Lord Vaizey of Didcot
Main Page: Lord Vaizey of Didcot (Conservative - Life peer)UK Software Industry
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Jim McGovern
When will a member of the coalition Government visit Abertay university?
Jim McGovern
The Secretary of State for Scotland has visited, but no Conservative Member has done so.
Jim McGovern
I thank my hon. Friend for giving way; I went to my usual seat in the Chamber over here, so I seem to have split from the Opposition.
On the subject of access to MPs, prior to the previous Labour Government’s March Budget statement, numerous Ministers—the Chancellor, the Secretary of State for Scotland, and Ministers from the Department for Business, Innovation and Skills and the Department for Culture, Media and Sport—visited Abertay university. They saw for themselves just how important the industry was to Dundee and, on the back of that, the Chancellor announced a tax break for computer games. However, since the general election, there has been not one visit to Dundee.
Jim McGovern
Prior to the withdrawal of tax breaks for the computer games industry, not one Minister visited Dundee. Does my hon. Friend the Member for Wrexham (Ian Lucas) agree that that was unfair, at the very least?
The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Mr Edward Vaizey)
I am grateful, Mr Weir, to be serving under your chairmanship today, instead of serving with you in Committee as we were yesterday, and will be again tomorrow.
I congratulate the hon. Member for Houghton and Sunderland South (Bridget Phillipson) on securing this important debate. May I give her one quick, straight answer, which is that I would be delighted to meet her at a later date if she finds my speech unsatisfactory? I can make a safe prediction that because I am a Minister and she is member of the Opposition, my speech will almost certainly fall short in some respects of what she wishes.
I would also be only too delighted to visit Sunderland and see some of the innovation and technology happening in that city. The hon. Lady used her speech to highlight brilliantly the sort of technology expertise that now exists in Sunderland. In fact, as pointed out, in the north-east alone it is said that the software and IT industry is worth something like £800 million; there are almost 2,200 businesses, 27,000 people and companies such as 5G, which she mentioned, and, in other parts of the north-east, Sage, Reflections and Eutechnyx. Sunderland is a hub of high-tech industry.
I am grateful to some of the other hon. Members who have contributed to the debate. The hon. Member for Southport (Dr Pugh) made a thoughtful speech, which was not partisan but reflected on many of the issues that affect the software industry. He effectively turned the debate, for a moment, into one on the video games industry. Another point, which I shall return to, and which I absolutely support him on, was his reflection that in schools children today are learning how to use applications rather than how to programme.
In fact, the hon. Gentleman might have shared with me some of the anecdotal experiences of talking to some of our top games developers, many of whom learned their trade, as it were, on the BBC Acorn computer in the ’80s. We simply do not have such access to the nuts and bolts of technology. One of the things that I want to work on, in a big society kind of way—I am one of those Ministers who fully understands what the big society is—is some sort of after-school club where children can sit down with developers and learn how to programme. I also took on board the hon. Gentleman’s points about big IT and big government. He will be well aware that many members of the new Government, particularly the Chancellor, are keen supporters of open source software. The Government are very focused on ensuring that small and medium-sized enterprises get a fair share of the cake from the Government.
I was pleased that the hon. Gentleman took a realistic view about the fate of BECTA—we should not always focus on the quango as the be-all and end-all of Government policy. I am sure that schools will continue to access excellent high-tech IT equipment for their children, not least from RM plc, one of the foremost educational technology providers in this country, based in my constituency, at Milton park in Didcot.
It was good to hear the speech of my hon. Friend the Member for Hove (Mike Weatherley), whose soon-to-be constituency I visited during the election. I am not sure whether I made a big impact; I suspect it was his hard work and dedication to his now constituents that secured him the seat. He has already made a name for himself in the House with his passionate support for the creative industries. He used to work in the film and music industry. His focus is on piracy, to ensure that there is a balanced debate and that we remember that rights holders deserve to make money from their creations. I take on board his points about the R and D tax credits.
I am delighted to see my hon. Friend the Member for North Swindon (Justin Tomlinson) in the Chamber, having won his seat at the election. His remarks reflected the change of tone in the House on video games. When I was an Opposition spokesman and talked about the importance of video games, the only Labour Member who would talk about video games was the right hon. Member for Leicester East (Keith Vaz), who regularly criticised them for their violence and their effects on society—he alleged. It is good that my hon. Friends are now standing up and saying proudly that they are players of video games.
Jim McGovern
Does the Minister accept that “video games” is perhaps the wrong title for the subject? Anyone who has visited Abertay university would see that what are called video or computer games can be applied to construction, architecture or medical science. It is wrong to say that “video games” just involve young lads sitting at a computer playing “APB” or “Grand Theft Auto”.
Mr Vaizey
Obviously, the software industry is far wider than simply video games. We tend to call it the video games industry in the vernacular, although some people call it the interactive entertainment industry. However, I have said consistently over many years that what one loosely calls the video games industry is at the heart of a whole range of technologies in defence, education, health and the wider creative industries, such as architecture. That is why it is so important to support the core skills and companies in the industry.
My hon. Friend the Member for North Swindon invited me to meet the Technology Strategy Board. I have done so. It is incredibly important to the debate about the future of the software industry, as well as across a range of other areas. I am delighted that it is in Swindon, just down the road from my constituency; indeed, several of its employees are constituents, so they are clearly people of great judgment. Let me take this opportunity to wish my hon. Friend a happy birthday for last Friday.
Last but not least, I welcome to our Benches the hon. Member for Dundee West (Jim McGovern). I cannot work out why he is sitting where he is, and I had better tread carefully in making an analogy, but he resembles one of those soldiers from the last war who was so dedicated to his craft in taking on the enemy that he dug deep, burrowed down, hid and covered himself in camouflage. In coming to his usual seat, he is as yet unaware that the last war has concluded, victory has been declared and there is a new Government. Alternatively, his choice might simply reflect the huge success of the coalition’s policies over the past six months, particularly pertaining to the software industry, to which I am about to turn.
Jim McGovern
Let me say in response that I might be the first, but I will certainly not be the last, to split this coalition.
Mr Vaizey
The hon. Gentleman indicates that he is simply acting as a buffer between Conservative and Liberal Democrat members of the coalition. I wonder what other conflict spots we could send him to, given that he is doing such an excellent job this morning.
I have mentioned the huge importance and success of the software industry in Sunderland. The hon. Member for Wrexham (Ian Lucas) talked of the success of the UK software industry, and I heartily endorse what he said. More than 500,000 people work in it, and there are more than 100,000 enterprises, generating more than £39 billion of gross value added. The UK market for software products and services is the largest in the European Union and has sophisticated leading-edge consumers in sectors such as logistics and financial services. As a result, almost all the world’s major software businesses have a substantial presence in this country, whether in research and development, logistics or sales and marketing.
The software industry is not immune to the pressures being felt across the UK economy. In the longer term, globalisation will create additional pressures, as routine tasks and activities continue to be relocated to lower-cost economies. However, there are also tremendous opportunities for the sector, and I am certainly from the school that sees the glass as half full, rather than half empty. Innovative software technologies will underpin many of the fundamental shifts that we see in our society and our economy—everything from how we shop and access entertainment such as television and video to how we improve our transport networks and manage our scarce natural resources. In all those areas, new software systems will be the key enabler and driver of growth and innovation. As a result, the sector’s importance extends far beyond its direct contribution to UK GDP and employment, vital though that is. The sector will be in the vanguard of our broader economic renewal.
The coalition Government are absolutely committed to creating the right conditions to allow software and other UK technology companies to flourish. That means responding to the sector’s distinct requirements to ensure that the software businesses of tomorrow are nurtured today. Last week, the Prime Minister launched “Blueprint for Technology”, which clearly stated the Government’s ambition to make the UK the No. 1 place in the world to start and invest in a technology company, as well as our ambition to be the most technology-friendly Government in the world.
The hon. Member for Wrexham took huge exception to the fact that the blueprint was launched in Shoreditch, not Sunderland, and I assure him that I will be writing to the hon. Member for Hackney South and Shoreditch (Meg Hillier) to tell her that one of her party’s spokesmen deems her constituency unworthy of the prime ministerial launch of a technology blueprint. The hon. Gentleman gave no reason, but if he wants to clarify why he has a downer on Shoreditch, he has only to intervene.
Ian Lucas
I would be delighted to intervene. I made it absolutely clear to the Minister, who clearly was not listening to my speech, that a commitment to the regions, which is so important to the future of the software industry across the UK, is lacking. I am sorry that Her Majesty’s Government, and particularly the Prime Minister, have not, for example, put in place a local enterprise partnership in Sunderland, which is an extremely important industrial city in the north-east, where one of the world’s most important automotive companies is based. I was illustrating the fact that the Prime Minister’s priorities appear to be focused on the south-east, which is where he launched the blueprint.
Mr Vaizey
The hon. Gentleman might as well say that the fact that we are having this debate in Westminster indicates that the Opposition’s priorities are focused on the south-east, rather than on Sunderland. It is slightly crass to rubbish the technology blueprint on the basis of where it was launched. It was launched in a Labour constituency, and the Government were absolutely adamant that it would be, to show our support for the Opposition.
As for the LEP, the hon. Gentleman well knows that individual local authorities and areas were invited to bid for an LEP. Sunderland’s bid did not get through the first phase, and it is now part of a wider bid for the Tees valley. I am certain that it will be constructively listened to and will progress. The idea that the north-east is somehow not getting LEPs is another complete myth; indeed, the hon. Gentleman’s speech was full of myths, to which I will return from time to time in my remarks.
For example, if the hon. Gentleman wishes to intervene again, perhaps he could elaborate on his remark that Google was rewarded for coming on board the east London project—along, I have to say, with important British companies such as Vodafone and BT—with a review of intellectual property. Is it his allegation that there is some corrupt deal between Google and the Government? If it is, he is free to intervene to make that point. I notice that he is not going to.
Software companies have said that their top priority is the ability to access the right skills in the right place at the right time. Those skills range from specialist capabilities in science and engineering through to practical know-how in systems maintenance. The relevant sector skills councils, including e-skills UK—the sector skills council for business and information technology—are working closely with software employers and the Government. The aim is to bring together the education system and workplace training to create the pool of skilled workers needed to generate and exploit innovative technologies. It is important to note that the Government announced early in their time in office the Livingstone-Hope review of skills for the video games industry, which is progressing extremely well and has generated enormous support from the sector. It will no doubt complement the other review that I mentioned.
The Government recognise that the software and technology sectors are globalised and highly mobile. We will therefore ensure that investors and entrepreneurs who want to operate in the UK can enter, while we are reducing the overall level of immigration to a manageable level. That is why the technology blueprint introduces a new entrepreneur visa to make sure that someone with a great business idea who receives serious investment from a leading investor can base their business in the UK.
Mr Vaizey
The hon. Gentleman shakes his head. We all know the Labour party’s record on talking about immigration, and we have been only too interested to see the leaflets that it was putting out during the election. Our policy takes a slightly more sober and reasonable approach to what can sometimes be an emotive issue.
Bridget Phillipson
The Minister may be aware that the Select Committee on Home Affairs, of which I am a member, gave careful consideration to the immigration cap. Some of the concerns that were raised, particularly from ICT companies, were about how it would work and whether it would be a deterrent for business investment, particularly in relation to highly skilled jobs such as those in scientific industries. I know that the Minister is making a party political point, but there are serious issues for the Government to consider about the working of the cap and the impact that it may have on the UK software industry.
Mr Vaizey
I should love the hon. Lady to point out what party political point I made. I was simply setting out our policy and the fact that we responded to the concerns in question with an entrepreneur visa. I noted that the hon. Member for Wrexham was shaking his head. Clearly, he simply opposes the policy for the sake of it, rather than considering what it does.
The blueprint also announces a review of the intellectual property framework, to ensure that its design will support the growth of both new and existing businesses. That review is incredibly important, because it will focus on the needs of small and medium-sized enterprises. We want to give our full backing to the high-growth, innovative companies of the future, whether they specialise in software or other disciplines. Part of preparing for the future is looking critically at the frameworks that we have in place to protect innovators. The review will focus on identifying and dismantling barriers to growth in the IP system, and will look at how the IP framework could better support new business models as they develop.
The third important element of our blueprint is the framework for supporting future technological innovation in software and other disciplines. We are now pledged to establish a network of elite technology and innovation centres, based on the model proposed by Hermann Hauser and James Dyson, to commercialise new and emerging technologies in areas where there are large global market opportunities and a critical mass of existing UK capability. The recent comprehensive spending review has provided £200 million of funding for the technology centres over the next four years. The network will be overseen—in answer to the questions of the hon. Member for Wrexham—by the Technology Strategy Board. Individual centres will operate with a high degree of autonomy, to give them the flexibility to respond to business needs and emerging opportunities, but the board will provide the overarching framework.
Our vision for technology and innovation centres is that they should help industry sectors to exploit new and emerging technologies, and bridge the gap between original research and technology commercialisation, reducing some of the attendant risks to business. I am aware of the issue from my constituency where there are several high-tech companies that can benefit from spin-off research. Each idea appears to me to be potentially world-changing, but the struggle they have to take that research to market and commercialise it cannot be underestimated. The centres will support projects that businesses and universities often cannot undertake, or that they do not have sufficient incentive to undertake on their own. They will help new technologies get to investment readiness so that they are a viable proposition for venture capital or other forms of investment, and will help, we hope, to accelerate their journey to market.
We want to get the network up and running as soon as possible, so the Technology Strategy Board will work closely with industry, stakeholders, and the Government to identify the priority sectors, the scale of initial investment required and the governance structure for the network of centres by April 2011. I urge the hon. Member for Houghton and Sunderland South and any other hon. Members who are interested in the issue to contact the board to discuss it.
The Technology Strategy Board plays an important role in supporting the software sector. It already supports innovation among software-intensive firms in a number of ways, either through sector-specific programmes or through cross-sector projects designed to deal with a particular challenge, such as low carbon. It also backs the software sector via initiatives such as knowledge transfer partnerships. Several of the Technology Strategy Board’s programmes routinely invest in initiatives where more than 90% of the business activities are software-related. That is true of its information technology programme, as well as its creative industries, intelligent transport and network security programmes. In addition, the board has identified its recently formed digital programme as one of its five strategic priorities in the period ahead. In total, over the past year the board has launched 13 software-intensive competitions for projects with a combined value of around £100 million, including £50 million of private investment.
Some other issues were raised, including broadband. Again, some myths were propagated by the Opposition. I think that we all agree that superfast broadband and that kind of infrastructure is essential to the future of the economy. However, I find it odd that the Opposition seem to believe that we have reneged on a promise, or that we do not share their view of its importance. The previous Government had a very poor ambition, which was simply to get universal broadband of 2 megabits at the end of 2012. They proposed to pay for that with a telephone tax that would have hit some of the poorest in society, as well as being a disincentive.
Jim McGovern
On the subject of promises, prior to the general election, the Minister was quoted—I shall have to paraphrase—as saying that his party unequivocally supported tax breaks for the computer games industry. What has changed his and the Chancellor’s mind?
Mr Vaizey
As to promises, the hon. Gentleman’s party said in, I think, the 2001 election manifesto, that they would not introduce tuition fees. So if the hon. Gentleman wants to accuse me of broken promises, perhaps he should look to his own party’s huge record of broken promises, not the least of which is leaving the British people with the biggest deficit in peacetime history, having promised to end boom and bust.
As I said, the telephone tax would have been a huge disincentive to investment. It would have hit small businesses and the poor—all for the paltry ambition of 2 megabits universal broadband.
Mr Mike Weir (in the Chair)
It seems to me that that is a matter for debate, not for the Chair.
Mr Vaizey
Thank you, Mr Weir, for reminding the hon. Gentleman that he has plenty of opportunities to make his point. It is a bit rich for a Labour politician to talk about the misrepresentation of other parties’ policies, given what we have seen in the news this week, after the first election court for almost a century was called on the basis of Labour party leaflets in the general election. Sheer brass neck does not even begin to describe it.
This is a debate in which I have an opportunity to set out our policy on broadband in response to the comments of the hon. Member for Houghton and Sunderland South about its importance. That is what I intend to do.
As I said, we want the best superfast broadband in Europe by 2015. We have secured the funding for it—£530 million to the end of the spending review, and a further £300 million after that. We have launched four super-fast broadband pilot projects, in the highlands and islands, Herefordshire, Cumbria and North Yorkshire, so that we can identify early lessons and work out how to proceed in the most cost-effective way. We shall also launch in more detail at the end of the year our policy on broadband, setting out some of the nuts and bolts issues. We have made huge progress on regulatory issues, such as duct access for competitors to BT and the opportunity to roll out broadband on telegraph poles.
Justin Tomlinson
On new developments, are there any thoughts about treating broadband in the same way as utilities such as gas, electricity and water? Having been a councillor representing new developments that have waited years for broadband access, I know that the introduction of that would be welcome.
Ian Lucas
I want to correct the Minister simply on a point of fact. The change to 2-megabit broadband was to be funded out of the money that he is using from the BBC licence fee—money that was left over from the digital switchover. The telephone tax was for the development of high-speed broadband. That was the position, and if the Minister wishes to, he can read about it in “Digital Britain”.
Mr Vaizey
I have read that report, and I am happy to stand corrected. We are in a similar position, except for the fact that the Government are not imposing a tax; we plan to get superfast broadband to as many people as possible by 2015, while the Labour party remains stuck in the slow lane at 2 megabits.
I now tackle the thorny issue of video games and tax breaks. Again, I shall try to knock down a few of the myths that have been propagated. To hear Labour Members speak, one would have thought that the land of milk and honey had arrived with the last Labour Government. When I was Opposition spokesman, I sometimes felt like a lone voice when talking about the success of the video games industry over the last three or four years. However, I pay tribute to the hon. Member for West Bromwich East (Mr Watson), who has been a fantastic advocate of the video games industry.
I remember that the Labour Government ruled out a video games tax break. When in opposition, we mentioned competition from Canada, and were told that the Government were going to refer the matter to the World Trade Organisation. However, a chance conversation with an insider revealed that that was a red herring. When I tabled a parliamentary question about it, the Government were forced to perform a U-turn and reveal that the reference to the WTO was an excuse for inaction. Finally, they were converted to a video games tax break.
At what point did that amazing conversion come? Was it at the beginning of a Parliament, when the Government had a strong majority and a lot of energy? No; it came with the last Budget of a discredited Government who were about to lose an election. They knew that they would not have to implement that tax break—and it was not implemented. It was an extraordinary U-turn; despite the comprehensive spending review of October the year before, that decision would still have had to go to Brussels for approval. The sound of Labour MPs clambering on to bandwagons now that they have no public policy responsibility for the matter is quite extraordinary.
Jim McGovern
I resent the Minister’s comment that Labour Members are jumping on a bandwagon. I have supported the computer games industry in Dundee for a number of years, and several Ministers have visited us. Why did Ministers not visit Dundee prior to withdrawing the tax break?
Mr Vaizey
Dundee is an incredibly important part of the video games sector in the UK. We have invested £2 million in the university of Abertay to support video games, but video games do exist in other parts of the country, and it is not essential to visit Dundee to decide whether we should have a tax break. But I intend to visit because it is a pioneering area with a world-class university. I am raring to get up there. Indeed, given the austere times that we live in, I hope that the hon. Gentleman will put me up for the night. It is a bit odd for Labour MPs to claim that if you cut them open, “video games tax relief” will be written on their hearts; the relief was a political ploy to win support from the industry in the run-up to the election, and they knew full well that they would not have to implement the policy.
Let us be clear about it: people want a video games tax break because of the competition that we face from Canada. A tax break is not a panacea; France has a tax break, but we have a more successful video games industry. Canada does not have a national tax break for video games. It has two strong regional Governments who actively compete for the video games industry; they made that decision 10 or 15 years ago and they are throwing money at the industry. They are handing over millions of dollars—there is nothing wrong with that—to tempt developers and publishers to base themselves in Canada, and that means salary holidays, rent holidays and other kinds of support.
I want to put in place a strategy for the video games industry—for example, so that it can access the regional growth fund that we announced, and can take advantage of the numerous funds that I have discovered in the Department for Business, Innovation and Skills. Partly because of exchange rates, we are close to Canada, even without a tax break. One company that has invested in Canada showed me the numbers; without breaking commercial confidentiality, I can say that there was a difference of about 10 or 15% in costs per employee. However, as the hon. Member for Southport mentioned, we have a fantastic skills base, and that is another important reason to invest here.
This has been a good-natured and good-humoured debate in which we have found a great deal of common ground, huge support for the software industry and a passion for the video games industry. There has been recognition of the pioneering role of the north-east and Sunderland in ensuring that the UK remains a world leader in this important industry. I set out our policies—the technology blueprint, our plans for technology innovation centres and entrepreneur visas, and our plans to review intellectual property law. However, there is broader support, too.
I was disappointed to hear that it is now the Labour party’s policy to push up corporation tax. Under this Government, corporation tax will fall year on year; that is an important point to make. We have also increased entrepreneurs’ relief for capital gains tax. Our tuition fees policy is progressive, and it will mean people paying back their debt when they are at a higher income level than applied under the Labour Government. We have made significant progress in empowering our universities. As the hon. Member for Southport pointed out, despite Labour’s U-turn on tuition fees, their introduction did not stop people wanting to go to university.
I was privileged to be at the graduation of four apprentices at Culham Science Centre in the constituency of my hon. Friend the Member for Henley (John Howell). It is worth remembering that we have a fantastic Minister for Further Education, Skills and Lifelong Learning in this Government; he has put together a national apprenticeship policy, which is important for high-tech industry. People leave school and go on to be apprentices, and the four whom I met were formidable. As the head of the Culham Science Centre said, they are as qualified as any graduate, but have been paid for four years and have no debt. Many will be going on to do higher degrees. They will be at the heart of a high-tech industry in Culham. Thanks to that Minister, this Government, unlike the last, have—at long last—a clear policy to promote apprenticeships and skills, which are important to both the IT and software industries.
I cannot read the face of the hon. Member for Houghton and Sunderland South, and I am not sure whether I have allayed all her fears, but she seems to be in a slightly happier mood than when the debate began. I am happy to sit down with her and talk through the issues at a later date, and to visit her in Sunderland.