Industrial Strategy

Kelvin Hopkins Excerpts

Thursday 20th October 2016 Commons Chamber

[Stephen Hammond (Wimbledon) (Con)]

It is a pleasure to follow the Chair of the Select Committee, the hon. Member for Hartlepool (Mr Wright). For a long time, the words “industrial strategy” struck fear into the heart, and raised the hackles, of many on the right of the political spectrum. Those words called to mind the era of excessive government intervention and anti-market philosophy, with the Government picking winners—usually winners that were declining—deciding on nationally strategic industries, and pursuing anti-competitive practices and industrial relations policies that stifled competition.

[Kelvin Hopkins (Luton North) (Lab)]

When it comes to industry, the most interventionist Government in Europe is Germany. It is also the most successful economy in Europe.

[Stephen Hammond]

That very much depends on how we define intervention; we might come on to that later in the debate.

To meet the challenges of the 21st century, especially in post-Brexit Britain, industrial strategy should be about four things: the Government creating the ecosystem or the environment in which industry can succeed and in which national productivity—a huge challenge—can be increased; ensuring that our country has the skills that it needs; ensuring access to finance; and boosting and promoting industries of competitive and comparative advantage.

When we talk about the ecosystem or environment, we almost inevitably talk about infrastructure. One of the achievements of the previous Government was that even in a time when we had to pay down the deficit, infrastructure was reckoned to be the key factor for economic growth. Public sector support has, rightly, been provided for all sorts of developments over the past few years, most notably in transport, energy, housing and broadband communications. The National Infrastructure Commission, which made it possible to look across sectors and move away from the previous silo approach, has had a great impact.

As the hon. Member for Hartlepool pointed out, an urgent priority for the Government has to be a consideration of not only how we strategically assess, but how we deliver. That is partly about smart procurement and making the Government an intelligent client. Our inability over the years to specify design has meant that costs have inevitably increased, so the cost base and project management costs have been much higher than they would otherwise have been. The Treasury optimism bias or risk quotient, depending on what one calls it, has had to be increased throughout. By driving into the Infrastructure and Projects Authority some of the skills needed for the delivery of smart procurement, we will be able to reduce costs and make projects more attractive and fundable.

We need to get the private sector much more involved than it has been so far. If we travel anywhere else in the world, we will use roads and bridges that are privately owned and run, and the fact that they are privately owned and run does not make them any less useful. A commitment to infrastructure must be a cornerstone of any modern industrial strategy, so I gently say to the Minister that I hope he will push his colleagues for the appointment of a new Minister for infrastructure, preferably with some responsibility for industrial strategy, and preferably a Member of this House rather than the other place.

Our departure from the European Union will give us a couple of fortuitous possibilities in what some of us think will be a difficult time. The EU procurement rules are some of the most onerous and bureaucratic anywhere in the world. Getting rid of them from our procurement system will undoubtedly help small industry and the supply chain. State aid has been a way of thwarting, as well as supporting, a lot of investment, and we will no longer have to abide by all the state aid rules. I hope that the Minister will say later that he accepts that challenge.

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[Joseph Johnson]

Our export performance is one of the features of our economy that we are seeking to improve through our industrial strategy, and I am looking forward to explaining a bit more about how we will do that.

The UK has the second lowest productivity in the G7, a fifth below the G7 average, and closing just half that gap would add £250 billion to the economy by 2025. A proper industrial strategy can play a key role in that, by delivering real benefits to the work and lives of businesses, consumers and employees.

[Kelvin Hopkins]

I, too, am concerned about our low productivity. Does the Minister not accept that a factor in that is cheap labour? If wages are low, that does not encourage companies to invest and become more efficient. We have a history of driving down wages or keeping them too low.

[Joseph Johnson]

Wages by and large correspond to the value added per hour worked that a company is willing to pay for. What is important is that we increase the average skills level in our workforce, so that we have a skills base that is globally competitive and able to command the wages in a market economy that we want people to have.

When Governments fail to look ahead and make the right long-term decisions on fundamentals such as tax, infrastructure, research, education and skills, they are abdicating responsibility. Such plans require us to take not a partisan approach but one that seeks to establish common ground. I am delighted that so many Members from all parts of the House have participated in the debate today, and I thank them for doing so.

I want to say a bit more about the principles guiding our approach to industrial strategy. The first thing to say is that developing a proper strategy takes time. It is not something that we can drop out overnight. We need to engage with a wide range of organisations and people to design and deliver a strategy that can have a real and lasting impact. That means engaging with Members, including through the Business, Energy and Industrial Strategy Committee’s welcome inquiry on industrial strategy. It also means spending time over the coming months engaging with businesses of all sizes and sectors, investors, local leaders and consumers, so that we can reflect their views and build on their knowledge and experience.

Our industrial strategy will necessarily be wide ranging, but that should not be at the expense of clear focus, so I would like to say a few words about where we will be concentrating our efforts. First, building on proven strengths is a cornerstone of good strategy, and as many Members have observed, this country has no shortage of them. For a start, let us acknowledge our powerful record on science and innovation. Only America, with a population nearly five times our own, has more of the world’s top universities, Nobel prizes and registered patents. The UK has the most productive science base in the G7 and has overtaken the US to rank first among comparable major research nations for field-weighted citation impact, a key measure of research quality. This is hugely important. Science, research and innovation are essential to our future and must be at the core of any effective strategy for the long term.

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[Joseph Johnson]

The hon. Gentleman might recall that there was a point during the last Parliament—I think, in 2013—when this country became a net exporter of cars for the first time since 1975, when the then Labour Government nationalised British Leyland. It is the automotive policies of this Government and our predecessor coalition Government that have taken the car industry to the heights that it currently enjoys and that have not been seen since the early 1970s.

[Kelvin Hopkins]

Like the Minister, I think that the British motor industry has a brilliant future—provided that our currency remains relatively competitive. Does he accept that we do well in export markets outside the EU but poorly inside in the EU because of the uncompetitive exchange rate? I think that we still import four times as many cars from Germany as we export to Germany. It is our trade outside that makes the difference.

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[Kelvin Hopkins (Luton North) (Lab)]

I am pleased to participate in this important debate, and I congratulate the hon. Member for Warwick and Leamington (Chris White), not only on securing it, but on what he said, which was excellent.

British industry has suffered for too long from neglect and diminution, and I am pleased that the Prime Minister has chosen to reintroduce the term “industrial strategy”, one that I cannot recall being advanced by our political leaders for a very long time. She has also suggested that the state must have a role in promoting and managing our economy, and ensuring that it is healthy and strong and will serve the citizens well. The state cannot simply stand idly by and let the markets do their worst, and I am pleased that an era when that was too often the case now seems to be coming to an end.

I have differences with the hon. Member for Wycombe (Mr Baker), whom I admire and like in many ways, as I am a statist and he is not. Some 18 years ago, I tried to press the new Labour Government to intervene—to consider intervention—but my plea fell on deaf ears and I was told by a humorous Back-Bench comrade that that sounded too much like socialism. Governments of all colours since the 1970s have allowed much of our manufacturing sector to wither and reduce. We still have some fine manufacturing, as the Minister has said, but the whole sector is too small and cannot produce enough to bring any kind of sensible and sustainable balance to our economy. We have allowed an enormous trade deficit to emerge, above all in manufacturing, and primarily with the European Union. The pound has been grossly and persistently overvalued, above all against the euro, and has been a prime cause of our manufacturing weakness. We now, at last, have some relief, with the depreciation of sterling since the referendum, and already the economy is beginning to benefit. I look forward to renewed growth in our manufacturing industries and to our trade deficit reducing.

Lord Mervyn King, the former Governor of the Bank of England, said this month that Britain was borrowing 5% to 6% of GDP a year simply to buy imports and live beyond its means—this prosperity was an illusion borrowed from the future, fine for people who wanted to buy a Mercedes-Benz or have a holiday in Spain, but doing nothing for British industry. Professor Ashoka Mody, the former deputy director for Europe at the International Monetary Fund, has said:

“The idea that Britain is in crisis or is on its knees before the exchange rate vigilantes is ludicrous”.

He also said:

“The UK economy is rebalancing amazingly well.”

We should all welcome more of that.

Manufacturing based in Britain has bright prospects, provided the exchange rate is kept at a sensible level; exports will rise and import substitution will see domestic sales of UK products booming. There will probably be a J-curve effect at first, until goods already committed diminish and quantitative effects take hold, but that will not be long in coming. I have already suggested to some of our motor manufacturers that they would now do well to expand their supply chains in Britain and reduce their proportion of imported components. I am convinced that the motoring sector will be doing brilliantly in future years if they do that. We should not forget that Britain is a massive market, to which our own producers should be supplying more.

I want, however, to press the Government further in a virtuous direction regarding our industries. I urge the Government to give serious thought to recreating the National Economic Development Council—Neddy—and the little Neddies for the various industrial sectors. That was an agent of what was then called “indicative planning”, bringing together representatives of business, Government and trade unions. The NEDC was hardly socialism, set up as it was by Edward Heath’s Government, but it did valuable work and could do so again.

There is much more we need to do to make our industrial strategy a long-term success, but an appropriate exchange rate is a vital if not sufficient condition for success. On that score, let me say just one more thing: the euro is proving to be a disaster, particularly for southern Europe. Its future is, thank goodness, now in serious doubt, with Italy in crisis, along with Greece and others. I believe the euro is actually the Deutschmark in disguise, with a number of weaker currencies bolted to it, holding down its value at a falsely low level. That is not only crippling for those weaker economies, but disadvantageous for us. It will be better for those European economies, as well as ourselves, when national currencies are re-established and are allowed to move to appropriate parities. The end of the euro would be good news for us all and, especially, for Britain’s industries.

Finally, let me say that outside the EU we will be free to use smart procurement to benefit British industries and to use state aids as we see fit. If that is protection, I welcome it.

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[Hannah Bardell (Livingston) (SNP)]

It is somewhat ironic that we discuss industrial strategy following a debate on the scandal and tragedy of the collapse of BHS, especially given that one of the Government’s emerging pillars for their industrial strategy is:

“New corporate governance structures, including consumer and employee representation on boards, and greater transparency around executive pay”.

It is a shame that the Government’s industrial strategy was not in place before Philip Green got his grubby mitts on BHS.

The Government’s plans for a strategy come as we face a post-Brexit prospect of being out of Europe and out of the single market. The uncertainty caused by the UK’s decision to leave the EU and the Tories’ lack of a Brexit plan seriously damage the long-term planning capacity of firms and the UK’s trade outlook.

When one tries to ascertain what exactly the UK Government’s industrial strategy is, it appears that one needs to be a sleuth, as even the Library research team were challenged. Its debate pack, which is excellent as usual, states:

“This note brings together the limited information that has been published since Theresa May became Prime Minister which provides clues as to the how the Government’s industrial strategy will operate.”

We have limited information and only a few clues, but I am sure that between us we can cobble something together!

We know of some of the terrible failings of the Prime Minister’s predecessor. He and his Cabinet presided over a complete failure of long-term strategic planning, which has only perpetuated the productivity slump in the UK economy and low wage growth, and increased social, regional and gender inequalities. On an output per worker basis, UK productivity is 20% below the average of the other G7 countries, as the Minister mentioned. UK workers have suffered the biggest fall in real wages among leading OECD countries between 2007 and 2015, with their wages dropping by a shocking 10.4%. That is a terrifying statistic, given that our workers’ rights and conditions are under threat as we leave the EU.

We have seen the carbon capture project scrapped, feed-in tariffs for renewable energy schemes cut, and innovation grants turned to loans, and that is all before the UK faces losing access to the valuable Horizon 2020 EU research funding. The UK Government say they are taking back control—

[Kelvin Hopkins]

The hon. Lady and many other hon. Members talk of losing EU funding, but if we simply replace EU funding with British funding, we still make a £10 billion profit by not paying into the budget.

[Hannah Bardell]

If only it were as simple as that; the arrangement might be somewhat more complex.

The steel sector in England and Wales has been crying out for support, yet the Government were flat-footed in their response. In contrast, the SNP-led Scottish Government worked tirelessly to find a new operator for the Dalzell and Clydebridge plants. Our First Minister said she would leave no stone unturned and that is exactly what she, her Government and the Scottish steel taskforce did.

What next for industrial strategy? We are all wondering and waiting with bated breath. When the Prime Minister created the new Department for Business, Energy and Industrial Strategy she brought together two of the most significant Government Departments. It is good to see a sharper focus on industrial strategy, even if only in name. As we all know, this Government are expert in meaningless rebranding. Of course, there are two areas missing from the departmental name—innovation and skills. The Minister touched on those aspects and it is vital that we continue to focus on them.

We see as key to a successful strategy sustainable and inclusive growth which closes the gender gap and ensures that women and people of all backgrounds across our society are welcomed and included in our workforce. We need to be seriously more ambitious about a diverse workforce. In March this year the Equality and Human Rights Commission published a damning report which said that women were being held back by the old boys’ network. It stated, as the BBC reported, that

“nearly a third of the UK’s biggest companies largely rely on personal networks to identify new board members”,

and that

“most roles are not advertised”.

An EHRC commissioner was quoted as saying:

“‘Our top boards still remain blatantly male and white’”.

The study, which looked at appointment practices in the UK’s largest 350 firms, which make up the FTSE 100 and FTSE 250, found that more than 60% had not met a voluntary target of 25% female board members.

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[Roger Mullin]

I wish the hon. Gentleman would not mince his words—he should say it as he really feels it.

Where Smith has some relevance is in his argument that critical to growth was the division of labour in society, with specialisation—what we might call today the importance of having the education and skills that allow us to promote innovation and change. That is what spurs longer-term growth, and on that he was absolutely correct. That important need to drive forward with new technologies and new thinking is why it is utter madness that the Government pulled out of one of the biggest world-leading research projects, the carbon capture project in the north-east of Scotland. If ever there was an indicator of their turning their mind away from what is fundamental to long-term economic growth, it is that decision.

The other thing Adam Smith said that I completely approve of is that there is a role for state intervention. In particular, it is to ensure the kind of education that supports society economically as well as socially. We cannot leave education and skills to the marketplace. We have to make sure they are taken care of.

I was interested by the way in which Members talked about the importance of technology. It strikes me that historically, one of the problems we have had with funding is that we have plenty of people in our universities and the like who are able to come up with great technological ideas and innovations, but those innovations take many years to reach the marketplace. Private sector investment seems best when it is either at or near the marketplace. The problem, very often, has been the gap between the idea and bringing it to fruition. That is where the need for the role of the Scottish Investment Bank comes in, and I think that is what my hon. Friend the Member for East Lothian was hinting at when he talked about the valuable work of the Catapult centres. They can attract different forms of funding in a competitive way for things that may take time to reach the marketplace.

I was interested in the remarks made about the challenge that we face because of Brexit. The Government’s response, chaotic as it is, is driving down confidence. My hon. Friend the Member for Edinburgh West talked about the importance of confidence. That reminded me of what Keynes argued, which was that the principal determinant of the level of private investment is not the rate of interest nor even the level of aggregate demand, but the state of business confidence.

[Kelvin Hopkins]

I am listening with great interest to the hon. Gentleman. I always enjoy his speeches, I have to say. When it comes to the EU, however, does he not accept that confidence has been driven down by those who lost the argument and the vote, who are constantly saying that it will be terribly damaging and an economic disaster? In fact, as Ashoka Mody has said, it is actually proving to be quite beneficial.

[Roger Mullin]

I would take issue with the latter part of the hon. Gentleman’s observations. We were on the opposite side of the argument, but surely he would agree that the Government’s response to the vote has been utterly chaotic? We are no further forward four months later than we were at the time as to what the Government mean by Brexit and how they are going to take us there. That is doing nothing other than driving down confidence in business.

I do not want to take up too much time, but let me come on to one further important issue that was raised, which is in the general sphere of education. That is the importance of the post-study work visa. I would add to that the tier 1 entrepreneur visa. We need to encourage people from overseas to come to this country to help us drive up business investment and innovative ideas. I read an essay by a friend of mine, Professor David Simpson, a few weeks’ ago. He pointed out that one third of successful business start-ups in California between 1980 and 2000 were by people who had come from either India or China. At a time when we need, not least in Scotland, to attract the best minds to help to drive forward the economy, setting our face against that cannot be in anyone’s interest. It certainly cannot be in the interest of anything we might call an industrial strategy.

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[Chris White]

I am pleased to follow the shadow Minister. I was enjoying her speech, until it all seemed to go a bit wrong towards the end. Where I finished listening was where she said that she welcomed the Government’s initiative to have an industrial strategy. I am grateful to the Backbench Business Committee for providing time for the debate and to everyone who has had the opportunity to speak.

I take from the hon. Member for Aberdeen North (Kirsty Blackman) what she said at the beginning of her speech, which was that, basically, everyone had a different interpretation of what industrial strategy was all about. I do not think there is anything wrong with that. That is the purpose of this debate: to provide an opportunity for everyone in the Chamber who indicated a wish to speak to give their take on an industrial strategy.

I would go back one step further. I look forward to reading the book by the hon. Member for East Lothian (George Kerevan) when it finally comes out—I am sure that it will be selling round the corners. Until that time, I recommend anyone to read the book by Lawrence Freedman, “Strategy: a History”. It is important for us all to return to the definition of strategy. The shortest, most precise definition that I have come across is to get the furthest with the most. I do not think that is a bad foundation for this debate.

I would like to refer to my very good friend, my hon. Friend the Member for Bedford (Richard Fuller). I am sure that the House would agree that he was enjoying his speech far too much. He put a spanner in the works of otherwise consensual and positive debate with his desire to hold to the philosophy of a free-for-all—everything is for the best in the best possible world. I hope that he will come around to welcoming the pragmatic opportunities provided by the initiative that, through the Minister, is being formed. Discussion papers are being written. We are again going to be able to have our say, I hope. This matter will come back to the House for further debate. None the less, I imagine that all Members would agree that it is better to have this debate now.

[Kelvin Hopkins]

I much enjoyed the hon. Gentleman’s speech and agree with what he is saying, but the point that has not been answered is my point: low wages and flooding the market with cheap labour does not help investment. It keeps productivity at low levels. If we are going to see high investment in modern technology, we need to raise wages and stop flooding the market with cheap labour.

[Chris White]

I thank the hon. Gentleman for that intervention, but I suggest that a proper and full industrial strategy that looks at issues such as productivity would take those issues into account.

I thank all hon. Members on both sides of the House for their contributions, and I express my appreciation to the Chair of the Business, Energy and Industrial Strategy Committee for the work that it is doing on the issue.

Question put and agreed to.

Resolved,

That this House has considered industrial strategy.

Intelligence and Security Committee

Ordered,

That Richard Benyon and Mr David Hanson be appointed to the Intelligence and Security Committee of Parliament under section 1 of the Justice and Security Act 2013 in place of Sir Alan Duncan who ceased in accordance with paragraph 1(2)(b) of Schedule 1 to that Act to be a member of the Committee when he became a Minister of the Crown and Mr George Howarth who has resigned as a member of the Committee in accordance with paragraph 1(3)(a) of Schedule 1 to that Act.—(Michael Ellis.)