Industrial Strategy Consultation

Lord Fox Excerpts

Monday 23rd January 2017 Lords Chamber

[Lord Mendelsohn (Lab)]

My Lords, I welcome the launch of the Government’s Green Paper on industrial strategy. There is much to go through and be positive about and much to scrutinise. I hope there will be other opportunities to have meaningful debates on this matter. There are considerable questions about the Green Paper, which I hope the Minister can answer. It is clear that there is much for us to do to maintain our economic position. Whether or not it has novel ideas is no test of a good industrial policy. There is much to be gained by doing more of what was being done—just doing it better. Much of this has a familiar feel. Seven of the 10 pillars of the industrial strategy were key parts of the Government’s productivity plan, Fixing the Foundations—the words “cut and paste” crossed my mind.

However, on this side of the House we are glad that some of the approach—particularly the sector plan—does represent a new way to support the development of our economy. We are keen to observe the development of this strategy: how the Government will deal with the obvious issues around picking winners and national champions, and how this approach will evolve. We are pleased that the Government are looking to support the automotive industry. A sector deal would undoubtedly be useful here. The Government have been very coy about the view that they did much to encourage the most recent announcement of investment by Nissan—the so-called secret deal. However, I am sure the Minister can confirm that there was, in fact, no deal and that the investment announced was planned for a timescale that would not be adversely affected by our relationship with Europe. Will the Minister confirm that the message from Nissan reminded the Government that, in common with other Japanese companies, it would review its position in keeping with the Japanese Government’s 15-page letter? Given the current plan for exit from Europe, and its inconsistency with their desired approach, a sector deal is the only way to ensure a viable car industry in the medium to long term.

I am also pleased to see that the pharma industry and the life science industry get a special mention. Can the Minister confirm that the Government will defend the UK base against US industry’s ambitions in any potential trade deal with the United States?

The Green Paper was accompanied by the re-announcement of existing commitments of resources. The funds for science and research are very important and, as I understand it, recover our position since the cuts started to set in in 2010. None the less, the focus on supporting science, technology and innovation is to be strongly supported. Additionally, the support for technical education is welcome, and the work of the noble Lord, Lord Sainsbury, in promoting this crucial requirement for our economy should be acknowledged.

As with many areas of this plan, there is a case for scepticism about any further education proposals that do not address the severe capacity issues in the sector. Can the Minister provide a clearer idea of how the development of this strategy will be able to call on new resources, what the expected timetable is for outlining further elements of the industrial strategy, and how it will dovetail with the budget process?

The Green Paper suffers from two of the perennial problems we always face with government business policy announcements. There is a terrible lack of objectives, and there is no clear road map or sense of desired outcomes. Instead, a series of good and reasonable measures, worthy as they are, do not make a plan that is likely to have real impact or be effective and efficient. Can the Minister tell us whether any concrete objectives or goals that can reasonably be measured will be set in this process?

Secondly—the Statement just did this again—the Green Paper glosses over a huge imbalance in the economy. Our huge reliance on the service sector is not meaningfully addressed in this industrial strategy; nor is the acute problem of the size of our manufacturing industry and its disproportionate decline. While any industrial strategy must look to the long term, our immediate future relies on how well our services can perform. I would be grateful if the Minister could outline how the service sector is expected to be part of, or to be assisted by, the industrial strategy. This is especially important in areas where, in support of the industrial strategy, we are looking at reinforcing our research and innovation, such as in robotics and artificial intelligence, and many others that are likely to have a major impact on employment requirements in the services sector.

There are, of course, some areas in which we had been expecting something new and different in the industrial strategy. We had hoped for greater ambition on broadband and mobile capacity, signalling a change to the currently pedestrian goals in the Digital Economy Bill. We had also expected slightly more about how we see effective markets and competition, and the culture of business. Crucially, are there any plans to create tougher oversight of foreign investment in the United Kingdom? Does the Minister agree with the sentiment that,

“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 am sure he does: those were, of course, the words of the Prime Minister previously. Can the Minister account for their omission from the Green Paper?

There is much to welcome in starting a conversation about an industrial strategy, and there are some positive ideas here. But this is not yet a plan, and on this side of the House we hope that, over time, one will emerge. This is a first step. Martin Luther King said:

“Faith is taking the first step even when you don’t see the whole staircase”.


The Government would do well to remember the old adage that setting goals is the first step in turning the invisible into the visible. An effective industrial strategy will need that.

[Lord Fox (LD)]

My Lords, the Prime Minister’s decision to adopt a new active role for Government in industry is welcomed on these Benches. The Green Paper’s 10 pillars have most of the right words, and they identify many of the areas of concern that have been voiced in many debates over the past few years. I trust that we will have an opportunity to debate some of those aspects in more detail. I shall focus on just two of those elements—skills and cultivating world-leading sectors. I remind your Lordships of my published interests.

First, the Green Paper is right to identify skills as a central issue to future prosperity and productivity for the country, and a cash boost for technical and STEM education is, of course, welcome. However, it should be put into the context of a 7.5% reduction in schools’ per-pupil funding by 2020 and the cash-freezing of the adult skills budget until 2020—a £30 million real-terms cut next year. Thus, £170 million for new institutes of technology is all very fine but irrelevant given some of the wider cuts affecting all our young people. Therefore, can the Minister please tell us whether the Government plan to reverse their cuts to the education budgets for four to 19 year-olds? Also on skills, the Government continue to ignore the benefit and value that we gain from workers and scientists from the European Union working in this country. They continue to treat these people and their families as a bargaining chip. Could the Minister at least acknowledge the personal anguish being caused to these people, many of whom are already contributing greatly to the success of the industrial sectors that he seeks to bolster?

Secondly, the Green Paper’s support for the coalition’s sector strategy is very welcome. Here I disagree with the noble Lord, Lord Mendelsohn, in that a bit of cut and paste is actually a good thing as these strategies have to span more than one Parliament to be successful and take root. Therefore, they depend on a long-term approach. It is good news that the Government are continuing to run those strategies through. However, the idea that any Government can have a reasonable strategy for British industry while recklessly withdrawing from the single market is not credible.

Last week, the Prime Minister confirmed her intention to exit the single market, yet, extraordinarily, the Green Paper fails to refer to either the single market or the customs union, although a few euphemisms such as “turbulent times” creep in. The Government’s idea seems to be to negotiate individual sectoral agreements for “frictionless trade”—their term. Not every sector can benefit from this, or we would still be in the single market, and not every sector can expect the negotiations to succeed. Therefore, as these negotiations start, the Government will have to decide which sectors will be top of their list for trade deals. Conversely, some will be at the bottom. The Prime Minister has said that the industrial strategy is not about picking winners, but the Brexit negotiations will inevitably pick losers. Can the Minister please tell the House which sectors will win and which will lose?

[Lord Prior of Brampton]

I thank both noble Lords for their interesting comments. I agree with the noble Lord, Lord Fox, that if this industrial strategy is to have real strength, it will have to be spread across Parliaments. As part of the consultation process it will be interesting to hear whether noble Lords have any ideas on how we can do that and how we can institutionalise some cross-party agreement around productivity. I do not know whether anyone else read the speech given by Andy Haldane from the Bank of England in the north-east a month or so ago, which I think was entitled Red Car, Blue Car. He reminded us that the US economist, Paul Krugman, noted:

“Productivity isn’t everything, but in the long run it is almost everything”.


I think that most people would agree with that. Particularly in an economy such as ours with high levels of employment, if you want to increase wealth, you have to increase productivity.

It is true that we are building on the past. I pay tribute to the work done by previous Governments in this field. But despite what has been done in the past we have to accept that productivity levels in this country are low; worse than that, they are much lower in some parts of the country than in others. Although productivity may be just an economic concept, the consequence of that is that wage levels are much lower in some parts of the country than in others. In the East Midlands, for example, the average wage is £480 a week, whereas in the south-east it is £670 a week. No one, on either side of the House, can be happy with that degree of inequality. If we are to address that, we have to address productivity. Therefore, if there is a familiar feel to our Green Paper, I make no apologies for that. We are building on the past but we must do a lot better.

I think that both noble Lords support the very significant growth in R&D spending, and that there will be broad support across the House for the two horizontal parts of this industrial strategy: R&D and innovation spending, and the focus on technical skills. That is not to say that we are not doing anything now but we could do a lot more. We have huge strengths in our university sector, but we are less strong on how we commercialise some of that research. I was horrified to learn that 14 to 16 year-olds today are no more literate or numerate than people aged between 45 and 55. There has been no real improvement in teaching basic literacy and numeracy for 20 or 30 years, which is quite an indictment of our education system. Therefore, putting more resource into education at all levels—primary school as well as later on—particularly into the STEM subjects, is extremely important. Skills are very important.

Reference was made to coming out of the single market. I do not think that is a debate we can usefully have at this point. Of course, we will do everything we can to retain as much frictionless access to the single market as possible. It is a very important market for many industries. However, other markets are important as well and we need to develop them. That is very much a part of the industrial strategy.

The noble Lord, Lord Mendelsohn, referred to life sciences. I absolutely confirm that they are important. The pharmaceutical, med tech and biotech industries are extremely important. British research is absolutely at the forefront of world research in cell and gene therapy. As far as Japanese investment is concerned, we will do everything we can to encourage inward investment from Japan and other parts of the world. The automotive industry would be only a pale shadow, were it not for the big Japanese investments that came here in the 1980s. We fully recognise that and are working very closely with Toyota, Nissan and Honda to ensure that they remain and continue to invest in the UK. The advanced manufacturing unit at Warwick is doing extraordinary work in automotive and advanced manufacturing, and the Green Paper contains a commitment to develop an institute for battery technology. Finding a way to store energy economically and efficiently would give us a huge competitive advantage as we develop the industrial strategy. However, this is a Green Paper; it is out for discussion for the next three months. I was asked about the timing. The consultation period will last for three months. The plan is to produce a White Paper by September, which will feed into the Autumn Statement. That is the broad timing. I look forward to engaging with many noble Lords as we develop the Green Paper into a White Paper over the next six months.