Queen’s Speech

Debate between Lord Giddens and Lord Liddle

Wednesday 25th May 2016 Lords Chamber

[Lord Giddens (Lab)]

My Lords, let me join the queue to congratulate the right reverend Prelate the Bishop of Newcastle on her terrific maiden speech and, I gather, on her athletic prowess. She is a very welcome addition to your Lordships’ House.

A huge intellectual and policy-making revolution is beginning today across the world as the limitations of the efficient market hypothesis become evident. We have reached the limits of endless privatisation. The structural strains that we see everywhere, the rise of populist parties, the sharp relative decline of the BRICs, about which the Minister knows a lot, and the accumulation of huge levels of debt in the advanced economies will demand profound revisions in our thinking and policy-making both globally and locally. I see very little sign that the Government have recognised the depth of this imminent intellectual and policy-making shift.

I shall speak of only one area where a great deal of innovative thinking is happening, which is the debate about reindustrialisation in the West. Rebalancing the economy, the march of the makers and the fabled northern powerhouse, which have been mentioned, are the Government’s way of talking about this debate, yet very little flesh has been put on those bare bones. There is a reason for that, which is that the Government find it hard to come to terms with the need for active industrial policy.

The wiping out of large swathes of British manufacturing industry has been a disaster for many communities in the north and in parts of Scotland and Wales. The contrast with Germany is very telling. Only two days ago—sorry, two decades ago—manufacturing in Britain accounted for 22% of GDP—[Interruption.] Mr Mandelson calling.

[Lord Liddle (Lab)]

Not at all.

[Lord Giddens]

Only two decades ago, manufacturing in Britain accounted for 22% of GDP compared to 23% in Germany. Today, in this country it has fallen to 9%, whereas in Germany the percentage is almost unchanged. It is a huge contrast. As we know, Germany has a substantial trade surplus, whatever you make of the UK trade deficit.

Reindustrialisation should be understood as an avant-garde process, not a reversion to protectionism. As I see it, three components are involved, although each interrelates with the other in a dynamic way—or ideally should do so. I shall put what I have to say as three questions to the Minister.

The first picks up on the speech of my noble friend Lord Morris. What lessons will the Government seek to learn from the travails of the British steel industry, specifically those involving Tata Steel, an episode whose outcome is still far from clear? Will the Government look simply to sell on whatever assets can be disposed of or consider developing a more rounded policy in which social costs are balanced against the economic ones and where longer-term strategies are involved?

Secondly, I think that I was one of the first people in your Lordships’ House to talk about the reshoring debate in the United States several years ago: the idea of bringing back offshored industries to the US. That movement has had considerable success. Firms have been attracted back to their country of origin by a mixture of positive inducements and the fact that rising labour costs, especially in China, have reduced the benefits of offshoring. Has Reshore UK, set up by the Government, achieved anything of note? I have found it hard to find it, if so, and it seems pretty radically underfunded compared to its American counterparts.

Thirdly, and most importantly, some of the most significant advances across the world are happening in what has come to be called advanced manufacturing, driven in large part by the digitalising of production and distribution. Robotics, 3D printing and supercomputing power are the main forces involved. The promotion of advanced manufacturing has become a prime concern of the federal Government in the United States. A recent report of the National Science and Technology Council argued that the knock-on effects are absolutely huge. For each such manufacturing job created, 16 other jobs are established.

The authors of a new book on these issues, The Smartest Places on Earth, spent two years travelling through the United States and across Europe studying areas of industrial renaissance. They came up with remarkable results and speak of “turning globalisation on its head” through the emergence of new hotspots of innovation and job generation, many of them in rustbelt areas ravaged by outsourcing. Costs are being reduced not by cheap labour but by what they call smart production. Manufacture is being reinvented in quite a different guise from the past. The “rustbelt”, as they put it, has become a “brainbelt”.

No one knows at this point how transformative advanced manufacturing will turn out to be in terms of the overall economy. However, a key feature is that the traditional divisions embodied in orthodox economic statistics, between manufacturing and service industries, are being broken down. The puzzle about why productivity has not improved even as the pace of innovation grows might be elucidated here, since perhaps the established measures are becoming obsolete.

The UK does not brook large in the book to which I have referred, although other parts of Europe do, interestingly. The authors question the idea that EU countries are becoming industrial museums; they see them as the centres of an enormous amount of information. What strategies are the Government deploying to ensure that the UK is not once again left behind?