Budget Statement

Lord Hunt of Chesterton Excerpts

Thursday 27th March 2014 Lords Chamber

[Lord Hunt of Chesterton (Lab)]

My Lords, I want to comment on some of the policies on energy, science, technology and exports that were in the Budget speech. I declare an interest as a director of a small company and as an emeritus professor at UCL and Cambridge. Some of the information about science expenditure was in supplementary information provided with the Budget speech and not in the version that we had from the Printed Paper Office. One question that one wants to ask is whether best use is being made of government expenditure on science and technology.

This Government certainly recognise the importance of science expenditure and there is a general feeling that the Chancellor has appreciated this more during his period in office. The previous Labour Government appreciated this, too, and had to overcome the lack of priority given to science and technology by the Thatcher and Major Governments.

The importance of the UK having a highly competitive science and technology area, and of its industrial applications, were raised in a recent report of the House of Lords Science and Technology Committee, which commented on the critical level of funding for parts of the UK scientific infrastructure—which I myself have seen accentuated in the areas of environment and engineering, as well as in atomic physics. That the UK did not have world-leading laboratories in hydraulics was a factor whose implications we saw in the floods of this year.

Importantly, the Chancellor said that policies for science and technology needed to be integrated with increased exports, but one has to recall that when the Conservatives came into power, the first thing they did was to indulge in various ideological decisions such as abolishing the regional development agencies, which were widely supported by industry and business. In Germany and elsewhere, such regional organisations of employers supported by government and local authorities are an important vehicle for encouraging exports. It is rather different from having a man from BIS coming to visit your company. That these organisations across Europe are extraordinary group activities is one of the reasons why they are so strong. As has often been commented on, the way that German industries in local areas work with the banks ensures expansion and adequate finance. It was surprising that the abolition of this very successful and growing area of our business in the UK was supported by the Lib Dems, who I had always thought were supporters of regional power and influence.

If we look at what has happened during the past three years, I suppose that we should be pleased that the Government have seen some of the error of their ways. Mr Willetts, in a rather nicely written piece that I have cited before, explained that when he came to power, he thought that the only thing the Government had to do was to get out of the way of business. He then stated that it was in fact very important that the Government lead, support and work with industry and science and technology to make important developments. A variety of specific initiatives have been taken, one of which was to focus on space. The UK is an important leader in applying work in space in a commercial way, as we saw just last week, with Inmarsat being located in London. That was a brilliant example of UK science and technology being widely recognised and used.

As part of the mea culpa article by Mr Willetts describing the evolution of government policy, he commented that, after being rather suspicious of the Labour Government’s Technology Strategy Board, the Government have become strong supporters of it. Although I did not hear any further mention of expanding it in the Chancellor’s Statement, it would be very interesting to know from the Minister whether that is planned. The amount of money being funded through the TSB is still small compared to the money spent in Germany, for example, through the Fraunhofer centres. The Fraunhofer centres also focus not just on very high-tech but give credit to important technology at the level of everyday living and small businesses—for example, how buildings get damp in strong rain conditions and what you should do about it. One of the Fraunhofer centres deals with that in particular. It was the noble Lord, Lord Sainsbury, who introduced the TSB, as he explains in his book on progressive capitalism.

One feature of the Chancellor’s speech, as of many speeches made by members of the Government, is the total absence of the word Europe. I was very gratified that the noble Lord, Lord Razzall, earlier commented that the most important feature for the long-term strength of UK industry, business, science and technology is that we remain in and active members of Europe.

The word from Brussels now is that because of our tendency under this Government to think of departing from Europe, in many European meetings in Brussels the UK’s point of view is simply ignored. They say, “You guys are on your way out; why should we listen to what you have to say?”. That was said by a senior British civil servant, now in Brussels, who said that the situation was serious. Last night, rather gratifyingly, we heard Mr Clegg talking about Great Britain, not Little England. I hope that that will be a feature of the next election. At the moment, we seem to be run by a Little England party. However, that was on Wednesday. On Tuesday, we had a speech from the Prime Minister saying that we greatly believe in Europe and that Europe is helping us with our development of full employment, so it varies from day to day.

It is important to keep reminding ourselves that areas in which the UK is a world leader are often those projects that we are undertaking with Europe. Airbus is a very important example. Rolls-Royce has only a small proportion of its work in the UK; most of it is now in Germany or in the United States. It is important for the Government to do much more to advertise that. When the Prime Minister flew to Beijing with his big delegation, he did not fly in an Airbus, he flew in a Boeing. When he arrived in Beijing, there was a big notice above his head, shown on television, reading “Boeing”. That is not very clever.

I also want to talk about energy and climate change. The Chancellor spoke about that in his speech and emphasised the fact that the UK is investing strongly in low-carbon sources of energy, particularly nuclear and wind. The fact that the UK is continuing its strong policy is one reason why we have some leadership in the world discussions on climate change. I am a vice-president of GLOBE, and many politicians from all over the world come to see what we are doing, both legally and by our policies. Indeed, our policies are coherent. I have been praising Germany in my speech, but the fact that it has a totally incoherent policy on energy—suddenly switching against nuclear—is a source of great difficulty in Europe.

However, the Government should not become too fascinated by the possibility of cheap gas. I notice that we had a fracking speech earlier this afternoon. The message from US politicians visiting London is that the reason why fracked gas is so cheap in the United States is that, as a result of legislation by President Bush, the costs of providing water for the fracking operation and for cleaning the water after the fracking operation are not attributed to the cost of the gas. In the words of American politicians, the water consumers of America are subsidising the cost of the gas. We need to be very careful about that.

I also notice that the issue rather reminds me of the Labour Government in the 1960s, when they asked whether they could abolish a railway going through Wales. Speaker Thomas, Lord Thomas, said, “Mr Prime Minister, that goes through 24 marginal constituencies”. I wonder whether the fact that fracking of gas would go through a lot of marginal constituencies in Lancashire may be the cause of the delay that we heard about this afternoon. To continue that point, the issue of water is one of the reasons why there was great concern about fracking in the UK; the Institute of Civil Engineers made some remarks about that that have not been explained by the Government.

I come to my last point. The Chancellor emphasised in his speech that the carbon price compensation for energy-intensive industries needs to be considered and implemented. However, it is very important that this is not just a handover of funds. Surely the funds should be handed over with conditions relating to efficiencies and new technologies implemented by the companies that are using this extra funding. In Stoke, for example, in the Potteries, they are using new techniques to make use of the gas coming out of the old coal mines. That kind of energy use should be supported. The other feature that the Government emphasised was the encouragement of combined heat and power. Many noble Lords have been commenting about that for 10 years or more and it is a very welcome development.