My Lords, the gracious Speech and many noble Lords have spoken of a new, modern, industrial strategy. I welcome this, because we need one. How can the Minister speak of strong fundamentals when after eight years of unprecedented fiscal stimulus from the Bank of England and eight years of austerity, we are still nowhere near balancing our books? Real incomes have fallen, our standard of living has fallen, and productivity has been virtually static. It is a fantasy that we can go on like this. In these circumstances, the industrial strategy should reflect our values of fairness as much as they reflect our ambitions to grow and prosper—a strategy that unites us. Even the Prime Minister has indicated a nudge in this direction.
So, how do we do it? The obvious place to start is the industrial strategy Green Paper issued in January. A lot of work has gone into responding to this and it really has the possibility of being a creative alternative to austerity. Consultation has been wide and it involved many parts of industry. Indeed, it involved a number of people from your Lordships’ House. Not least is the suggestion that the strategy should set tough targets for productivity and create a regulator to monitor and stimulate progress—a kind of productivity OBR. For instance, much is made of the matched funding available in the innovation fund. But that will be of value only to the incumbents who have the money to do the matching. Will the Government leave the funding to organisations such as Innovate UK to make judgments and not just reward those who can afford it?
In many fields, artificial intelligence is already superior to our own. Business will profit from recognising that fact, and encouraging this has to be part of our industrial strategy. Equally, part of the strategy must be to show how artificial intelligence can benefit us all, rather than just being a threat. As part of the strategy I would like to see a campaign similar to the public understanding of science campaign which we carried out when science was perceived as a threat. Indeed, that campaign may have been initiated in your Lordships’ House. There have been many enthusiastic submissions, and none of them should be wasted.
The strategy must include a review of patient capital. Extensive research shows that our present systems of big bonuses make executives less willing to invest because they do not want to do anything that would cause a short-term hit to profits. We know that this perverse incentive is one reason why productivity is low. Will the industrial strategy take steps to limit this?
Business has been very good at evaluating the impact of politics on its businesses. Indeed, many of us have tried to help in this—but the message coming through loud and clear is that this works both ways. Businesses should carefully consider the effect of what they do on politics, such as directors paying each other enormous salaries, companies using great ingenuity to pay less tax, and staff being often more exploited than nurtured. Then there are the customers faced with complications to their disadvantage. What steps will the Government take in their industrial strategy to discourage that behaviour, because all that it does is lead to a loss of trust?
The Labour manifesto recognises the reality that growing demands put on the state need more tax revenue. So why not, as part of our industrial strategy, broaden the tax base with heavier taxes on activities which damage the environment, or with VAT on financial services? There is a strong case for taxing expensive homes—why stop at band H? What about taxing the gains on people’s main homes when they are sold? If nothing else, it would help to stabilise the runaway housing market, which many have said needs to be dealt with.
We also need to make a better case for the role of the state as industrial stabilisers, and as regulators, especially after the Grenfell fire, and not just pursue deregulation for its own sake, as an end to itself. My point is that a new modern industrial strategy must decide to meet both economic and social objectives. We have been through a lot in recent months. A business and social industrial strategy will help to unite and support us after these difficulties by demonstrating our determination to put jobs and the economy on an equal footing with a fairer society.