Industrial Strategy

Peter Kyle Excerpts

Thursday 20th October 2016 Commons Chamber

[Peter Kyle (Hove) (Lab)]

It is good to serve under your chairmanship again, Mr Deputy Speaker. It is also good to follow the hon. Member for Wycombe (Mr Baker), because his was a very different speech from the one that I intend to make. I hope that the two will prove complementary in some way.

I begin by thanking the hon. Member for Warwick and Leamington (Chris White). It was good of him to initiate the debate, and very generous of him to invite me to co-sponsor it and accompany him to the Backbench Business Committee to make the pitch for it. It is extremely timely, and his opening speech served the tone of the ensuing discussion very well indeed.

“Industrial strategy” is a contested term, and one with which some Members on both sides of the House struggle, because almost every post-war Government who have tried to implement such a strategy have come up against one difficulty or another. However, I think it is quite simple if we focus on the strategy side of what needs to be delivered and what business needs. That is the bit that many businesses want the most, and it is the bit that the Government, in various different ways, have often failed to deliver.

“Strategy” means, quite simply, identifying with clarity where we are, spelling out with clarity where we want to go, and being aware of the bridge that links the two together. If the hon. Member for Bedford (Richard Fuller) were still in the Chamber, he would, I hope, have noticed that I did not use the words “long term”. In fact, it is always a mistake to spell out exactly how long a journey of this kind will take, because different parts of the strategy will take different periods of time.

Business needs clarity and consistency. I think the House will be informed if I give two examples from Governments—not just this Government but a previous one as well—that involve both clarity and consistency. Sadly, they are not good examples from which we can learn, but examples that we need to avoid in the future. I begin, unfortunately, with a contemporary example. In the past week, members of the Business, Energy and Industrial Strategy Committee have received a letter from the Secretary of State for BIS. I apologise to the Minister; I still call it BIS, because I think the new title, BEIS, sounds a bit like a kitchenware product. At the moment it seems be a gadget that does something with a wet lettuce, but we will see how it goes.

This is what the Secretary of State wrote in his letter about the industrial strategy that he will unfold and lead:

“Many of the key components of our industrial strategy will not be about particular industries or sectors, but will be cross-cutting. It will be relevant to people and businesses across the UK—for people as consumers and employees, and for businesses as investors and drivers of growth. It will also respond to and seize the opportunities presented by the transformations we are faced with in 2016—both domestically in our exit from the European Union, and in wider global trends.”

I am sorry, Minister, but that is a mission statement. It is not a strategy. It encompasses consumers and domestic, nationwide, international and global businesses. There will be a strategy for every aspect of business. Every business—from the self-employed right the way up—will be encompassed in one strategy. The Minister is nodding to say that it will be delivered; I think it will be wonderful, and I look forward to seeing how all that can be encompassed in one strategy. I support the notion of an industrial strategy, and I hope that it can be delivered. However, from that starting point, I start to have sympathy with the scepticism of the hon. Member for Bedford. I would never have imagined that.

I turn to the position of the last few Governments. The industrial partnership approach was introduced by Vince Cable in 2014 when he was Secretary of State. In 2014, his Department in the coalition Government introduced—I quote from the website at the time: “An industrial partnership” that

“brings together employers across an industry sector to lead the development of skills, with a focus on growth and competitiveness. There are currently 8 partnerships covering the aerospace, automotive, creative, nuclear, digital, energy & efficiency, science and tunnelling (construction) industries.”

It went on to say that all those partnerships would be

“funded up to March 2017”.

Unfortunately, the funding for that programme was cut in September 2015. Not six months after Vince Cable left office, the funding for the flagship industrial strategy of that time was cut.

Just last week, I received a response to a parliamentary question. The question was:

“To ask the Secretary of State for Business, Energy and Industrial Strategy, what role Industrial Partnerships will play in delivering the Government’s Industrial Strategy.”

The response was:

“The Department for Business, Energy and Industrial Strategy indicated that it will not be possible to answer this question within the usual time period.”

That non-answer says more than many of the real answers that I have had from the Department. It is not prepared to implement the strategy as we see it at the moment. We do not know what the strategy is, or how it will go forward. We do not even know whether any strands of previous strategies will be taken forward.

What does that mean to businesses on the frontline? In the past two years, we have had a clear sectoral approach to business strategy by one Secretary of State, but six months later it was changed by a Government who had no industrial strategy and refused to use the words “industrial strategy”. Now we have a Department with “Industrial Strategy” in the name. That is all over two years. Businesses are having to respond to that profound change in a rapid space of time.

[Mr Baker]

Along with anti-competitive market distortion, regime uncertainty is a problem. Exactly the phenomenon that the hon. Gentleman outlines causes businesses to make less profit than they otherwise would. I am sure that he would agree that it would be better if the Government did less.

[Peter Kyle]

I am sure the hon. Gentleman would agree that we would both want the Government to do more of the right things. So why do I not have a stab at spelling out what the right things are? There needs to be a focus on what businesses that create growth and quality jobs and generate tax want. What do they need in order to support their business? Many do not need any help from Government, but all are affected by Government policy in one way or another, because every business uses this country’s infrastructure, whether that be the internet, the roads or other transport networks. Government policy has an impact on businesses, whatever those businesses are. Getting the strategy right and listening to the voice of business as that infrastructure unfolds is at the core of how we can go forward.

What do businesses want from Government? The one thing that links all the things they want—we could go through many of the issues that are mentioned to us by businesses and industry groups that helpfully contact us, such as the EEF—is skills. It is good to have the Skills Minister here responding on behalf of a Department that—

[The Minister for Universities, Science, Research and Innovation (Joseph Johnson)]

Universities Minister.

[Peter Kyle]

I beg the Minister’s pardon. I apologise. I am grateful that the Minister is here. He is split between Departments and can perhaps answer on this cross-cutting part of his brief. Skills are the issue that one comes across from every business. Unfortunately, responsibility has moved from the Business Department to Education. Is it conceivable that that could mean that business will have a louder voice in the House as the skills agenda unfolds over time? I think it is inconceivable.

What can Government do that businesses cannot do? There are—and I hope this answers the point made by the hon. Member for Wycombe—some things Government can do that others cannot. How can the Government inspire, encourage or enable businesses of the future? First, through infrastructure. Secondly, let us look back to 2000, when Tony Blair and Bill Clinton, via video link, together announced the mapping of the human genome. That was achieved by two Governments working together on a scale that no individual business could match, and certainly never without a patent. All the innovation that has spread from that single gesture by two Governments has spawned many industries since in academia and the private sector—for instance, in pharmaceuticals—and medical advances.

Those are the types of things that businesses need to be looking to. Government can do those things as part of a strategy, and I look forward to the Minister responding accordingly.

Fourth Industrial Revolution

Peter Kyle Excerpts

Thursday 8th September 2016 Commons Chamber

[Peter Kyle (Hove) (Lab)]

Being called second to speak in a debate is a new experience for me; it feels like going to the airport and being upgraded.

I am grateful to the hon. Member for Havant (Mr Mak) for including me in the discussion that led to this debate and for allowing me to second the motion, which is a privilege. He spoke brilliantly. As we listened to him, we realised how exciting and exhilarating the idea of a fourth industrial revolution is.

There is one aspect of this revolution that should have every decision maker in our economy on high alert: the rapidity with which it is occurring. The fourth industrial revolution will sweep through our economy in a matter of years, rather than the centuries it took the previous industrial revolutions to unfold. Sadly, we have been fed a diet of automated cars and drones to deliver our groceries, which to those of us of a certain age has a certain “Tomorrow’s World” feeling about it. The truth is that this revolution is already under way. Consumers are already controlling their home heating and security with their mobile phones. People’s hand-held devices are controlling real-world events via the cloud. That is happening today, but we have barely crossed the start line in this race.

Microsoft alone is investing £5 billion in capital expenses worldwide to build data centre infrastructure, which gives us an idea of the scale of the transformation that is yet to come. Advances in nanotechnology, 3D printing and renewable energy are opening up a multiplicity of opportunities for medical, academic and industrial research. Our universities are rising to the challenge. Next year, for example, the University of Sussex will open a new £10 million centre for computing, robotic electronics and mechatronics. I would welcome an intervention from the hon. Member for Havant to tell me what “mechatronics” means; perhaps we can visit the University of Sussex and discover that together.

Although many of these new trends will be powerful enough to break through regardless of market conditions, there are several barriers that will need to be dealt with. The private sector will need to tackle the threat of data security. Cyber threats pose a real-world problem to those who have been affected by them and a psychological barrier to those who have not. The private sector must also invest in management skills to ensure that their businesses can be effectively led through this change. They must put aside the territorial needs of their business to ensure that the technologies work across platforms and geographical areas.

There are challenges that Governments must be active in supporting our economy to overcome. One is the infrastructure for the future economy—the internet. Internet speeds are increasing, but consumers and commerce will need reliability as well as speed. The biggest challenge that we must overcome is that of making sure that the next generation is equipped with the skills to contribute collectively to our economy of the future and personally thrive in it. There is a danger that the rate of change in our economy will not be matched by the ability to produce and retain the skills that are needed.

I am a supporter of the Government’s apprenticeship levy, but it is being rolled out too fast to ensure that the benefits reach all parts of our economy. Nowhere is that more acute than in the technology sector. Here, post-16 training is too late. Training needs to happen before 16, and preferably from primary school upwards, if we are to develop the programming skills and high levels of creative thinking that are needed by cutting-edge technology firms. Forcing large technology companies to pay for post-16 skills development could have the perverse effect of forcing them to divert funding away from pre-16 investment in schools and to end up recruiting from abroad.

The key goal is to equip our students and young people with the social, creative and academic skills that they will need in a fast-evolving economy. To date, this has not been achieved. I agree with the former Tory Minister, Lord Baker, when he says that the back-to-basics approach to the curriculum is preventing the social and creative development that we need. In a report for the Edge Foundation, which he chairs, he says:

“The government’s White Paper has a firm commitment for students to focus on seven academic subjects at GCSE – English language, English literature, maths, two sciences, a modern or ancient language, geography or history, plus probably a third science. This is word-for-word the curriculum laid down by the Education Act of 1904, though it added three subjects – drawing, cooking for girls, and carpentry or metalwork for boys.”

I have no doubt that had the right hon. Member for Surrey Heath (Michael Gove) remained as Education Secretary for just one more week, we would have had those three subjects on the curriculum as well.

The report goes on to say:

“We should not go back to a 19th century diet of academic subjects for all. All young people should make and do things as part of a broad and balanced curriculum.”



Emotional intelligence will be as important to the future economy of our country as academic intelligence has been in the past. According to the Manufacturers Organisation, the EEF, staff skills are the No. 1 need of manufacturers. It is important to remember that the fourth industrial revolution is not only about the digital; it is also about manufacturing. Britain must have confidence as we move into this next stage of our economic life, and accept that we have the same potential to “make things” as we did in the first industrial revolution.

It was 30 years ago today that Margaret Thatcher opened the Nissan factory in Sunderland. [Hon. Members: “Hear, hear.”] I pause to allow those on the Government Benches to celebrate. Back then, people thought our automotive industry was on its last legs. Now we know that it is one of the most advanced and successful in the world. Thirty years ago car doors closed with a loud clunk; today they do so with a soft click. That is because of the huge effort and expense that go into innovation and material design in our country and explains why this part of our economy can and must work in tandem with, not apart from, the revolution that is unfolding.

The manufacturing sector will contribute to and benefit from the fourth industrial revolution. It has a lot to offer and a lot to gain. The progress made by Jaguar Land Rover and Nissan since the 1980s shows what can be achieved in Britain’s foundation industries, including the use of metals and materials. This has the potential to benefit our new economy massively. From steel to ceramics, coatings and Graphene, this £200 billion sector has the potential to provide the innovation and materials that are strong and light enough to make the robotic dreams of tomorrow a reality. I sense my hon. Friend the Member for Stoke-on-Trent North (Ruth Smeeth) twitching at the mention of ceramics, and I will be listening out for her contribution shortly.

However, this sector is omitted from the Government’s catapult centres, even though the potential for them to integrate with the technology sector is enormous. I hope the Minister will listen to the voices in this sector and play an active part in bridging any gaps there may be between the manufacturing and the technological sectors of the fourth industrial revolution. The benefits to this sector from the unfolding revolution are clear. Supply chains and production lines will move towards a system with end-to-end autonomous decision making by machines, continuous demand sensing, and better use of resources. In short, there will be less error, more efficiency and higher productivity.

Finally, I move to the other end of our economy, because this revolution will impact on the self-employed as well as the tech giants and the manufacturers. Between 2000 and 2015, the number of British people working alone rose by 73%. The largest growth has been in the service sector, primarily supplying education, health and business services. The fourth industrial revolution will transform these people’s connection, virtualisation, and cloud computing experiences. Huge power that has been available only to large companies and public sector departments will now be readily available to individuals. One person with the right skills and imagination will have the power and capacity to make a transformational impact in the economy of the future.

The challenge that we face is to make sure that this power is available to everyone from whatever background. I do not believe that entrepreneurial spirit was a gift to the middle classes; I believe it was a gift to humanity. But unless we equip every young person with the right skills, many will find the door to modern life and all its wonders slammed in their face. The time to ensure that that does not happen is now.

--- Later in debate ---

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Jesse Norman)]

It is a pleasure to speak with you in the Chair, Mr Deputy Speaker. I congratulate my hon. Friend the Member for Havant (Mr Mak) and the hon. Member for Hove (Peter Kyle) on securing a debate on this very important topic.

According to the World Economic Forum, the fourth industrial revolution is characterised by a range of new technologies that are fusing the physical, digital and biological worlds. As my hon. Friend reminded us, it has, they say, the potential to transform and to integrate products and services to reshape radically the way in which things are made, the factories in which we make them, and the ever more personal and customised uses to which they are put. This can take many forms, be they new web applications, micro robots, peer-to-peer services, advanced manufacturing, personalised medicines and cyber-medical technologies. They, in turn, can be leveraged by big data, and better and more widespread digital connectivity.

I want to speak briefly about what I think the fourth industrial revolution is or might be, why it matters and what the UK is doing to promote these developments. Let me start by saying that I am quite sceptical about the language of the fourth industrial revolution. I share some of the scepticism of my hon. Friend the Member for Wells (James Heappey). Voltaire once rather sardonically remarked that the Holy Roman empire was neither holy nor Roman nor an empire. I worry that the fourth industrial revolution is neither the fourth nor particularly industrial, and not a revolution.

The natures and causes of the original industrial revolution are still, may I remind the House, rather contested. Was it the result of access to coal and high thermic value coal in particular? Was it the result of spreading trade? Was it the result of the bourgeois virtues of thrift and hard work, of tolerance and openness to other countries, or of science and technology? These are still contested matters among historians. What we can say is that it was based on steam, and that something like 150 years later there was one based on electricity.

Where does that leave us now? I think we need to go to the fons et origo, the foundation of all economic discussion: Adam Smith. I was particularly glad that the hon. Member for Inverclyde (Ronnie Cowan) highlighted the importance of Glasgow, since Smith was Glasgow University’s greatest professor at a time when it was, along with other Scottish universities, one of the greatest universities in the world. Smith was wise on many fronts. He was, alongside David Hume, a Unionist above all. He said:

“The Union was a measure from which infinite good has been derived”

to Scotland. He was wise in economics, by pointing to the importance of the division of labour. He pointed out in particular that the capacity for specialisation was limited by the size of the market. He said that we did not get porters in villages. These days we might say that we do not get Uber in towns—the market simply is not big enough.

I would suggest that change today has been powered by the same things it has always been powered by: bigger markets; technological innovation; better materials and access to materials; and, above all, the human appetite for risk and the questing nature of the human imagination. It was one my predecessors, Lord Willetts, who pointed out the eight technologies on which the previous Government founded their industrial strategy, ranging from satellites to agri-science. I think that that marks a better approach to thinking about these issues than talking airily in terms of revolutions.

There is a contrary view, which has been very well articulated by Robert Gordon in his book “The Rise and Fall of American Growth”. He argued that there was a golden century of innovation between 1870 and 1970, a time of genuine transformation through innovative technologies. As John Kay has said, someone who was born when Benjamin Disraeli was Prime Minister and lived to see Edward Heath would have witnessed horse-drawn transport give way to cars and aircraft, medical services that were non-existent replaced by cures for infectious diseases, as well as the introduction of electric light, indoor plumbing and colour television. Each of them was a transformative technology. Paul Volcker has pointed out that the greatest technological change of the past few decades in finance has been the ATM. Anyone who knows anything about finance has a great deal of sympathy with that viewpoint.

These technologies reshape. Gordon’s suggestion is that the capacity for transformative innovation has slowed. We have upgrades but we do not have the same life-transforming breakthroughs—breakthroughs such as the washing machine, which even more perhaps than the internet has shaped people’s lives—and the result is low growth and low productivity. I do not share that pessimism; for me, the things that matter are imagination, energy, the capacity for risk and the ability to work.

At this point, I should declare an interest by mentioning two projects with which I have been associated. One is the New Model in Technology & Engineering, which will be the first wholly new university for three decades. It will be based in Hereford, and is creating a curriculum along the lines of liberal engineering, tying the liberal imagination of the arts and sciences to the engineering discipline required to create genuine innovation. Its approach will be problem-based rather than curricular, and students will be taught in three-week blocks rather than attending specific lectures. There will be a 46-week curriculum. The university has links with Olin College in America, and with the universities of Warwick and Bristol in this country. It is not just a very important local institution in embryo, but a potentially national—disruptively national—institution in higher education, and I think that it will do an enormous amount to assist the technologies about which we have talked today.

The other project is, if anything, even more personal. It is a not-for-profit car that my father has designed—a flat-pack vehicle. Even you, Mr Deputy Speaker, with your astonishing breadth of understanding and knowledge, may be surprised to learn that the vehicle can be assembled by three people in a day. It costs a third of the price of a luxury 4x4, and it carries three times the weight. Its target price is under £20,000. It is astonishingly simple, and, of course, achieving such simplicity requires terrific design and terrific engineering. What the project shows is that great innovation does not require high technology; it can come through simplification, or a sense of the possibility that simplification can change manufacturing processes. This is a vehicle that has potentially revolutionary implications for developing countries.

Let me now deal with our own situation more widely. My hon. Friend the Member for Havant rightly highlighted the importance of policies that support enterprise, as did the hon. Member for Stoke-on-Trent North (Ruth Smeeth), and I very much share that view, but manufacturing companies in this country are overwhelmingly employers of 50 people or fewer, and those small firms account for more than 50% of manufacturing employment. Small and medium-sized enterprises will be the lifeblood of change over the next few decades, as they are today, because they are versatile in their manufacturing and light on their feet. They are also able to respond quickly as customers demand more customised, bespoke and niche products, using new materials and revolutionary production techniques such as 3D printing, intelligent machines and sophisticated computer design.

I hope that Members are already aware of Innovate UK, which brings together entrepreneurs and innovators with great ideas. It runs funding competitions to identify the strongest opportunities, and connects with the best partners to get their products market-ready, be they digital or solid-state. The High Value Manufacturing catapult, enabled by Innovate UK, helps small manufacturers to adopt and use those technologies. In its first five years of operation, about £300 million has been invested in high-value manufacturing by that means. Over the past year, the HVM Catapult has worked with more than 1,650 private sector clients on more than 1,300 projects and 1,800 small and medium-sized enterprise engagements. It has the right equipment to support the adoption of advanced technologies. Its use of virtual modelling enables businesses to understand what technology could do for them, and to plan and remove risks. Through Innovate UK, we are supporting the £9 million CityVerve internet of things smart city demonstrator in Manchester. The Future Cities catapult is collaborating with Microsoft and Guide Dogs for the Blind to develop tools to make moving through cities easier and more enjoyable for partially sighted people.

Those are just some of the very interesting collaborations that this model of support between the private and public sectors is operating and offering. It is a virtuous circle, and the Government want it to be replicated many times. We need to increase awareness of and access to these catapults. We need to increase the number of catapults so that more small businesses can test out how to transform what they do and open up new market opportunities.

[Peter Kyle]

I cannot help but make the observation that only someone who has never shopped at Ikea would ever think it was possible to buy a flat-pack car and assemble it in a day.

Catapult centres are a fantastic idea. Does the Minister think there is merit in linking them more to some of the industrial materials, products and services that are being developed in parts of the heartlands that my hon. Friend the Member for Stoke-on-Trent North (Ruth Smeeth) mentioned?

[Jesse Norman]

I very much take the point. There is only one way to think of this flat-pack car: it is the product of three years’ development by the former chief designer at McLaren. That is the only way one could get a vehicle that would meet the criteria set out by the hon. Gentleman. On the issue of linking to industry, he is right. One of the things that is interesting about catapults is that they have proved to be quite flexible. There is no reason why that flexibility, as they grow in number and extend themselves, cannot be used to create even closer links. As he knows, there is what Lord Willetts used to call a “valley of death” between research and development. The tie-in to employers in education and to businesses in development is vital to stop that problem.

I thank colleagues and congratulate them on the debate, which has been extremely wise and intelligent. The Government want to be at the forefront of the changes that are being discussed here—the dramatic transformations in the landscape of our industry and commerce. We want to lead this revolution—whether it be the third or the fourth—as we led the first, and we plan to do so through the new Department for Business, Energy and Industrial Strategy and the industrial strategy, which will be unveiled in the next few months.