Viscount Stansgate
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Viscount Stansgate (Lab)
My Lords, it is a pleasure to follow the noble Lord, but I will not be discussing power stations in Essex.
On Budget day, at 2.44 pm and six seconds—I know because I double-checked—the Chancellor spoke the following words:
“Our job is to make Britain the best place in the world to start up, to scale up and to stay”.—[Official Report, Commons, 26/11/25; col. 386.]
That was key message in the Budget and there was action to demonstrate the intent. The £38.6 billion that the Government have announced for UK research and innovation projects over the next four years will be crucial to the achievement of the primary objective of growth. The House should also note that the Budget gives solid backing to British-based AI in four new AI growth zones spread out within the UK—the north-east, Oxfordshire, and north and south Wales. There is also £500 million for a sovereign AI fund to back promising British businesses.
This is all very welcome, but more must be done. We need a step change in the way we fund the growth of science and technology businesses, to ensure that they scale up and stay in the UK. I am advancing today the argument put by your Lordships’ Committee on Science and Technology, chaired by my friend, the noble Lord, Lord Mair, and of which I am a member, in its report last month, Bleeding to Death: the Science and Technology Growth Emergency. This is at heart an economic report, which is why it is so relevant to today’s debate. The argument can be very simply put: this country is brilliant at research and good at start-ups but is failing at scale-ups. As a result, we are losing potentially world-class science and technology businesses, often to the USA.
As a matter of fact, a good example took place while we were conducting our inquiry. In a deal formally completed in September, Oxford Ionics, a quantum tech company based in Oxford, was bought for $1 billion by an American company. Some of the research will continue to go into the UK but the benefits and the finance will go to the USA. If we do not find a way to succeed in scaling up science and technology businesses in the UK so that the benefits and the success are felt here, we will miss out on some of the best prospects for future growth in our economy.
The Select Committee made a number of recommendations. I cannot go through them all, but I will mention a couple. First, it called for leadership at the top, from the Prime Minister and the Chancellor and across government. In our view, we need to exert this through a new national council for science, technology and growth. We have a National Security Council; now we need a growth council. It should include Ministers from all the relevant departments: DSIT, DBT, the Home Office, the MoD, the Department of Health and Social Care, DESNZ, the DWP and the Department for Education, and especially, of course, the Minister of State for Science, together with key public investment bodies and scientific advisers.
Secondly, we need to do more to encourage institutional investors. There has been a shocking decline in the proportion of domestic pension fund investments in UK equities. We need the Mansion House reforms to succeed. If countries such as Canada can amalgamate their pension fund to invest in UK science and technology, so should we.
Thirdly, we need more co-ordination among the public investment bodies that play such a key part in the growth of science and technology companies: Innovate UK, the British Business Bank and the National Wealth Fund. There is a case for amalgamating them, and there is certainly a case for what might be called a concierge service, which guides start-ups through the business of trying to get the additional money needed to scale up.
Fourthly, we must start to exploit the power of public procurement, because it can unlock the growth of innovative science and technology companies. My time is fast running out, but I will say that we should move from grants to contracts because they better enable businesses to grow. We should also have mandatory government targets to invest in UK-based SMEs.
My time is up, so I can only repeat that we need to take this question much more seriously. In the long run, success in this area will be more lasting and important than any of the transient budgetary headlines of the last week.