Peter Mandelson addresses House of Lords

On 3rd December 2009, Lord Mandelson addressed the House of Lords on the creation of the Department for Business, Innovation and Skills (BIS) with much of the speech based around the Government's aspirations towards supporting UK manufacturing. Hard facts or hot air – you decide!

My Lords, I congratulate the Noble Lord, Lord Hunt of Wirral on securing the debate. I am, of course, grateful for this opportunity to set out again the purpose of the new Department for Business, Innovation and Skills and – more importantly – its progress.

A number of very relevant points have already been made during this debate and I will seek to address them in my remarks. But I want to start with the challenge that goes to the very heart of why the Government created BIS.

More than a cyclical recovery

My Lords, we need to recognise that we need to prepare this country for something more than just a cyclical recovery. Because the changes in the global economy are structural and are not going away, they present both dangers and opportunities for us.

The pace and intensity of global competition will increase. In due course we will be challenged even in the areas such as advanced manufacturing, financial services and creative industry that we rightly think of as our greatest strengths. Innovation will, above all, need to be the lifeblood of the economy.

Without it there will be fewer new jobs to drive employment and there will be no rising standard of living. And, whatever some on the opposition benches might believe, or at least say, there will be no balanced budget.
Economic growth is the biggest antidote to debt which is why we should emphatically reject the policies of sweeping retrenchment that would derail current recovery.

That does not mean that all growth is the same. The growth we need must be resilient and durable and widely shared – diversified both across the sectors of the economy and the country. It must be environmentally sustainable. It must be built on something more than turning a quick profit, because this is not the basis for a national business model.

And if I may say so, however important the services we supply and the invisibles we trade in, a huge part of our self identity and our creativity rest – and should rest – in what we make. I am glad that a commitment to invest in and cultivate our modern manufacturing capabilities in Britain is becoming the hallmark of BIS.

We pay high wages and we believe in quality public services in Britain. These things are not, in my view, negotiable. But both of those things depend on the ability to pay our way in a global economy.

In a global supply chain economy, Britain cannot and should not ever aspire to be a country that competes by undercutting on wage costs or employment standards. It has to compete on adding value.

That puts the premium in what we do on knowledge and specialisation and sophisticated skills. It puts a premium on making this country one of the world's great repositories of scientific and technical knowledge and the ability to commercialise that knowledge.

It puts a premium on thinking about the interests of business not just in terms of the businesses that already exist, but those that do not yet exist – but are out there in an entrepreneur's head. The question is: how do we help create them?

We need to see industrial competitiveness not just as the end result of the discipline of the market, but as the result of the right combination of private initiative and dynamism and public investment. Of course private enterprise will always be the engine of the economy and we have to encourage it, nurture it and reward it.

But at the same time we also need to recognise that our comparative advantages are built on a complex network of essential capabilities such as sophisticated skills, access to growth finance on the right terms, modern infrastructure and a strong science and research base.

And that is where Government enters the picture, and where BIS in particular finds its key role.

Unfortunately, the backdrop of industrial policy in the 1970s and the anti-manufacturing prejudices of the 1980s do not serve us well and that's why I tried to turn the argument around in the Government's framework policy statement ‘New Industry New Jobs' this year. And that, my Lords, is the policy challenge that BIS reflects and the agenda that it has driven forward effectively this year.

That remit is simple: to maintain the UK's position as a dynamic, open knowledge economy; to use the influence of government to drive innovation and competitiveness; to invest in the capabilities and resources our people, business and society need to prosper in a global economy. And to drive this agenda in Europe, which is our biggest market, and an amplifier for our economic policy around the world. The logic for bringing the parts of the government that do this work into a single team is compelling.

Sheffield As a way of making this a little more concrete, I want to refer to my recent visit to Sheffield. One of the UK's great manufacturing cities, over the last thirty years Sheffield has had to reinvent itself.
Fifteen years ago, too much of the talk in a city like Sheffield was about what had been lost. These days it's increasingly about what is being built and renewed – new jobs, new industries and new ties to the global and European economies.

Now, Sheffield has the potential to be a hub for the UK's civil nuclear supply chain, but that is going to require a number of things to happen. The first is a clear commitment from government to nuclear in Britain's energy mix so that private investors can move with confidence. With our planning statements for nuclear new build, and clear strategies from the utility companies, they now have that confidence. More than 300 companies have registered over the last nine months to be certified suppliers to EDF, Westinghouse and Areva.

It's going to need major private investors with the depth of experience to handle nuclear technologies, which is why we agreed to partner Rolls-Royce with £45million of government investment in a range of advanced manufacturing plants, including a civil nuclear factory proposed for the South Yorkshire region.

It's going to need a strong network of research strengths behind it – the strengths we committed to protecting and leveraging in BIS' new Higher Education Framework – which is why this morning I announced that we will support the Universities of Sheffield and Manchester in leading a new Nuclear Advanced Manufacturing Research Centre in partnership with industry.

It's going to need a growing pool of British technicians and scientists with the skills to handle civil nuclear technology. That's why we have created A Nuclear Skills Academy, and why we've just invested £8 million to upgrade the training facilities at the Dalton Cumbria Educational Facility.

That's also why the key ambition of BIS' new Skills strategy last month was the creation of a new class of modern technicians in Britain through a big expansion of advanced apprenticeship numbers. Many of whom will for the first time, be able to move from apprenticeships to universities where they will be able to train to the highest level in handling these new technologies.

The point my Lords is that unless we understand the multiple capabilities and interconnected policies that produce these industrial outcomes we will fail to achieve them. The levers here are university and science policy, business and innovation support, skills policy, strategic investment. BIS puts those levers in one place for the first time.

Cars and other strengths As illustration is the best means of argument, let me give another example. Earlier this year Richard Lambert of the CBI said: “The UK has the capacity to be a serious player in the manufacture of electric vehicles. What's needed is for the industry to produce a credible road map identifying strengths and weaknesses – and for judicious public funding to support the necessary technology. That's industrial activism!

We now have that roadmap, one of a number of sectoral strategies we have produced this year. The UK now has the world's biggest demonstrator project of its type for low carbon vehicles – because BIS and the Government funded it.
It now has a low carbon economic area in the North East which leverages low carbon automotive strengths in the same way we are doing in Sheffield for nuclear. We are investing in charging infrastructure and consumer subsidies for the first generation of low carbon cars. And where have Toyota and Nissan chosen to base their low carbon operations in Europe? Britain – as a result of the actions we have taken over the last year.

Britain also now has a new range of demonstrator and product development facilities for innovative small companies in key technologies like industrial biotechnology, wind power, wave energy, and plastic electronics. Because BIS funded them through the £750million Strategic Investment Fund created at the Budget.

We have a new Office of Life Sciences, which is bringing the same kind of strategic direction in biosciences. Jeff Kindler, CEO of Pfizer, has described the Office of Life Sciences as being a: “unique, forward thinking and effective model of Government working with Industry and the Health system.” He has recommended the model to US Government.

BIS from here

My intention is that BIS will remain absolutely the frontline of public policy for protecting our enterprise environment, getting our productive base through this recession intact and investing in the strategic capabilities we will need for the future.

For the present time, we remain on a crisis footing for business support. Since the global crisis began over 95,000 businesses have benefited from a free Business Link Healthcheck. 6,855 businesses have been offered loans totalling £692 million through our Enterprise Finance Guarantee Scheme. Over 150,000 businesses have been able to defer tax payments to help cash flow. Targeted measures such as our Car Scrappage Scheme and Train to Gain – which are both BIS initiatives – have helped sustain demand and retain essential skills across British supply chains. Our new strategies for adult skills and higher education represent a cast iron commitment to our world class university system and a new focus on ensuring that Britain has both the generic skills and the specialist STEM graduates and technicians that our modern economy requires. We're creating the new UK Innovation Investment Fund to create a new public/private source of investment in innovative companies and we will build on this in our response to the Rowland's Review. I am convinced that long term finance for industrial investment in this country is not a cyclical problem it is a structural one, and we are now responding to that. We've put a lot of time and effort into creative and innovative finance. Maybe now we need a bit more focus on financing creativity and innovation.

We will also be producing our new tasking framework for regional and local government investment in economic growth, which will further strengthen the role of the Regional Development Agencies in managing national investment and growth strategies across their regions.

The RDAs have played a vital role over the last decade – training almost half a million people, securing or creating 200,000 jobs and turning every pound they have invested into four pounds worth of economic growth.
The public interest

My Lords, let me conclude by saying with complete conviction that BIS is a department created in the public interest, and it is delivering for the public's future.

The immediate costs of setting up BIS have been limited – around £160,000 on changes to signage and offices. That's just 0.05% of our total annual budget. We are also already delivering savings and greater efficiencies as a result of the merger.

I want to pay tribute to the hard work and professionalism of the BIS staff and their partner agencies, without whom the achievements of the last six months would have been impossible.

My wider public interest argument today I hope is clear. Britain's business environment and industrial base are not things we can leave to chance. It is strong, but we ignore its future needs at our peril. It needs to be stronger, smarter, more sophisticated.

BIS' core remit is to ensure that Government investment in these capabilities ultimately pays for itself in new growth, new strengths and new opportunities. I believe that BIS is now uniquely equipped to do that and should command respect and support from all parts of your Lordship's House.

BIS
www.bis.gov.uk