(5 years, 7 months ago)
Westminster HallWestminster Hall is an alternative Chamber for MPs to hold debates, named after the adjoining Westminster Hall.
Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
I beg to move,
That this House has considered provision of long-term capital for business.
It is a pleasure to serve under your chairmanship, Mr Walker, and it is truly a privilege once again to lead a debate in Westminster Hall. Long-term capital for business is critical to the future of our economic wellbeing. Business knows business best, and in many ways the industry panel patient capital review was the genesis of the debate. That review, published in October 2017, was written by experienced and successful business leaders, and I commend it to hon. Members.
I recognise that the debate is somewhat overshadowed by what is happening in the main Chamber and what will transpire later this evening. That said, I cannot think of a better time to hold a debate on this subject. These are critical days for the future of our country, and we will be making critical decisions. It is incumbent on us to put the long-term interests of our country at the heart of the decisions we make. Our country, its people and those who come after us will not thank us if we make decisions based solely on narrow, short-term or selfish interests.
What is true for our country in our current predicament is also true when it pertains to the fortunes of business. Although there are undoubtedly risks in making strategic decisions for the long term, there are greater perils in considering the tactical only here and now, in looking for immediate returns and being unprepared to consider the bigger picture in a way that a long-term view necessitates. I am afraid that one life lesson that we must sadly keep learning is connected to what is often described as the law of the harvest: we can reap only what we are prepared to sow in the first place. The harvest comes in due season, but we must be prepared to be patient. I want us to reflect on the pitfalls of short-termism, and the missed opportunities and failures of a lack of a long-term vision.
As every colleague who ever worked with me in my previous business career would attest to, I am no accountant. However, it is insightful that, in accountancy terminology, a long-term investment is defined as an investment that is to be held for more than a single year, which hardly seems long term to me.
We have quite rightly heard a great deal about the UK productivity gap. Productivity is defined by the Office for National Statistics as the output per worker, output per job and output per hour, and it is ordinarily calculated by dividing the annualised GDP per capita by the average annual hours worked per employee. Countries with a track record of rising productivity tend to benefit from higher rates of growth and low inflation. It is the golden fleece of national economics, if I may describe it as such.
Productivity in the UK over the past few years has not been our best feature, and we rank poorly compared with other developed economies. We are currently at No. 17 in the world rankings, with our average hourly productivity across the economy being £17.37, compared with the Germans, who produce £23.30 per hour, the Americans, who produce £25.74 per hour, and the Danes, who produce £28.87 per hour.
Imagine for a moment that we were as productive as the most productive of the developed economies. It would transform our fortunes. We could pay ourselves more, and as a result of paying more in taxation we could invest many billions more in our NHS and other public services. The increased profitability in the private sector would also yield increased dividends, which in turn would be good news for our pension funds.
Has my hon. Friend looked at how many countries have a means of producing long-term capital, and at what sort of competitive advantage our having one would give us as a result?
I am grateful to my hon. Friend for that timely intervention. That is the very point I will come on to. Let us examine the critical reason for our lack of national productivity, again comparing investment in our economy with that of the world’s leading economies. A good indicator is the level of gross fixed capital formation as percentage of GDP, which is the value of the acquisitions of new or existing fixed assets in the economy less the disposal of fixed assets. It is just a single measure.
In 2017—the most up-to-date World Bank figures are for 2017—we invested 16.8p for every £1 of GDP. The Chinese invested 41.8p for every £1 of their wealth. We also lag significantly behind developed western economies. For every £1 of GDP, Italy invests 17.5p, Poland 18p, Germany 20.3p, Denmark 20.4p, Spain 20.5p, France 22.5p, Finland 22.6p, Canada 23p, and Belgium 23.3p. That is but one measurement of investment, but it says something about future business activity and also about our confidence in the future. It is my firm belief that much of our productivity gap in this country is due to that indicative investment gap. We are simply not investing enough, and I contend that that is because there is an insufficiency of quality patient capital in our economy.
It is a much-worn anecdote that, while we come up with great ideas, breakthrough technologies and transformative product concepts, all of that good stuff ends up being commercialised somewhere else by someone else. As a young Scot, my pride in being a Scot was spurred by the great stories of our inventors, scientists and engineers. I believe it is a valid contention—one I am prepared to stand by—that the modern world was largely designed by the Scots. The litany of great Scottish contributors include James Watt, Alexander Graham Bell, John Logie Baird, James Chalmers and John Dunlop. I am delighted to give way at this point to the hon. Member for Strangford (Jim Shannon).
A timely intervention, as ever, from the hon. Gentleman. These British Isles are a crucible for invention. The genius of the people of these islands, their creative free thinking and their imagining of the unimaginable has created whole new branches of sciences and technology and whole new categories of product. That native, creative, entrepreneurial spirit is alive and kicking.
Entrepreneurs are among us in abundance. The number of start-ups in this country is at an all-time high. Entrepreneurs are launching themselves and their ideas on to the high seas of enterprise in greater numbers than at any time in our past. Our universities and other research institutes are brimming with exceptional people having very bright ideas. Some of those ideas, if carefully nurtured through the commercialisation process, will not only continue to change the modern world for the better but will be the source of the wealth of this nation for generations to come. However, they must be nurtured, and that nurturing relies, in substantial part, on the availability of long-term patient capital.
All too often at present these small to medium-sized businesses fall prey to predators, who invest in them for the short term and then sell on without having made the necessary long-term commitment to bring the businesses to their full potential. I am not arguing against the importance of short-term investment or venture capitalism, but I argue that it is wrong to surrender our whole economy to that model of capital. Some 650,000 new companies were formed in Britain last year, but the number that scale up is relatively small. Some of those are lifestyle businesses that suit the people running them, but many business owners are driven by a sense of purpose—to build a growing, successful business—and they very often come up against the obstacle of the limited availability of patient capital.
My hon. Friend is being very generous with his time. He may be about to come on to the digital industry. It is a major industry and such a fundamental part of our economy, and it needs investment, as I know from my own costs when I ran a company involved in that area.
Anyone would think that my hon. Friend and I were working in some form of symbiosis, because the very next thing I wanted to say was that the need for investment is never more pertinent than in the technology sector, in which large American corporations invest speculatively and then buy companies when they reach a sufficient level of development. One reason that so many British businesses go that way is that they reach a stage where their access to affordable long-term capital dries up. This is not just about start-ups but about how a business accesses capital to be able to invest in new assets or capabilities.
(6 years, 2 months ago)
Westminster HallWestminster Hall is an alternative Chamber for MPs to hold debates, named after the adjoining Westminster Hall.
Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
I agree with much of what the hon. Gentleman said. I welcome his intervention. I will come on to the point he raised. It has also become the norm with the current arrangements that Scotland’s two Governments conduct their business by megaphone rather than by meeting, speaking and perhaps even listening. There is no imperative that means they must sit down and listen to each other, which speaks to the point made by the hon. Member for Glasgow North East (Mr Sweeney), and that is just not right. Regionalism is a positive example of how things could be made to work.
The recently established metropolitan Mayors by necessity work with different levels of government. They work with the councils across their regions and with the UK Government. That in turn builds a broad-based coalition of partners that seems to work well, criss-crossing local rivalries and party political loyalties for the good of the region. It encourages compromise and the sharing of objectives. Andy Burnham, the Labour Mayor of Greater Manchester, must work with Conservative and Liberal Democrat councillors, and he also must work closely with Conservative Government Ministers. He must negotiate and compromise, as all the Mayors do, but of course none of them are nationalists.
The arrangements for the devolved Parliaments and Assemblies do not encompass that vision of partnering. They seem to me to be tokenistic and designed to create a hierarchy of importance that is not in keeping with a vision of partnership unionism. The history of the JMC is that it meets irregularly on an ad hoc basis, with little or no formal recognition of the value of joint working. There is limited transparency on what happens at those meetings and what difference they make. They are exclusively focused on the Government-to-Government business of the moment. There is no structure for formal departmental or inter-parliamentary working, or for local government agencies or other national agencies to work together. There is so much to be gained by creating those networks and forums as part of the process of the machinery of the Union.
There are examples in the world of how things can be made to work better. The Canadian system is a case in point. It is federal in nature, but the different provinces and territories have different levels of local control, and the parliamentary system has important similarities with that of the UK. The Canadians have a national Ministry of Intergovernmental Affairs and Youth, headed by a Cabinet Minister—the so-called Unity Minister. So important is that role to Prime Minister Justin Trudeau that he performs it himself. It is not as simple as being a command and control network from the federal Government. Far from it—the Ministry’s remit is far deeper than establishing national guidance or control for the provincial and territorial governments. It is responsible for encouraging joint working between the provinces and territories and the local government agencies.
My hon. Friend has spoken precisely about the Canadian situation. He is coming from a Scottish point of view, but does he see the parallel with our position in Europe? There is an intergovernmental body in existence already, called the Council of Europe. We should be using it more as the framework for the future.
My hon. Friend makes an important point about the Council of Europe, and I am going to talk about Europe. I will return to Canada for a moment, though, because there is a plethora of joint working agencies across Canada engaged in educational, infrastructural, economic, health and environmental works. The support mechanism is a secretariat that seems to be independent of the federal Executive. The body is drawn from civil servants from across the Canadian public sector and exists to support intergovernmental co-operation at all levels. It encourages and facilitates meetings, helping provincial, territorial, federal and local government leaders to arrange sessions and meetings on any subject. They call it collaborative federalism, and it encourages a sense of national unity, even in a federation where there are nationalist elements. There are lessons for the United Kingdom here.
I propose a partnership Unionism. At present, we have the Wales, Scotland and Northern Ireland Offices. It has often been thought that merging them would create efficiencies for the UK Government, but in doing so we would lose a lot of the point of those Departments. The idea is that they give voice to the nations of the Union within the UK Government and are the UK Government’s voice in the nations that they serve. Rather than thinking about merging them and reducing the role of the respective Secretaries of State, it would be far better to think of an entirely better way of working.
There is a statement in the memorandum of understanding of 1999 that says that
“the Secretaries of State for Scotland, Wales and Northern Ireland are responsible for ensuring that the interests of those parts of the UK in non-devolved matters are properly represented and considered.”
Part of the issue here, however, is the role of the territorial Offices of Scotland, Wales and Northern Ireland. The Departments that have a Union responsibility, such as the Treasury, the Department for Business, Energy and Industrial Strategy, the Department for International Trade and so forth, depend too much on the territorial Offices. They should not be channelling their activities through a territorial Department; they should be actively involved in Scotland, Wales and Northern Ireland on a direct basis and to a greater extent. I feel very strongly about that.
The Departments that have an area of responsibility covering the whole of the Union should be active in all the nations and regions of the Union, not only in England. Please do not short-change my constituents. We pay our taxes, elect a Government and have every right to expect that the Union Departments are working for us across the United Kingdom.