Westminster Hall
Wednesday 10 November 2010
[Mr Mike Weir in the Chair]
UK Software Industry
Motion made, and Question proposed, That the sitting be now adjourned.-(Angela Watkinson.)
9.30 am
Bridget Phillipson (Houghton and Sunderland South) (Lab): It is a pleasure to serve under your chairmanship for the first time, Mr Weir. I am grateful for the opportunity to hold the debate. I take a keen interest in the UK software industry, and I am proud that Sunderland Software City, which is a centre of excellence, covers my constituency.
I thank the Minister for coming to the Chamber to put the case for the Government-I am sure that we are all eager to hear what he has to say. I would like to extend to him and his colleagues an invitation to meet me after the debate to address any points that we might be unable fully to thrash out in the time available to us.
The UK software sector has compound growth of 5.6% and is now worth £100 billion to the UK economy-almost as much as the financial services sector. The industry benefits from low capital costs, and its products are instantly exportable. Its technology can also make non-software companies more efficient, further adding to its worth to our economy. Figures from the UK's Technology Strategy Board show that 29% of the $3.4 trillion of worldwide spending on information and communications technology in 2007 was spent on ICT software. Such spending is expected to reach some £2.6 trillion in 2011. I am sure we can all agree that Britain needs to be at the heart of that new wave of ICT innovation and investment.
The US is currently the world's largest software market. We are all familiar with some of its major exports. We all use Microsoft operating systems and office software in our parliamentary offices, and I am sure that we all know of the success of Apple's iPhone and iPad. However, I am proud that behind that American muscle is British innovation. Specifically, the technology of Britain's chip maker ARM Holdings-including firmware, which is a subset of software-is in 95% of the world's mobile handsets, including products such as the iPhone and BlackBerry, and in more than a quarter of all electronic devices.
The Labour Government left Britain in a good position to become the world's leading exporter of ICT software and services. From the story of ARM, it is clear that Britain has what it takes to compete in the global market, as long as the Government provide the tools and support that the industry requires.
According to "Resilience amid turmoil: Benchmarking IT industry competitiveness 2009", the Economist Intelligence Unit's third annual study into information technology sector competitiveness, Britain was ranked third for human capital in the world, and fourth for support for the IT industry as a whole. However, I want Britain to do even better. The report found that access
to broadband networks, investment in skills and business support, and an adequate legal framework that strikes the right balance between promoting technology and allowing market forces to work were vital for the industry to prosper.
It was the Labour Government who developed the framework that pushed Britain to become the fifth largest ICT market behind the United States, Japan, China and Germany. However, I fear that the actions of the coalition Government since the election will jeopardise that. I hope that the Minister can alleviate some of my fears in his reply.
Let us consider the record of the coalition Government so far. Labour promised universal access to broadband by 2012, but the coalition has scrapped that pledge. A joint report by the Boston Consulting Group and Google showed that the internet economy in the UK represented 7.2% of our gross domestic product, and that we led the world in e-commerce, exporting nearly £3 for every £1 imported. The report also found that 250,000 jobs were dependent on the internet. The future of the software industry in Sunderland will rely on the ability to communicate digitally, and a strong broadband network is at the heart of that. It is estimated that it would cost more than £500 million to bring superfast broadband to the north-east. Without it, creative industries could move their business elsewhere. Will the Minister tell me his plans for broadband, particularly in the north-east?
The coalition has announced a review of our intellectual property laws with the aim of relaxing the rules, but that could leave Britain's intellectual property exposed and unprotected. What assurances can the Minister give me, as well as UK software and new media industries, that that will not happen?
The Tories and Liberal Democrats previously committed to providing tax breaks to the computer games sector. I know that many of my colleagues have spoken about that in this Chamber and on the Floor of the House on many occasions, and that there are strong feelings about it. I support their views on the need for tax breaks for the industry. The industry body states that, without them, the UK will be at a disadvantage compared with foreign competitors. What is the coalition's justification for reneging on that promise?
On education and training, instead of incentivising software development as a viable career, the coalition will increase tuition fees for students taking mathematics and ICT-related degrees, despite pledges to the contrary from some of coalition Members before the election. It has even cut the body tasked with buying computer equipment for schools. Will the Minister tell me how children in this country can be expected to use ICT in the school environment and go on to become a future Steve Jobs, Paul Callaghan or Chris Curry without any co-ordinated approach on ICT provision?
Support for the software industry is about not just investment in business and education, but a whole package of measures. Another consideration of businesses that I wish to draw to the Minister's attention is the availability of conventional transportation: road and rail. He might not be aware that two large capital transport projects in Sunderland-the central route and the strategic transport corridor-are in jeopardy. The success of those projects is vital for the north-east to access the rest of the UK, but also for the UK to access
the north-east. Does the Minister agree that if we make the north-east as interconnected to the rest of the UK as possible, we will have a more balanced economy?
I wish to dedicate the concluding part of my speech to a success story: Sunderland's developing software industry. Thanks to some remarkable people, Sunderland has more tech start-ups than any other region in the UK, with the exception of London. Almost 50 software companies operate in Sunderland, and almost 300 across the north-east, and the number grows every week. One North East estimates that the annual size of the north-east's new media, games and software industry is more than £250 million. Sunderland city council's business team has opened the e-volve centre in my constituency, which provides start-ups with vital tools for their development such as office and server space, and a bespoke package of advice and support. It also works with Sunderland university to offer internships to ICT students. It is vital that the region can offer highly skilled jobs to graduates, particularly to allow our young people to remain in the area rather than feel that they have to move elsewhere, often after they have studied at our world-renowned universities.
The software industry provides an ideal opportunity for growth to provide the highly skilled jobs that the north-east needs to continue to attract investment and develop. However, that potential for growth and development faces significant challenges. The coalition has cut One North East, the region's hugely successful development agency, but let me tell the Minister what One North East achieved for the UK software sector and the region.
Fifth Generation Technologies, an Indian company that produces business intelligence tools for companies, came to Sunderland thanks to One North East. Codeworks, a centre for digital innovation based in the north-east, and DigitalCity, a successful and self-sustaining digital media, digital technology and creative supercluster based on Teesside, are what they are today thanks to One North East.
The best example of the success of One North East, however, is Sunderland Software City. This innovation was developed in partnership with Sunderland city council, the university of Sunderland and private sector partners. It inspires and supports the growth of the software industry across the north-east, and makes the region the location of choice for software businesses.
From a single, easily accessible point that local companies have found invaluable, Software City provides local companies of all sizes, from the smallest start-up to firms with multimillion pound turnovers, with the support that they need to succeed. It helps companies to raise capital and find investors and customers, provides one-to-one business and technical support, and helps with access to foreign markets such as India, China and the US. More than 80% of participants in its student placement scheme have gone on to permanent jobs with the companies to which they were assigned. Since Software City started in 2008, it has helped almost 200 companies, including Test Factory, Raise a Tree, and Guroo, which has managed to get almost 500 clients in just two years.
I shall conclude by offering the Minister an opportunity to recognise the software industry and to invest in the north-east. Software City was made possible by One
North East, but its £6.5 million grant will run out in March 2011. I welcomed the Government's announcement last week of a £200 million fund to invest in high-tech hubs. Will he support the use of part of that fund to secure funding for Software City up to and including 2015?
9.39 am
Dr John Pugh (Southport) (LD): It is a pleasure to serve under your chairmanship, Mr Weir. I congratulate the hon. Member for Houghton and Sunderland South (Bridget Phillipson) on having started an important debate on an important theme. She will understand that I cannot comment on the situation in the north-east, so I shall concentrate my remarks on the contentious issue of video games-that has been the matter of some parliamentary discussion-and on Government procurement, which is an issue that interests me even more.
I am not especially interested in video games per se. I have not played them since the days when I had a Commodore 64 and played a game called "Pesky Painter", which unfortunately I have not been able to obtain since. If anyone listening to this debate has a copy, I would be pleased if they wrote to me so that I could have access to the game again. Gaming is an addictive pursuit that takes up a lot of time, and someone who has other interests in IT-as I do-finds other things to do. There is, however, an argument in favour of Government support.
There are basically two extreme views on Government support. One is that the Government should always support successful and/or sometimes failing industries, and the other is that the Government should never interfere in the market. A friend of mine who is a software engineer alleges that any IT company that needs Government investment ought not to be backed in the first place, because there is enough venture capital out there and IT is a progressive and successful market.
I do not think that anyone seriously believes in either of those extreme positions. People who do not believe in state intervention at all are a bit like the people who do not believe in censorship at all. A case in which censorship was needed can always be cited, as can a case in which the state needed to intervene. The arguments usually centre on not the principle of state intervention, but the degree of it and the method used. I think everyone accepts, including the video games industry and all other branches of the software industry, that there is a role for the Government in incentivising economically useful behaviour. The video games industry supports the continuing policy of research and development credits, and of such credits that are specifically aimed at smaller businesses, presumably smaller software houses and the like. New starts are plentiful in the industry, and new starts can often become very big companies.
All the companies that we are talking about, including all those in the north-east, favour a sensible regime of business taxation. We can all talk about that, and about levels of corporation tax and the like. I guess that everyone nowadays accepts that tax incentives and breaks are better than direct subsidies, because they are a more effective way of encouraging winners and of getting the kind of behavioural impact that people want. I accept that a tax incentive is a form of sectoral subsidy, as
essentially an amount that is due is not being paid, but the issue here seems to centre on whether a sectoral subsidy is, on the face of it, justifiable and necessary. It has to be necessary to be justifiable. On the face of it, there seems to be a pretty good case. I think we all accept that the industry has huge potential. The hon. Lady laid out very well what kind of potential it can offer, not only for the country as a whole but in areas of substantial deprivation. An area such as Sunderland is not necessarily associated, in the way that California is, with the IT industry, but the association is certainly helpful to Sunderland.
There is obviously a huge native skill-base in this country. I was surprised when, during the general election, individual constituents of mine e-mailed me to say that they were very much involved in a video games or software business, and they made representations on behalf of the industry. I was surprised at how many of them there were, and I was also surprised, in these days of the internet, that they did not know one another very well. I felt that after the election I could perform the useful function of putting them all in touch with each other. The hon. Member for Liverpool, Wavertree (Luciana Berger)-who has just arrived-is well aware that Liverpool has a burgeoning software industry involving a lot of small companies. We should support that industry emphatically, because it is very green, forward-looking and progressive.
Luciana Berger (Liverpool, Wavertree) (Lab/Co-op): Does the hon. Gentleman agree that we should introduce some kind of domestic tax incentives and support not only to boost the industry, but so that we can compete on an equal playing field? Other countries across the world that produce software and video games have additional incentives for the industry, in both research and development and in the wages of people who come from abroad. Because we do not, we have dropped from sixth to fourth place in the world in video games production. We have so many people leaving the UK to go to other countries, such as Canada, the United States-
Mr Mike Weir (in the Chair): Order. I remind the hon. Lady that interventions should be brief.
Dr Pugh: I am not sure that the causal chain is as emphatic and clear-cut as the hon. Lady represents it, but later I shall come to the business of a level playing field.
It could be argued, could it not, that the indicators for what the industry offers and its potential are so good that the case for state investment is almost being undermined? If it is that good and there is that much potential, why would the Government be needed? Why should venture capital not be there; why would it not be there? I suppose there are some answers to those questions. It could be argued that this country's financial sector is notoriously short term, which indeed it is. It is somewhat tax averse, and we have seen plenty evidence of companies preferring to go to places where the tax burden is less. The companies are certainly not patriotic and if they have scope elsewhere in places such as Canada, they might well decide that they want to place their funds there.
There are other strong arguments against the state getting too heavily involved in managing the industry. One is that the IT industry is notoriously volatile and unpredictable. One only has to look at the giants of the
past that have crashed in the night-the IBMs, the Lotus Notes and the strange fall and rise of the Mac. One need only consider what would have happened had they put their money into floppy disc manufacture a few years ago, or into CD-ROM manufacture in the past five years. When someone puts money into the software industry or the IT industry more generally, they do so at an appreciable risk.
It cannot be in the long-term interest of the nation-of all nations-to base national taxation, for any sector, on the lowest common denominator of international taxation. Although the video games industry has said a lot about Canada, I would like to see what is happening in other areas where the software industry is also thriving and is competitive with Canada. I shall not rehearse the arguments that we could have about state aid and protectionism. I do not understand, however-the Minister can help me here-the argument presented by the Chancellor for not giving tax relief to the video games industry. He said that it could not be well targeted. I do not grasp that, and some evidence in the notes that have been provided makes it less than clear what is being said, meant or agreed by the Treasury.
Jim McGovern (Dundee West) (Lab): I think the Chancellor actually said that the tax breaks were poorly targeted, rather than not well targeted. I have since had meetings with Ministers who have said that it is Government policy no longer to target any industry for tax breaks. Does the hon. Gentleman have a view on that?
Dr Pugh: The second answer that the hon. Gentleman was provided with seems to possess greater clarity than the first, because the first is, I guess, contestable. We can have a long discussion about how we can and cannot target breaks. A rational argument can quite decently be made that the software industry, given its potential for the capital venture market, is a lower priority than some other industries in a context of scarce resources; or it could be said that a break would be an unnecessary fiscal discount. The Minister can perhaps explain later exactly what is meant by the poverty of targeting in this case.
It is true that under our existing taxation policy some industries have failed, but even some of those mentioned in the notes we have been provided with have failed not because of the taxation policy, but because other things have gone wrong in the software development world and the product simply has not taken off. It is an intrinsically risky market, and the state ventures into it with some caution.
Just to extend the debate, there are other things that we should be talking about. I do not think the Government's role in encouraging the software industry simply starts and finishes with tax breaks. They have a definite role in education. The hon. Member for Houghton and Sunderland South underplayed the continuity of British education between one Government and the next with regard to developing the software engineers of the future. In that context, I have a general worry about how the curriculum shapes up. In the initial phases of IT education, children were taught about programming and so on, but a great deal of recent IT education is simply about how to use applications. The people who are going to produce the applications of the future
will not be the British: they will be Indian, Chinese and possibly American. There is a decline in IT education in this country-or, rather, it is not what it could be.
On the Government's role, there is a further aspect to consider. The Government are probably the biggest customer for IT. Some 40% of all IT products, software included, are ordered by Departments. Government procurement is extraordinarily difficult for small software companies to work with, the process often being so prolonged that they cannot sustain their interest in applying for work, which the big companies ultimately get. The Cabinet Office and the Department for Culture, Media and Sport should consider how that process operates.
Labour Members must forgive me for going in this direction, but I have to say that huge software projects that were going to be embraced in the Building Schools for the Future programmes were, by and large, built by allowing the biggest players-the big American software firms-to engage with the process. Small British software firms found it difficult to get on the British Educational Communications and Technology Agency list. I have complained about BECTA in this Chamber in the past and I am glad that, as a result of my representations, it has been abolished.
There is a close and unattractive relationship between big government and big IT. We are blessed with the Connecting for Health project, with all its problems, ramifications and extra costs, largely because of close connections and conversations between the previous Prime Minister and Bill Gates. There has been a slow commitment to interoperability, open standards and open source in IT procurement in this country-particularly state and government IT procurement-all of which has effectively shut out the burgeoning British software engineering companies and favoured the large players, including Microsoft and Oracle.
I noted the Chancellor's suggestion before the election-I am sure the Minister can comment on this-that by adopting a more favourable position towards open source and open standards, the country would save £500 million. I have not seen that in the comprehensive spending review so far. I can provide the press releases if any hon. Member doubts it, but I am sure we would all want to follow that up. That must surely be better than falling for the trick, as has happened in the past, where we receive memorandums of understanding and order shed-loads of products from big software houses abroad, simply because they give us the licenses at slightly less than the exorbitant prices they would charge a private customer.
The Government can do a huge amount in monitoring how taxation policy plays out. If there is a case, and serious empirical evidence is produced, showing that the video games industry is deserting the UK purely off the back of current taxation policy because the Government are reluctant to follow through on some suggestions made prior to the election, they will need to look at that. We cannot afford to stand by and let the industry go, because that would be a serious loss to the country.
We need to keep an open mind on fiscal measures and what will work, and to take a hard, prolonged look at both our education-
Jim McGovern: Before the general election, the Conservative and Lib Dem spokesmen on this subject both said unequivocally that they would support tax breaks for the video games industry. Why has that changed?
Dr Pugh: I am not party to the discussions that have led to that change. Clearly, there were opportunities for previous Governments to do precisely that.
The opportunities for the British software industry are huge. The Government just need to make the right move. Some of the right moves are plain and obvious, and I hope they will make them.
9.55 am
Mike Weatherley (Hove) (Con): I congratulate the hon. Member for Houghton and Sunderland South (Bridget Phillipson) on securing this debate.
The Government have made a number of announcements in the past weeks emphasising the importance of innovation to the UK economy. In particular, I welcome the Prime Minister's "Blueprint for Technology" and the specific measures set out to support technology-based innovation. The UK software industry is at the heart of such innovation, and none more so than the video games and interactive entertainment industry.
The UK video games industry-the fastest-growing creative industry in Britain-is one of the biggest in the world. More video games than ever before are being played on an ever-growing range of platforms: consoles, online, mobile phones and interactive TV, to name a few. One in three voters consider themselves gamers. My hon. Friend the Member for Southport (Dr Pugh) mentioned his preferred game; mine is "Command and Conquer: Red Alert 2".
A large part of the industry's strength lies in its development of original intellectual property. The UK video games industry excels in innovation and research and development. It is anticipated that the growth in mobile and online gaming in particular will provide new opportunities for original IP development. Sussex is home to a number of content creators and digital media companies, poised to play their part in the UK's economic recovery. In my constituency-Hove and Portslade-and in the wider Brighton and Hove area, companies such as Black Rock Studios, NCsoft, Eurogamer and Futurlab are meeting demand from a thriving home and export market.
Government support is needed to ensure that the UK remains at the forefront of this thriving industry and to ensure that it continues to grow. IP protection is crucial in that regard. I am sure that I do not have to remind hon. Members of the importance of intellectual property rights, particularly in the online space. I welcome, and I hope other hon. Members do, the Government's commitment to IP and the Gowers report, and to pursuing infringers through the Digital Economy Act 2010, although it is not perfect in respect of the appeals procedure. It is right that the Government continue this good work, making the IP framework more conducive to innovation.
As the Prime Minister reflected this week, IP is not just about protecting the end result; it is also about ensuring originality in creation. Will the hon. Lady join me in welcoming innovations in the video games sector
that are allowing the UK to harness its talents and exploit its advantage? For example, the university of Abertay Dundee, is achieving great things with Government support. With support from the Department for Business, Innovation and Skills and from the European regional development fund, Abertay university is establishing a video games centre of excellence and a prototyping fund, allowing small games developers throughout the UK to apply for grants of up to £25,000 to support the development of fully working prototypes.
Jim McGovern: When will a member of the coalition Government visit Abertay university?
The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Mr Edward Vaizey): On 3 February.
Jim McGovern: The Secretary of State for Scotland has visited, but no Conservative Member has done so.
Mike Weatherley: I thank the Minister for his intervention.
Commercialisation and project management support will also be provided from Abertay's business and computer games experts, giving each successful applicant the best chance of establishing or developing a thriving business. The spill-over effects into other areas are plain. For example, talented students and graduates will gain important work experience opportunities on project teams, working in the same studio environment as computer games companies. Overall the project can be described as a pipeline for the creation of new intellectual property and it is expected to stimulate the economy by attracting private sector investment.
Similarly, a partnership between Cardiff schools of creative and cultural industries at the university of Glamorgan and Swansea Metropolitan university will support companies holding creative IP in exploiting that resource through identifying routes to market and developing capacity. The DigiLab will ensure that games prototypes for further investment are generated, and that subsequent end products reach the key games publishers quickly to the benefit of participating companies and sponsors.
I call on hon. Members to support those and other initiatives, which are providing crucial commercial and intellectual partnerships to spur innovation and sustain a sector that is at the heart of our economic recovery. I welcome recent announcements about the Government's intention to establish technology and innovation centres and to use Intellectual Property Office savings to support UK business, helping companies to develop new technologies and offer advice in developing their intellectual property. I look forward to seeing how those projects develop in the coming months.
Finally, the Government have signalled that they will consult business later this autumn on the taxation of IP, and the support that research and development tax credits provide for innovation. That area is of vital importance to the software industry, and I urge my hon. Friends to engage with industry bodies such as the Association for UK Interactive Entertainment, and provide a framework for the industry to flourish.
10 am
Justin Tomlinson (North Swindon) (Con): I rise to support the principle of this excellent debate secured by the hon. Member for Houghton and Sunderland South (Bridget Phillipson). Let me provide a little context on why I have come to support the debate. At midnight on Monday, "Call of Duty: Black Ops" was launched as the latest product in a series of the world's best-selling computer game. More than 100 HMV stores were open, and queues of people were waiting to get hold of the game. About £1.5 million of sales were expected on the first day, and worldwide sales are expected to exceed £1 billion, which will make it the best-selling computer game ever. It was my birthday on Friday, and I am hopeful that when I return from Westminster at the end of the week, a copy of the game, along with "Football Manager 2011", will be waiting for me. I must, however, confess that I am exceedingly average at both games.
I have spoken to a lot of hon. Members about this debate, and the average level of knowledge about computer games among MPs is not fantastic. I have done a little research, and found that Positech Games has launched games called "Democracy" and "Democracy 2", where there is the opportunity to be the Prime Minister. I am sure that the Leader of the Opposition will soon be ordering a copy.
I have taken part in many debates in which we sought to identify new markets to allow the UK economy to expand and diversify. The information and technology market is happening now. As has been mentioned, the worldwide ICT market is expected to reach $4.3 trillion in 2011. UK studios already generate global sales of £1.7 billion a year, with the UK market in the region of £3.5 billion a year. It is essential that we are best placed to benefit from that.
Interestingly, the market is changing and in many ways it is going full circle. Although big budget games can cost around £25 million to develop and are therefore dominated by the big players, many of the early software industries in the '80s initially expanded from a bedroom industry to become the multi-million pound industries of today; for example, Codemasters, which was set up in 1986 by Richard and David Darling. With iPads, iPhones and Facebook applications, once again, new players can enter the market. We should encourage and support that.
My constituency can play a part in helping the UK to benefit from that growing market. The head office of the Technology Strategy Board is based in Swindon, and I had the pleasure of meeting its chief executive a couple of weeks ago. Part of the company's remit is to invest in stimulating business innovation in ICT, and its primary role is to work with e-skills UK, professional societies, and research councils-many of which are based in Swindon-the Department for Business, Innovation and Skills and the Department for Education. Through its co-ordination, expertise and funding, the UK should, and can, fully benefit from that crucial market.
I extend an invitation to the Minister to meet the Technology Strategy Board. As an incentive, Swindon-in its second role in the industry-is home to the Museum of Computing, which I support. All hon. Members who have referred to computer games, or to their original computers, can go and see those things proudly on display, and the museum would be delighted to welcome them.
10.3 am
Ian Lucas (Wrexham) (Lab): It is a pleasure to serve under your chairmanship once more, Mr Weir, and to have listened to the various hon. Members who have contributed to our debate about an extremely important industry for the United Kingdom. The ICT industry has developed hugely over recent years. I remember that when I was a bright-eyed, bushy-tailed candidate in 1997-I was one of the few Labour candidates to lose-we talked about giving computer internet access, as we then called it, to schools. Now, 13 years later, much of that optimism and much of the commitment made by the previous Government to putting schools online and introducing computers into schools has been realised. We easily forget the scale of the change that has taken place in our schools as a result of investment over the past 13 years.
There is no doubt that when the Labour party left office, the British software industry was strong on the national stage with 1.2 million people working in it to service the 22 million people throughout the UK who access IT and use computers every day in their work. We must try to ensure the continuation of our competitive advantage and knowledge base that has enabled the success of the international UK computer industry.
Today, thousands of students are marching in London in response to the Government's proposals for university tuition fees. That is relevant to today's debate, because over the past 13 years, there has been major investment in higher education and an increase in the number of students going to university. If one industry is knowledge-based, it is the IT and software industry. Those students who went to university and were attracted by all the games-of which hon. Members know much, and I know very little-have grown our IT industry. Many imaginative and successful small companies in the UK have come out of universities. My fear is that as we go forward, given that it is proposed that student tuition fees will rise to £9,000 a year, many people similar to those who went to university over the past 13 years will be discouraged from attending university and therefore from going into an educational, innovative atmosphere that could lead them into that innovative industry.
Dr Pugh: The hon. Gentleman will recall that he voted for tuition fees in the last Parliament and I did not. I say nothing about the current policy, but at the time I said that the introduction of tuition fees and top-up fees would reduce the number of people applying to university. As a matter of empirical detail, I turned out to be wrong. There is an outside chance that, regardless of the merits of this policy, the hon. Gentleman could also turn out to be wrong, as I was.
Ian Lucas:
The hon. Gentleman is wrong to state that I voted in favour of tuition fees-I did not. I have always opposed tuition fees. There is a difference in kind between the tuition fees introduced through legislation in 2003-04 and the present position. The fees introduced in 2003-04 were supported by a generous bursary scheme that the Government put in place, which was the main reason why the proposals went through. We now have a situation in which fees of £9,000 a year are being proposed. Before the introduction of those fees, when Parliament will be asked to increase the cap to £9,000, we will not have any discussion about the bursaries that will be put in place. The White Paper on higher
education-one of the most important subjects for our nation-will not be produced until after we have voted on the cap, and that is a matter of profound concern. I have always shown a great interest in this issue and, for the benefit of the hon. Member for Southport (Dr Pugh), I can say that it is one of two occasions when I voted against the Labour Government. The matter goes to the heart of whether the UK software industry succeeds in the future.
Of all the countries that compete with us, we are alone in cutting back on investment in higher education. Teaching grants for most of the subjects that will lead to people studying IT at university will be removed. That cannot make us more competitive as a nation, because it will make our students less knowledgeable. It is therefore necessary that we say that the removal of those teaching grants will have profound effects.
In its 2008 "Developing the Future" report, Microsoft stressed explicitly the importance of industry placements for students. When talking about the lower level of tuition fees, it stated:
"The introduction of tuition fees may have created a deterrent to students considering taking up a placement as they are likely to be more anxious to finish their studies as soon as possible in order to repay their loans and avoid further debt."
How much greater will that deterrent be as tuition fees are set to triple?
That is not the only area of uncertainty created by the present Government. Labour made a clear commitment to universal broadband by 2012, but it has been scrapped by the Tory-Lib Dem Government. That will create a competitive disadvantage for many companies away from the south-east of England and centres of population in general. It will inhibit the development of innovative small businesses, which are so evident in the software industry. Even more serious is the uncertainty about the expansion of high-speed broadband services, which are key to the development of software companies. We all know that the £530 million docked from the licence fee will be insufficient to pay for universal high-speed broadband across the UK. Will the Minister please tell us where the Government believe the money for that will come from?
The Government have set their face against support for the video games industry by scrapping Labour's games tax relief. We heard today that we need a clearer explanation of why the Government believe that that step-it contradicts the Conservatives' pre-election stance, although we have come to expect that from the present Government-should be taken. My hon. Friend the Member for Dundee West (Jim McGovern) has been doggedly pursuing the matter for as long as I can remember, but he is still to receive straight answers to the straight questions that he has been putting. Why is an industry that we know is successful and that is in a very competitive environment not receiving the support from the Government that the Conservatives stated before the election that they would provide?
Justin Tomlinson: Will the hon. Gentleman clarify whether it is still Opposition policy to support those tax incentives? If so, how would they be funded and where would that funding come from?
Ian Lucas:
Let me give the hon. Gentleman one example of what the Government whom he supports have chosen to do. They have chosen to reduce corporation tax rates year by year, and they are paying for that by
taking away tax incentives for industry to make capital investment. The Labour party believes that that approach is wrong, because lower corporation tax has a huge effect on banks' income, and the approach detrimentally affects investment and manufacturing in this country. We want to support investment and manufacturing in this country, so we favour tax incentives and relief for investment made by business. That is the line that we are taking. We took it in government, and we believe that it is correct.
Luciana Berger: Is my hon. Friend aware that the Red Book cites the amount involved in not introducing the video games tax relief as £200 million, but that that does not take into account the net benefit of introducing a video games tax relief, which conservative estimates have put at an additional £200 million?
Ian Lucas: I am very grateful to my hon. Friend. That sounds like a good deal to me, so perhaps such an approach that should be followed. We have a successful industry. We should be encouraging it to prosper, not taking away its advantages.
Last week, the Prime Minister made a speech about information technology. Interestingly, he chose to make it in east London. I note that this debate was secured by my hon. Friend the Member for Houghton and Sunderland South (Bridget Phillipson). We want innovative companies throughout the UK-in England, including the north-east of England, in Scotland, in Wales and in Northern Ireland.
My hon. Friend made the excellent point that the north-east had one of the best regional development agencies in the country in One North East. She talked about Sunderland, its Software City and its computer city-approach. We all know about the success of the investment levered into the UK from Nissan by One North East, working with Her Majesty's Government. That £400 million of investment came at a cost of £20 million. That is the type of work that has been going on in the north-east to bring innovative new companies and investors from abroad to the UK. Unfortunately, One North East has gone and, as we speak, Sunderland does not have a local enterprise partnership.
We heard the Prime Minister talk last week about a fund of £200 million for new technology and innovation centres, so I would like some information from the Minister about the money. Is that sum separate from the regional growth fund? If so, who will administer it and how does one access it? If part of the country, such as Sunderland, does not have a local enterprise partnership, how will it access finance from the fund? Is the fund intended to be solely for the benefit of east London or is it a national fund? [Interruption.] The Minister chuckles, but it tells us something that the Prime Minister shuttles across to the east of London to make such an announcement instead of going, for example, to the north-east of England, which has many great industrial stories to tell.
I would also like to pick up the point that the hon. Member for Southport made about Microsoft having a close relationship with the previous Prime Minister-or was it the Prime Minister before? There was evidence in last week's announcements of another close relationship between a Prime Minister and a major multinational
software company-Google. Strangely, however, the hon. Gentleman did not refer to that. In particular, there was an announcement of a review of the intellectual property system, which the Prime Minister himself said frustrated Google in this country. It is interesting that on the very day the Prime Minister announced that there would be a review of intellectual property rights in the UK, Google announced that it would be taking part in the east London high-tech city project.
Dr Pugh: We all need to be cautious about such things, and I must add to that the fact that my right hon. Friend the Deputy Prime Minister made some significant announcements the other day at the event involving Microsoft. We all need to be wary about these issues.
Ian Lucas: We do indeed, but the hon. Gentleman raised the issue initially-specifically in connection with the Labour party and Labour Prime Ministers. I thought it only fair to illuminate the debate by highlighting the announcements that were made only last week.
When examining issues such as intellectual property, which is extremely important and does need to be examined, we need to be conscious of not only freedom of expression and access to information, which are of course vital and needed to make our nation competitive, but the rights of those who create original material, who are often the small people in all this and do not have access to Prime Ministers, and sometimes have difficulty gaining access to MPs. Their rights concerning their intellectual property need to be retained. I shall therefore be watching the review with great interest. It is important that there is broad input into the review and I encourage anyone who has interest in this area to contribute. We are at a positive stage for the UK software industry. We have great talent, great innovation and great originality. My contention is that much of that arises from the positive intellectual atmosphere that has been fostered generally in the UK, and specifically in our universities. I am worried that that atmosphere might disappear because of the environment in which we operate.
Jim McGovern: I thank my hon. Friend for giving way; I went to my usual seat in the Chamber over here, so I seem to have split from the Opposition.
On the subject of access to MPs, prior to the previous Labour Government's March Budget statement, numerous Ministers-the Chancellor, the Secretary of State for Scotland, and Ministers from the Department for Business, Innovation and Skills and the Department for Culture, Media and Sport-visited Abertay university. They saw for themselves just how important the industry was to Dundee and, on the back of that, the Chancellor announced a tax break for computer games. However, since the general election, there has been not one visit to Dundee.
Mr Vaizey: Just the Secretary of State for Scotland.
Jim McGovern: Prior to the withdrawal of tax breaks for the computer games industry, not one Minister visited Dundee. Does my hon. Friend the Member for Wrexham (Ian Lucas) agree that that was unfair, at the very least?
Ian Lucas:
We all benefit from close contact with not only our constituents but, for example, universities. I am delighted that the Minister will be visiting the university in Aberdeen-[Interruption.] Dundee; I am
corrected. I am sure that he, like all of us, would benefit from such a visit. It is important that we understand how different universities are from when some of us attended university.
As I mentioned, another area about which I have particular concern is high-speed broadband. I speak as a Member of Parliament for Wrexham and for Wales, and I am worried that uncertainty around the proposals for developing high-speed broadband, and indeed universal broadband before that, is leading to an atmosphere in which businesses away from the south-east of England will suffer a competitive disadvantage. In an area such as software, that will be crucially important.
Justin Tomlinson: Will the hon. Gentleman clarify what speed he would classify as high-speed broadband?
Ian Lucas: Speeds of 10 megabits-plus are commonly perceived as high speed, although figures of up to 50 megabits are valued in some areas of the computer industry. Those are the sorts of speed that I would like to see. The problem is that there are many parts of the country-rural areas, which are not normally represented by Labour MPs-that do not as yet have even 2 megabits. Under this Government, there is no commitment to ensure that individuals from these areas will receive such support for broadband services in the future.
YouView will be introduced into this environment next year and demand for broadband services will increase as a result. This important area is at present below the radar-if I may mix all my metaphors and technological expressions-but it will become more evident in the next year or so because of the expansion of such services. If we are to maintain a broad-based industry across the country, it is important that we focus hard on this and also that we get some detail and certainty about how the investment will be delivered right across the United Kingdom.
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The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Mr Edward Vaizey): I am grateful, Mr Weir, to be serving under your chairmanship today, instead of serving with you in Committee as we were yesterday, and will be again tomorrow.
I congratulate the hon. Member for Houghton and Sunderland South (Bridget Phillipson) on securing this important debate. May I give her one quick, straight answer, which is that I would be delighted to meet her at a later date if she finds my speech unsatisfactory? I can make a safe prediction that because I am a Minister and she is member of the Opposition, my speech will almost certainly fall short in some respects of what she wishes.
I would also be only too delighted to visit Sunderland and see some of the innovation and technology happening in that city. The hon. Lady used her speech to highlight brilliantly the sort of technology expertise that now exists in Sunderland. In fact, as pointed out, in the north-east alone it is said that the software and IT industry is worth something like £800 million; there are almost 2,200 businesses, 27,000 people and companies such as 5G, which she mentioned, and, in other parts of the north-east, Sage, Reflections and Eutechnyx. Sunderland is a hub of high-tech industry.
I am grateful to some of the other hon. Members who have contributed to the debate. The hon. Member for Southport (Dr Pugh) made a thoughtful speech, which was not partisan but reflected on many of the issues that affect the software industry. He effectively turned the debate, for a moment, into one on the video games industry. Another point, which I shall return to, and which I absolutely support him on, was his reflection that in schools children today are learning how to use applications rather than how to programme.
In fact, the hon. Gentleman might have shared with me some of the anecdotal experiences of talking to some of our top games developers, many of whom learned their trade, as it were, on the BBC Acorn computer in the '80s. We simply do not have such access to the nuts and bolts of technology. One of the things that I want to work on, in a big society kind of way-I am one of those Ministers who fully understands what the big society is-is some sort of after-school club where children can sit down with developers and learn how to programme. I also took on board the hon. Gentleman's points about big IT and big government. He will be well aware that many members of the new Government, particularly the Chancellor, are keen supporters of open source software. The Government are very focused on ensuring that small and medium-sized enterprises get a fair share of the cake from the Government.
I was pleased that the hon. Gentleman took a realistic view about the fate of BECTA-we should not always focus on the quango as the be-all and end-all of Government policy. I am sure that schools will continue to access excellent high-tech IT equipment for their children, not least from RM plc, one of the foremost educational technology providers in this country, based in my constituency, at Milton park in Didcot.
It was good to hear the speech of my hon. Friend the Member for Hove (Mike Weatherley), whose soon-to-be constituency I visited during the election. I am not sure whether I made a big impact; I suspect it was his hard work and dedication to his now constituents that secured him the seat. He has already made a name for himself in the House with his passionate support for the creative industries. He used to work in the film and music industry. His focus is on piracy, to ensure that there is a balanced debate and that we remember that rights holders deserve to make money from their creations. I take on board his points about the R and D tax credits.
I am delighted to see my hon. Friend the Member for North Swindon (Justin Tomlinson) in the Chamber, having won his seat at the election. His remarks reflected the change of tone in the House on video games. When I was an Opposition spokesman and talked about the importance of video games, the only Labour Member who would talk about video games was the right hon. Member for Leicester East (Keith Vaz), who regularly criticised them for their violence and their effects on society-he alleged. It is good that my hon. Friends are now standing up and saying proudly that they are players of video games.
Jim McGovern: Does the Minister accept that "video games" is perhaps the wrong title for the subject? Anyone who has visited Abertay university would see that what are called video or computer games can be applied to construction, architecture or medical science. It is wrong to say that "video games" just involve young lads sitting at a computer playing "APB" or "Grand Theft Auto".
Mr Vaizey: Obviously, the software industry is far wider than simply video games. We tend to call it the video games industry in the vernacular, although some people call it the interactive entertainment industry. However, I have said consistently over many years that what one loosely calls the video games industry is at the heart of a whole range of technologies in defence, education, health and the wider creative industries, such as architecture. That is why it is so important to support the core skills and companies in the industry.
My hon. Friend the Member for North Swindon invited me to meet the Technology Strategy Board. I have done so. It is incredibly important to the debate about the future of the software industry, as well as across a range of other areas. I am delighted that it is in Swindon, just down the road from my constituency; indeed, several of its employees are constituents, so they are clearly people of great judgment. Let me take this opportunity to wish my hon. Friend a happy birthday for last Friday.
Last but not least, I welcome to our Benches the hon. Member for Dundee West (Jim McGovern). I cannot work out why he is sitting where he is, and I had better tread carefully in making an analogy, but he resembles one of those soldiers from the last war who was so dedicated to his craft in taking on the enemy that he dug deep, burrowed down, hid and covered himself in camouflage. In coming to his usual seat, he is as yet unaware that the last war has concluded, victory has been declared and there is a new Government. Alternatively, his choice might simply reflect the huge success of the coalition's policies over the past six months, particularly pertaining to the software industry, to which I am about to turn.
Jim McGovern: Let me say in response that I might be the first, but I will certainly not be the last, to split this coalition.
Mr Vaizey: The hon. Gentleman indicates that he is simply acting as a buffer between Conservative and Liberal Democrat members of the coalition. I wonder what other conflict spots we could send him to, given that he is doing such an excellent job this morning.
I have mentioned the huge importance and success of the software industry in Sunderland. The hon. Member for Wrexham (Ian Lucas) talked of the success of the UK software industry, and I heartily endorse what he said. More than 500,000 people work in it, and there are more than 100,000 enterprises, generating more than £39 billion of gross value added. The UK market for software products and services is the largest in the European Union and has sophisticated leading-edge consumers in sectors such as logistics and financial services. As a result, almost all the world's major software businesses have a substantial presence in this country, whether in research and development, logistics or sales and marketing.
The software industry is not immune to the pressures being felt across the UK economy. In the longer term, globalisation will create additional pressures, as routine tasks and activities continue to be relocated to lower-cost economies. However, there are also tremendous opportunities for the sector, and I am certainly from the school that sees the glass as half full, rather than half empty. Innovative software technologies will underpin
many of the fundamental shifts that we see in our society and our economy-everything from how we shop and access entertainment such as television and video to how we improve our transport networks and manage our scarce natural resources. In all those areas, new software systems will be the key enabler and driver of growth and innovation. As a result, the sector's importance extends far beyond its direct contribution to UK GDP and employment, vital though that is. The sector will be in the vanguard of our broader economic renewal.
The coalition Government are absolutely committed to creating the right conditions to allow software and other UK technology companies to flourish. That means responding to the sector's distinct requirements to ensure that the software businesses of tomorrow are nurtured today. Last week, the Prime Minister launched "Blueprint for Technology", which clearly stated the Government's ambition to make the UK the No. 1 place in the world to start and invest in a technology company, as well as our ambition to be the most technology-friendly Government in the world.
The hon. Member for Wrexham took huge exception to the fact that the blueprint was launched in Shoreditch, not Sunderland, and I assure him that I will be writing to the hon. Member for Hackney South and Shoreditch (Meg Hillier) to tell her that one of her party's spokesmen deems her constituency unworthy of the prime ministerial launch of a technology blueprint. The hon. Gentleman gave no reason, but if he wants to clarify why he has a downer on Shoreditch, he has only to intervene.
Ian Lucas: I would be delighted to intervene. I made it absolutely clear to the Minister, who clearly was not listening to my speech, that a commitment to the regions, which is so important to the future of the software industry across the UK, is lacking. I am sorry that Her Majesty's Government, and particularly the Prime Minister, have not, for example, put in place a local enterprise partnership in Sunderland, which is an extremely important industrial city in the north-east, where one of the world's most important automotive companies is based. I was illustrating the fact that the Prime Minister's priorities appear to be focused on the south-east, which is where he launched the blueprint.
Mr Vaizey: The hon. Gentleman might as well say that the fact that we are having this debate in Westminster indicates that the Opposition's priorities are focused on the south-east, rather than on Sunderland. It is slightly crass to rubbish the technology blueprint on the basis of where it was launched. It was launched in a Labour constituency, and the Government were absolutely adamant that it would be, to show our support for the Opposition.
As for the LEP, the hon. Gentleman well knows that individual local authorities and areas were invited to bid for an LEP. Sunderland's bid did not get through the first phase, and it is now part of a wider bid for the Tees valley. I am certain that it will be constructively listened to and will progress. The idea that the north-east is somehow not getting LEPs is another complete myth; indeed, the hon. Gentleman's speech was full of myths, to which I will return from time to time in my remarks.
For example, if the hon. Gentleman wishes to intervene again, perhaps he could elaborate on his remark that Google was rewarded for coming on board the east
London project-along, I have to say, with important British companies such as Vodafone and BT-with a review of intellectual property. Is it his allegation that there is some corrupt deal between Google and the Government? If it is, he is free to intervene to make that point. I notice that he is not going to.
Software companies have said that their top priority is the ability to access the right skills in the right place at the right time. Those skills range from specialist capabilities in science and engineering through to practical know-how in systems maintenance. The relevant sector skills councils, including e-skills UK-the sector skills council for business and information technology-are working closely with software employers and the Government. The aim is to bring together the education system and workplace training to create the pool of skilled workers needed to generate and exploit innovative technologies. It is important to note that the Government announced early in their time in office the Livingstone-Hope review of skills for the video games industry, which is progressing extremely well and has generated enormous support from the sector. It will no doubt complement the other review that I mentioned.
The Government recognise that the software and technology sectors are globalised and highly mobile. We will therefore ensure that investors and entrepreneurs who want to operate in the UK can enter, while we are reducing the overall level of immigration to a manageable level. That is why the technology blueprint introduces a new entrepreneur visa to make sure that someone with a great business idea who receives serious investment from a leading investor can base their business in the UK.
Mr Vaizey: The hon. Gentleman shakes his head. We all know the Labour party's record on talking about immigration, and we have been only too interested to see the leaflets that it was putting out during the election. Our policy takes a slightly more sober and reasonable approach to what can sometimes be an emotive issue.
Bridget Phillipson: The Minister may be aware that the Select Committee on Home Affairs, of which I am a member, gave careful consideration to the immigration cap. Some of the concerns that were raised, particularly from ICT companies, were about how it would work and whether it would be a deterrent for business investment, particularly in relation to highly skilled jobs such as those in scientific industries. I know that the Minister is making a party political point, but there are serious issues for the Government to consider about the working of the cap and the impact that it may have on the UK software industry.
Mr Vaizey: I should love the hon. Lady to point out what party political point I made. I was simply setting out our policy and the fact that we responded to the concerns in question with an entrepreneur visa. I noted that the hon. Member for Wrexham was shaking his head. Clearly, he simply opposes the policy for the sake of it, rather than considering what it does.
The blueprint also announces a review of the intellectual property framework, to ensure that its design will support the growth of both new and existing businesses. That review is incredibly important, because it will focus on the needs of small and medium-sized enterprises. We want to give our full backing to the high-growth, innovative companies of the future, whether they specialise in software or other disciplines. Part of preparing for the future is looking critically at the frameworks that we have in place to protect innovators. The review will focus on identifying and dismantling barriers to growth in the IP system, and will look at how the IP framework could better support new business models as they develop.
The third important element of our blueprint is the framework for supporting future technological innovation in software and other disciplines. We are now pledged to establish a network of elite technology and innovation centres, based on the model proposed by Hermann Hauser and James Dyson, to commercialise new and emerging technologies in areas where there are large global market opportunities and a critical mass of existing UK capability. The recent comprehensive spending review has provided £200 million of funding for the technology centres over the next four years. The network will be overseen-in answer to the questions of the hon. Member for Wrexham-by the Technology Strategy Board. Individual centres will operate with a high degree of autonomy, to give them the flexibility to respond to business needs and emerging opportunities, but the board will provide the overarching framework.
Our vision for technology and innovation centres is that they should help industry sectors to exploit new and emerging technologies, and bridge the gap between original research and technology commercialisation, reducing some of the attendant risks to business. I am aware of the issue from my constituency where there are several high-tech companies that can benefit from spin-off research. Each idea appears to me to be potentially world-changing, but the struggle they have to take that research to market and commercialise it cannot be underestimated. The centres will support projects that businesses and universities often cannot undertake, or that they do not have sufficient incentive to undertake on their own. They will help new technologies get to investment readiness so that they are a viable proposition for venture capital or other forms of investment, and will help, we hope, to accelerate their journey to market.
We want to get the network up and running as soon as possible, so the Technology Strategy Board will work closely with industry, stakeholders, and the Government to identify the priority sectors, the scale of initial investment required and the governance structure for the network of centres by April 2011. I urge the hon. Member for Houghton and Sunderland South and any other hon. Members who are interested in the issue to contact the board to discuss it.
The Technology Strategy Board plays an important role in supporting the software sector. It already supports innovation among software-intensive firms in a number of ways, either through sector-specific programmes or through cross-sector projects designed to deal with a particular challenge, such as low carbon. It also backs the software sector via initiatives such as knowledge transfer partnerships. Several of the Technology Strategy Board's programmes routinely invest in initiatives where
more than 90% of the business activities are software-related. That is true of its information technology programme, as well as its creative industries, intelligent transport and network security programmes. In addition, the board has identified its recently formed digital programme as one of its five strategic priorities in the period ahead. In total, over the past year the board has launched 13 software-intensive competitions for projects with a combined value of around £100 million, including £50 million of private investment.
Some other issues were raised, including broadband. Again, some myths were propagated by the Opposition. I think that we all agree that superfast broadband and that kind of infrastructure is essential to the future of the economy. However, I find it odd that the Opposition seem to believe that we have reneged on a promise, or that we do not share their view of its importance. The previous Government had a very poor ambition, which was simply to get universal broadband of 2 megabits at the end of 2012. They proposed to pay for that with a telephone tax that would have hit some of the poorest in society, as well as being a disincentive.
Jim McGovern: Will the Minister give way?
Ian Lucas: Will the Minister give way?
Mr Vaizey: I will take the intervention of the more senior Member first.
Jim McGovern: On the subject of promises, prior to the general election, the Minister was quoted-I shall have to paraphrase-as saying that his party unequivocally supported tax breaks for the computer games industry. What has changed his and the Chancellor's mind?
Mr Vaizey: As to promises, the hon. Gentleman's party said in, I think, the 2001 election manifesto, that they would not introduce tuition fees. So if the hon. Gentleman wants to accuse me of broken promises, perhaps he should look to his own party's huge record of broken promises, not the least of which is leaving the British people with the biggest deficit in peacetime history, having promised to end boom and bust.
As I said, the telephone tax would have been a huge disincentive to investment. It would have hit small businesses and the poor-all for the paltry ambition of 2 megabits universal broadband.
Ian Lucas: Will the Minister give way?
Mr Vaizey: Let me develop the policy. Then the hon. Gentleman can come in. He does not have a broadband policy, so perhaps he should listen to someone who does. Then he can make his point-if I may set out our policy.
Ian Lucas: On a point of order, Mr Weir. Is it in order for a Minister to misrepresent the stated policy of Her Majesty's Opposition and not to allow an intervention so that he can be corrected about that?
Mr Mike Weir (in the Chair): It seems to me that that is a matter for debate, not for the Chair.
Mr Vaizey:
Thank you, Mr Weir, for reminding the hon. Gentleman that he has plenty of opportunities to make his point. It is a bit rich for a Labour politician to talk about the misrepresentation of other parties' policies, given what we have seen in the news this week, after the
first election court for almost a century was called on the basis of Labour party leaflets in the general election. Sheer brass neck does not even begin to describe it.
This is a debate in which I have an opportunity to set out our policy on broadband in response to the comments of the hon. Member for Houghton and Sunderland South about its importance. That is what I intend to do.
As I said, we want the best superfast broadband in Europe by 2015. We have secured the funding for it-£530 million to the end of the spending review, and a further £300 million after that. We have launched four super-fast broadband pilot projects, in the highlands and islands, Herefordshire, Cumbria and North Yorkshire, so that we can identify early lessons and work out how to proceed in the most cost-effective way. We shall also launch in more detail at the end of the year our policy on broadband, setting out some of the nuts and bolts issues. We have made huge progress on regulatory issues, such as duct access for competitors to BT and the opportunity to roll out broadband on telegraph poles.
Justin Tomlinson: On new developments, are there any thoughts about treating broadband in the same way as utilities such as gas, electricity and water? Having been a councillor representing new developments that have waited years for broadband access, I know that the introduction of that would be welcome.
Mr Vaizey: That is certainly a very important element of the question. I hope that we shall shortly be able, with the Department for Communities and Local Government, to publish a code for developers, to ensure that broadband is at the heart of their thinking.
Ian Lucas: I want to correct the Minister simply on a point of fact. The change to 2-megabit broadband was to be funded out of the money that he is using from the BBC licence fee-money that was left over from the digital switchover. The telephone tax was for the development of high-speed broadband. That was the position, and if the Minister wishes to, he can read about it in "Digital Britain".
Mr Vaizey: I have read that report, and I am happy to stand corrected. We are in a similar position, except for the fact that the Government are not imposing a tax; we plan to get superfast broadband to as many people as possible by 2015, while the Labour party remains stuck in the slow lane at 2 megabits.
I now tackle the thorny issue of video games and tax breaks. Again, I shall try to knock down a few of the myths that have been propagated. To hear Labour Members speak, one would have thought that the land of milk and honey had arrived with the last Labour Government. When I was Opposition spokesman, I sometimes felt like a lone voice when talking about the success of the video games industry over the last three or four years. However, I pay tribute to the hon. Member for West Bromwich East (Mr Watson), who has been a fantastic advocate of the video games industry.
I remember that the Labour Government ruled out a video games tax break. When in opposition, we mentioned competition from Canada, and were told that the Government were going to refer the matter to the World Trade Organisation. However, a chance conversation
with an insider revealed that that was a red herring. When I tabled a parliamentary question about it, the Government were forced to perform a U-turn and reveal that the reference to the WTO was an excuse for inaction. Finally, they were converted to a video games tax break.
At what point did that amazing conversion come? Was it at the beginning of a Parliament, when the Government had a strong majority and a lot of energy? No; it came with the last Budget of a discredited Government who were about to lose an election. They knew that they would not have to implement that tax break-and it was not implemented. It was an extraordinary U-turn; despite the comprehensive spending review of October the year before, that decision would still have had to go to Brussels for approval. The sound of Labour MPs clambering on to bandwagons now that they have no public policy responsibility for the matter is quite extraordinary.
Jim McGovern: I resent the Minister's comment that Labour Members are jumping on a bandwagon. I have supported the computer games industry in Dundee for a number of years, and several Ministers have visited us. Why did Ministers not visit Dundee prior to withdrawing the tax break?
Mr Vaizey: Dundee is an incredibly important part of the video games sector in the UK. We have invested £2 million in the university of Abertay to support video games, but video games do exist in other parts of the country, and it is not essential to visit Dundee to decide whether we should have a tax break. But I intend to visit because it is a pioneering area with a world-class university. I am raring to get up there. Indeed, given the austere times that we live in, I hope that the hon. Gentleman will put me up for the night. It is a bit odd for Labour MPs to claim that if you cut them open, "video games tax relief" will be written on their hearts; the relief was a political ploy to win support from the industry in the run-up to the election, and they knew full well that they would not have to implement the policy.
Let us be clear about it: people want a video games tax break because of the competition that we face from Canada. A tax break is not a panacea; France has a tax break, but we have a more successful video games industry. Canada does not have a national tax break for video games. It has two strong regional Governments who actively compete for the video games industry; they made that decision 10 or 15 years ago and they are throwing money at the industry. They are handing over millions of dollars-there is nothing wrong with that-to tempt developers and publishers to base themselves in Canada, and that means salary holidays, rent holidays and other kinds of support.
I want to put in place a strategy for the video games industry-for example, so that it can access the regional growth fund that we announced, and can take advantage of the numerous funds that I have discovered in the Department for Business, Innovation and Skills. Partly because of exchange rates, we are close to Canada, even without a tax break. One company that has invested in Canada showed me the numbers; without breaking commercial confidentiality, I can say that there was a difference of about 10 or 15% in costs per employee. However, as the hon. Member for Southport mentioned, we have a fantastic skills base, and that is another important reason to invest here.
This has been a good-natured and good-humoured debate in which we have found a great deal of common ground, huge support for the software industry and a passion for the video games industry. There has been recognition of the pioneering role of the north-east and Sunderland in ensuring that the UK remains a world leader in this important industry. I set out our policies-the technology blueprint, our plans for technology innovation centres and entrepreneur visas, and our plans to review intellectual property law. However, there is broader support, too.
I was disappointed to hear that it is now the Labour party's policy to push up corporation tax. Under this Government, corporation tax will fall year on year; that is an important point to make. We have also increased entrepreneurs' relief for capital gains tax. Our tuition fees policy is progressive, and it will mean people paying back their debt when they are at a higher income level than applied under the Labour Government. We have made significant progress in empowering our universities. As the hon. Member for Southport pointed out, despite Labour's U-turn on tuition fees, their introduction did not stop people wanting to go to university.
I was privileged to be at the graduation of four apprentices at Culham Science Centre in the constituency of my hon. Friend the Member for Henley (John Howell). It is worth remembering that we have a fantastic Minister for Further Education, Skills and Lifelong Learning in this Government; he has put together a national apprenticeship policy, which is important for high-tech industry. People leave school and go on to be apprentices, and the four whom I met were formidable. As the head of the Culham Science Centre said, they are as qualified as any graduate, but have been paid for four years and have no debt. Many will be going on to do higher degrees. They will be at the heart of a high-tech industry in Culham. Thanks to that Minister, this Government, unlike the last, have-at long last-a clear policy to promote apprenticeships and skills, which are important to both the IT and software industries.
I cannot read the face of the hon. Member for Houghton and Sunderland South, and I am not sure whether I have allayed all her fears, but she seems to be in a slightly happier mood than when the debate began. I am happy to sit down with her and talk through the issues at a later date, and to visit her in Sunderland.
Local Enterprise Partnerships (South-West)
10.59 am
Mr Ben Bradshaw (Exeter) (Lab): A more accurate title for this debate than local economic partnerships in the south-west would be the absence or lack of local economic partnerships in the south-west. When the Government launched their flagship regional economic policy the week before last, most of the south-west was completely missing. Only Bristol and Cornwall are covered by these new bodies.
This sorry saga began with the Government's ideologically driven determination to abolish the regional development agencies. That of the south-west, like most of those around the country, was successful. It had brought much-needed strategic coherence to our region, as well as valuable investment. It had managed to overcome the age-old political in-fighting between the different parts of the region, and the RDA could take a view as to what was in the interests of the region as a whole. I am afraid that, like so much of what the coalition Government are doing-and in spite of the Business Secretary's support for RDAs before the election -regardless of their merits RDAs had to go, because they were a Labour creation.
Soon after the election, in preparation for the new policy, the local business leaders in our half of the region-led by Tim Jones and the Devon and Cornwall business council-started an early promotion of the idea of a peninsular local economic partnership, comprising Cornwall, Devon and Somerset. The business community felt scale and capacity were vital for these local economic partnerships to succeed, and I wholeheartedly agree. In his letter of 29 June, the Secretary of State invited local areas to come together and put forward bids for LEPs in their areas by 6 September. That precipitated a two-month period of chaotic negotiations, lobbying and planning. That happened largely behind closed doors and was led, not primarily by business, as was supposed to be the case, but by the upper-tier local authorities-in our case, Cornwall, Devon, Plymouth and Torbay. Somerset county council was effectively frozen out of those discussions. It was clear that the four upper-tier authorities in Devon and Cornwall did not want Somerset's involvement in the discussions or in any subsequent local economic partnership for the area.
My own local authority, Exeter city council, and the Exeter business community, led by our chamber of commerce, were totally excluded from the discussions. They were never formally consulted on any of the emerging proposals. That was in spite of numerous requests to be involved as one of the two key economic drivers in our peninsula. Exeter's exclusion was also in clear contravention of an instruction in a letter of 25 August from the Minister with responsibility for decentralisation, the right hon. Member for Tunbridge Wells (Greg Clark), to Gary Porter, chair of the district council network, in which the Minister said,
"It is essential that district authorities are included."
He went on to say that he did not expect county councils to act as "sole building blocks", and that
"We want to see economic geographies reflected in proposals, not just administrative ones."
It soon became clear that Cornwall, as is so often the case, wanted to go it alone-a move unfortunately endorsed by the Government for political purposes, much to the consternation of the Cornwall business community and business leaders in the rest of the peninsula.
I have a number of questions for the Minister today. First, does he agree with me and the business community in the west country that local economic partnerships should have sufficient scale to add value and to have clout? Does he also agree that they should reflect real functional economic areas? Is it not the case that the first of those objectives has been compromised by his Government's decision to accept Cornwall's bid to go it alone? Is it not also the case that the Cornwall bid did not meet the criteria the Government laid down and did not enjoy sufficient business support? Will he explain how, exactly, a Cornwall local economic partnership will differ from or add value to the economic development functions of the unitary Cornwall county council? Does he also agree with me that it is vital urgently to salvage something from this sorry mess, and that the most sensible solution would be for Devon, including Plymouth and Torbay, to work with Somerset and, if they are interested, those western parts of Dorset that look west rather than east? Will he confirm that the Government have been pressing such a solution?
When questioned in the House on the day of the announcement, the Business Secretary blamed the situation in the west country on the lack of agreement between the local authorities involved. That, I am afraid, is an understatement. In spite of the fact that Devon, Somerset, Plymouth and Torbay are all Conservative-controlled councils, which one might think would make the process of negotiation easier, they have been fighting like rats in a sack. We have seen a return to the worst sort of petty political in-fighting that blighted economic development so badly in our region in the past, and was one reason why Labour set up the RDAs in the first place. I understand that there is little love lost between the Conservative leaders and the councils involved. At one stage, to illustrate the ludicrousness of the whole process, Somerset became so frustrated by Devon county council's behaviour that Somerset suggested a tie-up between it and Cumbria, based on the nuclear industry.
Will the Minister please start banging some heads together and tell his political friends in the south-west that they must stop their childish squabbling and work together in the interests of the public and local businesses? If they cannot, or will not, do that, will he please tell them to get out of the way, and let the business community get on with it? Business leaders are keen to move forward with a partnership on the basis I have outlined.
Anne Marie Morris (Newton Abbot) (Con): I am delighted that the right hon. Gentleman has given this debate an airing, because it is crucial that we have LEPs in the south-west. Would he agree with me that, in the vein of what he has just said, we should put political divides aside and move forward and get an LEP for Devon, and I suspect for Somerset, as quickly as possible? I believe the business community is now absolutely behind it.
Mr Bradshaw:
The hon. Lady is right; the business community is behind it. The point I was trying to make is that this is not about putting political differences
aside, because the four local authorities involved are all Conservative controlled. They do not-or should not-have political differences but they have been completely incapable of working together on a sensible local economic partnership for our region. I hope we can see them make swift progress toward doing so now. If they will not do it, I want the Minister to tell the local authorities to get out of the way and leave the field clear for the business community, which, as the hon. Lady rightly says, is keen to make progress, so it can put in a bid. Will the Minister confirm, on that basis, that the business community is entitled to come forward with a bid-that it is perfectly possible for it to bypass the fractious local authorities? Will he assure the business community and me today that the Government would look favourably on such a bid? Will he also reaffirm the instruction of the Minister with responsibility for decentralisation: that it is essential that Exeter, which is so important for our region's future prosperity, be included at the table? If I were the Minister here today, I would be hopping mad at Devon's deliberate and calculated rebuff to his colleague's instruction that Exeter should be included in the process.
As the head of Britain's leading business organisation, the CBI, said recently, this process has been a shambles. We now know that the Minister's own colleague, the Minister of State, Department for Business, Innovation and Skills, the hon. Member for Hertford and Stortford (Mr Prisk), warned the Business Secretary in a letter of 14 September that the Government's local economic partnerships were in danger of failing. I quote from his letter:
"There is a strong view amongst the business community that many LEPs lack the ambition to make significant economic impact undermining our agenda for growth. Key messages I have been made aware of include: a lack of credible business representation on LEPs Boards; negotiations dominated by local politics and a lack of a clear focus on economic growth. They also report different messages coming from Government about LEPs. John Cridland [of the CBI] specifically was concerned that the process has not been transparent, business engagement was poor overall and exacerbated by a tight timescale. He and other senior business leaders from Tesco and Ford have expressed their concern that in their view the policy is in danger of failing to aid economic growth."
That is exactly what the Labour party warned would happen if the Government went ahead and abolished RDAs. The public and businesses of Devon and most of the south-west have been badly let down by the Government, and the Minister and the Government need to get a grip before it is too late.
11.9 am
The Minister for Further Education, Skills and Lifelong Learning (Mr John Hayes): It is a pleasure to speak on this subject and I congratulate the right hon. Member for Exeter (Mr Bradshaw) on securing this debate. I think that he and I first faced each other many years ago when he was fisheries Minister. In those days, he was in government and I was in opposition, but to the relief of fishermen, their friends and many other people, the boot is now on the other foot.
I thank the right hon. Gentleman for drawing these important matters to the attention of the Chamber. Creating the right framework for local economic growth
and renewal in the south-west and throughout the whole country is an important issue that the Government take seriously. Indeed, it is one of our core priorities. As my Department-the Department for Business, Innovation and Skills-is the Department for growth, I am pleased to be able to respond in that spirit.
It is important to understand that as we manage growth, and as we stimulate business to deliver the additional growth that we need to move from recession to recovery and ultimately to prosperity, we take account of the economic profile of different parts of the country. Contrary to what was at least suggested in the right hon. Gentleman's remarks, this issue is not a matter of disagreement among the coalition partners. The two partners in the new coalition Government are both committed to the principle of having a local, regional and sub-regional structure to stimulate growth; we have been committed to that principle before and after the election.
Local enterprise partnerships are a vital element in the broader reforms that we are implementing to create the new framework for local growth. They are underpinned by three important principles, which I shall outline at the outset. The first principle is that the economic geography of our country is not fixed, but changes as the character of the economy changes. It is widely understood that as economies advance, their needs-for example their skills needs-also advance. However, it is not so often said that economies also become more dynamic as they develop, and our prospects for growth will depend on creating the right framework to facilitate and stimulate that dynamism.
The second principle is that economic prospects can be transformed when enterprise is free to innovate. That additional freedom is about creating the right conditions in which entrepreneurs, businesses and commerce can thrive. I think that it would be vulgar to make too many narrow party political points, but I am not sure that even the greatest advocates of the last Government would argue that they had created the right environment for business to thrive.
The third principle is that lasting economic renewal requires civic and business leaders to feel empowered to shape their own community and its economic interests. That principle has long been embedded in our assumptions about the role of local government. At district, unitary and county level, local government has long had an economic purpose: to produce an economic development strategy and to ensure that that strategy married with the wishes and desires of local business people, as well as those of the wider population, in the interests of the common good.
I believe that private enterprise is the dynamo that will power our future prosperity and fuel the innovation that will underpin our future global competitiveness. The White Paper on local economic growth, which was published on 28 October, sets out our detailed proposals, as the right hon. Gentleman acknowledged. Those proposals are designed to promote economic development and spread economic opportunity right across the country, and they rest on four foundations.
The first foundation is the strengthening of national economic leadership for the activities that enable the UK to compete internationally: trade, inward investment and innovation. At the risk of digressing-I know that you will not let me digress too much, Mr Weir-I also
will add the issue of skills, which was referred to in the previous debate by the Under-Secretary of State for Culture, Olympics, Media and Sport, my hon. Friend the Member for Wantage (Mr Vaizey). Skills are critical for driving economic growth, because if an advanced economy is to become more dynamic, its skills needs also need to become more dynamic and advanced. That is why we are putting so much emphasis on skills, and I hope that I will be forgiven for repeating the fact that we are making apprenticeships the pivot of our skills policy, with substantial additional investment. Indeed, many business people have written to the national press today to celebrate that fact.
The second foundation of our proposals is investing in crucial infrastructure such as broadband and high-speed rail. As you know, Mr Weir, the Government have already said much about that. The third foundation is establishing the regional growth fund to support jobs and growth, which is worth £1.4 billion over three years.
The fourth foundation of our proposals is to create local enterprise partnerships, which is the central issue of this debate. However, before I deal with the specific matters on which the right hon. Gentleman understandably concentrated, let me set out the case for local enterprise partnerships before I say a little about their application in the south-west.
If we are to succeed in rebalancing the national economy and kick-starting local economies, including in the areas that the right hon. Gentleman mentioned, we need a framework that recognises the economic geography of the country rather than one that is twisted to fit arbitrary administrative structures. I think that I can warmly support what the right hon. Gentleman said in that regard. I believe he said that the system should match "real" areas of economic growth and economic interest rather than being an artificial construction.
The role of LEPs in those terms will be to build genuine and effective partnerships of local business and civic leaders. Once again, I do not think that there is any disagreement between us on that point. I have already mentioned the long-standing commitment of local government to economic planning, and indeed to economic development. That idea is central to what I think is our shared understanding of the role of these new LEPs. It is absolutely right that civic leaders who identify with their area, share an ambition to grow the local economy and believe in creating jobs, wealth and so on should play a part in ensuring that measures taken by Government and other agencies match the priorities of their local area.
Duncan Hames (Chippenham) (LD): Given those requirements, will the Minister tell us what the Government consider should be included in the bid for an LEP, including what requirements the bid for a Wiltshire LEP is yet to meet? Will he also explain to us the timetable for the announcement of further LEPs?
Mr Hayes:
The hon. Gentleman knows that I will not go into details about a timetable because he also knows, given his interest in the particular matter to which he refers, that that is very much under discussion. Indeed, representations that have been made in that area are being considered in detail by my Department. As he is probably aware, there is an ongoing discussion between
the locality and the Department. However, it is reasonable to say that we do not want any undue delay in establishing the parameters of each area, because to do so would create uncertainty. The right hon. Member for Exeter is right that we need to establish the parameters within which people are going to work clearly and reasonably speedily so that we can then move forward to the next stage of development. I will therefore not give the hon. Member for Chippenham (Duncan Hames) a definitive answer now, but I think that he will understand the emphasis that I have placed on dealing with the perfectly proper intervention that he has just made.
Let me go on to talk a little about how we will assess success, because I think that that issue relates directly to the hon. Gentleman's intervention.
Neil Carmichael (Stroud) (Con) rose-
Mr Hayes: Before I do so, however, I give way again.
Neil Carmichael: I would just like to make a couple of points about LEPs. The first, of course, is that they really should co-operate with each other. I would certainly expect to see such co-operation when Gloucestershire's relationship with Swindon-or some other relationship-is established, particularly in connection with the west of England LEP, which is of course centred around Bristol. My second point-
Mr Mike Weir (in the Chair): Order. Will the hon. Gentleman resume his seat? This debate is about the south-west. I think that Swindon might get into that region-my geography of southern England is perhaps a bit uncertain-but I think that the west of England does not form part of the debate.
Neil Carmichael: May I just say that all Back Benchers in the Chamber at the moment are south-west Members? I am; the right hon. Member for Exeter (Mr Bradshaw) is; the hon. Member for Chippenham (Duncan Hames) is; and my hon. Friend the Member for Newton Abbot (Anne Marie Morris) is.
Andrew Jones (Harrogate and Knaresborough) (Con): I am from Yorkshire.
Neil Carmichael: My hon. Friend is not from the south-west. Nevertheless, this is an important question, because what happens in Cornwall or Somerset affects what happens in Bristol or Gloucestershire, because they are in the south-west and all under the one regional development agency which, thankfully, will be abolished in 2012.
My second point is about the necessity for local authorities to co-operate with each other, specifically in connection with economic development, and I think that that point needs to be discussed in this debate.
Mr Hayes:
I am delighted to say that my hon. Friend is absolutely right that local authorities should co-operate with each other in pursuit of that objective of economic development. We would expect them to co-operate, but the early stage will inevitably involve a process of negotiation and of bid and counter-bid. That is not unhealthy, provided that it does not delay progress unduly and
Government play a helpful mediating role in assessing those representations against the core criteria, which I am about to discuss.
We announced the first wave of successful LEPs alongside the White Paper on 28 October. The first 24 partnerships-of many more, I am sure-all shared certain characteristics. Perhaps it will help the hon. Member for Chippenham and my hon. Friend the Member for Stroud (Neil Carmichael) if I describe those characteristics: they have a strong local identity; they have a buy-in from the business community; and they are a testament to the ambition and ingenuity of local people. That is what we expect of local enterprise partnerships.
In the south-west region, we received seven applications, two of which were approved. Each of the remaining five groups of applicants has been asked to do further work to develop their proposals, and we are supporting them as they do so. I understand why the right hon. Member for Exeter is making a strong case for his area-it is right that he should do so-but he should know that Devon, Plymouth and Torbay have been asked to hold further discussions with local business, civic leaders and the Government to develop the long-term vision for their partnership. In addition, they have been asked to consider in more detail their economic links with neighbours, particularly Somerset. The chief executives of Devon, Torbay, Plymouth and Somerset have embraced that feedback and are working together to secure the best outcome for their area, and we hope to say more in due course. The right hon. Gentleman will also be mindful that I have said that undue delay would be unhelpful.
Anne Marie Morris: I am delighted to hear what the Minister is saying. I am glad that progress is being made, and I welcome LEPs. They are absolutely the right vehicle, and the combination of local government and businesses is on point. I ask that a decision be made quickly-subject to all the bodies concerned giving him all the information that he needs-so that the deadline to apply to the regional growth fund is not missed. I hope that that will be present in his thinking and timeline, even though he cannot be specific.
Mr Hayes: My hon. Friend, like me, will want to ensure that the criteria are applied robustly and consistently. The right hon. Member for Exeter made the good point that we need to be certain that the marriage between local authorities is right, as is the link between them and business. I repeat that I share the view that the construction of areas should reflect their economic profile. That seems fundamental to making the scheme work well.
The right hon. Gentleman mentioned Cornwall, so I will give him a straight answer. Cornwall made a powerful argument for a local enterprise partnership covering Cornwall and the Isles of Scilly, making it clear that it was a functional area. The Department examined it closely and we decided, in the end, to support the partnership. I know that counter-arguments will be made, but as he knows from his long experience as a Minister, the Government sometimes have to take decisions. We took that decision, and I think that we can justify it based on the criteria that I have outlined. People from
Cornwall would certainly argue that the area's profile is very particular. The right hon. Gentleman will know the economic challenges that face Cornwall. Its issues include skills, employment and the character of the local economy, which legitimises the case that Cornwall made.
South-west Members, including the right hon. Gentleman, understandably make the argument that they do not want the south-west to be left behind. I assure him that we are keen to see as many local enterprise partnerships taking root as possible, both across the whole of England and in the south-west. We do not want any part of the country to be left behind, so as soon as a bid can demonstrate that it meets the assessment criteria, it will be given the green light.
I will say a word about Exeter in particular, as the right hon. Gentleman would expect me to do. I am aware that he is worried that his constituency might suffer disadvantage and that it will not be able to bid to the regional growth fund because it is not part of a partnership. Let me reassure him that although we expect many LEPs to submit project bids to the fund, it is not a prerequisite that applications for funding must be submitted by partnerships-any public-private partnership may apply. Exeter's business community and local council-along with other potential partners, such as the city's excellent university, which he and I both know-may work together on an ambitious plan for economic development and then apply for funding accordingly. Indeed, I take this opportunity to encourage them to do so. I know that the right hon. Gentleman, as a diligent local Member, will work with them to make it a success.
Mr Bradshaw: My concern was not simply that Exeter would not be able to access the funds; it was more about the whole process. Devon county council has deliberately excluded Exeter, for which it was criticised by the hon. Gentleman's ministerial colleague in the letter that I quoted. Will he deliver a message to Devon today that Exeter needs to be at the table?
Mr Hayes: Although the right hon. Gentleman probably did not know it, he was quoting a letter to the leader of my district council, Councillor Gary Porter, who also holds national office. I know that Councillor Porter was anxious to ensure that district councils played their part.
The Government's position is clear and resolute. We want local government to play a part. Local government is, as I said earlier, district, unitary and county government. Circumstances will differ in different parts of the country, and that encourages-indeed necessitates-different approaches. We do not take a vanilla-flavoured view about what will emerge, although we are clear that the criteria must be met. The criteria should be consistent, but the character of local partnerships might be different, given that the local economic profiles of various parts of the country differ. We want all partners to be involved. As I think I have suggested, there is a degree of permissiveness about who may bid.
Given that enterprise, investment and innovation are the south-west's route to lasting prosperity, as is the case in other parts of the country, we are clearing away the panoply of failed quangos that we inherited and replacing them with local enterprise partnerships as
part of our new framework for economic growth and renewal. The new framework will recognise functioning local economies rather than imposing arbitrary boundaries. It will offer civic leadership and a genuine partnership between local businesses and councils instead of assuming that Whitehall knows best. It will be less about targets and micro-management, and more about the inspirational qualities of local businesses and local people. It will combine a strong voice for business with democratic accountability to local people. It will also have the flexibility to respond to local economic priorities.
The Government are determined to make the next decade the most dynamic and entrepreneurial in Britain's history. Britain's future can be as great as its past, and local enterprise partnerships have a vital role to play in making our ambition a reality.
11.28 am
Science Research
[Annette Brooke in the Chair]
2.30 pm
Nicola Blackwood (Oxford West and Abingdon) (Con): I am absolutely delighted to have secured today's debate on science research. The contents of my inbox show that Oxford West and Abingdon is a constituency that surely must contain more STEM-science, technology, engineering and maths-researchers and science-based companies per square mile than any other, and it is a great privilege to represent them today. My predecessor was a great advocate for science and I aim to continue his excellent work to the best of my ability.
Although I am not a scientist, as the daughter of a very single-minded doctor, I spent many a breakfast time having the parasympathetic nervous system or the role of the white blood cell explained to me in great detail-Rice Krispies were never quite the same to my seven-year-old mind. Despite my father's best efforts, I did not follow him into medicine, but he succeeded in instilling in me a deep respect for the value of science research-not only for the future of medicine, but for giving our industrial sector a competitive edge, for developing a greener transport system and a more advanced telecoms infrastructure, and for giving our troops the best intelligence and protection possible. Most importantly, my father taught me the intrinsic value of looking at the world as a problem solver and about the innate desire in all scientists to understand better how the world around us works. We must protect and strengthen that sense of curiosity. Perhaps speaking up for this issue today will make up just a little for my non-medical career path.
Medic or not, I understood from the moment I was selected and had knocked on my first door as a candidate the value that my constituents place on science. As a candidate, I visited Begbroke science park with my right hon. Friend the Member for Havant (Mr Willetts)-he is now the Minister for Universities and Science-where we glimpsed just the tip of the iceberg of the richness of STEM-based research and industry in Oxfordshire. Since then, I have had the opportunity to meet businesses such as Nexeon, which is developing next-generation lithium batteries. I have also met Professor Rawlings and some of his team to hear about the role that Oxford university's astrophysics department is playing in the extraordinary square kilometre array project. In addition, I have visited the Joint European Torus at the Culham centre for fusion energy, where many of my constituents work.
Just last week, I took part in the Royal Society's MP-scientist pairing scheme, which does exactly what it says on the tin. The scheme was set up in 2001 to help build bridges between parliamentarians and some of the best science researchers in the UK by pairing MPs and scientists in an exchange programme. More than 200 MPs have taken part in the scheme including, I understand, the Minister himself. The pair spend one week in Westminster, during which the scientist has the opportunity to observe an MP in their natural habitat, while in the second week the politicos venture into the laboratories, so both scientists and politicians get a chance to walk for a week in the other man's shoes. Such a scheme offers the hope of better networks between Westminster and the science community and
aims to lead to more evidence-based decision making in Parliament, more targeted lobbying from the science community, and far better communications between both sides. Perhaps it might even tempt a few more scientists into Parliament.
When I participated in the scheme, I had the good fortune to be paired up with no less a luminary than Professor David Wark, who is fellow of the Royal Society, a leading international authority on neutrino physics and-along with his family-my constituent. I obviously cannot speak for him but, so far, I have found the experience extraordinarily eye opening. The Government's statement on higher education, my meetings with Oxfam about the situation in southern Sudan and my meetings with the Independent Police Complaints Commission on the challenges facing policing have all been reflected back to me through the prism of a particle physicist's perspective. I have yet to find out what I will learn from accompanying Professor Wark to his work at Rutherford Appleton laboratory, but I can only hope that, during that time, I will gain a deeper insight into how Government policy can better encourage and support science research and development in the UK.
One of the ways the Government can do that is, of course, is to keep funding science. Before the comprehensive spending review, my inbox was filled with e-mails from science supporters who were deeply worried that the cuts would fall especially hard on science. The Chancellor's extremely welcome decision to freeze the science budget in cash terms at £4.6 billion a year was therefore a great relief to many. I thank the Minister for the role I am sure he played in securing that commitment, but it still represents a cut of roughly 10% over four years. Even with the speculated savings, that will be a challenge for a historically underfunded area. We also need to consider the announced reductions in university funding. Although such reductions are sustainable, they do not represent any real closing of the funding gap for major research universities competing on an international stage, and that is cause for concern.
I am sure that the Minister is aware that UK scientific research is among the best in the world. With just 1% of the global population, the UK produces 11.8% of the world's scientific citations, which are the most reliable measure of academic excellence. The UK also has three of the world's top 10 research universities, one of which is, of course, in my constituency. All that has taken place despite the comparatively low funding that UK science receives. In 2007, for example, Germany, the USA, and France spent 0.71%, 0.77% and 0.81% of their gross domestic product on public research and development, while the UK spent just 0.55%.
Clearly, UK science already does extraordinarily well with less, but just think what we could do if there were a level playing field. In the context of the current fiscal situation, increasing research and development spend might not be immediately possible, but it is worth noting that our competitors, such as Germany and the US, are both increasing science funding in real terms. They recognise, as I believe the Government do, that STEM funding is not a net loss to the country, but an investment in the smarter, greener and more sustainable growth that all hon. Members agree should be our aspiration.
To achieve that growth with the kind of investment we are able to make right now, we have to make absolutely sure that we spend the money in the best possible way. One of the key concerns raised with me is that the short-term funding models of our four or five-year Governments are naturally at odds with the more long-term investment that is typically needed to reap significant results from STEM R and D. Moreover, the frequent changes of funding models and strategies undermine the stable growth in STEM fields. Our top priority, therefore, must be to outline as clearly as possible the entire funding structure and the Government strategy for STEM, not only so that current researchers will be on solid ground with their planning, but so that graduates and students deciding on their career paths will know that the Government value them and that they have a secure future in the UK.
We are in an environment in which we risk losing our best graduates to other countries' facilities if we cannot assure them of our long-term commitment to funding research programmes in the UK. Inward investors must be shown that this is a sector to which the Government are fully committed, both through funding and by creating a competitive and attractive R and D environment.
In that spirit, will the Minister clear up a few uncertainties that have remained following the spending review? Research councils' capital expenditure has been excluded from the science settlement. The total capital budget available to the Department for Business, Innovation and Skills next year has been set at £1.8 billion and will fall to £1.1 billion the following year. However, it is not clear how much of that will be made available for science and research. As well as investment in bricks and mortar, such as new labs, that capital spend supports the maintenance of existing facilities, training, and investment in essential but non-tangible infrastructure, such as digital. A significant reduction in capital expenditure funding will potentially lead to funds being diverted away from research and into facilities maintenance.
The Science and Technology Facilities Council is the research council that relies most heavily on capital expenditure. By way of background, it is worth noting that it is also the research council that the previous Government created in 2007 from the Particle Physics and Astronomy Research Council and the Council for the Central Laboratory of the Research Councils. That merger was administered in such a ham-fisted way that it led to an almost catastrophic funding crisis in particle physics, nuclear physics and astronomy, which arose in part because the capital liabilities of the CCLRC meant that funding for research had to be diverted into funding expensive facilities. Today, those facilities-such as the Diamond synchrotron and the ISIS neutron source in the Minister's constituency-are the responsibility of the STFC, along with the experiments now running in CERN, the Institut Laue-Langevin and the SKA project I mentioned earlier. In short, capital expenditure makes up more than a sixth of the STFC's entire expenditure.
In case anyone listening thinks that spending on such physics experiments is a luxury that can be forgone in times of austerity, let me assure them that that is not the case. The Wakeham review of physics found that 6.4% of the UK's GDP came from physics-based industry. A constituent recently sent me some excellent examples of the valuable real-world outcomes of research at the ISIS neutron source. The ISIS has improved the medicine
that is sprayed into new-born babies' lungs to help them breathe and has created a new technique to fix cleft palates in babies. It is performing vital research that is needed to make hydrogen fuel cells market-ready so that they can play their role in solving the energy crisis. It also performed the majority of world research on data storage and LCD screens more than 20 years ago, which led to innovations such as the iPod and the modern laptop, which illustrates the role that physics plays in major industry. In addition, it studies why oil companies' pipes clog, which is a problem that leads to billions of pounds of losses for those companies and the UK economy each year.
Despite the Government's commitment to the Diamond synchrotron, which I know the Minister welcomed as much as I did, he will recognise that there are many worried STEM researchers who are awaiting clarification on capital expenditure, because the ramifications go well beyond just keeping up the buildings in which they work. We do not want to make the same errors that the previous Government made and fail to attach sufficient significance to the availability of capital funding.
In addition to capital spend, there is the issue of the funding that reaches STEM via the Technology Strategy Board and R and D tax credits. So far, the Government have not announced plans for those funding routes. While that uncertainty remains, companies cannot include such support for innovation on their balance sheets as an incentive for investment. However, the Government have announced that they will spend more than £200 million over the next four years to establish a network of technology innovation centres that will be overseen by the Technology Strategy Board. I understand that those centres will be based on the recommendations of the Hauser and Dyson reports, which in turn were loosely modelled on the German Fraunhofer centre networks. Given the prohibitive cost of such undertakings, it is unlikely that Government funding alone will be able to achieve that. The Government have said that they wish to encourage private investment, but so far they have not released a target for such investment or explained how they intend to attain it. Will the Minister go into further detail on that point?
My father would not forgive me if I did not take a moment to mention the importance of world-class medical research. Charitable organisations contribute greatly to scientific inquiry in the UK. The recently announced £50 million project on tumour profiling, which is funded jointly by the Medical Research Council and Cancer Research UK, is a great demonstration of the continuing commitment of DBIS to supporting charity-based medical research. I know that the Minister will be aware of the charity research support fund, which is a programme through which the Government support the infrastructure costs of charitably-funded pure research. However, for those in Oxford West and Abingdon and elsewhere whose hopes are pinned on the research coming out of these projects, I hope that the Minister will clarify the Government's plans for the future of that fund.
The Government have also announced the introduction of a £1.4 billion regional growth fund over three years. Local enterprise partnerships will be able to make bids to that fund, and they will have a role in supporting regional R and D. As the Oxfordshire city region has deservedly won its bid to be an LEP, and because Oxfordshire is well placed to lead as we seek to achieve
sustainable growth in the STEM sector, will the Minister give an insight into the Department's strategy for the role that regional growth funds and LEPs will play in creating an internationally competitive environment for UK R and D and innovation?
Clarification of these funding questions will be valuable to the STEM community. If the Minister is unable to answer my entire shopping list of questions today, I know that he and his Department will be working hard to clear them up as soon as possible. However, the fact is that without a clear, long-term strategy that sets challenges and the direction for UK science, we will not achieve the stability and certainty that is needed to attract inward investment and retain the brightest and best graduates in UK institutions.
On the other side of the question about exactly how much research funding will be available is the question of exactly how the money will be allocated. Some scientists have expressed concern that if they are to receive research council funding, they will have to demonstrate the short-term economic benefits of their work. I am perfectly sure that that is not the intention of any part of the Government or the research councils, and I know that the Minister for Universities and Science has expressed his support for a dual funding system based on scientific independence and excellence. However, there has been some uncertainty over the past few years about the interpretation of the Haldane principle, and I know that the Minister for Universities and Science has recently announced that he will, in consultation with the scientific community, develop a clearer statement on the principle. It would be helpful if the Under-Secretary of State for Business, Innovation and Skills, my hon. Friend the Member for Wantage (Mr Vaizey), today reiterated the Government's position on the role of pure research in our STEM strategy. Neither lasers nor MRI scanners would be saving lives today were it not for the blue-sky research that began their development into applied technologies. When determining exactly which streams of research receive funding, we need a strategy to ensure that we do not exclude the research that will lead to the vital discoveries of tomorrow.
Such a strategy cannot be achieved by DBIS alone. The key growth sectors of low-carbon technology, biotechnology, advanced manufacturing and electronics will rely on a good supply of scientists, engineers and technologies, and that goes far wider than the Department.
Mr David Lammy (Tottenham) (Lab): Does the hon. Lady agree with me that, in relation to those future innovations, subjects beyond those that are traditionally described as STEM are of critical importance, and that we need design and creativity, including the overall arts and humanities? Is she therefore concerned about the decision to withdraw state funding for teaching anything other than science? We need interdisciplinary and multidisciplinary practice in our universities if we are to pioneer the innovations of the future.
Nicola Blackwood: I thank the right hon. Gentleman for his comments. As a musicologist, it is hard for me to disagree, so I will be interested to hear the Minister's response to those points.
To continue with my range across the Departments, the Home Office must take a wider strategy into account when setting the permanent cap for tiers 1 and 2. We
all know that STEM research is a highly international and mobile field and that we need sufficient flexibility in our immigration system to enable the UK to recruit the brightest and best into key areas that the domestic work force cannot fill. That point has already been made by a number of groups, including the Home Affairs Committee, of which I am a member, and I know that it is something of which the Minister for Immigration is well aware.
The role of the Department for Education is also integral to creating an environment in which our young men and women are excited about pursuing careers in science. I heard from dozens of constituents earlier in the year about the need for more specialist physics teachers, as a quarter of all schools for 11 to 16-year-olds in England have no specialist physics teacher. A sixth of those schools-more than 500 institutions-fail to send a single pupil on to study physics A-level. It is important that our schools ensure that the invaluable subjects of science and maths are taken up and that students are given the support necessary to allow them to excel.
The Department for Education must ensure not only that schools are able to achieve that-for example by offering triple science-but that the right careers and financial advice is available to both girls and boys. That advice must give them the best possible options, whether that is to pursue science degrees through an entirely academic route, or to take up an apprenticeship, or through a combination of the two. The Government's commitment to offer 75,000 more apprenticeships is welcome, but it will improve student choices only if the right information gets to the right students at the right time and with the right funding support. The previous Government's record on that count must stand as a warning that things can go wrong if the information does not reach the students at the right time.
Even after education, we must consider how we support researchers and scientists as they go into the work force, and that is especially important for female scientists. Although, according to Research Councils UK, the number of women studying STEM subjects at undergraduate level has increased at a greater rate than that for their male counterparts over the past six years, the drop-off rate between qualification and employment in science, engineering and technology is still higher for women graduates. Of the 600,000 SET-qualified women in the UK, 97,000 are inactive and 70% are employed elsewhere in the economy. Women still make up just 9.1% of the total SET work force in the private sector.
Most barriers affect women and men, but they are often more decisive for women. After a break to take up caring responsibilities, for example, women commonly lose their place on the career ladder and are unable to regain it. Women do not reach senior levels in the same proportions as men with the same qualifications. A number of businesses, labs and institutions, including many in my constituency, are making positive improvements in their workplace and trying to create viable career paths through increasing flexible working, through fair, transparent and anonymous recruitment processes, by offering parental leave, or quality part-time or job-share roles, and with inclusive workplace cultures.
However, DBIS and the Government Equalities Office can play a role by finding ways to support better practices by employers and to provide better indicators to measure
progress. Of course, UK Trade and Investment must also play its role in working effectively with UK STEM-based business to attract inward investment and advise innovative start-ups in how to leverage that crucial early years financing. The best research in the world will be lost to the UK if start-ups and entrepreneurs do not get the right advice to support such development at the outset.
I could continue my speech for some time, but I am aware that many Members would like to speak and I think that I have made my point. The role of science in our society is not just a matter for DBIS. Science touches on so many parts of our society that it needs to be on the agenda for all parts of the Government. Now that the Treasury, by protecting the science budget, has sent the message that science research is a priority, we need to fill in the details and move to a cross-departmental strategy that can create the long-term certainty that is needed for sustainable growth and investment in STEM research and development. UK science is already world class-the growth rate of the space sector is evidence enough of that. With a Parliament and a Government who are behind it, there are no limits to what it can achieve.
2.49 pm
Andrew Miller (Ellesmere Port and Neston) (Lab): I congratulate the hon. Member for Oxford West and Abingdon (Nicola Blackwood) on securing this debate and on making a splendid speech. There are two sentences I would delete from it, and I would be happy to claim the rest as my own. She was perhaps misled while eating those Rice Krispies. It is a great pity, because there is a huge link between music and mathematics, and it is always great to see more young women, in particular, coming into science and engineering. It is a pity that perhaps she missed her vocation. We might attack her on other things as time goes on, but I congratulate her now.
On the hon. Lady's general points, she was absolutely right about the importance of the Royal Society pairing scheme. It is a huge asset to the House because so few Members have had any experience of working in the science, technology, engineering and mathematics sector. I would encourage as many Members as possible to think about signing up for it next year, particularly colleagues who do not have a STEM background. The scheme is hugely beneficial to us, and to the science community, who can see how we solve the problems that face us.
Not the least of those problems is the challenge of the comprehensive spending review. I agree with the hon. Lady: the Minister for Universities and Science did a splendid job in arguing the case for the core science budget. She was right to say, nevertheless, that there will be a 10% reduction over the four-year spending round. More important is a point on which I would press the Minister; in fact, I have pressed his colleagues on it during successive Question Times-[Interruption.]
Annette Brooke (in the Chair):
As Members can tell, there is a Division in the House. The sitting will be suspended and will resume in about 15 minutes. Ten minutes will be added for any immediate subsequent Division. I was intending to call winding-up speakers at 20 minutes to 4, so if you add the time that we take out,
you will be aware of when the winding-up speeches will occur. Also, people need to be mindful of how many Members wish to speak.
2.51 pm
Sitting suspended for a Division in the House.
3.2 pm
Andrew Miller: Before I was rudely interrupted-not through any fault of yours, Mrs Brooke-I was going on to draw something from the observations that the hon. Member for Oxford West and Abingdon made about this being a cross-governmental issue. I have been trying, in a series of questions-three of which I raised on 1, 2 and 3 November with different Ministers-to find out what happened with the cross-departmental analysis of the impact of the whole comprehensive spending review. The CSR's impacts on science will not only be seen in the block grants to the research councils; very serious impacts will be caused by any cuts that might occur in departmental science spending, the details of which have yet to be announced. The Browne report-I say that loudly, given the noise of the students drumming away outside-also has an impact, as does, perhaps in a slightly more sensitive way, the migration cap, which is a cause for concern. All those items together need a cross-departmental analysis, so that we can be certain that none of them causes long-term damage to the science base. I hope the Minister will be able to throw some light on that, because I am trying very hard to get to the bottom of what analysis has occurred, and to find out what contingency plans there are for any unforeseen effects of the impact of any of those items on another one. That is hugely important.
I also want to comment on the hon. Lady's remarks about education, which is a significant area for us. I appreciate that this goes well beyond the Minister's brief, but we need to look deeply at how we incentivise young people to switch on to science. The hon. Lady went into music despite the efforts of her father. We have to go right down to the core of how primary education is taught, how we train our primary teachers and keep them up to date, and how we partner them with industry and academia to inspire them to pass on the exciting things that are happening in the world today to the children around them. One of my favourite examples, which happens to be led by a constituent of mine, Professor Mike Bode, is the National Schools' Observatory. It is hugely disappointing how few primary schools use that tool. It is there, it is free and it is hugely exciting, so we have to ask ourselves, "What is it that is frightening teachers?" It is not the curriculum, because the tool can be used in the context of the curriculum without any difficulty, but there must be problems and we need to work with our colleagues in the Department for Education to find out what the underlying problem is, and solve it.
The hon. Lady touched on technology innovation centres, which are, in principle, a very important development. She was right that the development stemmed from Hermann Hauser's report to the previous Government and James Dyson's to the current one. Both those reports picked up on the same theme. As shorthand, a number of people have said that this is like lifting them out of the Fraunhofers and planting them in the UK, but it cannot be that, because it would miss the point
about what is here already. We do need to learn, however, from what happens elsewhere in the world: for example, how it is that venture capital works better on the west coast of the States, and how it is that state involvement in the Fraunhofers seems to help more longer-term finance to emerge in the German market. Those are hugely important issues. We need to learn from them, and we need to apply the British solution using tools like that in our economy. The technology innovation centres provide a way forward, but we should not go for a one-size-fits-all solution. Alternative models might evolve, based on the structures that are already in place, in the public, private and not-for-profit sectors.
I shall make one more remark on the CSR, which I know will get support from my colleagues from outside the golden triangle-apologies to my colleagues within it. I welcome the four big capital projects in the CSR, as they are very important to UK science, but I hope that Her Majesty's Government will not forget that science occurs right across the nation, outside the golden triangle. We must not forget the centres of excellence in universities in the regions of this nation outside that area, for example the Daresbury laboratory.
My final point stems from the privilege-it is a privilege-I have as Chair of the Science and Technology Committee. Doors have been opened to me that I did not know existed. Just yesterday I found myself sharing a platform with Professor Brian Cox, which was a fantastic honour. We were addressing a group of engineers in an innovation competition run by National Instruments, and he made the point that the hon. Lady has just made: that we ignore blue-skies thinking at our peril. On the panel with me were a very successful entrepreneur, someone from National Instruments and Professor Cox, and all four of us saw the link between the small entrepreneur and blue-skies thinking. For goodness sake, I hope that at no stage during this Parliament will anyone inside the Department for Business, Innovation and Skills or elsewhere start to make suggestions against blue-skies thinking, against the need to support some of the big science projects such as Rutherford Appleton, Daresbury, the space programme and CERN.
Those hugely important projects have direct benefits for some of our smaller companies, so let us make sure that we join up the needs of our business and academic communities. Let us find ways further to inspire young people to take up exciting careers in science and engineering and to make sure that this Parliament goes down in history as the one that really sought-on a cross-party basis, I hope-to make a difference in this hugely important field.
There is no doubt that the success of our economy in years to come will depend on our continual investment in science and engineering and in all the education programmes I have touched on. It is vital that Parliament take the lead in ensuring that there is no diminution in investment; in fact, investment should move in a positive direction, and we should drive it up in the sectors we are talking about.
Annette Brooke (in the Chair): Order. The winding-up speeches will now commence at 3.51 pm unless we have another Division.
3.11 pm
Dr Julian Huppert (Cambridge) (LD): It is a great pleasure to serve under you, Mrs Brooke. Before I start, I should declare an interest as a member of the Institute of Physics and the Royal Society of Chemistry, as well as a Research Councils UK academic fellow, although I am on long-term leave. [Laughter.] This feels like the Floor of the House during Prime Minister's questions earlier. I was, therefore, an academic scientist before I fell in with a bad crowd and ended up here.
It is a great privilege to follow the hon. Member for Ellesmere Port and Neston (Andrew Miller), who is the Chair of the Science and Technology Committee, and the hon. Member for Oxford West and Abingdon (Nicola Blackwood), whom I congratulate on securing a debate on this important topic. As she commented, her predecessor, Dr Evan Harris, was a great champion of science in Parliament, and, in that respect, there is a lot of work to do to replace him.
It is great that the hon. Lady gave such a well-researched speech, which dealt with so many of the issues that are dear to the hearts of many scientists around the country. I would, however, take issue with her description of Oxford West and Abingdon as having the highest density of STEM researchers and science-based companies. We will have to measure that properly, because I suspect that Cambridge could do rather well, given that it is the best university in the world, according to one recent rating.
I have experience in a number of areas of science, which says a lot about how we can do interdisciplinary science. I am a chemist, and I used to work on biology in a physics department. It is becoming much easier to break through. If I have any issue with triple science, it is with the idea that there are three separate sciences. We need much more integration.
I should also tell hon. Members that I set up a spin-out company. If they are interested, I will tell them later exactly what it was trying to do.
The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Mr Edward Vaizey): Now.
Dr Huppert: We were aiming to make it easier to collect virgin female fruit flies, and I will explain later exactly why we wanted to do that.
Scientific research is extremely important. This country has a proud history of scientific research. We have Newton, who was, of course, also a Member of Parliament, Watson and Crick, a whole series of people based in Cambridge and the fantastic glut of Nobel prizes that we won this year, although, in some cases, the work involved was not based in Cambridge.
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