Industrial Strategy — House of Lords, 2018-01-08
Topic: Mixed Topics
Sushantha Bhattacharyya (Labour, Centre-left): Oh, hi The turnover of people is matched by changes of policy. For many years, everything was seen as interventionist. Even research and science budgets were reduced—it was not the job of government. I remember that the first thing done by the Blair Government was to put back the science budget because it was in a terrible state. However, the research institutions that worked with industry had closed, so we had to reinvent them. I hope that the next industrial strategy is an update and not a reboot Another reason to focus on implementation is to keep our focus on delivery and then fixing where we fall short. For example, we have one of the lowest rates for business R&D, both within firms and in collaborative research. The Government have as a target for total R&D spending 2.4% of GDP in 10 years. It is a good target, and we want to hit it, but in 2004, the target was 2.5% of GDP, also in 10 years. Fourteen years later, total R&D spending as a share of GDP is largely unchanged, and the target is still 10 years away Is it a total policy failure? Not at all. Some sectors have made outstanding progress. Automotive businesses in this country disappeared completely. Today, automotive businesses have more than trebled R&D spend in a decade, from £1 billion to £3 billion a year. As a result, exports have doubled in a decade. Ninety per cent of that growth happened before Brexit devalued the pound. Imagine what would have happened if we had stayed in Europe. The challenge is replicating that success. It is the result of years of hard graft. When the great recession hit, the automotive sector struggled to get the help it needed to survive. As I said, "industrial strategy" and "intervention" had been anathema in government, so car makers chose to manufacture one. We started with a sector-wide Automotive Council so that the industry spoke with a single voice. We used this to secure support from government. The greatest success in BEIS today is what is happening with the Automotive Council, with all the industries together working with government. That led to collaborative investment in lightweight materials, low-carbon and connected and autonomous vehicles, all ideas which would completely change transport We built collaborative research centres to work on industry priorities, from battery technology and improving welding to data security. Big data analytics are completely changing the way in which cars are designed. Crucially, we persuaded global R&D leaders such as my friend, Ratan Tata, to invest in Britain. That put us in the right position to make a case for further investment, with money from government and industry together. This is where the regional policy comes into being. Our new mayor, Andy Street, and the local authorities—some are Labour, some are Conservative—have come together and we are now in a position to create 30,000 to 40,000 employment opportunities in the Midlands sub-region which had completely disappeared. That was one reason why the £80 million Faraday Institution for battery research was announced by the Secretary of State in October. There is also the business-funded, £150 million National Automotive Innovation Centre at Warwick, which will have a budget of about £1 billion within the next five years. On top of that, because there has been a big skills problem, we decided jointly with the LEP to fund a big apprenticeship centre, which will have 1,000 higher apprentices by the end of this decade Unless we have all such bodies joined up and the local authorities and regions working together, nothing will happen. It is the firm foundation that allows us to raise our ambitions. The challenge now is to encourage more business R&D in other sectors and increase our innovation intensity. We can use one successful sector to lead the way for others. In Britain, people used to say, "Oh, well, the automotive industry has disappeared. We should not be a manufacturing nation. We should only be a service sector; we should only be in the financial sector". Let us now imagine it: the sector that died and lost tens of thousands of people in employment has come back within a matter of eight years. We have the skills in this country; we have the R&D base in this country; we have just to get our act together and it happens I shall give another example. The pressure on the automotive sector for lightweight vehicles has led to a challenge for our steel and materials industry. The noble Lord, Lord Prior, knows all about this. We need to reduce vehicle mass by 15% percent; if not, the Chinese will kill us. As a result of low-carbon vehicle targets, the UK steel sector needs net shape facilities. In this sector now, Port Talbot has been rescued without very much money from government, but with government support, including government moral support and, again, making the regions come together, with the Welsh authorities, with a LEP there and various other authorities coming together to save Port Talbot. I am pretty sure that in five years it will be one of the best steel plants in Europe We can do this because success breeds success. If we do not do research in that area we will again fall behind the Chinese and the Germans—even the Germans have struggled with the Chinese—and again have a sector where the raw materials will be coming from other countries. This is what this strategy is all about and it leads me to a crucial point. A strategy for the long term does not exist in a vacuum. Our industrial strategy needs to inform the rest of government policy. Our steel industry needs to invest in areas where the car industry has a market for it. All these sectors are not so independent that each can have its own sectoral industrial policy I give another example. We need to be very careful when we change behaviour with tax incentives. The Treasury encouraged Britain to buy diesel cars because they have the lowest emissions. Now British cars have the lowest emission tariffs. So what does the Treasury do? It raises duties and overnight the market collapses, because of the perception that it is raising duties because eventually the Government will ban diesel cars. This is another enormous waste, when one part does not know what the other part is doing. I hope that the Government understand that the right hand needs to know what the left hand is doing. It is no use having the integrated strategy that the noble Lord, Lord Heseltine, has mentioned many times if, within the Government, there is no integration. So I welcome this strategy. It is not perfect—nothing is—but it is a very good start and we should give it time in order to make it work.