Pre-Budget Report

My Lords, I congratulate the noble Baroness, Lady Noakes, on once again making a comprehensive and telling speech, which this side of the House fully supports. I am not going to follow necessarily the noble Lord, Lord Barnett, who always speaks a lot of common sense and commands the House’s attention. I want to concentrate in a few brief remarks on the impact of the crisis and indeed the Pre-Budget report on industry. Earlier today, your Lordships’ House heard from the noble Lord, Lord Mandelson, the Secretary of State for Business, about support for the automobile industry. That is certainly welcome. He said that support was to prevent a loss of skills and technology in that industry. The noble Lord assured noble Lords that Her Majesty’s Government would take further action within the limits of the announced fiscal stimulus in the Pre-Budget report for other industries that are necessary for our industrial well-being and that need help. I hope that I have summarised what the noble Lord, Lord Mandelson, said. I wish to raise briefly the serious financial plight of early-stage high-technology innovative companies in the United Kingdom, given the present financial crisis and indeed the outlook for 2009-10. Those companies—the United Kingdom is renowned for its wealth of such innovative companies—are pre-revenue; they are often spun out of our great universities to exploit potentially world-beating new technologies. I declare an interest as chairman of Cambridge University’s technology transfer office. That is not a paid job; it is pro bono. I am a board director of a number of small technology companies. I speak with a little experience and a great deal of feeling. These companies and this sector of our economy are in a very serious position because venture capital funding has completely stopped. For a variety of reasons, those who normally provide funding are nervous about continuing to support existing companies, let alone new companies, and universities throughout the country are finding it difficult to support existing spin-out companies because of the pressure on their own university resources. If no government action is taken—I intend to suggest sensible action in just a second—some forecasters have said that at least half of all the high-tech start-up companies will die during this year. That forecast is not unreasonable. The new Minister for Trade and Investment, the noble Lord, Lord Davies, visited Cambridge last week. He was told about the squeeze on venture capital and therefore on the lifeblood of the region’s technology and, particularly, biotechnology companies. How to assist? It is not about tax, although I pay credit to the value of research and development credits paid back through HMRC, which certainly has helped the development of many young start-up companies. It is not about bank lending because these companies are at too early a stage to benefit from the credit scheme the Government have announced, and which was referred to on a number of occasions by my noble friend on the Front Bench. It is about the availability of risk capital. The Government talk about a fiscal stimulus of £3 billion of government capital spend that will be brought forward from next year into this year. Of that, £442 million is to accelerate projects to improve further and higher education and to bring forward development of scientific research facilities. I say to the Minister that, although this capital expenditure infusion is welcome, unless some of these resources are devoted to the research and development base of the high-technology companies, a lot of the building work is going to be wasted. We have to save the lifeblood of our research and development capacity in this country for the future. I believe that the solution is an extension of the existing public/private partnerships, which have worked extremely well. The Government’s initiative, over the years, of the enterprise capital funds has helped but is much too small. That initiative needs to be expanded. This is where matching funds come from government and the private sector to fund early-stage companies. The Technology Strategy Board is now under the leadership of the noble Lord, Lord Drayson. I pay tribute to what he has done already in seeking to expand its work, but, frankly, what is on offer is a pinprick; it is extremely modest in terms of the crisis now facing the industry. The European Commission has acted swiftly, and I pay tribute to it, in approving improved aid to high-technology companies, particularly in the form of risk capital, where the partnership ratio can go as high as 70 per cent from the public sector and 30 per cent from the private sector—I do not suggest that that is a standard rule. However, the Commission has responded quickly and we should be grateful. Green technology is one of the areas that could certainly benefit. Her Majesty’s Opposition, as the Minister will know, propose the creation of a green-tech start-up fund with matching funds coming from the private and the public sector. That is to be welcomed. Her Majesty’s Government have £535 million of capital spending in this fiscal stimulus for work specifically in the environment. Some of that money should be devoted to emerging new technology to help meet our renewable energy targets in 2020. We cannot rely on existing technology, whether it is wind, solar or tidal. We need more research and it must be done urgently. In summary, more public resources within the fiscal stimulus already announced should be devoted to saving our innovative technology industry, which is in dire straits. I support the recommendation of the National Endowment for Science, Technology and the Arts for a £1 billion early stage fund. It is an entirely non-political body, chaired by Sir Christopher Powell. That proposal has been put to the noble Lord, Lord Drayson, the Minister for Science and Innovation. I hope that it will receive sympathetic consideration. Moreover, environmental schemes deserve priority. They will keep innovation alive and meet the climate change targets. The noble Lord, Lord Smith, the chairman of the Environment Agency, who is not in his place, has been quoted extensively in the press over the past few days as warmly supporting the call for further funding for environmental schemes. If the noble Lord, Lord Myners, is not able to respond to these comments, I hope that he will at least pass them on to his colleagues in other departments. I look forward to his response.