Thames Valley Technology Sector

Lord Vaizey of Didcot Excerpts

Tuesday 17th March 2015 Westminster Hall

[The Minister for Culture and the Digital Economy (Mr Edward Vaizey)]

No.

[Adam Afriyie]

Okay. Preferably he will have “right hon.” at the beginning of his title. Some great broadband pilot schemes are coming from the Minister’s Department, which are welcome, including the point-to-point beaming of broadband to smaller villages and hamlets around the country, but again, I would like a little more focus on using solutions that are already available to access hard-to-reach areas.

We have many great businesses in Windsor. Indigina Technologies and Imagebase Technology do software design, and Honeycomb Digital does digital marketing. When it comes to education, of course, we also have East Berkshire college and many others running new technology curriculums, giving young people practical skills in state-of-the-art classrooms and making good use of broadband locally.

I am a great believer in the power of science, technology and the digital. To be party political for a moment, I believe that the digital world is part of the Conservative vision of the world. It changes the data asymmetry between Governments and public services, enabling citizens to see the same level of data. If we use it correctly, citizens will certainly become more powerful, and the state will gradually become less powerful. It is interesting that the Thames valley is rather Conservative in the complexion of its MPs, which is a good thing—

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[Mr Iain Wright (Hartlepool) (Lab)]

It is a pleasure to serve under your chairmanship, Sir Edward. I wish you and other hon. Members a happy St Patrick’s day.

I enjoyed the contribution of the hon. Member for Windsor (Adam Afriyie). He hinted, far too modestly, at his considerable knowledge and experience of the technology sector, having been an entrepreneur in the field before coming to the House. He has demonstrated that passion and knowledge admirably. I praise him for his great work as chairman of the all-party parliamentary group on space. It is a leading technology not only in Britain but for the rest of the world. Britain is well placed to be a leading player in the space industry of the future. I agree with the ambition to secure 10% of the global space market, which represents £40 billion, by 2030. It is incredibly admirable how he advocates for the space industry in this House and throughout the Houses of Parliament.

I welcome the Minister for Culture and the Digital Economy, the hon. Member for Wantage (Mr Vaizey). His constituency covers a large part of the area discussed by the hon. Member for Windsor. On the space industry, the Minister will be aware that Harwell in his constituency is the nucleus of a great and exciting emerging space industry cluster; that must continue in future.

It is clear from the contribution of the hon. Member for Windsor that the Thames valley has considerable strengths in the technology sector. As he mentioned, the area boasts the European and global headquarters of more than 200 Fortune 500 companies, such as Microsoft, Oracle, Vodafone, Fujitsu, Johnson & Johnson and Honda. Huawei, one of the fastest-growing telecoms companies in the world, recently moved its European headquarters to Reading.

One structural weakness of the British economy is the widening productivity gap between us and the rest of our economic rivals, but the technology sector shows that we in Britain can resolve that. It has demonstrated the highest productivity of any sector in the UK economy, and has powered ahead in the past 10 years.

This sector has enormous potential. TechUK estimates that the internet of things will reach a global market value of $7.3 trillion by 2017. The hon. Member for Windsor mentioned big data. Big data and data analytics will have a global market value of $32.4 billion by 2017. And wearable technology will be worth $70 billion by 2024. The world is changing fast, but it is clear that the Thames valley can develop and evolve its comparative advantages in this important sector, and create more jobs and wealth, not only for itself but for the rest of the United Kingdom. However, in order to achieve that potential, the area needs to address several elements, as we heard time and time again during the hon. Gentleman’s remarks.

The first point that I will address is skills. The UK Digital Skills Taskforce, led by Maggie Philbin, has stated that we face a growing shortage of digital skills. The Science Council has stated that the information and communications technology work force will grow by 39% by 2030, and O2 concluded in 2013 that around 745,000 additional workers with digital skills would be needed just to match existing demand between 2013 and 2017. Baroness Lane-Fox has gone further, saying that a million new tech jobs will be needed by 2020.

The Thames valley is well-placed to take advantage of this growth, but skills shortages remain a problem for the area. I want to avoid engaging in partisan hectoring and criticism, but how are the Government addressing this problem? In order to have a long-term industrial strategic approach, it is necessary, with the full co-operation and indeed leadership of industry, to marry up business policy with education and skills policy, and to ensure that they are aligned. The hon. Gentleman talked about coding and computing being part of the curriculum, which is a very welcome step, but how will we in this country ensure that we gain the digital skills that we need by making sure that, from the earliest possible age at primary school, the curriculum is developed through, so that the workers of the future will be well-placed to get well-paid, fulfilling tech jobs?

It is important to link different parts of business policy with other aspects of Government. So, does the Minister think that the Government’s immigration policy addresses this issue? I am not suggesting for one moment that we have an open-doors policy, but ensuring that the UK is a great destination, both for inward investment and global talent, is incredibly important. Has the Minister considered several points made by techUK about the field of immigration, such as reinstating the two-year post-study work visa and extending the tier 1 exceptional talent visa beyond start-ups to scale-ups, which I will come on to in a moment? How are we making sure that immigration policy is geared up towards fulfilling the potential of the technology sector?

One of the problems regarding skills could be exacerbated by the magnet of London’s Tech City pulling talent away from the Thames valley and other regions. Richard Devall, a partner at the law firm Pitmans, has recently been quoted as saying:

“We have become an established tech region at the expense of home-grown start-ups. Local and even global talent is going to places like London because it is perceived as ‘where it’s at’. People still don't know what the Thames Valley offers. The pull of London’s east end Tech City is immense for a young techie and the Thames Valley is losing out, certainly on global talent.”

The Thames valley area is often seen as a destination for large and mature companies in the tech space. There is nothing wrong with that whatsoever, as large companies provide great employment and can nurture a wide cluster or ecosystem of companies through their supply chain. Nevertheless, this issue has been identified as a challenge for the Thames valley, not only by Richard Devall but by Louize Clarke, co-founder of ConnectTVT, a new accelerator community in Reading. She said:

“It appears we have decided as a region that we are going to be mature, and not do anything to attract the next generation of technology start-ups. We are just not looking at that community locally, and they are going elsewhere. Yet, if you support a start-up community it will help improve local talent, because not all start-ups succeed, and people within them learn, then go into other local businesses.”

I fully accept that this sector is not the sole responsibility of Government, but what are they doing? Are they working together with the local enterprise partnerships to ensure that start-ups, scale-ups and the whole cluster or ecosystem that the hon. Gentleman for Windsor mentioned is actually being developed in the Thames valley?

As part of that wider cluster, procurement can be used to stimulate growth and scale-up in smaller firms. The Government have a target to ensure that 25% of central Government spending on procurement is being awarded to small and medium-sized businesses. Given that we are now in 2015, when the target was meant to be met, could the Minister update the House as to how the Government are progressing towards achievement of that target? Also, given the strength of the tech sector in the Thames Valley, how does that area fare when it comes to winning contracts from both central and local Government?

More emphasis should also be given to scale-up companies. An excellent report last year by Sherry Coutu, who is herself a prominent tech entrepreneur, stated that if we closed the gap of scale-up between ourselves and the US and other leading economies, in the short term—within three years—an additional 238,000 jobs and £38 billion in additional turnover would be possible, and in the longer term—by 2034—150,000 net additional jobs and £225 billion additional gross value added in the economy could be provided.

That excellent scale-up report from last year, with its ambitious but achievable recommendations, does not seem to have progressed with Government. Can the Minister give the House an update as to how the Government are taking forward the recommendations in the report? Can we expect to see a detailed Government response before Dissolution? How will the Government ensure that local decision-makers—particularly LEPs, which are mentioned a lot in the report and which are very relevant to the Thames valley—are included in the planning for the report’s implementation and delivery?

We have heard from a number of hon. Gentlemen today—both the hon. Member for Windsor and the hon. Member for Newbury (Richard Benyon), who is no longer in his place—about how infrastructure is vital if the Thames valley area is to achieve its vision of prosperity. From a northerner’s point of view, the tech sector in the Thames valley is often seen as being the M4 growth corridor, which gives an indication of the importance of the road network. However, the importance of rail has also been mentioned in the debate today.

In addition, will the Minister accept that in order to attract global talent and inward investment, a co-ordinated aviation strategy is also needed? In the debate today, we have only heard about aviation in passing. However, discussion of Heathrow’s future is important. What should the Government be doing with regard to a swift implementation of the recommendations of the Davies airport commission, to ensure that our international competitiveness is not compromised and that linkages with the growth hubs of the world are developed?

On the subject of infrastructure, the Minister will recall that about a week ago we had a debate in Westminster Hall on broadband; he will remember because, to be honest, he was quite grumpy, with respect to the success of the broadband roll-out.

[Mr Vaizey]

indicated assent.

[Mr Iain Wright]

Broadband has again been referred to a number of times in today’s debate. The hon. Member for Windsor mentioned how broadband can be not only about fiddling late at night but about ensuring that broadband connections are the arteries of economic growth in the future economy. How can we ensure that that is the case? And what is happening with regard to roll-out of broadband, both in the Thames valley generally and in its rural areas?

I would suggest that linked with all of this debate is an emphasis on the need for long-term policy stability and certainty that transcends Parliaments, ensuring that it is recognised that the future of this country’s prosperity is based upon embracing a knowledge-based economy and ensuring that Government can work together with industry to achieve the tech sector’s enormous potential and benefit from its comparative advantages. That being the case, the Minister will know the importance of a long-term innovation strategy in science, particularly when it comes to providing a long-term funding framework to develop science, innovation, research and development.

I am very conscious that tomorrow is the Budget and I know that the Minister will not pre-empt any announcements that the Chancellor might make. Nevertheless, could he give an indication of the Government’s position on making sure that that long-term funding framework for science and innovation, which is necessary to exploit the advantages that the tech sector can provide, is being recognised and put forward by Government?

My final point is about Europe and the EU. Europe is an important part of our marketplace and of how we will derive prosperity. The development of the European digital single market is an important part of the tech sector’s future. I agree with techUK’s firm assertion that the EU digital single market should be shaped and led by Europe’s most successful digital economy, which is the UK’s economy. We should be leading, not following. We should be shaping it according to our own interests, not sniping on the sidelines. That being so, will the Minister explain how he, and other colleagues—but particularly him, because he takes an interest in this—are shaping the European digital single market and ensuring that it is to our key advantage?

This is an important debate. The tech sector is a key part of future economic growth, prosperity and employment for this country, with a particular emphasis on a knowledge-based economy. The Thames valley is well placed to be at the forefront of that sector. However, it requires a co-ordinated, integrated industrial strategic approach that is industry-led, with join-up between central Government and local government and industries. Huge prizes are on offer with regard to the tech sector and we can achieve those with such a co-ordinated approach. I know that the Minister will want to talk about how Britain can succeed in the tech sector, both now and in future.

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[The Minister for Culture and the Digital Economy (Mr Edward Vaizey)]

May I say what a pleasure it is to serve under your chairmanship, Sir Edward? I wish you a happy St Patrick’s day. As a descendent of Henry VII, Lord of Ireland, I know that this day in particular means something to you.

I congratulate my hon. Friend the Member for Windsor (Adam Afriyie) on securing this important debate. He spoke without hesitation, deviation or repetition for 37 minutes. He could have spoken for a lot longer, because he has a great story to tell about the successes in the Thames valley, including in his own constituency.

I thank the hon. Member for Hartlepool (Mr Wright) for his slightly shorter, but no less potent, contribution. Were things to turn out differently, he would make a fine Business Minister. Sadly, as his party is going to lose the election, we can simply dream of what might have been.

Let be begin with some important statistics about the Thames valley, Berkshire. Business start-ups are at an all-time high. Almost 9,000 businesses started up across the Thames Valley Berkshire local enterprise partnership area in 2014, an increase of nearly 50% on the year before. My hon. Friend talked about the importance of the IT sector, and no wonder, because it represents about a quarter of the gross value added in Berkshire, compared with just 6% nationally.

As a Government, we are supporting the growth in Berkshire. As my hon. Friend mentioned, under the growth deal there will be some £100 million-worth of investment. We estimate that that could bring up to 20,000 jobs and 12,000 homes and £40 million-worth of public and private sector investment. In addition, we have supported 10,000 new homes in Wokingham with £24 million. We are investing in transport infrastructure, with £10 million for Maidenhead station. The huge redevelopment of Reading station is costing some £800 million.

I will talk about broadband later, albeit more philosophically than previously. The hon. Member for Hartlepool was right to say that I was grumpy in last week’s debate about broadband. Not that I spent any time on Twitter during my hon. Friend’s speech, but a Deloitte media and telecoms conference is going on at the moment, and the Twitter feed is all about how grumpy the BT man is during his presentation. He is obviously as fed up as I am with hearing the criticisms of the broadband programme, which has been hugely successful, particularly in Berkshire, where £6 million of investment will ensure that we reach 97% coverage by 2017. More than 6,000 homes there had broadband by the end of last year, thanks to this programme.

I will talk about education in some detail as well. My hon. Friend mentioned the £2.3 million that the Government have invested in three new solutions labs, in partnership with local further education partners, to provide science, technology, engineering and maths skills. We think that the solutions labs will bring 250 new jobs to the area, as well as 130 level 3 apprenticeships, 210 higher apprenticeships, 220 level 3 STEM qualifications and 140 STEM traineeships.

It is important to recognise the contribution of the British Business Bank in investing in British businesses, providing more than £890 million of new lending to 21,000 small businesses.

The “Tech Nation” report, mentioned by hon. Members, shows that one in five enterprises in the area we are talking about are tech companies. Indeed, as my hon. Friend said, some of the biggest technology companies in the world are based in Reading, including Oracle, Microsoft, Symantec, Huawei and Nvidia.

The university of Reading is home to a number of science and tech-based specialisms. It has just received a catalyst fund grant of almost £6 million from the higher education funding council for a multi-million pound environmental data centre.

These are all good news statistics for the Thames Valley Berkshire area. Given that I am standing in for the Business Minister, as usual—it seems to be my main role in life: it is nice to find a role after all these years—I shall use this opportunity to big up the Thames Valley Berkshire LEP neighbour, the Oxfordshire LEP, the star of which is, of course, my own constituency of Didcot and Wantage.

My hon. Friend, who is chair of the parliamentary space committee, talked a lot about the success of the space sector. The hon. Member for Hartlepool was kind enough to point out the role of Harwell—in my constituency—in that sector. My hon. Friend will be interested to know that three years ago, there were about 200 high-tech posts in the space sector and now there are nearly 500, and it is estimated that in the next 15 years there will be 5,000 posts, making Harwell the largest multinational space complex in Europe.

Harwell is where the satellite applications catapult is based. My hon. Friend the Member for Windsor, and my hon. Friend the Member for Newbury (Richard Benyon), talked about using satellites to help farmers, which is precisely what the satellite applications catapult is there to do. It is there to show lots of businesses that may not think that satellites have any role to play in their business how those can help them enhance what they do.

In the past 18 months, the UK’s space gateway at Harwell campus has grown from just over 40 to 60 organisations, and only 10 years ago there were fewer than five. This summer, both the European Space Agency’s European Centre for Space Applications and Telecommunications building and the Rutherford Appleton Laboratory space environmental test building will open on the campus.

Just down the road, as part of this Thames valley success story, 1,000 additional jobs have been created at Milton Park just in the past 12 months. Of course, we remain the UK’s, and indeed the European, centre for cryogenics. All this is good news.

Let me start to address points put to me both by my hon. Friend the Member for Windsor and the hon. Member for Hartlepool. We always listen with great care to what my hon. Friend says. He has a distinguished track record in technology and science and is known in this House as a thoughtful and intelligent man. Therefore when he raises issues they are worth addressing and considering.

My hon. Friend’s first point was about data ownership. He is right to raise this issue. All sorts of metaphors can be used, including big data being the big oil of the 21st century, or whatever, but there is no doubt that data are the currency driving the 21st century technology economy and, as such, a relatively dry subject has moved up the agenda. The ownership and use of data is an important issue.

The European Commission and the European Parliament are due to conclude a data protection directive, which could be a big prize, giving Europe one data protection regime across all 28 member states. I am fond of saying that, in many respects, it may be the most important piece of economic legislation that Europe passes in the next decade, because if its final iteration is too bureaucratic or business-unfriendly, it could have a big impact on business. However, we start rightly with the principle that the citizen owns their own data and should have control over how those data are used. It is a circle that has to be squared. The citizen has to trust and understand how the data are being used, but at the same time businesses need to be able to use those data to function efficiently and provide the services that many people want.

I am sorry not to reach a clear conclusion on my hon. Friend’s contribution. I am simply acknowledging that this debate will continue.

[Adam Afriyie]

I hope that I indicated during my remarks that I was flagging the subject, not looking for a solution. I am delighted with my hon. Friend’s response about the citizen being right at the centre of control of their own data.

[Mr Vaizey]

I am grateful for my hon. Friend’s kind words. The other issue that he alluded to was closed shops on the internet. He is right that that will provoke debate and policy developments over the next few years. Clearly, the large tech companies play an increasingly important part in our lives, whether they are Facebook, Google, Apple, Amazon or others, but it is important that we remember the first principles of open competition. The competition authorities have the requisite powers to stop any potential abuse of market power, not that I am suggesting that there is any at the moment. It is one of those debates that we will continue to have. As for the permissiveness of creativity, we have undertaken some important intellectual property reforms over the past few years. The Government remain committed to the protection of intellectual property, and that is right and proper, but we also recognise that intellectual property has to be up to date in how it is used in the digital age.

My hon. Friend talked about clusters and Tech Nation. The clusters identified in the “Tech Nation” report were in essence self-identifying and organic, but I take his point that we should be accurate when we identify a cluster, and at least use the same name consistently so that people are used to it. Tech City has done a great job in bringing together the 20 or so clusters identified in the “Tech Nation” report to share best practice. I agree that Thames valley is the largest tech cluster in Europe. When politicians say that they want to create a Silicon Valley in the UK, I say, “You already have it. If Cambridge is included, you have effectively got a Silicon Valley in and around London.” There are Silicon Valleys all over the UK, and that is the great strength of technology. In any major city in the UK, from Dundee to Brighton, there are important tech clusters, which often specialise in particular areas.

My hon. Friend concluded by talking about the importance of access to broadband. I was disappointed to hear that he had only just got superfast broadband, but given the size of his estate, it is not surprising. The huge amount of engineering and the massive length of fibre that had to be rolled out to reach his study will have taken years of digging. I am glad that BT has finally made it past the ornamental cannon to the front door, through the scullery and into the study. He is a passionate supporter of satellite. I have never been against it; my only point throughout the entire debate has been that satellite does not provide the mass market solution. It will be appropriate in certain places. One of the pilots to identify how to bring broadband to the most difficult areas—what we call the last 5%—has been a satellite pilot. It is not beyond the wit of man to speculate that satellite may well prove to be one of the solutions put forward to reach the final 5%. His point was well made.

The shadow Minister expressed his concerns, which the Government share, about skill shortages. It is important to stress that every country in the world and every developed nation in the world is aware of skill shortages. The debate is happening in America and in the major economies of Europe. How do we upgrade people’s skills to cope with a fast-moving technology economy? The shadow Minister and my hon. Friend were right to say that virtually every business is a digital business, whether it is a very small business that needs its own website and e-commerce software or the largest businesses that rely on data management software to manage the work force and stock and so on.

We have made great strides. Not only have we put coding on the curriculum, which is a long-term investment, but we are beginning to properly audit further education and higher education courses to ensure that they are fit for purpose. We have launched degree apprenticeships, which are effectively employer-led degrees where people will spend as much time working with an employer as they will at university. That is a fundamental change that has been brought about by technology. The world of work and the world of study will necessarily have to blur, because, funnily enough, it will be the world of work that has the most up-to-date technology and a much greater understanding of how that technology will be used in the real world. There is also our huge push on apprenticeships, where we focus on technology apprenticeships. In Didcot, for example, I was pleased to meet six apprentices at Harwell last Friday. I am pleased that Didcot university technical college is due to open in September. UTCs are another innovation that recognises the need to develop the proper skills required for the work force.

We welcome “The Scale-Up Report” by Sherry Coutu. It made a valuable contribution to the debate. We are not planning a formal response to it, but Sherry Coutu remains an important adviser to Government and politicians of all colours. Her passion is for the technology sector, and she has been a great advocate for it. She pioneered “Silicon Valley in the UK”, where tech companies from Silicon Valley came over to meet tech companies in the UK. We are taking forward a lot of her recommendations. Many were already in train. Baroness Joanna Shields has pioneered the Future Fifty, where 50 fast-growing companies in the UK are identified. The Government work with them and offer mentorship in the belief that they should stay in the UK, eventually float in the UK and grow to be significant British businesses.

The shadow Minister rightly mentioned aviation, which is not part of my brief. The Davies report will be important and will drive the debate forward. When it is published after the election, I am sure all parties will study its recommendations. I have covered broadband and why it makes me grumpy. So far as long-term science funding is concerned, all I can say is that we clearly have a Chancellor who is passionate about the science base and who recognises that scientific research is an incredibly important and fundamental starting point for our leadership in so much of the technology sector.

The shadow Minister also mentioned procurement. I do not have the exact figures in front of me on the Thames valley businesses that have succeeded in getting procurement services from Government, but I will happily write to him on that. As he well knows, the Government are committed to opening up Government procurement to small businesses. We have launched an improved Contracts Finder website. We have made the process far less bureaucratic, for example by redrafting the pre-qualification questionnaire. We have also improved our record on late payment by ensuring that the public sector will pay undisputed invoices in 30 days.

Finally, we talked about the digital single market, which could be a great prize for this country and for Europe. We often talk about Europe in very negative terms, but a digital single market where UK tech companies can sell their wares to a marketplace of 500 million consumers with uniform consumer protection, uniform terms and conditions and secure delivery and carriage would be a great prize that we can work towards together as a family of European nations. I know that you, Sir Edward, will take that closely to your heart. On that note of hope and aspiration, it is time to conclude my remarks.