case. The defence sector is very important to the strategy, and when some of the sector deals that I will come on to discuss are agreed, the hon. Gentleman will see that in abundance.

Drawing on input across the United Kingdom, we have an approach that is the distilled wisdom of many different contributors. It is a vision to help businesses raise their productivity performance, which is essential if we are to increase the country’s earning power. If we want to pay ourselves better as a nation and a society, we need to earn the way to do that by creating better-paid jobs and putting our country at the forefront of the industries of the future.

Let me introduce the four grand challenges that we have set out. I mentioned that we are uniquely well placed in this country, having leadership in some of the areas of the future, but we should not take that leadership for granted. We should have a deliberate plan and programme to reinforce that success. The four areas we have set out in the strategy, on advice, are artificial intelligence and the data-driven economy; clean growth; the future of mobility; and meeting the needs of an ageing society. Those challenges have been identified on the advice of our leading scientists and technologists, and they will be supported by investment from the new industrial strategy challenge fund and matched by commercial investment.

Let us take each of those briefly. We know that, whether in the Alan Turing Institute or in our companies throughout the UK, we have some of the most innovative thinkers and practitioners in AI and the use of data. We already have that reputation, but we need to keep at the forefront of those developments. A big part of the strategy is to recognise that, historically, as all Members know, we have been better at the “R” of R&D than the “D”. We have had brilliant ideas, but sometimes we have let them slip through our fingers and seen them implemented in industrial processes and investments in manufacturing in other countries. A big part of the challenge is therefore not just discovery but applying those discoveries in UK industry.

[James Heappey (Wells) (Con)]

When travelling overseas on parliamentary business and visiting universities, I have noticed, particularly in America, that people are much more entrepreneurial in their research projects and mapping out a route to a market. What might the Department do to encourage that sort of entrepreneurial spirit in our universities?

[Greg Clark]

We are getting better at it. Most colleagues will have experience of their local universities and others, and most research universities have active programmes to spin out discoveries and reap the benefits. Again, through the industrial strategy challenge fund, funding is available on a match basis to universities to pursue that implementation of good ideas. My hon. Friend is absolutely right.

Let us take the future of mobility. The hon. Member for Coventry South (Mr Cunningham) and I have had many conversations about this country’s reputation not only for the efficient manufacture of vehicles—that is a proud record—but for innovation, whether in the west midlands or the world-beating cluster of Formula 1 businesses around Oxfordshire and Northamptonshire. The world comes to the UK for the next generation of technologies. Forty-year veterans of the automotive industry say that this is the most exciting time in their career, when not only the powertrain but the way in which vehicles navigate is undergoing a revolution. Around the world, there is increasing demand for that set of technologies and we have a strong capability in them. Again, setting a grand challenge is crucial.

We have set the Faraday challenge to be a world leader in the development and application of new battery technology. It is already attracting great interest around the world, and the hon. Member for Coventry South will know that the national battery manufacturing development facility will be located in Warwickshire at the heart of our cluster there.

On the ageing society, whether in Glasgow and Edinburgh or Cambridge, we have some of the best researchers in the world looking at medical breakthroughs that will be in increasing demand around the world. I make it clear that now and long into the future, we will invest in the facilities and the people to make us the place to come to research new innovations. As Members from Scotland will know, the Glasgow city deal had a big medical component to build on our success there.

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[Rebecca Long Bailey]

I completely agree again.

Another issue that has been brought to my attention relates to sector deals. I understand that sectors are ready with proposals for such deals, but there is no clear structure or process in place for them to follow. For example, the rail industry has had a proposal for a sector deal ready since October, and the plan would deliver transformation across rail over the next 20 years, including new approaches that will cut the cost of digital signalling, addressing capacity issues and reliability. Perhaps the Minister will explain to the House what the delay is. How many proposals for sector deals has he received and how many have been agreed? Perhaps he will also commit to setting out in clear guidance, accessible to all businesses, how to go about pitching for a sector deal? Finally, will he update us on the implementation of the “Made Smarter” review? It was effectively ready to go, but I am sad to say that it received only a few cursory lines in the Government’s industrial strategy White Paper.

In short, Mr Deputy Speaker, as I am sure you have gleaned from my comments, the Government's industrial strategy, as drafted, is inadequate. While they now recognise the importance of an industrial strategy—well done—they are not prepared to use the full policy levers at their disposal to achieve it.

[James Heappey]

Following the shadow Secretary of State’s consultations with businesses around the country, will she name just one that agrees with Labour’s plans for nationalisation?

[Rebecca Long Bailey]

I would not want to put on the record in public the names of any specific companies without their consent, but there has been resounding support for Labour’s approach to the industrial strategy, because we are prepared to invest in our country’s future and to provide the support that businesses deserve. I am afraid that I hear time and again from businesses that the Conservative party simply does not listen anymore.

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[Drew Hendry]

Of course, in a discussion about the future of EU nationals, many of whom are very worried about their future, the hon. Gentleman tries to make a rather petty political point. What he should acknowledge is that Scotland is far from being a less attractive place. Thanks to the huge council tax hikes in England, which are the largest in 14 years—bills are up by some 5.1%—people are actually paying more tax in England than they are in Scotland.

There are roughly 181,000 EU nationals in Scotland. Half the welcome net increase in the Scottish population between 2000 and 2015 has come from people born in EU countries, yet the strategy overlooks the likely impact of immigration restrictions on UK industry. If there were a time to pause and think about the effects of immigration on people and industry, it should surely be this week, when we have seen the manifest failings of the UK Government’s current immigration strategy.

Some sectors in Scotland, such as the thriving food and drink sector, are particularly reliant on the employment of EU nationals. Many businesses across Scotland and the UK employ and rely on EU workers, but the UK Government’s regressive approach to immigration has failed to take proper account of that fact. It is simply not possible to replace straightforward access to the EU labour market with domestic recruitment, and replicating existing immigration rules for non-EU nationals would place significant and unnecessary costs and bureaucracy on business. As has been noted, we have had two very clear cases of people in my constituency of Inverness, Nairn, Badenoch and Strathspey who have been contributing to our local economy being booted out by the immigration policy of this Tory Government.

Let us now turn to the ambition of the industrial strategy. If we really want to deliver affordable energy and clean growth, it is astounding that the UK Government have failed properly to recognise renewable energy in the industrial strategy. The devastating predicted drop in renewable investment of 95% between 2017 and 2020 should be a wake-up call that urgent action should be taken to secure a thriving future for this dynamic sector. Of course, during that period, we have also seen the near decimation of the solar industry.

Scotland is proudly in the vanguard for the development of renewable energy projects and investment. The SNP Scottish Government have set out ambitious targets for a transition to a low-carbon economy. By contrast, the UK Government’s erratic energy approach and the UK’s decision to leave the European Union have created uncertainty in the sector. The UK Government have responsibility for the damaging effects that we have seen.

[James Heappey]

rose—

[Drew Hendry]

No, I will not give way. I did say earlier that I would limit the number of interventions. I have a lot to say on this subject, and I am wary about people taking too much time early in the debate.

Carbon capture and storage technology should play a leading role in tackling climate change, yet the UK Government have been complicit in stifling investment to develop this technology, as well as showing a lack of interest in developing and protecting jobs in Scotland. We wholly condemn the decision to cancel the CCS competition, which left Peterhead betrayed, resulting in a damaged relationship between the Government and industry as well as a negative legacy on investment and consumer confidence.

We have heard warm words about new investment in CCS, and I welcome that, but what I say constructively to the Secretary of State is that one 10th of the previous required investment will not cut it in terms of making the difference that needs to be made. Sustainable energy has been a success story for Scotland in recent years, and the Scottish Government have set out an ambitious strategy for renewable investment with the powers at their disposal. We firmly believe that supporting long-term energy security and environmental protection should be a key priority for any responsible Government. A robust and sustainable strategy for energy security would not only assist the creation of a low-carbon future, but boost productivity, which has largely flatlined in the UK for far too long.

Scotland’s oil and gas industry still has a prosperous future ahead of it, but support is needed to maximise the longevity and success of this dynamic industry. The industrial strategy has failed to mention any new developments in the oil and gas sector. Although I understand that work is ongoing to develop a sector deal, we remain in the dark about what this might look like. Furthermore, Brexit again poses a risk to the development of this vital sector. The Oil and Gas Institute at Robert Gordon University in Aberdeen has said that the departure from the EU bloc is likely to cost the North sea oil and gas supply chain another £200 million a year in tariffs and export taxes. It is time for the Secretary of State to show the same level of support for the oil and gas sector that has been mooted for the automotive and aviation sectors.

The UK Government have ploughed ahead with costly and ineffective investments in nuclear energy projects such as Hinkley Point C at the expense of the rest of the industry. The UK Government must halt the agenda of unexpected, cherry-picked and damaging announcements and policies in favour of making this a thorough industrial strategy for the supply and demand of energy.

I know that I will please the hon. Member for Spelthorne by saying that the UK Government must now invest more in science and in research and development. More than 50,000 international students study in Scotland, which is home to 19 educational institutions. The Scottish National party is incredibly proud of Scotland’s world-class university and higher education sector, and will support the necessary steps to ensure that it remains open, outward-looking and inclusive, yet the industrial strategy offers no assurances that this relationship will be protected. I again ask the Secretary of State to make his Government take the opportunity to do this.

Science, and research and development, have the potential to thrive further in Scotland. For example, the life sciences sector in Scotland could be worth £8 billion a year by 2025, according to industry groups. Although we welcome the sector deal for the life sciences, it is particularly worrying that it was agreed without any consultation with the SNP Government. That must not be replicated in any other sector deals.

On trade and inward investment, being a member of the EU means that Scotland’s businesses are operating within the world’s largest trading area of 500 million potential customers. The EU single market is eight times bigger than the UK’s alone. Moreover, trade with EU countries is becoming more important for Scotland. Since 2007, Scottish exports to the EU have grown by more than 25% to more than £12 billion in 2015. Although some steps are welcome, including the creation of an inward investment strategy, the mechanisms offered to overcome the challenges do not go far enough to alleviate the threat posed by the loss of EU single market membership and the trading partners that come with it. The Government must stop their reliance on rhetoric about trade and investment needs, take action to acknowledge the industry’s concerns and work constructively with the Scottish Government to maximise inward investment as part of a genuinely co-operative approach.

Members of the SNP have a shared goal: to make Scotland the best place to live, work and do business. Although the UK Government have overall responsibility for the economy, we will use all the powers that we can in Scotland to try to achieve this. The SNP has had a plan with trade and investment, manufacturing, innovation and employment at its heart for a number of years, and the recent enterprise and skills review aligns its agencies and resources behind those plans.

Since 2007, the Scottish Government’s central purpose has been to create a more successful country through increasing sustainable economic growth. That remains our ambition and is at the core of our single economic strategy, which was published in 2015. The strategy sets out the overarching economic approach of the Scottish Government and is backed by a series of policies to boost economic performance. We are supporting business and growing Scotland’s economy by focusing on investment, internationalisation, innovation and inclusive growth; building on the successes of our enterprise and skills agencies; and developing a system of support for Scottish businesses and the economy.

An overarching strategic board is now in place that will maximise the impact of the collective investment that we make in enterprise and skills development, and it will create the conditions for delivering inclusive growth. We have also created a new enterprise agency in the south of Scotland with an interim economic partnership in place, backed with £10 million of investment. We have appointed Benny Higgins to lead the work to establish a Scottish national investment bank to support investment growth, among many other measures.

I have a lot more to say, but I am going to cut my speech short to aid progress. On fairness, we have put in place progressive social policies in Scotland. With the cost of living rising, our commitment to our social contract with the people of Scotland is more important than ever and vital for economic prosperity for all. Conservative Members have referred to the changes to income tax. Indeed, this will make Scotland the fairest-taxed part of the UK, with the majority of taxpayers paying less than elsewhere in the UK. Compared with last year, everyone earning less than £33,000 will pay less tax in Scotland. By choosing a fairer path on taxation, we will protect Scotland’s cherished public services.

Given that the cost of living is rising, we will deliver a minimum 3% pay rise for public servants earning less than £36,500—75% of public sector workers—while those earning more than £36,500 will receive a 2% rise, and a cash cap will be put on increases for those earning more than £80,000. There is new investment to ensure that Scotland is the best place to do business and invest. We are investing an extra £100 million to deliver the best business rates package in the UK, increasing investment in business research and development by 70% and making a £4 billion investment in vital infrastructure—and doing much more to build a fairer Scotland.

Finally, I have some asks for the Secretary of State. Will he take on board Scotland’s concerns about Brexit and its industrial strategy? The risks are real, as he knows, and they threaten the economy and people’s incomes. With his overarching responsibility for the success or failure of the UK nations’ economies, will he acknowledge that Scotland’s economy, like those of the other nations of the UK, is unique, and will he engage in a meaningful way with the Scottish Government on the industrial strategy so that we can maximise the benefits for all and support some of the key sectors that I have outlined? Does he recognise that we need inclusive growth to prosper and will he ask the Government to put an end to austerity policies that are damaging the lives of thousands of families across all the nations of the UK?

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[James Heappey (Wells) (Con)]

It is good that we have an industrial strategy. It is not the command economy of past industrial strategies but an opportunity to put together a coherent plan to develop and support the industries that will underpin this country’s economy in the future, boost productivity and raise the skills needed.

In that sense, we should be very excited about what the Government have done. The four grand challenges within the strategy—artificial intelligence, clean growth, dealing with an ageing society and the concept of future mobility—are essential ingredients of that future economy, but of course each does not stand alone; all entwine with one another to deliver something that is quite exciting, not just from an industrial and economic perspective, but from a social perspective and in terms of how our communities and the future economy will operate.

Within that are the sector deals. It is right that the Government are seeking to reinforce the success of current industries that have done well for the UK, such as defence and aerospace and nuclear, and looking to use these sector deals to incubate our future economy too. To be clear, in putting together this industrial strategy, focusing on the areas as it does and in looking over the horizon—while not, I suspect, trying to pick winners but trying to understand what is likely to be the bedrock of a future economy—the Government must use the industrial strategy and everything around it to facilitate disruption as much as they can. I say that because, again and again, we see that the new businesses that really change the way we live, drive down costs for consumers and drive up customer service are the ones that have come in and disrupted old and lazy industries. These industries, often underpinned by exciting advances in automation, artificial intelligence and tech, are exactly the things we have the opportunity, through good policy making in the next few years, to unleash to the benefit of UK consumers.

If I may make a political point, such an approach is in stark contrast to the rather retrograde measures proposed by the Opposition, such as a return to nationalisation, as well as their outright fear of automation, suspicion of artificial intelligence and desire to regulate almost to the point of obsolescence the gig economy that underpins so many of the businesses particularly popular with the millennial age group. It is right that Conservative Members should champion this approach.

The way in which we will really unlock all those things is by recognising that the internet of things is a very exciting proposition for our nation’s economy. It will create smart homes, smart businesses and smart communities as the vehicles through which all disruptive businesses will undoubtedly succeed. There is a catch, because we need to lead on regulating for the data challenges that come with an internet-of-things economy, with data points all over the place bringing huge amounts of very personal data into the possession of private companies. From there, self-learning AI algorithms will be able to discern things about the way in which we live our lives that are really very intimate, and we need to protect consumers from that. However, that should not stop us being hugely excited about the opportunity for this future economy, and we should use the industrial strategy to let it off its leash.

Our colleagues in the Department for Business, Energy and Industrial Strategy should really look at the fact that the very many different funds they have brilliantly brought forward to address so many of the challenges for our future economy are all stand-alone ones. My final point is that I would very much like us to start to designate test towns in which we could trial such things at scale. When we are looking at the future of mobility, we will learn most only when we have, at scale, automated on-demand transport. When we are looking at how to support an ageing society, we will be able to do so only if we can see, at scale, how CivTech will actually support people in old age to live in their own homes for longer, with the savings that that will deliver to local health services. On clean growth, it is only when we can see, at scale, the advantages of a digitised, decentralised energy system—with storage, interconnected electric vehicles and demand-side response—that we will really understand such opportunities. I therefore hope that the Minister will look at the opportunity for test towns.