Economic Environment: Growth and Jobs

Lord St John of Bletso Excerpts

Thursday 11th July 2019 Lords Chamber

[Lord St John of Bletso (CB)]

My Lords, I join in thanking the noble Baroness, Lady Neville-Rolfe, for introducing this topical and timely debate. I shall focus my comments on promoting job creation and business growth in the digital ecosystem. The industrial strategy made provision for substantial investment in digital infrastructure, as well as investment in talent and skills. My observations are less about the tax system, save for the tax incentives to invest in digital entrepreneurship through EIS and SEIS.

Last year I was fortunate to be a member of the ad hoc Select Committee on AI, ably chaired by the noble Lord, Lord Clement-Jones, in which we did a deep dive into both the benefits and the threats of AI. I am tempted to talk more about medtech, infotech, proptech and digitech, but in my limited time I will focus on the importance to our economy of fintech, a sector where the UK is arguably the global leader. Fintech is essentially a combination of financial services with innovation, with a multitude of benefits and savings. The UK fintech ecosystem has all the key elements for a world-leading environment where the industry can thrive with start-ups, entrepreneurs and technological innovation in abundance.

However, I must stress that this is not a time for complacency. As the noble Baroness mentioned in her introductory comments, the digital revolution has provided disruptive technology solutions to age-old as well as brand new problems, from efficiency and reliability to transparency and usability. It also poses a potential threat of massive job losses.

It is a sobering reality that there are currently 1.3 million unbanked working adults in the United Kingdom. Moreover, 16 million people in the UK have less than £100 in their savings account. Some 10% of households are still without access to the internet, and 30% of people over 65 have never used a computer. Fintech holds the key to unlocking and tackling financial inclusion, and it is a sector that places entrepreneurship at its heart. I entirely agree with the noble Baroness that we need to establish a culture of enterprise.

Start-ups are the lifeblood of the sector and are driving the digital economy forward. Banking the unbanked, highlighting affordable credit solutions and providing SME loans all combine to deliver the future that we all deserve. At a time when investors have less appetite for high risk, the tax incentives of EIS and SEIS for start-ups have been essential to the sustainability of many fintech businesses. Last year the United Kingdom had its best year ever in terms of fintech investment, with over £3 billion invested from private equity and VC investments alone. This puts the UK third in the sector, behind only China and the US. London has the world’s highest concentration of 64,000 financial and professional services firms. There are just over 1,600 fintech firms in the UK—a figure that is destined to double by 2030.

Key to the success of fintech in the UK are our progressive regulatory frameworks, enabling challenger banks, remittance providers and fintech pioneers to lay their foundations and rapidly scale up. There have as a result been several unicorns such as Revolut, Monzo and GoCardless. While there is a lot to be positive about in the fintech ecosystem, the future of Brexit will invariably pose a major threat to open borders and the international talent pool that is vital to the success of fintech in the UK. Immigration policy questions will continue to loom large in the light of Brexit uncertainty, and it is thus all the more important to grow the talent pipeline with a greater range of diverse talent at home. Can the Minister give assurances that there will be more provision for tier 1 exceptional talent visas to help retain and fill the demand for skilled labour?

I mention the challenge of diversity because at present, only 12% of senior executives in the UK fintech sector are female. We need policies that drive the recruitment of diverse talent, both to tackle the gender imbalance and to have a workforce with other skills backgrounds. I entirely agree with the noble Baroness, Lady Neville-Rolfe, that education is pivotal. I welcome the introduction of fintech courses, apprenticeships and sponsored work placements to strengthen the fintech talent pool, as well as the Fintech for Schools campaign, which educates young people in how to use fintech.

In conclusion, the UK, and particularly London, has built an incredible financial services community that, positioned correctly, can withstand techno-economic headwinds. But this is not a time for complacency; we need to focus our energies on collaboration rather than competition.

Artificial Intelligence (Select Committee Report)

Lord St John of Bletso Excerpts

Monday 19th November 2018 Lords Chamber

[Lord St John of Bletso (CB)]

My Lords, I join in thanking the noble Lord, Lord Clement-Jones, for his able chairmanship of the ad hoc Select Committee on AI in the United Kingdom. In my many years in your Lordships’ House I have never been on a Select Committee that has been so absorbing and stimulating.

We are living in the most extraordinary times. The confluence of big data, connectivity and artificial intelligence has revolutionised old industries and created new ones. As the Industrial Revolution transformed the nature of manual work, so AI is set to change dramatically the nature of white-collar workers and the service industry, from chatbots replacing call centres, to those who make decisions on credit and even accountants—and, with the emergence of autonomous cars, truck drivers—being replaced. This confluence of change means that AI has reached a flashover point, with computer power, the availability of huge volumes of data and the fact that digital channels for interacting with businesses and citizens are now preferable.

Apart from the oral and written evidence, we were fortunate to visit Google DeepMind, the Microsoft research laboratories in Cambridge and the Alan Turing Institute, as well as techUK. My noble friend Lord Kakkar spoke most eloquently about chapter 7 of our report. This details the huge benefits that AI can deliver to healthcare, particularly in the National Health Service. This could include more effective detection of diseases, management of chronic conditions, drug discovery and, of course, delivery of more efficient health services. We are increasingly moving from a world of reactive medicine to one of proactive medicine.

However, one of the potential drawbacks in the National Health Service is the fact that that there is no centralised database, resulting in most data being kept in unrelated silos. While keeping data isolated made sense historically as a security measure, the data-driven world in which we operate demands greater visibility and consolidation. Machine learning provides unique value in being able effectively to remove the manual processing of data, thus significantly reducing back-end operating expenses.

Clearly, the management of data in the NHS requires strict adherence to data privacy—there are concerns about the criminal misuse of AI and data—and, as the noble Lord, Lord Reid, mentioned, respect needs to be given to data ethics and accountability. Concerns have been raised about the risk of abuse of AI and breaches not just of public trust but of data security.

Many fear that the merger of infotech and biotech could push many hundreds of thousands of people out of the job market, a point made by the noble Lord, Lord Hollick. Yes, there will be masses of job losses but, equally, replacement jobs will be created.

As the noble Lord, Lord Clement-Jones, said, there are concerns also that big data could create digital dictatorships. Our report covered the need for reasonable access to data, particularly for SMEs. While several are sceptical about the effective use of AI in the UK, our report sought to focus on the positive contribution that it can make to our lives in many different ways. One industry not mentioned in the report but to which the noble Baroness, Lady Rock, may refer is the agricultural sector, where AI can have a huge impact. We now have precision agriculture, where farmers are able to utilise drones in the sky, connected with the help of big data to sensors in the fields.

As the noble Lord, Lord Hollick, said, it was encouraging that the Government mentioned in their industrial strategy that AI and data capture need to be identified as one of the four grand challenges in which the UK can lead the world for years to come. To maximise this opportunity, we need more qualified data scientists who are able to use algorithms to sort through enormous databases, combining profiles, eliminating duplicates and thereby providing a complete and unified set of data. What plans do the Department for Education and other departments have to provide students with training to more effectively prepare them to embrace data scientific skills?

Trustworthiness underpins public support for data innovation. I have already referred to the benefits in healthcare and agriculture, but there are huge benefits also in the financial services sector and autonomous systems. Lessons have been learned from the fiasco of data breaches at Cambridge Analytica.

I want to make brief mention of the opportunities of blockchain technology, which is not just about cryptocurrencies but is more a transformational tool and game-changer for the future. Distributed ledgers can be created which will form a significant part of future databases, providing greater transparency and accountability to both the public and private sector.

There is no doubt that AI presents a significant opportunity to solve complex problems, boost productivity and accelerate innovation. We need to shift legacy mindsets to embrace new ideas. AI and machine learning need to be embraced while respecting privacy, ethics, transparency and good governance. I wholeheartedly embrace all the recommendations of our report and trust that the United Kingdom can consolidate and thrive as a global leader in the development of artificial intelligence.