Trade, Exports, Innovation and Productivity

Richard Graham Excerpts

Wednesday 13th January 2016 Commons Chamber

[David Rutley]

SNP Members may justify their position, but what we are committed to doing for this country is to decentralise. It is vital that we do that, because it will give further power to local communities to come up with their own solutions on a broader scale. I think that there are lessons for Scotland to learn from that—that is my opinion.

It is fundamental that we do that, because it will encourage economic growth and ensure higher rates of productivity and exporting, and, indeed, success in innovation, which the hon. Member for Inverness, Nairn, Badenoch and Strathspey was so keen to stress. If we do that, it will help us move on from those reckless years of boom and bust delivered by the Labour party.

To unlock that local dynamism, we are advancing important initiatives, including local economic partnerships, city regions and—this has been vital in the Macclesfield area—strategic deals between city and county, such as that involving Alderley Park, to turn the tide in favour of civic renewal and increase the rates of growth and economic activity across the country.

That will build on what we have already done to achieve record levels of employment in this country, to reform welfare and make sure that work pays, and to incentivise tens of thousands of households to transform their lives. That is what we want to do—we want to help people to transform their lives and get on their own two feet.

The Government are committed to getting the balance right and to getting the job done. That is why we have set challenging targets on exports and raising productivity. We are doing all we can to promote entrepreneurialism and to lower the barriers that for too long have stood in the way of people who want to set up their own businesses and move on with their lives.

As I have said several times in this Chamber, I believe that economic success and growth rest on the four Es: entrepreneurs, employers, exporters and, of course, employees. They all need to be given the opportunity to succeed in the important work they do. In order to have the enterprising economy that we need, we have to help in particular those who are seeking to fulfil those activities and roles for the first time. We are making progress in that area. For example, the new enterprise allowance has enabled thousands of people who were previously unemployed to get on to the rewarding path of self-employment and enterprise. I am especially pleased that the Department has taken forward an initiative with Julie Deane, the founder of the Cambridge Satchel Company, to review how we can help the self-employed. The move to self-employment is an undeniable trend in our labour market and Conservative Members are committed to helping the self-employed.

My hon. Friend—my great friend—the Member for Bedford highlighted key community initiatives such as the business school in Bedford. We were lucky enough to be at business school together, where we learned much. Great lessons can be learned in the community and, through our Make it Macclesfield organisation, we are privileged to have Enterprising Macclesfield, a community-led initiative that involves local businesses working together to help more businesses to succeed and flourish, and to get the advice that they need to move forward. If we are to crack down on the blockages that have led to social immobility in this country for too long, we need to help people to establish themselves in first-time employment, or to become first-time employers or, importantly, first-time exporters.

The hon. Member for Hartlepool (Mr Wright), the Chair of the BIS Committee, who is no longer in the Chamber, highlighted the deep cultural change that is required to get more businesses exporting. We are committed to addressing this deep-seated situation, which is why we have set such high targets. It is not always easy to get someone to do something for the first time, and those of us who have been involved in marketing know—I have first-hand experience—that that can be one of the hardest tasks. As we have heard, only one in five businesses exports anything, but the figure for Germany is one in four. We are behind countries such as Belgium and the Netherlands, so it is not just that we are being held back by Brussels bureaucracy, although that is the case too often. There are wider, deep-seated issues that we have to address. We therefore need to ensure that we get behind businesses and help them to learn how to crack new markets. We need to demystify the exports process, and that is a role not just for the Government, but for business.

There is no question but that we are playing our part by setting ambitious targets and taking the challenge of exports seriously. I welcome Lord Maude’s appointment to his key ministerial role because he has a great track record of taking forward a change agenda and getting the job done, which is exactly what we need for exports. The Treasury and BIS have taken great steps to de-risk the exports process. Last year, through UKTI’s exports work, more than 48,000 business were supported. The new first-time exporters initiative, which offers training and advice to businesses that really need it, will be vital in moving that work forward.

Export finance for smaller businesses has been improved and it is critical that we make it easier for businesses to pitch for high-value opportunities. UKTI should be providing not only information, but opportunities that businesses can hook into to ensure that UK plc has more success in export markets. I am pleased to note that UKTI has a new chief executive, Dr Catherine Raines, who is a neighbour of mine—I said that Macclesfield exports many good things. The focus on exports is improving significantly, and the “Exporting is GREAT” website identifies the good work that is done each day and provides the signposts that businesses need to succeed.

There is more that we need to do, however. People ask what we should do to help on exports, but the Prime Minister and the Chancellor are leading the way, not least through their trade missions to China. I am sure that my hon. Friend the Member for Gloucester (Richard Graham), the chair of the all-party group on China, welcomes—he will probably mention this in his speech—the phenomenal things that we are doing to make contacts, to help to add value and to win market share in countries that are sometimes difficult to get into. From a local perspective, I am very pleased to see the Chinese invest in Airport City Manchester. They have experience in that. When I went to China a couple of years ago, I found out that they had built 45 airports in the previous five years. They know what they are talking about and we can link in with not only their funding, but their experience.

[Richard Graham (Gloucester) (Con)]

It may be useful for hon. Members, including those from the SNP, to be aware that many of those new airports in China were designed by a great British company, Arup, led by the head of its airport and aviation sector, who is a Scotsman based in Edinburgh.

[David Rutley]

I am pleased to hear it—good things come from Scotland, as well as from Macclesfield. When I was in China I met representatives from Arup, which is doing phenomenal work. Again, we are in a global economy and the interactions that we have with the Chinese are vital.

Trade shows cannot be just about having a shop-window. They are an opportunity to initiate contacts, enabling businesses to find a way to seal the deal. UKTI’s role has to be even more proactive in this arena and help roll out the red carpet for businesses that are taking those risky decisions to move into new markets. We cannot focus solely on traditional export markets such as north America and Europe, which has been all too comfortable for businesses in the UK since the second world war. I was massively disappointed a couple of years ago when I held a UKTI conference, which was incredibly well supported in north-east Cheshire. UKTI did a tremendous job, but I said, “Let’s bring along representatives from China and from India to support this.” UKTI would not do that. I asked why not, and it said, “Because the businesses are so focused on the US and Germany.”

We have to shake things up. Government have a role to play and business has a role to play as well so that we have the right focus on emerging markets, as well as on traditional markets. We need a bit more of the buccaneering spirit that the Minister for Small Business, Industry and Enterprise has demonstrated in the Chamber today and throughout her ministerial career.

Like a falling tree, we might ask, “If help for businesses is available and only a few businesses hear about it, is it effective enough?” Communications do matter, not just Government-to-business communication, but business-to-business communication. We need a better way of communicating to businesses if we are to step up a gear and become better at exporting goods, just as we have shown the world that we can lead the way in exporting financial services. In services we have the leading role. That should point the way forward for the opportunity to export goods. Let us make sure that Ministers in BIS and across Government make an extra effort to get those banks that have been successful at exporting their services to help their customers in the UK become better exporters of goods. There is a leading role for those banks to play.

When we say that we need to do more, it is not just about what the Government do; it should include businesses as well. I know the Government have been doing a huge amount of work to encourage exports. We are leading the horses to water. I see prime-time TV ads promoting the benefits of exports. Those horses now need to drink and businesses need to take a lead in exporting.

We are a great trading nation, but we need to do more to reach our current export potential. By focusing on the needs of first-time exporters and spreading the lessons of our trading history across more businesses for a vibrant and noteworthy trading future, we can spread opportunity across the country and revitalise the old British trading spirit—can-do policies for a can-do generation in a can-do United Kingdom.

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[Richard Graham (Gloucester) (Con)]

It is a pleasure to follow the hon. Member for East Antrim (Sammy Wilson), with his enthusiasm for what can be done to help boost exports and growth in Northern Ireland. In declaring an interest as the Prime Minister’s trade envoy for the Association of Southeast Asian Nations in Indonesia, I welcome this Opposition day debate. It focuses on important issues such as the balance of our economy, our export and productivity challenges and the financing of business research and development. These are important, although sadly not important enough to attract more than five Labour Members, but I should highlight the presence of both the hon. Members for Hartlepool (Mr Wright) and for West Bromwich West (Mr Bailey)—former and current Chairmen of the Select Committee on Business, Innovation and Skills, and now lonely champions of business in a party more committed to strikes and reshuffles than innovation and exports.

The hon. Member for Dundee East (Stewart Hosie) led us off on today’s debate. Although he made some interesting points, his speech was overshadowed by what I can describe only as an overwhelming gloom or an extended rendering of the lament from Private Frazer in Dad’s Army—“We’re all doomed”. I waited, pen poised, to hear some of his proposals to lift us from this gloom. The UK economy, he said, should have more manufacturing. I agree—we all do—as it halved under Labour and is still recovering, but no suggestions came. He highlighted the UK’s relatively weak productivity, but offered no solutions. We await the BIS paper and Select Committee recommendations. He felt that there might be a deterioration of business R and D funding, but he gave no recognition of the importance of the R and D allowances, the capital allowances and, indeed, the explosion of venture capital funding for smaller companies. We know the answer, alas, from the hon. Member for Dundee East—“We’re still all doomed.”

Today, I want to try to offer some shafts of light amidst the encircling gloom. Here I have to disagree slightly with the fellow Eeyore of the hon. Member for Dundee East on the Labour Benches—the hon. Member for Sefton Central (Bill Esterson). He suggested that Britain’s rise to head the G7 growth table within a few years of the great recession was inevitable. I do not believe that any recovery is inevitable, and certainly not one that generates more jobs than the other 27 countries of the European Union put together. Both are driven by a determined partnership between Government and business, with MPs across the House playing our part by hosting jobs fairs, hiring apprentices and helping businesses to export.

Let me say a few words about Gloucester, where I hosted in 2011 the first constituency and county-based China seminar with the China-Britain Business Council. I shall mention some of the manufacturing products that we export from Gloucester to bring some cheer to the SNP Benches about the state of our manufacturing. We export cylinders that are in every Dyson vacuum cleaner across the world. We export giant valves into the oil and gas sector, and we export dental drills predominantly to China and America. Both those companies are almost 100% exporting. We export gantrails for container ports and marine diesel engines for customs and other marine boats. We even make shirts, which are sold both directly from the factories in Gloucester or via Jermyn Street in London. We have a series of manufacturers who are subcontractors in the world of aerospace, especially to Airbus, with the landing gear for every Airbus, several Boeings and every Eurofighter made just outside Gloucester.

It is true that we have not yet sold our “made in Gloucester” cricket bats to China. I am working on that, but what I can confirm is that our “Gloucesterpreneurs” have sold flavoured tea back to China. This is part of an overall UK growth in exports to China and Asia, now generating more than £500 billion of exports a year—up some £80 billion since 2010. I pay tribute to Ministers, and to UKTI. They have added to resources in China, although I would add that some modest rebalancing towards south-east Asia would be very welcome.

There is always more to be done in relation to exports and growth. As the hon. Member for East Antrim said, we cannot and should not over-egg the current situation. Here are a few suggestions.

First, we need a restructuring of UKTI resources to focus on where value can be most added. I believe that that is happening as we speak, and I believe that value is best added not by the writing of otiose reports, but by a serious, customer relationship-driven approach.

Secondly, we need additional trade envoys for markets where nothing is easy but everything is possible, and doors need to be opened by representatives of the Prime Minister. The model is proven, and it provides continuity with Governments overseas.

Thirdly, we need to focus on the industries of the future. The honourable exception to the tale of gloom on the SNP Benches was provided by the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry), who did say a little about that subject. We should be focusing on creative media, cyber, FinTech, aerospace and marine technology, as well as on some of the current great exports, which, by the way, include education.

Fourthly, we need closer relationships with universities, not just because of their export potential—important though that is—but because of their research output. For example, Bristol University’s research produced the wonderful electronic and driverless robot “pods” that deliver some people to their flights at Heathrow’s terminal 5 from the car park.

Finally, we need greater use of technology to capture the success of our SME exporters, and to communicate it remotely via film to seminars as far away as Portaferry, Pembroke, Plymouth or Perth.

What cannot be doubted, however, is the Government’s commitment to business and exports, led by the Prime Minister himself—as my hon. Friend the Member for Macclesfield (David Rutley) rightly pointed out—and by successive Trade Ministers. That commitment can be seen in the expansion of the capital that is available from UK Export Finance, the reduction in red tape and corporate tax, and the increase in the allowances to which I have referred, as well as in new sector-specific funds such as the skills investment fund and the video games prototype fund. It can be seen in the patent box, the new investment allowance which is so important to the oil and gas sector in Scotland, and—last but by no means least—the creation of the GREAT campaign from No. 10 itself. I believe that its creator was awarded the OBE in the new year’s honours, and rightly so.

All that makes for a strongly export and growth-focused Government, but there is another aspect of UKTI’s work that has not yet been mentioned: inward investment. Given our mountains of inherited debt, we need others to finance our infrastructure growth, and we have been successful in almost doubling foreign direct investment in the last five years. Why, and how, does that boost UK manufacturing? The question was raised earlier by the hon. Member for East Lothian (George Kerevan), and the answer is that so much of the design, construction, servicing and operation of the new Hinkley Point power station will be provided by British companies and British expertise.

While those figures do nothing for our exports in themselves, they boost our manufacturing and our growth. The same will be true of Crossrail, HS2, and other key infrastructure projects. They also act as a catalyst for the growth in our services, which are the one part of our exports that is growing sharply, and play a key role in our overall growth.

Another aspect that has been missing from the debate so far is the impact of tourism to Britain, driven by our heritage and boosted by important incentives for film makers and those in the creative arts—some of which, incidentally, were introduced by the current Secretary of State when he was Secretary of State for Culture, Media and Sport. Tourism follows another great success: our bids to host great sporting events. The Labour party can take pride in the successful bid for the 2012 Olympics as well. I have first-hand experience, from the great rugby world cup of 2015 and the impact of the games at Kingsholm on the city of Gloucester. I pay tribute to the role of the captain of the Scottish rugby team, Greig Laidlaw, who is Gloucester’s scrum half. The athletics championships are coming soon, and Scotland itself will surely remember—this is, after all, an SNP-driven motion—the importance of those great sporting events from the Commonwealth games in Glasgow, which took place only about 18 months ago.

This is a Government who are trying to do their bit for growth in a series of different ways, which brings me to my last point about Scotland. In the 18th century, when Scotland joined England in what has arguably been the world’s most successful union, the land of my ancestors was full of entrepreneurs. They exported not just products but themselves, all around the world. They set up what is still the largest non-Government employer in Hong Kong, Jardine Matheson, started a still-flourishing tea business in Bangladesh and Kenya, Finlays now owned by Swire, created teak merchants in Burma, railroads in Canada and helped Raffles himself establish Singapore, and much more besides. My ancestors exported themselves to Northern Ireland and helped create the linen business over there.

My point about these great Scotsmen is that they did not advocate a welfare state or an ever-increasing role for the Government or belong to the International Marxist Group like the hon. Member for East Lothian; they were innovative and they got on with the business of business. So where are they today? The two giant Scottish banks crashed, oil and gas is struggling, nuclear defence is disdained. It is time for the SNP to get behind the new entrepreneurs and increase Scotland’s share of UK exports, which is currently 7%, slightly less than that of the east midlands. I believe the land of my ancestors can punch significantly better than that.

The UK is here to help. UKTI has offices in 200 countries abroad and in 2013-14 helped 2,300 Scottish companies to export, and all of us involved in exporting are ready to help. I have twice spoken to groups of businesses and universities in Edinburgh and I will happily come up again, and I know my right hon. Friend the Minister will do her bit, too.

[Chris Stephens (Glasgow South West) (SNP)]

The hon. Gentleman mentioned the Commonwealth games and I was curious about that. Can he tell me how much money the UK Government put into the Glasgow Commonwealth games?

[Richard Graham]

The hon. Gentleman and his colleagues will know the answer to that question better than me, but I think he will find that the expertise involved in setting up the Commonwealth games largely came from the 2012 Olympics held in London, so it was a perfect example of how the UK can work together for the greater good of everyone, including Scotland.

[Hannah Bardell]

I am sure the hon. Gentleman would not seek to mislead the House, so let him answer the question my colleague asked: the answer is zero. In terms of the Olympics, Scotland—along with many other parts of the UK—had its lottery funding sucked away into that project and did not for quite a considerable period of time get the returns it was promised.

[Richard Graham]

The hon. Lady, of whom I am a great fan, risks sounding as if she is carping on the issue of the Commonwealth games. I did make the point that that was a really good example of working together. [Interruption.] She will know of the input from all the people who made such a success of the Olympics. [Interruption.]

So let me now to the final bit of my speech—despite the chuntering of the right hon. Member for Gordon (Alex Salmond), who is welcome to intervene if he wishes. [Interruption.] He is still chuntering; we still do not know if he wishes to intervene. He has his chance. [Interruption.] An hon. Member says he is not allowed to speak from the Bench he is currently occupying; well, there we have it—we will keep his chuntering for another day.

We can surely all agree today that there is a great deal more to be done. I hope the report from the Business, Innovation and Skills Committee and the Education Committee will contain helpful recommendations to Government, and I know the Ministers are working on their own productivity plan. I hope the Government will take note of the suggestions made both by my neighbour my hon. Friend the Member for The Cotswolds (Geoffrey Clifton-Brown) and me.

Sadly, I have not heard many positive ideas from the SNP Benches, with the honourable exception of the hon. Member for Inverness, Nairn, Badenoch and Strathspey, as I mentioned earlier. I do believe that Scotland needs to rediscover her entrepreneurial spirit, and find more Tiggers and fewer Eeyores to promote business, and I am sure the hon. Members for Livingston (Hannah Bardell) and for Ochil and South Perthshire (Ms Ahmed-Sheikh) can do this and get that brave heart playing its full role in the revival of the growth of the UK, with a drive for all of us to increase our exports and our inward investment.

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[Roger Mullin]

Is it close? [Laughter.]

The hon. Lady opened her speech by mentioning the hon. Member for East Antrim (Sammy Wilson) who is also not in his place. I was going to compliment him, because what he brought to this debate was a recognition that criticism is not always a negative thing; indeed, it can be helpful. When he said that, I immediately thought of an old teacher of mine, Professor Tom Burns, who, in the 1960s, along with his colleague Graham Stalker, wrote the famous book, “The Management of Innovation”. In it, he pointed to several factors that are essential for the development of innovation, some of which are extraordinarily pertinent to this debate. For example, one was that there are two types of ideas that we need to mobilise—creative ideas and critical analytical ideas. It is the forging together of those two types of ideas that becomes very important. He also said that one of the fundamentals in driving the rise of the industrial revolution was the creation not only of those types of ideas, but of the means of disseminating the ideas. That was fundamental. We saw it in Scotland with the sharing of ideas, flowing as they did from Edinburgh to Glasgow and Glasgow to Edinburgh. It seems a small thing to say in the modern era, but at that time it was fundamental to getting the sharing of ideas going.

To move on from my teachers, a few years ago I attended a fascinating lecture by Professor Tom Stonier. He pointed out that more people worked in pure research in the last 25 years of the 20th century than did so in the entire pre-history of the world. Let us think about that for a moment—there has been huge growth in the number of people undertaking research. If we combine that with the growth in new technology, such as IT and computing power—whereby an Einstein no longer needs to take years to work out his equations by longhand, and ideas can be processed so quickly—we will see that they are fuelling huge growth in innovation throughout the world.

I shall not dwell, as the hon. Member for Gloucester (Richard Graham) likes to do, on doom and gloom, but I shall point out some of the challenges we face. On the growth in the rate of research and the ideas coming into our world, the countries that will remain in front will be those that can capture and develop those ideas, put them into play and own them for themselves. That is the key challenge, which is why I am worried about recent trends in the UK.

Some days ago, the Chancellor of the Exchequer rightly pointed to a “cocktail of dangers” in the global economy. One of the dangers is that we are not investing enough in the type of research and development and innovation needed to keep us at the forefront. My hon. Friend the Member for East Lothian (George Kerevan) pointed out in his fine contribution that this country has a problem of a lack of long-term investment in business. That is true of many sectors, and part of the problem is that, compared with some of our major competitors, we are generating less investment from the business sector than we did in the past.

I am delighted that the Minister for Universities and Science, whom I met in a previous Westminster Hall debate about science, will sum up for the Government this evening. In 2010, the previous Government froze the science budget for five years, which meant a 10% cut in real terms, at a time when it was already at a modest level compared with those of our major G8 comparators. In 2012, UK public investment in science fell to less than 0.5% of GDP. As my hon. Friend the Member for Glasgow North West (Carol Monaghan) pointed out in the debate at which the Minister was present, that is a lower rate than any G8 country has invested in the preceding 20 years. The G8 average is now about 0.8%, compared with the UK’s 0.44%.

If we look at broader measures of research and development, we see that a generation ago the UK was one of the most research-intensive economies in the world—and didn’t we benefit from that? Now, however, as with science, we are one of the least research-intensive economies. My late brother was at one time chair of the OECD committee on science and technology policy, and in recent years, before his sad passing, we would regularly discuss the failure of the UK—and his homeland of Scotland—to keep up. In terms of broad research and development measures, we have slipped from leading the OECD countries in 1979 to trailing behind all our major competitors. The US invests 2.8% of its GDP in all forms of research and development. On average, the OECD and EU countries invest 2.4% of their GDP, but the UK now spends only about 1.7% of its GDP on research and development. That is not going to keep us at the forefront or allow us to face some of the challenges and competition of the future. The hon. Member for East Gloucestershire—

[Richard Graham]

Gloucester.

[Roger Mullin]

Apologies again; I am quite happy about apologising to the House.

The hon. Member for Gloucester pointed out several of the challenges that he felt we faced, but I want to suggest several things that could be done, given that he berated us for not coming up with ideas. If he gives me a few moments, I shall suggest a number of points that I would like the Government to address.

I am especially interested in how some of the Government’s decisions on this front do them no good, because this is about not just funding, but strategic choice. When faced with an opportunity to be a world leader in the development of carbon capture, it is just insane to pull the rug on that if the Government are trying to say that we want to ensure that we are at the forefront of such development. Several Members may have received emails from one of my constituents—he emails many people, and he recently wrote to the Prime Minister—about smart meter technology. When I spoke to him, he echoed what others have said about our technological choices, including on smart meters. He wondered why we were not investing in the most up-to-date technologies to ensure that they are the very best to meet the country’s needs, rather than going for what seems to be good enough at the moment.

Recent work, most notably by Dr Stephen Watson of Glasgow University, has pointed out the huge importance of infrastructure spend to the Government’s investment in science, and research and development. Our universities in Scotland punch well above their weight in attracting funds from the research councils, but we do poorly compared with elsewhere in the UK, especially the golden triangle of Oxford, Cambridge and London, in attracting UK Government infrastructure spend on research and development, which is fundamental to the future of a healthy research and development community. We need to map out such investment much more, both thematically and territorially, although that has never been done by any Government.

Let me give hon. Members an example of the problem, although I will speak about something that the Government are doing that is good, not bad. I applaud the way in which they have invested large sums to create the Francis Crick Institute, the biomedical research centre in the heart of London that is a consortium of three London universities—Imperial College, University College and King’s College. It is funded by the Medical Research Council and bodies such as the Wellcome Trust. Its initial investment was £650 million and the operating budget is £130 million a year. On one level, this is to be applauded, but is it not strange that Dundee University, in the city of my hon. Friends the Members for Dundee East and for Dundee West (Chris Law), is the world leader in biomedical research, yet is not part of the Crick Institute? Indeed, no one in the north of England is part of the institute. My first suggestion to the Government is that when they consider infrastructure spend for research and development, they would do well to think about the distribution of such investment throughout the whole UK.