Long-term Capital for Business

Peter Dowd Excerpts

Tuesday 15th January 2019 Westminster Hall

[Peter Dowd (Bootle) (Lab)]

It is a delight to see you in the Chair, Mr Walker.

I congratulate the hon. Member for Stirling (Stephen Kerr), who I am glad to see is back in his rightful place after his illness before Christmas, on securing this debate, and I thank the hon. Members for Ochil and South Perthshire (Luke Graham), for Strangford (Jim Shannon), for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry), which are all beautiful places, and for Motherwell and Wishaw (Marion Fellows), who has just spoken, for their contributions to the debate.

Patient capital must be set in the context of a wider economic perspective and not just seen on its own. The structure of our economy has fundamentally changed over the past four decades. In the early 1980s, 26% of UK jobs were in manufacturing compared with only 8.1% now; in 1948, 46% of GDP came from the service sector and now it is 80%. That is largely due to the decisions of successive Governments, which effectively said that as long as headline growth was strong and the welfare state redistributed resources sufficiently, it did not matter where growth came from.

However, the financial crash and its aftermath have clearly demonstrated that that theory was wrong, and that reliance on an unfettered and highly volatile financial sector has not worked for the vast majority of people and businesses. Headline growth may have recovered, but it is still pretty sluggish, and nothing exemplifies that better than the way that banks have actually shifted their activities away from lending to businesses.

The Institute for Public Policy Research’s Commission on Economic Justice said:

“Across a whole range of economic indicators, the UK economy exhibits serious underlying weaknesses. On investment, research and development, trade and productivity, we perform worse than most of our European neighbours—and have done so not merely over the last ten years, but for much of the last 40.”

As the hon. Member for Stirling has said, productivity and investment are stagnant. That seems to be the way of the economy at the moment and it has got to change. A 2017 report by the ScaleUp Institute highlighted significant capital barriers to the growth of business, beyond the start-up phase, in the UK. And of course there is Brexit, but I will leave that to other people to talk about; I will not do so now.

Other countries use state direction of innovation and investment to carve out vital areas of expertise in robotics, electronic cars, clean-tech and the smart city. Labour has a plan for a national transformation fund and £250 billion of lending by our new national investment bank and a network of regional development banks, which will enable us to transform our economy over the first two terms of a Labour Government. Reconnecting the financial sector to the economy of research and development and production will transform our financial system.

We will establish a strategic investment bank, which is the sort of bank that the hon. Member for Stirling thinks is good, and he is absolutely right in that regard. It will comprise people from various agencies and organisations, and of course Members of this House. We will use the power of Government to unlock the lending power of the private sector, and we will deliver lending to small and medium-sized enterprises across the UK through new regional development banks. Our investment strategy will no longer accept the disparities across the regions that have been identified here today. It is a crucial element of any Government policy to make sure there is equity right across our nations.

Labour wants to invest in people and show that businesses can access a highly skilled workforce, which is why we will set up our national education service, allowing everyone to upskill and retrain at any point in life. That comes back to the point that it is not just a case of having patient capital investment; the ecosystem and infrastructure around that investment also matter. We want patient capital investment and we hope that we will be able to set the scene and the environment for that to develop. We will ensure that all our regions, nations, cities and towns are able to get access to that patient capital investment over the next few decades.