Britain’s Industrial Base

Lord Bhattacharyya Excerpts

Tuesday 9th October 2012 Lords Chamber

[Lord Bhattacharyya]

My Lords, I would like to thank my noble friend Lord Adonis for securing this debate and join others in welcoming the Minister to his new role. I declare my interest as the chairman of Warwick Manufacturing Group at the University of Warwick.

I have argued many times for a greater emphasis on industrial and innovation policy in Britain. However, for 30 years, we did next to nothing. That was the demise of British industry. Why did no one act? It was because past failures—bailouts, walkouts and closures—haunted Governments of all parties. We had White Papers about knowledge-based economies and so on, but real support for industry was off the table. We now realise that without industrial growth, we will not create the long-term, well-paid jobs the nation needs.

However, we can do it. Since the financial crisis, Jaguar Land Rover has created several thousand new jobs and apprenticeships. This is the sort of “industrial renaissance” we need. It has happened; it has not taken a long time—it has happened over the last three years. The leader of my party has had the guts to make changing the structure of our economy his long-term priority. However, there are simple steps we can take together, immediately, that will make a real difference to our industrial future.

First, Parliament has been saying since 1867 that we have a skills gap, but it is still a significant issue today. One step forward would be to extend the university technical college programme, championed so ably by the noble Lord, Lord Baker, and my noble friend Lord Adonis. Currently some 30 colleges are being developed. What stands in the way of tripling that number?

Next, I welcome the Government’s aim to increase apprenticeships and my party’s proposal for giving funding control to businesses. Yet apprenticeships work best when business seeks out talent and offers quality training in return, not when government simply gives funds for a particular programme, or even when a business does. Young people can tell which apprenticeships have prospects from make-work schemes. Recently, GKN offered 30 apprenticeships and had over 500 applicants. Scottish Power had 1,600 applicants for 30 positions. We must help businesses to create more high-demand, long-term apprenticeships. To do so at low cost, why not extend the tuition loan scheme with student apprenticeship loans? We would create a pot of money that businesses could use to pay for college courses for their apprenticeships. The student would decide if the apprenticeship was worth while; the training budget would help the business to afford apprentices; and the task of providing transferable skills would lie with colleges and universities. This would also help to abolish the vocational academic divide, which we urgently need to do.

Next, we need to increase investment. For two years now I have been fighting for a business bank. I am delighted that the Business Secretary has announced such a bank. Yet the Government talk about a billion in assets. A British bank needs to be operating at £1 billion a year. Much of this could be found by combining ineffective, small programmes and leverage could be increased by focusing on reducing the risk of loans made by private banks.

Finally, we need to increase funding for innovation. Here, again, scale is the issue. I recently returned from China, where I had discussions with senior ministers about their industrial strategy; I was hoping to set up a big company there. China is so concerned that the growth rate is falling to a mere 7% a year that it plans to increase innovation spend by a third in the next five year plan. China is also spending $160 billion on infrastructure alone, which will drive innovation in transport and green energy.

We have high-speed rail, of course, but even here, we seem to be frightened to take decisions. We also have good innovation programmes, such as the “catapults”, but budgets are small. As money is tight, why not take an example from America? Could we not put a small internal tax on government procurement, and use the proceeds to fund small business innovation? Today, departments have to identify innovation needs first, then find funding. No one wants to cut their budget to fund innovation elsewhere, so not much happens. If the funding was set aside, this would create a “funding well” that everyone would go to. Public procurement is over £200 billion a year, so even a quarter of a per cent would give us real scale.

That is four simple steps to help industry grow for the long term by acting today. In the last three decades I have often felt like a voice in the wilderness on industrial policy. However, I have brought some of the biggest inward investors into this country. They are all succeeding, because we have a lot of talent, a large skills base at the upper end, and because our science and technology is second to none. Why is it that other companies can use these? Today the words “industrial policy” are on everyone’s lips, which is most welcome. But worthy talk means nothing without action. Now is the time to deliver.