Industrial Strategy

Lord Horam Excerpts

Monday 8th January 2018 Lords Chamber

[Lord Horam (Con)]

My Lords, my first experience of a debate on industrial strategy was rather dramatic. In the early 1960s, I was a young reporter with the Financial Times, and in that capacity I was sent up to Scarborough for the Labour Party conference. Jim Callaghan was Chancellor of the Exchequer and made his big Chancellor’s speech. Half way through, Hugh Scanlon—a name to conjure with then but perhaps forgotten now; he and Jack Jones were the two great trade union leaders—got up and said, “But Jim, where’s the plan?”. Jim Callaghan looked a bit nonplussed for a second or two, but sitting next to him on the platform was George Brown, Secretary of State for Economic Affairs at the time, with the economic document that his department had produced. Jim grabbed it, held it up to Hugh and said, “Hughie, there’s the plan—that’s what we’ll do”. It was a great rhetorical moment and it brought the house down with cheers. I still do not know whether it was planned between Hugh Scanlon and Jim Callaghan or whether it was indeed an entirely spontaneous reaction to Hugh Scanlon’s impromptu remark, and I will not find out now. None the less, it was an example of that period of economic planning, of which the noble Lord, Lord Hennessy, will be well aware.

We come back to this again and again. As my noble friend Lord Heseltine made the point in his own document Industrial Strategy, this is the 10th time since the war that we have come back to an industrial strategy of some kind. There is a good reason for this. The fact is that government inevitably has a huge effect on industry and the economy generally through procurement, financing research and development, education and training, the defence department, technology and all such things. Therefore it makes total sense, even in a de minimis way, to get it all together in a mature and sensible way and to give it sensible leadership so that it can support the market economy in a sensible, professional and valuable way. That is why we have to do it. In addition, as was pointed out by my noble friends Lord Prior and Lord Heseltine, other countries are doing it ruthlessly—for example, China, which has a huge economy, and a tiny economy such as Singapore, which now has a higher standard of living per head of population than we do, because it has done that in spades. Even Saudi Arabia, for heaven’s sake, is now getting its act together with the rather more forceful leader it now has, and, as my noble friend Lord Prior points out, even the USA also does it—rather less obviously than the other countries, but it does it. The fact is that we need a properly thought-through industrial strategy if we are to survive and prosper in the world. Therefore, it is simply a question of whether we have the right priorities and whether we are going about it in the right way.

Surely a central priority that has come out again and again in this debate is investment in infrastructure, as the noble Lord, Lord Mair, has just pointed out, and in skills—a point made very clearly by the noble Lord, Lord Stunell. On page 172 of the document there is a shocking table showing fixed capital investment as a percentage of GDP. For every year from 2005 to 2017, the UK is consistently at the bottom—not just bottom in one year but in all the years mentioned. Even Italy is ahead of us. Germany is at 20%, we are at 15% to 18%, France is at 23% and so on.

Along with the huge problem of low infrastructure spending, we have problems with the digital economy, as pointed out by the noble Lord, Lord Mair. On page 152 of the document, there is another appalling table showing broadband speeds among the G7. For once, we are not at the bottom, but we are very low down and far from the top. This problem lies with BT. What is BT doing? It is depriving us of the facility to watch Champions League football and the Ashes test matches, although at the moment that is not a bad thing, given our performance. None the less, it is depriving us of the chance to watch these things for free, while it is not doing its job of getting speedy broadband distributed to rural areas throughout the country. Indeed, some urban areas do not have satisfactory broadband.

I am pleased that the Government will shortly put into law the right of every consumer to have high-speed broadband by 2020. They were right to face down the industry, which wanted a voluntary arrangement, and to go for a legal requirement by that year, but to liven up BT in this area they need to back that up with further recognition that more competition is needed. Plenty of people are willing to provide the competition and there is plenty of investment that recognises that this is a good area into which to put cash.

Another important area is skills. Technical education has been a Cinderella subject throughout my lifetime. The noble Lord, Lord Hennessy, made the point that people were talking about this 150 years ago, but the fact is that we are still failing in this area. In 2016, only 1,800 18 year-old school leavers in the entire country started higher apprenticeships. That is an astonishing and appalling figure. The latest statistics on apprenticeships show a 60% drop in the take-up of apprenticeships. Clearly something is going wrong here. The fact is that the bureaucracy is not delivering on a very aspirational and sensible policy. Therefore, I hope that whoever is the new Secretary of State—I have not heard the news today on whether the Secretary of State is to carry on or whether there will be a new one—

[A noble Lord]

She is carrying on.

[Lord Horam]

Splendid. I hope the Education Secretary makes technical education a top priority. For far too long we have given priority to academic education; we now need to help the non-academic children in our society.

Finally, as a Cambridge economist, I agree with the point made by the noble Lord, Lord Eatwell, about the trade gap. The fact is that this has been bad, it is bad and it is getting worse. We pay for the trade gap only by borrowing or selling off assets. At the moment, exports account for only 25% of our GDP. In Germany, the figure is 45%. Even France and Italy are ahead of us in exports as a percentage of GDP. Only 10% of all the companies in this country are in the export field. Admittedly, most companies are small and therefore do not export. The figure is higher among medium-sized companies and 40% of large companies export, but the figure is still not that high.

If I may boast for a moment, I started an economic consultancy after leaving Cambridge and shortly after leaving the Financial Times. It is a medium-sized company, with 250 employees, and we export 92% of all our product. I have never seen a trade agreement—I do not know what they are. If you have a good product and a good marketing system, you can export; there is no problem with doing that. Therefore, this is clearly something to which we have to pay attention.

Finally, we should also be careful about selling off too many of our national assets. Alex Brummer’s book, Britain for Sale, points to the dangers of that. Foreign ownership often brings in efficiency and competence, which we need, but all too often national interests are not really followed by the new owners of these organisations. Therefore, I think we need a national interest test as well as the security and consumer tests that we have in relation to foreign takeovers.

I am sure that in these tumultuous and uncertain times we need an industrial strategy. This time, I hope that the one we have started will be sustained.