I beg to move,
That this House
has considered industrial strategy.
May thank what we call the BBCom for approving my application for this debate? Let me also thank the hon. Members for Hove (Peter Kyle), for Edinburgh West (Michelle Thomson) and for Hartlepool (Mr Wright) for supporting this debate. We often debate policy in this Chamber, but it is rare for us to debate the creation of a new Department and what it will in fact mean.
In my maiden speech, I referred to my constituency, Warwick and Leamington, as being at the centre of the country, both geographically and demographically. We have good schools, colleges and two highly respected universities on our doorstep. We have many businesses, which are household names, a skilled workforce and low unemployment. The constituency has a strong reputation in the technology sector, particularly in the video games industry, and the wider region has a heritage firmly based in manufacturing.
This month, on a visit to my constituency, I was pleased to see the site that will house a new factory for Vitsoe, the furniture manufacturer and exporter. It is on the very spot that was home to the Ford foundry until it sadly closed in 2007.
The hon. Gentleman’s constituency is next to mine, and he will know that Jaguar Land Rover has its main development plant in Coventry, probably employing around 5,000 to 6,000 employees. Equally, he will also know that the Chinese have put more investment into the black cab company, which is constructing a new site in Coventry. That gives us a good demonstration of some of the industries that have been created in the midlands.
I welcome that intervention. The hon. Gentleman and I have attended some of those very interesting institutions and worked together at Warwick University, one of our leading international universities.
I am pleased that Tata has based its new technology centre in Leamington, which shows what effect inward investment can have on our constituencies and our country. Despite the collaboration—the links between our educational institutions and business, its location and its workforce—how much more could we do as a constituency and as a country if we had the strong foundations of an industrial strategy?
Since working in the automotive sector, I have always had a passion for manufacturing, not least as co-chair of the all-party manufacturing group. I am a member of the Business, Energy and Industrial Strategy Committee—I am pleased to see its Chairman, Mr Wright, in his seat—and we are currently taking evidence on this concept.
We have recently heard evidence from Mr Osborne, the former Member for Twickenham and Lord Heseltine, who all assured us in their own different and special ways that we have had an industrial strategy all along. Perhaps they are right, but I would like to use this speech to say how I think an industrial strategy could be reformed to meet some of the present challenges that we face.
In the last Queen’s Speech debate, I spoke on industrial strategy. I remember that most of the other speakers spoke about sugar tax, an important issue at the time. I must admit that I was not entirely overwhelmed by the Government’s enthusiasm for what I was saying, so no one is more delighted than me to see the inclusion of the words “industrial strategy” in the name of a Department.
There has been a sense of scepticism about industrial strategy. [Interruption.] That was more warmth than I received for my remarks in the Queen’s Speech debate. Industrial strategy has been given negative connotations. Let us consider British economic performance, for example, in the post-war period. Britain’s relatively poor record between 1950 and 1979 has generally been blamed on the lack of competition, with traditional firms being unwilling to adopt technological or process advances. Wilson’s “white heat” of the scientific revolution was replaced by a heavy reliance on the financial sector. Neglect in the past has seen a weakening of our supply chains and a huge shortfall in the skills that a world-class industrial base requires to satisfy both demand and opportunity.
We need to have a strategy and structure in place, a need made even more urgent following the EU referendum. In addition, highly capital-intensive advanced manufacturing requires long-term planning. There is a burden on companies to invest in skills and equipment, and a burden on the state to help create stability for long-term decision making—macroeconomic, fiscal and regulatory.
For manufacturing to grow, an emphasis needs to be placed on encouraging investment and greater long-termism. Although initiatives such as the midlands engine and the northern powerhouse are laudable, they need to be supported by strong tangible policy, and that policy will be less effective if it is piecemeal. For example, capital allowances were popular with industry, but were discrete in their design. A coherent strategy can work for the midlands, the north and the south, driving growth, building economies and providing sustainable employment and the subsequent reduction in community and individual inequalities.
Any new industrial strategy must fit the times we live in, the domestic economy, the global marketplace and developing themes such as Industry 4.0. In September 1965, the then Secretary of State for Economic Affairs produced the national plan, which sought to cover
“all aspects of the country’s economic development for the next five years”.
The plan was more than 450 pages long and looked at everything from the running costs of schools to the future development of the electronics industry. The plan was comprehensive in scope, but our economy no longer operates under such a structure and the plan would have negative consequences if replicated today.
The lack of success of documents such as the national plan does not mean that there should not be a national industrial strategy now for the UK, or that there is not a case for a coherent document to be drafted by the Government, outlining the support that they intend to give the sector and Departments. In countries such as Germany, long seen as a model industrialised nation, there has been little need for the Government to pin down formal strategies or statements because this philosophy is so entrenched and embedded in all activity. In Britain, there has been a tradition of volunteerism when it comes to economic organisation.
Does my hon. Friend agree that in Germany, in the Kreditanstalt für Wiederaufbau—KfW—which has been in place since the late 1940s and provided long-term support to small and medium-sized enterprises, we have a model that could be replicated here, perhaps in the form of a UK investment and development bank?
I thank my hon. Friend for his contribution, but I gently suggest to him that that slightly misses the point. It is just one element of an industrial strategy.
Is Germany the only model that the hon. Gentleman is examining? The challenge that we face, with only 10% of our people in the manufacturing workforce, is that with a smart bit of kit it is possible to manufacture anywhere in the world. That is a wonderful opportunity. Does he not think that Germany is an outdated model to follow?
With the economic advances in our technology and with institutions such as the Warwick Manufacturing Group and other such groups, including in the hon. Gentleman’s constituency, we need to invest in research and development to make sure that we maintain the cutting edge and lead in those technologies.
Central Government, or perhaps more accurately Whitehall, generally responds well to objectives and targets, which provide focus and concentrate minds. A cohesive document would allow the public and business to hold the Government to account. Debate would be unavoidable and long-term consensual policy would prevail. The document, or statement, would lay out policies to support manufacturing for the medium term—around 10 years, say—giving clear objectives for the economy.
Does the hon. Gentleman agree that Governments have tended to intervene when a sector is failing, but they have failed to support a successful sector because we in this country step back and say, “Why should we support it? It’s doing fine on its own.”? Is that not one of the big problems that we have faced for many years?
The Government should intervene before a sector is failing. We always seem to miss the problem when it occurs, which makes it much more difficult to resolve, not least in some of our strategic industries.
The Government need to state how they intend to achieve their objectives through a long-term framework. Although it is recognised that manufacturing does not make up the majority of the economy, it can be seen as a driver for other sectors in respect of efficiencies, processes, skills, exports and so on. It requires more explicit planning than other sectors, which can be seen as interdependent, with the state playing a more active role. This should not come, however, at the expense of creativity or productivity, and it should assist rather than hinder.
One of the most consistent calls from manufacturing has been for the Government to articulate a long-term commitment to the sector and to give an indication of the policy framework they are likely to operate in the medium-to-long term. That should be a rolling document, updated regularly and taking into account fluctuations in the wider global economy and in the sector in the UK. It should be debated in Parliament to provide transparency and accountability. It should address a wide range of challenges. How effective is the British Business Bank in terms of access to finance? What capital is required to radically change manufacturers’ investment decisions? Can incentives be created to encourage business to invest? What progress is being made with green manufacturing?
Education is a vital component of the strategy. There is currently little planning associated with supporting the development of STEM subjects—science, technology, engineering and maths—in primary education, which is a major factor in creating the skills gap the industry is now experiencing. Those subjects are the bedrock of degrees and apprenticeships, but they are left to the latter stages of education—often too late to influence a child’s decision-making process.
Does the hon. Gentleman know that tens of thousands of young people in further education colleges up and down our land are desperate to get into apprenticeships, but they cannot, because they cannot get their GCSEs in English and maths? When will the Government introduce a practical maths GCSE to unblock that blockage? Will he persuade them to do that?
I will leave the Minister to answer that question in his remarks.
In a truly global trading nation, more provision should be made for studying languages. What is the number of children at school studying Chinese or Russian? How can it be improved? A welcome manifesto commitment—the hon. Gentleman has touched on this—was to increase the number of apprenticeships to 3 million by 2020. How are we going to take down the barriers that prevent that from happening?
Infrastructure is an essential part of the strategy, not least in improving the quality and reliability of supply chains. That should include the comprehensive development of a digital infrastructure that is fit for purpose. Other elements of the strategy would, of course, include an energy policy, procurement, immigration, export—including the role of supporting bodies such as UK Trade & Investment—catapult centres, research and development, through-life engineering services and the wider contribution from Whitehall.
Social enterprises may not be the first issue that springs to mind in this context, but they are a sizeable part of our economy. The positive impact social enterprises have on local communities is of huge value, and it is through an inclusive approach to shaping our industrial strategy that such sectors can be supported.
I am sorry; I will not give way again.
Clearly, an industrial strategy needs to establish a framework—from how many children are studying STEM subjects at primary school, right through the industrially strategic pipeline to how many businesses are exporting. Where have targets been met, and where is further intervention required? As the strategy becomes more embedded, those things will not come as shocks, but more as minor adjustments to the levers of policy. We used to say quite a lot about the long-term economic plan. We need an economic plan, and underneath any economic plan, we need a strong and robust industrial strategy.
Order. May I suggest to Members that if we work around eight minutes, everybody will get the same?
Thank you for that guidance, Mr Deputy Speaker—I need to have a productivity improvement of about 20% immediately.
It is a real honour to follow Chris White. I think we have exactly the same principles, motivations and objectives when it comes to having an industrial policy. He is a fantastic member of the Business, Energy and Industrial Strategy Committee. I thank him, other members of the Committee, and the Backbench Business Committee for allowing this important topic to be debated today.
I welcome the Prime Minister’s rhetoric about having a “proper” industrial strategy. We on the Committee have embarked on an inquiry into industrial strategy to assist with the development of policy. A number of fundamental questions need to be addressed to ensure that we have a modern, competitive, productive, sustainable and profitable business base in this country. What is the correct and optimum level of state intervention in economic and business policy? It would be ludicrous and naive to suggest that the Government do not intervene every single day through legislation and regulation that affect the prospects of hundreds of thousands of businesses.
How can that intervention be done in as strategic and co-ordinated a manner as possible? The primary consideration for business in any industrial strategy, or indeed any Government policy, is long-term certainty—something the hon. Gentleman has already mentioned. How can we ensure that the broad sweep of industrial policy transcends Parliaments and can withstand changes of Government? We have to acknowledge that there is a mismatch between the long-term requirements of business and short-term political pressures. Ministers of all Governments and of all persuasions are prone to the temptation of announcements, initiatives and reviews. Governments are keen to give the impression of action and activity, even if that is not often matched in reality. How better to give an impression of zeal and purpose than to announce a review of something?
The hon. Gentleman talks about the importance of the long term as he yet again stumbles into the same mistake that politicians make generation after generation—believing that they know what industrial strategy is but do not bother to ask their colleague for whom it might be something different. My experience of business has been in technology. The only long-term thing in technology was the knowledge that tomorrow will be different from today. How on earth are the Government, with their lumbering, slow way of manoeuvring, supposed to keep up with the entrepreneurs who have created so much progress in society?
We can have many debates on industrial policy—we have and we will.
The hon. Gentleman touches on the second big theme of my speech, which is: What do we mean by picking winners? Let me go back to the notion of long-term business considerations and wishes for policy stability at the expense of short-term political culture. We have seen this already with the new Government. The new Prime Minister has announced that we need to have
“a proper industrial strategy”.
In doing so, she seems to have jettisoned much of what has gone before. In a letter to me this week, the Secretary of State said that there needs to be
“a much stronger relationship between Government and business. For that reason, now is not the time for the Government to set out its approach in detail”.
Although that provides clear blue water between the current Government and what went before when David Cameron was Prime Minister, it hardly provides the reassurance of certainty for business. At a time when the process of Brexit is leaving business with unprecedented uncertainty and giving pause to future inward investment into this country, greater detail should have been provided. It is a cause for concern that over three months after the new Department was formed, the Secretary of State is still insisting that he cannot set out the Government’s industrial strategy in any kind of detail. Equally, important steps on large strategic matters such as airport expansion and new energy generation are taking far too long, especially when Britain needs to demonstrate to the world that we remain open for business.
Another key principle of what we need for a successful industrial strategy is effective cross-Government co-ordination. Industrial strategy will be a failure if it merely resides in No. 1 Victoria Street. As previous Administrations have demonstrated, unless the relevant Department—the Business Department, the DTI, or whatever it is called—is headed by a big beast, whether a Heseltine or a Mandelson, the notion of effective co-ordination across Whitehall turns into dust. Early signs from the new Administration are encouraging. Most importantly, the new Cabinet Committee on Economy and Industrial Strategy is chaired by the Prime Minister herself. This should ensure co-ordination and effective leverage from No. 10 and demonstrate to other Departments that the Prime Minister is very interested in this issue and will be pushing to bang heads together if they do not demonstrate due respect to an industrial strategy.
That said, the Cabinet Committee still has to combat a silo-based and defensive approach from Departments. I think that the Secretary of State recognises that. As he said in his letter to me,
“to be successful, the industrial strategy will need to deliver an upgrade to our infrastructure”, and yet the Treasury will not relinquish control over infrastructure spend. He also stated that a successful industrial strategy will need to
“improve our education and training system to provide the skilled workforce that will be needed in the future”, and yet the Department has lost control over skills policy. Lord Heseltine, giving evidence to our Committee last week, said that
“industrial strategy starts in primary schools”, and yet when we met the Permanent Secretary this week and asked, “To what extent does BEIS have influence over the design of primary school policy in order to link it with industrial policy?”, he conceded that the Department had no such influence. I am yet to be convinced, based on experience of successive Governments, and having had the privilege of serving as a Minister myself, that Whitehall Departments will have as a primary objective the effective implementation of an industrial strategy. I hope that the Minister can demonstrate otherwise.
A further key way in which effective Government co-ordination can be demonstrated is through smart procurement. There may often be a tension between Departments in securing goods and services at the cheapest cost, and in considering the use of British-based and British-made products, which may sometimes be more expensive. I would contend, however, that it is often a false economy to buy off the shelf from overseas at the long-term expense of an effective British manufacturing sector. This month’s announcement that the hulls of the replacement Trident submarines are to be built with French steel, at a time when the British steel industry has been pushed to the brink of extinction, shows vividly an acute failure of industrial policy. I am not for one moment endorsing the idea of protectionism. That approach insulates domestic companies from the harsh realities of having to compete in the global economy on cost, innovation and quality, and it ultimately dooms them to obsolescence. However, given the great success story of many parts of British manufacturing, why is not every single public organisation’s fleet using Nissan cars built in Sunderland or Vauxhall vans built in Luton? How is the procurement process nurturing British industry, and how will a proper industrial strategy ensure that that becomes the case?
I am grateful to the hon. Gentleman for giving way a second time. He said that he was not talking about protectionism, but then he outlined, chapter and verse, a protectionist position that we should buy British products. How is that not protectionism?
I think that smart procurement can engineer proper prosperity, but I warn the hon. Gentleman that what I have to say next will give him spasms. It relates to the link between a proper industrial strategy and foreign takeovers, and how the state can intervene to perhaps limit the range of foreign takeovers.
In her speech launching her campaign to be Conservative party leader in July, the Prime Minister said:
“A proper industrial strategy wouldn’t automatically stop the sale of British firms to foreign ones, but it should be capable of stepping in to defend a sector that is as important as pharmaceuticals is to Britain.”
I welcome that approach. One of Britain’s virtues is its openness and the fact that that openness lends itself to dynamism and a willingness to consider new ideas and innovate new products. That ultimately leads to better competitiveness, yet there is a risk that this country will sell off the crown jewels, which would be detrimental to the long-term success of British business. We are at the heart of a dynamic and connected global economy, but we are at greater risk of investment in capital allocation decisions that affect British industry being made far away from these shores by parent boards headquartered overseas.
Indeed, within days of the Prime Minister entering No. 10, it was announced that SoftBank was buying Cambridge-based Arm Holdings for £24 billion. That was not an old-fashioned, obsolete, loss-making businesses, and it did not require a bail-out from the state. It was a successful British company in the growing global tech revolution. If the tests for stepping in to defend a sector that is important for Britain were not at work in that instance, it is difficult to see when they would be applied. Indeed, what would those tests be? For every instance of a welcome takeover, such as Tata’s purchase of Jaguar Land Rover, there are numerous examples of takeovers where industrial capacity was moved offshore, such as Kraft’s takeover of Cadbury. What are the criteria for stepping in and intervening?
That is music to my ears. When I was young man, I worked for Imperial Chemical Industries. These days it is called Syngenta and it has a big plant in my constituency. The leading agritech company in the world was taken over, including all its sites, not by a normal company, but by ChemChina, which is a part of the communist Government of China. That is not a normal takeover, but what are this Government doing about it? I have not heard anything.
That is a fair point and it gets to the heart of what we mean by foreign takeovers and their link to industrial strategy.
I am conscious that colleagues want to make their own speeches, so I will finish. The Government have yet to articulate what is meant by picking winners, whether they be individual companies, sectors or technologies. There seems to be a move away from our previous sectoral approach, but there is no clarity with regard to the criteria. It is increasingly obvious that the Government are not entirely clear about what an industrial strategy looks like. Starting with a blank piece of paper gives the Select Committee a welcome opportunity to contribute meaningfully to the development of policy, but it does not provide much reassurance or certainty to the firms that are working hard to create wealth and prosperity for this country—and certainty is what they are crying out for at the moment.
It is a pleasure to follow the Chair of the Select Committee, Mr Wright. For a long time, the words “industrial strategy” struck fear into the heart, and raised the hackles, of many on the right of the political spectrum. Those words called to mind the era of excessive government intervention and anti-market philosophy, with the Government picking winners—usually winners that were declining—deciding on nationally strategic industries, and pursuing anti-competitive practices and industrial relations policies that stifled competition.
That very much depends on how we define intervention; we might come on to that later in the debate.
To meet the challenges of the 21st century, especially in post-Brexit Britain, industrial strategy should be about four things: the Government creating the ecosystem or the environment in which industry can succeed and in which national productivity—a huge challenge—can be increased; ensuring that our country has the skills that it needs; ensuring access to finance; and boosting and promoting industries of competitive and comparative advantage.
When we talk about the ecosystem or environment, we almost inevitably talk about infrastructure. One of the achievements of the previous Government was that even in a time when we had to pay down the deficit, infrastructure was reckoned to be the key factor for economic growth. Public sector support has, rightly, been provided for all sorts of developments over the past few years, most notably in transport, energy, housing and broadband communications. The National Infrastructure Commission, which made it possible to look across sectors and move away from the previous silo approach, has had a great impact.
As the hon. Member for Hartlepool pointed out, an urgent priority for the Government has to be a consideration of not only how we strategically assess, but how we deliver. That is partly about smart procurement and making the Government an intelligent client. Our inability over the years to specify design has meant that costs have inevitably increased, so the cost base and project management costs have been much higher than they would otherwise have been. The Treasury optimism bias or risk quotient, depending on what one calls it, has had to be increased throughout. By driving into the Infrastructure and Projects Authority some of the skills needed for the delivery of smart procurement, we will be able to reduce costs and make projects more attractive and fundable.
We need to get the private sector much more involved than it has been so far. If we travel anywhere else in the world, we will use roads and bridges that are privately owned and run, and the fact that they are privately owned and run does not make them any less useful. A commitment to infrastructure must be a cornerstone of any modern industrial strategy, so I gently say to the Minister that I hope he will push his colleagues for the appointment of a new Minister for infrastructure, preferably with some responsibility for industrial strategy, and preferably a Member of this House rather than the other place.
Our departure from the European Union will give us a couple of fortuitous possibilities in what some of us think will be a difficult time. The EU procurement rules are some of the most onerous and bureaucratic anywhere in the world. Getting rid of them from our procurement system will undoubtedly help small industry and the supply chain. State aid has been a way of thwarting, as well as supporting, a lot of investment, and we will no longer have to abide by all the state aid rules. I hope that the Minister will say later that he accepts that challenge.
I have an example in my constituency of state aid preventing development. That development would help companies, and if we can do so, they will grow and create jobs upon jobs. The current situation seems ludicrous and we would be well rid of it, in my view. Does my hon. Friend agree?
There will be some real opportunities. We will have the chance to re-examine our regulatory regime and competition policy to ensure that the UK is at the forefront of not only oversight, but competition.
If the movement of labour is restricted, there will be an acute skills shortage in this country, so we urgently need to look at ways of curing that. The Government have been at the forefront of one of such initiative, namely specialist academies for major infrastructure projects that allow us to build some of the skills that we have lost, but we need to do more. The Crossrail tunnelling academy is a prime example, and several other major rail projects are establishing academies alongside their projects. We would do well to continue to push that forward.
The recent Institution of Civil Engineers “State of the Nation 2016: Devolution” report recommends the creation of regional pipelines for infrastructure to identify where opportunities exist so that industry and academic institutions can invest in the training required.
In the longer term, there are two things the Government should urgently study and consider. The first is giving 14 to 18-year-olds an understanding of the fact that academic skills are not the only requirement for success in life, and that other things should be set alongside such skills. Why not have a national vocational qualification, alongside GCSEs and A-levels, to attract people into engineering? Equally, it would be perfectly possible for the Government to set up outreach projects that go beyond the theoretical and teach the application of STEM subjects.
Secondly, on finance, I hope the Minister will take the opportunity of our being rid of the state aid rules to consider some of the possibilities open to us. Almost inevitably, sovereign debt is chosen as the way to fund projects, because the weighted average cost of capital is cheaper. However, many countries look at possibilities in the private sector, such as pension funds, venture capital and sovereign wealth funds. The UK still seems to be suspicious of such funding. We should encourage the UK pension industry and other industries to set up direct investment funds. Equally, with the new freedoms they will have, the Government should explore setting up regional infrastructure and industry bonds, or regional equity schemes. This could be the new popular capitalism—the Mayism of the new century, just as popular capitalism was the Thatcherism of the 1980s. That will mean that people can invest in their country and region, and invest in their country’s success.
I see that the hon. Gentleman agrees. My point is that we could now do this regionally, probably by using local enterprise partnerships as a delivery mechanism.
With any infrastructure policy, there is the challenge of what the Government need to do to organise the machinery of government that will support it. The National Infrastructure Commission represents a great strategic advantage to this country. The Minister has already heard me talk about the need to ensure that the IPA delivers on making the Government a smart client. Equally, the Government should look at the machinery in place and then sweat that machinery to ensure industrial success. Many of the LEPs can play a role in helping with regional skills and financing.
Finally, many incubators have already been set up in universities, which is fabulous. My hon. Friend Chris White mentioned the one in his constituency, and there are others around the country, such as the agri-corridor in East Anglia, and particularly those in Cambridge, Leeds and Manchester, and across the north. However, we now want accelerators, which are for the next stage up. Businesses that have been in an incubator and have received some support are sometimes left to drift, and that is where universities can play a big role by bringing forward accelerators to help those businesses to reach the next phase of growth. We have talked a lot about picking winners, and if I had not spoken for longer than my eight minutes, I would have said much more about that. The Government need to ensure that universities focus those accelerators on our areas of comparative advantage. I know that the Minister—wearing not only the business hat he has on this afternoon, but his universities hat—will make that point to them. I am grateful for the opportunity to have spoken in the debate.
I certainly look forward to hearing other contributions to this debate and to taking part in the Business, Enterprise and Industrial Strategy Committee’s inquiry on this important area.
In October 2015, in light of problems with the UK steel industry, I asked the then Minister if she regretted the Government’s lack of an industrial strategy. She said, “You could have had all the strategies in the world and it wouldn’t have made any difference.” I guess we can add this to the list of topics on which the new Prime Minister and Anna Soubry disagree.
I welcome the Prime Minister’s decision to implement an industrial strategy and to recognise that the fact that that is difficult does not mean we should not bother trying. A coherent and forward-thinking industrial strategy can set the foundations for economic growth and improve productivity, but only if that is done properly.
This debate will be full of questions. We need to ask what sort of industrial strategy the country requires, what the Government’s most effective levers are for improving economic growth and productivity, where Government intervention can have the biggest benefit for research and innovation, when we should get out of the way of business and when we should get involved. We also need to consider timescales, as we have heard. When can we realistically expect a White Paper or Green Paper on the industrial strategy? Will it be by early next year? We need to bear in mind that, even if we get full realisation by the end of the first quarter of next year, that will be only three years before the next general election. I reflect on the comments of Mr Wright that Governments have been consistently making policy and then moving away from it with the fashion of the time. Industrial strategy will be even more of a challenge, given the all-consuming task of co-ordinating Brexit at the same time.
Although we do not yet have a White Paper, we have had speeches and letters from the Secretary of State setting out some of the areas that the industrial strategy needs to cover. He has noted the need for a long-term sustained approach to policy making, as well as the development of an enduring policy framework that provides a stable and predictable environment for business.
In principle, I do not disagree. Many businesses in my constituency and beyond made long-term investment plans on the assumption that they would have unfettered access to the largest market in the world—one that is right on their doorstep. They therefore would, I am sure, appreciate knowing sooner rather than later whether their rights to trade in Europe will be equal to those of their competitors. That point was highlighted really clearly by the Japanese Government, who said:
“Uncertainty is a major concern for an economy”.
They went on to note that Japanese businesses had
“invested actively in the UK, which was seen to be a gateway to Europe.”
Investor certainty is vital. The Brexit vote has shown how incredibly difficult it is to implement a long-term strategy that is resilient enough to withstand the change in fortunes of Ministers and Governments. A focus on evidence-led policy making could provide some ballast against the constant upheaval that exists in a parliamentary democracy.
Even when there is evidence in favour of a policy, however, more needs to be done to ensure that it is, in fact, implemented. Look at airport expansion in the south-east of England. We know there is evidence that that needs to happen to support businesses right across the UK. We have research on the costs and benefits, and several options are on the table, yet we still do not have a decision on which runway to build or extend. The link between timescales, vital infrastructure and decision making needs to be recognised. We know that the decision is being delayed for political reasons. This is a prime example of political priorities getting in the way of sensible industrial policy. We could also mention here the Green Investment Bank, which is based in my constituency of Edinburgh West. As soon as it made a profit, plans were made to sell it to the private sector. Those examples do not demonstrate a long-term, sustained approach to policy making, so I hope that they are considered when the strategy is put together.
The Secretary of State has also highlighted the need to build on and reinforce the UK’s existing industrial strengths while developing a local approach to strategy—noble sentiments indeed. Given that stated commitment to localism and desire to build on existing areas of strength, perhaps he will look again at some of the mistakes made by his predecessors in government. I and many others were disappointed to see funding to reduce carbon emissions and tackle climate change scrapped or reduced by the previous Chancellor. Whether we look at the cancellation of the proposed carbon capture and storage plant in Peterhead, the cuts to efficiency schemes or the withdrawal of support for onshore wind generation, we see that the Government have demonstrated neither a local approach nor a desire to build on one of Scotland’s undoubted economic strengths.
That disregard for local and long-term policy considerations and the failure to support national and regional economic strengths have had a major impact on the Scottish Government’s attempts to harness the country’s natural advantages, in turn putting at risk plans to reach a target of generating 100% of Scottish energy needs from renewables by 2020. A milestone was reached this year when, for one full day, 100% of Scotland’s energy needs were met by renewable power. That was an exciting glimpse into a possible future that could be supported by a sensible industrial strategy from the UK Government.
Another example of short-term politics taking priority over economic needs was the cancellation of the popular post-study work visa in Scotland. This was a highly popular route for overseas graduates from Scottish universities to stay in the country. Many of the people who obtained this visa contributed a great deal to the Scottish economy and wider society. Universities Scotland conservatively estimated that Scotland lost out on at least £254 million pounds of revenue between 2012 and 2015 as a direct result of scrapping this visa route.
Scottish politicians in this Chamber have repeatedly declared that they would like more control over immigration policy in Scotland and the return of the post-study work visa. Scotland has shown its commitment to helping those in need by finding homes for a third of all Syrian refugees who have settled in the UK in the past 12 months. The long-term economic benefits of such a policy are obvious; the political will exists and the local need is there.
Finally, I just want to touch on the idea, also suggested by the Minister, of an upgrade in corporate governance. During our previous debate about BHS and Sir Philip Green, the topic of corporate governance was brought up several times. For too long, the focus of corporate governance has been on financial profit without any reflection of ethical values. Professor Christopher Hodges of Oxford University has led thinking about how improved corporate governance can lead to more ethical business practices and move everything forward.
To sum up, there is often a tension at the heart of industrial strategy between horizontal policies, which cut across all sectors, and vertical policies that focus on specific sectors. Prioritising specific sectors can see wider industry suffer, and if no sectors are focused on at all, the strategy runs the risk of being unfocused and unsuccessful. In evidence submitted to the Business, Energy and Industrial Strategy Committee, the Korean technology company Samsung said:
“In a fast-moving digital economy, the Government should not seek to direct or manage innovation, but instead should seek to create the conditions which promote innovation.”
If all other sensible ideas fall foul of political pressures, I hope that this one principle will remain.
On balance, I welcome the Government’s commitment to an industrial strategy. I hope it will not only lead to greater economic growth and productivity, but rectify some of the mistakes of the previous Government.
It is with considerable trepidation that I rise to speak in a debate led by my hon. Friend Chris White. The last time I did so, I think I persuaded the Government to accept only the first clause of his three-clause social value Bill, but he kindly asked me to serve on the Bill Committee, by which time the civil service had vastly expanded it into something of a Christmas tree Bill. I very much hope that on this occasion there will be a different outcome, but it was of course a great pleasure to serve on that Committee.
Competition on the merits is a perfectly reasonable industrial strategy for the Government to adopt. It is the one that creates the most wealth and it has been proven to lift people out of poverty. I encourage any Member and anyone listening to have a look at the website HumanProgress.org and its Twitter feed for bite-sized snippets that illustrate just how well entrepreneurship, strong property rights and freedom to contract in a market economy not only facilitate production but engage other social forces that are healthy. It is social co-operation through the mechanism of competition in the market. Other mechanisms have always brought about poverty and misery. The goal of the Government’s domestic policy should be to lower anti-competitive market distortions, and it is on that concept that I wish to focus my remarks.
Anti-competitive market distortions adversely affect economies and contribute to high costs. If we reduce distortions in both the UK and the world we could, according to the Legatum Institute’s productivity simulator, see a significant increase in productivity and public welfare. One of the great problems with domestic suggestions is that they increase the level of ACMDs, which can lead to higher costs and push more people into poverty.
I would like to offer a taxonomy of ACMDs from a paper in the competition law journal, Concurrences— No. 4 of 2014—entitled, “The effect of anticompetitive market distortions (ACMDs) on global markets” by Singham et al. The authors classify those distortions into six areas, and I offer them not as a menu from which interventionists might pluck their preferred action, but as a description of areas in which Governments take policy choices that push people into poverty by prejudicing competition.
The first and most obvious is the type 1 distortion, described as
“government laws, regulations or practices that eliminate competition completely. Examples might include a local content regulation that eliminates foreign production from competition, or a capital adequacy regulation set so high that some banks are forced to exit the market.”
That produces monopoly or oligopoly.
Type 2 distortions are
“government laws, regulations or practices that lessen competition. These are laws, regulations or practices that make markets less competitive, but do not necessarily foreclose competitors from the market entirely.”
“elevate the costs of certain companies.”
I thank my colleague on the Treasury Committee for giving way. Does he accept that there is a middle way whereby Government can encourage competition, as we have seen with the superb Catapult centres, which are an example of an industrial strategy that works? By offering prizes for competitive solutions to technical problems, it is possible to create the ecology that the hon. Gentleman seeks.
Well of course, the great prize in a free market should be a profit, which one is allowed to keep and invest in further production. I do not wish to bore the hon. Gentleman or the House, but by the time I get to point 5, he will see that I will turn to competition authorities.
I was saying that type 2 distortions that lessen competition create dead-weight costs in the economy. Examples would include distribution laws that increase costs for certain suppliers. Types 2a and 2b can be split up—[Interruption]—but I shall not go through them all. The hon. Gentleman has generously indicated that reading from this fascinating paper is perhaps not the most engaging speech for him, so I shall cut some of it down.
Type 3 distortions
“apply different rules to different firms”.
One would have thought that in a society governed by the rule of law, no one would stoop so low, yet they do. Other countries around the world—particularly, I am afraid, India and the Philippines—have such regulations.
Type 4 distortions
“are largely caused by state-owned enterprises”, which include “government privileges in licensing” and distortions relating to the pricing practices of state-owned enterprises and to “abuse of regulatory process”; while type 5 are
“largely due to action or inaction by competition agencies”.
I will happily share with the hon. Gentleman some of the detail on how competition authorities, either by acts of omission or commission, fail properly to promote competition.
Type 6 distortions are
“caused by anticompetitive state aid or support” whereby firms are given
“subsidies and other subventions that may or may not be anticompetitive”.
The point is that it is now well known in academic literature that various categories of Government interventions make us poorer. They can be subjected to a taxonomy, and their costs can be estimated—[Interruption.] I apologise if Chi Onwurah does not like me using a particular word.
I declare an interest in that I have worked for a competition regulator, Ofcom. The hon. Gentleman is suggesting that a lack of competition is always the fault of the Government, either by doing or not doing something. Does he not recognise that it is possible—indeed, it is what the literature shows—that companies acting in monopolistic ways or capturing markets are themselves responsible for a lack of competition?
I have; I am grateful to the hon. Gentleman, my colleague on the Treasury Committee, for saying that. I absolutely have, but perhaps not the same extent that he has. I certainly cannot quote the passage that I know he has in mind.
I say to the hon. Member for Newcastle upon Tyne Central that I certainly did not suggest that a lack of competition is due only to the Government. I think she has applied her own ideas about what I stand for in order to come to that conclusion. I shall certainly read Hansard very closely tomorrow to see whether I suggested that. What I am suggesting is that in a taxonomy of six different categories of anti-competitive market distortion set out in a serious journal of competition law, two sub-categories of one category relate to mistakes that can probably be seen to be made by competition authorities. They are not perfect; no human institution is perfect, including competition authorities.
We are undergoing a process of becoming more open to trade, as indeed we should—seeking comparative advantage, seeking to supply new markets, and seeking to buy from new markets in order to drive down prices. However, the experience of trade negotiators whom I have consulted is that if we go and talk to nations in which the largest segment of the economy is agriculture, we find that we cannot do a deal with them if we take agriculture off the table. Why? Because of the extent to which we subsidise it. We must ensure that agriculture is well looked after, within the expectations that the Government have set; we must ensure we can continue to supply food. What we must not do, though, is try to negotiate with other nations if we ourselves are substantially distorting our own domestic markets in such a way that they cannot hope to compete with us.
I want to impress on the Government—there is substantial literature about this issue—that it is conceivable that both domestic and global productivity could be radically improved for the long term by means of a productivity and consumer welfare Act, which would entrench the very best of competition policy in British law in order to eliminate anti-competitive market distortion.
It is good to serve under your chairmanship again, Mr Deputy Speaker. It is also good to follow 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 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 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 share sympathies with the hon. Member for Bedford, who is sceptical about it. 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.
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.
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—
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 many things Government—I hope this answers the point made by the hon. Member for Wycombe—but there are 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.
By speaking relatively early in the debate rather than at the end, I want to signal that the Government do not intend at this stage to have the last word on the country’s industrial strategy. Such plans, which must command the support of successive Administrations, must be built on strong foundations of engagement, discussion and careful consultation across the Government and, indeed, across the country. As has been said, they should not be imposed from 1 Victoria Street or, indeed, anywhere else in Whitehall.
The industrial strategy is under development, as hon. Members have observed, so now is not the time to set out detailed plans for our approach. We expect to publish a discussion paper around the time of the autumn statement and then a response from the Government in the new year, 2017.
In the new year.
At the autumn statement this year.
Let me give Members a broad overview of the context in which we are developing the industrial strategy and a flavour for some of the principles guiding us as we do so. First, however, I want to thank my hon. Friend Chris White and the hon. Members for Hove (Peter Kyle), for Edinburgh West (Michelle Thomson)—who is no longer in her place—and for Hartlepool (Mr Wright) for securing the debate and making such powerful contributions.
The UK economy has delivered a huge amount of growth and employment over recent years. Unemployment has been reduced from 8% in 2010 to 5% now, while full-time employment has climbed from 70% to 74% over the same period—a faster rate of employment growth than France, Germany or the USA. But, as the Prime Minster has made clear, our economy is not working perfectly. Gains are not always shared across the country and too many people are losing out. We want to deliver an economy that works for everyone.
Our export performance is one of the features of our economy that we are seeking to improve through our industrial strategy, and I am looking forward to explaining a bit more about how we will do that.
The UK has the second lowest productivity in the G7, a fifth below the G7 average, and closing just half that gap would add £250 billion to the economy by 2025. A proper industrial strategy can play a key role in that, by delivering real benefits to the work and lives of businesses, consumers and employees.
I, too, am concerned about our low productivity. Does the Minister not accept a factor in that is cheap labour? If wages are low, that does not encourage companies to invest and become more efficient. We have a history of driving down wages or keeping them too low.
Wages by and large correspond to the value added per hour worked that a company is willing to pay for. What is important is that we increase the average skills level in our workforce, so that we have a skills base that is globally competitive and able to command the wages in a market economy that we want people to have.
When Governments fail to look ahead and make the right long-term decisions on fundamentals such as tax, infrastructure, research, education and skills, they are abdicating responsibility. Such plans require us to take not a partisan approach but one that seeks to establish common ground. I am delighted that so many Members from all parts of the House have participated in the debate today, and I thank them for doing so.
I want to say a bit more about the principles guiding our approach to industrial strategy. The first thing to say is that developing a proper strategy takes time. It is not something that we can drop out overnight. We need to engage with a wide range of organisations and people to design and deliver a strategy that can have a real and lasting impact. That means engaging with Members, including through the Business, Energy and Industrial Strategy Committee’s welcome inquiry on industrial strategy. It also means spending time over the coming months engaging with businesses of all sizes and sectors, investors, local leaders and consumers, so that we can reflect their views and build on their knowledge and experience.
Our industrial strategy will necessarily be wide ranging, but that should not be at the expense of clear focus, so I would like to say a few words about where we will be concentrating our efforts. First, building on proven strengths is a cornerstone of good strategy, and as many Members have observed, this country has no shortage of them. For a start, let us acknowledge our powerful record on science and innovation. Only America, with a population nearly five times our own, has more of the world’s top universities, Nobel prizes and registered patents. The UK has the most productive science base in the G7 and has overtaken the US to rank first among comparable major research nations for field-weighted citation impact, a key measure of research quality. This is hugely important. Science, research and innovation are essential to our future and must be at the core of any effective strategy for the long term.
The Minister is talking about the science and technology research sector. Will he acknowledge that leaving the EU will create huge risks for that sector? Will he tell us how his Government will respond to those risks?
Our research base is globally competitive, and organisations and scientists from around the world are keen to collaborate with institutions in this country. Collaborations between institutions in the UK and others around the world have some of the highest impacts of any science undertaken anywhere. We are desirable partners for collaboration, and I have every expectation that, with the support of the Government, we will continue to be a globally competitive science power in the years to come.
We are competitive in science, but we are also at the cutting edge of industry—for example, in advanced manufacturing. In the UK, almost 1.6 million cars were produced in 2015, up 4% on 2014 and up by nearly 60% since 2009. The hon. Member for Hartlepool asked why the Government did not procure cars for its fleet solely from Nissan in Sunderland. I must point out to him that we make fantastic cars all over the country. I believe that the Prime Minister drives a Jaguar XJ that was built in Castle Bromwich in the west midlands. So there is no need to buy cars from only one place in the United Kingdom. Globally competitive cars are made in a vast number of locations in the UK.
Surely, the Minister is aware that we have a net deficit in trade in automotive products. We assemble car parts that are brought in from the rest of the world.
The hon. Gentleman might recall that there was a point during the last Parliament—I think, in 2013—when this country became a net exporter of cars for the first time since 1975, when the then Labour Government nationalised British Leyland. It is the automotive policies of this Government and our predecessor coalition Government that have taken the car industry to the heights that it currently enjoys and that have not been seen since the early 1970s.
Like the Minister, I think that the British motor industry has a brilliant future—provided that our currency remains relatively competitive. Does he accept that we do well in export markets outside the EU but poorly inside in the EU because of the uncompetitive exchange rate? I think that we still import four times as many cars from Germany as we export to Germany. It is our trade outside that makes the difference.
I thank the hon. Gentleman for his observations. I will take a look at the statistics that he mentions. The car industry is just one example of advanced manufacturing in which we excel at the moment.
I am going to make a tiny bit of progress and then I will give way.
I hope that the Minister will join me in celebrating this country’s excellence in not only manufacturing, but research in Formula 1. We have a number of teams in the UK. We are also the world’s second biggest aerospace manufacturer after the mighty United States. We do tremendously well, and Opposition Members are far too downbeat.
Order. I welcome interventions, but when Members see the speaking time drop down to five minutes, they will understand, won’t they?
Another globally competitive sector is satellite technology, with a quarter of all satellites launched into space currently being made in Stevenage.
Science and advanced manufacturing are, of course, not the only examples of excellence. We can point to other parts of our economy such as financial services, accountancy, law, consulting and creative industries that also set the global standard. We have worked hard over the years to make Britain one of the best places in the world to start and grow a business. We are creating a business environment that supports growth, by encouraging long-term investment and a dynamic economy with open and competitive markets. That has included backing business by cutting corporation tax to 17% by 2020, slashing red tape by a further £10 billion and making major investment in the UK’s research infrastructure.
We have a strong base to build from. The question is how we can make the most of it, but we are not starting from scratch. Previous industrial strategies have seen success in particular sectors. Our challenge now is both to build on our competitive advantage and to identify and support the sectors that can drive future growth. This is not about picking winners, which hon. Members have urged against, nor about propping up failing industry or bringing old companies back from the dead. We must be open and ready for new competitors and open to welcome new disruptive industries that may not exist anywhere today but that will shape our future lives. It is about identifying industries that are of strategic value to our economy and supporting and promoting them through policies for trade, tax, infrastructure, skills, training and R and D.
It is hugely important that we take a local approach to strategy. Governments are fond of quoting national figures—I have already quoted some myself—on economic growth, productivity and employment, but the truth is that economic growth does not exist in the abstract; it happens in particular places when a business is set up, takes on more people or expands its production. The places in which businesses operate are a big part of determining how well they can do. We must recognise the strengths of areas across the country, including the midlands engine and the northern powerhouse. We have a strong framework in place to do that, such as through local enterprise partnerships or, as mentioned by my hon. Friend Stephen Hammond, our network of universities and our enterprise zones.
Through our science and innovation audits across the UK, led by local areas, we are mapping research and innovation strengths and infrastructure to identify and build on areas of greatest potential in every region. Such strengths are too often overlooked outside the golden triangle of London, Cambridge and Oxford. Through our Catapults, the sectoral centres of excellence based across the country, we are supporting innovation where UK businesses have the potential to be world leading and to address local disparities in productivity.
Helping all parts of the country contribute to national success is key to our planning and a cornerstone of our approach. What is needed in each place is different and our strategy must reflect that. That is why many of the policies and decisions that form our industrial strategy will be not about particular industries or sectors, but cross-cutting. For us to succeed in the future, we need to have the right infrastructure—roads, rail, broadband and mobile—to connect businesses to their workforce. New infrastructure such as Crossrail is about to open, but we still have bottlenecked roads, overcrowded trains, and broadband and mobile coverage that needs upgrading.
We also need to upgrade our skills base. We need a rising generation of young people who are not only better educated than those of our competitors and their predecessors, but also better trained.
On schools, we have announced £67 million for the next five years to recruit and train an extra 2,500 maths and physics teachers, and to upskill 15,000 existing maths and physics teachers. We need to make sure that vocational education, especially in engineering and technology, plays a much more prominent role in our country than it has for many years now. We also need a modern system of corporate governance, too. The Prime Minister has also already made it clear that we will look at that area, including further reforms on executive pay, as part of the Government’s work to build an economy that works fairly for everyone, not just the privileged few.
I ask Members to take up to seven minutes, to try to get everybody in equally.
I am pleased to participate in this important debate, and I congratulate Chris White, not only on securing it, but on what he said, which was excellent.
British industry has suffered for too long from neglect and diminution, and I am pleased that the Prime Minister has chosen to reintroduce the term “industrial strategy”, one that I cannot recall being advanced by our political leaders for a very long time. She has also suggested that the state must have a role in promoting and managing our economy, and ensuring that it is healthy and strong and will serve the citizens well. The state cannot simply stand idly by and let the markets do their worst, and I am pleased that an era when that was too often the case now seems to be coming to an end.
I have differences with Mr Baker, whom I admire and like in many ways, as I am a statist and he is not. Some 18 years ago, I tried to press the new Labour Government to intervene—to consider intervention—but my plea fell on deaf ears and I was told by a humorous Back-Bench comrade that that sounded too much like socialism. Governments of all colours since the 1970s have allowed much of our manufacturing sector to wither and reduce. We still have some fine manufacturing, as the Minister has said, but the whole sector is too small and cannot produce enough to bring any kind of sensible and sustainable balance to our economy. We have allowed an enormous trade deficit to emerge, above all in manufacturing, and primarily with the European Union. The pound has been grossly and persistently overvalued, above all against the euro, and has been a prime cause of our manufacturing weakness. We now, at last, have some relief, with the depreciation of sterling since the referendum, and already the economy is beginning to benefit. I look forward to renewed growth in our manufacturing industries and to our trade deficit reducing.
Lord Mervyn King, the former Governor of the Bank of England, said this month that Britain was borrowing 5% to 6% of GDP a year simply to buy imports and live beyond its means—this prosperity was an illusion borrowed from the future, fine for people who wanted to buy a Mercedes-Benz or have a holiday in Spain, but doing nothing for British industry. Professor Ashoka Mody, the former deputy director for Europe at the International Monetary Fund, has said:
“The idea that Britain is in crisis or is on its knees before the exchange rate vigilantes is ludicrous”.
He also said:
“The UK economy is rebalancing amazingly well.”
We should all welcome more of that.
Manufacturing based in Britain has bright prospects, provided the exchange rate is kept at a sensible level; exports will rise and import substitution will see domestic sales of UK products booming. There will probably be a J-curve effect at first, until goods already committed diminish and quantitative effects take hold, but that will not be long in coming. I have already suggested to some of our motor manufacturers that they would now do well to expand their supply chains in Britain and reduce their proportion of imported components. I am convinced that the motoring sector will be doing brilliantly in future years if they do that. We should not forget that Britain is a massive market, to which our own producers should be supplying more.
I want, however, to press the Government further in a virtuous direction regarding our industries. I urge the Government to give serious thought to recreating the National Economic Development Council—Neddy—and the little Neddies for the various industrial sectors. That was an agent of what was then called “indicative planning”, bringing together representatives of business, Government and trade unions. The NEDC was hardly socialism, set up as it was by Edward Heath’s Government, but it did valuable work and could do so again.
There is much more we need to do to make our industrial strategy a long-term success, but an appropriate exchange rate is a vital if not sufficient condition for success. On that score, let me say just one more thing: the euro is proving to be a disaster, particularly for southern Europe. Its future is, thank goodness, now in serious doubt, with Italy in crisis, along with Greece and others. I believe the euro is actually the Deutschmark in disguise, with a number of weaker currencies bolted to it, holding down its value at a falsely low level. That is not only crippling for those weaker economies, but disadvantageous for us. It will be better for those European economies, as well as ourselves, when national currencies are re-established and are allowed to move to appropriate parities. The end of the euro would be good news for us all and, especially, for Britain’s industries.
Finally, let me say that outside the EU we will be free to use smart procurement to benefit British industries and to use state aids as we see fit. If that is protection, I welcome it.
I congratulate my hon. Friend Chris White on securing this important debate on a key aspect of the Government’s policy programme. I begin by welcoming the creation of a new Cabinet Committee on industrial strategy, which will put science, technology, innovation and exports at the heart of the Government’s agenda. I also welcome the Secretary of State’s speech at the Royal Society in July in which he committed to supporting new technologies and new industries as a key part of this new industrial strategy.
My argument is that only by embracing the fourth industrial revolution as part of the industrial strategy can we truly achieve our potential as an industrial power in the 21st century. This fourth industrial revolution—the unprecedented fusion of technologies that blurs the traditional boundaries between the physical, digital and biological spheres—is already transforming industrialised economies around the world, including our own.
That revolution is now accelerating and leading to breakthroughs and new products in fields such artificial intelligence, advanced robotics and the internet of things. I am talking about driverless cars, drones, 3-D printers and nanotechnology to name but a few. They have already captured the imagination of the British public and now the attention of our policymakers. Mastering and leading the fourth industrial revolution should be at the heart of the new industrial strategy for our own country. What is clear from the experiences of other nations is that countries that are best able to take advantage of this new revolution are those with nimble economies, supportive Governments, low taxes and a competitive regulatory regime.
I am pleased that the Minister has confirmed that the Government will continue to focus on pro-enterprise and pro-innovation policies, which make Britain a world leader when it comes to starting and growing a business and exporting to the world.
I wish to offer three suggestions to the Minister and his colleagues as they develop our new industrial strategy for this century. First, the economic benefits of the fourth industrial revolution must be shared throughout the country, including in places such as Havant, and not just concentrated in London. Regional investment funds for 4IR technologies should be made available to promote regional growth hubs that stimulate growth and innovation outside the M25. I see local enterprise partnerships as a key partner, building on the success of the Government’s catapult centres, which the Minister mentioned in his remarks.
I very much welcomed the Chancellor’s announcement in Birmingham a few weeks ago that an additional £100 million will be made available to extend the biomedical catalyst and that there will be an extra £120 million for universities across Britain to fund new tech transfer offices. Those are welcome and forward steps. Research UK and Innovate UK—both Government-backed bodies—should also continue to ensure that their work and funding are truly national.
Secondly, the Government should use their procurement power to buy British when it comes to 4IR products. Other advanced economies such as Israel already play a key role in helping new sectors and new industries to develop, and our Government should do the same. The news that our Ministry of Defence has launched a new £800 million fund to promote defence innovation is therefore very welcome and a good example for other Departments to follow.
Finally, Britain must continue to invest in digital infrastructure, which is as essential to our future economy as railways were in the age of steam. This should include a new phase of the fibre-optic broadband roll-out, and 5G mobile internet.
I have put my thoughts in a new paper, which I have written with the free enterprise group of MPs and which is backed by the Institute of Economic Affairs. I look forward to sharing it with the Minister just before the autumn statement, and hope that he will come back to me on it.
In the meantime, I hope that the Minister will agree that, as the fourth industrial revolution gathers pace, we should embrace it and encourage it as part of our new industrial strategy. Throughout our history, Britain has adopted a pro-innovation and entrepreneurial approach to technological development. From farming mechanisation to domestic labour-saving devices, we have never allowed our fears about the future to hold back our economic or social progress. We soon realised, for example, the folly of requiring early cars to be preceded by a man carrying a red flag. We must adopt the same forward-thinking approach when it comes to the fourth industrial revolution and our new industrial strategy. Just as happened in centuries gone by, this new wave of technology can certainly bring about substantial benefits, from greater productivity, new jobs and lower production costs to more choice for consumers through new goods and services. If we deliver all those things as part of our new industrial strategy—more jobs, more productivity, lower production costs and more choice—we will certainly have delivered an economy and a country that works for everybody.
It is somewhat ironic that we discuss industrial strategy following a debate on the scandal and tragedy of the collapse of BHS, especially given that one of the Government’s emerging pillars for their industrial strategy is:
“New corporate governance structures, including consumer and employee representation on boards, and greater transparency around executive pay”.
It is a shame that the Government’s industrial strategy was not in place before Philip Green got his grubby mitts on BHS.
The Government’s plans for a strategy come as we face a post-Brexit prospect of being out of Europe and out of the single market. The uncertainty caused by the UK’s decision to leave the EU and the Tories’ lack of a Brexit plan seriously damage the long-term planning capacity of firms and the UK’s trade outlook.
When one tries to ascertain what exactly the UK Government’s industrial strategy is, it appears that one needs to be a sleuth, as even the Library research team were challenged. Its debate pack, which is excellent as usual, states:
“This note brings together the limited information that has been published since Theresa May became Prime Minister which provides clues as to the how the Government’s industrial strategy will operate.”
We have limited information and only a few clues, but I am sure that between us we can cobble something together!
We know of some of the terrible failings of the Prime Minister’s predecessor. He and his Cabinet presided over a complete failure of long-term strategic planning, which has only perpetuated the productivity slump in the UK economy and low wage growth, and increased social, regional and gender inequalities. On an output per worker basis, UK productivity is 20% below the average of the other G7 countries, as the Minister mentioned. UK workers have suffered the biggest fall in real wages among leading OECD countries between 2007 and 2015, with their wages dropping by a shocking 10.4%. That is a terrifying statistic, given that our workers’ rights and conditions are under threat as we leave the EU.
We have seen the carbon capture project scrapped, feed-in tariffs for renewable energy schemes cut, and innovation grants turned to loans, and that is all before the UK faces losing access to the valuable Horizon 2020 EU research funding. The UK Government say they are taking back control—
The hon. Lady and many other hon. Members talk of losing EU funding, but if we simply replace EU funding with British funding, we still make a £10 billion profit by not paying into the budget.
If only it were as simple as that; the arrangement might be somewhat more complex.
The steel sector in England and Wales has been crying out for support, yet the Government were flat-footed in their response. In contrast, the SNP-led Scottish Government worked tirelessly to find a new operator for the Dalzell and Clydebridge plants. Our First Minister said she would leave no stone unturned and that is exactly what she, her Government and the Scottish steel taskforce did.
What next for industrial strategy? We are all wondering and waiting with bated breath. When the Prime Minister created the new Department for Business, Energy and Industrial Strategy she brought together two of the most significant Government Departments. It is good to see a sharper focus on industrial strategy, even if only in name. As we all know, this Government are expert in meaningless rebranding. Of course, there are two areas missing from the departmental name—innovation and skills. The Minister touched on those aspects and it is vital that we continue to focus on them.
We see as key to a successful strategy sustainable and inclusive growth which closes the gender gap and ensures that women and people of all backgrounds across our society are welcomed and included in our workforce. We need to be seriously more ambitious about a diverse workforce. In March this year the Equality and Human Rights Commission published a damning report which said that women were being held back by the old boys’ network. It stated, as the BBC reported, that
“nearly a third of the UK’s biggest companies largely rely on personal networks to identify new board members”, and that
“most roles are not advertised”.
An EHRC commissioner was quoted as saying:
“‘Our top boards still remain blatantly male and white’”.
The study, which looked at appointment practices in the UK’s largest 350 firms, which make up the FTSE 100 and FTSE 250, found that more than 60% had not met a voluntary target of 25% female board members.
On that point, does my hon. Friend agree that the studies that came out recently about the motherhood penalty are particularly concerning, and something the Government need to tackle as soon as possible?
I absolutely agree with my hon. Friend. These issues transcend party politics, and I know the Conservatives are doing their best, but, unfortunately, it is just not good enough, because in 2012-13 and 2013-14—the period of the study—fewer than half of the companies increased their female board representation. The Equality and Human Rights Commission said the problem was particularly acute with executive roles, where nearly three quarters of FTSE 100 companies, and 90% of FTSE 250 companies, had no female executives at all on their boards during the time covered by the study. Despite the fact that there are no longer any all-male boards in the UK’s FTSE 100 companies, the Equality and Human Rights Commission said very clearly that the “headline progress” of Britain’s biggest companies was “masking the reality”. Closing the gender pay gap, at which Scotland is already outperforming the UK, should also be a key priority.
Skills and innovation must be at the heart of the UK Government’s approach to industrial strategy. A statement released by the Prime Minister on
We have seen a strong focus on those areas in Scotland as a result of the Scottish Government’s labour market strategy, which will provide up to half a million pounds to support the fair work convention; double the number of accredited living wage employers from 500 to 1,000 by next autumn; and provide £200,000 to Business in the Community. The strategy also encourages innovative ideas about how to bring business and Government together to form a fairer, more inclusive society.
On the subject of employee participation in industry, I welcome the remarks the Prime Minister made when launching her campaign to be Conservative party leader about putting employees on company boards. I hope she honours that commitment. I am a big supporter of employee contributions to company decisions, and particularly of co-operatives. Having spoken previously about the benefits of co-operatives not just to their businesses but to the engagement and success of employees themselves, I hope the Minister intends to follow through on that promise. Will he also look specifically at the apprenticeship levy and its application to co-operative companies? I have spoken to a number of companies, including companies such as John Lewis, that are concerned they are being treated unfairly under the apprenticeship levy.
At this early stage, while the strategy is still being formed, let us remember what truly drives a fair and productive industry: investing in a diverse, skilled workforce, from apprenticeship to pension; working together with business, local and international; and encouraging innovation from the bottom of the workforce to the top executives. The Government need to get a grip.
I congratulate my hon. Friend Chris White on securing this afternoon’s debate. I would like to focus my contribution on one of the points the Minister made—the role of local bodies in the delivery of industrial strategy at a regional level.
The Government’s focus on industrial strategy, and their continued support for regional development in areas outside London, are welcome news in my constituency. The timing is also incredibly pertinent. The closure of Rugeley B power station in the summer was a real blow to the workforce and the community. It was a real turning point; for decades, Rugeley has had an economy based on the energy industry, being home to mines and power stations. For a long time, that was the main source of employment. The closure of Rugeley B is the end of that industrial heritage, and the question I am regularly asked is, “What next for Rugeley’s economy? What next for the next generation?”
The closure of the mines and Rugeley A power station saw the creation of industrial estates, business parks and housing, and the area is home to one of Amazon’s fulfilment centres. However, the redevelopment of the Rugeley B site presents a real opportunity to develop a strategic vision that creates a long-term sustainable local economy in Rugeley that creates skilled jobs and opportunities.
In creating a strategy for Rugeley, we need to consider other land sites that will become available for development in the coming years, including the site that is currently home to JCB Cab Systems and the land that could be developed once the flood defence scheme has been completed. In short, there is a need, and a real opportunity, to create a more strategic plan for Rugeley. I am calling on all the relevant bodies, including Cannock Chase District Council, Staffordshire County Council and the two local enterprise partnerships, to look at the Rugeley B site, not just in isolation but in the context of other land sites. The vision needs to be ambitious and strategic, taking account of the growth in new industries and technologies, and sectors of growth. There is a great danger that we fall into a trap of just doing “more of the same”. This is where the Government’s industrial strategy can help us scope an exciting new vision for Rugeley.
My hon. Friend the Minister referred to innovation. Rugeley was at the heart of innovation in the energy industry. I have mentioned before in the House that the four cooling towers are in two different colours of brick because people were trying to decide which was the most likely to blend into the countryside; they failed completely. Rugeley is ideally placed to home new industries, including digital and technology industries, given the infrastructure that already exists. Indeed, there is a connectivity crossover where fibre-optic broadband and the national grid meet. This makes the area particularly well placed to home data centres, as well as an innovation hub. The Minister also mentioned advanced manufacturing, where the region has real strength. I am very fortunate to have companies such as ATP Electronics and Gestamp in my constituency. I hope that we will build on companies such as these.
That is not to say that we should be turning our back on our energy heritage. Only this morning in the BEIS Committee, we met stakeholders from the energy industry who highlighted the importance of the sector. With the closure of coal-fired power stations, there is a desperate need to build gas-fired power stations as part of our mix of energy sources. As the national grid infrastructure is already in place, Rugeley is ideally placed to home a gas-fired power station. Earlier in the debate, the Chair of the Committee, Mr Wright, made the important point that industrial strategy needs to be cross-departmental. I have previously raised with Ministers issues about the cumbersome process for securing planning for a gas-fired power station on sites where there had been coal-fired power stations. This is not a change of use. I ask BEIS Ministers to review this with their colleagues from the Department for Communities and Local Government.
The redevelopment of Rugeley is a once-in-a-generation opportunity. I believe that all bodies involved in the planning process are strategic and visionary, and bold and ambitious, and that they can create a home for successful and innovative businesses that create real, skilled jobs and opportunities for the next generation. An industrial strategy that has productivity at its heart, encourages entrepreneurship and innovation, and creates opportunities for young people could provide the framework to ensure that we create an exciting future for Rugeley.
I have spent a lot of the past two days in the Chamber, and it has been pretty instructive. Yesterday I learned the word “contemporaneous” and today the word “oligopoly”, which I had not heard before, so I feel as though I am learning things. The thing that I have not yet learned is what an industrial strategy is, because everybody in the entire Chamber has come up with a different idea of what they think it is and what it should be. I am not going to break with that; I am going to say what I think an industrial strategy should be.
As Members would expect me to say, oil and gas should be top, front and centre of the UK Government’s industrial strategy. It is, without question, the most important industry in the UK. Over the five years from 2008 to 2013, the average annual tax revenue from the oil and gas industry was £9.4 billion. That figure represents direct production taxes; it does not include all of the economic benefits to wider economic areas that the UK Government have also seen.
The industry is not having the best of times: the oil price is low and we are struggling and losing jobs. Things are not all that much fun in Aberdeen and the north-east, which is why it is even more important that this Government commit to ensuring that the oil and gas industry is right up there in the industrial strategy. The oil and gas industry has a bright future, but we need to ensure that Members in this place in particular understand what is happening in the industry and take positive action to secure its long-term future.
Aberdeen city, Aberdeenshire and, indeed, the UK as a whole are the absolute gold standard for the oil industry across the world. If a technology is being used on the UK continental shelf, companies know that it will be accepted anywhere across the world and they will say, “That’s brilliant. It’s the gold standard and we should do that.” The Government need to ensure that that continues.
There is no doubt that we will be taking oil out of the North sea for a long time yet. People can have a discussion about exactly how many billion barrels of oil are left, but everybody agrees that there are billions left. We need to ensure that we maximise the amount of oil that we extract from the North sea, and that our supply chain companies are supported to continue to do the brilliant work that they do on the UKCS and in exporting. It is an export industry. In 2013, Aberdeen had the fourth highest number of patents per head of population of any city in the UK. It was not quite the highest, but we have done an amazing amount of innovation in our city, and we are acknowledged to be a centre of excellence. It is impossible to overstate how valuable that has been to the UK Treasury. We have paid taxes to it for years and we will continue to do so.
Absolutely. We need to ensure that we get UK Government support now and that companies are incentivised to invest. If they stop investing, the industry will not have a bright future. Some companies are struggling with cash-flow issues. The UK Government need to inspire confidence in the industry by ensuring that private equity people invest and that banks continue to do so. The industrial strategy must express the UK Government’s confidence in the future of the oil and gas industry. That is really important for Aberdeen, the north-east and the wider UK. So many jobs are indirectly linked to oil and gas, and we need to keep them.
I want to address a couple of the things that were mentioned earlier. On apprenticeships and the young work force, Aberdeen has an initiative called “Developing the Young Workforce North East”, which is a brilliant piece of work linking industry with schools. It resulted from Ian Wood’s 2014 report, “Developing the Young Workforce”, which was presented to the Scottish Government. We are making really positive moves and it is being widely welcomed and recognised. The UK Government should consider incorporating it into the industrial strategy.
I thank the Minister for listening and ask him please to make sure that the oil and gas industry is at the top of the industrial strategy.
I know that there is little chance of that.
George Brown, the noble Lord Heseltine, the noble Lord Mandelson, Vince Cable—to this hallowed series of greats we should now add the names of the Minister for Universities, Science, Research and Innovation and the Secretary of State as the people who will champion industrial strategy for our country. There are no two better minds in this House that we could apply to the task, but my concern is that we are sending our best brains in pursuit of a nonsense.
As the hon. Member for Aberdeen North has just said, we do not know what industrial strategy is—no one has defined it. When I heard earlier that the Minister had not yet published what the industrial strategy was, I raised my hands in prayer. As long as the Government continue not to define their industrial strategy, they will keep themselves out of a great deal of trouble. As soon as they define it, people will start to disagree with them, because the phrase “industrial strategy” is a wonderful grab bag of good ideas. There are loads of ideas in industrial strategy, every single one of them good. Ne’er a one is a bad idea, because a bad idea will not be allowed into the industrial strategy. In industrial strategy, all are winners, because no industrial strategy will pick a loser. The Minister will always say yes, because with an industrial strategy, one can never say no.
I hope that the Minister will maintain his rather reticent approach to industrial strategy so that he can continue to be friends with all Members across the Chamber and not upset anyone. In the phrase “industrial strategy” it is, first of all, hard for him to define industry. Is financial services an industry? The word “industry”, as my hon. Friend the Member for Warwick and Leamington conjured up in his opening speech, is about manufacturing. What is strategy? Strategy is the pursuit of a goal, but what is the goal for an entire economy and, if there is a goal, how on earth is it the Government’s role to tell everyone what it is? That went out in the 1940s and ’50s with Soviet planning. I know that my friend the Minister has no interest in returning to those days, but unfortunately he may unwittingly, in his endeavours, encourage Opposition Members to think that the good old days of centralised socialism are back. He would not wish to be a fellow traveller on that journey to despair.
Industrial strategy, we are told, is positive because it enables us to think about the long term, but that is what shareholders do. We think about the news cycle and we think about the election cycle. We have to make sure that, in five years, we are re-elected. When we talk about consensus in other countries, we have to recognise that consensus in this country is built differently; it comes from the competition of ideas, and from one set of new ideas being subsequently accepted by the opposing party. The promotion by the Conservative party under Margaret Thatcher of a reduction in the power of trade unions and a liberalisation of markets was accepted by the subsequent Labour Government. The Labour Government’s introduction of the national minimum wage and regulation against discrimination in the workplace was accepted by the coalition Government. That is how we build consensus, and that is not compatible with the expectation that one can set an industrial strategy that stands for all time. The Minister will be here, I am sure, until he gets promoted, but at some stage—perhaps in 20 years’ time—the Opposition will get ready to take over power, at which point the long-term plan may be picked apart.
To be slightly more helpful to the Minister, I will point to some areas that he and his colleagues might like to look at. Although I would not call these things an industrial strategy, they might be good ideas. If we are to be successful, as my hon. Friend Mr Mak mentioned, we have to promote innovation. Innovation is promoted by lowering taxes, ensuring that our markets are flexible, and looking carefully at regulatory sunsets to ensure that incumbents cannot use regulation to defend themselves against insurgents. Corporate governance also needs to be looked at seriously, as we discussed in the previous debate.
I commend my right hon. Friend Mr Osborne for his productivity plan, not because it was about projects, but because it for the first time concentrated on what the Government can do regarding strategy, which is the implementation of things that are helpful, particularly for infrastructure. We need only look at the difficulties with the expansion of airport capacity in the south-east to see that we are very poor at implementing the decisions we make. I commend the productivity plan to the Minister for him to look at again.
The Prime Minister has rightly said that the United Kingdom is at the forefront of free trade. That is something on which the Minister and I clearly agree. Free trade is what the United Kingdom does best. We need to make sure we have appropriate protection against dumping, but we also need to be on the front foot in lowering our tariffs.
We are leaving the European Union, which is a major event for the whole of our economy. I understand that the Government want to form a view on that and know what actions they should take in the short term to assist us through this transition to a better and stronger future. However, each of these are things that the Government would do anyway. We do not need a Department for industrial strategy to do them; we do not need such a Department to improve our skills. We do not need one to change the law regarding the governance of our boards, although I agree with Hannah Bardell that the Government should do that. We do not need the phrase “industrial strategy”. I am worried for the Minister in that, as he pursues it, he will set the Government up for a fall. I, for one, want to support the Government in their endeavours so that that does not happen.
I am glad to be tail-end Charlie. Fortunately for someone in this situation, my book on industrial policy is published next month, so I may save time and send it to the Minister.
The challenge is: is there is an industrial policy? I accept that there is no generic policy—Richard Fuller is correct—but there is industrial strategy in the here and now. Its definition is what the state does to help to provide competitive advantage to the companies in that state. If the state does not do that, other states will help theirs, which will wipe out those companies. I remind the hon. Gentleman that that is why the UK’s exports have flatlined for the past five years.
I put that point to the Chancellor of the Exchequer yesterday, and he spoke about international conditions and lack of demand. Yet Germany’s total industrial exports have risen by a third in the past five years, helped by the German Government. They tax industry more than it is taxed in this country, but they pour the money back into industrial support. In the United States, generations of productivity growth have been funded by investment in its defence industries, which flows through into the private sector. The point about the state picking winners is that there is a partnership in which the state backs up its industries, and particularly its companies. The state gets out of the way where it needs to, but there has to be such a partnership.
I do not have a lot of time, so I will do something really strange, which is to support something that has been a Government policy for the past five years. I was originally very cynical about it, but the more I have researched it and talked to people in the industry, the more I think it has been very successful, although it may have been stumbled on by accident. That is the policy of having Catapult centres. Public money is put into centres for technology that small companies cannot buy on their own, so that such companies can use it, which helps to provide a competitive advantage. Catapult centres provide competitive grants and challenge companies to come up with solutions to problems, and that works. Catapult centres are the solution. They are not about picking winners, but about creating a competitive environment and providing resources. If we do not do that, other countries will.
To give a very simple example, there is a close correlation between exports as a percentage of GDP and how much is spent on research and development—not blue-skies R and D in universities, but industrial R and D. In countries that have a higher share of exports in their GDP, industrial R and D is orders of magnitude higher than the amount we spend, because their Governments and their military put money into it. Mr Mak made a very good point about the role of the military.
I found a statistic that my good friend Mr Baker might like, as an ex-RAF officer. At the moment, the RAF has 475 aircraft that were built in Britain. For the first time, the majority of its aircraft have been bought from abroad—507 of them. I should say that I tried to bump up the number of British-built planes by including the Spitfires in the Battle of Britain memorial flight. If we buy from Boeing and Lockheed, and let those companies use their technology, we cannot survive. We have to use the weight of the state behind our companies. That is what industrial policy is about.
My final point is that the budget for the Catapult centres is about £600 million a year. That sounds a lot, but if we look at a comparable organisation in Finland, we find that its budget is about 75% of that. The UK spend is peanuts. We should treble that amount. Will some of that money be wasted? Yes, but some will produce the ideas and new technology that we need.
What a pleasure it is to follow my hon. Friend George Kerevan. As he was talking, I wrote down the following: “Until I read my hon. Friend’s book, I will remain in some sympathy with Richard Fuller and my hon. Friend Kirsty Blackman.” One problem, as I see it, with nearly every other contribution, except that of my hon. Friend Michelle Thomson is that no one has mentioned what, to me, is critical in anything that calls itself a strategy—namely, what its purpose is.
What is the purpose of this thing we call an industrial strategy? Since we all have our own ideas to share, I am assuming that at the end of the day its purpose would be to help propel economic growth to support people’s wellbeing. That assumption might not be shared by everyone in the Chamber—I do not know whether it is shared even by my hon. Friend the Member for East Lothian—but I will frame my few remarks around it.
I enjoyed the opening remarks of Chris White. He led the debate with a bit of a historical review of past efforts at industrial strategies. He also pleaded for us to look to the future in our new context. In that historical light, I was also interested to hear Mr Baker indicate that he had read the works of Adam Smith. Since my constituency, Kirkcaldy and Cowdenbeath, is the home of Adam Smith, I feel compelled to venture a few thoughts to continue the hon. Gentleman’s education.
I wish the hon. Gentleman would not mince his words—he should say it as he really feels it.
Where Smith has some relevance is in his argument that critical to growth was the division of labour in society, with specialisation—what we might call today the importance of having the education and skills that allow us to promote innovation and change. That is what spurs longer-term growth, and on that he was absolutely correct. That important need to drive forward with new technologies and new thinking is why it is utter madness that the Government pulled out of one of the biggest world-leading research projects, the carbon capture project in the north-east of Scotland. If ever there was an indicator of their turning their mind away from what is fundamental to long-term economic growth, it is that decision.
The other thing Adam Smith said that I completely approve of is that there is a role for state intervention. In particular, it is to ensure the kind of education that supports society economically as well as socially. We cannot leave education and skills to the marketplace. We have to make sure they are taken care of.
I was interested by the way in which Members talked about the importance of technology. It strikes me that historically, one of the problems we have had with funding is that we have plenty of people in our universities and the like who are able to come up with great technological ideas and innovations, but those innovations take many years to reach the marketplace. Private sector investment seems best when it is either at or near the marketplace. The problem, very often, has been the gap between the idea and bringing it to fruition. That is where the need for the role of the Scottish Investment Bank comes in, and I think that is what my hon. Friend the Member for East Lothian was hinting at when he talked about the valuable work of the Catapult centres. They can attract different forms of funding in a competitive way for things that may take time to reach the marketplace.
I was interested in the remarks made about the challenge that we face because of Brexit. The Government’s response, chaotic as it is, is driving down confidence. My hon. Friend the Member for Edinburgh West talked about the importance of confidence. That reminded me of what Keynes argued, which was that the principal determinant of the level of private investment is not the rate of interest nor even the level of aggregate demand, but the state of business confidence.
I am listening with great interest to the hon. Gentleman. I always enjoy his speeches, I have to say. When it comes to the EU, however, does he not accept that confidence has been driven down by those who lost the argument and the vote, who are constantly saying that it will be terribly damaging and an economic disaster? In fact, as Ashoka Mody has said, it is actually proving to be quite beneficial.
I would take issue with the latter part of the hon. Gentleman’s observations. We were on the opposite side of the argument, but surely he would agree that the Government’s response to the vote has been utterly chaotic? We are no further forward four months later than we were at the time as to what the Government mean by Brexit and how they are going to take us there. That is doing nothing other than driving down confidence in business.
I do not want to take up too much time, but let me come on to one further important issue that was raised, which is in the general sphere of education. That is the importance of the post-study work visa. I would add to that the tier 1 entrepreneur visa. We need to encourage people from overseas to come to this country to help us drive up business investment and innovative ideas. I read an essay by a friend of mine, Professor David Simpson, a few weeks’ ago. He pointed out that one third of successful business start-ups in California between 1980 and 2000 were by people who had come from either India or China. At a time when we need, not least in Scotland, to attract the best minds to help to drive forward the economy, setting our face against that cannot be in anyone’s interest. It certainly cannot be in the interest of anything we might call an industrial strategy.
It is a real pleasure to speak for the Opposition in this debate and to follow so many interesting, provocative and informative contributions. I have not agreed with all of them—or at least all of all of them—but I have been pleased to listen to them. I congratulate the Backbench Business Committee on bringing forward the debate.
I want to single out some contributions, however difficult that is among so many. The opening contribution was from Chris White, who spoke eloquently and compellingly about the importance of having an industrial strategy. I mention, too, the contributions of my hon. Friend Peter Kyle, Mr Mak, who sponsored the recent debate on the fourth industrial revolution, and my hon. Friend Mr Wright, who chairs the Business, Energy and Industrial Strategy Committee.
It crucial for this House to show the nation and the world that industry is what we are about. I am grateful for the contribution of the Minister for Universities, Science, Research and Innovation in setting out the beginnings of a timetable for an industrial strategy, but it would have been nice to hear something concrete on the subject from the Under-Secretary of State for Business, Energy and Industrial Strategy, Jesse Norman, and I look forward to doing so.
As the contributions from Members of all parties have shown, industrial strategy is an issue that this House takes very seriously. Labour Members have made it absolutely clear that we recognise the hugely positive contribution that industry makes. Industry—and the businesses and workers that form it—drives our nation’s economic success and positive outcomes for our constituents. We can build an economy and society that we want—one that reflects our values as a nation and what we want for the next generation. That, I would say, is the purpose of an industrial strategy. Labour calls for an industrial strategy that is based on our values. That means the principles we hold dear—equality, democracy, empowerment, the value of labour, and economic liberation guiding the direction of a growing economy.
We need an industrial strategy that is geared towards stable jobs, tackling the great challenges of our time such as climate change and narrowing the gap between the haves and the have-nots. Working from first principles, we can put together mission goals for a new economy and develop the industrial strategy that delivers them. From building a green future to closing the gender pay gap; from balancing the economy beyond the financial services to tackling youth unemployment, industrial strategy can contribute to addressing those great challenges.
A strategy is necessary. The market alone has not provided the answers. We have not let it. Without an industrial strategy, the market has not been allowed to deliver the economy that we want. It has given no respite for those who have seen their communities starved through austerity, for young people who will never have well-paid jobs or own their own houses—or at least fear that they will not—or for those subject to draconian conditions in warehouses such as in Sports Direct.
We have seen an increase in precarious work, bogus self-employment, lower wages and higher costs of living. The market has failed all but a privileged few at the top of our society, which the Minister did not seem to recognise. But then the Tories have not had an industrial strategy since the 1950s. Their time in government over the past six years would be to be pitied if they had not actually ruined the lives of so many people.
Let me give just one example. Many of my constituents live in fear of the rise of the robots, which could result in fewer jobs. OECD research shows that 25% of workers could see the majority of their work automated in the next 10 years. I want this Government to be proactive and to use technology to help create more jobs for people across the country. Sadly, however, the Science and Technology Committee has condemned the Government for the complete absence of a strategy on digital.
In 2010, the Conservatives claimed that they would restore the balance between sectors of our economy, but manufacturing is still at the same level as in every year since 2007, accounting for 10% of economic output. In fact, the Conservatives have starved our communities with their austerity agenda. That agenda is now apparently forgotten, but my constituents merit an apology for what they have had to suffer in the name of austerity—and, unfortunately, that will be as nothing by comparison with the impact of the hard Brexit that we see the three Brexiteers attempting to implement.
We have seen the Conservatives’ lack of strategy for our industries in the disintegrating and fragmenting of our industrial support infrastructure. Innovation, for example, is now promoted by at least three separate bodies—Innovate UK, the research councils and NESTA—as well as the Catapult centres. The Government have starved regions outside London by abolishing regional development agencies and providing no replacement for them.
Each industrial age needs leadership from the Government. Harold Wilson said in his famous 1960s “white heat of technology” speech that innovation was driving us in a new direction, but we need leadership to embrace the changes and—this is very important—to ensure that that direction is for the benefit of us all, because growth has a direction. We have seen the third industrial revolution, but now we need leadership more than ever as the next waves of technological change break over us.
We would welcome the Government’s late coming to an understanding of the importance of industrial strategy, but unfortunately—as was pointed out earlier by my hon. Friend Clive Lewis—the Tories have shown time and again that, although they can talk the talk, they cannot walk the walk. Since the Prime Minister took office, she has ignored the need for a digital industrial strategy. The Digital Economy Bill, which is currently in Committee, ignores the opportunities that the digital revolution could provide for businesses in Britain, and that has resulted in very real neglect. As we heard earlier, one of our tech success stories, ARM Holdings in Cambridge, was sold to Japanese investors with no reassurances about job security for the 3,000 people who worked there.
I am glad that the Minister has attempted to make a contribution to supporting our industrial strategy, but we remember the assurances that were given in the case of, for example, Cadbury and Kraft. Assurances need to be concrete if we are to see the benefits, and we need to have the necessary powers.
I am glad that the Minister has seen fit to intervene again. I look forward to those assurances being proven, and I look forward to his apology should that not be the case.
The Tories’ legacy for Britain’s industrial future will be one of apathy and incompetence. There is no vision for business, or how it could bring about a more just society. On energy, on automotive, on materials, on manufacturing, on food and drink, on agribusiness, on process industries, on biotech, on steel, on tech and on the creative industries, it is for us in the Labour party to provide the leadership on industrial strategy that the country needs so much.
I am pleased to follow the shadow Minister. I was enjoying her speech, until it all seemed to go a bit wrong towards the end. Where I finished listening was where she said that she welcomed the Government’s initiative to have an industrial strategy. I am grateful to the Backbench Business Committee for providing time for the debate and to everyone who has had the opportunity to speak.
I take from Kirsty Blackman what she said at the beginning of her speech, which was that, basically, everyone had a different interpretation of what industrial strategy was all about. I do not think there is anything wrong with that. That is the purpose of this debate: to provide an opportunity for everyone in the Chamber who indicated a wish to speak to give their take on an industrial strategy.
I would go back one step further. I look forward to reading the book by George Kerevan when it finally comes out—I am sure that it will be selling round the corners. Until that time, I recommend anyone to read the book by Lawrence Freedman, “Strategy: a History”. It is important for us all to return to the definition of strategy. The shortest, most precise definition that I have come across is to get the furthest with the most. I do not think that is a bad foundation for this debate.
I would like to refer to my very good friend, my hon. Friend Richard Fuller. I am sure that the House would agree that he was enjoying his speech far too much. He put a spanner in the works of otherwise consensual and positive debate with his desire to hold to the philosophy of a free-for-all—everything is for the best in the best possible world. I hope that he will come around to welcoming the pragmatic opportunities provided by the initiative that, through the Minister, is being formed. Discussion papers are being written. We are again going to be able to have our say, I hope. This matter will come back to the House for further debate. None the less, I imagine that all Members would agree that it is better to have this debate now.
I much enjoyed the hon. Gentleman’s speech and agree with what he is saying, but the point that has not been answered is my point: low wages and flooding the market with cheap labour does not help investment. It keeps productivity at low levels. If we are going to see high investment in modern technology, we need to raise wages and stop flooding the market with cheap labour.
I thank the hon. Gentleman for that intervention, but I suggest that a proper and full industrial strategy that looks at issues such as productivity would take those issues into account.
I thank all hon. Members on both sides of the House for their contributions, and I express my appreciation to the Chair of the Business, Energy and Industrial Strategy Committee for the work that it is doing on the issue.
Question put and agreed to.
That this House
has considered industrial strategy.