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House of Lords

Thursday, 3 July 2014.

11 am

Prayers—read by the Lord Bishop of Oxford.

Bishop of Guildford: Appointment


11.06 am

Tabled by Lord Trefgarne

To ask Her Majesty’s Government whether the Prime Minister is yet in a position to make a recommendation to Her Majesty the Queen in respect of a new Bishop for Guildford.

Baroness Harris of Richmond (LD): My Lords, on behalf of the noble Lord, Lord Trefgarne, and at his request, I beg leave to ask the Question standing in his name on the Order Paper.

Lord Gardiner of Kimble (Con): My Lords, the Crown Nominations Commission had its first meeting in early June and will have its second meeting on 21 and 22 July. The Prime Minister awaits the nomination from the Crown Nominations Commission and will then make a recommendation to Her Majesty the Queen, with the hope of an announcement in September.

Baroness Harris of Richmond: I thank my noble friend for his reply, as I am sure the noble Lord, Lord Trefgarne, will. I mention my having just completed the lengthy but very successful process of choosing a new dean for Ripon Cathedral, in a new and vast super-diocese. Will my noble friend consider sitting down with the Archbishops’ Secretary for Appointments and the Prime Minister’s Appointments Secretary, both of whom do a magnificent job with very few resources, and perhaps with others who have been through this long and involved process, to review and come back with some proposals to streamline that process? Alternatively, should the church be free to appoint its own bishops? I declare an interest as high steward of Ripon Cathedral.

Lord Gardiner of Kimble: My Lords, because of the age profile of the current House of Bishops, I understand that a number of vacancies and some retirements are coming along. I know that the most reverend Primate is conscious of this. The last time this was considered in 2008, the previous Government brought forward some changes to the appointments process. This Government do not have any proposals to change any further but I am sure that these matters ought to be borne in mind.

Lord Faulkner of Worcester (Lab): My Lords, perhaps I may ask the Minister a slightly broader question about public appointments which have been held up.

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Is he aware that since last Monday, the Science Museum Group—I declare an interest as a trustee—has been without a chairman, even though the process to reappoint the excellent Dr Douglas Gurr started as long ago as last summer? Numerous other appointments are awaiting decisions from the Cabinet Office or 10 Downing Street, of which the Science Museum is perhaps the most blatant example at the moment.

Lord Gardiner of Kimble: My Lords, I very much take the noble Lord’s point. Leadership in all institutions and bodies is very important and I will take that back. Again, I am very mindful of the point that the noble Lord is making.

The Lord Bishop of Oxford: My Lords, would the Minister find it helpful if the most reverend Primate the Archbishop of Canterbury was made aware of the concern of the House about there being sufficient meetings of the Crown Nominations Commission, so that when there is a pile-up of episcopal vacancies, as it were, there are sufficient meetings to address that? Is the Minister also aware that we very much hope to have legislation by the end of this year so that women can become bishops?

Noble Lords: Hear, hear!

The Lord Bishop of Oxford: They would therefore be eligible, and much overdue, to come into this House.

Lord Gardiner of Kimble: My Lords, what the right reverend Prelate said last is of great importance not only in this House but to the nation as a whole. I wish the deliberations of the General Synod extremely well. I know that when we had a previous exchange the most reverend Primate the Archbishop of Canterbury was going to be made aware of some of the concerns, and it would be extremely helpful if a record of our discussions today were made known to him.

Lord Howell of Guildford (Con): I shall ask a slightly narrower question than the Question on the Order Paper. Is the Minister aware that Guildford is a lovely place and that the cathedral at the centre is superbly sited, although it is in need of funds for repairs? Does he agree that there ought to be a whole raft of people eager to serve in this great role as bishop of Guildford? I hope there is an excellent range of candidates, one of whom will soon be appointed.

Lord Gardiner of Kimble: I agree with my noble friend. I hope the appointment will be made soon. It is very important that dioceses have bishops at the helm. I am aware that Guildford is in a very beautiful county, the most wooded county in the country. It is a fine place.

Lord Hunt of Kings Heath (Lab): My Lords, is Guildford a suitable place for fracking?

Lord Gardiner of Kimble: I am sure that when the new bishop arrives he—or perhaps, if it is some time, she—will consider these things. The important thing is that we need an energy mix in this country. Fracking

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could well provide that. Clearly it needs to be done carefully and sensitively, but we should not pass this opportunity.

Baroness Berridge (Con): My Lords, I expect that the winds of change will blow through the Anglican Church later this month. Will the Minister outline whether the Government will take this opportunity to look at the selection process for appointments in slightly more detail? Previously, I lived in the north-west of England for nine years. Liverpool, Manchester, Warrington, Bolton, Blackburn, Burnley, Preston and Lancashire are not currently on the Benches of the Lords spiritual but, as of right, Winchester is. That diocese includes the Channel Islands, which are not in the United Kingdom. Is it not time that we had a system of appointment that saw our metropolitan cities represented as of right?

Lord Gardiner of Kimble: My Lords, I can safely say that much of this is a matter for the church. There is legislation going back to the 19th century on these matters. At some point perhaps that might be looked at.

Lord Morgan (Lab):My Lords, would it not be desirable if the Prime Minister made no suggestion about appointing the Bishop of Guildford, as would be the case with the disestablished Church in Wales? Would that not greatly liberate the church as an independent body free from the trammels of state interference?

Lord Gardiner of Kimble: I am not sure that I am inclined to that view. Obviously the Church in Wales and the Church of England have taken different paths. That is a matter for the Church of England.

Lord Deben (Con): My Lords, we should be careful because the Church of Rome appoints its own bishops and takes a great deal longer than the Church of England, which is itself very dilatory. Changes do not necessarily speed up the system.

Lord Gardiner of Kimble: I am a great believer that if one does not want too much change, one should have some change.

Lord West of Spithead (Lab): My Lords, the House is not sitting tomorrow. There was mention of Her Majesty. Tomorrow, Her Majesty is naming the first fleet carrier to have been built since the Second World War. It is the work of 10,000 men and women around our country—a masterpiece of engineering. Would the Minister like to acknowledge and welcome this marvellous event tomorrow?

Lord Gardiner of Kimble: My Lords, the whole nation is extremely fortunate to have a head of state who works so hard on our behalf.

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Economy: House Prices


11.14 am

Asked by Lord Wood of Anfield

To ask Her Majesty’s Government what assessment they have made of the impact of increases in house prices on the strength of the United Kingdom economy.

Lord Newby (LD): My Lords, the housing market is recovering alongside the rest of the economy. As in previous recoveries, house prices have risen but, with the exception of London, remain below their pre-crisis peak in real terms. As a result of increased confidence in the housing market, planning approvals and housing starts are now at their highest for six years. With the creation of the Financial Policy Committee we now have the tools to guard against risks in the housing market.

Lord Wood of Anfield (Lab): My Lords, the list of those expressing serious concern about the impact of the UK housing market now includes the IMF, the European Commission, the Royal Institution of Chartered Surveyors, the Bank of England, Vince Cable, the Deputy Prime Minister and the entire economics profession. However, in a week where new figures showed house prices in the UK rising by 10% and by nearly three times that figure in London, a leaked document from the Department for Communities and Local Government showed that the Government are, astonishingly, expecting new housing starts to fall by 4% this year. Can the Minister explain why government housing policy seems to be based on a mixture of denial, bad economics and passing of the buck? What is their plan to do something about the UK’s chronic shortage of housing?

Lord Newby: My Lords, I remind the noble Lord that in Q1 2009 there were 17,000 housing starts and in Q1 2014 there were 36,000. There has been a major crash in the housebuilding sector. This is now being corrected with housing starts and planning permissions being significantly greater—typically around 30% more—than a year ago. I also remind the noble Lord that while we have had a rapidly rising population in the UK, for decades housing starts have been 200,000 fewer than in France, for example, where the population has not been rising in the same way. There is a chronic problem in housing. We are beginning to tackle it by programmes that support people buying their own home, liberalising planning and providing support for small to medium-sized housebuilders. This is not going to be an easy fix for a Government of any colour.

Lord Lawson of Blaby (Con): My Lords, while it is certainly very desirable that more houses are built in this country, does my noble friend not agree that the real problem is still the unmet need to streamline and speed up the planning process? Would it not be a good idea if all sides of the House would put pressure on this?

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Lord Newby: My Lords, there is clearly a challenge in terms of planning. Wherever one seeks to gain significant planning permissions there tends to be very vigorous local opposition. One of the ways we are hoping and planning to tackle this is by supporting a new generation of new towns. The first one in Ebbsfleet is now under way. That is one way of getting a number of bulk areas of new housebuilding. However, all parties are going to need to be much more robust in making the case for a higher level of new housebuilding than we have seen for several decades.

Baroness Whitaker (Lab): My Lords, can the Minister tell the House how many planning applications for housing have been approved but the houses have not been built?

Lord Newby: My Lords, there is always a lag between planning permissions and housing starts. If we take the last two quarters for which I have figures, there were planning permissions for 52,534 houses in Q4 2013 and 32,000 starts. In Q1 2014 there were 43,000 permissions and 36,000 starts.

Baroness Butler-Sloss (CB): Does the Minister think that anything should be done about the special position of London?

Lord Newby: My Lords, clearly London is in a special position. The population of London rose, I believe, by 108,000 in the past year and this is going to require a significantly higher level of housebuilding. The mayor has plans to build 40,000 new homes a year in London—bearing in mind that in 2009 there were 14,000 new homes built in London. With the population increasing very rapidly there is clearly going to be a long period of stress in terms of housing in London.

Baroness Maddock (LD): My Lords, the economy of the north-east is not growing at anything like the rate that it is in London. Is there not an argument for putting some of the stamp duty, much of it generated by the 26% increase in house prices in London, towards growth and infrastructure projects in the north-east?

Lord Newby: The Government have a comprehensive infrastructure plan, which includes a number of major new initiatives in the north-east of England. As the noble Baroness will know, over the years the Treasury has been very much opposed to hypothecating particular taxes for specific purposes, largely on the basis that they may be buoyant one year but may not be in another. Leaving aside stamp duty, the key point is that we have a comprehensive infrastructure programme in the north-east, and I believe that we have one for the next decade.

Lord Davies of Oldham (Lab): Is the Minister aware of the town of Altrincham in the north-west? The Chancellor certainly is because it is close to his constituency. Altrincham is one of the most prosperous towns in the north-west. Is the Minister aware that house prices in Altringham are half those in three

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inner London boroughs—not Kensington and Chelsea but Hackney, Southwark and Lambeth? Does that not show how chronic the situation in London is?

Lord Newby: Yes it does, my Lords.

The Countess of Mar (CB): My Lords, is there a sufficiently skilled workforce in the building trade after the doldrums that it has been in for such a long time? Are there enough people who have all the skills required to build houses? Has the Minister considered the modern prefabricated buildings that I understand can be put up within a week, in order to speed up housebuilding?

Lord Newby: My Lords, there are reports just today about skills shortages and rising wages in the construction sector. With the number of housing starts having increased so rapidly, you would expect that to be the case. Incidentally, when one talks about the free movement of labour within the EU, it is worth remembering that were it not for highly skilled technicians from other parts of the EU, the position regarding employment within the construction sector and shortages would be much worse. As the noble Baroness may know, we are investing an awful lot in apprentices and apprenticeships. In the medium term, that will be crucial in order to get to a new and higher level of building, but it takes quite a time to train someone to be, for example, a highly qualified electrician.

Carers Strategy


11.22 am

Asked by Baroness Pitkeathley

To ask Her Majesty’s Government whether they intend to make addressing the financial hardship of carers a priority in the forthcoming update of the Carers Strategy.

Baroness Jolly (LD): My Lords, the updated action plan will focus on the four priority areas of the Government’s 2010 strategy to demonstrate activity against those areas. In reviewing progress and setting out further actions, the plan will consider other emerging cross-cutting policy and practical issues relevant to more than one of the four priorities. This will include issues of financial hardship for carers. These will be referenced throughout the plan to show how they impact on the existing priorities.

Baroness Pitkeathley (Lab): I thank the Minister for that response, and am very glad to hear that financial hardship will be considered. She will know from the recent Carers UK Caring& Family Finances Inquiry that a growing number of carers are finding it really difficult to make ends meet. The commitment was made in the 2008 strategy that carers would always be supported so that they would not suffer financial hardship. That pledge was removed from the 2010 refresh of the strategy. Do I understand the Minister to be saying that it will be reinstated in the current strategy?

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Baroness Jolly: The current strategy is not yet released and I have not read it, so I am not able to give any indication. I can say that financial hardship is acknowledged by the Government and will be threaded through the strategy. I can give the noble Baroness a sneak preview of one action. She will know that younger carers are more likely to be not in employment, education or training, and contained in the strategy is an action to carry out a task and finish study to look at how young adult carers between 18 and 25 get into employment and/or study, and what support might be needed.

Baroness Howarth of Breckland (CB): My Lords, in a week when we celebrated the dementia-friendly Parliament, what are the Government doing about ensuring that existing programmes work? I have been approached by a number of people who have had good social work but appalling benefits, where their papers have been lost. If the present system worked for carers, it would help, with the addition of those issues raised by the noble Baroness, Lady Pitkeathley.

Baroness Jolly: Benefits are clearly critical to carers and, indeed, to the people they care for. The Government are really aware of that. I urge the noble Baroness to tell anyone who has approached her about individual problems to get in touch with their MPs, who have hotlines to all these agencies.

Baroness Knight of Collingtree (Con): My Lords, my noble friend indicated that this matter is under consideration. Would she please think of speeding up what is being considered, because there is a real urgency about this matter? Carers who sacrifice a great deal of their physical well-being on looking after a relative should not have to bear these very large costs that are often applied months and months before there is ever a chance of getting the money.

Baroness Jolly: The noble Baroness is right; the report is overdue for publication. I pressed my officials before coming here about when it is likely to be reported and the answer was, “Very, very soon”.

Baroness Barker (LD): My Lords, can the Minister say what assistance is being given to local authorities to fulfil their duty under the Care Act to provide assessment and independent financial advice to carers?

Baroness Jolly: Yes. That issue came up throughout the passage of the Care Bill. There was a lot of anxiety on behalf of local authorities. The impact assessment has committed extra money for carers’ rights and an additional £69.4 million for 2015-16 through the Better Care Fund, rising to £192.6 million by 2020.

Baroness Wheeler (Lab): My Lords, on the issue of benefits, Carers UK figures show that by 2018 the Government will have cut carers’ benefits by an estimated £1 billion through the reduction in support with council tax, housing costs, the overall numbers receiving the carer’s allowance and the benefits cap. With their carers and disabled people losing support from the

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benefits system in this way, what assessment have the Government made of the very serious knock-on impact on social care and families’ abilities to provide care?

Baroness Jolly: That assessment will come as a result of the work being done on the report that was referred to earlier. However, I can tell the noble Baroness that the carer’s allowance will increase faster than wages and in line with inflation this year, from £59.75 to £61.35. A household will be exempt from the benefit cap where someone is receiving carer’s allowance and also there is someone within the household in receipt of a qualifying disability benefit, such as PIP, DLA housing benefit or attendance allowance.

Baroness Gardner of Parkes (Con): My Lords, I understood from the Queen’s Speech that at last there was going to be some justice for certain people—not those who do voluntary caring but people who are employed in that capacity. I have explained to the House before that these people and their organisations are used by most councils and that a person is only paid for the 15 minutes or half hour that they work for someone. There is no pay then for what may be an hour’s travel onwards. Those people are earning something like £2 an hour and because they are considered to be on self-employed rates of pay they simply do not get any more money. I understood that that was going to be changed. Can the Minister tell us when it is going to be changed or whether it is all just speculation in terms of this new strategy?

Baroness Jolly: Certainly there are some questionable employment practices within the care industry. I know that my right honourable friend the Secretary of State at BIS has got his eye on employment practices. I feel sure that this issue will be swept up within that.

Lord Purvis of Tweed (LD): My Lords, I declare an interest as patron of the Borders Carers Centre. Many services for carers are devolved, with reserved benefits. Will my noble friend the Minister ensure in any forthcoming strategy that, in examining the interaction between devolved and reserved areas with regard to benefits and services for carers, particular attention is paid to young carers who do not need to know the constitutional niceties of devolution and reservation but need the support that is owed to them?

Baroness Jolly: A lot of work is being done on young carers through the provisions of the Children and Families Act. I will make sure that my noble friend’s message gets back.

Student Loans: Misleading Practices


11.30 am

Asked by Lord Paddick

To ask Her Majesty’s Government what action they propose to take in respect of the Student Loans Company and the reports that it has employed misleading practices to ensure that graduates keep up with their debt repayments.

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Lord Ahmad of Wimbledon (Con): My Lords, it is important that the Government recover taxpayers’ money, but they must do so in a way which is fair. They must not use misleading tactics to get people to do the right thing. The Student Loans Company has now stopped issuing letters under the Smith Lawson brand and we are speaking to it to ensure that lessons are learnt and that its procedures and correspondence are brought into line with industry best practice.

Lord Paddick (LD): I thank my noble friend for that response. The practice of companies sending threatening letters falsely representing themselves as debt collection agencies is something that we might expect of payday loan companies, but not of a government agency. Will the Minister please reassure the House that in every case where one of these misleading letters has been sent, the Student Loans Company will now write to the individuals concerned to put the record straight?

Lord Ahmad of Wimbledon: First, I assure my noble friend and, indeed, the House that this practice has ceased. It was brought to our attention on 27 June. I believe that since then only two further letters have been issued manually, in error. I take on board the point that my noble friend makes. This afternoon, the chairman of the SLC will talk to my right honourable friends the Secretary of State for Business and the Minister for Universities and Science. They will look at what other remedial action is necessary. However I assure the House, once again, that this activity has now ceased.

Lord Stevenson of Balmacara (Lab): My Lords, when similar practices were undertaken by Wonga we learnt that it was going to make redress to those affected by letters of this type, in significant amounts of money. Can the Minister confirm that all students who have been similarly affected in this way will also receive redress?

Lord Ahmad of Wimbledon: As the noble Lord may well know, this practice started in 2005, and since then a great number of letters have been issued. As to the differences between Wonga and Smith Lawson and Company: first, no charges were made for the letters that the latter issued; and secondly, the name Smith Lawson was set up as a trading name and, in accordance with procedures, was registered with the Intellectual Property Office. However, as I have already said, the Secretary of State and the Minister responsible for this area are looking at the situation, and I shall of course let the House know of any further action that needs to be taken.

Lord Elton (Con): My Lords, my noble friend has just told the House the astonishing fact that this practice started nine years ago. What responsibility do departments hold for the oversight of agencies responsible for work in their area?

Lord Ahmad of Wimbledon: Ultimately, responsibility lies with the relevant Minister. The decision in 2005 was made by the board of the Student Loans Company, BIS and the Minister responsible for the area at that

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time. It is right that Ministers should ultimately be responsible for all government agencies in the departments in which they lie.

Lord Phillips of Sudbury (LD): My Lords, does my noble friend not see that to have talks with the Student Loans Company is simply not enough? This is straightforward deceit. If any student were engaged in deceit of this nature he or she would be thrown out of their university or denied a job prospect. Surely we must start to set an example. At least the chair of the Student Loans Company should resign from his or her position. Without some exemplary conduct, the standards in this country, which are already declining, will, frankly, decline more and more.

Lord Ahmad of Wimbledon: I agree totally with my noble friend’s sentiments. It is right that those who are held accountable for this should take responsibility as well. The highest standards should be set, and Governments and government agencies should be setting those standards. As I said, this was brought to the attention of BIS, of the Minister, on 27June. Subsequently, all further letters have ceased going out. We are looking at what other action needs to be taken. As I said, we shall look at what comes out of the Secretary of State’s meeting; I do not want to pre-empt anything in that regard. One thing is very clear, however: this practice was wrong. The Government agree with that sentiment and the practice has now stopped.

Lord Low of Dalston (CB): My Lords, when the practices that Wonga was engaging in came to light, the question of possible criminal liability was canvassed. Will that be investigated in the case of the Student Loans Company as well?

Lord Ahmad of Wimbledon: On the issue of criminal liability, the loans are, first and foremost, in two formats: mortgage-based or mortgage-style loans, which are no longer available; and those which are currently issued, which do not fall within the remit of the Consumer Credit Act. That said, we are currently taking appropriate advice to see whether there are any matters that need to be looked at in this way. Again, I assure the House that if such matters need to be brought to light in the House, appropriate action will be taken either through a Statement or, I am sure, through future Questions tabled in this regard.

Lord Elystan-Morgan (CB): Is there not one feature that Wonga and the Student Loans Company hold in common—that they hold licences under statutory regulation? The House was told a few days ago that, in respect of Wonga, there will be a careful examination of its capacity to hold properly such a licence. Will the same be done in relation to student loans? In asking this question, I declare an interest as a former president of a Welsh university.

Lord Ahmad of Wimbledon: My understanding is that, in the decision taken at the time under the previous Administration, appropriate advice was followed and decisions were taken in the light of the industry

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practice. I hear what the noble Lord said. As I said, however, the key difference between Wonga and the Student Loans Company is that Smith Lawson was registered as a trading name with the IPO. It is a key distinction. In the case of Wonga and some of the companies being used, as I understand it, that was not the case.

Finance Bill

First Reading

11.37 am

The Bill was brought from the Commons, read a first time and ordered to be published.

Business of the House

Timing of Debates

11.37 am

Moved by Baroness Anelay of St Johns

That the debate on the Motion in the name of Baroness Wilcox set down for today shall be limited to 3 hours and that in the name of the Earl of Shrewsbury to 2 hours.

Baroness Anelay of St Johns (Con): My Lords, I remind noble Lords that our two debates today are time limited in the normal manner of Thursday debates. The number of those taking part means that for Back-Benchers in both our debates today the time is limited to seven minutes. I remind all speakers that when they have reached the time allocated to them, the number on the clock means one’s time is up and at that stage one should conclude one’s remarks. I also remind noble Lords that if they are content to take interventions on their speeches, the time taken on the intervention comes out of the time allocated to the Peer who has accepted the intervention. That is indeed the nature of our proceedings. Our time-limited debates are exactly that.

Lord Campbell-Savours (Lab): On that question, this matter was raised last week. Some of us feel very strongly that if we are to have a free debate in this Parliament, then interventions should not be taken out of the contribution of the Member. We are destroying debate in the way that the House is now conducting its debates.

Baroness Anelay of St Johns: My Lords, I can hear some assent, but the fact is that if interventions are allowed as freewheeling additions—I entirely understand the argument of the noble Lord that interventions assist a proper debate—then one simply does not have time-limited debates, unless of course the House would be content with the fact that time would run out and Peers who had contributed to debates had no response from a Minister. I know that that is not the wish of

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this House. If Peers wish to abandon the idea of time-limited debates, that is a wide matter for debate, not a matter for debate today.

Lord Campbell-Savours: I am sorry to come back again but the facts are that this is not the Commons, where interventions take up a lot of time during the course of a debate. Interventions in this House are rare, and I cannot see why we cannot allow a little time for interventions on the rare occasions that they take place.

Baroness Anelay of St Johns: My Lords, I am delighted to hear the affirmation from the noble Lord that this is not just an echo of another place. Here every Peer can have a voice. When we have time-limited debates, every Peer is allowed to sign up. The other side of that is that in a time-limited debate every Peer should be allowed their voice, and if there are lengthy interventions at the beginning of a debate, it will mean simply that those who are to speak later are denied their voice. This is a House that respects the conventions of the way in which we work, and I know that we will have two very effective debates today.

Lord Higgins (Con): My Lords, is it not the case that the time limits are now becoming so short that it is not only virtually impossible to take an intervention but very difficult to make a speech that covers the subject adequately? Should we not consider carefully whether we should have a minimum time limit—if necessary regulated by a ballot or some other means? We ought not to go on having limits as short as some that there have been recently.

Baroness Anelay of St Johns: My Lords, I know that these matters have been considered on previous occasions in the Procedure Committee and there are valid arguments on both sides regarding the proposal made by my noble friend. All I can say is that today the time limit is seven minutes, which is considered to be ample time to set out one’s arguments. Perhaps I may quote my noble friend Lord Patten who remarked on one occasion, in a Question for Short Debate, that after speaking for five minutes in another place he had barely cleared his throat. Here we are perhaps capable of putting our arguments succinctly and forcefully in a remarkably compact amount of time.

Lord Davies of Stamford (Lab): My Lords, the constant refrain that the House does not have enough time for interventions and that the House does not have enough time to give people a decent number of minutes to express their views in a debate comes ill from a Government who keep on telling us that we are not needed and that we ought to have more holidays and more time off.

Baroness Anelay of St Johns: My Lords, the noble Lord often intervenes with some amusing remarks. That was amusing but not accurate.

Motion agreed.

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Economy: Manufacturing

Motion to Take Note

11.42 am

Moved by Baroness Wilcox

That this House takes note of the case for strengthening the United Kingdom’s manufacturing sector, stimulating investment and innovation in new technologies, and encouraging young people to seek a career in manufacturing.

Baroness Wilcox (Con): My Lords, I shall try to stick to time. I am glad to have this chance to offer some thoughts on UK manufacturing. I have spent much of my life in manufacturing and the food industry. I ran my family business in the West Country. I sold fish to the Japanese, which took quite a long time—longer than I would have thought—but was well worth doing in the end. I became a director of Cadbury Schweppes for 10 years and learnt the difference between selling fish and manufacturing chocolate. It all came down to flow systems in the end.

The assumption, still alive in too many parts of the world and, indeed, within this country, that the UK no longer makes anything has always frustrated me. For, despite the grim commercial environment ushered in by the recent financial crisis, UK manufacturing remains a vital element of our economy and is responsible for more than half our exports. It is vital in another sense too. Manufacturers, large and small, are very much in the vanguard of recovery. The Office for National Statistics released the index of production figures last month, revealing the biggest quarterly growth since 2010, with manufacturing output up a full 2%. This Tuesday, the survey company Markit reported the sector hiring people at the highest rate for more than three years.

We must of course continue to treat such evidence with a degree of caution. Manufacturing output is still significantly below the pre-recession peak in 2007. Nevertheless, with exports also on the increase—9% above 2007 levels in real terms—there are grounds for guarded optimism.

The greater part of the credit for this turnaround must go to the manufacturers themselves and to their employees for their fortitude and flexibility in difficult times. However, the Government also deserve recognition for taking concerted steps, in partnership with industry, to secure the long-term future of our manufacturing base. Like me, many noble Lords will have vivid memories of the 1970s, when high-profile government interventions in the industrial sphere went so badly wrong. Those poor decisions overshadowed policy-making for decades and that does much to explain why support for our manufacturers was mostly inadequate thereafter. The result was production hived off overseas, domestic supply chains eviscerated and vast numbers of jobs destroyed. It is astonishing to recall that, in 1975, manufacturing employed more than 7 million people—over 30% of the total workforce.

Two years ago, however, the coalition resolved to address these problems, all of which had long been common knowledge. The industrial strategy, led by

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my former department but involving the whole of government, set out a clear path to drive investment and growth, not for the next year or two, but beyond the current Parliament. For years, business has been crying out for long-term certainty, which is the absolute prerequisite for planning and investment. Via the process of agreeing 11 sector strategies, covering areas as diverse as automotive, healthcare, renewable energy and construction, industry leaders were equal partners with government in establishing priorities and agreeing sector-specific plans of action. Above and beyond these strategies, the Government are addressing shortcomings that affected the growth prospects of all types of business, including manufacturers: in particular, access to finance, support for innovation and the skills shortages. Perhaps I may briefly illustrate these.

On finance, clear issues remain regarding capital availability for business. The Government have taken significant steps to alleviate the situation. I would highlight the regional growth fund, providing £3.2 billion for companies to spend on capital investment, R&D and training. Two new institutions, the British Business Bank and the Green Investment Bank, are now up and running, working respectively to diversify sources of lending and to accelerate our transition to a green economy, with all the opportunities that that must present. There is also specific support for manufacturing now, recognising that we need a sustainable network of specialist suppliers to keep industry on track. The advanced manufacturing supply chain initiative has made £345 million available to encourage the repatriation, anchoring and growth of these firms.

On innovation and R&D, the past few years have seen a couple of major co-investments: £2 billion over seven years for the Aerospace Technology Institute and £1 billion over 10 years for the Advanced Propulsion Centre—its mission to bring low-carbon technologies to market and to create safeguards for some of our 30,000 jobs in that area. It is worth noting that, although our manufacturing sector accounts for about two-thirds of UK R&D spend by businesses, fully one-third of that comes from just 10 companies. Hence, the catapult network was created—I am very keen on the catapult network—with long-term, public-private funding worth £1.5 billion. Its purpose is to make research expertise and facilities readily accessible to smaller firms. In that network, the High Value Manufacturing Catapult, which is spread across the UK, has already engaged in more than 1,500 individual projects with small and medium-sized enterprises, the ones from which we will see our large companies grow in the future.

With regard to skills and inspiring the next generation, arguably the most deep-seated issue facing manufacturers is the lack of job-ready employees, particularly now, with unskilled factory positions largely a thing of the past. Manufacturing today could not be further removed from those tired images of metal-bashing. It is all about satellites, robotics and pharmaceuticals, and 50% of capital expenditure goes to intangible assets such as design and branding.

The most substantial response to this challenge has been the unprecedented growth in apprenticeships, backed by record public investment. I particularly

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applaud the attention given to higher-level apprenticeships, which are necessary for demanding technical roles. This, too, has been very much a project in partnership with industry, with employers setting rigorous apprenticeship standards appropriate to the needs of their sectors. Manufacturers have especially welcomed the confirmation of a new £18 million college located in the Manufacturing Technology Centre in Coventry—set to become a beacon of excellence for vocational training.

At the same time, repeated surveys have shown that manufacturing simply fails to register among the career aspirations of young people. This is particularly true of girls. Tackling this persistent mindset—permanently changing the views of parents and of teachers too—is where we must direct our fire-power. There is a lot of evidence to show that when teachers talk about careers with children in schools, particularly with girls, if a girl comes forward and says that she has three A*s at A-level, the teachers usually think, “Well, you’re going to university then, aren’t you?”. We have evidence of young girls who want to do engineering, particularly wanting to take apprenticeships with some of our biggest companies, and being told by a teacher in their school, “Well, I don’t know anything about that. You’ll have to ask someone else”. This has to stop.

Something which has recently become an annual fixture is See Inside Manufacturing. I encourage your Lordships to go and see this if they get a chance to do so. Last year, more than 6,000 pupils and teachers visited manufacturing sites, and this gives them a better understanding of manufacturing. I have been pleased to hear about another new initiative, Inspiring the Future, which sends volunteers into schools to discuss the great jobs that exist in science, engineering and manufacturing. I really do hope that more and more of your Lordships will do the same thing. We must grab the attention of young people at the earliest opportunity.

The policies I have mentioned by no means represent the full range of support for our manufacturing companies. There is substantial help for manufacturers with energy bills, for example, with a £7 billion package announced in the Budget. There is also the reconstituted Manufacturing Advisory Service. There is an awful lot of help out there ready to take us even further.

I hope that this intervention has sketched the broad outlines of the coalition’s partnership with our manufacturing base and that it has communicated my support for this agenda. Working together with industry has always been the best way to go. It is clearly a world away from what occurred under the previous Government, when manufacturing halved in size through a combination of neglect, inconsistency and stifling regulation. Uncertainties inevitably remain—our ability really to address endemic skills shortages and the scale of competition posed by countries both emerging and fully emerged, to name but two. However, there is now real cause to believe that good days lie ahead for manufacturing. I congratulate UK businesses on their resilience and I have every faith in their ability to succeed, with appropriate support from government at last.

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11.54 am

Lord Monks (Lab): My Lords, I congratulate the noble Baroness, Lady Wilcox, on initiating this debate and on championing the cause of modern manufacturing in Britain today. I am pleased to see that manufacturing is getting attention in this House. It got some a few weeks ago with the excellent maiden speech of the noble Lord, Lord Bamford. Most of us who are interested in manufacturing very much welcome his presence in this Chamber, providing a new, strong voice for British manufacturing.

As the noble Baroness, Lady Wilcox, rightly said, manufacturing is going rather better than it has done for some time. She mentioned the role of employers, managers and employees. I may not have been listening carefully enough, but I did not hear any appreciation of the role of trade unions in her litany of people who are to be congratulated. However, unions have not got enough credit for the agreements made by them to preserve jobs and capacity through the dark days of the recession in 2008, 2009 and 2010. It was a terrific period of British industrial relations. It is worth noting that a lot was done, responsibly and quietly, and there is still capacity around, unlike in previous recessions when we lost it.

The noble Baroness, Lady Wilcox, put her case in a generally balanced way. UK manufacturing is certainly not a basket case. The problem is it is simply not big enough. There is not enough of it and what there is is not particularly well distributed. The very poor balance of payments, which has been negative since 1983, should be at the front of our mind. The noble Baroness made one or two rude remarks about the 1970s but we did run a balance of payments surplus for most of that decade. It is worth remembering that the trend really reversed in 1983. There have been many reports, from Richard Lambert and others, about what we need to do about British manufacturing, so we know we have to rebalance our economy more in that direction, with investment in infrastructure and boosting the weaker regions. I declare an interest, as a member of the advisory committee of the regional growth fund, which is very much engaged on this work. As a country, we know we should save more, invest more, borrow less and live less on debt. We know that we cannot continue to treat the City of London with exaggerated reverence, adopting an almost protectionist zeal which we do not apply to any other sector of the British economy. The City can be an asset, but the banks can be near lethal to the country, as they were in 2007-08. We need banks that lend to the real economy. Industrial investment was about 2% of bank lending last time I looked. This is, again, not a new problem. In the late 1920s, Winston Churchill said that the problem with Britain was that finance was too proud and industry too humble. He had a point then and it is even more the case today.

In his report No Stone Unturned, the noble Lord, Lord Heseltine, had a go at some measures to try to get the UK more match-fit than it is now. I will emphasise one or two points that he made. We want, at least, to get up to the level on the other side of the North Sea. Similar countries with similar living standards such as Germany, the Netherlands, the Flanders part of Belgium and the Nordic countries have high productivity economies, with good records on their

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balance of payments and exports. They combine this with strong social states, excellent training systems and, by the way, influential trade unions. They are savers, innovators and investors. They are not by any means perfect: in certain areas, we have people who match them and exceed what they do but, again, not enough. The critical mass here is not large enough.

We have tended to cover up our weaknesses rather than face them squarely. We did this with North Sea oil revenues and then we did it with the boom in financial services. Manufacturing did not really matter in the 1980s and 1990s because we had another way of earning our living. There are no further windfalls like those in view. There are no more short-term fixes except, perhaps, another dose of devaluation, of which there have been seven since the end of the war. We cannot rely on devaluation as a centrepiece of our future strategy, as we tended to do in the past. By the way, the last thing we need is a self-imposed exile from the EU unless it bends to our model—a sort of voluntary Dunkirk. Would we be better alone? We need to work with others to learn how they do it and what we can apply ourselves.

Looking at what other countries do—some do it very well—is central to our future. We should look not just in the direction of Germany but in the direction of the Asian economies. South Korea spends five times the amount on innovation and research than we do. There are a lot of competitors who know what they are doing and they are doing it with great purpose and determination. We need to match that.

I add a German-Dutch-Nordic lesson as regards the advantage of co-determination over the more adversarial system that has prevailed in this country in terms of relationships at work. The co-determination principles seem outrageous to many in British business but they keep managements more long-termist and a bit less inclined to help themselves to a disproportionate share of company profits. It is no accident that much of our successful manufacturing is in foreign ownership. The foreign takeovers of British businesses and their presence in many key strategies is a lesson to the rest of us. I welcome them very much. They have filled a gap rather than ousted good British managements. However, we need to be aware that these companies’ head offices and R&D centres often are somewhere else rather than here.

On the public interest test, we need to look at France in terms of takeovers and mergers. The way in which it is dealing with Alstom and the assurances that it is getting from General Electric are a real object lesson. We would not have been in anything like the same position had the takeover of AstraZeneca by Pfizer gone ahead. We need to be as tough as other countries tend to be. It is interesting that the Business Secretary will be at the Economic Affairs Select Committee next week.

Lord Ahmad of Wimbledon (Con): I am sorry to interrupt the noble Lord but he has spoken for eight minutes in a seven-minute time-limited debate.

Lord Monks: I apologise to the House. I congratulate the noble Baroness, Lady Wilcox, on introducing this very important subject. This is not the end of the debate.

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12.02 pm

Lord Young of Graffham (Con): My Lords, I congratulate the noble Baroness on introducing this debate. First, unequivocally, manufacturing is important, but I also believe that it has to be put in context. Let me explain. Three hundred years ago, 97% of jobs were agricultural; 250 years ago, along came the Industrial Revolution; and by this time in the last century we were a manufacturing nation. There is no doubt that that was the way in which you created wealth. But life moves on.

The noble Lord, Lord Monks, paid tribute, with which I rightly agree, to the role that the trade unions played after 2008 and 2009 but I notice he did not refer to the role that they played in the 1960s and 1970s. Nevertheless, by the time I came into this House, I was instrumental in introducing three Japanese car companies into this country to rescue a proud industry that had been broken down by years of turmoil and conflict. If you look at us today with not only Nissan, Honda and Toyota but also with Jaguar Land Rover, you realise that we make more cars than we ever made before. If you go into a car factory, you do not see many people because if you want an efficient manufacturing business it has to be done by robots which work 24/7, never take a tea break or ask for a raise, although they have to be funded differently. However, robots do not run by themselves.

I turn now to some work on education which I have been doing for the previous 10 months. An educated and talented workforce is key to any industry we have in this country. I introduced the youth training scheme 32 years ago this month, which is when we ran the pilots for the first of the schemes. I went down to a small manufacturing company in the West Country, and I went to the quality control department. I saw a young lad, who was in one of the pilot groups, calculating deviancies and plotting on charts exactly what was going through the quality control system. I said to him, “You must have been very good at maths”. “Oh no, sir”, he said—that was the way they spoke in the West Country—“I didn’t get anything at school”. The supervisor said to me, “As soon as he saw the relevance of what he was doing, he learnt”.

Over the next three years I went round the country, week in, week out, and I saw this time and again. I came to the conclusion that in reality the fourth R is relevance. In those days, after 10 years of compulsory education, up to 30% of young people left the school system illiterate, innumerate or sometimes both. I come back all these decades later and go round looking at the school system again, and I see that conditions have not changed that much. The Prime Minister asked me to look at this, and I have been working on small firms for him since the beginning of the coalition. I went to him over a year ago and said, “Whatever we do, we have to look at the way we educate our people.” This has nothing whatever to do with the curriculum—we have no complaints about that, except that I sometimes think that it could be more relevant. It has to do with motivation.

Education has to encourage young people to see the relevance of what they are doing, and encourage them to work. That is why I hope that the report which I

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published last week will come into effect. I believe it will have a transformational effect on the state of education in this country. It includes such things as an enterprise adviser for every head teacher. Here I should satisfy the noble Lord, Lord Monks, that I have the agreement of both the head teachers’ unions, and we work closely together. The enterprise adviser will be responsible for bringing speakers into the schools system, to talk to pupils not when they are 17—as I have done and, I suspect, many of your Lordships have done—but when they are 12 and 13. They would then be able to appreciate the relevance of what they are about to be taught. It would be best for pupils to be spoken to not by the great successful captains of industry, but by someone who left their school a few years ago, has a little business round the corner and has a nice car—that is a key element. He or she can say to them, “This is the reason I succeeded”.

It is not only enterprise. In my book, yes, enterprise makes entrepreneurs, but it is also about seeing the glass as full, and being positive. I am convinced that this can be taught. Enterprise is also about bringing in advisers who can talk about STEM subjects to encourage young people to get the basic skills to go into manufacturing, because today manufacturing does not consist of people with screwdrivers. It consists of people who can operate computer programmes and people who can look at the way that robots work.

I have not spoken in your Lordships’ House for many years. I see that my time is nearly up, and I have no intention of getting into trouble. I am grateful to your Lordships.

12.09 pm

Lord Shipley (LD): My Lords, I thank the noble Baroness, Lady Wilcox, for enabling this debate. I agree with almost everything that the noble Lord, Lord Monks, and my noble friend Lord Young of Graffham have been saying.

There used to be a fashion for suggesting that the decline in UK manufacturing did not matter given the rise of our service economy. In my view, any commentators who still believe that are profoundly mistaken because we need both. Having a strong manufacturing sector creates jobs and helps our balance of trade. It still represents half our exports and over two-thirds of our research and development investment. It can contribute much more, particularly in high-value manufacturing. It has, recently, been expanding at almost twice the rate of the rest of the country. All this is important because manufacturing growth will substantially be located outside London and the south-east, and this can help to rebalance the UK economy away from overdependence on financial services and on London and the south-east.

I first draw attention to the nine High Value Manufacturing Catapult centres—all outside London and the south-east—which provide manufacturing companies with access to equipment and facilities that they might not otherwise have, and join up academia with industry and government to develop new technologies. Output growth and rising business investment now suggest that recovery is sustainable because it is

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no longer consumer spending that is driving growth. Now, business investment is too. Demand for UK manufacturing is now strengthening as part of that. The recession had a heavy impact, but manufacturing output is now back to similar levels to before the recession and is growing, helped by lower corporation tax, better employment allowances, tax incentives for investing in new equipment and increasing the level of financial support for exporters—all introduced by this Government.

However, a large number of potential SME exporters are reportedly unaware of UKTI and UK Export Finance. It seems clear that our export performance could be much stronger, particularly if there were a clearer regional remit, a set of regional targets for UKTI and better connections for SMEs with export finance.

I take absolutely what my noble friend Lord Young of Graffham said about robots, but new figures show that the UK’s automotive industry now employs 750,000 people, having added 44,000 jobs last year. That is partly about demand for new models and partly about companies reshoring, but a very important increase is happening. The F-35 project, which will have a 70-year life and in which BAE Systems has a 15% stake, is another example of the UK’s leading role in innovation.

The Government have been helping to create jobs, many of them in manufacturing. There have been jobs for young people, with some 2 million apprenticeships by the end of this Parliament, and jobs across the country, as the noble Lord, Lord Monks, said. Some £3.2 billion has been available through the regional growth fund. Like him, I sit on the independent advisory panel as deputy chair. Of course there are also all the green jobs—£3 billion to fund the world’s first Green Investment Bank.

This debate is about strengthening manufacturing. I was very interested by the Engineering Employers’ Federation report published recently, Pioneering Great British Products,which said that we had failed to celebrate UK inventions by setting no example for young people to aspire to. It is important to rectify that when we think of all the things that the UK has invented.

I want to raise the issue of women in engineering, which is the lowest percentage of the workforce in Europe at 8.5%. When you look at Scandinavia, which has a quarter, or Italy and France, which have a fifth, you realise that we need 100,000 new engineering graduates each year to meet current demand—twice current levels. More needs to be done but half our state schools send no girls on to university to study maths and sciences. It is a massive loss of talent given this expanding sector. Early careers advice to choose the right courses and enter careers in engineering and sciences is very important.

The greatest threat to a manufacturing-led post-recession recovery is the lack of skilled labour. Retaining skilled people with manufacturing and engineering skills is of paramount importance to companies. Too often, skilled employees struggle to find skilled work after they have completed a contract or been made redundant, and they end up leaving the sector. I am

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pleased that Vince Cable, Secretary of State for Business, Innovation and Skills, responded to this challenge by requesting senior industry leaders to find a solution. As a result, a new programme, the Talent Retention Solution—TRS—was developed and financed by the sector for the benefit of all companies and individuals wishing to work in advanced manufacturing and engineering. It puts skilled individuals looking for work in touch with companies searching for new employees. It is a UK-wide scheme which now includes employers from aerospace, automotive, civil engineering, defence, energy, marine, nuclear, power generation and renewable industries. It has an employers’ group, chaired by my colleague and noble friend Lord Willis of Knaresborough, and it provides specific, easy-to-use recruitment advice and services to companies.

For the first time in our manufacturing history, we have a system to capture talent before it is lost. That system is now expanding to include undergraduates and FE students, so I hope that the expensive waste of talent will become a thing of the past. Interestingly, BAE Systems said that TRS has helped to place more than 400 people leaving the shipyards on the Clyde and in Hampshire since closures were announced last November.

There is clear potential in reshoring more. In its economic outlook, published in March, PricewaterhouseCoopers concluded that up to 200,000 jobs could be created in the UK in a decade through reshoring, particularly in textiles, advanced manufacturing, research and development and business support. I hope the Government will encourage that process because it is very important.

In my home region of the north-east of England, it is really exciting to see the amount of investment and activity now taking place. High-value companies are expanding, exporting, growing and generating jobs. Manufacturing industries are leading the north-east economic recovery. Confidence is high; orders are up; productivity is up, and two-thirds of north-east manufacturers anticipate a rise in orders in 2014.

This Government have put in place the foundations to grow the manufacturing sector and it should be commended for doing so.

12.17 pm

Lord Carrington of Fulham (Con): My Lords, I, too, congratulate my noble friend Lady Wilcox on this important debate and on her powerful opening speech.

I started my working life in manufacturing in the early 1970s. I worked on the shop floor, making components for the motor industry, in what were called—in those distant days—the metal-bashing industries. A sorry place it was, too. Labour was largely unskilled, using outdated tools to produce motor components that met any specification or tolerance limits required by the customer only by coincidence. Indeed, most of the skilled workforce in the factory seemed to spend their time rectifying or hiding the errors in the motor components so that they could be shipped to the desperate customer and sold on to the poor, unsuspecting motorist. Perhaps it was not surprising that the UK motor industry went into precipitate decline. Sadly, the decline in British manufacturing

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was not confined to the motor industry, as I later discovered when I was financing exports to the Middle East. But we have come a long way since then.

The lessons were very simple. Manufacturing needs good, professional management. It requires high and continuous levels of investment, equipment and research. It must be responsive to the changing needs of its customers and to anticipate changing markets. When I worked in the motor components industry, the Government were trying to pick winners. They were trying to direct investment. They were trying to tell manufacturers how to do their job while, at the same time, taking too much in tax—mostly through personal taxation, since little profit was made in companies such as the one for which I worked. They took so much in tax that no manager or investor had any incentive to take risks or to invest.

Since the much needed and vital reforms of the 1980s, under the leadership of Baroness Thatcher, British manufacturing has changed out of all recognition. Thanks to my noble friend Lord Young, the motor industry is a near perfect case study, with resurgent motor manufacturing and superb motor components suppliers. Exports boom and the quality of vehicles is second to none. What we have learnt is that the Government cannot run industry. All they can do is to create a supportive, nurturing environment so that industry can flourish. They cannot double guess the entrepreneur, still less the market.

It is no use pretending that the Government can protect jobs. The only protection for jobs is that someone wants to buy the goods being sold at the price at which they have been manufactured. That is why we have to have a low-tax economy. We need a globally competitive corporation tax rate to encourage our industry to invest and to attract new investment from abroad. We also need low personal taxes. No one will work hard unless they get to keep the fruits of their labour, and the cleverest people in manufacturing, as in the service industries, will have many offers to work elsewhere in the world.

The world has changed. We can compete with low-wage manufacturing in eastern Europe, Asia and Africa only by producing high-tech goods and having high quality in traditional products. Competing solely on price has proved time and again not to work. However cheaply we can produce something, someone else can produce it cheaper.

Just as manufacturing industry needs low taxes, so it needs a high level of education in the workforce, which is why the Secretary of State for Education’s reforms are so important. It does not matter if a student gets high marks in a debased exam; what matters is if he or she can read, write and understand numbers. Then they can progress to a full education.

I used to run an organisation with the second-largest apprentice training scheme in the UK—again in the motor industry. We would take on several thousand apprentices every year and, even after rigorous aptitude testing and positive reports from their schools, a depressing number of them would require us to start their apprenticeship with remedial reading, writing and maths so that they could understand the basic instruction manuals. That was after 11 years of schooling.

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The really sad thing about that is that after about 12 weeks of remedial work, we got those boys and girls up to a satisfactory level of literacy and numeracy. The problem was not the apprentice, it was the school, which either did not notice those talented young people’s problems or did not care. In any event, the school had done nothing about it. I am glad that our Government are tackling that scandal.

Having the UK business environment right is vital, but not enough. Industry needs markets into which to sell its goods. I am sure that we are all in favour of free trade and open markets; then we can compete in the world. Sadly, much of the rest of the world does not see it that way. It is the age-old problem; many countries see it to be in their national interest to protect their local industries from foreign competition. The emerging or emerged markets in the Far East are not alone in putting up formal and informal trade barriers. The EU does the same, and the USA has always done so throughout its history. Let us not kid ourselves that we can be any different.

It would be wrong in this context not to pay tribute to Joseph Chamberlain, who died 100 years ago yesterday. He was a very great man and a very great politician, whose influence in making the Conservative Party the vibrant, radical party it is today is still immense—not in policies, but in attitude and political style. His last great campaign of tariff reform was designed specifically to tackle the problem of unfair competition. He advocated the raising of tariffs against those countries that did not allow us to export to them on the same terms as we allowed their imports.

The trade problem with manufactured goods that Chamberlain saw more than 110 years ago is still with us. Large countries—empires, as Chamberlain called them—such as the USA, Germany and Russia were manipulating trade agreements to their advantage while we naively clung to the belief that if we manufactured a better mousetrap, the customers would beat a path to our door. Sadly, as he knew and we know on a daily basis, if we allow unfair competition—no matter whether it is from Asia, America or Russia—we can have the best manufacturing industry in the world but it will still go under.

12.24 pm

Lord Giddens (Lab): My Lords, I, too, congratulate the noble Baroness, Lady Wilcox, on having secured this debate and introduced it so ably.

There is cross-party agreement these days that the economy should be restructured over the next few years and that active government intervention will be needed to achieve that. Deindustrialisation and offshoring may produce economic benefits, but once they reach a certain point, their social and economic consequences become destructive.

A key question for our times is how to achieve a resurgence of manufacture with reindustrialisation instead of deindustrialisation, and reshoring rather than offshoring. I was pleased to hear the noble Lord, Lord Shipley, mention this, if only briefly. I discussed the issue of reshoring in your Lordships’ House about two years ago and I would now like to offer an update on it

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because it is decisively important. It goes against a few of the things that the noble Lord, Lord Carrington, just said.

To understand this debate, we have to turn to the United States. The reshoring debate has been going on in the US for quite a while but has only recently percolated to our shores. We could say that we have actually reshored the reshoring debate, as reshoring has quite rightly become part of government policy and recently figured in the discussion of the All-Party Manufacturing Group. Discussion and analysis in the United States has been led by another group with a big G: the Boston Consulting Group, which has produced a series of really interesting reports on this issue. Those reports are helping to fuel a significant transformation of the American economy in respect of manufacturing.

The most recent work of the Boston Consulting Group is a study of 25 nations that account for 90% of global exports of manufactured goods. The study uses several indicators of manufacturing cost competitiveness and concludes that the old perception of low competitiveness in the West, compared to high competitiveness in Asia, is becoming obsolete. The manufacturing cost advantage of China over the US, for example, has shrunk to no more than 5%. It is tiny now. According to the study, the UK is not far behind. In other words, we could put it this way: the tectonic plates of the global economy are shifting quite radically, which creates very significant opportunities for not just the UK but other pre-existing industrial countries.

According to the BCG, more than 50% of US manufacturing companies with a turnover of more than $1 billion are actively contemplating bringing their production back to America. That is in its detailed survey study. The reasons given are: rising productivity in the United States; a more transparent regulatory structure than is achieved in other countries; better patent protection, which is important for businesses functioning in some countries elsewhere; the increasing costs of transportation; the positive impact of automation; and low energy prices associated with the shale gas revolution. That is a very significant package of changes, so big change is imminent in the nature of the global economy and its competitive structure. In the United States, local and regional activism has also made a big impact—as should happen here.

Looking at the situation here and the debate about reshoring, your Lordships can see that it is only just beginning. We simply do not have enough research in this country to know how we compare with the United States. A study carried out in 2013 found that 15% of companies surveyed were thinking of bringing back production to the UK. However, that was a pretty limited study and it described it as,

“a trickle rather than a flood”.

We simply do not have the data and we must gather some.

I will conclude by making a number of brief points, which I will enumerate. First, more research is needed into what firms are actually doing and how they take their decisions. That needs government support: will it be forthcoming? Secondly, and crucially, the results need to be made available to businesses. The American

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research shows that many companies are operating with obsolete assumptions about the global economy and are therefore taking decisions without the full array of relevant information.

Thirdly, experience in the United States shows that regional activism is crucial. As other noble Lords will no doubt ask, have the Government really done enough to follow up on the Heseltine report?

Fourthly, there is an extremely high level of technological innovation in most areas of manufacturing, especially IT and robotics. Reshoring is therefore going to be much more complex than simply bringing back pre-existing processes and jobs. Handled properly, as the very interesting experience in the United States shows, these innovations can facilitate reindustrialisation and reshoring rather than inhibit them, partly because of the impact they have on labour costs.

Fifthly, it is often said that as a country we lack the skills necessary for reindustrialisation to be successful. This has been mentioned by noble Lords. We have to approach this with some caution, given the landscape of enormous technological change. Rather than fixed skills, we are likely to need open and adaptable learners. For this reason I go slightly against the orthodox wisdom of my party. I have reservations about the role of apprenticeships, which are so often talked of as of key importance. We have to prepare ourselves for a complex world in which there will be processes of deskilling as well as of reskilling and where established skills can become redundant almost overnight. There is likely to be a different pattern of learning and adaptation from the past, and I would welcome any comments from the Minister on these points.

12.31 pm

Lord Jenkin of Roding (Con): My Lords, I very much welcome the chance that my noble friend Lady Wilcox has given us to discuss this hugely important subject. Later, I shall refer to one or two of the things that she said in her excellent speech.

Like the noble Lord, Lord Monks, I read the speech made by my noble friend Lord Bamford with huge interest and admiration. It was very eloquent, particularly about the role of professional engineers—engineers who have done a full professional course and qualified—which is what I am going to talk about exclusively this afternoon. During the debate on the Queen’s Speech my noble friend said that,

“behind every product there is an army of talented creators, makers and engineers … We need their brains, hands, knowledge, creativity, design and technical skills and, most importantly, we need them to know that they are valued by society as a whole”.—[

Official Report

, 10/6/14; col. 268.]

I thought that was an inspiring description of what engineers do. Yet here we are in a country which it is widely recognised needs to be training twice as many professional engineers as it is training at the moment.

This led me to study a remarkable article by an extremely knowledgeable academic, Professor Kel Fidler, who gave a paper to the Royal Academy of Engineering on engineering and big science. He called his article Sorting Out Engineering: The Need for a Major Review. That is what I want to recommend to the Minister this morning. I can only summarise the professor’s arguments

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as the article covers pages, but I want to talk about the main subject. Of course, the training of technicians, which my noble friend Lord Young of Graffham referred to, is enormously important, but the shortage of university-trained engineers is one of the things that are holding this country back.

The professor’s first point is—and here I differ a little from what has been said— that despite all the considerable efforts to attract the interest of young people, and they have been considerable, the proportion of applicants to go to universities to study engineering courses has been virtually unchanged over the past 10 years at around 3.5%. There has been a modest increase, but it simply parallels the increase in the number of applicants. The professor said that,

“all the initiatives to get proportionately more young people onto engineering … courses … have so far been unsuccessful”.

Of course there is much enthusiasm—things such as the Big Bang attract enormous numbers of people—but it does not turn them on to choosing engineering as a career. That is what we really have got to tackle and so one asks why. There is no shortage of facilities in universities. That is clear. There is excellent teaching and equipment. As my noble friend Lady Wilcox noted, the real problem is that, in the words of the professor,

“many young people and their teachers remain largely ignorant about the nature of engineering”.

This ignorance is also true of parents, teachers and the nation as a whole.

The National Grid summed up some of these things recently in its report Engineering Our Future: Inspiring and Attracting Tomorrow’s Engineers:

“Engineering is seen a job rather than a profession. The work has an image of being menial, dirty and about fixing things … This leads to low appreciation of what engineers do for society. Both parents and young people placed engineering below medicine, teaching and policing in its contribution to modern life”.

If this is true it is immensely disturbing.

I will make another point. It is more controversial. There is confusion between engineering and science. I know that there are many departments of engineering in universities called “engineering and science”. However, they are not the same. Again, Professor Fidler makes the point that,

“science is about understanding the world … engineering is about creating things … embracing design, creativity and innovation”.

So what do we do about it? The Americans again have pointed the way and other speakers have made this point. The National Academy of Engineering in 2008 recommended a rebranding of engineering as a strategy. It wanted the message to get across that:

“Engineers make a world of difference. Engineers are creative problem solvers. Engineers help shape the future. Engineering is essential to our health, happiness and safety”.

Back in 1981 when my noble friend Lord Young of Graffham worked with me for a short time when I was Industry Secretary, I inherited the Finniston report, which recommended a major reshaping of the professional institutions of engineering. It failed abysmally. There was a total refusal on the part of those institutions even to contemplate change. A third of a century later we are still paying the price. This must not happen again.

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This is where I come to the professor’s main recommendation, which I commend to my noble friend. He says that all the major stakeholders such as the Government, the nation, the professional engineering institutions, the Engineering Council, the Engineering Employers’ Federation, the Royal Academy of Engineering and industry—and, I add, certainly the trade unions—must get together. They must decide not just what needs to be done—there have been endless reports—but how it is going to be done. In my view, this requires the leadership of Ministers and I look forward to the Minister’s reply.

12.39 pm

Lord Broers (CB): My Lords, I, too, compliment the noble Baroness, Lady Wilcox, on obtaining this important debate. I regret that I have to catch a plane this afternoon and will not be able to stay until the end of the debate, and I apologise to the House for that. However, I was not going to miss this opportunity to support the noble Baroness in her campaign for manufacturing, which has been so effective, and to encourage her to continue it.

I must say that it is interesting to find the noble Lord, Lord Jenkin, for whom I have huge admiration, giving the speech that I normally give. As an engineer I sometimes feel modest—or not—about that, or that I am claiming too much for engineers. Of course, the noble Lord is absolutely right.

I shall address two topics that are very much in resonance with what the noble Baroness, Lady Wilcox, was saying. I shall talk about the catapults, which are already contributing to innovation, and the need to increase the number and quality of workers with STEM skills to meet the needs of our engineering and science-based industries, and I think that all noble Lords have touched on that.

There are now seven catapults, of which there are two with which I am especially familiar: the High Value Manufacturing Catapult, which the noble Baroness, Lady Wilcox, mentioned, which is already contributing to a broad range of manufacturing technologies, and the transport catapult, which was officially opened by the Secretary of State, Vince Cable, two weeks ago. I declare an interest: I chaired the TSB’s Transport Knowledge Transfer Network which generated the proposal for that catapult. The transport catapult, among other things, is exploring the opportunities that modern communications and processing technologies present for co-ordinating different forms of transport and providing faster and more convenient end-to-end transport. Both catapults have attracted outstanding leaders and have already built very strong research and development teams. The point that I wish to make is that the establishment of these technology transfer institutes is a long-term project, and the Government—in this case, the TSB—must be prepared to sustain their support and be prepared to scale it up to match industry’s involvement, should the catapults prove even more successful than predicted.

The development of modern technologies can take up to 10 years, and a planning horizon of five years is essential. The High Value Manufacturing Catapult is

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already facing this situation, and although it is early days for the transport catapult it is also gaining industrial involvement at a level above what was predicted, which is very encouraging. Let us not make the mistake that has been made in the past with initiatives like that recommended by the Alvey commission, whose initial initiative was to rebuild the UK’s microelectronics industry; after a strong start that initiative was basically abandoned, leaving that technology, which underpins all manufacturing and modern technology, to others. Support for the Fraunhofer-Gesellschaft is long-term and sustained, and to a certain extent it was the model for our catapults.

My second topic is the supply of people with STEM skills. Cranfield University recently published a White Paper on UK manufacturing productivity to coincide with the national manufacturing debate organised by Professor Rajkumar Roy at Cranfield in May, which I chaired. The White Paper contains a 25-year analysis of the issues affecting manufacturing productivity in the UK, as reported in news articles. The most important of the 12 issues identified is the skill and education of the workforce. The second is investment, and so on, but I want to concentrate on skills and education. This topic also arose in several of the presentations at the debate from leaders of industries ranging from automotive to information technology and communications, and of course it has arisen endlessly in this debate. The issue concerns training and education at all levels, from shop-floor employees to the creative engineers who conceive and design products, and includes the continuing education of the workforce as well as initial tertiary education. It includes apprentices, technicians and engineers and the ability of workers to progress through those categories during their careers. Somewhat controversially, it was suggested that our university sector, which now includes some 150 universities, does not contain enough institutions that specialise in producing graduates with professional STEM skills and that there are too many universities that aim to be liberal arts universities—to use the American description—rather than institutes of technology such as MIT and Caltech. David Willetts, Minister for Universities and Science, spoke at the debate very eloquently in support of the need for a strong manufacturing sector; however, he did not agree with that suggestion.

Leaving aside the discussion of whether our university sector supports our industrial needs optimally, there is a huge problem looming in the supply of an appropriately trained workforce. In 2012 the Royal Academy of Engineering estimated that in the UK we could have a shortfall in STEM graduates of about 0.5 million by 2020. Overall, less than 50% of our students actually enter STEM industrial jobs each year, building towards that 0.5 million. Perhaps even more troubling is the prediction that many of the brightest will enter the financial sector, where they will spend their time evaluating what others do rather than producing something themselves.

Lord Denham (Con): There is slight unhappiness that the noble Lord, who is probably speaking for longer than the permitted limit, will not stay for the end.

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Lord Broers: I do not think that I want to be beyond the limit. I am at the limit now; thank you for the interruption.

It is essential that we do all that we can to support our manufacturing sector. The easiest way to do that is to produce more and better STEM-skilled workers for our industry. If we fail we will endanger the recovery of the nation’s economy and allow our huge deficit in the balance of payments to grow even further.

Lord Ahmad of Wimbledon (Con): Before the next noble Lord speaks, I remind the House that the debate is time-limited. It is also the normal convention that if someone does not stay until the end of the debate, as a courtesy to the House, they should scratch. That is just a small reminder.

Noble Lords: No.

12.47 pm

Lord Horam (Con): My Lords, I do not want to intervene in this controversy. I will carry on with what I intended to say.

It is often said that in Bill Clinton’s campaign manager’s office there was a sign: “It’s the economy, stupid”. I often think that government Ministers—and, indeed, shadow Ministers—ought to have a sign in their office: “How are we going to earn our living?” It was forecast some time ago in the 20th century that in the 21st century China would do all the manufacturing, the United States would produce all the food, the Middle East would produce all the energy—and what would Europe do? We would be the museum that all the other continental members would send their tourists to see.

I am glad to say that it has not quite worked out like that; but there is no doubt that over the last 30 years there has been a relative decline in the share of manufacturing in the UK, as in other countries. As the noble Lord, Lord Shipley, pointed out, there was a time when everyone said that it did not matter and was irrelevant; we would all earn our living through financial services or other things. However, the fact is that the great recession has put paid in spades to that argument. Many of the profits earned and the growth made during that period has proved to be an illusion. We are back to the reality that manufacturing does matter.

The noble Lord, Lord Monks, said that there was not much left. He ought to read Evan Davis’s excellent book Made in Britain—perhaps he has—which indicates that there is quite a lot of manufacturing left in this country. It is not only high-end manufacturing. I am a fellow of my old college at Cambridge and go to Cambridge quite often. What is happening there in the knowledge industry is staggering, quite frankly, and is hugely beneficial to the country.

I do not know what they are doing in Oxford, by the way. It seems mainly to produce politicians—but never mind; Cambridge is doing a fantastic job on the science and engineering side. It is not just a case of new industries. The other day I met a man who was in the textiles industry—an old industry from my old part of the world, the north of England—who was

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doing a marvellous job of producing suits with gold thread in them. The gold thread was often imperceptible, in some cases entirely so, but people in the Middle East love them and that man is doing a fantastic job of reviving the textiles industry.

The fact is that we rather like manufacturing. My father was in the car industry, to which my good and noble friend Lord Carrington referred in his excellent speech, as did my noble friend Lord Young. That industry has been revived as a result of his efforts, those of the late Lady Thatcher and of my noble friend Lord Tebbit. He, too, played a part. My father loved his time in the car industry and loved being a mechanic down on the shop floor.

Like my noble friend Lady Wilcox, who initiated the debate, I was involved in the food industry. She was involved in the food industry in her youth—although she is, of course, still young. My noble friend worked for Schweppes while I worked for Rowntree’s. A lot of research went into developing new products and I still take great pride in the products that we manufactured. If noble Lords ever sink their teeth into an After Eight thin mint, I hope that they will think of me as, in a small way, I was one of the people involved in developing such products, which now sell worldwide. I think that 57 billion Kit Kats are sold worldwide, which is a staggering performance by British industry.

Of course, it does not really compare with all the magnificent products that the company of the noble Lord, Lord Bamford, produces, but it still contributes to our manufacturing output and I am very pleased that for that short period of my life I at least did something and was not purely a politician. Therefore, I think that the Chancellor’s rather clunky phrase, “the march of the makers”, is absolutely apposite and I am grateful to my noble friend Lady Wilcox for bringing this issue to our attention and for setting out some of the things that the coalition has done.

It is very important at a very serious level to see the bigger picture here. Noble Lords may have read the excellent book published recently entitled The Fourth Revolution, by the editors of the Economist, my old newspaper. The authors point out that the threat from the East in terms of state-directed capitalism and authoritarian modernisation—the threat is epitomised by China but is also a feature of many other Asian countries—is a very serious one for this country’s economy and way of life. We need to respond to it urgently.

How do we respond? First, we need more consistency in our approach. It is vital to have continuity of thinking on education between, say, the noble Lords, Lord Baker and Lord Adonis, and now Michael Gove. Education has been touched on a great deal in this debate. Whatever Government come to power after the next general election, it is important that we maintain this continuity of thinking.

As regards infrastructure, even if the Conservatives do not win the next election, I hope that HS2 will go ahead and that a Labour Government will maintain that infrastructure spending. There has been far too much chop and change by government. Further, it would be helpful to have fewer blunders by government. I am going through my reading list at the moment.

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There is an excellent book entitled

The Blunders of



by Anthony King and Ivor Crewe, which is very relevant to the point I am making.

Four blunders in the book occurred under the Conservatives, six under Labour and two under both Governments. I am afraid to say that there is probably one under the coalition as well. Some of the blunders that Governments made have had a seriously negative impact on the establishment of a coherent strategy to challenge the continuing development of the eastern model.

Finally, we need better governance not just at the UK level but, as the noble Lord, Lord Monks, hinted, at the European level. What Europe has done in relation to the euro is not an example of good governance, and America has not handled its debt well. I come back to where I started: we have to place a high priority on how we earn our living.

Baroness Deech (CB): On a point of order, I wonder if the noble Lord has left the House misinformed about the relative contributions of Oxford and Cambridge. Oxford, once the home of car manufacturing, is now at the forefront of new technology and turning biological and pharmaceutical inventions into drugs that benefit the whole world.

Lord Horam: I was not being entirely serious in my remarks about Oxford and Cambridge.

12.55 pm

Lord Whitty (Lab): My Lords, unlike the noble Baroness who initiated the debate, I stopped working in the manufacturing industry in the 1960s. For most of my workmates at that time, I might as well say that I stopped working, full stop. In those days manufacturing jobs for both white collar and manual workers were the only real jobs, certainly for young men. The situation has dramatically changed. In those days, of course, as others have said, the proportion of our economy and workforce that was engaged in manufacturing was not much less than that of Germany. On both counts, it is now less than half that of Germany.

I went on to work for the Ministry of Technology—I am diverting slightly from what I was intending to say—which was, of course, the great intervener. Some of those interventions have paid off in the long term with high-tech, high-end manufacturing which still exists in this country.

The reason we were knocked off our perch on manufacturing at a macro level was partly North Sea oil, which helped bits of manufacturing that relate to North Sea oil but undoubtedly raised the exchange rate to price out large chunks of British manufacturing for a long period of time. In parallel with that was the development of the financial sector, as my noble friend Lord Monks has said, so that the banks became the master rather than the servants of the economy. And, of course, I also acknowledge, as the noble Lord, Lord Young, said, that in parts of the manufacturing sector the industrial relations scene had a detrimental effect; particularly in one part, the automotive industries, which I will come back to in a moment.

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The history of intervention has been mixed but on balance positive. I am very glad to welcome Mr Vince Cable to the list of intervening Ministers, which started with the post-war Labour Government and continued through Tony Benn, Michael Heseltine and others. At last, the Government—or rather, the Conservative Party—have at least in part abandoned the view that the market will sort all these things out.

We need intervention. We need support from government, at local as well as national level. We need a supportive banking system, particularly for small business—we have not yet got that. We need positive engagement by the trade unions in the restructuring of jobs and of industry. We need a major commitment to raising skills. The basic education system is one problem, but lifetime re-education and reskilling is necessary for all grades of worker.

I will give a few examples of the combinations of these things that have happened and have been successful. Although the current Government tend to take responsibility and credit for it, much of this started under the previous Government. For example, my noble friend Lord Drayson started a new industrial strategy for the defence industries, which has greatly benefited their competitiveness; it was dealt with in a way that was greatly collaborative with the trade unions, including my own, the GMB, and the unions that now form Unite. In the automotive sector, as others have remarked, it was even more dramatic. From the very poor situation that we were in—hit dramatically by the recession further down the road—the revival of manufacturing in that sector has been partly down to foreign investment, partly down to clear government intervention by my noble friend Lord Mandelson and then Vince Cable, and partly down to a much more constructive relationship with the trade unions, started mainly by Unite with Tony Woodley. Without those deals on hours, pay and conditions, much of the automotive industry would not have survived the recession. There are lessons to be learnt from that.

There are smaller scale examples as well. We have managed to solve, with great union involvement, what looked like a very difficult situation with Manganese Bronze, the manufacturers of London taxis. They are now going to be produced again.

On a broader but more local scale, when AstraZeneca left Manchester it was a disaster for the area and for the potential technology and science within it. However, the local authorities, the university and the private sector, together with the workforces, have now combined to establish a science park on that site that will bring technology back to what was the heart of the Industrial Revolution and of our manufacturing pre-eminence in the north-west.

More locally still, we and local government need to support local firms. It was drawn to my attention earlier this week that in Erewash in the east Midlands, the Labour council group is being very supportive of small firms. We need to ensure that that is backed at the national level. One of the recommendations of my noble friend Lord Adonis, who has just joined us, is that 25% of all public procurement should go to small firms. All Governments should learn that lesson. Another aspect of my noble friend’s report is the key issue of

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taking everything, or a lot, away from national interventions and giving support to local government and new local and regional institutions. It was also the theme of the recent report by the noble Lord, Lord Heseltine; it is something that you have to do on a large scale to make work and it will fit in with the Labour Party’s commitment to greater devolved authority to the regions, particularly the city regions.

So we have to act at the local as well as the national levels, engage the workforce and the unions, and invest heavily in lifetime training. In that way, there is a future for British manufacturing, which again can compete effectively with countries such as Germany, Korea and Japan, which have done this far better in recent decades.

1.01 pm

Lord Chidgey (LD): My Lords, listening to the noble Lord, Lord Whitty, I started to reflect that I spent the first 30 years of my working life as a professional engineer and the next 20 as a professional politician. I am not sure whether that was upskilling, reskilling or, as some might consider, downskilling. I hope that it was not the latter.

I congratulate the noble Baroness, Lady Wilcox, on bringing this debate to us, and wish to pick up on something she said about the Markit/CIPS purchasing managers index survey. It is important because, according to the media, it is a constantly watched figure. The index for June was 57.5, compared to 57.0 for May—a clear indication that the economy is continuing to move in the right direction. Despite this, there remain issues of potential concern. Despite considerable effort by the Government, manufacturing exports are still failing to grow at a proportionally acceptable level. The United Kingdom is also importing far too much of what we consume. The UK’s seasonally adjusted trade deficit in goods was £8.9 billion in April compared with £8.2 billion in March—roughly double what it was for the same period in 2012.

A reading above 50 on the Markit index indicates that manufacturing is expanding and playing its part in the 0.8% growth in the economy registered in the first quarter of this year. We can be reasonably confident that the following few months, allowing for holidays, will show good manufacturing figures, due to an increase in exports, unlike in the eurozone—which, as far as I know, has not been mentioned—where the Markit index has fallen to 51.8, compared with the UK’s 57.5. That is a remarkable difference.

By the time I entered Parliament in 1994 and became employment spokesman, manufacturing’s share of the UK’s economic output had halved, from around 40% post war to less than 20%, with over 1 million skilled workers out of work for more than a year. The noble Lord, Lord Monks, will remember that when he was secretary-general of the TUC and I came to chat to him in his office about the national minimum wage, these were the issues that we had to cope with back in the early 1990s.

Today, manufacturing represents some 11% of the UK’s output, but this further fall is in part due to much stronger gains in the service sector. Nevertheless, contrary to common belief, UK manufacturing is

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strong. According to the trade magazine,

The Manufacturer

, the UK is currently the 11th largest manufacturing nation in the world, accounting for 11% of the UK’s gross value added and 54% of UK exports, and employs directly 2.6 million people.

In the global aerospace manufacturing industry, the UK ranks second in the world. The automotive industry exported a record-breaking 84% of the 1.6 million vehicles manufactured in 2011. The chemicals and pharmaceutical industries add £20 million every day to the balance of trade. Most importantly, underpinning these achievements is an average annual productivity increase of 3.4%—two-and-a-half times greater than the UK economy as a whole.

Manufacturing dominates the UK’s research and development spending. In 2012, that spending totalled £12.2 billion. R&D spending in the services sectors totalled only £4.3 billion, despite these sectors accounting for 79% of our economic output. BIS and the Government Office for Science report that over the next 20 years we will have an increasing dependence on high-skill workers. In response to that assessment let me turn to the fourth report of the Institution of Mechanical Engineers, of which many years ago I became a graduate and associate member. The report, entitled Engineered in Britain, points out that the UK needs to double the number of engineers entering the profession each year between now and 2020 to meet economic demand and to counter the increasing number of engineers retiring. This is a result of the baby boomers. To achieve this, we will need to increase annual engineering graduate output from the current level of some 46,000 to 87,000.

The number of qualified apprentices needs to increase from 27,000 to 69,000 over the same period. These apprentices should not be confused with the 1.8 million that the coalition Government, inspired by the Lib Dems, have played a major part in creating. Although playing an essential role in helping to upskill the general workforce, the 1.8 million apprentices should not be compared with the highly skilled engineering apprenticeships, which lead to highly qualified technicians.

Efforts to increase the number of entrants into science, technology, engineering and maths—the STEM subjects and STEM-based professions—by government and industry have improved recently, especially when they include engineering apprenticeship. There is, however, a lack of co-ordinated action between all parties at all levels to address the problems. I listened with great interest to my noble friend Lord Young’s comments and look forward to his report. From what he said, I think that it covers this aspect.

A key area of concern raised by the Institution of Mechanical Engineers is that we are not recruiting more entrants into the ranks of technicians and engineers because of a lack of high-quality careers advice. There are insufficient connections between schools and local industry to educate and inform students of the range of career opportunities available to those who study STEM subjects. I heard the most appalling tale a few weeks ago about a bright young lad who wanted not just to study engineering but to become an engineer. His teacher told him, “No, you are far too bright to do engineering”. I am speechless. I am presently trying to find internships for high-end A-level students—boys

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and girls, interestingly—looking for gap-year placements in industry before taking up offers of places at Oxford, Cambridge and other main universities to read engineering.

Without a future pipeline of skilled engineers and technicians, manufacturers will need either to import the required talent or export their facilities to countries where engineers are in supply. It is vital that schools and local industry collaborate to inform students of the opportunities, qualifications and skills required to enter STEM professions. I very much take the point made by the noble Lord, Lord Jenkin.

1.09 pm

Lord Lyell (Con): My Lords, I am immensely grateful to my noble friend Lady Wilcox for giving us the opportunity to speak today. I am probably unique in the speakers list in that at no time in my 76 years have I been involved, actively or passively, in manufacturing. However, I am very proud to have been an apprentice in that great city of Glasgow, known so well to the Minister—an apprentice chartered accountant. The motto of the Institute of Chartered Accountants of Scotland is “Seek the truth”. I can tell noble Lords, there is nothing a chartered accountant cannot do.

That is why, 37 years ago, when Lord Belstead and I were looking at the Patents Bill—a hugely important Bill that updated the law that had existed in the United Kingdom since 1949—he said to me, “Just pop off and learn a bit about the pharmaceutical industry”, so I did. It will give my noble friend Lord Bates on the Front Bench great joy to hear that I will cut my speech right down. I will speak on pharmaceuticals, which is a hugely important industry in your Lordships’ House and around the country, not just because of its intellectual primacy in the United Kingdom but because of its role in manufacturing.

One has to have enormously high qualifications in this branch of manufacturing. In his excellent speech, my noble friend Lord Carrington pointed out how it is entirely necessary to have very high skills. You may start with reasonable skills, but nothing is a lost cause: build them up. That is why we have thousands of young people—I hesitate to call them boys and girls—involved in the pharmaceutical industry. My noble friend can write to me to confirm this later, but I think that the United Kingdom’s pharmaceutical industry is so successful that it runs a £2 billion trade surplus every year. It is a glowing industry that deserves the support of your Lordships and my noble friend.

I want to add a few words on the motor industry. This is the week—it is always in July, or at least it has been for 50 years now—when we sit in front of the television saying, “Hey ho, it’s the British Grand Prix at Silverstone”. For the past 20 years my noble friend Lord Astor and the noble Lord, Lord Drayson, have hosted downstairs representatives of the Motorsport Industry Association. They are representatives, great and small, of the entire motor industry in the United Kingdom. It is suitable that it is held around the time of the British Grand Prix at Silverstone. I do not know which channel it is on, but I hope all your Lordships will be able to look in to give encouragement to the British motorsport industry at Silverstone this weekend.

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Silverstone is within striking distance of the heart of what used to be the motor industry. In that particular area of the east Midlands there are hordes of small and medium-sized enterprises, of the type that were fostered by my noble friend Lord Young of Graffham during his great career. Helping SMEs is an ongoing drive and commitment of all Governments. The motor industry is based all around the country, including Coventry, but there is a heavy concentration around Silverstone because they have the facilities there for high-powered testing of components.

Your Lordships will see that an enormous amount—I think 15% to 20%—of the components in most grand prix motor cars originate, are manufactured and are sourced in the United Kingdom. I could be wrong, and I would certainly accept correction. Nobody could have done more to foster the motor industry than my noble friend Lord Young. We can look at Nissan, which is based in the north-east, and also at Toyota and Honda. I do not think he has mentioned it, but we can look at another market we would not necessarily think of: Rolls-Royce, Bentley and BMW are massive contributors to the British motor industry. Those cars are produced here and go all over the world.

I occasionally go to the great city of Liverpool, due to the lightweight Lyell activity of cheering on a great team there. Its motto is, “Only the best will do”. They do not manufacture young men, although they train them well, but plumb opposite their training ground is Halewood, which used to be a major producer of Ford motor cars. Jaguar Land Rover—perhaps that should now be Tata—now produces very high-powered and excellent Jaguar motor cars there. I may be wrong, but I think that the advice I had from the University of Warwick is that it now produces a very upmarket Range Rover called an Evoque at Halewood—if it is elsewhere, I apologise—and I believe that it is now on a three-shift system, such is the demand for them, mainly from China. That is an example of everything my noble friend has been looking for in innovation from young and old people. Young people are brought into it for a career. You can find that success there.

To quickly conclude, I was enormously impressed and encouraged by the advice I had from the University of Warwick, which does everything that should be done for young apprentices. Young boys and girls train from the age of 16 to about 20 or 25. They then either move into the industry or carry on in research on the pathway set out by my noble friend Lord Carrington.

1.16 pm

Lord Sheikh (Con): My Lords, this is a very important debate about the future of our nation’s economy. I would like to commend my noble friend Lady Wilcox for introducing the subject and for her excellent speech.

Without seeking to rebalance our economy we will struggle to secure the long-lasting recovery that we seek. It was the manufacturing sector that made our country great and it can do so again. In recent years our economy has relied too much on services and too little on goods. I say that despite coming from a background in financial services. We must of course

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promote our services industry, but it is also imperative that we manufacture and export specialist products. We have the resources to produce and export such goods, as well as the expertise of our people. We must begin to make things again and reactivate our manufacturing capabilities.

I am pleased that the Government have improved our infrastructure, and that they will make further improving it a priority. Strong infrastructure is important to enable goods to be transported throughout the country and overseas. As noble Lords will be aware, specialisation leads to division of labour; as a result of this many products are manufactured in a variety of places. We must therefore provide businesses with the means to get things from place to place as quickly as possible.

Manufacturing declined massively under the previous Government. In addition, they allowed our skill base to drop considerably. I agree with the Government’s policy of taking robust action and improving our system of training and education, particularly in relation to apprenticeships and vocational training. I am very pleased that, under the Conservative Government, we have created more than 1.7 million apprenticeships. This will enhance our manufacturing base and help in our recovery.

We must also enhance our work with universities to bolster our manufacturing capabilities. Much of what is manufactured in this country requires very advanced skills, and while our academic institutions do great things, I feel that the two do not work alongside one another as well as they should. We need a joined-up approach that will allow academia to feed into industry and vice versa. I would like to ask my noble friend the Minister to comment on this matter, and on what the Government are doing to ensure that it will happen.

We need to encourage the bright thinking that will further promote our manufacturing sector, but we must also protect the ideas that we as a nation produce. In my professional role, I have worked on the insurance of copyrights and patents. I welcomed the Intellectual Property Act, which was introduced by this Government.

Output in our manufacturing sector declined sharply in 2008-09 and, after a short period of growth, it declined again in early 2012. Then 2013 saw something of a recovery, and indeed things do seem to be moving in the right direction in certain sectors. The UK is traditionally a base for high-quality pharmaceutical manufacturing, particularly of innovative medicinal products and delivery systems.

Another area where a revival has been seen is in our motor industry. This is one area where Britain fares very well on exports. Last year, 82% of all cars made in the United Kingdom were exported overseas. Unfortunately, across the board the picture is not that good. More needs to be done to increase our manufacturing capabilities. In this regard, I feel that we need to give assistance to SMEs, which are the backbone of manufacturing and other business activities. They are resilient and certainly determined to do well in whatever they undertake. I am a great supporter of SMEs and in my business life have rendered them support, with the result that my company has flourished and the SMEs, too, have done well.

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On many occasions in your Lordships’ House, I have stressed the importance of placing a greater focus on trade, and particularly exports. From more overseas trade comes growth, and from growth will come prosperity and stability. It will also enhance our manufacturing sector and stimulate investment and innovation in new technologies.

We also have much work to do if we are to hit the Government’s target of doubling UK exports to £1 trillion by 2020. The continuing efforts of UK Trade & Investment must be acknowledged, and I applaud the Chancellor for expanding the resources available for exports. Doubling the amount of lending available to exporters and cutting interest rates on this lending will be welcomed across the board, but the fact that exports are still stalling suggests that more should be done. Do the Government plan any further measures to give a shot in the arm to exports?

In this regard, we also need to do more to target emerging markets, particularly those such as India, Brazil, China and Africa. We also need our embassies to take on a more commercial role, opening doors for our businesses and assisting them by pushing the brand of UK plc. They can also assist our business and political leaders in organising more trade missions. I ask my noble friend to comment on those points.

I end by saying that the United Kingdom is doing well financially on its path to recovery. The Government’s achievements can be summarised as follows: the deficit has been cut by a third; more than 1.5 million new jobs have been created; more than 1.7 million apprenticeships have been set up; and our growth, which is expected to be about 3% this year, will be the highest of the G7 countries. We cannot be complacent; we must continue our efforts to improve our financial health and achieve success in every way. More manufacturing will certainly play a vital part in achieving this.

1.24 pm

Lord O'Neill of Clackmannan (Lab): My Lords, I welcome the opportunity to debate manufacturing today, and I thank the noble Baroness, Lady Wilcox, for her success in getting this on to the Order Paper.

Manufacturing accounts for just over 10% of output but it would appear to be on the edge of expansion. I know that in some circles there is a sense of euphoria about recent progress, and the improvements are to be welcomed. However, a note of caution has to be struck, because the fragility of the achievement so far has to be protected and nurtured, and I think that there is a feeling along those lines across the Chamber today.

It is also fair to say that part of the improvement is due to the fact that recessions cannot go on for ever—eventually, they end. We could have a debate about whether this recession could have ended more quickly but that is not for today. I simply say that the improvements in manufacturing output are to be welcomed but they have to be put in context. Yesterday’s Financial Times quoted the Bank of England as estimating that output per hour in 2013 was still 16% below the pre-recession trend. Therefore, we have a lot of catching up to do. I say that not to denigrate the achievements but simply to put into context the scale of the task that faces us.

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In part, it has to be said that low productivity—my noble friend Lord Monks referred to this in his opening remarks—is attributable to the fact that due to very imaginative deals being struck between manufacturing businesses and the workforce, and particularly the unions, a number of jobs were protected during the recession. It is fair to say that productivity probably collapsed at that time because there were more people than there was work to be done. Equally, in a number of instances, businesses were in effect buying orders by putting in artificially low prices simply to keep the businesses going. Although that was helpful in reducing unemployment and maintaining the skill base, it probably also denied businesses the resource they needed to invest in the kind of productivity-increasing equipment that we all know manufacturing requires on a daily basis.

It is also fair to say that there is still some work to be done on the whole question of bank lending. We have had a double bind in that respect. I have to say that as a supporter of the Labour Government I was always disappointed by the low priority that they placed on manufacturing. Their infatuation with financial services as the panacea for all economic ills was not shared by those of us who, like me, at that time represented constituencies in Scotland and the industrial areas of the United Kingdom. There were difficulties and it was frustrating to see the indifference shown at times towards those difficulties by that Administration.

I also have to say that this Government have gone some way towards helping with finance. Investment tax credit arrangements are being put in place as a consequence of the Budget. However, for tax credits to be effective, you have to make profits in the first place. Therefore, we come back to the fact that if you need investment, you probably have to get it from a bank, or if you are engaged in green activities, you may eventually get the investment from the Green Investment Bank. We are beginning to see an ending of Treasury hostility towards supporting investment. The Treasury view used to be that if you gave money to firms to help them invest, all you were doing was helping the firms that would not have invested in the first place, and the other firms that would invest did not need the money anyway. That rather cynical view is now under scrutiny. I am very happy that an organisation with which I am associated and which is listed in the register of interests, the Manufacturing Technologies Association, is engaged in a serious study of the effectiveness of this Budget proposal. I think that that will be quite interesting. It may well be that ultimately the Treasury has some answering to do if it proves to be the success that many of us would like it to be.

We have heard a lot about the car industry today. When I chaired the Trade and Industry Committee in the Commons at the turn of the century, I remember having a meeting with my colleague, the noble Lord, Lord Bhattacharyya, and the management of Jaguar. They explained that they had a wonderful new car which would be a great success, particularly on the west coast of America, but they did not have the money to match the discounts that their competitors, Mercedes and BMW, were able to offer. Equally, they had a range of cars and platforms for new models in

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prospect which they felt could beat the pants off the rest of the world. What they lacked was money from a potential investor and it was not until the Tata group came along that they got that degree of support. It says something about UK financial institutions and the priority we place on manufacturing that open goals of this nature were so spectacularly missed by the British financial services system. Our car plants are world class. Nissan’s plant in Washington is the most successful in the Nissan empire. We have the workforce and the innovative capabilities. A number of these places are not just assembly plants: they have design capacity and capability far beyond that.

I have been slightly critical of the previous Government, but credit is due to the noble Lord, Lord Mandelson, and his work in setting up the TSB and the catapults. I will finish on this point. One catapult is a manufacturing base within Scotland. We need to have access to the other centres of advanced engineering which are opening across the United Kingdom. If the vote were to go the wrong way on 18 September, Scotland would be left in the wilderness. If anything demonstrates the interdependence of our country, not only within the United Kingdom but within Europe, this is it. So many inward investors would not have come here had we not been members of the European Union and continued to be members of the European Union. I hope that we will continue to be members of the United Kingdom as well.

1.32 pm

Lord Flight (Con): My Lords, I add my congratulations to my noble friend Lady Wilcox on both her speech and her commitment to manufacturing. I echo her comments about the noble Lord, Lord Bamford, and pay tribute to what he has achieved for the British economy. It is welcome and good that he has joined this House.

It is great to see manufacturing now recovering, and I would point to two important things. The first is the point made by the noble Lord, Lord Giddens—that much of the supply chain that has been overseas is now starting to come back to the UK. The plates are moving: the financial advantages of manufacturing in China are now far fewer. Secondly, although productivity has, disastrously, not grown overall in the past decade, it has grown by about 1.4% per annum in manufacturing, while actually falling in the service sector. So although it has had a rough time, the manufacturing sector has managed to raise productivity. I do not wish to be complacent, but 16 months of manufacturing expansion and second quarter growth of 2% is pretty good. Productivity is rising further; domestic and international order books are full. This is about the best climate for manufacturing for a generation.

Others have talked about the British car industry, in which 750,000 people now work. Investment is up, as is demand for new models; the supply chain is, as I said, coming back to the UK; and vehicle production of about 2 million per annum is expected by 2017. Domestic car manufacturing is up by 10.3%, representing £64 billion of GNP. There has been a 9.7% increase in investment in new technology, worth about £1.9 billion. My noble friend Lord Lyell referred to the pharmaceutical

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industry, the gross exports of which amount to £20 billion; with net exports standing at £4.9 billion, not just £2 billion, they have virtually doubled. This is another industry in which Britain is very strong, with the help of Oxford, as has been mentioned; some £4.3 billion was invested in research in the past year.

I welcome some particular things that are happening beyond this. A huge expansion in entrepreneurship is going on. My noble friend Lord Young is to be congratulated on having got this going many years ago. The new generation is much more willing to give it a go. Some 35% of people coming out of school are quite happy to have a go at setting up their own business. The number of new, young businesses is huge: there are now more than 4 million in this country. There is a huge growth in new technology, and not just in the Greater London area. The new technology can be—and often is—exploited easily by SMEs. I declare an interest as chairman of the Enterprise Investment Scheme Association, a government scheme which offers tax incentives to put risk capital into small businesses. The amount put in last year doubled, as it did the year before. Some £12 billion of risk capital has now been put up and it looks as if it will double again this year because there are now a lot more professional parties involved in finding the right businesses to invest in and monitoring those investments. There is also a real boom going on in risk equity for SMEs.

I pay great tribute to what my noble friend Lord Young has just said about motivating people. I am sure that he would want to join me in paying tribute to what my noble friend Lord Baker is achieving. The university technical colleges are brilliant and are supplying a real need, both in motivating young people who often do not get motivated in mainstream schools and in helping them get the skills where employment is good. My wife has been involved in getting a university technical college for Westminster. It will, I am glad to say, specialise in engineering, and its two main business backers are British Rail and British Telecom. Both of those companies need more engineers as a lot of their existing ones are getting old. There is a lot more scope for university technical colleges. In case noble Lords are not aware, the working day at these is 8 am to 5 pm, there are only two weeks holiday a year and students, who are often successfully motivated, are really involved in the areas they are looking at.

My noble friend Lady Wilcox pointed to the high-tech nature of today’s manufacturing, but where is the line between manufacturing and services? It was very easy to consider in old-fashioned thought, but with all the IT and software products and everything going with the internet, what is manufacturing and what is services? I wonder whether government statistics are up to date in this area. I suspect that if what I call “new manufacturing” is included, manufacturing is a lot larger than the 10% of GNP we recorded it as being in old-fashioned terms.

I greatly welcome, as others have done, the Government’s initiative to start, at last, to address our infrastructure needs. For over a decade, Governments have failed to do this in airports, roads, rail and energy supplies. I anticipate that energy will be the rising manufacturing activity, as we will need more of it over

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the coming years. Candidly, this is partly a result of the misdirection of huge resources to subsidise inadequate and unreliable alternative energy, rather than investing sooner in nuclear power. There is now, to my astonishment, a proposal that the Government should start paying industrial users to shut down to avoid power shortages hitting the public. If there is any truth in that, it is an absolute disgrace and I challenge the Government to make clear that there will be more than sufficient energy supplies for a considerable recovery in British manufacturing.

1.39 pm

Lord Borwick (Con): My Lords, making things is great fun, and the joy that one gets from seeing a finished product in the hands of a contented customer is one that a lawyer or accountant will never feel. Despite the eyebrow-raising assertion of my noble friend Lord Lyell that there is nothing that an accountant cannot do, I doubt that the feeling that they have is the same. I have spent most of my working life manufacturing different products. I have manufactured London taxis and metal parts for other makers too. I thank my noble friend Lady Wilcox for raising such an important issue.

In order to strengthen the sector, it is important to think about what manufacturing is. When I was manufacturing taxi cabs, our products were decorated with a “Made in Coventry with Pride” sticker on completion. In this context, the word “made” does not really mean anything. Much like Humpty Dumpty said to Alice in Through the Looking Glass, a word means,

“just what I choose it to mean—neither more nor less”.

“Made” is not the same as “manufactured”.

Consider the best-selling shop-bought pizza in Italy. It is the same as the UK’s best seller, and it is made by a company called Dr Oetker. It is also the best-selling frozen pizza in 33 other countries around the world. That product is made by a German-owned food company on an industrial estate in Lancashire. Who really makes that product is an open question. Manufacturing is a series of processes that usually happen in several locations. There are the ideas, the design and development and the assembly of the product. We must ensure that the sector in the UK is adding value along the way.

We should remember some basic principles if we want a strong manufacturing sector. They are lower taxes and less regulation. The Government have been doing great things. Cuts to corporation tax are making the UK more competitive. However, we must stay on the tax-cutting path. Competitive tax rates are offered elsewhere, particularly in developing countries. In a global economy, manufacturers can make the rational choice to go elsewhere and cut their costs.

We must also avoid introducing other damaging taxes. For instance, when the carbon floor price was introduced, the aluminium smelting plant in Lynemouth, in the north-east of England, announced that it was closing, mainly because of the Government’s decision. Some 515 jobs were lost as a result. It is not only the level of taxation that is the problem—it is the maddening complexity of it all, too. Businesses have to cope with that. It means paying higher administrative costs for

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paying the bills. As I said, the Government are moving in the right direction, but lower and simpler taxes will help strengthen the sector.

When I was running my own manufacturing firm under the previous Government, I had several discussions with the quangos that were set up to help business. I remember only two things from those conversations: that they wanted to take credit for my success, and that I would not employ any of them. They were useless. However, I understand that my noble friend Lord Livingston of Parkhead has brought a genuine sense of purpose to his role as Trade Minister. The people whom the Government hire to operate in these roles are important and he has sought those who have business experience to drastically improve this process. Joe Greenwell, who leads the Automotive Investment Organisation, is a good example. As the former chairman of Ford UK, he is the right person to help create a friendlier environment in which to do business in the car industry.

Overall, more work on stripping out bureaucracy and cutting tax would be the quickest and best ways to strengthen the sector. Despite the commonly held belief that manufacturing is on the decline, the truth is rather different. However, one thing that does worry today’s manufacturers is that the younger workforce lacks the skills needed. That is a genuine cause for concern. I believe that, as with most things, developing a strong manufacturing sector starts at childhood. Children often have a natural affinity for manufacturing. Lego, Meccano, play dough and many other toys are fantastic training tools for young people with a knack for making things. I fear that that is drummed out of them at school and by computer software. Young people with a skill for making things are often lumped together on vocational courses at school. The perception of these vocational courses is that they are inferior to university degrees and that the children taking them are less intelligent, which, of course, is not always the case.

Attempts by the Government to encourage more apprenticeships mean that the senseless drive to send the majority of school leavers to university will not leave youngsters with other talents behind. However, there is still work to be done. GNVQs, for instance, often separate business courses from manufacturing courses. This makes the teacher have to answer the reasonable child’s question: “What’s the difference between manufacturing and business?”. Teachers, who often have no experience of either, have to distinguish between them. They seemingly say: “Business is things like travel agencies and tourism, where you get to travel the world; manufacturing is holding a spanner fixing things in a drab factory”. It is no wonder that young people would choose business over manufacturing. The joy of making things, and how that fits into the manufacturing process more widely, should be encouraged at school. That would help strengthen the sector for years to come.

1.45 pm

Lord Hunt of Chesterton (Lab): My Lords, I greatly commend the noble Baroness for introducing this important debate about strengthening manufacturing,

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stimulating it and encouraging young people. I was an engineering graduate of the University of Cambridge in the 1960s. In those days, we all had to have industrial experience on the shop floor. For six to eight weeks, I worked with ICI in Runcorn and Widnes on maintenance operations. Such was health and safety at the time that I used to get extremely drunk from breathing the fumes from the leaking pipes. It is a wonder that I am here today. I worked at Vickers in Barrow tightening nuts on the diesel electric motors. All the tools said, “nuclear only, not to be used anywhere else”, so we learnt how there was cross-subsidisation in Vickers.

In France and the Netherlands, engineering students continue to have to spend much more time in industrial internships, which, regrettably, have been dropped from many British engineering courses. I met with a successful consultancy last week, which said that it often recruits people from the continent because of their practical experience. However, many British students, who are extremely able to an international standard, take various jobs. The consulting company of which I am chairman in Cambridge often uses excellent students for that purpose, but it is not hands-on manufacturing.

The present and previous Governments in the UK have increased the numbers of apprentices in engineering, which the industry welcomes. However, as many noble Lords have mentioned, there is still a great lack in the numbers of apprentices and technicians. Last evening, I spoke to a representative from Airbus at the Royal Society. He commented on the literally thousands of intermediate technicians being trained in the colleges and at the Airbus factories in Toulouse. Companies, such as JCB—we will hear from the noble Lord, Lord Bamford, next—and Rolls-Royce contribute with their excellent schemes working with local universities, although the number of top-class, practically trained technicians and engineers will not be sufficient in the UK.

It is always amusing to me that the other side talks about money, money, money but when it comes to engineers they never talk about salaries. We have not had a single contribution on that. Do they know that the starting salary of an engineer is about half what they would get in law? Most art students start with higher salaries than engineering students. It is an extraordinary situation. When Siemens hires engineers in the UK, it pays them significantly less than it pays its engineers in Germany.

I ask manufacturing bosses over here to pay their engineers more and then they will get more of them. Schoolteachers know that. They are extremely aware of salaries and they jolly well know that most people who leave university with engineering degrees and go into engineering will get a lower salary. To become an engineer in this country is almost like entering the church—perhaps I missed a comment from the Bishops’ Benches. I hope that the other side will take on that point.

The other important point is of course that all parties now agree that government can play a very major role in stimulating investment in advanced manufacturing. After the last election there were nasty remarks in taxation magazines that this Government were going to withdraw the tax relief on R&D. However, I am glad to say that sense prevailed, and doubtless

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will continue to do so beyond the next election, certainly if Labour is returned. This has been a very important point. I am very well aware that this arrangement of tax relief on R&D has meant that small SMEs have been able to continue a very high level of R&D activity. Indeed, in that respect we are rather better than some of the continental countries.

All parties agree that in certain areas of manufacturing technology, selection is now a desirable approach. The Government have a whole raft of these, such as aerospace, automobiles, chemicals, industry and drugs, and we heard today about some of them. However, there is very wide concern, expressed particularly by the noble Lord, Lord Heseltine, that the foreign ownership of much of UK industry means that the strategic decisions are no longer made by the UK. For example, a Japanese company is going to have a big railway facility in the UK, but was very emphatic that all the key engineering designs will be done in Japan. Through our excellent R&D, the UK can try to get its feet under the table of these strategic long-range discussions.

Noble Lords might be interested to know that, after 350 years of the Royal Society, in this year’s summer exhibition there is a joint exhibition of a British team and a French one. The French have been allowed in, which is fantastic. I am one of the exhibitors, and I am labelled under Toulouse for this purpose. This is an extraordinary exhibit of smart wings, which airbus planes will be flying with by around 2025. This shows how we have to combine new materials, aerodynamics, bird flight and control systems. However, sadly we are learning that with the withdrawal of British Aerospace as a major shareholder and a British Government position that is not completely clear, the strategic decisions in Airbus are largely taken by the Governments of France, Germany and Spain.

It is important that the very complex messages we have been giving have not meant that we are right at the strategic level. As I have mentioned before in this House, when a Prime Minister—whose name I have suddenly forgotten—flies around the world, he does not seem to fly on an airbus, unlike the Prime Ministers of our major European colleagues. It is a very important point, and this is a major area of British manufacturing. We have excellent people, but commitment is required. BIS and Whitehall understand that if you have ambitious, able graduates, they want to do something that is at the top level in the world. The top level in the world is the City, so of course they go there. It is very important to underline the need for top strategic engineering areas, because that is where we will have our best people.

1.53 pm

Lord Bamford (Con): My Lords, I also congratulate my noble friend Baroness Wilcox on securing this important debate on manufacturing, and I thank her for her excellent speech. This is a debate that really matters, as we consider our economic future in a fast-changing and more competitive world.

I begin by declaring an interest. I am an industrialist, and I am also an engineer. My family business, JCB, has 11 factories in the UK, employing more than 6,000 people. Perhaps I could respond rather quickly

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to the noble Lord, Lord Hunt, and say that I think that engineers are paid properly in Britain. As an illustration, last week we advertised on the net for engineering graduates with experience, and we got 1.3 million hits. They were from around the world but, all the same, being an engineer cannot be too bad.

My recent maiden speech touched on many of the themes which have formed part of this debate. Today I would like to focus first on what has been done to support UK manufacturing, and secondly on what still needs to be done. In 2012 I wrote a report on the state of UK manufacturing, which was written for policymakers of all political parties. It included recommendations to support our manufacturers. The key recommendation was to improve capital investment incentives. When I started my report, the annual investment allowance was a mere £25,000. I congratulate the Government on initially raising this to £250,000, and on raising it further in this year’s budget to £500,000. This is quite an increase, which will certainly help to unlock investment.

I also called on the Government to continue lowering corporation tax. I am pleased to say that the rate is now down from 28% in 2010 to 21% today, and there are plans to reduce it still further to 20% next year. This is a real boost to business confidence. Capital-intensive industries think long and hard before investing in equipment such as machine tools, which can cost many millions of pounds. Payback can take years or even decades, so the importance of such measures must not be underestimated. They make a real difference to manufacturers.

Research and development are our industry’s life-blood. Do noble Lords know that German companies submitted 47,000 patent applications in 2012, compared with just 15,000 in the UK? That is three times as many. Why is this the case? The answer is alarmingly simple. Germany places more value on research and development than we do. However, the Government are now on the right track. The recent patent box legislation means that manufacturers can now translate innovation into profit, which can then be put back into the business and so back into UK manufacturing. The report also called for more help for exporters. I am pleased that my noble friend Lord Livingston of Parkhead is realigning UK Export Finance, which many of you will of course know under its previous name of the ECGD. This will support many more manufacturers than before, both large and small.

All of these steps taken by the Government are vital. I am glad that they have had an immediate and positive effect but, as I said before, more needs to be done. Our overriding priority must be our young people. I therefore welcome the Government’s focus on apprenticeships, but what really matters to manufacturers is not the number but the quality of apprenticeships. We need meaningful apprenticeships, which offer young people the chance to develop world-beating skills. Such apprenticeships should last anything from three to five years, not six to 12 months, and culminate in a proper degree. Quality apprenticeships must become a vital part of our long-term manufacturing strategy.

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It is for this reason that the long-term future of UK manufacturing requires real cross-party support. We also need to give absolute priority to continued investment in our young people up and down the land. I end by asking my noble friend the Minister if he could ensure that the quality of our apprenticeship programmes is given far more priority, to ensure a vital and competitive global future for our country.

1.59 pm

Baroness Trumpington (Con): My Lords, I wonder how many noble Lords read in the Times last week about beautiful Dumfries House and its fabulous contents. It has been bought by His Royal Highness the Prince of Wales and turned into a hotel staffed by formerly unemployed young people. It occurred to me that there must be other places, not necessarily of course stately homes, but premises of a kind that are either getting dilapidated or are not sufficiently occupied. They could be used for the education and employment of unemployed young people, turning out a profit for the owners of the buildings and profit for the young people who will be thus employed, and who could gain further experience that they could use in their future lives. This would be a practical way of stopping the decay of many buildings while helping the young people of our nation.

2 pm

Lord Young of Norwood Green (Lab): My Lords, I, too, congratulate the noble Baroness, Lady Wilcox, on introducing what we would all agree has been a fascinating debate. There are far too many facets for me to comment on in a relatively short speech, but I congratulate her on both the subject and her contribution. I did not necessarily agree with every aspect of it, but most of it was an excellent analysis.

The characteristics of successful 21st-century British manufacturing embody much of what we want to see in the modern economy—not a race to the bottom based on low-cost, low-value and low-skilled work. That is not a race that British manufacturing nor the British economy can or should try to win. However, we can win a race to the top based on an emphasis on, as many have said, high skills, innovation and competitiveness in which goods manufactured in Britain are the best in the world for technology, quality and product reliability and for which the customer is prepared to pay a premium.

I think that you can look at the statistics and find a number of different figures in relation to the performance of manufacturing. Indeed, when I looked in the Library for information on this debate I found it worrying. I do not wish to put gloom on this because I do not think this is an area for gloom. I am responding to my namesake. It is good to see in person the noble Lord, Lord Young of Graffham—I redirect a lot of his post. To be serious, the comment on page 4 of the Library’s report to us states that:

“In terms of manufacturing as a proportion of national economic output, the UK has fallen from 15th in the world in 1970 to 114th in the world in 2012”.