Green Finance

Lord Fox Excerpts

Thursday 18th January 2018 Lords Chamber

[Lord Fox (LD)]

My Lords, I join others in thanking my noble friend Lord Teverson for securing this debate and for proving that he is the very model of a modern eco-warrior. I will focus on two areas: resilience to climate change, and transparency; and—the Minister will not be surprised to hear—the industrial implications of this for the UK.

Starting with resilience and transparency, historically UK pension investments were dominated by fossil fuels, not least because of the position of Shell and BP in the FTSE. A managed retreat from that exposure to fossil fuels is in our interests not just societally but in terms of our pensions. Progress has been made but it should be noted that the value of local council pension fund holdings in fossil fuels has actually risen 15% to £16 billion over the past two years.

Planning and reporting decisions need to be made rationally. They need to be based on investment-grade analysis and backed by real data. London pension funds have been global leaders in pressing companies to report their exposure to climate change, as we heard from the previous speaker. We warmly support the Bank of England and its task force on climate disclosure and reporting requirements for companies because, clearly, we need to do more. In that regard, does the Minister have any comments on my right honourable friend Vince Cable’s suggestion regarding reporting? He suggested that the UK should follow France’s lead in ensuring that disclosure applies both to companies and the flows of finance. That would include requiring investors to explain how their policies align with UK carbon budgets set under the Climate Change Act. As your Lordships know, transparency on sustainability, alongside transparency in financial reporting, helps investors make informed decisions.

This is a global trend and, as we have heard from other speakers, the UK benefits hugely from being an early adopter, helping to shape how the practice has developed globally. The Government can best help this by setting standards for transparency. Can the Minister reassure the House that the momentum injected into transparency by the coalition Government will not be lost over time? Reporting will also be assisted by common standards so we are looking forward to the output of the BSI, which is working closely with industry to develop a new set of green and sustainable finance management standards. The first standard will be produced, I think, early this year, but these standards will be voluntary. Can the Minister confirm that once the standards have emerged, the Government will put their weight behind getting business and other areas to adopt them? Without a standard approach, comparison becomes very difficult.

Turning to the industrial implications of this sector in the UK, as the Minister knows, importantly, the Government’s published industrial strategy includes a clean growth strategy. Clean technology must be an important element of our future industrial strategy. BEIS estimates that clean tech already employs about 430,000 people in the UK and is growing at double-digit rates. The very existence of the clean growth strategy is itself positive and we welcome it. Clean energy entrepreneurs have long felt that they were fighting for recognition. This starts that process. The Government have firmly stated that this industry is not a niche and that the clean economy is an important growth area for the UK economy. We welcome that.

Of course, the challenge is what happens next. This is a very broad sector that operates at many scales. It covers everything from a neighbourhood scheme to insulate homes, to a £1 billion offshore wind farm. Can the Minister perhaps devote some of his time to explaining the way in which the Government’s industrial strategy will vary across these different opportunities? Of course, progress turns not just on government but on access to finance, and we have heard strong interventions today from other speakers. Yet the UK’s Green Investment Bank—GIB—has been sold to Macquarie. Before the sale, GIB demonstrated the benefits of building a centre of expertise in green finance. My party regrets what we see as an ideological sale. While there are other games in town for those seeking finance, the Government must now further free things up, in particular by changing—as my noble friend, I think, pointed out—the fiduciary duties of owners of pension funds.

Place was another important, and very welcome, aspect of the industrial strategy. In that regard, the existing clean-tech industry is more geographically spread than many other industries: it is helping to rebalance some of the industrial activity around the United Kingdom. Much of this industry serves local people and is inherently distributed across the country, so it serves the “place” part of the industrial strategy agenda to continue to encourage it. In addition, the Government now plan local industrial strategies. Can the Minister say how these will incorporate the green element?

Funding for smaller projects is still a challenge. With the sale of GIB, we lost an organisation dedicated to this sector. It was, I repeat, wrong for it to be sold. We now need the Minister to explain how the Government will encourage more microfinance for the smaller, more locally based projects around the country. Perhaps the Government should also commit to allowing local authorities to borrow for green infrastructure improvements related to energy saving or other green elements.

I turn to business investment. Many businesses perhaps choose to spend capital on new plant, rather than fixing some of the environmental needs of their sites. The Government can do more on messaging the importance of efficiency—in the energy or environmental sense—to leverage higher productivity, and they can look at taxation. Will the Minister undertake to speak to Treasury colleagues about how tax can be further used to drive green investment in our industry?

Worryingly, the UK is becoming a less attractive destination for green investment. For example, the EY—formerly Ernst & Young—index measuring countries’ attractiveness to energy investment saw the UK fall from fourth place in 2013 to 10th place in 2017. Can the Minister tell the House how he intends to reverse this negative trend?

I expect that the Minister will mention the Government’s green finance task force, as have other noble Lords. We welcome it, but my understanding is that it will meet three times and disband after six months. Can the Minister confirm that and, if it is true, say what he hopes to get from such an ephemeral gathering?

Clean energy forms a significant part of green finance. Energy is complex, as the Minister knows. Heat, transport and power are inextricably linked. Any action on one element has a reaction elsewhere. Energy is badly served by decisions taken on political instinct or to grab headlines. Energy investments are long term, requiring investors to consider future policy for several Parliaments to come—often more than several. We need stable policy, developed collaboratively across the whole industry.

A clear pipeline of future work is the best environment for clean investment. Businesses that see a future market will invest in technology, facilities and the skills of their people. That helps bring costs down and hastens the transition to a clean economy. Furthermore, it will unlock the clean finance we need.

To conclude, the UK led the way on resilience and reporting. It has built great expertise in investing around the world, as we have heard from other speakers. As this debate reveals, there is cause for positive thoughts, but overall there can be no backsliding: it is a competitive world. Most of the success outlined here today is a result of decisions taken five or 10 years ago. We need to know that this Government understand today’s challenges and opportunities. I call on the Minister to convince us that he has that understanding.

Industrial Strategy

Lord Fox Excerpts

Monday 8th January 2018 Lords Chamber

[Lord Fox (LD)]

My Lords, I, too, welcome this debate and the White Paper. I refer Members to my declared interests. The debate has been far-ranging, with much wisdom and experience. Your Lordships will be relieved to hear that I will not try to distil the whole debate in my speech. But I note, as others have, the commonality and the coming together of the language that noble Lords have used in describing an industrial strategy. As many have noted, from the noble Lord, Lord Heseltine, to the noble Lord, Lord Mandelson, to the coalition, through to today’s White Paper, the curriculum has begun to come together.

However, before we become too self-congratulatory about that, the White Paper is designed to, and does, paint big pictures—pictures that many noble Lords can pick up and take something from. As the noble Lord, Lord Prior, pointed out, the harder part is the next step—the implementation. That is where the nitty-gritty—the friction—will come. We heard some preludes to that from the noble Lords, Lord Heseltine, Lord Wrigglesworth and Lord Stunell, who started to set out some of those challenges. For this reason, I will unapologetically focus in on some of the nitty-gritty in that implementation. I trust that if the Minister is unable to answer today, he will provide a written answer. Looking at the paper in front of him, I suspect that he has rather a lot of questions to answer already.

During the launch of the White Paper, very little was said about how the strategy would be driven, measured and assessed. As other noble Lords have pointed out, it was announced that the Cabinet committee chaired by the PM would be at the apex of the strategy. Can the Minister tell us when, if and how often this committee will meet, and who else will be involved?

Moving on, we talked about the industrial strategy council. The noble Lord, Lord Hollick, brought that into focus, saying that it has to be focused on outcomes. How will it be funded? What metrics and benchmarks will it hold the strategy to? How will it hold the Government to account? Will it be at Cabinet level or Select Committee level? Who will be on it and how will members be selected? In other words, how will it maintain an independent view? Actually, will it be able to maintain an independent view as an OBR-type organisation? Perhaps the desire of the noble Lord, Lord Heseltine, to have an organisation that can look ahead as well as back may be possible within that, but a lot depends on the questions I have just asked.

As to delivery at local level, a lot has been said by many people. The challenge of place is important, not least around the equality issue that a number of noble Lords on both sides of the House made very strong points about. The challenge of overlapping responsibility, as illustrated by the noble Lord, Lord Heseltine, is huge. For example, in terms of training and small business development, there are 133 organisations doing small business development in Cheshire alone. This level of duplication and lack of focus really will get in the way of a meaningful delivery of local industrial strategies, so how are the Government going to develop that necessary focus?

We also talked about civic leadership. Beyond the seven mayoral areas, my noble friend Lady Randerson pointed out that we need to find ways of developing that civic leadership in areas where there is no mayoral leadership.

Local enterprise partnerships have been mentioned. The paradox here is that they are generally weakest in the places where we most need what they might do. How are the Government going to address that issue if we do not have a single, unitary focus? LEPs are going to be an important part of it so where do they feature in the Government’s thinking and what are they going to do to make them work where we need them most? The noble Baroness, Lady Valentine, raised a relevant query about how local industrial strategies will be trialled and where. Again, we need more details around how that will come.

Regarding funding, on the positive side, to date the Treasury has signalled support for the research and innovation elements of the strategy. That has been extremely positive and I agree with the noble Lord, Lord Willetts, that we should all be behind that process. The industrial strategy challenge fund has been a focus, and the noble Lord, Lord Kakkar, and others have made it clear that we have to ensure that basic research also gets the necessary funds and that it is not all going through a challenge route, because that basic competence is the magnet that draws so much to the United Kingdom. Going back to the challenge fund, I think that wave 2 funding has been decided. Can the Minister explain how that decision process will be in train for further and future waves? Perhaps he can also help us with some maths and tell us, after the money which has so far been announced by the Government, how much money is now left for future challenges.

More widely, some examples within the White Paper which highlight and demonstrate the Government’s commitment are actually partially, or largely, funded by the European Regional Development Fund. We have not seen guarantees of where and how all that ERDF funding is going to be replaced. We would like some indication about that because there is a danger of it leaving some very important projects in limbo. That would hardly signal the long-term approach that the White Paper promised. Perhaps the Minister will be able to address that issue.

As many noble Lords noted, including the Minister himself, a meaningful industrial strategy has to encompass and embrace industry 4.0—the automation, digital and robot revolution. I was surprised and perhaps a bit disappointed that neither the Minister nor anyone else mentioned the Made Smarter Review, which the Government commissioned and contains some very strong and specific recommendations. The last time that the Minister and I engaged on this subject was the day after he took over. I hope he has now had a chance to study the report and can let us know where he feels some of those important recommendations should come. Now is not the time and place to go through them all but one was about a national adoption mechanism, which starts to address the long-tail issue mentioned by a number of noble Lords. There is a very long tail of small and medium-sized businesses for which embracing industry 4.0 or the digital age is going to be difficult. Frankly, they are not going to be much driven by it. The Made Smarter Review put together a strategy on how the Government can start to lead that process, bringing that long tail up to speed. So far the Government have passed on opportunities to fund it, the most recent Budget being the most recent opportunity. Perhaps the Minister will say where that lies in the firmament of opportunities to invest in items.

Many words have been spoken today about training and skills. The noble Lord, Lord Bhattacharyya, highlighted what I think he called the skills mess. However the Government, and certainly the Minister, presented a very rose-tinted view of where we are on training and skills in the White Paper. If there is any part of the White Paper that I would urge the Government to go back into, it is that one. There are huge challenges, some of which have been outlined by noble Lords. I will pick up on a couple.

One is the terrible outflow already of EU 27 talent. We are seeing it from academia and from industry, and the Government need to find a way of staunching that now, as well as embracing some of the issues that the noble Lord, Lord Maude, brought up around free movement and ways of making sure we can remain the magnet for talent that we have become within the European Union. We have to find a way of doing that.

The second point, highlighted by the noble Lord, Lord Horam, is the apprentice system and, frankly, the disarray that we currently find it in. All of us hope that this disarray is temporary and is about the apprentice levy being worked through, but there is a suspicion that there have been quite a lot of dropped balls when it comes to the implementation of this. It has also impacted other areas, particularly vocational training and other colleges where accreditation has been interfered with by the system. I would ask the Government to redouble their efforts to clear up the mess that appears to have been created around the apprentice levy.

We have not talked a lot about teachers, but the STEM teachers of the future come from the student body we have. That is a lot of pressure on teaching. Teacher recruitment has constantly missed targets, which have generally, a bit like in the construction industry, been filled by recruits from other EU countries. Clearly, the possibility of Brexit is already creating uncertainty for those potential recruits. At the same time, the number of domestic recruits has plummeted. The Minister has some big challenges here around skills. There is a real danger that this industrial strategy could be dead in the water from the outset due to the absence of the people to actually deliver it. The Minister needs to acknowledge that and perhaps tell us how the White Paper, and certainly its implementation, can address that challenge.

We clearly have a long way to travel: as the noble Lord, Lord Prior, said, this is the hors d’oeuvre, and we have a great deal of hard work to get to the nuts and port. However, the fact that the Government and all those in opposition are debating this on the same terms should be taken as a positive. We are using the same language, which has a big benefit. Wise Peers have noted that we need to develop, engender and move forward that consensus in order to smooth this delivery process. I agree with that. We face an uncertain future and, as the Minister said, we are at a critical point.

Industrial Strategy

Lord Fox Excerpts

Monday 27th November 2017 Lords Chamber

[Lord Mendelsohn (Lab)]

My Lords, I draw attention to my interests as listed in the register.

I thank the Minister for repeating the Statement and I give a warm welcome to much of the industrial strategy White Paper, the warmest welcome being for its existence. There is much in it to be applauded and many important aspects. It is, like the Green Paper, quite a compendium of what we are familiar with and what we have already heard, but there are some very useful illustrations of collaboration across government, business, trade unions and science. The test is whether, joined together, it has the capacity to make a powerful difference.

The White Paper encompasses the old, the current and the new. The old—that is, what is already established—has been addressed through the sector deals. What is most welcome is that much, although not all, of what has been drifting now has a process to come to a conclusion. The present is in the grand challenges, but we also have to address the more chronic problems of regional imbalances, low wage growth, service sector imbalances and weakness in skills, as well as competition, markets and finance. The ONS statistics published last week show a stinging decline in capital stock, which shows that businesses are relying on cheap labour rather than investing in system upgrades to improve efficiency.

I had noticed that the Green Paper was 132 pages long, whereas the White Paper weighs in at 254. It is so much larger that it has already started to be part of the growth story of the industrial strategy. However, given that the font size is up by around 25%, with more pictures, tables and illustrations than the Green Paper, that is in and of itself a good way to start evaluating whether it is more productive.

Reading the previous Government’s press release launching the effort to help to reposition the UK’s independent capability in the post-Brexit world, the word “productivity” did not even get a mention. However, it got a mention from one trade body, which said that it hoped that the strategy could help with productivity in its sector.

Today, the White Paper is all about productivity. This is different from the post-Brexit world and, I think, weaker for it; nevertheless, it is essential that we address it. Performance over the last decade has been the worst for any decade since the 19th century. In fact, since the predecessor document on the productivity plan was launched in 2015, we have seen the worst quarter performance recorded in the last 200 years. So this may not equip us over the horizon that we originally looked at but, as the OBR report illustrated, this is a pressing target now.

There are now five drivers of productivity and four grand challenges—nine items, not 10. By my reckoning, the last 10 pillars could probably fall into the first five and the challenges have been elevated to grand challenges. To my mind, these are more matters of presentation, so I would like to ask some questions on three major areas which I think are fundamental.

The first concerns institutions. The report announces the establishment of the industrial strategy council. This is to be welcomed and it comes in a section which has my favourite phrase of the entire report. It says that the strategy,

“needs to combine agility with patience”,

and that the industrial strategy council will be there to help consistency and adaptability. However, we will be concerned if it becomes the same as the OBR. Will the Minister confirm that its make-up will demonstrate independence and what that might be? What independent powers will it have? Will it be able to talk to departments outside the Treasury? Will it have to take the political assumptions of Ministers and departments for its measurements? Will it publish independently of ministerial and departmental input, especially the Budget? Will it be accountable to Parliament, and will its head have to go through a confirmation process? Without those assurances, it may not have the necessary long-term cross-party support that this sort of strategy needs in order to succeed.

The White Paper adds some extra institutions and has a welcome review of SME productivity, but it does not address institutions such as NESTA which look like they are in need of a refresh, or even the newly established Small Business Commissioner, who, if he could unlock the problem of late payments, would create the recycling and velocity of cash that makes a measurable and meaningful difference to output per worker.

We do not address the weaknesses of our venture capital sector, which is much more reliant—despite our tax arrangements for VC through the SEIS and the British Business Bank—on the European Investment Fund than we are prepared to face up to. So is there a wider review of all the agencies and current arrangements, and will they too be considered over time within the context of the industrial strategy report?

Secondly, there is the crucial question of funding. The White Paper indicates that we are going to try to do more with less. I am a great fan of efficiency but surely additional investment is required. Why is Germany streets ahead of us in preparation for the so-called fourth Industrial Revolution? It is because it has a €40 billion agency. Why did a small country such as Israel steal a march on us in the volume of VC tech and cybersecurity investment? It was because it established a well-funded agency called Yozma and dedicated 8% of all government IT departments’ expenditure to it.

So will the Minister please tell us how much new—not previously announced—money there is in here or in the sector deals? Of the money that has already been announced, such as the Industrial Strategy Challenge Fund and all other announcements, how much is left unallocated?

I have always given great credit to the Government for increasing R&D spend, although much now has to go to make up for the loss that we face from Brexit. I welcomed the first place that R&D received in the Green Paper but I am not sure that it is there with the same force now. There is much to welcome but we are still aiming to be behind the OECD average and well behind all the pace-setter nations, even when we hit 2.4%. Can the Minister assure us that this is not the end of the science story in the UK’s industrial strategy?

Finally, the report remains weak on identifiable, quantifiable and operable ambition and targets. DARPA, which is cited in the report, is clear about its mission and objectives. It is essentially and critically to ensure that the US military maintains overwhelming technological superiority over any rival. The clarity of the mission makes it clear how its challenges and structure can be overcome. The industrial strategy challenge fund needs to be similarly clear. Can the Minister provide us with what he considers to be the most concrete objectives, targets and outcomes we can measure it against; and what specific goals any of the measures are set to achieve?

I would have preferred a stronger call to action. It is said that you have to set goals that are almost out of reach. If you set a goal that is attainable without too much work or thought, you are stuck with something below your true talent and potential. Discipline is the bridge between goals and accomplishment. Without that, as good as this White Paper is, it can never truly be great.

[Lord Fox (LD)]

My Lords, I draw attention to the interests registered in my name. Like the noble Lord who has just spoken, I am pleased that the words “industrial strategy” are coming from the Government’s lips. In the life-cycle of an industrial strategy, we are perhaps at the most optimistic bit before cynicism and despair begin to set in. I shall try not to hasten us down that curve but there are some points that we should perhaps bring out today. It behoves me most of all to point out that the reference to Brexit, made as an aside in the Statement, clearly indicates the effect that the Government believe it will have on our industrial capability—and it is not positive.

This should be set into the context of the OBR’s recent forecast which downgraded GDP by £45 billion by 2021. That is around £700 per person. We would have valued a sense of urgency in the report but there has not been any. It has been a long time in the making. The Minister pointed out that we have been through a long consultation and a long Green Paper, which was almost a year in the cooking. I acknowledge that we need a long-term strategy but, because it is a long-term strategy, that does not mean it needs such a long-term gestation.

For us, the most important part in this—it has received few column inches despite the font size and photographs, as pointed out earlier—is the implementation side. Without implementation, this is just another brochure; another tour of the industrial landscape. It is right that it falls to a Cabinet committee, chaired by the PM, to drive this issue forward. I would welcome the Minister’s comments on how often the committee meets, how much energy we can expect from it and how often Parliament will receive a progress report from it.

Like the previous speaker, we also welcome the establishment of the industrial strategy council—or we think we do because there is so little detail it is almost impossible to know what it is, what it is for, how it will be resourced, how it will be staffed and to whom it will be answerable. Like the previous speaker, we would welcome answers to those questions.

Then we come to the grand challenge. There are noble Lords on many Benches who think this is a rehash of picking winners. I know the Statement went out of its way to decry that view but, however one looks at it, there is an element of picking sectors that we think are needed and can be successful, and investing in them. One can call that something else or picking winners. I urge the Minister to ensure that we are not cutting out funding into the wider exploration and seeking of knowledge because, without investment in that kind of research, graphene would never have been discovered. We still need to seek out the unknown unknowns in order to advance our science and keep us moving forward.

Perhaps I may add another warning on DARPA. This is not a DARPA process for one important reason—there is not the money that DARPA has to throw at these challenges. There is not the huge industrial military complex that sits behind it, which has itself enormous US Government funding for these initiatives. We should be careful when we bandy the word DARPA around.

That said, overall the topics that have been chosen for the challenge are broadly welcome. I note the inclusion of clean growth, which was hardly mentioned in the Green Paper and not at all in the consultation. It was mentioned extensively in the Lib Dem response to the consultation so I shall claim that as a Lib Dem win. However, the Government’s record casts doubt on their commitment to clean growth. They have scrapped subsidies for solar and offshore wind and cut funding for carbon capture and storage—even though we know that kind of support works—and, further, they have sold off the Green Investment Bank. This announcement is either a damascene conversion or just more paper.

I have just one question on the life sciences strategy. The Government commit the NHS to its role in the life sciences strategy: what extra resources will be given to the NHS in order for it to take up the research role it has been set?

The Government want to increase research and development spending to 2.4% of GDP by 2027. That of course is only the average, as has been pointed out, and a more ambitious target would be more sensible. However, there is not very much new money. If you do the maths, you will find that it is about £0.4 billion on top of what has already been announced. Certainly that is what has been said in the other place. The £2.5 billion investment fund to be created by the British Business Bank was not costed in the Red Book, raising questions of where the money will come from. Perhaps the Minister can enlighten us. These commitments are inadequate compared to what is being lost—the £2 billion provided by the European Investment Fund for start-ups and the €3.6 from Horizon 2020, which will disappear after that time.

Catapults are important and I am pleased they have been mentioned. I have two points. The paper mentions that there are poorly performing catapults. Can the Minister enlighten us as to how many are performing well and how many are not? Secondly, I note that the highly-regarded CEO of Innovate has just stepped down. Perhaps we can hear what that is about.

We on these Benches have said before that we will need the right people to implement this strategy. There has to be a joined-up national skills strategy.

[Lord Henley]

I thank the noble Lords, Lord Fox and Lord Mendelsohn, for what I take to be their general welcome of the industrial strategy. The noble Lord, Lord Fox, claimed that parts of it were in response to comments from the Liberal Democrats in their response to the Green Paper. He claimed that there was a lack of urgency, but when one publishes a Green Paper in January, as we did, to produce a response of this kind by December is doing pretty well. If we had produced it any faster, the noble Lord would accuse the Government of hurrying their response. He cannot have it both ways and my right honourable friend has got it just right. I am grateful that I joined the department only four weeks ago, so came in at the tail end of the development of this response, but I can assure the noble Lord that we have been busy these last four weeks going through draft after draft of the White Paper to produce this document, which went to the printers only last night.

The noble Lord, Lord Mendelsohn, worried what the size of the document compared to the Green Paper indicated about productivity gains. He noted that it was so many pages longer than the original Green Paper but then said that the font was larger, although he did not point out that the pages were smaller. I will have to take advice on whether there are more words in this document, when the pictures are taken out, than there were in the Green Paper. All I can say to both noble Lords is that it has been a very considered process with, as I say, some 2,000 responses that had to be carefully considered. We had to talk to many people and develop our policies, as well as take it the whole way around the Government.

I am grateful to the noble Lord, Lord Fox, for emphasising the role of the Prime Minister. It is important to make it clear that the Prime Minister is fully committed to the strategy, as are all members of the Government. If this was a Business, Energy and Industrial Strategy document coming merely from the department, it would be nothing. The fact is that it reaches out to all other departments, which have all played their part and helped to produce it. As we implement the ideas behind it, other departments will contribute, be they the Department of Health, as mentioned by the noble Lord, or education and so on. The point is to get beyond the siloisation that we have seen on many occasions in different Governments of all persuasions; we want to bring a truly cross-government feel to this.

Both noble Lords asked a number of questions, which I will try to address. I hope I can provide responses that will satisfy them, but if not, I will be more than happy to write in due course. The first point made by the noble Lord, Lord Mendelsohn, was that he felt that the White Paper does not deal with regional imbalances. I assure him that this matter is of great concern to me more than most. He will know how activity can vary a great deal across the regions. If he looks at the north and the Midlands, he will find that productivity can be 9% to 14% below the United Kingdom average. We had quite a few speakers from Wales earlier today; productivity in Wales can be around 19% lower than the United Kingdom average. We want to reach out to the regions, to Wales and to Scotland, to ensure that we bring them up to higher levels of productivity. If we fail in that, we will have failed in all other ways.

Both noble Lords also asked about the industrial strategy council and wanted assurances that it would be independent. I can give that assurance and that it will include business leaders and experts. We will be able to give further details about the council in the coming months.

I was asked about British Business Bank investments. I can give an assurance that £2.5 billion of new funding is on offer and that further announcements will be made in due course. I was also asked about what further investment was required and how much new money there is. I have given the figures for what we are seeking to do on research and development so that we get that up to at least the OECD average by 2027. Importantly, that is just the initial target; we would like to get it up to 3% in the longer term. Going back to the question about infrastructure as a whole, we are looking at £31 billion in the pipeline for the future.

The noble Lord, Lord Mendelsohn, asked about measuring our goals and how we will seek to assess the success of the industrial strategy in due course. At the highest level we have a set of goals relating to productivity. We believe that it will be for the industrial strategy council to assess progress on those goals and the others outlined in the strategy.

I am beginning to feel that I am using up time that I should not, but perhaps I may turn to one or two of the questions asked by the noble Lord, Lord Fox, particularly on NHS funding. I refer him to what the Chancellor announced in the Budget when he referred to new funds. The noble Lord also asked about clean growth and whether the Government are cutting funding for renewables. I assure him that we have particularly fast growth in renewables and that we are still committed to a further £557 million for new contracts for different renewables such as offshore wind. We are seeing growth in that area.

As my right honourable friend said in another place, in the Statement and in response to questions, the industrial strategy sets out the long-term strategy that we hope to see. We hope to see developments continue in the manner made clear by my right honourable friend. I thank the noble Lords, Lord Mendelsohn and Lord Fox, for what I think was their cautious welcome. I hope that, as the strategy develops and we continue to bring it forward, that welcome will also continue.

Fourth Industrial Revolution

Lord Fox Excerpts

Wednesday 15th November 2017 Lords Chamber

[Lord Henley]

My Lords, I welcome the noble Lord’s enthusiasm for these matters. I think the House is grateful for his very prompt intervention.

The noble Lord recognises, as I do, that changes are coming and that we must accept them and work for them. He will have seen the Made Smarter Review that we commissioned, published only a week ago by the chairman of Siemens, and I think he would accept that we will see many more jobs; I think the review estimated this could create something in the order of 135,000 new jobs. In terms of what he was saying about greater inequality, which I do not accept, there are estimates that the fourth industrial revolution will not only create new jobs, but create them faster and create better-paid jobs. That is something we need to look at. I will certainly look at the other reviews he mentioned, but there are challenges that we must accept. These changes are happening and we must work to ensure that they happen to our best advantage.

[Lord Fox (LD)]

My Lords, I am delighted that the Minister has mentioned the Made Smarter Review, which highlights that the UK is slow in adopting digital technology compared with our industrial competitors. One of the things it proposes is to run an adoption pilot scheme and to use the north-west of England as the location for it. Does he agree that we need to hurry up the adoption of a digital strategy and that a pilot in the north-west of England would be a good way of moving that forward?

[Lord Henley]

My Lords, I shall not make any firm commitments about that review, which was published only at the beginning of the month. Noble Lords will know that we have already had a Question dealing with it. I confessed that I had not yet read the full 246 pages of the review, but I am making progress under the advice of the Leader of the Opposition, who recommended that I read it with a mug of cocoa. I will look at all recommendations. I will not make promises about the north-west of England but the noble Lord will know I have a particular interest there. I would welcome going back up there as often as possible.

Productivity

Lord Fox Excerpts

Tuesday 7th November 2017 Lords Chamber

[Lord Henley]

Perhaps I may correct one of the noble Lord’s statistics: it is only my fourth department since 2010. It is important to get these things correct. I am glad that the noble Lord, like the Government, welcomes the report; we will certainly take note of it. As I said, we are waiting for the industrial strategy to come out later this month, and I am grateful that he makes it clear that there are matters other than government spending which are important here, particularly in dealing with questions of productivity. We want to make sure that all levers that are available to the Government can be made use of. He mentioned purchasing. We will certainly make that clear, and I hope that other departments will do their bit. He mentioned purchasing within the health service, but there are other things that the Government can do as well, in relation to deregulation and trade policy, as well as procurement, which he mentioned.

[Lord Fox (LD)]

My Lords, I, too, welcome the Minister back to the Dispatch Box. His immediate predecessor gave those of us who are impatient for the industrial strategy White Paper a preview a couple of weeks ago. In that preview he identified three particular strands that will address the productivity issue that this commission has highlighted so well. One of those was skills, and in that he particularly highlighted apprenticeships. I am sure that the Minister has not had much time yet, but he will have noticed that the latest statistics from the manufacturing organisation, the EEF, show a 61% fall in the number of registrations for apprenticeships in the last quarter. Does he agree that this is not just disappointing, it is awful? Can he explain what the Government are doing to improve their lamentable performance over the apprentice levy, which is causing this problem?

[Lord Henley]

My Lords, I am not going to go into detail now but I am grateful that the noble Lord went to the meeting that my predecessor held and listened there. I agree that the figures are disappointing but again, if he can be patient and wait for the launch of the industrial strategy he will see what we are doing and what we are bringing together from all parts of the Government in this area.

Life Sciences Industrial Strategy

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Monday 23rd October 2017 Lords Chamber

[Lord Prior of Brampton]

My Lords, there is a strong case for increasing the amount of resources that go into R&D in the UK. It is true that about 1.7% of GDP goes into research at the moment, whereas the OECD average is 2.4% and many countries are aiming at 3%—Germany is looking at 3.5%. We share that aspiration. As the noble Lord will know, we are increasing the amount of money that the Government spend on research by £2 billion a year from 2020-21 and an extra £4.7 billion over the lifetime of this Parliament, which is a very big increase. This is one of those areas where we can almost never spend enough.

[Lord Fox (LD)]

My Lords, the life sciences industrial strategy is a clear and comprehensive review of the biomedical and pharma sectors, but it misses out large swathes of the industry—namely, animal health and plant science. Was that narrow interpretation by the deliverers of the industrial strategy on the advice of the Government, or was it the interpretation of those making it? Can the Minister give us assurances that plant science and animal health will also be included in the industrial strategy sector deal when it emerges?

[Lord Prior of Brampton]

My Lords, it is true that the life sciences industrial strategy was largely based on humans rather than plants or animals. That does not mean to say that we will not be having a strategy for other sectors of the economy as well, including plants and animal science.

Science and Innovation Strategy

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Monday 23rd October 2017 Lords Chamber

[Lord Fox (LD)]

My Lords, it is difficult to be innovative in this debate, having heard 10 such erudite and thorough speeches, and possibly because I have already left the creativity window that the noble Baroness, Lady Greenfield, has just ably described, but I will do my best. We should first congratulate the noble Lord, Lord Patel, as everybody has, on securing this debate and on the quality of his intervention. We should be optimistic that this debate is being had, and grateful that all sides of the House are doing so on relatively similar terms, because we will and do need a plan, leaving aside the implicit issues around Brexit—which will enable me not to be chippy or curmudgeonly at all when I talk about some of the other issues that face public life.

The world is changing fast. There is the rise of international competitors, particularly from the East, as the noble Lord, Lord Patel, pointed out. There is the emergence of global technology giants, which stand across borders and territories. The looming shadow of automation, machine learning, robotics and all that are also changing the game and we have to step up. But we should be optimistic that our science and technology background may set us up to do that.

We have an industrial strategy on the cards, yet I often get the impression that when we talk about that emerging strategy, we all say what we want it to be. That wish probably differs across the House, so I thought I might give your Lordships some perspective on how we will judge the industrial strategy when it emerges from its current form, in a White Paper. We need to understand whether it will develop the skills we need; I will come back to that. But will it create sustainable and green growth across the country? Will it deliver 21st-century infrastructure, physical and digital? Will it encourage and improve investment in research and development? Will it nurture excellence while supporting and understanding entrepreneurs and innovators? Does it deliver regional and diverse growth across the country and establish the best financial and regulatory framework? That is the kind of framing we need to bear in mind when we look at that industrial strategy.

Underpinning this are skills. The noble Baroness, Lady Morgan, ably set out the case for them. We need a society that can thrive, and we need that thriving to happen right across society. We are not in that position. As noble Lords will have seen, according to the OECD nearly one-third of 16 to 24 year-olds in the UK have weak basic skills. Mark Walport, when he was still leading the Government Office for Science, gave a similar, damning assessment. High-level skills are not equally distributed across the country. There are big gaps. The UK does not do well in ensuring that people are work ready. Even when they get to work, there has been a decline in lifelong learning, so we have a big skills challenge.

As the noble Lord, Lord Hennessy, pointed out, that challenge has faced many Governments over many years, and we do not appear to be overcoming it easily. The noble Baroness, Lady Morgan, set out the need for an overarching skills and learning strategy. The Liberal Democrats support that strategy and have been campaigning on those grounds. Apprenticeships and T-levels have been offered as a solution, but they are not a unique solution. Without a gear change in delivering the basic skills that people need as a starting point to drive them through to higher levels, we will not meet the challenge.

Turning briefly to research and innovation, we welcome the recognition in the last financial statement that research and innovation need investment to thrive. That was a good step, and we hope it is just one step in a more ambitious investment journey.

The creation of the new unified UKRI has been referred to by a number of noble Lords. I was grateful to hear that the noble Lord, Lord Freeman, sees positive effects from it, and the noble Lord, Lord Bhattacharyya, should be congratulated on his role in helping to bring that forward. There is an opportunity and a challenge in bringing the seven research councils and UKRI together. The opportunity is, in a sense, that UKRI infects the research councils with innovation. I think that was what my noble friend Lord Willis was referring to. The danger is that it is the other way around and we move somewhere down the TRLs, into 1 or 2, and UKRI is dragged into research rather than innovation and development. I would like the Minister’s view on how we keep the right side, if you like, of that continuum because we do not want to lose the innovation we have.

The industrial strategy challenge fund seems to be a good idea, and it would be useful to understand the timetable. I understand that the Faraday challenge will be heading out soon. I urge that we get an early assessment of how that process is working because we do not want to keep making the same mistakes. It looks as if this is a way of tackling big problems, but we would like the Government to keep us posted about how that moves forward. The Government have likened this to DARPA, just as they have likened catapults to Fraunhofers. There is an element of delusion in this. The challenge process is not DARPA. It is not big enough or wide enough and it does not have the support of huge industries. We have to be careful how we describe what catapults do. Catapults have been a welcome introduction into the innovation landscape, and we could benefit if the Government were to put more money in and perhaps declare a few more catapults, but we should be careful in the language we use.

Are we fit for purpose? Do we have an industrial strategy that embraces the challenge and delivers the skills and the landscape that we need because we are going to need it? Industry 4.0 will change everything we do. We will need the skills and we will need to maintain, and further, investment in research and innovation, substituting lost funding from the European Union and adding more. We need to step forward with an overarching sense that this is a mission. Here I agree with the noble Lord, Lord Hennessy, and with what he said in the nuclear debate a few days ago. The nation needs to find its momentum, its push and go, around science. We, as people in public life, should be part of that process of developing that energy.

Nuclear Research and Technology (Science and Technology Committee Report)

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Tuesday 17th October 2017 Lords Chamber

[Lord Fox (LD)]

My Lords, it is always a pleasure to hear the noble Lord, Lord Hennessy, speak but it is also a challenge to follow him. I predict that there will be no swirling waters of the Pentland Firth in my speech.

Along with everyone else who has spoken, I thank the noble Earl, Lord Selborne, for his leadership on the report and during my early years on the committee, and join him in thanking the team that supported us in producing this report. I also thank my fellow members of the committee, many of whom were able to give a seminar on this subject at the drop of a hat, as noble Lords have heard.

This is a subject of great complexity, but I hope that the Minister has received some clear messages from what has been said today. The time for the Government to sit on their hands, if ever there was one, has gone. As the noble Lord, Lord Hennessy, said, the time for push and go is with us.

The report sets out three things that have to happen for us to see some action in this area. First, as my noble friend Lady Bowles, the noble Lord, Lord Oxburgh, and others set out, the Government need a strategic plan for the UK energy market—the road map which the noble Lord, Lord Broers, set out in detail on the kind of energy that we will need, how we will generate it and when we will need it. Without that master plan, it will be very difficult for us to fit this one technology into the wider picture. It is clear from the Clean Growth Strategy that some of the elements of that are in place. However, as the noble Lord, Lord Broers, very clearly set out, there is work to do before this becomes a clear and obvious road map. I hope that the Minister can tell us when and how this will be forthcoming and whether it follows on from the Dieter Helm review. If we are to have a nuclear section within the industrial strategy, surely it has to be based on something of this nature in the first place. In a sense, what is the chicken and what is the egg in the process of developing the industrial strategy?

Secondly, as other speakers, including my noble friend Lady Bowles, set out, the Government need to firmly establish what sort of nuclear industry we want to have. Are we a maker or a taker, as she said? Are we going to be a player in electricity generation technology or are we going to settle back and buy it off the shelf? If the answer is that we are going to be a player, time really is at a premium. For example, our position regarding Generation IV and SMR reactors needs to be clarified very swiftly. This report sets out those questions, but the Government’s response largely avoids giving us an answer to them. In the Government’s opinion, are we going to be fully in the generation technology business—because being half in and half out is an expensive way of not achieving that?

Looking at the committee’s report, the pedestrian nature of the Government’s response should not be a surprise. For a long time, we have had slow progress and, frankly, a lot of retracing of steps as well as shuffling forward. Yet, to be fair, some elements of that response were positive. It is good to see that a successor organisation to NIRAB is on the horizon. I found the language about its nature in the Government’s response somewhat sphinx-like, so if the Minister can set out when he thinks this organisation will emerge and what differences and similarities it will have in relation to NIRAB, that will be very helpful. It is also interesting to see that the NIC will soon meet. What outcomes does the Minister expect from the NIC, and when will these begin to flow?

I said that there are three conditions. Obviously, the third of those is funding. It was good to see set out in the Clean Growth Strategy that the Government are earmarking £460 million. Sadly, in the atmosphere of suspicion, I had exactly the same questions that the noble Earl, Lord Selborne, had. Is this new money? Is it coming out of the Challenge Fund, or where is this money coming from? Perhaps the Minister could fill that in.

Before closing, I would like to say a few words about SMRs—there has been a lot said already—and about Euratom. It is good news that, after stalling a year ago, the SMR competition is moving forward. The noble Lord, Lord Oxburgh, set out the situation very thoroughly. My understanding is that there are more than 30 entrants sitting in the in-box for this competition, and it is going to be a challenge to deselect these. The issue of comparing apples with pears is going to arise very quickly. Some of these bids will be finished for very highly developed concepts and designs; some will be merely front-end concepts. Some, I suspect, will be genuine light-water Generation III-style; some will border on Generation IV. How is that deselect process going to be embraced? It is a challenge, and it could happen that we will end up spending another year or two in that comparison process, so it would be very helpful to know how that technical comparison is going to be carried out.

In their response, the Government talk about the SMR market—“the market”—in abstract, but frankly, the Government are the market, and they need to take responsibility for being the market. Indeed, in some cases, or many cases, the UK alone will not be a sufficient market for the economics of these reactors, so the Government have to be in, in order for whoever wins this complicated down-select process to be able to step forward into the international market and gain purchase in that market to create an economic product. Therefore, I would welcome the Minister’s view on how the Government intend not just to encourage other people to be the market but to be the market themselves.

On Euratom, I associate us with all the comments that have been forthcoming, particularly those of the noble Earl, Lord Selborne. The Government are making reassuring noises about the post-Euratom environment in which we will find ourselves. We on these Benches still consider this to be an unnecessary burden that the Government have taken upon themselves. There is still an opportunity for the Government to buy themselves some more time. The Prime Minister is acknowledging that the ECJ will have a role in certain aspects of the transition process. Given that the major bugbear for the continuing relationship with Euratom is the role of the ECJ, it seems perfectly reasonable that, if the ECJ has a role in some aspects of the transition process, it could also continue to have a role with Euratom, and we would not have to leave Euratom until after the transition period. Can the Minister say what thoughts the Government have had on that point, so that, rather than leaving Euratom on leaving day, we would leave after the transition period? Perhaps that is what they are already planning, but it would be very helpful to have that information.

The noble Lord, Lord Hennessy, asked whether we had lost our national nerve; the noble Lord, Lord Hunt, pointed out that we need a nuclear vision for the United Kingdom. Now is the time for that clarity because, if the Government wait any longer, the corporate will and the people—the engineers, the people with the knowledge to deliver any vision—will be gone. I would welcome the Minister’s views on those points.

International Investment

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Tuesday 17th October 2017 Lords Chamber

[Lord Mendelsohn (Lab)]

My Lords, I thank the Minister for repeating the Statement in this House. I also thank him for his personal interest in these matters, not just in relation to Bombardier but for his deep involvement in shaping the Green Paper, which is shown through its pages.

I turn to the last part of the Statement, which is the very welcome news that Bombardier and Airbus have determined to create a joint venture to look at developing the C Series aircraft. The pairing of these two cutting-edge product lines is a very exciting prospect for the future of aerospace manufacturing and the excellent industry that we have here. We are hugely encouraged by such a step and what it means for the UK. I would be grateful to the Minister for some further information on what assurances or indications the Government have gained from both companies as to the likely investment or potential for jobs growth in this country as a result of such an excellent step. I reaffirm the broad consensus of the House, as demonstrated during the course of the last Statement, that we strongly support the Government’s actions in defending Bombardier’s position against a completely unjustified and unwarranted attack by Boeing, and a process which we are not convinced is as straightforward and clear as it could be. We urge the Government to do whatever they can and we support their continued efforts to try to ensure a swift and speedy resolution of these matters.

We warmly welcome the excellent and timely Green Paper National Security and Investment and Infrastructure Review. We are pleased that the Government have chosen to look at how we can update our structures to deal more effectively with changing times. As a general observation, this creates further changes to our merger regime, some of which the Minister has already mentioned, such as matters involving the Takeover Panel and the FCA and further reviews of corporate governance. Even some of the insolvency reforms have a bearing on how we look at this regime. I make a plea for a more holistic process in how we review these issues of industrial strategy. Especially as we face Brexit, it would be useful if the Government could come up with a more joined-up approach to how these different parts can achieve the outcomes that we want, rather than having conflicting and competing claims or unwelcome consequences.

In relation to the principles from which we approach this review, it is important to state—as the review itself does—that we have to ensure that the UK remains open for investment and participation. We still want to be a major global player in all these areas. Sometimes the indication that we are involved in a review creates a chill. We should be clear that, while it is entirely legitimate to protect the country’s interests, we will not create a large investment review. This also applies to how we address issues such as the clawback of funds and how those funds might be used for early development or other things for companies which might not be eligible. That provision would itself raise a series of questions. One has to assess things delicately and put them in sensible terms. The intention is clearly right, but we would not want it to have unwelcome consequences.

We are pleased with the short-term and long-term approach to ensuring that we have an adaptable and operational system. The review stresses our foreign direct investment position, which this House has discussed many times. We are mildly sceptical about the nature of some of this investment. The charts in the paper identify the level. If we subtract the gold transactions which take place in the UK as goods received—which effectively net each other out—I am not sure the position would be so flattering. Our FDI position is not as good as is suggested and we should be conscious that we have a long way to go in encouraging the right sort of job-creating investment. The review should be seen in that context, rather than giving the feeling that we are in a much stronger position than we are.

Will the Minister provide some thoughts on the following issues? First, what are our national security requirements? Are these strategic or are they direct security concerns? What balance will be in place on issues such as security of supply versus strategic control, as well as our own capacity to ensure that we have certain technologies? We welcome the important short-term measure of lower thresholds, which does plug gaps. On long-term measures, the review is right to look at mechanisms such as call-ins and notifications. However, these raise questions themselves, the first of which is the nature of acquisitions and security concerns as companies develop in the modern world. This is not always about the takeover of a company. As we have seen from the way in which companies acquire access to technology and other things, this can frequently be done through partnerships, joint ventures and other things which do not involve a complete and direct transfer of equity. Sometimes control changes due to debt, so we need to consider all these measures. I would be very grateful for the Minister’s observations on those points.

In relation to the nature of these companies, we have looked at lower tests on dual use in the military sector and those involved in the design of computer chips and quantum technology. Certainly, our security concerns can be identified in other high-tech sectors, including life sciences and even food technology, as well as other areas of science and research. I would be very grateful to be told how the Government decided which sectors to select.

In the context of the voluntary and mandatory reforms, what was the thinking behind the notion that you can divide those sectors into voluntary and mandatory? Certainly, the guidance the Minister talked about would be enhanced by giving a much clearer view on that.

Finally—I do not wish to sound too mischievous, but I will ask this question anyway—does our reviewing the matter at this stage suggest that we may well take a different view over the long term, as these companies already fell within the threshold, or that we might be open to taking a different view on what took place in relation to ARM or even Hinkley Point?

[Lord Fox (LD)]

My Lords, I draw your Lordships’ attention to the interests registered in my name. I, too, thank the Minister for repeating the Statement in this House. He is of course right to declare that the UK economy should be open. All of us on these Benches earnestly hope that that is the way the Government continue to play it and that we do not start to close down and become a little England.

The Minister also rightly highlighted the need for changes in appropriate safeguards. The world is changing very quickly, national security needs are changing and the Government are right to keep those under review, so this is a timely process.

The noble Lord, Lord Mendelsohn, asked for a holistic approach to the whole issue of mergers and acquisitions. En passant, I add pensions to that list, which he did not include, because increasingly pensions and the rights of pensioners are becoming a driver within the mergers and acquisitions section.

On the Statement, there is a powerful case for strengthening the public interest in takeovers, as, indeed our leader Vince Cable has argued regularly, most recently, I think, on the AstraZeneca case. However, while lowering the threshold is a welcome step, the Government’s proposals are narrow and do not add a great deal to the overall public interest element, which should be covered in a more holistic approach. In recent months we have seen several of the UK’s high-tech companies snapped up by foreign competitors. This has been exacerbated by the fall in the value of the pound. That is a regrettable outcome. Therefore, today’s inclusion of computer chips in the list of new technologies singled out is somewhat interesting given that it follows the much publicised acquisition of ARM, arguably the world’s best chip designer. That, again, was driven by the weakness of the pound. Perhaps the Minister agrees that there is an element of closing the stable door here. We wish that some of the measures we are discussing were in place at that time.

The addition of quantum technology raises the question: why only that? Again, the noble Lord, Lord Mendelsohn, opened up a list of other technologies. I had biosciences and some aspects of IT and encryption on my list. It seems to me a rather narrow list when you consider the potential threats to a range of technologies. In some technologies, the threats have not been thought of yet but they exist. In our view the scope should be widened to defend not just the science base from a security point of view but also the overall knowledge base of this country. Knowledge can leak out from this country through a variety of means, of which mergers and acquisitions is but one. Joint research projects are another. In many cases you often have competing aims where inward development exercises try to draw foreign investors into research projects where the IP driver in this country would be to exclude some of those investors. In many cases, therefore, we are creating a situation that is leaking out valuable information —whether it is for security interests or economically valuable—through actions that the Government or local government are driving. Perhaps this is something that the Minister could look at. At the heart of this is the narrow look at security needs. These Benches would widen that to cover more economic interests of this country, and we hope the Government will take that on board.

Turning to Bombardier, I am sure the whole House welcomes the announcement of this deal, which should protect the future of the plane-maker. Clearly, only a few days ago, we were discussing a very bleak future for the 4,000-plus workers and all of those indirectly involved in the economic area that it has created in Belfast, so this is good news. I said at the time that even though this is not a case that would, in the end, be won by Boeing, time was the issue that would kill off and affect Bombardier. This is a very effective way of trying to bridge that time and of negating that problem. We should all congratulate everybody who has been involved in expediting this so swiftly and effectively. I am sure there are “i”s to be dotted and “t”s to be crossed, and I hope the Minister will give assistance to all those who require it to make sure that happens. In that regard, will the Minister tell us what anti-trust hoops he expects this deal to have to jump through?

We would also welcome some clarity from the Minister on what assurances have been forthcoming, both on investment and on the public statement made by the CEO, Tom Enders, on the notion that operations will be more efficient. What will be the job implications in both Belfast and perhaps in Broughton? What assurances have been given, and how will he be able to uphold them? In many ways, the US Administration and Boeing might feel that they have got off the hook somewhat by this, but there are still huge tariffs outstanding on this aircraft. The actions of the US remain a salutary warning to this country that its relationship with the Trump Administration is, at best, strained and poses something of a black cloud.

In conclusion, today’s announcement on takeovers and mergers sets out steps in the right direction. We welcome greater breadth in scrutiny and the requirement for notification. I am sure that, as the consultation process goes through, the Government will look at the technologies, and at which elements of which technologies we should be concerned about. I hope they will also take on board the public interest aspect in mergers and acquisitions.

[Lord Prior of Brampton]

I thank both noble Lords for their broad welcome for the news on Bombardier and the Green Paper. Turning first to Bombardier, both noble Lords would like further information about jobs, growth and possible anti-trust implications, but it is too early to say at the moment. This joint venture has only just been announced. It is still subject to negotiations between the two parties. Rather than hazard a guess at where they will come out, perhaps we should report back to the House when further details become clear.

Turning to the Green Paper, both noble Lords would like a more holistic approach. The noble Lord was referring particularly to the takeover context, and he is absolutely right. Pensions are absolutely essential in that context, as are environmental obligations and the like. The noble Lord, Lord Mendelsohn, referred more to a holistic approach in the context of industrial strategy more generally, rather than specifically on takeovers. He will have to wait until later in November, when we will announce our industrial strategy. I hope he will agree, when that strategy is before him, that it is a holistic, joined-up approach to industrial strategy.

I will deal with some of the other issues that both noble Lords raised. Of course foreign direct investment is essential. There is a balance; we want to be open to foreign direct investment—the last thing we want to create is a chill, as the noble Lord put it, on investment coming into this country. Although it is absolutely true that a number of high-tech British companies have been sold over the last two or three years, particularly to American buyers, in the vast majority of cases those American companies have brought capital and support. I refer, for example, to Google’s acquisition of DeepMind; it has put huge resources behind that company which might not have been there had it remained a private British business. SoftBank’s acquisition of ARM falls into that category as well; it gave a number of important undertakings about research and keeping that research in the UK. Therefore, there is a balance to be struck in these areas and the last thing we want to do in this country is shut ourselves off from investment from the US and elsewhere. If one looks at how we support small tech companies, it raises a much broader issue about patient capital, spin-outs from universities and the like. I hope we will deal with those issues when we come to our industrial strategy in a few weeks’ time.

Both noble Lords raised whether the definitions of quantum computing chips and dual-use defence were too narrow. They will, no doubt, want to comment on that issue in the consultation. We have gone for quantum computing and chips in particular because they are often embedded into infrastructure and safety-critical areas. Quantum computing is precisely the area where cybersecurity is so important; we can use it to break complex encryption codes and the like. We felt, having done a lot of consultation, that those areas of chips and quantum computing were the critical ones. I understand the noble Lord’s point about life sciences; there may be other areas that he would like us to consider as part of the consultation. In general, however, this is a question of balance and where we draw the line. We can always argue about the balance, but I am reassured that we have not got it too far wrong when both noble Lords broadly support what we are doing.

Industrial Strategy

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Wednesday 19th July 2017 Lords Chamber

Asked by

[Lord Fox]

To ask Her Majesty’s Government what conclusions they have drawn from their consultation on the introduction of a new industrial strategy.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Prior of Brampton) (Con)]

My Lords, the responses to the consultation are broadly supportive of the proposals in the Green Paper and endorse the challenge of developing an ambitious and enduring industrial strategy that sets a clear long-term vision and works for all parts of the country. The responses will inform the development of the White Paper to be published later this year.

[Lord Fox (LD)]

I thank the noble Lord for his response and for the fact that the consultation is being heeded. I understand that sector discussions are under way and that the metaphor has moved from referring to 10 pillars down to four. Quite apart from that giving the department more time to spend on Brexit chaos, what is the rationale behind this change and which of the pillars have been jettisoned?

[Lord Prior of Brampton]

I think that the noble Lord is confusing two things. This is a question about how the White Paper is to be structured. It is clear from the feedback received during the consultation period that technical skills is probably the most important area we need to focus on, along with universities and science and innovation, infrastructure, and what we all call “place”. We cannot have an industrial strategy that does not reach out to other parts of the country beyond London.