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Lords Chamber

Volume 754: debated on Thursday 3 July 2014

House of Lords

Thursday, 3 July 2014.

Prayers—read by the Lord Bishop of Oxford.

Bishop of Guildford: Appointment


Tabled by

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

My Lords, on behalf of the noble Lord, Lord Trefgarne, and at his request, I beg leave to ask the Question standing in his name on the Order Paper.

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

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

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

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

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

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

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

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

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

I am sure that when the new bishop arrives he—or perhaps, if it is some time, she—will consider these things. The important thing is that we need an energy mix in this country. Fracking could well provide that. Clearly it needs to be done carefully and sensitively, but we should not pass this opportunity.

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

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

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

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

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

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

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

Economy: House Prices


Asked by

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

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

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

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

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

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

My Lords, can the Minister tell the House how many planning applications for housing have been approved but the houses have not been built?

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

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

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

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

Is the Minister aware of the town of Altrincham in the north-west? The Chancellor certainly is because it is close to his constituency. Altrincham is one of the most prosperous towns in the north-west. Is the Minister aware that house prices in Altringham are half those in three inner London boroughs—not Kensington and Chelsea but Hackney, Southwark and Lambeth? Does that not show how chronic the situation in London is?

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

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

Carers Strategy


Asked by

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

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

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

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

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

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

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

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

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

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

My Lords, on the issue of benefits, Carers UK figures show that by 2018 the Government will have cut carers’ benefits by an estimated £1 billion through the reduction in support with council tax, housing costs, the overall numbers receiving the carer’s allowance and the benefits cap. With their carers and disabled people losing support from the benefits system in this way, what assessment have the Government made of the very serious knock-on impact on social care and families’ abilities to provide care?

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

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

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

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

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

Student Loans: Misleading Practices


Asked by

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

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

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

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

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

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

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

Ultimately, responsibility lies with the relevant Minister. The decision in 2005 was made by the board of the Student Loans Company, BIS and the Minister responsible for the area at that time. It is right that Ministers should ultimately be responsible for all government agencies in the departments in which they lie.

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

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

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

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

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

My understanding is that, in the decision taken at the time under the previous Administration, appropriate advice was followed and decisions were taken in the light of the industry practice. I hear what the noble Lord said. As I said, however, the key difference between Wonga and the Student Loans Company is that Smith Lawson was registered as a trading name with the IPO. It is a key distinction. In the case of Wonga and some of the companies being used, as I understand it, that was not the case.

Finance Bill

First Reading

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

Business of the House

Timing of Debates

Moved by

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

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

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

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

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

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

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

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

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

My Lords, the noble Lord often intervenes with some amusing remarks. That was amusing but not accurate.

Motion agreed.

Economy: Manufacturing

Motion to Take Note

Moved by

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

In his report No Stone Unturned, the noble Lord, Lord Heseltine, had a go at some measures to try to get the UK more match-fit than it is now. I will emphasise one or two points that he made. We want, at least, to get up to the level on the other side of the North Sea. Similar countries with similar living standards such as Germany, the Netherlands, the Flanders part of Belgium and the Nordic countries have high productivity economies, with good records on their balance of payments and exports. They combine this with strong social states, excellent training systems and, by the way, influential trade unions. They are savers, innovators and investors. They are not by any means perfect: in certain areas, we have people who match them and exceed what they do but, again, not enough. The critical mass here is not large enough.

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

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

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

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

I am sorry to interrupt the noble Lord but he has spoken for eight minutes in a seven-minute time-limited debate.

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

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

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

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

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

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

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

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

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

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

I first draw attention to the nine High Value Manufacturing Catapult centres—all outside London and the south-east—which provide manufacturing companies with access to equipment and facilities that they might not otherwise have, and join up academia with industry and government to develop new technologies. Output growth and rising business investment now suggest that recovery is sustainable because it is no longer consumer spending that is driving growth. Now, business investment is too. Demand for UK manufacturing is now strengthening as part of that. The recession had a heavy impact, but manufacturing output is now back to similar levels to before the recession and is growing, helped by lower corporation tax, better employment allowances, tax incentives for investing in new equipment and increasing the level of financial support for exporters—all introduced by this Government.

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

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

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

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

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

The greatest threat to a manufacturing-led post-recession recovery is the lack of skilled labour. Retaining skilled people with manufacturing and engineering skills is of paramount importance to companies. Too often, skilled employees struggle to find skilled work after they have completed a contract or been made redundant, and they end up leaving the sector. I am pleased that Vince Cable, Secretary of State for Business, Innovation and Skills, responded to this challenge by requesting senior industry leaders to find a solution. As a result, a new programme, the Talent Retention Solution—TRS—was developed and financed by the sector for the benefit of all companies and individuals wishing to work in advanced manufacturing and engineering. It puts skilled individuals looking for work in touch with companies searching for new employees. It is a UK-wide scheme which now includes employers from aerospace, automotive, civil engineering, defence, energy, marine, nuclear, power generation and renewable industries. It has an employers’ group, chaired by my colleague and noble friend Lord Willis of Knaresborough, and it provides specific, easy-to-use recruitment advice and services to companies.

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

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

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

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

My Lords, I, too, congratulate my noble friend Lady Wilcox on this important debate and on her powerful opening speech.

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

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

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

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

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

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

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

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

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

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

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

My Lords, I, too, congratulate the noble Baroness, Lady Wilcox, on having secured this debate and introduced it so ably.

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

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

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

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

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

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

“a trickle rather than a flood”.

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

I will conclude by making a number of brief points, which I will enumerate. First, more research is needed into what firms are actually doing and how they take their decisions. That needs government support: will it be forthcoming? Secondly, and crucially, the results need to be made available to businesses. The American research shows that many companies are operating with obsolete assumptions about the global economy and are therefore taking decisions without the full array of relevant information.

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

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

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

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

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

“behind every product there is an army of talented creators, makers and engineers … We need their brains, hands, knowledge, creativity, design and technical skills and, most importantly, we need them to know that they are valued by society as a whole”.—[Official Report, 10/6/14; col. 268.]

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

This led me to study a remarkable article by an extremely knowledgeable academic, Professor Kel Fidler, who gave a paper to the Royal Academy of Engineering on engineering and big science. He called his article Sorting Out Engineering: The Need for a Major Review. That is what I want to recommend to the Minister this morning. I can only summarise the professor’s arguments as the article covers pages, but I want to talk about the main subject. Of course, the training of technicians, which my noble friend Lord Young of Graffham referred to, is enormously important, but the shortage of university-trained engineers is one of the things that are holding this country back.

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

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

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

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

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

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

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

If this is true it is immensely disturbing.

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

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

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

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

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

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

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

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

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

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

The development of modern technologies can take up to 10 years, and a planning horizon of five years is essential. The High Value Manufacturing Catapult is already facing this situation, and although it is early days for the transport catapult it is also gaining industrial involvement at a level above what was predicted, which is very encouraging. Let us not make the mistake that has been made in the past with initiatives like that recommended by the Alvey commission, whose initial initiative was to rebuild the UK’s microelectronics industry; after a strong start that initiative was basically abandoned, leaving that technology, which underpins all manufacturing and modern technology, to others. Support for the Fraunhofer-Gesellschaft is long-term and sustained, and to a certain extent it was the model for our catapults.

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

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

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

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

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

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

My Lords, I do not want to intervene in this controversy. I will carry on with what I intended to say.

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

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

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

I do not know what they are doing in Oxford, by the way. It seems mainly to produce politicians—but never mind; Cambridge is doing a fantastic job on the science and engineering side. It is not just a case of new industries. The other day I met a man who was in the textiles industry—an old industry from my old part of the world, the north of England—who was doing a marvellous job of producing suits with gold thread in them. The gold thread was often imperceptible, in some cases entirely so, but people in the Middle East love them and that man is doing a fantastic job of reviving the textiles industry.

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

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

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

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

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

As regards infrastructure, even if the Conservatives do not win the next election, I hope that HS2 will go ahead and that a Labour Government will maintain that infrastructure spending. There has been far too much chop and change by government. Further, it would be helpful to have fewer blunders by government. I am going through my reading list at the moment. There is an excellent book entitled The Blunders of Our Governments by Anthony King and Ivor Crewe, which is very relevant to the point I am making.

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

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

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

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

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

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

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

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

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

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

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

More locally still, we and local government need to support local firms. It was drawn to my attention earlier this week that in Erewash in the east Midlands, the Labour council group is being very supportive of small firms. We need to ensure that that is backed at the national level. One of the recommendations of my noble friend Lord Adonis, who has just joined us, is that 25% of all public procurement should go to small firms. All Governments should learn that lesson. Another aspect of my noble friend’s report is the key issue of taking everything, or a lot, away from national interventions and giving support to local government and new local and regional institutions. It was also the theme of the recent report by the noble Lord, Lord Heseltine; it is something that you have to do on a large scale to make work and it will fit in with the Labour Party’s commitment to greater devolved authority to the regions, particularly the city regions.

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

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

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

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

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

Today, manufacturing represents some 11% of the UK’s output, but this further fall is in part due to much stronger gains in the service sector. Nevertheless, contrary to common belief, UK manufacturing is strong. According to the trade magazine, The Manufacturer, the UK is currently the 11th largest manufacturing nation in the world, accounting for 11% of the UK’s gross value added and 54% of UK exports, and employs directly 2.6 million people.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Without seeking to rebalance our economy we will struggle to secure the long-lasting recovery that we seek. It was the manufacturing sector that made our country great and it can do so again. In recent years our economy has relied too much on services and too little on goods. I say that despite coming from a background in financial services. We must of course promote our services industry, but it is also imperative that we manufacture and export specialist products. We have the resources to produce and export such goods, as well as the expertise of our people. We must begin to make things again and reactivate our manufacturing capabilities.

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

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

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

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

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

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

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

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

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

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

My Lords, I welcome the opportunity to debate manufacturing today, and I thank the noble Baroness, Lady Wilcox, for her success in getting this on to the Order Paper.

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

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

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

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

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

We have heard a lot about the car industry today. When I chaired the Trade and Industry Committee in the Commons at the turn of the century, I remember having a meeting with my colleague, the noble Lord, Lord Bhattacharyya, and the management of Jaguar. They explained that they had a wonderful new car which would be a great success, particularly on the west coast of America, but they did not have the money to match the discounts that their competitors, Mercedes and BMW, were able to offer. Equally, they had a range of cars and platforms for new models in prospect which they felt could beat the pants off the rest of the world. What they lacked was money from a potential investor and it was not until the Tata group came along that they got that degree of support. It says something about UK financial institutions and the priority we place on manufacturing that open goals of this nature were so spectacularly missed by the British financial services system. Our car plants are world class. Nissan’s plant in Washington is the most successful in the Nissan empire. We have the workforce and the innovative capabilities. A number of these places are not just assembly plants: they have design capacity and capability far beyond that.

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

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

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

Others have talked about the British car industry, in which 750,000 people now work. Investment is up, as is demand for new models; the supply chain is, as I said, coming back to the UK; and vehicle production of about 2 million per annum is expected by 2017. Domestic car manufacturing is up by 10.3%, representing £64 billion of GNP. There has been a 9.7% increase in investment in new technology, worth about £1.9 billion. My noble friend Lord Lyell referred to the pharmaceutical industry, the gross exports of which amount to £20 billion; with net exports standing at £4.9 billion, not just £2 billion, they have virtually doubled. This is another industry in which Britain is very strong, with the help of Oxford, as has been mentioned; some £4.3 billion was invested in research in the past year.

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

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

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

I greatly welcome, as others have done, the Government’s initiative to start, at last, to address our infrastructure needs. For over a decade, Governments have failed to do this in airports, roads, rail and energy supplies. I anticipate that energy will be the rising manufacturing activity, as we will need more of it over the coming years. Candidly, this is partly a result of the misdirection of huge resources to subsidise inadequate and unreliable alternative energy, rather than investing sooner in nuclear power. There is now, to my astonishment, a proposal that the Government should start paying industrial users to shut down to avoid power shortages hitting the public. If there is any truth in that, it is an absolute disgrace and I challenge the Government to make clear that there will be more than sufficient energy supplies for a considerable recovery in British manufacturing.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The other important point is of course that all parties now agree that government can play a very major role in stimulating investment in advanced manufacturing. After the last election there were nasty remarks in taxation magazines that this Government were going to withdraw the tax relief on R&D. However, I am glad to say that sense prevailed, and doubtless will continue to do so beyond the next election, certainly if Labour is returned. This has been a very important point. I am very well aware that this arrangement of tax relief on R&D has meant that small SMEs have been able to continue a very high level of R&D activity. Indeed, in that respect we are rather better than some of the continental countries.

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

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

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

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

I begin by declaring an interest. I am an industrialist, and I am also an engineer. My family business, JCB, has 11 factories in the UK, employing more than 6,000 people. Perhaps I could respond rather quickly to the noble Lord, Lord Hunt, and say that I think that engineers are paid properly in Britain. As an illustration, last week we advertised on the net for engineering graduates with experience, and we got 1.3 million hits. They were from around the world but, all the same, being an engineer cannot be too bad.

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

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

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

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

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

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

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

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

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

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

There is no room for complacency, but the idea that we are not a manufacturing country any more is too far on the pessimistic side. Plenty of manufacturing is taking place but, as my noble friend Lord Monks said, we could do with a lot more of it.

I would welcome the Minister’s response about the areas that the Government have rightly placed some investment in. What is the feedback on the Catapult centres? What is the return on that worthwhile investment? I ask the same in relation to the advanced manufacturing supply chain initiative and the Manufacturing Advisory Service. Are these government initiatives having the kind of impact that we know is necessary?

Throughout this debate, one area that has been shown to be fundamentally important is finance. The noble Lord, Lord Flight, suggested that everything was rosy in this area but, if that were the case, why are manufacturers still telling us that one of the biggest problems they face is access to finance? I do not wish to exaggerate this because I do not believe I have to. Manufacturing is often viewed by the banks with either ignorance or hostility. It is not often seen as a sector to lend to even though it should be viewed as one of the growth areas of the future. Many innovative manufacturers with the potential for high growth, the capture of global markets and good job creation are denied the funding they need because the bank says no. We still do not seem to have cracked that problem. In the first quarter of 2014, net lending to business from banks participating in the Government’s Funding for Lending scheme fell by £2.7 billion. I would welcome the Minister’s comments on that.

We also surely need—the noble Lord, Lord Bamford, referred to this—to call for a long-term approach. He talked about the payback on high-level investment in machinery and equipment. In other words, we have to call for patient capital instead of short-term trading because this is where both the business interest and the public interest lie. We have to argue for tax rules that encourage investment rather than provide tax dodges. We know that there is a good rate of return for investment in science. Government funding played a significant part in keeping Jaguar Land Rover going. Will the Minister tell us what the rate of return on our investment in tax credits is, for example?

Perhaps the other most important area that has been mentioned is the question of how we attract the level of people that we need in engineering, specifically in the manufacturing industry. I could not help smiling when the noble Lord, Lord Hunt of Chesterton, talked about it being harder to get into engineering than into the church. Perhaps it is a case of blue collar versus white collar. Whether or not that is really the case, throughout this debate we have realised that we have to attract more young people—both boys and girls—into engineering. That is a huge challenge.

Paying low wages subsidised by the taxpayer is no way to attract people into an industry. Central to good pay is productivity. That is where our record is not so good and worse than all our competitors. Surely the real measure of our economic progress is not just GDP but the growth in GDP per hour worked. You do not raise productivity by cutting wages and sweating the assets. That is a race to the bottom. The principal source of growing productivity is our capacity to learn to do things better, not necessarily cheaper—achieving the same objective in a completely different way because of new investment in new tools, new methods and new sources of information.

Last but by no means least is an area that I am not sure was referred to—the question of management training. One statistic I still find amazing is that only one in five of our managers has received any training at all. If we are talking about improving the way that people are managed and improving productivity and performance, surely that has to enter the equation.

I conclude on the question of how we attract young people, because it is a key part of what the noble Baroness, Lady Wilcox, has put into this debate. My experience reflects what a lot of people have mentioned today. So many schools are still pushing all young people on to the academic route, thereby implying that a vocational career is somehow second class. We all know that that is wrong. We know that we need more young people—both boys and girls—to choose a vocational career. Why do they not? It is because we still have this prevailing attitude in schools. While I support what the noble Lord, Lord Young of Graffham, said about having someone to advise on entrepreneurship, which is not a bad thing, it is not the only thing that advice is needed on. We must get successful young people in engineering back into the schools to say, “Look; this is a really worthwhile career”. The Government must insist that schools carry out what they should be doing on careers advice—that is, advising young people on the whole range of careers available. They still are not doing so. If you go into schools and talk to young people about apprenticeships, you will find that, in many cases, they know little or nothing about them, and teachers are not promoting them. What are the Government going to do about this? If we are serious about starting at that key end by encouraging young people to perceive apprenticeships as a really worthwhile career, we have to change those attitudes. One of the ways to do this is through teachers—because they are such key influences—and by inviting young apprentices back into schools.

We have colleges in the UK that provide brilliant standards of high-level apprenticeships and vocational training. The trouble is that we need more of them. Take Nelson and Colne College in the north-west. It is one of the very best colleges in the country. It has the third highest success rate for 16 to 18 apprenticeships. It has been awarded STEM assured status by the New Engineering Foundation. It recognises excellence in STEM; and it has helped more than 300 jobseekers move off benefits and 50 young people progress to apprenticeships. It has done this through a determination and belief that high-quality apprenticeships which offer genuine job prospects are a fantastic opportunity for both young people and for businesses. It has built on that success.

As the report by my noble friend Lord Adonis recently highlighted, it is exactly this type of institution that we should be encouraging and promoting. Does the Minister not think that offering better support through local enterprise partnerships for business hubs to spread apprenticeships would be a more effective way of ensuring that colleges such as Nelson and Colne can continue to meet the needs of the local economy and employers, rather than the Government’s current approach to funding, which is causing some concern to small and medium-sized enterprises?

My Lords, I am grateful to my noble friend Lady Wilcox for initiating this important debate. It has been very encouraging to see that there is agreement across the House about the importance of manufacturing in the UK. As the noble Lord, Lord O’Neill, said, there is much more to do. I am also encouraged that so many of the issues raised here today are being acted upon. As my noble friend Lord Shipley indicated, for far too long there has been a misplaced assumption that we are a nation of grocers, bankers and lawyers. My noble friend Lord Horam provided a slightly more colourful anecdote to illustrate this point. There is an assumption that countries such as Germany, China and South Korea excel at manufacturing, but we do not.

UK manufacturing has a proud record of innovation and achievement and I will first reflect on some national statistics. My noble friend Lord Chidgey raised some interesting points when he spoke about the Markit figures. Some recent figures came out from Markit’s senior economist, who said:

“UK manufacturing continued to flourish in June, rounding off one of the best quarters for the sector over the past two decades”.

The sector delivered around £140 billion in gross value added last year alone. It produces over half our exports in goods; invests more than any other sector in R&D, and employs an increasingly skilled workforce of more than 2.5 million highly skilled people.

The UK aerospace sector is the second biggest globally, and Britain now has the most productive car sector in Europe. By 2017, UK industry predicts that Britain will be producing 2 million cars a year, beating our all-time peak of 1.92 million in 1972. In contrast to 1972, these will be cars that people actually want to buy. Remember the Hillman Imp? I do not know whether my noble friend Lord Young ever drove one, but I pay tribute to the work that he has done over so many years, including introducing foreign investors into the automotive sector, not only to effect change but to contribute so much to its success. That is a point which the noble Lord, Lord Lyell, highlighted. We are also developing new industries. Earlier this year, Siemens announced a £310 million investment in offshore wind at Hull, creating more than 1,000 jobs.

However, there is no use manufacturing if you cannot sell what you make. Earlier this year, my noble friend Lord Livingston, the Minister of State for Trade and Investment, accompanied the Deputy Prime Minister and 40 businesses to Mexico and Colombia. To reassure my noble friend Lord Sheikh, linking Britain to fast-growing new markets such as these—beyond Europe—is a vital part of the Government’s plan to provide sustainable growth and to compete in the global race. For example, in May this year Chinook Sciences secured an infrastructure deal worth more than £300 million to build the world’s largest advanced thermal energy-from-waste facility in the United Arab Emirates. Back in Europe, UKTI helped Augusta Westland seal a £1 billion deal to supply 16 helicopters to the Royal Norwegian Air Force, safeguarding at least 3,000 jobs.

My noble friend Lord Carrington spoke about the importance of free trade and the need to prevent protectionism. The Government favour the expansion of free trade around the world, for example through the Transatlantic Trade and Investment Partnership that is under negotiation at the moment and for which I have high hopes.

The noble Lord, Lord Monks, emphasised the role of the trade unions in manufacturing in the UK and made some important points about it. I agree with the noble Lord that there is a positive role for unions to play—for example, Unite’s part in securing the future of Ellesmere Port, both for the products and for the people who work there.

I should like to touch on the subject of intellectual property, which my noble friends Lord Bamford and Lord Sheikh, raised. The immense creativity and openness to innovation that runs through the UK’s manufacturing industry will be key to sustaining the positive signs of recovery we have seen in recent months. As Minister for Intellectual Property, I am committed to making sure that businesses are able to reap the rewards of their creativity.

My noble friend Lord Bamford raised the importance of research and development and my noble friend Lord Lyell highlighted the importance of the pharmaceutical sector. The House will know that the UK has a strong comparative advantage in pharmaceuticals and life sciences which builds on our world-class research base. Our catapult centres in cell therapy and stratified medicine support our life sciences sector. Through the Research Partnership Investment Fund, we are also supporting new research. A £34 million partnership between the University of Strathclyde, GSK, AstraZeneca, Novartis, Cancer Research UK and others, will accelerate innovation and establish new supply chains for medicines.

Many small businesses are unaware of the different types of intellectual property and how they apply to their business. In the last year the Intellectual Property Office spoke to 18,000 small businesses, helping them to understand IP and how they can best protect their innovation and—most importantly—use it to generate revenue.

Our innovative manufacturers are making products for today’s and tomorrow’s global markets and this is delivering UK jobs and growth. Only last month I was honoured to be invited to Berlin by the European Patent Office to present an award to Professor Chris Toumazou of Imperial College. He received the award for research and production of a “lab on a chip”. This is a ground-breaking development in the field of medical diagnostics which allows rapid diagnosis of life-threatening conditions.

People such as Professor Toumazou are inspirational figures for young people considering a career in science. He left school at 16, qualified as an electrician and graduated from the then Oxford Polytechnic—now Oxford Brookes University—before he found his niche in research at Imperial College, London. He then went on to become their youngest professor at the age of 33.

I am pleased that my noble friend Lady Wilcox and the noble Lord, Lord Whitty, recognised the significant measures being implemented through the industrial strategy. It was launched in September 2012 by my right honourable friend in the other place, Vince Cable. There have been some significant successes. As my noble friend Lady Wilcox said, we have announced a co-investment of £2 billion over seven years for the Aerospace Technology Institute to keep the UK at the leading edge, not only on wings—if noble Lords will excuse the pun—but also on engines, aerostructures and advanced systems.

Together with the automotive industry we are investing £1 billion over 10 years in a new Advanced Propulsion Centre. This will bolster our capabilities in the research, development and commercialisation of low-carbon technologies, thereby securing 30,000 jobs. The High Value Manufacturing Catapult was mentioned by my noble friend Lady Wilcox and the noble Lord, Lord Broers. It has secured more than 1,500 projects with private clients and has seen a similar number of engagements with SMEs.

The noble Lord, Lord Broers, stated that the TSB should be prepared to scale up the catapults. Technology entrepreneur and venture capitalist Hermann Hauser has been asked by Vince Cable to make recommendations to Ministers on how the Government can take forward the successful catapult network. Hermann Hauser’s report will feed into the science and innovation strategy, which is due to report in the autumn. Just this week, the TSB outlined plans for a further £400 million of investment in British innovation, including £72 million for new initiatives to support high-value manufacturing.

I will now focus on supply chains and reshoring. On the latter point, the noble Lord, Lord Giddens, gave some interesting examples from the United States. The subject was raised by my noble friends Lord Carrington and Lord Flight. We are taking action to ensure that we have the manufacturing supply chains needed to create strong, sustainable, balanced growth.

I hope that I can now answer some questions raised by the noble Lord, Lord Young of Norwood Green. Through the Advanced Manufacturing Supply Chain Initiative—AMSCI—we are providing funding for capital investment, skills and innovation to support the repatriation, anchoring and growth of manufacturing supply chains in England. Forty-four successful AMSCI projects have secured half a billion pounds of public-private investment, creating or safeguarding more than 15,000 jobs directly and a further 15,000 indirectly. More than 180 organisations have been involved, including many SMEs. A fifth round of AMSCI was announced by Vince Cable on 9 June. This will make available a further £100 million of funding for which companies can bid for support. The recently launched Reshore UK provides a one-stop-shop service, jointly delivered by the Manufacturing Advisory Service and UKTI, which helps British business return to and reinvest in the UK.

Many Peers spoke on the important subject of innovation. Creativity and innovation are in our DNA. Some of the world’s most exciting, cutting-edge technologies are being developed here in the UK. Forty per cent of the world’s small satellites are made in Guildford, and we are making great strides with graphene, composite materials and 3D printing. We have invested £600 million in the eight great technologies, which will be an important source of growth by transforming existing products and by creating entirely new products and industries.

For example—my noble friend Lord Young of Graffham made this key point—effective automation and use of robotics and autonomous systems will be key to the future of manufacturing productivity. We have therefore set up a special interest group bringing together industry and academic experts to outline a future vision for the UK. Its strategy was published on 1 July.

The world is seeing phenomenal levels of growth in the volume and speed of data being created. The internet of things, which allows devices from heart monitors to kitchen appliances to communicate through wireless internet connections, is real and with us now. The advent of 5G and smart cities will broaden possibilities even further.

The Government are working closely with businesses and academia to ensure that the UK can capture value from “big data”. Noble Lords can be forgiven for not knowing what that is. Big data is a term describing the analysis of complex and often large-scale data sets to convert raw data into knowledge. I hope that that is clear. The £42 million Turing Institute announced by the Chancellor in the Budget will help the UK remain at the forefront of this rapidly moving, globally competitive discipline.

I now focus on the important subject of skills, which has been a key theme of the debate this afternoon. It was raised by my noble friend Lord Young, the noble Lord, Lord Young of Norwood Green, the noble Lord, Lord Shipley, my noble friend Lord Jenkin, the noble Lord, Lord Monks, my noble friend Lord Carrington and others.

The UK cannot sustain growth in advanced manufacturing and innovation unless we have people with the right skill set to develop, exploit and embrace new technology. My noble friend Lord Young of Graffham spoke passionately about teaching enterprise. That is very much noted. That means having a skills pipeline at all levels from technicians through to postgraduates. The Perkins’ Review of Engineering Skills, published in November 2013, was a call to action to ensure the long-term supply of engineering skills. In response, the Government have announced up to £30 million in funding for employers to bid for to address engineering skills shortages in sectors with specific needs.

We have committed an additional £185 million over four years for the teaching of high-cost subjects such as science, technology and engineering. We have developed traineeships to give young people the skills and work experience that they need to compete for jobs or apprenticeships. We are developing a network of new national colleges to provide specialist vocational training up to degree level for critical sectors facing skills gaps. Colleges announced so far include advanced manufacturing, high speed rail, and nuclear. Since 2010, we have opened 17 university technical colleges providing high-quality technical education for young people aged 14 to 19, with a further 33 in development. My noble friend Lord Flight rightly paid tribute to my noble friend Lord Baker—and of course, not forgetting Lord Dearing.

My noble friends Lord Jenkin and Lord Borwick raised the issue of increasing the attractiveness of engineering and improving its image. That is an important point. I agree with my noble friends: it is vital that all stakeholders work together to address misconceptions about engineering careers and increase their attractiveness to young people. The Government are already taking action and we are keen to work with those who share our aims, because we want our best and brightest young people to see innovative, high-tech, high-value engineering as a desirable, rewarding career with the status to match—and, as my noble friend Lord Borwick put it so well, the joy of making things.

That is why we launched See Inside Manufacturing, an initiative mentioned by my noble friend Lady Wilcox, which is a partnership between BIS and industry sectors that aims to highlight the exciting opportunities and careers in manufacturing and engineering. Since SIM was piloted in the automotive sector in 2011, it has been extended to 10 sectors currently, and last month we announced that it will be expanded to all manufacturing sectors.

On 7 May, my right honourable friend the Chancellor of the Exchequer launched the Your Life campaign, including a call to action to get educators, industry and government to commit to boosting women’s participation in technology and engineering. My noble friend Lord Shipley highlighted that important point. I should at this stage spare the blushes of my noble friend Lady Wilcox, who raised this issue in her speech, but I note that she was the only Baroness who put her name down to speak today on this important subject—until the female representation in the Chamber today was doubled by the intervention of my noble friend Lady Trumpington.

So far, more than 180 organisations have pledged to do more to highlight the career opportunities open to those studying STEM subjects, committing to create more than 2,000 new entry-level positions, including apprenticeships, graduate jobs or paid work-experience posts. In addition, top firms are sponsoring a new DfE scheme to recruit post-doctoral graduates to become science and maths teachers, injecting top-level expertise into state and academy schools, including those with poor progression in those topics.

Many Peers talked about inspiring people into manufacturing. BIS funds the STEM Ambassadors programme, which sends more than 28,000 volunteers from industry and academia into schools to raise awareness among children of the range of careers that science and technical qualifications offer and provide stimulating scientific activities to increase their interest in STEM subjects. That complements the changes that the Department for Education has made to the design and technology curriculum to make it an inspiring, rigorous and practical subject. Even the youngest children are now using creativity and imagination to design and make products that solve real and relevant problems within a variety of contexts, but I acknowledge that we need to do much more.

My noble friend Lord Bamford raised the important issue of the quality of apprenticeships. I can reassure my noble friend that quality is very much a top priority. We are undertaking major reforms to ensure that the programme meets the future needs of a changing economy. The reforms put employers in the driving seat by giving them the role of designing new apprenticeships. Quality will be further improved by including higher expectations in English and maths and by more rigorous testing and grading at the end of the apprenticeship.

The noble Lord, Lord Monks, raised a separate, interesting point about the importance of competing with countries across the North Sea. He mentioned Germany and the Scandinavian countries and he is absolutely right. We need not just to compete with them but learn from them—which I think was his point as well.

My noble friend Lord Carrington spoke about reshoring in addition to the quality of manufacturing. I want to add another point on reshoring. Paradoxically, perhaps this is why businesses abroad are returning to the UK: not for lower prices but for the quality of the goods and the consistency of service that they get here. In addition, as was mentioned, the Patent Box provides much needed incentives for businesses to innovate.

My noble friend Lord Horam made an interesting point about the fledgling return of the textile sector. My ears pricked up at that point because I started in the mills in Scotland. In Paisley, 12,000 people were employed in the mills and I very much hope that we will continue to encourage regrowth in this sector.

My noble friend Lord Sheikh asked what the Government were doing to promote joined-up thinking between higher education and industry. Through the Engineering and Physical Sciences Research Council, we are investing around £800 million per year in research and postgraduate training. We also support partnerships between manufacturing industry and research partners. A £43 million partnership between the University of Sheffield’s Advanced Manufacturing Research Centre and manufacturing companies is developing the technologies needed for the future.

There is still much more to do, as I said at the beginning of my speech, but I believe that the industrial strategy is starting to have a real impact. Official figures for April 2014 show that manufacturing output is rising at the fastest pace since February 2011. Companies are bringing production back to the UK because they can see that the Government are committed to a long-term path. This gives them the confidence they need to invest both in new technology and more robust domestic supply chains and in skills, through a massive expansion in apprenticeships and the creation of new national colleges, and by putting employers in the driving seat on skills.

Overarching this, we have put in place an industrial strategy founded on stability, longevity, partnership and collaboration. These are the essential ingredients. As my noble friend Lady Wilcox put it so succinctly, supported by my noble friend Lord Horam, we are determined to ensure that this clear, long-term approach survives the current political cycle to maintain the certainty and confidence that our industry needs.

My Lords, I take the opportunity that I am given to thank everybody for taking part in this debate today. I particularly thank the Minister for such a full response. I do not think that he missed out anybody who spoke so there is no reason for me to pick up in any way on individual speakers. I have been walking with giants today. I have been sitting here, listening to manufacturing being described in various ways. I did not know or recognise some of them but was happily reminded of others.

I have only two regrets today. First, I missed out the role of trade unions. The noble Lord, Lord Monks, should take it as a compliment that I did in as much as I did not see them as sitting on the other side of the net from me. It has always been thought that from this side we are not going to listen and from the noble Lord’s side they are going to ask for everything. But where I worked in my business we had to work together as a team. If you got people into a fish-filleting factory at 3 am to fillet 30 tonnes of mackerel and someone started having an argument before we could get it out of the door, it was in everybody’s interest to fix it. Modern industry has to go forward and things will change so fast that we cannot entrench positions. I apologise that I did not mention the trade unions but it should be taken as a compliment that I felt we were all singing from the same hymn sheet at this stage.

Secondly, I am also sad that I was the only female to put her name down to speak in the debate. That shows us that we really have to work a bit harder at 50% of the population to see whether they can understand what manufacturing actually means. Perhaps we can get a few more soaps on the television to show girls taking part in such very exciting and good careers. I am very grateful to my noble friend Lady Trumpington for making her intervention as it meant that I was not alone. Thank you very much indeed to everyone.

Motion agreed.

Rural Economy

Motion to Take Note

Moved by

My Lords, the rural economy by its very nature is substantial and widely diverse: from agriculture, horticulture and arboriculture through mineral extraction, rural crafts, tourism, hospitality and field sports—the list goes on. Our countryside is a powerhouse of business and productivity, with agriculture as its backbone. Indeed agriculture, food production and processing is the largest manufacturing sector in the United Kingdom. I declare an interest as a member of both the NFU and the Countryside Alliance, and I live on the edge of the Peak District National Park.

Tourism also plays a major part in the rural economy. Inextricably linked to agriculture, the rural tourism industry all but died during the last foot and mouth epidemic and the bluetongue crisis. Thankfully, that dire situation is well on the way to full recovery, and Great Britain’s rural areas are indeed open for business. The UK’s national parks are a major draw for tourism with many additional benefits to local businesses of all types: hotels, pubs and restaurants, B&B establishments, holiday lets and activity centres, to name but a few. These parks are some of our most iconic landscapes, archaeological and historical sites, as well as our most valuable wildlife habitats. These beautiful regions contain strong communities who care passionately about their surroundings. These areas are living landscapes in the true sense and are visited by millions of people every year.

However, all is not always well in these rural areas. Many small communities have lost their social focal points. Pubs are closing at the nationwide rate of 18 per week, many of them in rural areas. Village shops have closed in large numbers although some communities, such as the village where my noble friend Lord Geddes lives, have invested in their own community shops, which is to be applauded. Many small post offices have closed, thus denying those communities financial services. For the rural community to grow, access to services is absolutely essential. Seven out of 10 villages in England no longer have a shop and rural Britain has lost over a quarter of its bank branches since 1995. The announcement in January this year by the Post Office about making available a current account in more than 100 branches, rising to 2,000, is most welcome but it is unclear how many of these branches will be in rural areas. I commend to your Lordships the post office at Rosehall, Glen Cassley, in Sutherland. It is a real outpost. That post office and village shop was saved from total closure by the local landowner for the community. He also happened to own Harrods, so he had a bob or two to spend.

Rural crime such as metal theft, fuel theft, livestock theft and fly-grazing presents major problems, as do fly-tipping, poaching and burglary, in areas which are often remote. In 2012, rural theft cost an estimated £42.3 million. Farm Watch and rural watch schemes— similar to neighbourhood watch—can be very effective in enabling the rapid exchange of intelligence about offences and suspicious activities but do not exist in all rural areas and are not always operated as effectively as they could be. The fact is that increasing pressures on police budgets have meant that rural areas have insufficient coverage, leaving country folk often feeling isolated and fearful of crime. All these matters need to be addressed with greater vigour and along the lines of the National Farmers’ Union’s action plan.

Turning to planning matters, planning policy in rural areas does affect food production, and the availability of an affordable housing supply is crucial to the well-being of the agricultural sector, as well as all rural communities. Figures released by the National Housing Federation on 30 June 2014 to mark the start of national housing week show that rural areas have become some of the least affordable areas to live in the country. On average, house prices in rural areas are 11 times the average salary. Wages would need to rise by 150% for potential homebuyers in these areas to buy a home. The problem continues to worsen, and it is imperative that the issue of affordable rural housing be addressed as a priority. Community-led affordable housing initiatives for smaller rural communities are needed, with properties both for sale and for the rental sector. Indeed, in Ballater in Aberdeenshire, people find it extremely difficult to get on to the housing ladder because retirees from below the border think it is a wonderful place to retire and the price of properties has gone up out of the reach of locals. It is very sad when you see that happening.

The Government’s recent proposals to make it easier for empty and redundant buildings to be converted into productive use are to be welcomed, but there is a caveat here. Such conversions are considerably more expensive than new-build and fraught with structural and planning difficulties. I know; I have been there. There is a very strong case for VAT to be cut on the labour element of domestic repair, maintenance and improvement of these buildings. It would not only generate growth and jobs but would protect the countryside against unnecessary new developments while bringing empty properties back into use and cutting carbon emissions. Will my noble friend make every effort to persuade his colleagues in the Treasury to look again carefully at the VAT position?

It is impossible for me to speak in a debate which addresses the rural economy without mentioning the importance of field sports to the well-being of that economy and their substantial contribution to the environment. I declare an interest as president of the Gun Trade Association and as a lifelong devotee of country sports. With regard to the rural economy, field sports and, in particular, quarry shooting, very often provide almost the only employment in less favoured, upland parts of the United Kingdom. Currently, 480,000 people shoot live quarry, and the annual spend from shooting sports is around £2 billion. Considerable sums are spent each year by foreign visitors on high quality, high cost game shooting on many of the country’s top sporting estates, with the obvious benefits those customers bring to the rural economy. The shooting sports, which provide the equivalent of 70,000 full-time jobs, are involved in the management of two-thirds of the rural land area. Two million hectares are actively managed for conservation as a result of shooting, with £250 million per annum being spent on conservation. These are significant figures.

Finally, I shall address the issue of broadband and its vital importance to the rural economy. Without the adequate supply of superfast broadband facilities, the rural economy is stifled. More and more institutions, such as Defra, HMRC and many more, are requiring customers to send in returns and other information in electronic form. If one does not have broadband—many people do not—one is expected to use an agent at significant extra cost for rural businesses. They simply cannot afford it. While I praise the Government’s effort and commitment to improving rural broadband coverage, and I welcome strongly the funds they have put aside for councils, four years since the announcement of BDUK, people who live in areas with little or unreliable broadband and mobile phone signals have yet to see the situation improving. A vastly improved broadband and mobile telephone rollout to all rural areas is key to the future growth and well-being of the rural economy. Will my noble friend confirm the current position of the rollout of broadband and 4G to the rural areas most affected? What is his estimate of when this essential service will be available at a competitive rate?

I have managed only to scratch the surface of the rural economy, and I have endeavoured to paint a broad picture. I welcome the opportunity to discuss these issues as they are all very serious. I shall listen with great interest to the debate, and I look forward to my noble friend’s responses. I beg to move.

My Lords, I have the pleasure of congratulating, thanking and supporting my noble friend Lord Shrewsbury. He opened a debate of great importance to all of us about investment in rural areas. Much was said earlier about the speech made by my noble friend, Lord Bamford. Many of us will never forget his maiden speech. He started, “I am an engineer”, and went on to describe how he makes things. I am a farmer, and I grow things. The pioneering spirit of the manufacturer and the farmer are why today we can claim agriculture as a huge success.

Living in the countryside is not always the idyllic life often shown in pictures or stories. Even the most sophisticated methods of husbandry cannot remove the risk of seasonal changes, as we witnessed this year. The demand for land in rural areas increases as the population expands—and they are not making any more. Land becomes scarce and expensive. We need it to grow more food for a growing population. The scale of the challenge is enormous. More needs to be done to remove obstacles to increased production from less land, and to get greater access to new markets while protecting the environment and preserving village life. More needs to be done to understand the implications of volatility, get better value out of science and technology and drive domestic growth.

The Minister may agree that we need a policy framework to help the economy which is right for consumers and producers. The most recent reform of the CAP was unnecessarily complicated. I have been involved in reforms of the common agricultural policy since 1973, and I can honestly say that it is more complicated than before. We need subsidiarity and to retain the emphasis on protecting the environment and the countryside as a whole. Of course, we need less red tape. The Minister may like to tell me whether the reduction of red tape since the report came out has changed very much. We need greater freedom to increase production. Declaring policy is one thing; the implementation of that policy is another. It still seems that the image of rural occupation is less important than industrial employment.

Land occupation is changing as farm size increases, and it is increasing rapidly. There are 3.7 million people involved in agriculture and food. The food industry cannot exist without the farming industry. Our colleges and universities are full of young people, enthusiasts and entrepreneurs who want to get into the countryside. They want to work and to produce. Many organisations are helping, not least the Prince’s Trust. I am often asked how in this changing world I would define the small farmer. I always answer, “It’s a chap about five feet tall”. It is the size of the business and the size of the production area that matter, not the size of the farmer. Often people say, “I haven’t heard ‘The Archers’ lately”, or perhaps, “We like ‘Countryfile’ on a Sunday evening sharing with us the wonderful views of our hills and valleys, and Adam and Matt are such charmers”. So how can we educate more urban dwellers to understand rural development and country living? It is insulting to say that farmers have created a degraded, horrible landscape. The countryside is obviously a diverse place, and it is neither wild nor natural. To keep a healthy industry, we need the birds, the bees and the butterflies, the hedgerows, the tracks, the fields and the crops in a land which is often described as “Farmageddon”. They are all there under the good management of today’s generation, which is the one thing that embraces the conservation challenge encouraged by Natural England’s scheme. Agriculture can make a much larger contribution to the economy given the investment it contributes.

There are three things I wish to mention briefly: education, the Arthur Rank Centre and rural crime. Many noble Lords have mentioned the importance of skills, which is second to none. Education starts with schools. There is an organisation called FACE—Farming & Countryside Education, which helps in schools. It is not very big. The organisation visited 362 schools last year, representing more than 18,000 pupils and worked with a further 12,000 pupils in 137 schools.

The Rank centre combines a lot of the organisations that support farmers in one form or another. It was started by that great entrepreneur himself. The centre pulls together many bodies and organisations by identifying the needs of local communities. It is a progressive organisation which recognises the many risks of living and working in the countryside. Its leader often reminds us, talking of risks, that Jesus never said, “Blessed are the cautious”.

Rural crime has already been covered by the noble Earl but I hope the Minister can agree that we need an adequate police protection system in rural areas. In many areas lengths of cable have gone off the electric poles, taken overnight. It is quite unbelievable. As the noble Earl so rightly said, £42 million was the cost of that crime last year. Rural theft is an issue of great concern to us and 38% of farmers have been the victims of crime, including arson, criminal damage, poaching and illegal fly-grazing. The insurance company NFU Mutual conducts an annual survey of rural crime. As the insurer covers around 70% of the rural market it provides a useful snapshot of rural crime patterns. Rural theft and its cost is of great significance in country areas. The link between rural crime and serious organised crime should not be underestimated.

My Lords, I thank my noble friend Lord Shrewsbury for providing the opportunity to debate this extremely important topic. It will be difficult to cover everything I would like to say in my allotted time. There is much to celebrate and many projects in the pipeline, but there are also some worrying trends.

Turning first to the positive, the counties of Devon and Somerset have been successful in securing government investment for the rollout of superfast broadband. This is a long-term project running until 2017 and also covers the unitary authorities of Bath and North East Somerset and North Somerset. Connectivity is vital if we are to attract new businesses and ensure that those already located in rural areas remain competitive. Even when this project is completed, it is likely that some deep rural areas will still not be connected, with large areas where more than 2 megabytes per second will be unachievable. Somerset County Council has this week committed a further £2 million, on top of the £10 million already invested, to this project to ensure it is successful. It is to be congratulated on this.

Another major investment project bringing jobs to rural Somerset is the proposed new nuclear reactor at Hinkley Point. Based on a travel-to-work time of 90 minutes, this will bring huge opportunities for employment over a large area, but the FE providers must invest in the skills that will be needed to meet this demand.

A significant plank of the rural economy is tourism. This is especially true in South Somerset. We have many historic and beautiful villages but recent publicity has dented our image and is deterring visitors. I refer, of course, to the terrible flooding during the winter. This occurred at the very time when people plan and book their holidays and the media images suggesting that Somerset was “closed for business” did not help. While many flood-affected businesses are now thankfully recovering, there is evidence that bookings and visitors are down in Somerset compared to last year, which was also a bad year for floods. Many small businesses are linked to the tourism supply chain. I fear a similar effect on the rural economy to that suffered during the foot and mouth outbreak in 2001, when the countryside was shut down for months on end and many in the farming community, as well as businesses, went under and did not recover.

As has already been said, rural communities are suffering the loss of services and facilities. People have lost the habit of supporting local businesses. This is partly related to prices and the desire to use cheaper supermarkets, but also to shopping online. The phrase “Knowing the cost of everything and the value of nothing” springs to mind. The past 10 years have seen large numbers of village shops, small garages and filling stations, post offices and rural services generally, become unviable and close. My own council finds it difficult to resist a change of use on premises in rural areas when it knows that domestic dwellings have far more monetary value than redundant shops and pubs. Once a local facility is lost there is little chance of reversing the process. The loss of these facilities causes a real sense of isolation for the elderly who would have used these outlets to keep up with the latest gossip. It would also have been a means for ensuring that those who were frail and needed assistance were known about and looked out for.

Lastly I would like to comment on the plight of young people and young families in rural areas. The lack of affordable housing in rural areas means many young people can no longer live and work in their local communities. South Somerset has a low-wage economy but house prices are relatively high. In one market town the average wage is around £17,000 but the average house price is around £170,000. Many noble Lords will think that this is cheap, especially if they live in London, However, there is a huge affordability gap and many young people will just never get on the housing ladder. Wages in remoter rural areas will be even lower, while house prices have been pushed sky-high because our villages have often become the target of second-home owners, who visit on the odd weekend.

Current youth unemployment statistics indicate that 2.46 million young people in England and Wales are out of work or trapped in underemployment. This is 40% of the youth population, compared to 28% of adults aged 25 to 64. Many of these will be in urban areas, but rural communities also have problems with finding jobs for their young people. There is a lack of apprenticeships to meet their needs. Young people often suffer a double whammy. While those in rural areas are transported to and from school by bus during their education, as soon as they need transport to begin their road to independence, there is nothing for them. If their village has a bus, it will only be during the working week and perhaps just one or two a day. There will be nothing in the evenings when they wish to hang out with their friends, or go to the cinema in the nearest town, which might be some 15 miles away.

It is not just the young who suffer from the lack of transport. This also affects the elderly. A trip to the doctor’s surgery, the library or just into town for a cup of coffee and a change of scenery becomes a major expedition which may require a costly taxi trip. Having recently broken my leg and having had recourse to taxis both at home and here in London, I can bear witness to just how much more expensive a taxi journey is in the countryside compared with London; it can be as much as one-third more.

There are many other areas that I could cover, including the loss of employment land, the reluctance of some communities to welcome housing development, the viability of our market towns and the skills agenda, but I am sure that others will cover these areas during the debate. Sadly, there is no magic wand to be waved here, but I look forward to the Minister’s comments at the end of this interesting debate.

My Lords, I thank my noble friend for securing this debate and congratulate him on its introduction.

I need to declare my interest rather comprehensively today, since much of what I want to say relates to what I do and have done for these past 40 years and more. I have a beneficial interest in a landed estate based mainly in south Lakeland. The estate’s activities include farming, forestry, leisure, minerals and housebuilding. We own and run a racecourse and have a full-time payroll of 250 people, 150 of whom are engaged in extracting, processing and selling slate, more than half of which is exported.

I have intervened on various occasions in debates on this subject. Almost two years ago to the day, there was a debate introduced by my noble friend Lord Jenkin, with his usual authority and command. I joined others on that day in highlighting the role of SMEs and their potential to lead us out of those dark days of recession. Some harsh truths were explored that dealt with the obstacles that lay in the way of recovery. Today, while everyone can agree that a huge amount remains to be done, it is fair to say that the performance of the British economy is not just better; it is better by magnitudes more than any of us had reason to expect on that July morning two years ago. Credit must go to enterprises large and small in rural areas for the significant part that they have played in turning the economy around.

However, since in the past I have been critical of things done or not done by this coalition Government, I feel entitled to offer them sincere congratulations on their contribution to the national recovery that we are witnessing today, and for what they continue to do. Only recently we saw the introduction of the small business Bill, which represents a serious effort to relieve the burden of regulation on small enterprises and provide better access to public procurement opportunities. Two days ago saw the Second Reading of the Consumer Rights Bill, which goes further than the title suggests and, I believe, will be good for business and growth. The Government have helped, and they seem on track to do more for small business and the rural economy. It is in that spirit that I draw attention to those things that still need to be resolved. Some of them, I am bound to say, are defects in our national approach to business and are largely outside the responsibility of government.

There remain some seemingly intractable long-standing problems. Others are probably better qualified to speak about this, but every survey suggests that there is still a long way to go in providing better broadband coverage in the countryside, and there is compelling evidence that this is harming rural enterprise. Some 80% of adults polled last summer said that nothing would have a greater impact on their enterprises than improved broadband provision.

The same could be said about mobile coverage. Visitors that I have spoken to from Africa, India, Australia and America find it beyond belief that they cannot use a mobile telephone when they are in Cumbria, a place that, after all, seeks to attract tourism. I hope that the Minister will respond to those anxieties. When he does, will he tell the House whether he feels that there is enough competition in the provision of these services?

I hope that the Minister will also tell us whether there are discussions with planning authorities—a matter brought up by the noble Earl in his opening remarks—given that planning delays are an obstacle to economic growth in rural areas. It is clear to me that these barriers to rural growth go beyond the well understood and largely quantifiable harm that they inflict. What none of us can say for certain is what effect these barriers have on people who are thinking of investing and are deterred by these structural weaknesses.

I shall touch on some other problems that need to be resolved and fall mostly, but not entirely, outside the scope of the Westminster Government; they are cultural in character. For all my time living and working in Cumbria, both as an individual and as a local councillor, virtually every visitor attraction and every business offering hospitality was underinvested. At intervals you could maybe attribute this to the fiscal climate, but even when credit was plentiful and the national economy was expanding there persisted a culture of low expectations. With any business, but especially with the visitor service and hospitality industries, it has always been self-evident, I would have thought, that even small and regular improvements pay rich dividends. It is gratifying to see at last this is being recognised, albeit slowly.

However, I believe that, as has been mentioned, there is a link between the tax regime, both direct and indirect, and the willingness and ability of small businesses to invest and reinvest. Indeed, the tax regime deserves more study as it applies to the rural economy. As a matter of equity, it may be worth pointing out that under the current local government financial settlement, rural residents will pay council tax that is on average £88.36 higher per capita than will urban residents, but the urban residents will receive £169 more in government funding. I wonder whether the Government might reflect in the next round whether it is fair for the settlement to be driven purely by population density, when you consider the additional costs of essential services that arise as a consequence of rural remoteness.

Low personal taxation is also a great spur to partnership and collaborative endeavour. I well remember that in the punitive days of high taxation it was impossible to work with other partners, as we were all striving to get different outcomes from our business. It is an excellent feature of the new age that we can all work together. My local village, called Cartmel, where we stage our national hunt racing, is also home to the village’s famous sticky toffee pudding, a world-class Michelin starred restaurant, a cheese maker, a meringue maker and a microbrewery. At the heart of all this is the glorious Cartmel Priory, whose vicar is also chaplain to the racecourse. Most of us, including the church, have subscribed to what is called a pop-up village, a collapsible edifice that goes on tour showcasing our various enterprises. I wonder if it is a coincidence that—rather bizarrely, I admit—the New York Times listed Cartmel as one of the 52 must-see destinations of the world. I make the serious point that local partnerships spawned through a communality of interests promote prosperity, and there is much pleasure to be had from taking part in them.

Many of the solutions for a healthy rural economy should remain in the hands of us, the local people. However, there is no escaping the truth that leadership in the countryside is at a premium. Whether it is attracting people to run the local institutions that we enjoy and benefit from, or whether it is drawing people into local government, it gets harder and harder. What is the reason for this? Well, why should they participate? Successive Westminster Governments have reduced local government to a shadow of what it used to be. They bully and harass what is left and send in power-crazed, unelected and unaccountable quangocrats to boss us about and, on a bad day, wreak havoc with our environment. If there is to be sustainable rural prosperity, local autonomy must be established; that would probably take a generation but it would be worth starting.

I also think that Whitehall and the Government should be a little more careful who they listen to. There is a breed of mostly men whom the BBC would describe as business leaders. More recently, these people are describing themselves rather condescendingly as “we business leaders”. They make statements on behalf of business that are certainly unrepresentative of many of my local SME friends and colleagues. There are people speaking on behalf of the CBI who have never made anything, done anything or taken a risk. Many large companies are not just indifferent to smaller ones; they are hostile to them and ruthless in their dealings with them.

I see that my time is up. I am not blind to the risks that lie ahead but I cannot remember a time when I felt so optimistic or exhilarated by my local economy; there is a buzz about the place. I see a bright future for farming. The Minister has dealt with the problems of the CAP, and he does not need telling that farming is a long-term business.

Lastly, Cumbria has the great good fortune to be attracting very significant investment in the near future. Many billions of pounds are coming its way. In short order, solutions must be found to cater for increased demand in all sorts of areas. It occurs to me that there is no precedent for such a combination of events on this scale. I ask my noble friend if it would be worth considering the possibility of inviting these major players to join forces in bringing about some front-end infrastructure investment in their own self-interest. If so, could the Government have a role in brokering such an arrangement?

My Lords, I very much welcome the opportunity to debate this important issue. I am very grateful to the noble Earl, Lord Shrewsbury, for stimulating this debate. I need also to declare a number of interests. I farm in Northumberland; I am a trustee of Clinton Devon Estates in Devon; I am chair of the Waitrose farm on Leckford Estate; and I am a member of the NFU and the CLA, along with other various interests.

I will not try to duplicate the comments already made by noble Lords, which I fully endorse. I particularly endorse the comments made by the noble Lord, Lord Plumb, on the importance of education and the role of FACE—Farming & Countryside Education—and how important it is to ensure that young people have a good understanding of farming, food and the countryside.

I want to comment on three specific issues regarding the rural economy. First, it is difficult to define. The rural economy does not have a ring-fenced border: it merges into urban and city economies. For rural businesses and enterprises to succeed there needs to be a recognition that rural, urban and city are interdependent. Too often in the past—and it is still a serious risk today—government policy, and therefore government spending, has been focused on cities and urban areas without appreciating that an inclusive policy that embraced the hinterland would be more effective.

City deals are a current vehicle for stimulating economic growth and I understand why. However, there are very few parts of England that are more than 15 miles from a city in this densely populated country of ours—although that is not quite so true of Scotland and Wales. Rural areas have suffered in the past through urban-centric policies. The rural development agencies, with few exceptions, struggle to embrace the rural economy. Having been established initially to deliver urban regeneration, they remain committed to that cause. I worked closely with them on the sustainable farming and food strategy during the 2000s.

The local enterprise partnerships are now crucial to this issue. They, too, in the main, are primarily focused on urban and city areas, so we need, with the help of Defra and the Minister, to ensure that they firmly embrace rural issues and the rural economy within their remit. With their expanded role to help and administer rural development funding they need knowledge on their boards of the rural areas they cover. They need appropriate consultation mechanisms to ensure that they are spending funds wisely. The LEPs need to develop strategic plans that see the integration of rural and urban within a single plan, as I said at the beginning. To present the option to businesses looking to locate into an area with either a rural or an urban location would be a step forward.

The rural areas of Britain have so much to offer in terms of quality of life, the working environment, parking and so on. I ask that the Minister satisfies himself that the LEPs have strategic plans that they implement and that recognise the importance of rural areas.

My second point is one that has already been made and will be repeated, I am sure, a number of times this afternoon—that is, the importance of agriculture within the rural economy. I continue to hear lots of comment about: the relative value of energy generation and how that could dwarf the value of agricultural output; the importance of tourism and how that could put farming into the shade; and that diversification away from agriculture and other business activities contributes far more to the rural economy than agriculture does. All these things could be true; we definitely need a diverse rural economy. As the noble Earl, Lord Shrewsbury, said at the beginning, the more diverse the better. We need to create employment and wealth to sustain rural communities and maintain rural services. We need affordable rural housing, as has been mentioned already. We urgently need high-speed broadband in every hamlet.

I want to give an example of what is possible. In the farm from which I took my title, Kirkharle, which is where we started farming in 1971, I employed two young men. Latterly it was farmed by contract and no one was employed directly. Through the development of rural business help and a retail visitor centre, 13 businesses are now established on that holding, employing about 30 people; so it can be done. The legislative framework within which rural businesses operate is also important; the noble Lord, Lord Plumb, referred to that. I congratulate the Minister on departmental progress in that area. There is still much more to be done.

I stress that agriculture is the platform on which to build our diverse rural economy. Mention has been made already of the dreadful experience in 2001 of foot and mouth disease, when the whole rural economy was shut down. Farmers have buildings; they have housing plots, with planning permission; they live near to villages. They can be the engines for enterprise and innovation through diversification as well as contributing to the nation’s food security through efficient food production.

My final point is to stress the importance of the work my noble friend Lord Cameron is engaged in in seeking to rural-proof government policies. We need to go further than has been the case to date, to ensure that impact assessments undertaken for new legislation include not just the impact on business, as they do now, but specifically the impact on rural business. That is very important.

I have already apologised to the noble Earl, Lord Shrewsbury, for the fact that I need to leave to go to a long-standing engagement. I apologise that I will not be able to hear the rest of the debate, but I will read Hansard with keen interest.

My Lords, I, too, am grateful to my noble friend Lord Shrewsbury for introducing this debate. It is an important topic for us to be covering at present.

I am particularly grateful to be following the noble Lord, Lord Curry, for two reasons. First, he started with a point that I wanted to raise; that is, how difficult it is to define the rural economy. I have different figures regarding the benefit of the rural economy and there is a difference between those figures of well over 50%—so it depends what basis the figures are on. One must of course remember that the rural areas cover not just those lovely little green fields outside towns in Sussex and south-east London where people could be walking today, but the wild moors of Scotland, which in six months’ time will doubtless be under four or five feet of snow. People have to live, work and earn their living in both those circumstances, with whatever variety of weather nature throws at us.

The noble Lord, Lord Curry, also mentioned Kirkharle. I mentioned Kirkharle in the tourism debate in your Lordships’ House on 12 June. I am glad to see my noble friend Lord Gardiner of Kimble on the Front Bench. He answered that debate; he knows the points that I raised, so I will not go through them again. No doubt he will bring them to the attention of my noble friend the Minister who is going to reply.

The noble Lord, Lord Curry, mentioned what happened at Kirkharle and I want once again to mention what has happened at the Castle of Mey, of which I am a trustee. That now employs 50 people during the summer months, six on a full-time basis. That is what is keeping the rural economy in these remote rural areas going.

The question of broadband has been raised, so there is no need to reiterate that. My noble friend Lady Bakewell mentioned the date of 2017, but that covers only 95% of the UK. The remaining 5% will be in rural areas and they are going to be hugely discriminated against unless further action is taken. I ask my noble friend the Minister when the Government’s response is expected to the Law Commission review on the Electronic Communications Code. This will be an important step forward, because the present position is unclear and inaccessible.

I will move now to an old pet subject of mine—that is, housing. I used to be a land agent and was also consultant to an estate agency, so housing has been in my life since I became qualified many years ago. There is a balance to be struck between new housing and agricultural land, as my noble friend Lord Plumb said. Indeed, we discussed this many times in the agriculture committee of your Lordships’ House. But, undoubtedly, agricultural land will have to be surrendered, and quickly. The present situation with regard to affordable homes in the countryside is getting much more difficult. I remember how difficult it was to resolve when I was a Housing Minister more than 25 years ago, and it is much more acute now. It is a very difficult problem to resolve but when one flies over our green and pleasant land, as I do on a fairly regular basis, one sees many areas that could be developed reasonably, without causing long-term damage to the countryside or affecting necessary agricultural production.

My noble friend Lord Shrewsbury mentioned house prices. If we get more development in rural areas, there must be a greater chance of keeping open the post offices, shops and pubs which are closing at present. My noble friend Lord Shrewsbury also mentioned country sports. These are immensely important, particularly in the more remote rural areas. In Scotland, they are a vital part of how the countryside and local villages operate. Surveys carried out in the rest of the UK and in Scotland show how much country sports are welcomed because they bring in extra tourism and extra finance and people who spend money. That is what is crucial. It is very nice to have our pretty rural areas but, unless people are active there and tourists and visitors bring in money, those pretty little areas will remain just that and will not be places in which people can earn their living.

I conclude by referring to the importance of investment. There are two types of investment: government investment and the more important private investment. The key to encouraging private investment is stability, whichever Government are in power in this country. Unless one has a consistent policy, people will not invest in the countryside in the way that they should. Therefore, stability is hugely important. There are enough problems given the whole question of the economy and the incidence of diseases that are unique to the countryside as opposed to urban areas.

I urge the Scottish Government to be very careful how they tread with regard to country sports, the countryside and its ownership because a delicate balance has to be struck. When it works well, it is very good and beneficial for all and for the economy as a whole. However, if one tinkers with it and tries to amend it, it will very easily collapse like a pack of cards.

My Lords, I, too, am grateful to the noble Earl, Lord Shrewsbury, for giving us this opportunity to debate this matter. We all approach this important subject from different angles. I want to emphasise one that is economic and the other that is personal in the sense of our own personal investment and commitment. I serve a diocese which is largely rural although it has large centres of population such as Oxford, Reading, Milton Keynes and Slough. However, the rural expanses of Oxfordshire, Buckinghamshire and Berkshire are considerable, with 815 churches and 650 clergy, all of whom are strongly connected to the all-round flourishing of our diverse communities.

The economic vulnerability of many rural areas is well known and has already been rehearsed this afternoon in different ways. I simply wish to highlight one particular element of that vulnerability, which is the plight of micro-businesses, which I come across a lot. Businesses with fewer than 10 employees make up half the employment in rural areas, yet it is these businesses that find it most difficult to access the appropriate advice, training and relatively small-scale grants and funding which they need to develop and expand. It appears that there is limited practical help for micro-businesses and business start-ups, with advisers tending to be professionals rather than entrepreneurs, which means that their advice is not always appropriate. However, the Centre for Entrepreneurs says that micro-businesses have been the largest contributors to new jobs in the United Kingdom over the past five years.

It is very good that the rural growth network programme has operated pilots in five areas to reduce barriers to economic growth in the countryside such as shortage of work premises, the slow internet connections we have talked about and business communities being spread out over wide areas. The churches’ contribution in this connection is through the Germinate! programme at the Arthur Rank Centre, which seeks to encourage micro-businesses. This is a highly practical six-session rural business start-up course, the pilots of which were very well received. It will be rolled out into a national programme to be delivered locally through community groups and churches. This programme is being delivered and developed alongside something with the rather evocative title of beer mat mentoring. This initiative has been established for some years and comprises monthly meetings in pubs of new entrepreneurs and old hands who offer practical mentoring accompanied by liquid refreshment—orange juice, I assume.

I said that I wanted to emphasise two angles—one economic and the other personal. By personal, I mean the investment that comes from people of good will investing their time and talent in the future of the countryside and the communities in which they live. That is where our churches and schools come into their own. So often the church and the school are the focus of community life, particularly when, as we have said, the village shop and pub have vanished. The school is often the hub of the community and needs our investment of time and talent. Sixty per cent of village schools are church schools and in the new educational landscape that we have not all of them are safe. However, they can group together in voluntary clusters or multiacademy trusts, and in that way they can gain the advantages of economies of scale and so on. For all sorts of reasons, we need to protect these schools. I very much hope that the Department for Education will not resort to a philosophy of “the weakest to the wall” with these small schools because small rural schools are so often worth their weight in gold, as the heart and hub of our rural communities. The Church of England will publish a report very soon on how to support our rural schools effectively.

A practical appeal that I often make is for capable people to volunteer to be school governors. Such people are key to ensuring success in this uncertain environment. I think that the Church of England already has 22,000 foundation governors in its schools but obviously community schools need high-quality governors just as much.

Our rural areas need both kinds of intentional support: economic—I have just highlighted micro-businesses—and personal—people who will make that personal investment in schools and communities. There is much more to be done.

My Lords, as we move towards the 2015 general election, clear policy direction is emerging from each party regarding their manifestos. The Chancellor, for example, fired an opening shot last week in Manchester proposing the building of HS3 and the development of a northern city linking Manchester and Leeds to rival the unstoppable growth of London. This suggests that the next election seems to be urban-blinkered and will focus on the growth of cities, where more than 50% of our population already live.

What, however, does this mean for the rural economy? Where does it feature as a national priority? Should the rural economy be taken more seriously if we are to avoid creating a two-speed economy? Nationally, this sector contributes £211 billion every year—nearly 20% of national wealth creation. There are more than half a million rural businesses and 3 million employees. Although rural areas have 20% of the national population, they have 30% of the total number of businesses, and that is growing. There is clear evidence, supported by the Commission for Rural Communities, that this sector could be worth an extra £347 billion if policy encouraged rural business growth.

Where I live, in the south-west of England—no finer place—the rural areas are home to more than 50% of the population and its success is vital to our future. It has quietly battled through the recession and not only sustained its position but continued to add jobs and produce wealth. Without clear support and direct qualities, however, this growth will not continue and a huge opportunity will be lost. What could also be achieved from a concerted campaign is new hope for those who live with the day-to-day problems of poverty.

An alarming new survey has revealed that one-third of households—750,000 homes across the south-west—are so deprived that they are going without three or more of the basic necessities of life. Many of these things we should take for granted, such as eating a balanced diet, heating or maintaining our homes, taking part in leisure activities, and even the ability to celebrate our birthday. All are, however included in this devastating report. What is also clear is how these problems are masked in the rural economy where declining village services, lack of access to public transport and, crucially, access to work opportunities represent a growing problem for support services and the welfare system. Should we be surprised that food and clothes banks have become an accepted normality in 21st-century Britain?

So what is holding back growth and what should be done? Again the evidence is clear. The barriers include affordable housing, transport infrastructure, communications infrastructure, access to finance and investment in the agritechnology sector. All of these have been mentioned to some extent this afternoon, but they are particularly important.

By looking at a number of examples, the reasons why growth is being stifled are clear. First—and again this has been stressed so clearly—there is the issue of affordable housing: the latest figures show a shocking state of affairs. Housebuilding has stalled so much in the south-west that the homes shortfall has grown by 36,000 properties since the last election. Around 60,000 homes have been built across our six counties in four years, but we need 96,000 to meet estimated annual demand. In Devon, Somerset and Cornwall, the housing crisis is arguably the worst outside London with house prices in places more than 10 times local wages. This means that just 6% of homes are within reach of a typical working family on an average income. In some areas this reduces to 1%. This has a disproportionate impact in rural areas and is forcing too many younger people to abandon rural life and often the south-west altogether. Government and planners must both shoulder the blame for this crisis.

Secondly—and I make no apology for mentioning this once again—there is rural broadband, arguably the single most pressing issue for the rural economy. Who would start a business today without superfast broadband? Despite numerous initiatives and some recent new investment in rollout programmes in the south-west, there is a damning Public Accounts Committee report on rural broadband delivery. Even after the investment is completed, more than 50% of the rural population will have to accept broadband at less than a tenth of the speed of urban areas, as my noble friend Lady Bakewell has already mentioned

Thirdly, I come to agritechnology: George Eustice, the Agriculture Minister, is the first to admit that we have spectacularly failed to invest in agricultural technology and science. Product development has stalled and many rural environmental schemes are creating unintended consequences in terms of pest controls. The sad story of bovine TB and clear evidence of growing tick-related infections are part of this evidence base. We need to set new horizons for a 21st-century farming industry with leading-edge products and land management together with the necessary skills to sustain delivery.

I am very grateful to my noble friend for introducing this debate. For as concrete steals across the western world, rural affairs take an increasingly second place. That is wrong and very stupid. Let it be clearly understood: the rural economy is a unique asset for this country. We are squandering it and thereby wasting a huge potential for the future. As much as I dislike them, the establishment of a royal commission on the state of the rural economy would be a minimum action if we are to avoid becoming even more urbanised.

My Lords, I add my thanks to the noble Earl, Lord Shrewsbury, for initiating this debate. I suggest that the rural economy is not just important but crucial to the well-being of the nation. A vibrant rural economy sustains our countryside, which in turn nourishes us spiritually—as an outdoorsman, a mountaineer and naturalist I value that hugely—and nourishes us literally. It is food, livestock production in particular, that I want to concentrate on today. After all, the production value of the livestock industry in the UK in 2013 was more than £12 billion.

We take food too much for granted. That is hardly surprising when one walks into a supermarket and sees the shelves groaning under the weight of food. But it was not, of course, always thus. Like many in this Chamber, I grew up, for the first few years of my life, with food rationing. Yet by the 1990s, the political view was that feeding the nation was not an issue. We lived in a settled world with global free trade and in a wealthy country, so we could buy whatever we wanted. If Polish milk could be bought cheaper than British milk, so be it. That was a complacent view then and is certainly a complacent view now. Thankfully, there has been a welcome political change and it was perhaps Hilary Benn who first signalled this at the Oxford Farming Conference in 2009, when he said:

“I want British agriculture to produce as much food as possible. No ifs. No buts”.

The current Secretary of State has said similar things.

What has happened to cause this change? Globally, we realise that this is not quite such a settled and peaceful world. Currently, when we think of Ukraine and Russia, we think of gas, but we should also think of wheat. If Ukraine implodes and Russia restricts wheat exports, as indeed it did in 2010, we will still be able to get wheat but the price will rise considerably. Political unrest means shortages, price increases and the potential for food to be used as a weapon.

Globally, more land is being used to produce biofuels. In fact, more than half the sugar cane in Brazil is now grown to produce ethanol. Climate change affects our global ability to produce food and rightly causes us to question the carbon costs of international freight. On top of all these factors looms the sword of Damocles of population growth—set to reach more than 9 billion by 2050. That is compounded by the rapid and dramatic change in the dietary habits of the fastest-growing populations, namely those in Asia. In 2000, the World Bank estimated that world demand for meat would rise by 85% by 2030.

All these factors amount to increasing competition for food resources, so food security has become an important issue. It is not the same as self-sufficiency, but a reasonable degree of self-sufficiency provides political and economic security, control over our animal welfare standards and a measure of biosecurity in that the less we import the less likely it is that we will import something undesirable. However, what has happened in the UK in the past two decades is that self-sufficiency—meaning food products that we can produce here—has declined from approximately 87% in 1995 to around 76% now. I suggest that this is dropping to an undesirable level. With increasing competition for land use in the UK, we need to maximise our food production at the same time as minimising pollution and greenhouse gas emissions. That in turn requires investment in farming technology and livestock health. The recent government agri-tech strategy is a welcome initiative but the first-round bids amounted to more than six times the funding on offer.

Investment in livestock health can not only increase productivity but also markedly reduce greenhouse gas emissions. For example, one particular condition of dairy cows causes up to a 24% increase in greenhouse gas emissions per unit of milk produced. The greenhouse gas emissions produced by lambs growing to market weight can be reduced by 10% if gastroenteric worms are properly controlled. As well as primary research, we need translational research to deliver to farmers the benefits of more basic research.

Finally, as others have said, these measures need to be supported by investment in rural communications, both digital and physical. Coupled with this, we need to ensure investment in the rural provision of veterinary services and surveillance. Rural veterinary practices face a challenging economic environment. They are significant rural SMEs and deliver vital healthcare to improve livestock productivity, ensure animal welfare and provide front-line surveillance for highly infectious and perhaps exotic disease. The government veterinary surveillance system is currently undergoing major restructuring and serious concerns about this have been raised with respect to animal and public health by the Royal College of Pathologists among others. It is essential that any changes ensure that we maintain and strengthen our disease surveillance capacity.

I remain optimistic, however. We have a resilient farming community and a dynamic and entrepreneurial veterinary profession. However, the ability to continue to contribute substantially to the provision of nutritious and affordable—that is an important word—food to the nation will crucially depend on a recognition of the importance of this national industry with concomitant private and public investment and, I suggest, some co-ordinated, long-term and strategic planning of land use.

My Lords, I join other noble Lords in thanking my noble friend for instigating this important debate on this subject, which, if anything, we should have the opportunity to debate more frequently.

I realise that there is no intention, but sometimes those in the countryside feel let down by the urban majority. If we had had this debate 20 or 30 years ago, it would have concentrated largely on forestry and agriculture. Now, for example, where I live in a rural area of Gloucestershire, we have tourism, manufacturing, IT service industries, mineral extraction and even, in one of our old air bases, the breaking up and recycling of old airliners. This raises the question of whether the rural economy is any different from more urban or traditional manufacturing industrial areas. I would argue that, apart from the environmental capital and the stewardship of agricultural land by the farming community, there is very little difference.

Much has been covered by other noble Lords, so I will try not to repeat too much of what has already been said. We have spoken at some length about broadband. In the past, when we have debates on the economy or the rural economy, I always have asked local businesses what is at the top of their shopping list of what they require for a correct environment in which to make money. In the past 10 years, they have found borrowing difficult or unavailable. Finance has been the big problem. This has prevented investment in SMEs, the backbone of our economy. My right honourable friend the Chancellor’s economic plan is helping these SMEs to thrive. However, the difficulties with access to broadband cannot be underestimated. This morning, I read about a business in Somerset that sells cut flowers and uploads its photos on to the internet. The lady in question was up at 5 am today because it was the only time when she could upload these pictures. I know that supplying faster broadband is a priority for the Government, but where the infrastructure is outdated it will be some years before we gain from faster broadband. This is the key to many of the problems in rural areas. I do not think that there are any plans to renew our local telephone exchange, but I gather that that is one of the reasons why we have very poor broadband at home.

Also mentioned has been the factor of mobile phone coverage. Businesses operating anywhere these days must have mobile phone coverage. Why on earth can I get perfect mobile phone reception at the top of an Alp in Switzerland but if I am on the road between Cirencester and Lechlade, there is no coverage whatever?

The other important thing is logistics, and I have been looking at the transport situation. Where I live we are served well by two motorways and a pretty good train service but, in addition, there is a trans-European road network that stretches from the south of Spain to Ross-on-Wye. Apparently, there is only one two-mile stretch on the whole of that journey that does not have a dual carriageway, between a place called Nettleton Bottom and Birdlip. Here there are daily delays in traffic and, sadly, crashes and fatalities on many occasions. Can my noble friend the Minister update me on any plans for the building and construction of what is known locally as the “missing link”?

Another aspect that has been touched on is tourism and how important it is. It came to my attention earlier today that a family of wild beavers can now be found in Devon. I gather there are plans to move those beavers to an animal park. Surely it would be better to leave them to be examined and used for research in the wild, and to aid tourism in future.

I will finish now, but I look forward to hearing the responses of my noble friend the Minister.

My Lords, I must first declare an interest as a farmer and a landowner. I must also congratulate the noble Earl on introducing this debate to the House.

Why is the rural economy important for the UK? Well, it is worth £348 billion. As was said by the noble Earl, Lord Caithness, there are various figures, but that is the highest I have seen. It is a huge amount. The countryside also hosts more than half a million businesses. There are actually more manufacturing businesses in the countryside than there are in the towns, so perhaps we should have combined the two debates we had in the Chamber this afternoon. Rural tourism adds £29 billion to the economy, and food and farming contribute approximately £84.7 billion. Our rural economy is vital for UK Inc, and it also provides the wherewithal to maintain and manage our most cherished national asset, our countryside, as mentioned a moment ago by the noble Lord, Lord Trees. England—not Britain—is, I believe, the fifth most densely populated country in the world, yet it still has some amazing countryside, which continues to be a vital factor in the health and well-being of our nation.

What are the Government doing about cherishing this incredibly important asset, our rural economy? Actually, they are doing quite a lot, to give credit where credit is due. For instance, the RDPE provides £60 million-worth of grants for micro and SME rural businesses. There is £20 million there for farmers and foresters, and another £20 million for skills and knowledge transfer. Skills and training used to be the major problem for rural businesses, which had difficulty accessing courses and facilities, but with the internet this is now getting better, or should be.

Talking of which, and to continue to praise the Government, the Government are putting £530 million into the rollout of high-speed broadband, which is another huge amount of money. Another £20 million is being put into rural community broadband. At this point I have to say that all the messages I have heard say that this rollout is going much more slowly than originally intended. As we have heard already this afternoon, it is causing a lot of problems. There definitely needs to be a big push to drive the actual implementation, but—bearing in mind that online shopping in the UK is greater per head of population than in any other country in the world—I believe that the rewards for doing so will be huge, if we can deliver.

Meanwhile, just to complete the picture, VisitEngland is investing £12 million in promoting rural tourism and Defra has allocated £10 million for local tourist initiatives. There are six pilot rural growth networks with funding of £15 million and a £2 million fund especially for women-led enterprises. Anyone in this House who, like me, has addressed the WIRE conference—where WIRE stands for women in the rural economy—will know that it is a pretty formidable force in our rural economy.

It would appear that the dead hand of the Treasury has been resuscitated as far as the rural economy is concerned. Even the planning system—often accused of being the real dead hand—is being loosened by a series of reforms, started under the Labour Government and continued under this Government, which should, in theory, make life easier for rural entrepreneurs, even if these reforms all too often run into the barrier of local resistance to change.

What is missing? On planning, one of the gaps is a lack of long-term vision of what makes a sustainable village, and how a good mix of young families, ample workspace and housing that is affordable for ordinary employees, or suitable for their retired parents, can be accommodated. The process for drawing up village and neighbourhood plans needs to be simplified and encouraged. However, central government must also share some of the blame for not rural-proofing all of its policies. For instance, the bedroom tax is disastrous for rural workers because there is virtually no small accommodation available in rural areas. The proposal to do away with the need for affordable homes on sites with fewer than 10 houses could be devastating for the rural workforce and the rural economy if it is implemented. Virtually all village sites have fewer than 10 houses and such an exemption could wreck the balance and likely future of a sustainable community.

Apart from good positive planning and ample affordable housing, my next ask would be for better transport, as has already been mentioned by several noble Lords. Transport is the life-blood of rural living. For the economy, we need better trunk roads to get our goods out to market and pull tourists in. I hope that the Infrastructure Bill, which I should probably be debating right this very minute in the Moses Room, will help in this respect, especially in the south-west. However, we also need better local public transport links for access to work. Big buses are hopeless, but more help for combined business and community transport would be beneficial.

There is also Wheels 2 Work. How does a young person, looking for their first job, find a job in the countryside? Unfortunately, they need their own transport to get to it. They cannot get their own transport because they have not got a job that pays the money to buy the transport. It is a Catch-22 situation. The only answer is to lend them a moped for six months. This is a brilliant scheme that costs less than jobseeker’s allowance and probably means that these kids will never be a burden on the state again. However, there is still reluctance by BIS and the DWP to save the state money by investing in these schemes.

Lastly, I make a plea for more interdepartmental rural-proofing. For instance, the Wheels 2 Work scheme, which I have just mentioned, is relevant to the Department for Transport, BIS and the DWP. They should all be thinking about it and gathering the evidence. Affordable housing is relevant to the DCLG, BIS and the DWP. Again, they need to work together to realise what needs to be done. Rural-proofing and rural understanding need to be embedded in the early stages of every department’s work.

Let us take, for instance, BIS, which is probably the most relevant department to today’s debate. The first thing to understand is that good evidence is vital to good rural-proofing. “Rural” should be a constant feature in government employment or manufacturing surveys and so on, so that rural economic needs can be assessed. Then, of course, they should respond to those needs. BIS’s agencies, UKTI, the TSB, LEPs and so on should all be asked annually to show how they have designed or will deliver new programmes and measures so that they are accessible to rural firms in all sectors. To have effective rural-proofing, you need constant vigilance.

As I think has been made very clear this afternoon, our rural economies are a crucial part of UK Inc. However, their specific problems need focus, care and attention. Only by giving that detailed attention will they be able to play their part in enriching our lives.

My Lords, I, too, am delighted to speak in this debate, and I am grateful to the noble Earl for enabling us to discuss and focus on these important issues.

Too often, when it comes to developing economic growth strategies, rural Britain is overlooked in favour of cities and conurbations, and I recognise that at times my own party has been guilty of that. However, harnessing the talents and skills of rural Britain is absolutely key to the future success of our nation. The noble Earl mentioned national parks and areas of outstanding natural beauty. I should be grateful if the Minister would agree to meet me to discuss a long-standing application from the Forest of Dean to become an area of outstanding natural beauty. We do not have a pop-up village but we do have cheese-makers, micro breweries, the excellent Three Choirs Vineyards and so much else.

As we have heard, people who work on the land make a huge contribution to the rural economy through farming and food production, and horticulture and forestry, protecting and conserving our environment for future generations and managing the impact of climate change. Yet many of those who work on the land, rather than own the land, work very long hours and are still too often poorly paid. I still lament the abolition of the agricultural workers board, which, based on the Government’s own impact assessment, will remove nearly a quarter of a billion pounds from the rural economy. As the noble Earl, Lord Arran, said, rural poverty is still a huge problem and, sadly, food banks are flourishing. Apparently 4,000 people in the Stroud district alone have had to resort to going to a food bank in the past year.

Many of the back-breaking and poorly paid jobs are now filled with people from eastern Europe and further east. It is not just in urban areas that we depend on immigrants to undertake those tasks which we no longer wish or choose to fulfil. However, the countryside today is about much more than farming and the growing tourist industry; it needs a sustainable third sector and successful businesses to thrive, as well as good public services. We need to invest in the infrastructure and businesses that drive rural economic growth, and we also need to invest in the people who live and work there.

In rural areas there is an ageing population and a high rate of youth migration. That presents a unique set of challenges and places pressures on local goods and services different from those experienced in urban areas. We want our young people to flourish, to have a good education which enables them to choose either a vocational or an academic path, and to have the skills and confidence to take advantage of opportunities in the wider world, but we also want to provide opportunities in rural areas for those who wish to stay or those who wish to return. To my shame, I do not know FACE, mentioned by the noble Lord, Lord Plumb, but I will seek to find out more about it.

We have much talent in our country and coastal towns, as well as in more rural areas. Young people should not have to leave because of a lack of jobs or because of housing costs. We have extraordinary people, including many volunteers, who are doing much to sustain and bolster our rural communities, but there is a role for an active state to support them, be it broadband or buses, affordable housing or accessible healthcare.

I am delighted that so many noble Lords focused on the crisis in affordable housing in rural areas. New homes are desperately needed and their construction drives local economic growth. On average, households need to earn £66,000 a year—more than three times the average rural salary—to be granted a mortgage to purchase a rural property. In Gloucestershire, for example, the average house price is 11 times the average wage and it would take a private rental tenant 15 years to save for a deposit in order to get a mortgage for a home. I am very proud of Two Rivers Housing in the Forest of Dean. It sustains a well maintained housing stock and builds eco-friendly homes, but many more are needed. Recently it received 360 applications for just 12 homes built in my neighbouring village of Littledean on a rural exceptions site. This is clear evidence that people desperately want to stay in their local communities.

The National Housing Federation is surely right when it says:

“Local people on modest incomes—who sustain our rural communities—are being priced out of the market, out of their communities and into towns and cities where there is cheaper housing and higher paid work”.

What are the Government doing to identify land in rural areas which can be used specifically for affordable homes? As the noble Lord, Lord Cameron, said, rural housing associations have been hit very hard by the bedroom tax. Lack of smaller homes means that even when people are willing and able to move they cannot be rehoused, so they are now in arrears and struggling with debt.

Beyond housing, the rural population—particularly young people—need to know that they will be able to find jobs which they can develop into a career. However, recent developments will not give them much confidence. Rural workers’ wages have risen slower than those in the rest of England, and rural families are already spending £2,700 more on everyday goods compared with those in urban areas.

Many noble Lords have rightly focused on the Government’s broadband rollout, which is so crucial to skill development. It is, however, delayed, and so much so that in Chew Valley in north-east Somerset—as the noble Baroness will know—they are having to turn to the independent supplier, Wansdyke Telecom, for broadband rather than BT. Infrastructure is critical to ensuring that all our regions prosper and deliver the growth and jobs necessary for our country’s success. Today my right honourable friend Ed Miliband has accepted the recommendation of a report by Sir John Armitt to establish an independent national infrastructure commission to identify the UK’s long-term infrastructure needs and hold government to account. I very much hope that the Minister will join my party in accepting this recommendation. We believe that these things are too important to be left to short-term political decisions taken in each Parliament.

As has been said, transport is a huge issue. Rural households annually pay nearly £1,000 more for transport than those in urban areas and this figure is rising. The noble Baroness spoke graphically about the problems and isolation caused by lack of transport. In Somer Valley, for instance, commuters face a 23% increase in their bus fares, with some tickets costing more than the hourly minimum wage. Yesterday I was with the Guide Dogs for the Blind Association which made me aware that the limited availability and continuing decline of bus services impacts particularly on blind and visually impaired people who are reliant on those services. The lack of audio-visual final destination and next stop announcements, particularly on buses in rural areas, is a barrier to independence and work. What are the Government doing to ensure that all new buses are fitted with this technology?

A healthy economy needs a healthy population and healthcare in rural areas faces specific challenges which are very different from those in the urban environment. Last year, the Environment, Food and Rural Affairs Select Committee reported that,

“rural authorities receive lower grant allocations, spend less on social care, charge more for home care and allocate lower personal budgets than those local authorities serving urban populations”.

In February, the BMA warned that nearly 100 GP practices could be forced to close and that large areas of rural England could be left with no GP practice because of national funding cuts. I was interested to learn of the launch of an initiative in Cumbria, headed by the University of Cumbria, to help improve health services in rural communities. The Cumbria Rural Health Forum will focus on how best to address challenges, including the distance people travel to healthcare, managing services for the older population and poor-quality broadband and mobile services. Will the Minister support such an interesting and important initiative and, perhaps, see if it could be rolled out in other areas?

I understand that the Government do not store national statistics on the NHS, but is the Minister aware of the impact of the cuts that have been made in rural GP services? Surely he must acknowledge that, because of the ageing rural population, having a reliable and accessible GP is absolutely critical and that any loss in the service could be potentially disastrous. Of course, social care has its own problems in rural areas, especially where there are long distances for people to travel to provide the necessary care.

This week my noble friend Lord Adonis published an excellent report on how we can mend Britain’s fractured economy and put devolution at its core, ensuring that prosperity is shared throughout the whole country. For too long we have had a centralised system, which is not only unsustainable but wastes talents and skills. In counties such as Devon and Cornwall, Cheshire and Lancashire, and Derbyshire and Northumberland, the economic potential is clear but waiting to be unlocked. This means working with businesses and industry. The RDAs were making inroads but these were abolished for ideological reasons without real thought about the future. We now have LEPs and we must build on their important partnerships. One of their important tasks is to nurture and help our entrepreneurs to grow. The right reverend Prelate mentioned the plight of micro-business.

Many people in our rural areas are bursting with ideas but lack the confidence or support to grow to the next level which would enable them to employ more people and develop their market, be it local, national or international. I have met many inspirational people who have succeeded. For example, Neill Ricketts of Versarien, which is based in Mitcheldean, is working with our major universities and developing innovative technology and products, such as graphene, which will provide engineering solutions for the future. We need to celebrate their success. It is a role model for others and can inspire our young people, who can then maintain their lives in our rural areas. Too often, success is hidden. I have to confess that I was unaware until recently that I live two miles away from the only British-owned manufacturer of road sweepers, Stocks Sweepers. Great things are happening, but too often these are hidden exceptions and are not the norm.

The case for rural investment is clear and has been well made this afternoon. Labour would devolve £30 billion of central funds to regional councils, enabling them to have the power they need to shape their own communities. Building on the knowledge they have about what works best in local areas, councils would be able to invest in the skills and networks that they need. We need strong economies around the country to share the wealth of the recovery and counterbalance the dominance of London and the south-east. By harnessing the individual contributions that people in rural areas make, we can create an economic recovery which works for everyone in the country.

My Lords, I thank my noble friend Lord Shrewsbury for bringing forward this important debate and all noble Lords who have spoken for their contributions. I start by declaring my interests. I have a farm and forestry interests. I benefit from the common agricultural policy and I have a minority interest in a commercially operated lake.

Rural growth and investment is hugely important and it is an area on which we place a strong emphasis. Helping rural businesses to unlock their potential to thrive and grow sustainably is one of my department’s four strategic priorities. Almost all noble Lords who have contributed to this debate have spoken about broadband. The rollout of broadband to rural communities is a challenge and it is one of our most important tasks. It has the potential to transform rural areas, bridging the age-old gap between rural and urban areas.

We are currently investing £790 million across the country with a key focus on rural areas. Government allocations must be matched locally, so the total available should be double that figure. Under the current £530 million rollout programme, more than 20,000 homes and businesses per week are gaining access, which will rise to 40,000 per week over the summer. Projections suggest that we will reach 90% superfast coverage in early 2016 and £250 million of funding will extend superfast broadband coverage to 95% of the United Kingdom by 2017. Meanwhile, we are continuing to explore with the industry how to reach 99% superfast coverage by 2018—whether fixed, wireless or 4G. Continuing on the communication theme, we are investing up to £150 million through BDUK’s mobile infrastructure project to build new masts for areas where there is currently no coverage. I hope that my noble friend Lord Courtown, with his particular point on the road between Cirencester and Lechlade, will benefit from that. Competition between operators is also driving what is expected to be the fastest rollout of 4G networks in Europe, following the successful auction by Ofcom of 4G radio spectrum last year.

Promoting strong rural economic growth is something we can and will prioritise through the Rural Development Programme for England. Our objectives will be building knowledge and skills, about which several noble Lords have spoken; funding new and developing micro, small and medium-sized rural businesses, to which several noble Lords referred; and funding small-scale renewables and, of course, broadband. The growth programme, working with the grain of the investment strategies developed by local enterprise partnerships, is expected to generate about 8,500 jobs across England. I thank the right reverend Prelate the Bishop of Oxford, in whose diocese I live, for drawing our attention to the pilot rural growth networks in five rural locations across England. We are looking carefully at the challenges to rural businesses, such as a shortage of work premises, slow internet connectivity, fragmented business networks, competitiveness, skills, and support for micro-enterprises.

Before the Minister moves away from broadband, may I ask him what speed broadband will be throughout rural England?

The noble Baroness may ask, but I will have to write to her with the details. These pilots are expected to create up to 3,000 new jobs and support up to 700 new businesses. We will share what the RGNs learn with other local enterprise partnerships and local authorities. Moving to another of the points raised by the right reverend Prelate, as we move into the new LEADER approach, we have looked to ensure that 70% of projects directly support the rural economy and indeed all of them must make a positive contribution to the rural economy.

Another hugely important investment area is farming and food. In answer to my noble friend Lord Plumb, we aim to remove 350 regulations and improve 428 others as part of our Red Tape Challenge. Of course, the Government cannot and should not do everything, but they can and should set the conditions for growth. We are making Defra’s and its agencies’ guidance simpler, quicker and clearer, with an ambition to reduce the volume by more than 80% by March 2015.

It is so important that we support British farmers by freeing them up and investing carefully in their future. The UK has a world-class research base, to which my noble friend Lord Arran and the noble Lord, Lord Trees, referred, with an impressive track record. My noble friend is right that we have not paid it enough attention. We are investing £160 million in our agritech strategy to improve the United Kingdom’s global competitiveness. We have great research and great farmers, but we have not been so good at moving the results of the research on to farms, and that is what this is about. It is about improving yields and competitiveness, tackling pests, diseases and climate change, and improving our environment.

As my right honourable friend the Secretary of State demonstrated this week during his visit to the United States, being a prominent G7 member does not stop us taking every opportunity to promote fantastic UK produce, such as haggis, and of course the huge range of other products which we have also been promoting in places such as China and across the Far East. I mention haggis because it is a terrific example of why we are better together.

The increasing demand of UK consumers for British food and drink is a huge opportunity for us. We are working with farmers, manufacturers and retailers to capitalise on this. My noble friend Lord Plumb raised the common agricultural policy, with some criticism of its complication. We are implementing the new CAP in England in a way that seeks to minimise the burdens on farmers and the risks of fines from the EU, while delivering value for taxpayers and improving our natural environment. We have made the greening rules as flexible and simple as we can for farmers to meet so that they can concentrate on producing food and helping to grow the economy. We have also cut the number of cross-compliance measures that they have to meet to reduce the burden on them while still maintaining important environmental protections. Our decisions follow extensive engagement with stakeholders on our approach to implementation and a major public consultation.

We are delivering a new IT service to support delivery of the new CAP, and from 2015 applicants for CAP funding will use a single system that is being developed with input from them and is key in our drive to ease the burdens on them. We are also providing regular information and updates on how the new CAP schemes will work in England so that claimants and stakeholders know what they need to do to make claims.

My noble friend Lord Shrewsbury and the noble Baroness, Lady Royall, referred to protected landscapes, which benefit the wider economy by providing attractive places to live, visit and enjoy, and by delivering essential ecosystem services on which the wider economy depends. There are 90 million visitors to national parks and their surrounding areas each year, who spend more than £4 billion—a third of the total rural tourism spend—which supports 68,000 jobs. In order to help our rural communities grow and prosper, we expect national parks and other planning authorities to take a positive and proactive approach to sustainable development, balancing the protection of the landscape with the social and economic well-being of the area. Tourism has been a key driver of the economic recovery. My noble friend Lady Bakewell is right but I think she would agree that the sector displays strong growth potential, with this trend set to continue.

Last week, I was in the Isle of Wight and saw a project similar to those referred to by my noble friend Lord Cavendish. In the Isle of Wight, the Wight Marque has been launched, which local businesses are enthusiastic about and which reflects a trend around the country where businesses are capitalising on an increasing appetite for local produce.

My noble friend Lord Shrewsbury referred to post offices. The network transformation programme is not suitable for about 3,000 of them. They predominately serve small, often remote rural communities. Many are the last shop in the village: he is right. The updated network transformation programme provides for the first time a £20 million investment fund allocated specifically to this part of the network. He and my noble friend Lord Plumb raised the issue of rural crime. Both police recorded crime statistics and the results of the Crime Survey for England and Wales show that the crime rate in rural areas is lower than that in urban areas for all crime types captured. But we must not be complacent. The noble Lord, Lord Cameron, held a meeting with my noble friend Lord Taylor on 24 June. It was a positive meeting bringing together the Home Office and Defra, and both; our departments committed to work together on, for example, the police allocation formula, which is currently being reviewed.

Several noble Lords referred to the important issue of affordable housing. It is a complex problem to which we are devoting close attention. It is an extremely important point. We have ensured that rural communities benefit from the affordable homes programme. In 2011-12 half the affordable homes built outside London were in rural areas. The Government have delivered more than 5,000 affordable homes in the smallest rural communities in the first two years of the current programme to ensure that affordable homes can be provided in these smaller rural settlements. We support rural exception sites, which are small sites used for affordable housing in perpetuity where sites would not normally be used for housing. Since April, the rules on permitted development have given farmers more flexibility regarding development of redundant farm buildings.

The noble Lord, Lord Cameron, and the noble Baroness, Lady Royall, referred to the spare room subsidy. As a result of Defra’s RCPU rural proofing, the Department for Work and Pensions has reviewed the discretionary housing fund and announced a package of £35 million of additional in-year funding for local authorities, including additional support to those affected in the 21 least densely populated areas of the United Kingdom.

Several noble Lords spoke about skills. While farming is not the only rural employer, it is an example of one. The future agricultural workforce is a vital part of meeting the challenge of global food security. We want to ensure that agriculture attracts entrepreneurial, talented new entrants who can rise to the challenges and the exciting opportunities that will occur in the sector in the coming years. I welcome the work that the farming industry does to attract new entrants and to promote farming as a rewarding career. We are currently addressing a number of the findings of the Future of Farming review, on which industry and government worked together, to look strategically at the opportunities and barriers encountered by those making a career in farming.

My noble friends Lady Bakewell and Lord Courtown and the noble Lord, Lord Cameron, referred to transport in rural areas. The Government recognise the importance of public transport for both the sustainability of rural communities and the lives of those who live there. Affordable and reliable transport enables people in rural areas to access services, to be economically active, and to avoid isolation. My department works closely with the Department for Transport to understand the specific problems and impacts of its policies on rural communities. If we can resolve the broadband problems, that will also make a major contribution to communication more generally.

My noble friend Lady Bakewell referred to the results of the recent flooding in the south-west. On 1 March, the Department for Culture, Media and Sport announced a package of support for tourism businesses in flood-affected areas. Some 755 tourism businesses received support—such as in business advice, drop-in clinics and local workshops. My department has made a £10 million fund available to help farm businesses affected by recent flooding across England.

My noble friends Lord Shrewsbury and Lord Cavendish referred to tax. This area is kept under constant review. Noble Lords will accept that HM Treasury’s key focus has to be on deficit reduction and any requests for reliefs and reductions need to be compellingly argued. I shall pass on the comments of my noble friends.

My noble friend Lord Shrewsbury spoke about the rural economic benefits of shooting. I saw a remarkable project this week on the Arundel estate of the noble Duke, the Duke of Norfolk, where the biodiversity benefits of what they are doing there are very clear.

The noble Baroness, Lady Royall, spoke about food banks. We know that some of the poorest families are really struggling to afford to feed themselves. While it is not the role of the Government to control the price of food, the impact of food price inflation is a real concern. Through Healthy Start, the Government provide a nutritional safety net, in a way that encourages healthy eating, to more than half a million pregnant women and to children under four years of age in very low-income and disadvantaged families throughout the UK.

Noble Lords know that we are reforming the welfare system. We recognise the important contribution organisations such as FareShare, FoodCycle and many other food charities and food banks are making by working locally to provide good food to those who need it most. It is worth saying that year-on-year food prices have fallen for the first time since 2006. In fact, prices went down by 0.6% in the year to May 2014.

The right reverend Prelate the Bishop of Oxford made some important points about small rural schools. The Department for Education has reformed the school funding system so that it is fairer, more consistent and transparent and so that the funding intended for education reaches the schools and the pupils that need it most. That department recognises that small rural schools have specific needs and has incorporated measures to address these, including adopting new measurements to capture pockets of rural deprivation and to introduce a sparsity factor within the funding formula.

The noble Lords, Lord Curry and Lord Cameron, spoke of rural-proofing government policy. I thank the noble Lord, Lord Cameron, and his review team, including the noble Lord, Lord Curry, for their ongoing support for the rural-proofing implementation review. We are committed to ensuring that all policies take proper account of rural needs and interests. We will be open and transparent about our record on rural-proofing. That is why we set out in the rural statement a commitment to an independent review of our rural-proofing activity. I am grateful to the noble Lord, Lord Cameron, and his team, who have held ministerial-level review meetings with DWP, DECC, DfT, DCMS, DCLG, BIS, the Home Office and the Department of Health to explore what actions they have taken to rural-proof their policies and programmes. That review will report to Defra Ministers in the autumn.

I hope that that will leave your Lordships under no illusion: rural-proofing is an area that we champion strongly across government. Of course, there is much to be done, but I believe that we are making genuine progress.

My Lords, this has been a fascinating debate; we really ought to do this more often. The countryside is a very special place. The debate has covered a wide variety of issues, not least broadband. Although I appreciate that Her Majesty’s Government are doing as much as they can to widen the scope of broadband in rural areas, it is not just the fact that a lot of the country has not been covered by it, it is the fact that it is so blooming slow. That is a real bugbear throughout the rural community, where people really rely on it, and increasingly need to.

I am extremely grateful to all noble Lords who have taken part in the debate, and I thank the Minister for his courtesy, as always, in his responses. I finish by saying that the countryside is indeed a magical and most special place, but it is also a place of serious work and investment, not simply a green and pleasant land.

Motion agreed.

NHS: Better Care Fund

Question for Short Debate

Asked by

To ask Her Majesty’s Government what effect the better care fund is having on the ability of the National Health Service to provide services to patients.

My Lords, I am delighted to have secured this debate today. We are all getting older and living longer, and that is very welcome, as medical and scientific advances make illness and diseases that would have killed us off no longer the threat to us that they were. There is still much to do, although that progress is very welcome.

However, as a consequence, we have an ageing population, which brings its own challenges: how we care for people as they live to a much older age and more people living with long-term conditions. It has long been recognised and has been an aim of Governments to deliver better integration of health and social care and improve people’s health and well-being by ensuring continuity of care while making the best use of resources.

I am sure that, in his response, the noble Earl will tell the House in some detail about the pooling of funds and the plans for local areas, including: the sharing of data and improving continuity of care; the plans for acting earlier so that people can stay healthy and independent at home; and delivering care that is centred on individual needs, with NHS and social care staff working together to deliver better outcomes for individuals.

The King’s Fund has done interesting research in this area and made some predictions about what will be the needs, how we will be living, and the pressures that that will place on the NHS. Those are important considerations in the planning that needs to be undertaken to meet the challenges ahead.

In the next 20 years, the number of people aged over 85 is expected to double. By 2030, the number of older people with care needs is expected to rise by 61%. At the same time, we expect 40% of households to be comprised of people living on their own. The number of people with dementia is expected to more than double in the next 30 years.

It is also a fact that people from the most affluent socioeconomic classes can expect to live as much as seven years longer than those from the poorest socioeconomic classes. Those and similar statistics point to increased pressure and demand on health and social care services, and government at all levels has to respond effectively to that challenge.

The better care fund is a good initiative but, as with many other things that the Government are doing in the area of health, I always have a niggling doubt whether they will put the resources in place to deliver the outcomes that we all want. I do not doubt the noble Earl’s personal commitment but as with many things in the health and social care sector, money more wisely spent at an earlier stage can deliver much better results for the patients and cost much less to the NHS.

I am a diabetic and I declare an interest as an active member of the charity Diabetes UK. I take the example of diabetic foot care and the fact that so many people have unnecessary amputations. Those could so easily be avoided; we are just not dealing with this issue. The cost to the individuals is high and traumatic. Then there is the cost to the NHS for the operations and the aftercare, and of course the projected lifespan after that, too. We need to ensure that people are able to enjoy an active and healthy life within their own communities, thereby reducing the demand for health and social care services. Well over two-thirds of patient bed days are for people with long-term conditions and a greater emphasis on self-management programmes can help to reduce unplanned hospital admissions. Ambulatory care-sensitive conditions accounted for 15.9% of all hospital admissions in England in 2009-10, with an estimated cost to the public purse of £1.42 billion. The rate of admission for those conditions in the most deprived areas was twice that in the least deprived.

Older people who are frail are a key concern for health and social care services and are at risk of sudden decline, including falling or becoming immobile. Identifying those at risk of falls and the setting-up of fracture prevention services for older people has been found to reduce hospital admissions and the need for social care, such as admission to a care home. Care co-ordination and proper case management, if well designed, has the potential to deliver better and more cost-effective care for the individual. However, as I have said, all these things have to be properly resourced to deliver the intended outcomes and savings in the future.

Just look at the whole area of emergency admissions, which can account for 70% of hospital bed days and 80% of stays of two weeks or more. A whole range of factors are at play here for hospital admissions including age, social deprivation, ethnicity and living in an urban area. A lack of alternative options then sees people being admitted to a hospital bed. That might not be the best thing for them but there is no alternative. Then on discharge, the important thing is to have a proper discharge plan in place so that people can remain at home in the long term and regain their independence.

At this point I declare that I am a member of Lewisham Borough Council, which will be involved in delivering services through the fund. The Local Government Association expressed concerns as recently as last month, warning that a larger better care fund is needed for a five-year period, with alongside that a separate transformation fund to ease the impact of these changes. It rightly expressed concern about the lack of clarity on the future of health and social care funding, which could put at risk the efforts to integrate services. The LGA is urging the Government to commit to a five-year plan, taking us to 2020. Can the noble Earl confirm whether this will in fact be delivered? If he cannot, can he tell the House why not? As I said, my worry is that the plan will falter because its provision of resources will be too short-sighted.

I have a number of questions for the noble Earl. If he can answer from the Dispatch Box that would be much appreciated. I do not expect him to do so; all I ask is that he gives a commitment to write to me afterwards and copy that to other noble Lords who speak in the debate today. I will take each question in turn. Will diabetes and diabetes foot care be prioritised as part of the better care fund? Will dementia be prioritised as part of it? Are there any plans to change the procurement rules when implementing the better care fund? What does seven-day working for social care mean? Is it correct that the health and well-being board chairs will have to sign off their local plans? What happens if the parties involved in devising a local plan cannot reach agreement? Is the better care fund’s additional allocation of funding in 2015-16 recurring or non-recurring?

In conclusion, I am delighted to have secured this debate. I look forward to the contributions of all noble Lords, including my noble friend Lord Hunt of Kings Heath and of course the noble Earl.

My Lords, I thank the noble Lord, Lord Kennedy of Southwark, for initiating this very important debate. He has rightly emphasised the need for early treatment of so many of the complaints which he outlined. It has long been recognised that there is a great need for integration of health and social care because this can support people better by improving their health and well-being by ensuring continuity of care while making better use of resources.

The basic mission of the better care fund is for health and care support to work together. From it flows, for instance, acting earlier and improving health education so that people can stay healthy and independent at home, thus easing the strain on hospitals and A&E, and from it also flows care which is tailored to individual needs with NHS and social care staff working together to provide seven-day services with a named co-ordinator.

The better care fund of course faces two challenges coming from very different directions. The first is the funding crisis common to the health sector and local authorities and the second is the increase in life expectancy mentioned by the noble Lord. Nevertheless it is a bold initiative. I welcome the tight but, I hope, not bureaucratic control over the operation of the scheme. One billion pounds of the fund will be tied to local performance. Peer support will be available to those areas which do not perform well. I also welcome the flexibility of the scheme by which £3.8 billion will be pooled in local areas, but the two services will be permitted to go further with additional funding where local conditions make this appropriate. There is a clear mandate for control of the funding to rest with NHS England which in turn will require clinical commissioning groups to use powers under Section 75 of the National Health Service Act 2006 to set up pooled budgets with local authorities. I welcome the checks and balances, for instance, that money from a pooled budget can be spent only with the agreement of both parties, with such spending agreed with the health and well-being board. In cases, which I hope will be rare, where the scheme is manifestly not working, it will be the duty of NHS England to intervene and instruct the CCG to come up with a solution.

Not for the first time, the King’s Fund has come up with a well researched document which draws together a number of studies relevant to the better care fund. It has produced a number of very practical suggestions for making this body viable and effective in its early years. The King’s Fund’s work contains its customary bibliography, and I am sure that the Minister, his department and, indeed, NHS England have taken note of the many constructive suggestions which it contains. The study fully acknowledges that this is a difficult time for the NHS in terms of funding. For instance, of the total of £3.8 billion budgeted for the fund, £1.9 billion will come from allocations to CCGs. It will not be new money. Guidance has come from NHS England that hospital emergency activity will have to reduce by 15%. We are in all-too-familiar territory here. Where patients go, whether to their GP or to A&E, justifies a debate on its own. Suffice it to say here that if the 15% reduction in emergency activity is to be reduced to assist the funding of the BCF, for the hospital it is a matter of considerable urgency.

Many of the recommendations contained in the King’s Fund document are contained in the admirable house of care programme developed by NHS England, which outlines so much of what the BCF should aim to achieve. I shall list only some of them: greater forward planning for LTC patients; involving patients in the self-management of their health; greater access by patients to their health records; agreed common goals for the NHS and care services; and emphasis on staff training. All these are common-sense aspirations—there is no rocket science here—but it is useful to have these brought together in a user-friendly document.

I return to the subject of the 15% reduction in hospital admissions. The Nuffield Trust, in particular, has made a study of more than 30 integrated care programmes, many of which had reducing urgent hospital admissions as a key goal. There have been a number of press reports suggesting that there is a real danger of financial collapse in the hospitals sector. I hope the Minister will confirm that across England there have been a number of pilot operations of the BCF model. I should welcome an update from the Minister on the results of these pilots and his reassurance that this very real problem relating to hospitals is being addressed.

Finally, I think it is true to say that attention has rightly been concentrated on getting the BCF off the ground in 2015-16 and in its first year of operation. Here I take up the point made by the noble Lord. I note that the Local Government Association chairman, Sir Merrick Cockell, while giving his strong support to the BCF is concerned about the longer-term funding, saying:

“Health and social care partners have shown their confidence in joining up their funding by putting in additional money over and above what was required by the Department of Health, but despite this there has still not been any indication that funding will be extended beyond this first year”.

I, too, hope the Minister will be able to say something about the Government’s plans for longer-term funding of the better care fund, the concept of which is welcomed from all quarters.

My Lords, there is no doubt that care in the community is grossly underfunded. There are too many elderly people living alone and in need of care that they are being denied. We know that social services are now only able to provide care for urgent cases and then often only a quite inadequate 10-minute visit to help those people get dressed, bathed or fed. We know, too, that GP services are extremely stretched in many parts of the country. I do not think the BMA was simply crying wolf in its recent pronouncements when it said that it is having great difficulty coping with its growing workload. On top of that I hear it is having problems recruiting in general practice, especially in the north.

Now we hear from the Local Government Association that its budgets will have been cut by 15.5% by next year and that it is looking at a black hole of a £5.8 billion deficit by then. It is against this background that we see this inexorable rise in demand for both acute and longer-term care. On the one hand, the increase in numbers of those aged over 80 is heartening and is a tribute, at least in part, to modern medicine, but equally it is troubling that we have to cope with them accumulating multiple illnesses and disabilities. The prospect of dealing with more than 1 million people with dementia by 2030 is not exactly comforting either.

It is irrefutable that social care services need more funding and the Government’s response has been to rob Peter to pay Paul by taking this £3.5 billion out of the NHS and handing it across. Social services certainly need it and the rationale for doing so might seem reasonable on the face of it. After all, the budget for the NHS is so much bigger at more than £100 billion a year and, of course, we know that our hospitals are full of patients who would be much better off at home if care could be provided there. Some 30% of beds are said to be blocked in this way. So let us shift money across. However, that ignores the extreme financial stress that already exists in the NHS, where talk of a looming financial cliff edge in 2015 is commonplace. The impact of the Nicholson challenge with £20 billion savings already made, largely by short-term measures such as wage restraints and redundancies, and predictions of even more stringent savings of some £30 billion by 2020, is sending shivers down the spine of many a trust chief executive when 40% of them are already said to be running a deficit.

I hope the noble Earl will forgive me for introducing a note of aggression in my talk. He knows my normal benign nature does not allow for much aggression but I feel quite strongly about this. There are those who say that we should close some beds or whole hospitals and money will be freed up. That may be true—money will be saved, but at what cost to patient care? We have already heard of the stresses placed on hospitals by rising demands for acute care—that is acute care, not the care of longer-term patients within hospitals. It is the rising tide of acute emergency cases that is taking its toll now on hospital services that is so difficult. These demands are being made now, in the summer, when we have approaching 88% bed occupancy rates. Incidentally, we have the lowest number of beds per head of population in Europe and the shortest length of stay, so we are already pretty efficient.

Of course we should do more to improve efficiency. We should continue the process of focusing specialised services in fewer major centres; we should merge services between small, relatively inefficient hospitals; and of course we should be looking at better models of integrated care across the health and social care divide—that is essential. Today’s publication by the NHS Confederation and the Local Government Association is a step in that direction.

There could be more efficiencies, too, in the bureaucratic machinery that we have set up to run the service. I am struck by the fact that we removed two layers of administration, the SHAs and PCTs, and replaced them with four. We have NHS England with its large staff, the 40 outposts, 27 area teams and of course the 211 CCGs. That says nothing about the clinical senates, of which we hear so little, and the complex network of clinical reference groups. Instead of the promised bonfire of bureaucracy, we have had an explosion of bureaucrats. We could save money here with a closer look at all this superstructure but that is not going to happen any time soon.

Meanwhile, the cash-strapped NHS is being taxed again by the better care fund. To expect to be able to run an acceptable level of integrated care between hospital and community by shifting limited resources from one to the other may be expecting just too much. Yet we are a wealthy country: the fourth wealthiest in the world, according to the ONS, and with more billionaires than anywhere else. In spite of that, we have cut the proportion of GDP that we spend on this from around 8.2% in 2009 to about 7% now, and we are predicted to cut that proportion to about 6% by the end of the decade. I can well understand the Treasury wanting our services to be more efficient, but I cannot see what justification there can be to cut the share of the national cake for the care of our population to just 6%, which is so clearly well behind other OECD countries. The contrast between reports of a country said to be doing so well economically with those that show that at the same time it is starving our vital services is, I find, just too much.

I have a number of questions for the Minister. How is it intended that the money from the NHS will be used for care in the community? Is it to be ring-fenced? Will there be true integration between the NHS trusts and social services in the way that it is spent? Have the Government any plans to encourage recruitment into general practice, particularly in the north, and for A&E consultant posts, two key services at the interface between community and hospital?

Have they given any thought to their predictions for the future funding of health and social care beyond 2015? I know that the Minister will say that future spending plans will have to wait for the next spending review but I fear that the crunch will come rather sooner than that, and probably far sooner than the election. The department must be making contingency plans now about how the service will cope over the winter; I would be surprised if it was not. I wonder if the Minister would be willing to share some of that with us. I look forward to his response.

My Lords, I congratulate the noble Lord, Lord Kennedy of Southwark, on securing this debate about the better care fund. This is probably a timely moment to pause and reflect on new routes to integration in the health and social care sectors, but we need to do so with some caution. It is too early to see the implementation of the first round of approved projects to its conclusion, and of course both local council and health budgets are under serious pressure, as all speakers so far have indicated. We also cannot expect full integration without being honest about the cost. It will be interesting to see what emerges in the manifestos of all the parties in the run-up to the next general election.

Still, I am pleased that the coalition Government are determined to see a real start to full integration in health and social care. There has been much lip service paid to it over the years but a marked reluctance by everyone, from politicians in Parliament to local authorities, the NHS and front-line staff, to make it happen. I suspect that this has been for a number of reasons.

First, there is the perception that there is financial competition between the two sectors, each worried about not losing funding to the other. Secondly, financial mechanisms are in place that inadvertently discourage integration. Reports from some areas show that this is a serious issue. Thirdly, which is the most important, the two cultures—social care, whether local government or private providers, versus health—could not be more different. I do not think that the NHS would define itself as naturally entrepreneurial; and it takes a long time to change its ways of working. There have been some major crises recently where we are now seeing wholesale changes in the way we work, as exemplified by the Francis report. The social care sector is a mixed economy, with public service providers working alongside large and small businesses and social enterprises—not just a different model to health but a different model within social care. Therefore it is completely understandable that dialogue at the start of this major project is difficult. But there is progress.

Before turning to that progress, I want to give you one story that absolutely illustrates why we need integration. The aunt of a friend of mine, who lives in Bradford, was receiving both health and social care support at home, which was important because it meant she could live independently. One of her issues was ulcerated legs, with one leg much worse than the other. The bad leg was being treated by the district nurse on daily visits. The better leg was checked and put into support tights by her domiciliary care worker. As a result of cuts made by the Labour-controlled council, all domiciliary care classed as moderate needs was cancelled, including hers. Can noble Lords guess what is coming? Under the local PCT rules the district nurse was not allowed to help with the better leg, so this elderly and vulnerable woman had to rely on a male elderly neighbour to put the special support tights on her leg last thing at night. You see, one leg was NHS and one leg was social care. That was until the better leg deteriorated to the point at which the district nurse was permitted to come in and dress that one too. Honestly, you could not make it up.

That is at the front line; it is not the district nurse but the person in the PCT who is setting down the rules. That sort of behaviour in commissioning makes an absolute mockery of integration. That is what I mean by the clash of two cultures. There are other stories of silo thinking. In some areas there is very little discussion between social services staff and health professionals such as physiotherapists and occupational therapists. Patients are referred by physios and OTs, but there is not a continuing dialogue. One physio recommended an electric wheelchair for a patient, on the basis that this would keep her fully independent, but the wheelchair department’s rules are so strict that the patient did not meet the stringent requirements. As a result, the local authority had to offer a carer to come in to help get her up in the morning, costing both the patient and her council much more money than an electric wheelchair would have cost.

That is enough of the difficult stories. Of course, there are shining examples: not just in Torbay, but in Cambridgeshire and other places. I ceased being a councillor in Cambridgeshire 10 years ago, but even then we had a joint trust between health and social services, as it was in those days, to really start to change the funding. The money was pooled and attitudes really started to change.

We need to hear what these good examples are doing, but also to understand why they work. Unless commissioners and finance directors understand the benefits of integration, there will be a reluctance to move away from the current model. The Bradford case illustrates the point perfectly. Three more minutes of the district nurse’s time would have prevented the better leg from deteriorating and thus costing the NHS more in the long run. Therefore, while there are any cases such as the Bradford one we are nowhere near integration. That is why the extra money from the Government for integration—the £2.7 billion to councils to join up with health and social care providers, as well as local authorities’ extra £100 million this year and an extra £200 million next year—is so vital.

I was delighted to learn from Lib Dem councillors at their annual conference last weekend that the LGA estimates that councils have more than match-funded the total money of £3.8 billion for next year, 2015-16, taking it to £5.4 billion. However, the cost of this means that councils are now spending 35% of their total budgets on social care. Therefore support from central government is essential and I do not believe that we can wait until next year for that to happen.

Personally, I somewhat regret the debate about NHS money being taken by local government. I am sorry to disagree with the noble Lord, Lord Turnberg, but I think that changes in practice will reduce the costs of acute care. Indeed, the noble Lord, Lord Kennedy, referred to amputations for diabetes sufferers in this regard. That is exactly the sort of invest-to-save cost that we should be seeing with the better care fund—for example, spending on preventive care to avoid trips and slips, and in ensuring appropriate support at home for patients being discharged to reduce the “revolving door” syndrome whereby patients return to hospital in a few days. Spending on all those initiatives would help to reduce the crisis in acute care and help to reduce the pressures on its budget.

Where integration is working well, there would not even be an issue about whose money it is, not least because the better care fund plans have been jointly signed off by not just local authorities but clinical commissioning groups and health and well-being boards. Plans have also had to demonstrate how local providers have been engaged. Adult social care services have to be at the heart of the integrated system, supporting health in everything they do by improving hospital discharge and bolstering reablement services.

We have to explode the myth that the better care fund was never intended to solve the financial problems in local government and parts of the NHS. That is one of the reasons why population changes are adding £400 million to council social care budgets every year and why, frankly, budgets must be looked at in this current year. Therefore, will my noble friend the Minister say whether the Government are looking at providing support for the health and social care sector before we even get anywhere near winter problems this year? That is absolutely vital.

I believe that the better care fund is right for the nation’s finances. Investing to save rather than saving to invest is the right thing to do. I believe that in the longer run we need a transformation fund to help the culture change and ease the impact of all the changes that we are talking about, but it must have targets, too, and peer support—something which local government is very good at. The introduction by the Labour Government of the Improvement and Development Agency really helped transform councils that were in trouble and helped with the ground-breaking changes in many council services. It would be good to see that stretched into health and other sectors, too.

In conclusion, I am pleased that the better care fund is now getting well and truly under way but am slightly concerned that NHS England seems to be changing the criteria for targets for the first round and hope that that will not delay the implementation of any of the projects. That must not continue. We will be nowhere near full integration until health and social care for older people in this country are fully funded.

My Lords, I am indebted to my noble friend Lord Kennedy for raising some real concerns about the way in which the better care fund will impact on the NHS. I thought that his questions went to the heart of the problem. I am grateful also to my noble friend Lord Turnberg for setting the very challenging context in which the fund is to work.

As we have heard, this is a straight transfer of money from the National Health Service to local government. The theory is that this will lead to more community provision, and therefore fewer people will need to go into hospital and it will be easier to discharge patients who have been admitted. The result will be that we need less acute capacity, and therefore the NHS can live on less money. That is the theory. However, there are five or six problems with the way in which this will work out in practice. The first problem is that local authority social care funds have been slashed so much that it is almost inevitable that a substantial portion of this money will be used to shore up their mainstream services. Only yesterday we had a report from the Association of Directors of Adult Social Services saying that these directors have had to cut their care budgets by 26% in the past four years. The budgets are very, very stretched indeed.

The second problem was identified this morning by the Health Select Committee. It described, in particular, managing the care of people with long-term conditions, who are the people we are largely talking about in this debate. It said that moving care for those with long-term conditions to primary community care and self-management—which I am sure we all support—is,

“intended to reduce unplanned admissions to the acute sector”.

That is absolutely right. However, it says:

“Reducing the activity of acute hospitals … and their income from such activity, is bound to have a consequential impact”,

on NHS hospital acute services.

One has to understand, as my noble friend Lord Turnberg said, that although one can certainly find problems with the way in which the health and social care system works at the moment, those who say that the NHS should become more efficient—and of course there are areas where it needs to become more efficient—also have to come back and respond to the point that this country has the lowest bed numbers and the shortest length of stay of any developed country in the world. That is why I certainly have some concern. Obviously, having just given up chairing the board of an acute trust, I come from that angle. But I am concerned whether this will be able to happen in practice.

One of my concerns is the absence of large NHS providers from these discussions. This is a consistent theme in the way in which local authorities, health and well-being boards and clinical commissioning groups have worked over the past years. I think that the reason for this is that they are scared of the acute trusts. They think that they will not be able to withstand the robust argument put forward, and therefore they prefer to exclude them from many of the discussions.

As the King’s Fund said, that is a big mistake. These decisions impact on providers’ existing activity and funding, and the risks arising from that need to be assessed and managed. We have seen it before. Let us take, for example, the four-hour A&E target. Although CCGs and local authorities make decisions that impact on that target, they do not bear the responsibility for it. That is the big problem with the fund that we are talking about. The local authority and the clinical commissioning groups may well make decisions about the fund that will impact on the ability of NHS acute services to do an effective job, but they do not bear the responsibility for it.

I think that the only way to do this would be to give acute trusts a lock on the plans. Unless there is shared ownership, we will not get uniformity in terms of accepting the risk and making sure that the use of this money will indeed drive down the use of acute hospitals. That is where we run into trouble. I am sure that the noble Earl will have seen the recent Nuffield Trust work by Nigel Edwards, who I think everyone agrees is an expert commentator. He says, and I agree absolutely, that,

“nobody can argue with the … sound principle of bringing health and social care closer together”,

as the Labour Party wants to do in its whole person care. However, he says that there is a fatal flaw in that:

“The Fund assumes that hospitals can quickly achieve a 15 per cent reduction in emergency admissions and that these reductions will result in savings in the same year, at full cost”.

The noble Baroness is absolutely right about the need for some kind of transformation fund. Unless you have some kind of double running, you run the terrible risk of money certainly being spent on community provision but acute hospital admissions not reducing, and then the system falling over. That is why we would be very grateful to hear the noble Earl, Lord Howe, respond not only to the questions put to him by my noble friend but also on how the Government will make sure that this community fund is absolutely spent on measures that will actually reduce acute hospital admissions. I hope that he will say—because I believe that this is right—that they should be signed off by the acute hospital providers. This is not an issue where you can simply say, “The commissioners will decide”, because the commissioners do not bear the responsibility. That is often a fatal flaw in the current arrangements. The Government should take a further look to make sure that this system will work effectively.

My Lords, I join other noble Lords in thanking the noble Lord, Lord Kennedy of Southwark, for enabling us to consider a topic of considerable significance for patients and service users.

In every area of the country, CCGs and local authorities are now planning together to use the better care fund to transform local health and care, to improve outcomes for people and to secure the best possible value for money by pooling resources. This is one part of a wider picture of change for health and social care. We must move away from traditional models if we are to provide responsive, effective services to a changing population.

Noble Lords will remember that the need for greater integration of health and social care has long been a recognised issue. The NHS and the social care system provide some fantastic care for people when they are already experiencing acute poor health and high care needs. We must, however, get better at providing care for those with long-term, chronic conditions by keeping people as healthy and independent as possible, living in their own homes and communities for longer, and going to hospital only when they really need to for specialist medical treatment. People will be supported to return to their homes, and to independence, as soon as possible.

We are living longer now than ever before, which is obviously good news, but we do not live all our lives in good health. As people live longer, we are seeing a corresponding rise in long-term conditions that require regular treatment. A lot of this treatment currently occurs in hospitals when it does not have to. It happens because the NHS was founded to treat episodic cases of sickness in hospitals, but the needs of the people are changing and we as the Government must work with the health and social care sector to adapt.

The noble Lord, Lord Turnberg, gave us some of the statistics. ONS projections show that between 2010 and 2030 the number of people aged 85 and over will increase by 95%. This increase is equivalent to more than 1.1 million people or a local authority the size of Birmingham. By 2030, there will be more than 3 million more people than today with three or more serious, long-term conditions.

Much long-term care can be undertaken in a way that promotes independence, sometimes with family members and carers, or with the support of professionals in people’s own homes and communities. People have told us this is what they want and, yes, it is a more efficient use of resources. As I said, these truths have been recognised for some time, and this Government are the first to address it head on. There is broad consensus that greater co-ordination of health and social care services to enable this kind of home and community-based care for the majority is the right direction in which to go. The better care fund presents a real opportunity for radical change at scale and pace for people to receive the right care in the right place at the right time. Local authorities and CCGs are working together to plan and deliver this shift to a more integrated system, with resources used to best effect where they are needed most. As the noble Lord, Lord Hunt, pointed out, acute trusts should indeed be part of that work.

As my noble friend Lord Bridgeman mentioned, for the first year of the BCF, it will include £1.9 billion of the real cash increase in the NHS budget. This represents 2% of the 2013-14 NHS budget, and it is being redistributed to help fund care in non-NHS parts of the system, which will in turn help to make acute care more efficient.

The noble Lord, Lord Kennedy, asked about funding for the longer term. I cannot yet commit to a five-year plan because we have said that it is for the incoming Government to look at their priorities next year. The 2013 Autumn Statement, however, made it clear that pooled budgets would be an enduring part of the framework for health and social care past 2015-16. While the structure of the fund and the pay-for-performance elements may change as progress is made, the principle is very much here to stay.

The noble Lord, Lord Turnberg, asked a similar question about funding for health and social care generally. We will set out the funding levels for social care from 2015-16 in the future spending review but the Government have already set out their plans for changes in how social care will be funded in the future through the Dilnot reforms.

On the specific issue of winter funding, which my noble friend Lady Brinton put to me, the Department of Health is constantly looking to the future, as she may well be aware. Possible pressures on the NHS and social care are very much part of that thinking. We have considered what pressures there will be in the coming winter and I can assure her we are planning appropriately.

Leading care professionals—hospital staff, care workers, GPs and researchers—all agree on the need for resource to be put into integrating our health and social care services, so that a better service can be provided at the same cost. This will certainly involve changing the way things are currently done. The NHS model is geared toward treating people as they get ill. We must shift our approach to focus increasingly on keeping people well and providing acute care in hospitals for those who unavoidably get sick. Keeping people well and out of hospital for as long as possible, and reducing their length of stay by co-ordinating with social care, will reduce the strain on NHS acute services. It will also improve people’s experience and improve health and well-being. An integrated service would allow this to happen, and that is what the BCF has been formed to do.

The noble Lord, Lord Kennedy, asked me whether dementia will be prioritised in the BCF. Guidance on the better care fund sets out that dementia services provision can be a part of the better care fund. Many area plans already contain good examples of health and social care working better together to provide dementia services. He also asked me what seven-day social working means. It is imperative to see social care working over seven days. Too often people have to stay in hospital because they are unable to leave at the weekend. Seven-day working, which will see social care operate at the weekend, as it already does in many areas, will see people return home at the earliest opportunity.

The noble Lord, Lord Turnberg suggested that all this was about robbing Peter to pay Paul. With respect, I do not see it like that at all. This is not about taking money from one part of the system and giving it to another. The better care fund will be held jointly by CCGs and local authorities for them to decide between them how best to spend it. They will decide how to make best use of the money available across the whole care system. This provides a real opportunity to join up services and transform people’s lives, particularly vulnerable people.

As I have explained, one of the aims of the BCF is to reduce the burden on acute services caused by avoidable admissions to hospitals. The way that funding for acute services works means that hospitals receive a marginal level of funding for unplanned admissions. Using the available budget to fund better-integrated, more proactive services will help hospitals to balance their budgets by reducing the operational and financial burden created by avoidable admissions. I am sure the noble Lord will be familiar with the 30% tariff for emergency admissions above a certain threshold. All this will allow hospitals to focus on providing specialist and trauma services, for which they receive full funding so it will make them more financially viable than they would be if the current system was retained. I say to the noble Lord, Lord Hunt, that evidence suggests around a fifth of all emergency admissions are avoidable in some way. If we get it right, transforming hospital care could therefore prevent these unnecessary admissions, which can be distressing for patients, quite obviously, and are costly to the NHS.

The noble Lord, Lord Turnberg, asked me whether the Government have plans to recruit more doctors into general practice. I am sure he will know from statistics that the number of GPs has increased since 2010, but our mandate to Health Education England requires them to increase the proportion of trainee doctors going into general practice from 40% to 50%. We have also set out our ambition to increase the primary care workforce as a whole—not just doctors, but nurses and other primary care professionals—by 10,000 by 2020.

Using resources to keep people out of hospital, by improving other methods of care—social care and home care—will lead to better use of NHS services, ensuring that services are focused on people who cannot be treated at home or in the community.

That brings me to the issue raised by the noble Lord, Lord Turnberg, of the impact of the BCF on acute care. All areas need to show that they have assessed the impact of their BCF plans on the acute sector—that is, hospitals. No plan will be approved without this. They will need to show that they have considered both the operational and financial implications and how these will be—

My Lords, I realise that the noble Earl does not have much time but can he just answer this point? Why not give the acute trusts the ability to sign up to it, or not, to prove that it will reduce capacity?

My Lords, we are looking at ways to assure these plans, and to assure them in a way that is satisfactory to the acute sector. At the moment, I cannot tell the noble Lord precisely how that mechanism will work but his central point is well made. I hope that in due course we will be able to share some of our thinking with him. However, the key point is that acute providers must have been consulted in this process.

This sort of approach is being pursued around the country. We know that it can work. For example, a network of 14 pioneer areas around the country are currently working with central government and health sector and third sector organisations to demonstrate the logic of integration and to disseminate what they have learnt to the rest of the country. That includes data-sharing—a point raised by the noble Lord, Lord Kennedy. Areas that have made significant progress in that respect are Southend, Leeds and South Tyneside.

There are other examples, too. In Greenwich, more than £1 million has been saved from the social care budget. In addition, 64% of people who went through their new integrated care pathway required no further services upon completion of the pathway. That has helped to lead to a 50% reduction in the number of people entering full social care.

My noble friend Lord Bridgeman asked whether admissions had been taken into account in the pilot scheme. Greenwich is a good case in point. More than 2,000 patient admissions were avoided there due to immediate intervention from the joint emergency team.

In Northamptonshire, £3.5 million has been saved through prevented admissions, exceeding the target by 14%. In Leeds, children and families now experience one service supporting their health, social care and early educational needs, championing the importance of early intervention. Since the service has been in operation, the increase in face-to-face antenatal contacts has risen from 46% to 94%.

Those examples, along with many others, should demonstrate to noble Lords that the integration of our health and social services can, and indeed has been, achieved in several areas. Integration will not only preserve our ability to provide services but improve them. The better care fund exists to enable all the local areas in England to do what the pioneers and others are doing to move towards a more responsive, effective and sustainable system that makes much better use of the resources available.

House adjourned at 5.18 pm.