Britain’s Industrial Base

Lord Haskel Excerpts

Tuesday 9th October 2012 Lords Chamber

[Lord Haskel]

My Lords, I welcome the Minister to his new job and also congratulate my noble friend on moving this Motion about industrial policy. In recent years so much of our industrial policy has been a debate about devaluation and copying others. Our industrial base must be built on our own strengths. We have to correct our own weaknesses.

John Kay’s report of 23 July points to our first weakness. His diagnosis tells us that the financial markets in this country serve the business creators poorly. It is the agents and the middle men who are served best. He also says that the structure of the markets militates against long-term decision making. An industrial base is certainly a long-term project. An early task is to change the rules of the financial markets so that stewardship becomes the business culture of our industrial base.

Let me turn to manufacturing. As the noble Lords, Lord Hennessy and Lord Empey, explained, manufacturing has to be part of our industrial base. We have strengths in manufacturing. We have some wonderful companies in the motor industry and aeronautics, and I am sure that the Minister will join me in singing their praises, but are they part of Britain’s industrial base? The majority are foreign-owned—owned by global enterprises that are part of the global industrial base. They are of course committed to the UK, but their concerns are global.

We must now see our British industrial base as part of the global industrial base. Globalisation matters. These companies also see themselves as part of the single-market industrial base. That is why the EU also matters. But manufacturing itself is changing. New manufacturing techniques and biological processes make customised and small-scale local production viable, as my noble friend Lord Giddens explained. New materials are making products with new processes, and new technology is raising productivity to make existing processes faster. This new technology and these new ways of looking at business are turning economies of scale on their head. All this has to be considered in assessing our industrial base. We have a strength, with the Technology Strategy Board providing help, without undue commercial pressure, to find our way through these changes. The ability of the public and private sectors to work together to convert ideas into products and services must be part of our industrial base, as my noble friend Lord Adonis explained. Hand in hand with this is the strength of our science base. The Government tell us that expenditure on our science base is justified and will be maintained. This must be a strength, but is it true?

We now learn that Government departments have cut their R & D budgets, and the details are in today’s Financial Times. I am sure that the Minister has seen them. Perhaps he can explain what is happening and what the truth is. For a modern industrial base dynamics are important: business has to work in concert with science. Cluster dynamics, or knowledge and innovation communities as the commission calls them, are an important part of our modern industrial base. This is where a lot of the innovation comes from. You get a double benefit. If you create an innovative piece of medical equipment the whole nation’s health benefits from this medical innovation enabled by this piece of machinery. This double effect is one of the real benefits of having a modern industrial base built in this way.

The most important part of our industrial base must be our people, our human capital. In the modern industrial base, so much of the so-called brain work is increasingly undertaken by algorithms and artificial intelligence, much of it to raise productivity. Our strength will be to accommodate this and not fight it, as described by my noble friend Lord Bhattacharyya. Skills training will have to take a quantum leap. It is the quality and the standard, not just the quantity, that will be relevant. This improvement must be continuous. If this is true, then our best and brightest will have to become our teachers. Our Teach First scheme is a start, but we will have to move into a higher gear. This uplift in skills will have to apply to everybody, not just to an elite, because, as my noble friend Lord Giddens said, modern technology can destroy jobs as well as create them. Therefore, our industrial base must be based on an equal society, on one nation, because without a fair and equal social base, our industrial base will be built on sand.