Britain's Industrial Base — Question for Short Debate

– in the House of Lords at 6:38 pm on 9th October 2012.

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Tabled By Lord Adonis

To ask Her Majesty's Government what is their assessment of the strength of Britain's industrial base.

Photo of Earl Attlee Earl Attlee Lords Spokesperson (Department for Transport), Lord in Waiting (HM Household) (Whip) 6:57 pm, 9th October 2012

My Lords, this is a time-limited debate and the time for all speakers, except for the noble Lord, Lord Adonis, at 10 minutes and my noble friend Lord Marland at 12 minutes, is limited to six minutes. I remind the House that this means that when the clock shows six minutes, it means that the speaker has already reached their permitted time.

Photo of Lord Adonis Lord Adonis Shadow Spokesperson (Treasury)

My Lords, I first congratulate the noble Lord, Lord Marland, on his new post. He earned great respect for his work at DECC, and I know he will do the same at BIS.

I do not think that there is much dispute that Britain's industrial base is too weak and too narrow. If that were not the case, we probably would not be in a double-dip recession and we would certainly not be in a crisis with 2.6 million unemployed, youth unemployment of more than 1 million and national income still significantly lower than before the 2008 crash. It is taking us longer to get out of this recession even than it did to get out of Great Depression of the 1930s.

Without a stronger industrial base, we face a bleak future, and I think we now all understand the need to be bold and explicit about this. Until recently, the words "industrial strategy" were unmentionable in polite society. They were regarded as a hangover-in all senses-from the disastrous 1970s and British Leyland. However, as Vince Cable put it in his Imperial College speech last month:

"We can have an industrial strategy by default or design. Ignoring this reality is not a policy-it is just negligence".

He continued, and I agree with this too:

"But just as bad would be to approach all our possible interventions in an ad hoc way, subjecting every policy decision to a short term tactical decision. There is not a serious and successful major company in the world that would proceed in such an unplanned way".

I agree, but that is precisely how we have been proceeding as a country for a generation, and it has to change.

In my experience, telling stories is more powerful than reciting statistics when painting a big picture. So I want to tell four brief stories. Yesterday, I went out on a boat to see the huge new Statoil wind farm off the Norfolk coast at Sheringham Shoal. When I was not being seasick, I was amazed at the size and scale of the turbines: 88 of them, across a huge stretch of sea, each rotor 350 feet in diameter, generating enough electricity for 220,000 homes. Sheringham Shoal is only the beginning: the plan for nearby Dogger Bank, which I previously knew only from weather forecasts, is for 3,000 of these giant turbines, with construction starting in 2015 if the finance can be put together by the development consortium.

This is green energy in action. By luck of geography, we have a greater opportunity to develop it than any European nation besides Germany and Denmark. It is a huge, growing industry in construction, design and maintenance, yet in industrial terms, we are seriously behind the curve. The Statoil project director told me that barely a fifth of the construction and assembly work for Sheringham Shoal was done by companies located in Britain. The turbines are made by Siemens and imported, and the foundations, the offshore cables, and a good deal of the work installing the turbines is done by overseas companies with little or no physical presence in the UK.

I was told by Statoil that infrastructure is another weakness, in particular the absence of superfast broadband on the Norfolk coast and terrible mobile phone reception. As for the huge Dogger Bank investment, uncertainty over long-term policy for renewable energy is a bigger issue. So we are in the midst of a green energy revolution yet new jobs and investment will be delayed and/or go abroad unless we get our act together as a country. This needs to start, crucially, by ensuring that Siemens builds its proposed £210 million turbine factory in Hull, the fate of which is now uncertain because of Government prevarication on wind energy.

Story two. Last week I visited Airbus at Filton near Bristol, part of the pan-European operation which has made Airbus so brilliant a rival to Boeing with its A320s, 330s, the soon to be 350s and the giant 380s. As well as its success in China, Airbus has taken the competition directly to the United States with a new factory in Alabama. The expertise in designing and making aircraft wings at Filton is second to none, just as the engine technology at next door Rolls-Royce is second to none.

Airbus itself is a fruit of industrial policy which dared not speak its name in the 1980s, when state loans made possible the A320, an investment which has been repaid many times over. Similar state industrial policy is now equally imperative in decisions surrounding the proposed BAE/EADS merger to create a military equivalent of Airbus. The Government cannot just leave it to the market. The Government are the market in this case. The critical requirements are that the UK should be an equal partner, not a subordinate one, and that the UK's position at the heart of any military equipment consortium should be assured.

We discussed all this at Filton. But just as pressing to Airbus were its skills requirements. Last year the company had 1,500 applicants for 86 apprenticeships. Yet despite this number, it could not recruit enough school-leavers with B grades or better in A-level maths and physics required for its higher level apprenticeships. Partly to tackle this it is sponsoring the proposed Bristol University Technical College which will specialise in engineering for 14 to 18 year-olds, but far broader action is required to supply its skill needs.

It was the same story when I visited Jaguar Land Rover's state-of-the-art facility at Gaydon near Warwick last month. Again, a brilliant success story both in technology and products, including the new Range Rover. JLR benefits from a deep partnership with the University of Warwick, which my noble friend Lord Bhattacharyya has done so much to forge over so many years. But again, real concerns over skill levels, too small a pool of engineering graduates from which to recruit-JLR told me that by its estimates the UK is producing only half the number of graduate engineers that it needs-and too few would-be apprentices with the right skills.

Another key issue for JLR is its supply chain, too little of which is local or even British. Yet British suppliers are finding it hard, if not impossible, to secure the patient finance they need to expand and the new inward investors likewise. The Society of Motor Manufacturers and Traders published a devastating report in June specifying how the growth of supply chain companies in Britain was being constrained by access to capital and lack of sectoral and regional expertise on the part of the banks.

My fourth story is from my experience as Secretary of State for Transport in the previous Government in awarding contracts for new trains. This is a big potential source of jobs and value to UK plc which will get steadily bigger as rail travel grows and HS2 is constructed in the next decade and beyond. The state is the procurer of these trains. To paraphrase Vince Cable, its contract decisions constitute an industrial strategy by default or by design, and if it is not by design then that is pure negligence. The issue is simple: because of past negligence, 21stcentury Britain-amazingly-no longer has a domestically owned rail manufacturer. There is only one international company, Bombardier, which even makes trains in Britain. So, as Transport Secretary, I decided to have an industrial policy by design in respect of the £4.5 billion contract to supply the successor trains to the Intercity 125s. To cut a long story short, this is what we did: Hitachi, the most experienced high-speed train manufacturer in the world, now into the seventhseries of Japanese bullet trains, won the contract and agreed as part of the deal to build a factory in Newton Aycliffe in County Durham, not far from Nissan, another great Japanese inward investor in transport manufacturing. The present Government stuck with the contract, the factory is being built and there will be more than 700 new jobs.

Now I had hoped that this would be the beginning of a coherent industrial strategy to build up domestic rail manufacturing. Alas, the present Government awarded the next rail contract for the new Thameslink trains to Siemens without securing UK manufacturing. This was serious negligence. If Siemens can build a wind turbine factory in Hull, and can even be persuaded by the Russian government to build a train manufacturing plant in the Urals in order to get state contracts, it ought not to have been beyond the wit and ingenuity of Her Majesty's Government to have secured a factory in return for the £1.4 billion Thameslink order. The failure to do so was a major failure of public policy which must not be repeated with the forthcoming order for Crossrail trains.

So, my Lords, four stories. What are the lessons for industrial strategy? It is that the fundamental planks of a modern industrial strategy are skills, technology, innovation, procurement, infrastructure, finance, and supply chains. We need a strong and dynamic private sector aided by a strong and dynamic state in all seven of these critical areas. The state needs to act strategically, not tactically. It needs to act overtly, not covertly. In short, we must end the negligence of the past and get real about building an industrial base capable of delivering the jobs and companies that Britain needs for the future.

Photo of Lord Bates Lord Bates Conservative 7:07 pm, 9th October 2012

My Lords, it is a privilege to follow the noble Lord, Lord Adonis, who has great expertise in these areas, and his contribution was typically thoughtful and thought-provoking. As he was recounting the painful experience of awarding the Hitachi trains order, I could not help recalling that while he was Secretary of State he desperately wanted to make that order announcement before the last general election. However other forces were at play and therefore it was with enormous pleasure that this coalition Government actually made that announcement following the election, demonstrating their commitment to the trains and the industrial base.

Telling stories is a very powerful way of communicating essential truths, because in the north-east-which I know best-before the last election we suffered the body blow of mass redundancies announced at Nissan, the Hitachi order and then the closure of the TCP blast furnace on Teeside. That was the final blow for the process industry struggling in that part of the world. Since the election we have seen Nissan announcing new investment, taking on workers and expanding. We have seen the Hitachi order and even seen the blast furnace reopen. At a CBI dinner last week in Gateshead, someone reminded me that eight major process industries-there is a cluster around Teeside and they are often interdependent-had gone out of business and into receivership before 2010. Of those eight, four had now come out of receivership and were employing more people than they were before.

I tell these stories because I think that they are quite important in demonstrating that I cannot in any sense see that this Government have an industrial policy of default rather than design. It may not be the design that others would actually choose, but it is certainly a design. It says that we want to make the United Kingdom the most competitive economy in the world for setting up and running a business. That is the stated aim. It is backed up with policies of reducing the corporation tax to its most competitive level, reducing barriers and regulation on employment and actually providing incentives for people to employ, such as setting up enterprise zones, creating an enterprise culture and getting rid of other regulations. Noble Lords may not agree with that but, none the less, it is certainly a policy and is having some effect. As my noble friend the Minister, who I welcome again to his position, reminded us yesterday, we saw the fastest rate ever of new business start-ups in the UK last year, with 1 million new private sector jobs being added to the economy since the election. This is all evidence of something that is happening: the creation of an enterprise economy. These businesses may not be the great oaks but they are the small acorns from which the great oaks will come in the future-of that I have no doubt.

Looking at these stories, does that mean to say that we have got everything right? Far from it; we have a very long way to go. I bring another thought from the north-east, of the Alcan plant at Lynemouth, where 515 skilled jobs went just last year- a decision which was a body blow for that part of Northumberland. They went because of EU directives on carbon pricing, which are seeing the price that people have to pay per tonne for carbon in the energy-intensive industries that are key to industrial output and manufacturing go up from £7 per tonne to £16 per tonne next April. Then in 2020 they will rise to £30 per tonne. That kind of decision, which has been taken at a European level, is causing plants such as Alcan's to be closed. Where does that industry go? Of course, some people sneer and imagine that it has probably gone on in the direction of Kazakhstan or China, or somewhere like that. No; it went to Canada, where they are building a plant that will put the emissions into the same atmosphere.

We need to get to grips with this whole area. Of course, we need to tackle the environment and there are massive numbers of jobs to be gained through green energy. However, we need to be sensible about how things are applied lest we undermine the means that we seek. In this respect, my noble friend Lord Marland has a particular role to play, not only as a businessman but-this is a critical element-in coming to his current brief within BIS from the Department for Energy and Climate Change. These are different pictures and there are different stories that we can tell, but they suggest that we are perhaps beginning to move in the right direction. Industrial output was up by 2.9% in June, its fastest rise for 25 years, while manufacturing output rose by 3.3% in June, its fastest rise for 10 years. To be sure, it does not mean that summer has arrived but it does perhaps mean that spring has started.

Photo of Lord Hennessy of Nympsfield Lord Hennessy of Nympsfield Crossbench 7:13 pm, 9th October 2012

My Lords, may I add my welcome to the noble Lord, Lord Marland, on his new portfolio? I am sure that I was not alone this summer when tasting the special delights of the Olympics and Paralympics in wondering whether there were wider lessons to be drawn from the glories we were witnessing. Our Olympics summer was a shining advertisement for what can be done through careful planning and a fruitful public-private mix, plus the energising effect of a wide and sustained political consensus in creating a remarkable collective enterprise. For those six lustrous weeks we were, to borrow from Abraham Lincoln's 1861 inaugural,

"touched ... by the better angels of our nature".

Such thoughts triggered in my mind a memory of 1985, when the one-off Select Committee of your Lordships' House on overseas trade reported under the chairmanship of Lord Aldington-of which committee the noble Lord, Lord Selsdon, was a member, as was the noble Lord, Lord Stoddart of Swindon. I was a journalist at the time and was struck by the urgency of the report's tone. It struck me even more forcibly when I reread it last month. The committee was appalled by the shrivelling of our industrial base, particularly by the decline of manufacturing as a proportion of our national wealth and by a growing overreliance on services. This is the sentence that left the deepest dent in my memory:

"A principal theme of the Committee's report is that of the national attitude towards trade and manufacturing and their principal recommendation is that it needs to change-and change radically-if we are to avoid a major social and economic crisis in our nation's affairs in the foreseeable future".

We did not and we have not. In 1985, manufacturing accounted for 25% of gross domestic product. In 1947-48, my first year of life, that figure stood at 36.6%. By 2010, it had fallen to 9%.

Much has been achieved in renewing our industries and services since the mid-1980s. I am not this evening deploying what Edward Thompson called,

"the enormous condescension of posterity", to the work of far better men and women than me in science, technology, industry and commerce, who have applied themselves in the past to this problem and given it their absolutely best shots-far from it. I am also hugely sympathetic to the coalition's industrial strategy, which seems to avoid both the excessive state interventions of the 1960s and 1970s and the excessive loss of confidence in what the state could do as an enabler in the 1980s. I have great hopes, too, for the review of competitiveness by the noble Lord, Lord Heseltine, which is due later this month, not least because of my admiration for the powerful public-private mix that he brought to the regeneration of Merseyside 30 years ago. I share, too, the analysis of the noble Lord, Lord Baker of Dorking, about our missed opportunities for transforming technical education since the exemplary White Paper on technical education of 1956.

I am, however, struck by the continuing resonance of the Aldington committee's analysis of 27 years ago, when its report laid out the interlocking and mutually reinforcing changes that the UK needed to redress the balance between manufacturing and services and to achieve an enduring breakthrough in exports. These included improvements in the levels of investment, education and training, research and development, competitiveness and the pursuit of a co-ordinated strategy for recovery resting on as high a level of political consensus as possible. Every one of these factors continues to merit acute attention and the urgency is even greater in 2012 than it was in 1985.

This is a post-Olympics task for our nation, which requires the better angels of our nature and much, much more. Would it help a little if here in your Lordships' House we found a way of deploying the sustained analytical application, realism and candour needed to assist in the improvement of our economic performance? Might a standing Select Committee comparable to Lord Aldington's one-off committee be the way? I offer this suggestion at the risk of adding to that self-congratulation of which our critics accuse us, but we have in this House as rich a mixture of industrialists, financiers, scientists, technologists and economists as, I venture, any legislative Chamber in the world. There is no element of the condition of Britain that merits our sharpest attention more than the well-being of our industrial base and the prospects for generations to come.

Photo of The Bishop of Blackburn The Bishop of Blackburn Bishop 7:18 pm, 9th October 2012

My Lords, in my diocese of Blackburn, which covers most of Lancashire, nine years ago the claimant count for the subregion was 1.6%. As I prepare to leave office, I note that this figure has now nearly doubled to 3% of the working-age population. To put this figure into direct unemployment terms, it has increased from 4.7% to 7.8% in that time. Yet there still remains a dynamic and outward-looking world-class aerospace industry that develops, manufactures and exports products throughout the world. It employs some 20,000 people directly. At present, it accounts for 23.8% of Lancashire's manufacturing jobs and has nearly one-third of the total employment in GB aerospace. I am sure that your Lordships will understand my concern at the talk of a merger between BAE Systems and EADS. The impact of such a merger could have serious implications, not just for BAE but for the large number of small and medium-sized enterprises that support them in their work. I would be particularly interested to hear of the possible impact of such a merger, especially in view of recent developments.

The subregion used to be recognised as one of the major drivers in the industrial landscape of the country. Sadly, that is no longer the case. Previous large employers have restructured and moved elsewhere, or closed altogether. They have done that, in part, because of a lack of investment in better transport-that is, public transport, of course. I am sure that that is one of the major reasons.

Sadly, the National Infrastructure Plan 2011, announcing £30 billion of spending, does not fill me with much hope for a rebalancing of the economy between the regions. The Institute for Public Policy Research has analysed the proposals contained in the plan and discovered that 11 of the 20 largest projects benefit London and the south-east. Of the transport infrastructure proposals, the effect is a spend of almost £3,000 per head for those living in London, compared with a spend of just £134 per head for those living in the north-west and, I understand, just £5 per head for those in the north-east. It would appear that the regional imbalances are set to continue for some time to come.

I hope that as most of that spending on infrastructure will take place after the next spending review-although it is interesting to note that 18 major transport infrastructure projects have already begun in London and the south-east, compared with just one in the north-west-there is still time to redress that imbalance. I believe that my diocese and the whole north-west has much to offer the country by way of expertise and application. However, if we are to assist in the development of a vibrant, diverse economy, we do not need to be shackled by lack of infrastructure. Sir Winston Churchill famously said, "Give us the tools to finish the job". I ask the Minister to talk seriously to his Treasury colleagues so that areas such as Lancashire, and indeed the whole north-west, can be given the tools to encourage investors. Not only will we in the north-west finish the job, but once again we will be the beating heart of the economy.

Photo of Lord Selsdon Lord Selsdon Conservative 7:23 pm, 9th October 2012

My Lords, I always have great regard for anyone who gets on the train and decides to go round to visit his patch. That is because my great-grandfather and grandfather were chairmen of railway companies and used to race each other to Scotland so that they could get into the siding for breakfast. Therefore, railways and transport have always appealed to me. The noble Lord, Lord Hennessy, referred me to the Aldington report. I have already mentioned in the House that that was rather frightening to be involved in because we asked, "What happens when oil runs out? What will the British economy be based on?".

I do not want to waste your Lordships' time, but being a member of the Information Committee, I have a duty to promote the Library. The Library has produced a most excellent briefing pack, which many of your Lordships will not have seen because the Library is not very good at marketing it. It covers most of the points that need to be raised. The first question we asked-because I am always among my intellectual superiors when I go into the Library-is: what do we mean by Britain's industrial base? The CBI could not tell me. Nobody could tell me. Were we talking of a manufacturing base? Was industry manufacturing? What about the service industries? I therefore wondered what the term applied to.

I looked again and thought that if we are to develop, we must accept what our economy is based on at the moment, and a large chunk of it must be based on foreign trade. However, we have relatively small exports by manufacturers. We have a large export of services and we have a tremendous financial business that often follows-as people have said, the star.

I always remember from my days when I had to do Latin:

"Abstract nouns in 'io' call Feminina one and all. Masculin can only be things that you can touch or see".

I like things and I do not like the internet-I do not like all these communications where you have no physical manifestation. I do not like picking up the phone and asking a question to be replied to by somebody in a call station in the Philippines. I wonder whether we are not moving too far away from the physical, on which our economy should be based.

Let us take transport. That is one area where we are good, and we are good at railways. I was very moved when I saw that great steam locomotive during the Queen's Jubilee. I thought that perhaps we have not run out of the ability to do trains. One project I got involved in was the Chemin de Fer Transgabonais. When President Bongo came to London, what clinched it was our suggestion that he might like to have a locomotive named after him: "Le President Bongo". He said yes, provided that he could have another one based on the iron maiden, La Vièrge de Fer, meaning my noble friend Lady Thatcher. That triggered our building a railway.

My noble friend on the Front Bench will know that the same thing happened in water and sewerage, which were areas where we had great expertise in tunnelling over the years. Often you would have to almost dig out of his grave the engineer who had done it. I would talk to people aged 80 or more who had been involved with the Crown Agents or one of the other development bodies that we had around the world.

If we are relying on foreign trade for a large part of our future economic growth, we should look at the energy sector worldwide and the maritime sector-the water and the sea. I have already mentioned in your Lordships' House that, with the Commonwealth, we have the longest coastline in the world. The coastline of the United Kingdom is longer than the coastline of India. That leads to shellfish because of the ins and outs. If we then look at the dependent territories and others, and the economic exclusion zones that apply around the islands, we see that we cover the largest part of the sea under what you might call the British flag.

In looking at our future, I suggest that we must take certain sectors and realise that we must not look only at this market; we have to look worldwide. Here comes the intellectual property of the engineering brigade made up of those who were educated and trained here and who trained others. An engineer from India trained here will go back to India, recall all that and have a certain loyalty. More can be done by training our young people and people worldwide, sending them back and keeping the relationship going.

We look, too, at the energy sector, which I find fascinating, and which the noble Lord raised. There is not just the movement of tidal floods, there is also the application of heat. We should look at where around the world there are energy requirements and energy resources-not just fossil fuels.

It is beyond my pay grade to work out how this happens, but people have said to me, "Look at the heat generated in the deserts. Look at heat transfer. Look at the pumping system. Look also at desalination". One thought that came to mind during the Gulf War was that if you wanted to bring a country to its knees, all you would have to do would be to let oil out into the Gulf and block up every desalination plant.

In an odd way, infrastructure around the world is one of our futures. We cannot afford to rebuild our own infrastructure without having large orders. I am enthusiastic about the future, but it must be technologically led.

Photo of Lord Bhattacharyya Lord Bhattacharyya Labour 7:30 pm, 9th October 2012

My Lords, I would like to thank my noble friend, Lord Adonis, for securing this debate, and join others in welcoming the Minister to his new role. I declare my interest as the chairman of Warwick Manufacturing Group at the University of Warwick.

I have argued many times for a greater emphasis on industrial and innovation policy in Britain. However, for 30 years, we did next to nothing. That was the demise of British industry. Why did no one act? It was because past failures-bailouts, walkouts and closures-haunted Governments of all parties. We had White Papers about knowledge-based economies and so on, but real support for industry was off the table. We now realise that without industrial growth, we will not create the long-term, well-paid jobs the nation needs.

However, we can do it. Since the financial crisis, Jaguar Land Rover has created several thousand new jobs and apprenticeships. This is the sort of "industrial renaissance" we need. It has happened; it has not taken a long time-it has happened over the last three years. The leader of my party has had the guts to make changing the structure of our economy his long-term priority. However, there are simple steps we can take together, immediately, that will make a real difference to our industrial future.

First, Parliament has been saying since 1867 that we have a skills gap, but it is still a significant issue today. One step forward would be to extend the university technical college programme, championed so ably by the noble Lord, Lord Baker, and my noble friend Lord Adonis. Currently some 30 colleges are being developed. What stands in the way of tripling that number?

Next, I welcome the Government's aim to increase apprenticeships and my party's proposal for giving funding control to businesses. Yet apprenticeships work best when business seeks out talent and offers quality training in return, not when government simply gives funds for a particular programme, or even when a business does. Young people can tell which apprenticeships have prospects from make-work schemes. Recently, GKN offered 30 apprenticeships and had over 500 applicants. Scottish Power had 1,600 applicants for 30 positions. We must help businesses to create more high-demand, long-term apprenticeships. To do so at low cost, why not extend the tuition loan scheme with student apprenticeship loans? We would create a pot of money that businesses could use to pay for college courses for their apprenticeships. The student would decide if the apprenticeship was worth while; the training budget would help the business to afford apprentices; and the task of providing transferable skills would lie with colleges and universities. This would also help to abolish the vocational academic divide, which we urgently need to do.

Next, we need to increase investment. For two years now I have been fighting for a business bank. I am delighted that the Business Secretary has announced such a bank. Yet the Government talk about a billion in assets. A British bank needs to be operating at £1 billion a year. Much of this could be found by combining ineffective, small programmes and leverage could be increased by focusing on reducing the risk of loans made by private banks.

Finally, we need to increase funding for innovation. Here, again, scale is the issue. I recently returned from China, where I had discussions with senior ministers about their industrial strategy; I was hoping to set up a big company there. China is so concerned that the growth rate is falling to a mere 7% a year that it plans to increase innovation spend by a third in the next five year plan. China is also spending $160 billion on infrastructure alone, which will drive innovation in transport and green energy.

We have high-speed rail, of course, but even here, we seem to be frightened to take decisions. We also have good innovation programmes, such as the "catapults", but budgets are small. As money is tight, why not take an example from America? Could we not put a small internal tax on government procurement, and use the proceeds to fund small business innovation? Today, departments have to identify innovation needs first, then find funding. No one wants to cut their budget to fund innovation elsewhere, so not much happens. If the funding was set aside, this would create a "funding well" that everyone would go to. Public procurement is over £200 billion a year, so even a quarter of a per cent would give us real scale.

That is four simple steps to help industry grow for the long term by acting today. In the last three decades I have often felt like a voice in the wilderness on industrial policy. However, I have brought some of the biggest inward investors into this country. They are all succeeding, because we have a lot of talent, a large skills base at the upper end, and because our science and technology is second to none. Why is it that other companies can use these? Today the words "industrial policy" are on everyone's lips, which is most welcome. But worthy talk means nothing without action. Now is the time to deliver.

Photo of Lord Empey Lord Empey UUP 7:35 pm, 9th October 2012

My Lords, like other Members I welcome the Minister to his new role. He comes to the Department at a very critical time. I also thank Lord Adonis for securing this debate, because if we listen to even today's trade figures, we realise what a mountain this country has to climb.

Lord Adonis opened his remarks by telling a story about wind turbines. May I inform him that in my own home city of Belfast, Harland and Wolff shipyard now assembles wind turbines and works very closely with Siemens in building the transformers and power distribution systems that have to be at sea. We hope that that will be a source of considerable economic growth.

This country took a wrong turning in the 1960s and 1970s, when contempt began to emerge for our manufacturing sector. It was true that British industry was disfigured by widespread strikes and became a byword for how not to do things. Motor vehicles were the most obvious example of where things began to go wrong, poor quality being the most obvious flaw. But in Whitehall a view began to emerge that we could no longer make things that the world wanted to buy, so we should move over to the service side. Finance, insurance, tourism and, later, IT were among the growth sectors. It was believed that the service sector could make up the losses in manufacturing jobs that people would no longer need. Therefore they would no longer require apprenticeships but could be trained for the white-collar jobs emerging, including a big surge in the public sector. A by-product of this thinking was the redistribution of jobs from the north of the UK to the south-east, something which still haunts us today.

The massive increase in interest rates in the early 1980s extinguished large swathes of our manufacturing sector. People were paying up to 22.5%. While much of the sector was clearly uncompetitive, the rapid and uncontrolled demise of such a large part of industry was regrettable and we still live with many of the consequences. The belief that we could survive in the modern world without making things that people here and in other parts of the world wanted to buy has been shown to be wrong.

Traditionally, as an island nation, we have always been traders of manufactures. This was our lifeblood and we turn our back on this part of our history at our peril. The strength of any country's industrial base comes from either the possession of large quantities of natural resources or from a highly skilled and motivated workforce with access to capital-or from a combination of both. There is a growing realisation that we have ignored manufacturing for too long and that our ability to pay for our public services is inextricably linked to our ability to export more goods and tradable services. Our trade deficit is running at about £40 billion a year-of which half is with China-and urgent action is necessary. We cannot permanently rely on borrowing to sustain our lifestyles.

People glibly say that the way out of our financial difficulties is to "grow the economy". Who says that we are guaranteed a growing economy? What happens if the natural growth in world demand is met by emerging economies? What happens if we have to rely long-term on the current level of economic activity? The first thing that we must do is to ensure that we hold on to what we have and ensure that it is fit for purpose.

Ironically, as we speak, the future of our major defence company is on the line with the proposed merger between BAE Systems and EADS, as a number of noble Lords have mentioned. The UK is number two in the world in the aerospace sector, with approximately 17% of world markets. I fully understand that defence spending is under great pressure here, in the rest of Europe and in the United States, and the temptation to spread the load and the risk with this merger must be great, but this is one decision that we must get right. Like many, I feel most concerned that any defence supplier to Her Majesty's forces should not be subject to any political pressure from any other Government, whether French, German or American.

We have seen examples in recent years of how Governments differ. In Libya last year, the German Government did not fire a shot in anger, and we recall that it was a French Exocet missile that created havoc for the Royal Navy during the Falklands dispute. What would happen if HMG took a different stance on a future conflict from either or both of those partners? How could we be sure that supplies of parts and spares would flow if those shareholders and HMG were on opposite camps? The Americans may have concerns over security of supply, but they also have commercial fish to fry; if they can find a way of pushing BAE out of the US market, there will be more to go around for US contractors. This is a very difficult decision, and I hope that we get an early chance to debate these issues before irrevocable decisions are taken.

As a nation, we must refocus on getting business the skills to train internationally, and I hope that the Chancellor will see to it that there are fiscal incentives to favour those companies and individuals that create wealth, rather than seeing them penalised for their entrepreneurship.

Photo of Lord Giddens Lord Giddens Labour 7:41 pm, 9th October 2012

My Lords, I also welcome the noble Lord, Lord Marland, to his role, and I look forward to many interesting debate with him.

I have been a practising social scientist for several decades-a sign of a misspent life, one could say-and never before has the future of world society and the world economy seemed to me so opaque and imponderable as it does now. To me, this is not a recession like other recessions; it is an expression of much more deep-rooted forces that none of us at the moment fully understands. When we look at manufacture worldwide, it is a big mistake to suppose that the dominant force in the world economy is a simple transfer from west to east. That is happening, of course; in 2010 China became the world's largest manufacturing country by output. Yet that simple statistic conceals complex changes whose consequences are not at all clear-at least not to me.

Manufacturing output has risen sharply over the past 30 years the world over, but the proportion of jobs created has actually gone into reverse. Worldwide, there has been a net reduction in manufacturing jobs since 1990 in spite of the rapid growth of manufacturing in China and other emerging economies. When we see areas in the UK, the US or the EU where unemployment is over 20%, this results as much from technological innovation as from a shift of manufacture eastwards. In other words, the advance of manufacture is very different from the creation of net new jobs. Moreover, much manufacture now takes place in global chains rather than in particular countries. As the FT journalist Peter Marsh points out, to be a star manufacturing company you do not need to make anything, and the biggest manufacturers in the world do not in fact make anything. Rather, what happens is that the company co-ordinates a diversity of businesses in different countries. This is radically different from the past.

We are currently experiencing what Marsh calls, in his book of the same name, a "new industrial revolution". It is initiating an era of mass personalisation, much more decentred than old manufacturing processes. A good example is the firm Essilor, based in Paris. It is the leading maker of lenses for glasses in the world, making 100 million lenses, unique to each customer -amazing-that are sold to 400,000 opticians in 100 countries. In order to do this, the company has a network of 20,000 computers in Essilor offices around the world. This is a totally different pattern of manufacturing from the past, and we do not quite know-as social scientists, anyway-where it is leading us.

Against this backdrop, it certainly makes sense that we should build up and expand the UK's manufacturing base, but we have to do so in terms of the trends that I have been describing and to be very sensitive to them. I have three brief points to make in working this through. First, although it is right to emphasise a return to industrial policy-the new wisdom, as it were-it will actually have to be totally different from the 1970s. It will not be a matter of picking industries or of simple investment in infrastructure; if it is going to work, it will have to be much more holistic and involve large chunks of the economy and of government, and at the same time be highly flexible. That is a great challenge. At the moment we do not really know how to do this and an awful lot of work will have to be done, so loose talk about industrial policy should be avoided.

My noble friend Lord Adonis mentioned renewables, but they are very unlikely to create new jobs. It is no good just saying that they create jobs; they have to create new net jobs, but jobs will be lost in the older fossil fuel industries as renewables come on track. New technology tends to destroy jobs rather than just creating them, at least in terms of net jobs.

Secondly, we have to be very careful about borrowing naively from what appears to be current best practice-for example, "Let's be more like Germany", "We need more technical skills", "We need more apprenticeships" and "Let's create the equivalent of the Mittelstand". It is only 10 years ago that Germany was regarded as the sick man of Europe, and its status as a manufacturing country gained enormously from its membership of the euro. A detailed study shows that Germany exited the euro, it would lose probably 40% of its manufacturing capacity competitively in world markets. One should reflect on that.

Thirdly, we should not assume that current trends are unilinear. I do not understand why people in this country are not taking notice of the reindustrialisation debate in the United States, which I have mentioned in previous discussions. The Boston Consulting Group reckons that 3 million net new jobs in the US can be created by 2020, but these result from a reversal of the existing chain transfer from west to east. The price of oil, the need to protect patents and the rising costs of labour in China are likely to reverse some aspects of the current trend of movement of manufacture from west to east. These are likely to be not in high-tech industries but in low-tech ones. That debate should be pursued in detail in this country too.

Photo of Lord Bilimoria Lord Bilimoria Crossbench 7:48 pm, 9th October 2012

My Lords, I welcome the noble Lord, Lord Marland, to his new ministerial role and look forward to many future interactions.

I thank the noble Lord, Lord Adonis, for securing this timely and indeed timeless debate. In fact, the word of the day with regard to British manufacturing is "decline". I declare up front my interest as chairman of the Cobra Beer Partnership, a joint venture with Molson Coors, one of the world's largest brewers. If you need evidence of Britain's continuing strength in areas of manufacture, look no further than the brewing capital of the world, Burton-on-Trent, the largest brewer in Britain and one of the largest in Europe, where we brew Cobra beer.

I am relieved that the Government have finally woken up to the fact that we in Britain do not have a balanced economy; we have let things slip. Agriculture is now barely 1% of GDP. In 1978, as we have heard, manufacturing was 26% of GDP; today it is 12%. In 1970, services accounted for 54% of GDA and manufacturing 40%; by 2009 services had increased to 78% while manufacturing had declined to 17%. Does the Minister agree that the Government need to encourage manufacturing?

We have not lost the ability to be the best of the best manufacturers in the world, particularly in advanced engineering and design. I visited the Rolls-Royce Motor Cars factory in Goodwood and was inspired. I visited the Rolls-Royce factory in Bristol and saw the engines of the Typhoon being built, and was inspired. Cobra is first and foremost a multiple award-winning manufacturer and I am proud of it-I am sorry to boast. Will the Minister admit that the Government are not doing enough to encourage innovation? First, we have had a short-sighted cut of up to 80% of teaching funding in higher education. We have the finest universities in the world along with the United States. Higher education is one of the jewels in our crown. How short-sighted is this eroding of our competitiveness as an industrial base?

Does the Minister agree that the UK Government are hugely underfunding and undersupporting R and D? The UK's investment in research and development is well below that of other advanced economies. Sweden spends 3.5% of its GDP on it, Finland and Japan around 3.4%, Germany 2.5%, the United States around 2.7% and the United Kingdom only 1.8%. Furthermore, according to the World Economic Forum, in skills development, about which the noble Lord, Lord Adonis, spoke, the UK workforce is 18th in the world behind Germany, Japan, Sweden and the Netherlands, to name just a few. Yet I was privileged to write the foreword for Big Ideas for the Future, published by Universities UK and Research Councils UK, and I was proud to see that despite this relative underfunding and underinvestment, British universities continue to punch well above their weight. This publication highlights 200 world-beating, world-changing innovations coming out of British universities throughout Britain, and not just Oxford and Cambridge.

Are we doing enough to encourage students at school to take up science and engineering? In 1949 an Eton biology master wrote in one his pupil's reports that he believed that he had,

"ideas about becoming a scientist; on his present showing this is quite ridiculous ... he would have no chance of doing the work of a specialist, and it would be a sheer waste of time, both on his part and of those who would have to teach him".

I was delighted and proud today to see that at my old university, Cambridge, yet another Nobel Prize was won by that same Eton schoolboy, Professor Sir John Gurdon, still middle-aged at 79. In my book old age is 80 onwards.

Having been born and brought up in India, and as the founding chairman of the UK India Business Council, I have seen the enthusiasm with which Indian students pursue engineering. The Indian institutes of technology are more difficult to get into than Oxford, Cambridge, Harvard, Yale, Stanford and MIT combined and multiplied by 10. There is the whole issue of funding in British industry. The irony is that we have bailed out the banks, but the banks are not lending to business, particularly to SMEs. I pointed this out to the Minister yesterday in the House and I remain unsatisfied that the Government are doing enough to make the banks lend to start-ups and SMEs. The Government need to encourage entrepreneurship and SMEs, and could institute so many more tax breaks and incentives for new business and businesses taking on new employees, such as cuts to employers' national insurance and NI holidays. Will the Government consider this?

We are very lucky to be outside the euro, and to be one of the most open and welcoming economies in the world. I was delighted today to read that in a recent survey, British companies felt less affected by red tape than those in other countries featured in the survey. This is great news. However, in spite of our corporation taxes coming down, our tax burden overall is still too high and unattractive to inward investment and to the brightest talent.

The Government's madcap immigration cap is sending out the wrong signals, not least by including student numbers in the overall permanent immigration figures, deterring foreign students. Does the Minister agree? I know that applications from India have been plummeting and that students there are asking, "Does Britain want us?". We need to attract the brightest and the best foreign students, let alone the £8 billion that they bring into the economy and the generation-long links that they build with their countries, which can only help our global business reach. Foreigners make up 30% of Oxford and Cambridge academics, and the immigration rules are affecting them. Does the Minister not agree that this is madness and short-sighted?

We have so much going for us in this country. We have an industrial base that is still the best of the best and that has the potential to grow if we make it a priority. I am delighted that the Government have finally woken up to this and I urge them to set a target that manufacturing grows as a percentage of GDP. It is manufacturing and business that pay the taxes that create the jobs that pay the taxes that pay for our public services. It is our world-beating manufacturing that is crucial to keeping Britain's competitive position at the top table of the world.

Photo of Lord Haskel Lord Haskel Deputy Chairman of Committees, Deputy Speaker (Lords) 7:54 pm, 9th October 2012

My Lords, I welcome the Minister to his new job and also congratulate my noble friend on moving this Motion about industrial policy. In recent years so much of our industrial policy has been a debate about devaluation and copying others. Our industrial base must be built on our own strengths. We have to correct our own weaknesses.

John Kay's report of 23 July points to our first weakness. His diagnosis tells us that the financial markets in this country serve the business creators poorly. It is the agents and the middle men who are served best. He also says that the structure of the markets militates against long-term decision making. An industrial base is certainly a long-term project. An early task is to change the rules of the financial markets so that stewardship becomes the business culture of our industrial base.

Let me turn to manufacturing. As the noble Lords, Lord Hennessy and Lord Empey, explained, manufacturing has to be part of our industrial base. We have strengths in manufacturing. We have some wonderful companies in the motor industry and aeronautics, and I am sure that the Minister will join me in singing their praises, but are they part of Britain's industrial base? The majority are foreign-owned-owned by global enterprises that are part of the global industrial base. They are of course committed to the UK, but their concerns are global.

We must now see our British industrial base as part of the global industrial base. Globalisation matters. These companies also see themselves as part of the single-market industrial base. That is why the EU also matters. But manufacturing itself is changing. New manufacturing techniques and biological processes make customised and small-scale local production viable, as my noble friend Lord Giddens explained. New materials are making products with new processes, and new technology is raising productivity to make existing processes faster. This new technology and these new ways of looking at business are turning economies of scale on their head. All this has to be considered in assessing our industrial base. We have a strength, with the Technology Strategy Board providing help, without undue commercial pressure, to find our way through these changes. The ability of the public and private sectors to work together to convert ideas into products and services must be part of our industrial base, as my noble friend Lord Adonis explained. Hand in hand with this is the strength of our science base. The Government tell us that expenditure on science base is justified and will be maintained. This must be a strength, but is it true?

We now learn that Government departments have cut their R and D budgets, and the details are in today's Financial Times. I am sure that the Minister has seen them. Perhaps he can explain what is happening and the truth is. For a modern industrial base dynamics are important: business has to work in concert with science. Cluster dynamics, or knowledge and innovation communities as the commission calls them, are an important part of our modern industrial base. This is where a lot of the innovation comes from. You get a double benefit. If you create an innovative piece of medical equipment the whole nation's health benefits from this medical innovation enabled by this piece of machinery. This double effect is one of the real benefits of having a modern industrial base built in this way.

The most important part of our industrial base must be our people, our human capital. In the modern industrial base, so much of the so-called brain work is increasingly undertaken by algorithms and artificial intelligence, much of it to raise productivity. Our strength will be to accommodate this and not fight it, as described by my noble friend Lord Bhattacharyya. Skills training will have to take a quantum leap. It is the quality and the standard, not just the quantity, that will be relevant. This improvement must be continuous. If this is true, then our best and brightest will have to become our teachers. Our Teach First scheme is a start, but we will have to move into a higher gear. This uplift in skills will have to apply to everybody, not just to an elite, because, as my noble friend Lord Giddens said, modern technology can destroy jobs as well as create them. Therefore, our industrial base must be based on an equal society, on one nation, because without a fair and equal social base, our industrial base will be built on sand.

Photo of Lord Hunt of Chesterton Lord Hunt of Chesterton Labour 8:00 pm, 9th October 2012

My Lords, I welcome this debate and thank my noble friend Lord Adonis for introducing it. I also welcome the noble Lord, Lord Marland, to his new role. He made a tremendous commitment to nuclear energy and I hope he has passed on the message to his successor at DECC. You cannot have all sweet-a little sour is necessary-so I have to remind him of when he got rather agitated at an all-party meeting on energy-intensive industry and suddenly loosed off. He said, "The UK should become the corner shop of the world". We wondered about that as it was an unusual ambition, and one hopes he meant the laboratory and workshop of the world. That is what I want to refer to.

Following the focus of the noble Lord, Lord Selsdon, on national laboratories and technological centres, all countries of the world have hitherto regarded them as an essential part of a technological economy, but not the UK. I worked in an industrial lab in the 1960s. At that time, we had fantastic, world-leading laboratories in electricity, gas, water resources, railways and hydraulics. They are all gone. Since the 1990s, we have lost the Royal Radar Establishment, the Royal Aircraft Establishment and the United Kingdom Atomic Energy Authority. They all played an essential role in providing advice and development, in testing new technology and in stimulating thousands of small companies. A few national centres have survived, such as the National Physical Laboratory, the Laboratory of the Government Chemist, Cefas, the Building Research establishment, the Culham laboratories and, I am glad to say, the Met Office. You can read about why the Met Office survived and about its history in the House of Lords Library.

However, a similar story also took place in the major industrial laboratories, which were world leading. We had two major oil company laboratories, one in Cheshire and one in Surrey. I am glad to hear that BP has now reversed its policy and is expanding its strength. We had amazing electrical engineering laboratories in Leicester, Stafford and Essex. I remember an advertisement in the 1960s for English Electric laboratories. It said, "Come and solve the Navier-Stokes equation and the problems of fluid mechanics". That does not happen now. As other noble Lords have emphasised-but not very many-we still have the world-class Rolls Royce centre and its remarkable network of university laboratories. Its approach was very different from elsewhere, and other countries have copied it. It is true that university research has expanded greatly in the UK, as in other countries, and we have new high-tech companies-in which I declare an interest as chairman of a small high-tech company-but these institutions are not the same as the technological base. The exception, perhaps, is Warwick's engineering centre, which has the roles of national technology base and university.

What is the future of our technological industrial base? There is no plan or even principle that one can discern, and one asks whether the UK will become a major technological economy again. The evidence is that the greatest success comes through international collaboration. We are, in fact, part of Europe and some of our major laboratories are now collaborations. One way of looking to the future is by looking at the market opportunities, such as aviation, in which we have Rolls Royce and Airbus. One of the interesting points about the 1960s-and I refer to the noble Lord, Lord Hennessy-is that there is a general statement that there were great mistakes about electronics and aviation. The French say that building Concorde was the essential breakthrough to persuade the Americans that Europe could produce an aeroplane that flew regularly and safely to America, and that without Concorde we would never have had Airbus. In Britain, Concorde is often regarded as an industrial mistake, but in France it was regarded as the way to enter the market. High technology enables you to enter markets.

The other point of the House of Lords Committee concerned why we have a very good software industry. The answer is Harold Wilson because he said that we not only had the white heat of technology but that we wanted to have transputers. Nobody had ever heard of them in the 1960s, but that was the basis of our extraordinary software industry. That is the reason why governmental and department initiatives are important, as well as research centres.

The other important point, which other noble Lords have mentioned, is that we must look forward to the long-term needs which will have strong technology input. My noble friend Lord Adonis referred to infrastructure for dykes, roads and buildings. The extraordinary thing about the Netherlands is that they put them together and put windmills on their dykes, which saves 40% of the cost of the windmills. We need energy, whether wind or nuclear. This Government have been very strong in advocating space. We now essentially have a government lab-it is a European government lab in Harwell-for making use of space. Looking forward, are we simply to rely upon industry and universities to provide the technological base, or should we reconsider establishing a new technological base, making use of them but, in addition, making use of government resources?

Finally, I emphasise the importance of good graduate engineers, which other noble Lords have mentioned. I was talking to colleagues this morning. The difficulty in the UK is that we have some universities with an extremely demanding curriculum producing extremely good engineers, but too many schools and universities do not have such a demanding level and German companies say that they do not correspond to the standards in Germany. In Germany, engineers are paid almost as much as lawyers. In Britain, engineers are paid half the salary of lawyers. Lawyers work extremely hard at university because of the high pay at the end of it. How are we going to solve that? I do not know. I leave that to the Minister.

Photo of Lord Young of Norwood Green Lord Young of Norwood Green Shadow Spokesperson (Business, Innovation and Skills) 8:07 pm, 9th October 2012

My Lords, I, too, congratulate my noble friend Lord Adonis on creating the opportunity for this debate. Given the complexity of the subject, it is a short period to try to deal with it. I congratulate the noble Lord, Lord Marland, on his appointment. I do not envy him trying to sum up this debate given the varying strands and the different advice that he has been given. Given the time available, I am going to focus on only one or two issues.

Skills are a key part of our industrial base and I want to draw attention to the importance of STEM subjects. My noble friend Lord Haskel mentioned the quality of teaching in engineering, maths and physics. My noble friend Lord Adonis was one of the promoters of Teach First. In trying to convince young people that engineering is an area worth entering, we need to focus on the quality of teaching.

There was lots of talk about infrastructure. I want to concentrate on our broadband network, investing in it and making sure that investment delivers and delivers on time, given the importance of broadband investment in R and D and in all our industries. My noble friend Lord Adonis talked about the poor quality of the mobile network. Why is it taking us so long to introduce 4G? By the time we get round to introducing it, 5G, which is on the horizon, will already be with us.

Given my interest in skills and apprenticeship, I want also to focus on apprenticeships. A variety of advice is coming to us on apprenticeships. I am not sure that I completely agree with my noble friend Lord Bhattacharyya on how we should fund them, but their importance should not be underestimated. My noble friend Lord Adonis told us of his experience of companies saying to him, "We were looking for 86 apprentices out of 1,500 and we could not get them". That comes back to the quality of teaching and ensuring that our best young people understand that it is worth going into engineering. That is fundamentally important. My noble friend Lord Bhattacharyya reminded us that the number of applications for apprenticeships vastly exceeds those available. Demand exceeds supply enormously. My noble friend gave his example and the example that I normally give is British Telecom. It has some 300 apprenticeships and it gets something like 25,000 applications.

The number of companies offering apprenticeships is still pitifully small-only a third of the FTSE 100 companies. Somewhere between 4% and 8% of companies are actually offering apprenticeships. They are a good deal, so how do we encourage the creation of apprenticeships? I hope the noble Lord will address in his reply why the Government are not demonstrating by example and by their own leadership. When they offer government contracts, they should ensure that apprenticeships and training are a key part of those contracts. We did that in the previous Government, and it is interesting that the noble Lord, Lord Hennessy, in his contribution referred to the Olympics-I cannot remember the wonderful quote from Abraham Lincoln. It was not by chance that we got nearly 400 apprentices out of the Olympics; we got them because there was a demand on the companies. Similarly with Crossrail, we ensured that some 400 apprentices would emerge from that. I cannot for the life of me understand why the Government do not understand the importance of demonstrating through their own contracts the creation of apprenticeships. It is an area that the Government have to tackle.

There is another way the Government could encourage apprenticeships. If they want more SMEs to participate in apprenticeships, one of the key ways is through more group training associations, the hubs that encourage SMEs to recognise that if some of the administrative and training burden is concentrated centrally, it becomes much more attractive to those companies to participate in apprenticeships.

I am conscious of the clock, so I will wind up my speech. I think it was my noble friend Lord Giddens who gave us the global perspective, if you like. I did not know whether to feel cheered or gloomy at the end of it, although he gave us some sage advice about the great challenge of trying to create net jobs. I hope that when the Minister gives his reply, he will focus on how we are going to create more apprenticeships.

Photo of Lord Marland Lord Marland The Parliamentary Under-Secretary of State for Business, Innovation and Skills 8:13 pm, 9th October 2012

My Lords, my wife said to me in the car as we came down from Birmingham that this was going to be a very interesting, high-quality debate. As always, my wife is right. I am very grateful for the support of my noble friends Lady Garden and Lord Gardiner, who are obviously showing their trade at skills very early on.

Photo of Lord Giddens Lord Giddens Labour

I thank the Minister for allowing me to speak. I find it interesting that there are no women taking part in this debate. Perhaps one thing we might do is encourage more female entrepreneurs-viz, your wife.

Photo of Lord Marland Lord Marland The Parliamentary Under-Secretary of State for Business, Innovation and Skills

My wife does not need any encouragement, but I am sure she will be very grateful.

I thank the noble Lord, Lord Adonis, for making this debate available because this is a massive challenge for the country, for the Government, and for those of us who have to set about the challenge. What came through to me about this debate was how passionate we all feel about the future of British industry, British manufacturing and Britain plc. We have a lot to do and we can all play our part. If we have passionate people who want to be involved, that is very good.

The noble Lord, Lord Adonis, summed it up by saying that we have been negligent in the past. That is true, and it is not just the previous Government but the Government before that. As has been referenced by the noble Lord, Lord Bilimoria, the present Government have inherited a reduction of manufacturing output from 22% down to 11% in the past 20 years. Why has that happened? It is because there has been a lack of investment, as has been referenced, and a lack of competitiveness, which we need to reverse.

However, it is not the end of the world. Years ago, as the noble Lord, Lord Hennessy of Nympsfield, reminded us, 92% of the activity in this country was in agriculture. The right reverend Prelate mentioned the industrial output in Blackburn. My family on both sides were involved in Ashton-under-Lyne, of all places, and further south in Manchester in the cotton manufacturing industry, in Lancashire Cotton. Now look at that industry; it has changed out of all recognition. As has been referenced by many noble Lords, including the noble Lord, Lord Haskel, we live in a global world with fast-changing global dynamics, where Britain has been at the forefront of moving with those dynamics and changing our economy into a diversified economy, which, of late, has become overdependent on the financial sector, and we are licking our wounds from that overdependence.

We have also failed to store the benefits of our prosperity for a rainy day. So many other countries do so, such as Norway, which has a marvellous, sovereign oil fund and so much of its oil profits have gone into those oil funds.

We have to redress the mess and we intend to do so. It will not happen overnight. Nothing does happen overnight. This is a big country where we need to change things. People have got used to a way of life that has revolved round a very munificent European purchasing economy and that is now changing as that economy goes into the doldrums. The Government are at odds with the noble Lord, Lord Bilimoria, in the sense that we believe businesses do better when government does less. We also believe that people do better when government does less. That is why it is important for government to set a framework for business and allow business to take things forward with the right initiatives and incentives, which I shall come to later. However, we cannot hold the hand of business. We can take it to the trough but we cannot make it drink.

The corporation tax plan that the Chancellor has outlined, which takes corporation tax down to 22% by 2014, which will make it the lowest in the G20, is a real incentive for business. Our Red Tape Challenge is being looked at very closely by this Government with a view to reducing 1,200 red tape regulations. We have revolutionised our UK trade and industry department with a very outward looking, purposeful export drive. Export is the key to our growth recovery. That is why, as I referenced earlier, I have done 25 country visits in the past 10 to 12 months. The noble Lord, Lord Green, has carried out some 43 such visits. The Prime Minister always takes a large delegation with him when he goes on overseas visits because without an export drive we will not get growth.

Time does not allow me to go through all the various schemes that we have put together. However, noble Lords will know that we have the regional growth fund, the Plan for Growth, mentoring schemes and schemes to develop education and skills, a lot of which I mentioned at Question Time yesterday. In manufacturing alone we have the Advanced Manufacturing Supply Chain, the Manufacturing Advisory Service and the high-value manufacturing Catapult Centre. I applaud the excellent work of our colleague, the noble Lord, Lord Bhattacharyya, who has been at the forefront of that as he has been at the forefront of the excellent Tata company, for which we are very grateful.

As the noble Lord, Lord Adonis, put it, we can all go round the country finding examples of good news and bad news, and he gave eloquent examples of each. The most important thing is to support the bad news stories and turn them into good news stories and that is the job of government. I am grateful to my noble friend Lord Bates for pointing out that all is not lost. We have 1 million new jobs in the public sector and 450,000 businesses have registered with Companies House in the past 12 months-the highest figure since records began, so there is a platform for starting this change of emphasis. Both the noble Lord, Lord Adonis, and my noble friend Lord Bates mentioned-

Photo of Lord Giddens Lord Giddens Labour

I thank the noble Lord for giving way. Could he also give an analysis of the businesses that have closed down?

Photo of Lord Marland Lord Marland The Parliamentary Under-Secretary of State for Business, Innovation and Skills

I cannot take too many questions as I shall never get through my speech in the 12 minutes which have been allocated, but I think the figure is about 290. However, we can give the noble Lord exact figures later.

The noble Lord, Lord Hennessy, talked about having a Business Select Committee. That is a very good idea. There is, in fact, a BIS Select Committee and a Lords inquiry into SMEs. One of the initiatives that I have undertaken is a trade representatives programme appointing specific trade representatives for specific countries. This will be announced by the Prime Minister in the not-too-distant future. We need to look at initiatives as regards how we can review trade. I am very grateful for that suggestion.

The right reverend Prelate referred to the British Aerospace and EADS merger. We think that we will know more about that tomorrow evening. Therefore, I think he would not expect me to talk about that at this point. We regret hearing that he will not be with us for much longer. We wish him every success. His contribution was extremely beneficial.

The noble Lord, Lord Selsdon, talked about energy and the rail infrastructure as being key areas of development and I cannot but agree with him. I have already mentioned the noble Lord, Lord Bhattacharyya, who has so much experience and knowledge of this area and feels deeply about the need to enhance our skills to provide a platform from which we can emerge into growth.

The noble Lord, Lord Empey, talked about trade and manufacture. He talked very interestingly about Northern Ireland, of which he has great knowledge. I take on board everything he says. The speech that the noble Lord, Lord Giddens, made was an immense tour de force. I compliment him on it and I totally agree that the holistic view has to be taken and that we need to consider globalisation. I am not going to be able to deal with all the questions the noble Lord, Lord Bilimoria, raised. I make the offer to him and to all noble Lords that I will be happy to discuss any of this at a later stage or at further debates. The noble Lord, Lord Haskel, again talked about globalisation and he is absolutely right. The noble Lord, Lord Hunt of Chesterton, reminded me of the need for laboratories but, again, all is not lost as Sir John Gurdon has been rewarded for his expertise.

The noble Lord, Lord Young of Norwood Green, talked about broadband. Broadband is fundamental; I was discussing it with the Minister responsible today and urging him that we should move on further. As a Government we took the initiative to sell G4, which we are in the process of doing. It takes a while but it was an initiative I am proud to say our Government took part in.

We have a world-class country. All of the countries I travel to want to do business with Britain. We are in the top three of any countries in the world that countries want to deal with. We have design and technology of the highest quality, architecture, accounting, agriculture, oil, defence, aerospace, digital music, motor cars. For the first time in many years we are exporting more cars than we are importing. We have insurance, strategic planning, medical, education, et cetera. We are a world-class country which is looked upon with huge favour by the world. I invite all Peers who feel as passionately as I do to support and champion business as we try to get ourselves out of the economic problems that noble Lords have all very kindly addressed. With that I thank all noble Lords for their contribution.

House adjourned at 8.26 pm.