Alan Mak: The British-Chinese contribution to our country is a success story that should be told more often

20 Jul

Alan Mak is a Government Whip and MP for Havant. He is the first ever Minister and MP of British-Chinese heritage.

When ConservativeHome asked me to write this article, it prompted me to think widely about the contribution British-Chinese people have made to our country. It also prompted me to look into the wider historical background to the community’s establishment in the UK, and examine how the British-Chinese are doing in general.

Firstly, we should be clear about who we’re discussing. The British-Chinese are UK citizens of Chinese heritage, many born and bred in this country, and who call the UK home. They should not be conflated with people from China, and it would be wrong to assume that British-Chinese people agree with (or have any interest in) the policies of the Chinese Government. Sometimes the British-Chinese are included in the umbrella term “people of East Asian and South East Asian heritage”, a much broader category which also covers people of Thai, Vietnamese, Korean and other Asian heritages; this article is not about them.

The British-Chinese are around 400,000-strong and the country’s third biggest visible ethnic minority, dispersed around the country but largely living in cities such as London, Manchester, Birmingham and Liverpool. Nobody speaks for all these individuals, and I certainly don’t claim to.

Though present in Britain for at least 150 years, most first generation British-Chinese immigrants came to this country from the 1960s onwards, leaving behind Mao’s Cultural Revolution to look for opportunities elsewhere. Some, like my father, came via Hong Kong, then a British Colony – and most toiled away night and day in low-wage, labour-intensive jobs in takeaways, restaurants and laundries in their new home.

My father’s generation now look on with pride as their British-born sons and daughters have flourished in an impressive and wide range of fields unimaginable to their parents. Britain has given them limitless opportunities to shine and make the most of their talents. Today, prominent British-Chinese figures include a Deputy Chief Constable, a Team GB and world champion athlete, entrepreneurs and business leaders, public servants in our Armed Forces, NHS, schools and civil service, and many others building careers in a wide range of sectors.

Whilst the restaurants and takeaways present in almost every British village, town and city are often the most visible symbols associated with the British-Chinese, they do not represent all that British-Chinese people have achieved in the UK. There is much more, and in my view the British-Chinese make an outstanding contribution to our country. This reflects the hard-working nature and aspirational values of a community that places a premium on education, family values and social mobility.

Figures in the recently-released Sewell Report, and the last census, bear this out: British-Chinese children outperform every other ethnic group at Key Stage 2, GCSE and A-Level, are the most likely to attend university, and are then amongst the highest earners ten years after completing their first degree (earning more than the White British average). In fact, Sewell calls on the Department for Education tounderstand and replicate the factors that have led to educational success” for British-Chinese people.

Social mobility is very high, with only five per cent of British-Chinese children remaining in the same routine manual positions as their parents. Second, third and fourth generation British-Chinese are less likely to work in geographically-isolated restaurants and takeaways with long, unsociable hours, and are occupying more professional jobs. British-Chinese people are the least likely ethnic group to receive state benefits, and the least likely to be stopped by the police.

The Sewell Report identified different outcomes for different ethnic groups on a range of indices from educational outcomes to home ownership, and from that statistical perspective the British-Chinese are, in general, doing well. My generation is certainly better off in many ways than my parents’ or my grandparents’. Unsurprisingly, The Economist described the British-Chinese as “a model minority as well as a silent one” – referencing the tendency to keep their heads down, particularly when it comes to getting involved in public life or coming to the attention of the media.

Coronavirus has brought an unwelcome development in that regard, and proved a tough time for some. Whilst the British-Chinese community has nothing to do with the virus breaking out, the pandemic led to a growth in abuse, perpetrated by a senseless minority, against both British-Chinese people and others of East Asian appearance.

During the first wave, the Metropolitan Police recorded 166 verbal, online and physical attacks in February and March 2020 on people of East Asian appearance, up from 66 during the same period in the previous year. By April 2020, this rose to 261, then 323 in May, 395 in June and 381 last July. I raised this with the Home Secretary, and the National Police Chiefs’ Council has been robust in asking its forces to respond proactively to reports of such incidents.

The British-Chinese have much to be proud of, and we can all play a role in telling the British-Chinese story better. This could include launching a “Museum of the British-Chinese” to gather together stories and exhibits that illustrate the British-Chinese contribution, from supporting the Allied war effort in World War I to present day work fighting the pandemic (possibly modelled on America’s national equivalent); and introducing a “British-Chinese and East Asian Heritage Month” to highlight contemporary success stories and raise awareness of how the community started in the UK.

Single-issue identity lobby groups often speak about Britain’s minorities with a pessimism bias in their narratives. Only by focusing on the facts, and empirical data specifically, can we discern a more accurate, balanced picture. Modern Britain is a place where everyone can thrive regardless of their background, and the success of British-Chinese people reflects the opportunities our country continues to provide.

Alan Mak: A week on from the Budget, it’s clear that it will boost innovation and productivity

10 Mar

Alan Mak is Vice Chairman of the Conservative Party, Co-Chairman of the Party’s Policy Board and MP for Havant

The pandemic has had a significant impact on the British economy. Over 700,000 people have tragically lost their jobs and the economy has shrunk by 10 per cent – the largest fall on record. And the impact could have been far worse had it not been for the Chancellor’s support schemes that have protected jobs and livelihoods throughout, from the furlough scheme to billions paid out in business grants and loans.

Last week’s Budget needed to continue this support for the economy in the short term. But crucially, it also needed to lay the foundations for building the economy of the future. What this country needs – and what Conservatives can wholeheartedly champion – is a robustly pro-growth, pro-enterprise and pro-innovation economy to turbo-charge our exit from the pandemic and help Britain lead the Fourth Industrial Revolution, all while remaining internationally competitive.

Last Wednesday, the Chancellor delivered, with a series of policies that will ensure technology and innovation are at the forefront of our economy. ConservativeHome readers agreed, overwhelmingly backing the Budget with 58 per cent saying it was “good” or “very good” in this site’s latest survey, as did voters polled by YouGov.

Last July, I proposed an IT scrappage & upgrade scheme to equip our promising start-ups, SMEs and scale-ups of tomorrow with better software and technology, in order to enhance productivity which has historically lagged behind our competitors. For years, governments have needed to target the least productive SMEs which have invested insufficiently in the latest software, automation or information technology. And too often, our brilliant small firms don’t have the time or resources to get the extra skills or technology tools they need to be more productive.

That’s why I warmly welcome the Chancellor’s two new Help to Grow schemes, specifically aimed at boosting the productivity of our small businesses. Help to Grow Management will help SMEs get world-class management training through government-funded programmes delivered through British business schools, with businesses contributing just £750 or 10 per cent of the cost of the course.

And Help to Grow Digital will level up the digital skills of our small businesses with vouchers entitling them to 50 per cent off the purchase of new productivity-enhancing software, up to a total of £5,000 each. Both these schemes are exactly what’s needed to tackle the UK’s longstanding productivity challenge, while laying strong foundations for the pro-growth future economy we all want to see.

The Budget went further by delivering other measures which high-growth, innovative companies should welcome. These businesses account for just one per cent of companies in the UK, but generate an amazing 80 per cent of our employment growth.

That’s why consultations to find ways to improve our research and development regime and reform the Enterprise Management Incentive scheme to support growing companies retain talent, are encouraging. Furthermore, ensuring firms have sufficient access to capital is vital, which is why the new Future Fund Breakthrough initiative, successor to the Future Fund, is welcome support for innovative tech businesses to access finance, match-funded by Government.

As the first MP of British-Chinese heritage, I also believe a global outlook and attracting world-class talent to the UK is pivotal to our future economic success. That’s why visa reforms aimed at making it easier for highly-skilled people to come to Britain are especially welcome. These include a new unsponsored points-based visa, and new simplified processes for scale-up founders and entrepreneurs.

These Budget measures to support our businesses and turbocharge our future economic growth build on the Treasury’s other impressive pandemic support schemes, such as extensions to the furlough scheme; temporary VAT cuts and business rates relief; two more self-employment grants; new recovery loans to help businesses access finance; and Restart grants of up to £18,000 for businesses who have been particularly hard hit. Overall, that’s over £400 billion of support this year and next to protect our economy.

I also welcomed the Chancellor’s frankness about the need to begin repairing our public finances. We cannot maintain the current levels of borrowing and debt and expect to be able to respond with another £400 billion when the next crisis hits. And as Conservatives, we believe in sound money and keeping our borrowing under control hence the Chancellor also explained why corporation tax is scheduled to rise for the biggest, most profitable businesses in two years’ time.

The unprecedented ‘Super Deduction’ policy to encourage companies to invest in capital assets such as new machinery – an effective tax cut worth around £25 billion – will also be key to incentivising our SMEs to adopt the latest productivity-enhancing technology. Last year I wrote about the dampening effect on capital expenditure (capex) and investment caused by Coronavirus already being large and destructive. The Bank of England predicted a 26 per cent drop in business investment for 2020. In 2009, as the financial crisis erupted, the fall was 16 per cent by comparison. The Super Deduction can help reverse the damage to our country’s technology base.

What we needed to hear from the Chancellor was a mixture of realism about keeping the economy going now, plus a dose of optimism for the future, by laying the groundwork for British businesses to lead the Fourth Industrial Revolution. We received both, building strong foundations for Britain’s growth and recovery.

Alan Mak: Industrial strategy. Focus narrowly and don’t spread thinly – concentrating on key innovative sectors.

11 Feb

Alan Mak is Co-Chairman of the Conservative Party’s Policy Board, a Vice-Chairman of the Party, and is MP for Havant.

As our world-leading Covid-19 vaccination programme continues apace, its success should be the blueprint for a new post-pandemic Industrial Strategy.

From the rapid development of the Oxford/Astra Zeneca vaccine followed by production at a British manufacturing facility to the swift procurement of other vaccines to provide supply resilience and the tight focus on key priorities (such as whittling down over 120 vaccine candidates to the most promising seven), we have many positive lessons to learn from this remarkable success story.

In the most demanding circumstances, we saw government, academia and industry working effectively together. The key principles that delivered such great results will help us shape a new Industrial Strategy that will leverage new technologies to deliver millions of new jobs, rising wages, and economic renewal.

Perhaps a different description to the 1970s-sounding “Industrial Strategy” will be needed to signal a new approach. But whatever it’s eventually called, this new plan will be key to enabling Conservatives in government to meet the Prime Minister’s pledge to “Build Back Better” after Coronavirus.

Five objectives should underpin this new post-pandemic strategy for growth:

1. Level Up skills and infrastructure in our regions

Levelling up skills and infrastructure so more people have the training, skills and transport to access high-wage jobs must be at the heart of the new plan.

Our new £95 million Lifetime Skills Guarantee is the first step. From April, it will offer adults without an A-Level or equivalent qualification free college courses, providing them with skills valued by employers. New jobs that work with advanced technologies like robotics (such as those made at Tharsus in Blyth, which pack Ocado’s shopping bags) or clean energy (for example at Teesside’s new Hydrogen Transport Centre) will require higher level skills.

Higher-wage jobs created by the new Industrial Strategy will only be meaningful if people can get to them, so the levelling up of regional transport infrastructure is also key. Local economies are more productive when people can get to work efficiently, especially using public transport. That a 27-mile train journey from Liverpool to Chester takes 46 minutes whilst passengers travelling from London Paddington to Reading cover double the distance in half the time illustrates the disparities that must be addressed.

2. Take advantage of our regulatory freedoms after Brexit

Our 2019 manifesto recognised that EU regulations were a “barrier to innovation”. Having now delivered Brexit, the new Industrial Strategy should fully take advantage of our new-found freedoms.

Recently-announced proposals for a new UK-wide system for providing financial support to businesses is a welcome step. As the long-term replacement for the EU’s prescriptive state aid regime, it will allow us to be more dynamic in providing business support, including in innovative, R&D-focused industries.

The new Regulatory Horizons Council will also identify the implications of technological innovation, and provide government with expert advice on the regulatory reform required to support its rapid and safe introduction.

In addition, we should establish a new legally-binding British Innovation Principle to provide a pro-innovation counter-balance to the EU’s overly risk-averse Precautionary Principle which still colours much of our approach.

The Precautionary Principle can unreasonably burden innovators with having to prove the absence of danger regarding a particular product, service, or procedure. It does not require regulators to weigh potential risks against the potential benefits that society might enjoy from technological development, and often constrains R&D. A British Innovation Principle would change that.

 3. Support the UK’s transition to Net Zero

The UK was the first major economy to have a legally-binding commitment to Net Zero greenhouse gas emissions by 2050. Having kick-started the first Industrial Revolution and its derivative emissions, our new Industrial Strategy must invest in the technologies that allow us to reach Net Zero. Hosting the COP26 Summit this year will also focus the world’s attention on Britain’s actions.

The Prime Minister has already announced £350 million of funding to cut emissions in heavy industry, including £139 million to support the transition from natural gas to clean hydrogen power, and scaling up carbon capture and storage (CCS) technology which can stop most emissions being released from industrial plants.

£10 million has also been allocated for further R&D for more efficient electric car motors and more powerful batteries – two areas where Britain can become a world leader. In welcome news, Britishvolt has selected Northumberland for the UK’s first battery Gigafactory, investing £2.6 billion and creating 3,000 jobs. This is the largest industrial investment in the North East since Nissan’s arrival in 1984.

The Government’s “Jet Zero” initiative to decarbonise the aviation sector is another example of the type of partnership that should feature prominently in the new Industrial Strategy.

 4. Focus on key innovative sectors and the Fourth Industrial Revolution

It would be tempting for the new Industrial Strategy to spread itself thinly, covering a wide range of sectors. This would be the wrong approach.

Instead, it should focus investment and political backing on the Fourth Industrial Revolution’s technologies. These are the most impactful and transformative technologies, likely to create whole new industries (and millions of jobs), apply across a wide range of economic sectors, and where the UK can develop a strong competitive advantage. These key technologies include:

  • Robotics and Artificial Intelligence, which will become all-pervasive across most sectors of the economy.
  • Life sciences and synthetic biology, where the big theme of the next decade will be personalisation as patients will no longer want a “one size fits all” approach, but products designed for their unique physiology.
  • Fusion, which aims to copy the process which powers the Sun to deliver a new carbon-free source of clean energy.
  • Space, where growth is driven by manufacturing including satellites, ground systems and components.
  • Quantum technology, including quantum computers which are exponentially more powerful than today’s computers and tablets.

5. Strengthen domestic manufacturing capacity and resilience

The global scramble for PPE at the start of the pandemic showed how relying on international supply chains can leave countries vulnerable. Equally, the manufacture of a key vaccine in Britain as the pandemic comes to an end shows how economically and strategically beneficial self-sufficiency is.

Strengthening our domestic manufacturing base, especially for key products crucial to national security and safety, must be a core component of a post-pandemic Industrial Strategy. Re-shoring production will help to increase supply chain resilience and create thousands of new jobs in Britain.

Through “Project Defend”, the Government is already identifying key economic goods and products, and last week, a new partnership was signed with vaccine manufacturer CureVac to rapidly develop new vaccines in response to new Covid-19 variants if needed, and to manufacture them in the UK. The CureVac deal bolsters onshore manufacturing capacity and is exactly the sort of agreement that should be encouraged in other sectors by the new Industrial Strategy.

We should also create a critical minerals reserve stockpile with our Five Eyes intelligence partners. This would end our collective supply vulnerability in relation to minerals such as lithium, cobalt and tungsten.

Getting our new Industrial Strategy right is key to our goal of “Build Back Better” and vital for our prospects at the next general election.

Alan Mak: The NHS Reserves will be a permanent, positive legacy of this challenging year

30 Nov

Alan Mak is MP for Havant, Vice Chairman of the Conservative Party and Co-Chairman of the Party’s Policy Board.

In 1944, it was a Conservative Health Minister, Henry Willink, who first set out a blueprint for a universal, free, health service. And for over 40 of the 72 years that the NHS has been in existence it has been under the care of Conservative Governments.

Nonetheless, at every general election Labour, like a broken record, falsely portray the Conservatives as enemies of the NHS. Last December, for example, Jeremy Corbyn’s dodgy dossier claimed the NHS was “up for sale” in UK-US trade talks.

Our modern NHS is very different from the Health Service of 1948, not least because it now employs ten times more doctors and four times more nurses, often in much more specialist roles than their counterparts from yesteryear.

But key to ensuring that our NHS continues to deliver on its founding principle – high quality care for all regardless of wealth – is the reform and innovation that has often been driven by Conservative Ministers. From Sir Keith Joseph leading the NHS’ first major re-organisation in 1973 to William Waldegrave’s Patient Charter in 1991 (later the NHS Constitution) setting out hospital waiting time targets and patients’ rights, Conservatives have steadily modernised the Health Service and put patients at its heart.

Our most recent Conservative Health Secretaries have continued that trend, with Jeremy Hunt and Matt Hancock both championing the digitisation of the NHS. They acted to meet the rising expectations of patients used to accessing data and services quickly on their phones and tablets. I’ve been proud to contribute towards that work, including last year successfully bringing forward legislation that resulted in the ban on NHS bodies using outdated fax machines and pagers.

Just as new technology is having a transformative impact on how our NHS operates, so too is the on-going Coronavirus outbreak.

This year has tested the NHS like no other in its long history. Our inspirational doctors, nurses, paramedics, and non-clinical NHS staff can be proud of the contribution they have made in the fight against Coronavirus.

But alongside them are the remarkable volunteers from every community. Over 750,000 people have signed up to become NHS Volunteer Responders this year, and they have collectively completed over a million tasks, from delivering prescriptions to making friendly phone calls to shielding patients. In addition, 80,000 people were already volunteering across all acute NHS Trusts in England.

We now have a once-in-a-generation opportunity to build on the foundations laid by these NHS volunteers by launching the NHS Reserves – a new, permanent reservist system for our Health Service modelled on the proven Armed Forces reserves and police special constables.

Last week, I introduced the NHS Reserve Staff Bill in Parliament to create the NHS Reserves, backed by the Health Secretary. The NHS Reserves would provide a formal structure – and a uniform – for some of the volunteers already working within the Health Service. It would also provide a route for retired NHS staff and recent leavers to continue contributing, and welcome new volunteers with relevant clinical and non-clinical skills that the NHS might need during periods of high demand. These would include public health emergencies, seasonal increases in demand, large public events and protests, industrial action, and critical incidents such as terrorist attacks or major accidents.

My Bill has secured wide-ranging support from across our Parliamentary Party. Backers included Sir Graham Brady, Sir Iain Duncan-Smith, Damian Green and Hunt, now chairman of the Health Select Committee, as well as 2019 intake ‘Blue Wall’ MPs including Dehenna Davison, Simon Fell, Stuart Anderson, and Brendan Clarke-Smith. All have all become NHS Reserves Champions for their constituencies. Lord Ashcroft is also a supporter and an early proponent of a reservist system for the NHS.

More MPs are becoming NHS Reserves Champions, and working with our councillors, activists, and members to promote the NHS Reserves at a local level.

I know from my role as Party Vice Chairman how active our members have been in helping with the community response to coronavirus. In many cases this has involved leading local groups delivering food or medical supplies, caring for vulnerable neighbours, or volunteering with the NHS. I hope our Party members can help spread the word and encourage friends, family and colleagues to apply when the NHS Reserves system is up and running properly.

As a Conservative family, we should be proud of our Party’s stewardship of the NHS. I hope the creation of the NHS Reserves will show that once again it is us Conservatives that are leading the way when it comes to thinking about how our Health Service adapts, innovates, and thrives in response to new challenges. Whilst the Covid-19 outbreak has brought so many negatives, the new NHS Reserves can serve as permanent and positive legacy that we can all support with pride.

Alan Mak: A new tech scrappage scheme will boost productivity

2 Jul

Alan Mak is MP for Havant and Founder of the APPG on the Fourth Industrial Revolution.

In the aftermath of the 2008 financial crash, governments around the world including those of Japan, Germany and the US responded to calls to help struggling car manufacturers by introducing popular scrappage schemes. After new car registrations declined by 30 per cent in the UK in the first quarter of 2009, the schemes saw demand bounce back, while dirty, polluting old cars were consigned to the scrapheap.

Now there is media speculation about a new car scrappage scheme – drivers will be given up to £6,000 to swap their petrol or diesel cars for electric ones – designed to provide a shot in the arm for the UK electric car manufacturing sector in the wake of Coronavirus.

Yet focus should also be given to how the Government could launch a similar scheme to help factories and businesses investing in the latest technology. We must use this period of recovery to press the fast-forward button on helping our businesses to improve their performance by adopting new technologies quickly, accelerating processes that would have otherwise taken many years into a much shorter period.

Just as the Government ushered a brand-new fleet of cars onto our roads a decade ago, a new scrappage scheme should be introduced for old and obsolete IT, tech and machinery. By particularly focusing on the adoption of robotics, it would achieve the dual ambitions of boosting productivity, and giving our businesses the cutting edge in international markets post-Brexit.

More British firms need to follow in the footsteps of innovators such as Ocado, who have created one of the most advanced automated warehouses in the world. Ocado’s newest fulfilment centre uses automation to pick 200 items per hour of labour time using its hive system – far outstripping traditional supermarket competitors.

As the Fourth Industrial Revolution accelerates, for British manufacturers and suppliers to keep up with international competitors, they must upgrade the machinery and software that is powering the workplace.

Yet automation and the adoption of new technology is an area where the UK needs to improve if we are to boost the nation’s productivity and economic growth after Coronavirus. Research published by the International Federation of Robotics shows that the UK has a robot density of 71 units per 10,000 employees – below the world average of 74 units – ranking us 22nd globally. Europe’s most automated country, Germany, has more than 300 units per 10,000 employees.

Whilst the critics will always fear job losses from automation, as we recover from Coronavirus, we can create high-wage employment through robotics. I’ve visited factories, such as Harwin’s manufacturing site near my own constituency of Havant, that have successful re-trained factory workers as high-skilled robot operators. We must rebut trade union leaders and others holding back change and hindering the adoption of new technology.

Just as a car scrappage scheme was brought in to safeguard the car manufacturing industry and protect demand in its vast supply chain, a tech scrappage scheme also has the potential to boost the fast-growing UK tech and robotics sector. Businesses that could benefit include Tharsus, the Blyth-based robotics company that supplies Ocado’s automated warehouse, which is now one of Europe’s fastest growing technology firms.

While individual businesses know the products that are right for them, a tech scrappage scheme can and should promote world class British engineering and high-end manufacturing by creating more demand.

Every UK business could benefit from upgrading technology and IT, but key to the success of the car scrappage scheme was incentivising people into the new car market by making them more affordable. To be eligible, the car had to be at least ten years old and many of those taking part in the scheme would never before have bought a new car. The same must be implemented for a tech scrappage scheme. The Government needs to target the least productive SMEs that have never before invested substantially into the latest robotics, software, automation or information technology.

Research published last year based on a survey of 2000 business owners showed that 46 per cent of small business owners believe technology is more important to their business than people. Just as we incentivised car owners into the market, a new scrappage scheme will give SMEs the confidence to make the tech upgrades their businesses need.

There would be environmental gains too. Just as polluting cars were taken off the road through scrappage, businesses would have the opportunity to replace diesel-fuelled machinery with cleaner and more energy efficient alternatives.

As our country bounces back from Coronavirus, and the focus shifts from health emergency to economic recovery, the Government must continue to focus on not only supporting businesses in the short term but arming our businesses to be ready for the long term impact of the Fourth Industrial Revolution.

Our economic recovery must be both green and digital – a scrappage scheme for IT, tech and machinery achieves both goals.

This is the third in a three-part series on how to boost our economy after Coronavirus.

Alan Mak: Reform capital allowances and R&D tax credits to fire up investment and create jobs

1 Jul

Alan Mak is MP for Havant and Founder of the APPG on the Fourth Industrial Revolution.

Improving Britain’s productivity is key to both our economic recovery after Coronavirus and enhancing our global competitiveness post-Brexit. The best lever for firing up Britain’s productivity is incentivising more investment in the latest IT and software, new plant and advanced machinery – all proven catalysts of growth and efficiency. Failure to direct billions of pounds into these fundamental building blocks of our economy will hold back our recovery.

The State cannot be expected to do all the heavy lifting, especially given the Government’s substantial spending commitments to help the country through the lockdown and beyond. Instead, it must be businesses that take the lead, especially SMEs who have traditionally made up the “long tail” of unproductive companies.

Rather than a safety-first approach of hoarding cash, postponing investment and hunkering down, businesses must be incentivised to invest more in the coming months. This must be an economic recovery powered by bold investment decisions that create jobs, upgrade technology and boost productivity.

The dampening effect on capital expenditure (capex) and investment caused by Coronavirus is already large and destructive. One investment bank estimates that £23 billion has been slashed from this year’s capex budgets already, whilst the Bank of England predicts a 26 per cent drop in business investment for 2020. In 2009, as the financial crisis erupted, the fall was 16 per cent by comparison. Some of the country’s biggest employers such as BP and HSBC have already started cutting investment.

In practice this means IT systems and software – now at the heart of every business – being used for longer. Machines normally replaced every decade will have their life extended. Trucks and vans will be allowed to age. Outdated buildings that offer no room for new employees will be kept on. Research and development (R&D) could stall.

Reductions in investment not only have negative consequences for our country’s GDP, jobs and productivity, it also damages our capacity for R&D and our reputation as a nation that innovates for the future – key to our leadership of the Fourth Industrial Revolution.

Reforming and adapting two existing incentive schemes – the Annual Investment Allowance and the R&D Tax Credit – would have a major impact in reversing this decline in business investment and productivity.

Introduce a new Annual Investment Allowance ceiling for green or digital investments

Capital allowances enable a business to deduct the cost of qualifying items from their profits, lowering their corporation tax bill. This incentivises investment in key productive goods from machines to laptops.

The Annual Investment Allowance (AIA) is the annual cap on such deductions and its level has varied dramatically in recent years from £25,000 in 2012 to £500,000 in 2015. Until December 2018, the AIA was £200,000 but it was raised to its current £1M level from January 2019. The £1 million level is due to expire this December.

To encourage a green recovery and investments that focus on digitisation, the AIA could be allowed to fall back to the previous £200,000 ceiling, except for certain types of capital expenditure that achieve environmental or digital goals which would still benefit from the £1 million special ceiling. Replacing a diesel-powered machine on the factory floor with one powered by electricity, or digitising a production line by adding new software powered by artificial intelligence (AI), could be examples of investment that would be rewarded by the new special AIA ceiling.

Alongside the introduction of a special £1 million ceiling, the scope of what can be claimed through capital allowances should also be expanded to take account of the growing digital dimensions of every business. For example, digital tools purchased on a subscription basis (such as monthly website hosting costs) should benefit from relief not just one-off investments in physical goods (such as buying a new machine).

Increase R&D tax relief rates for SMEs and widen the scope of the reliefs

R&D tax reliefs support companies that work on innovative projects in science and technology, and enables the cost of qualifying projects to be reclaimed from HMRC. They’re especially effective for digital start-ups, who get a tax break and much needed cashflow back for critical work.

From April this year the relief rate is 13 per cent, but the lion’s share of R&D tax relief is claimed by large, research-intensive businesses. SMEs can currently claim up to 14.5 per cent in certain circumstances, but incremental increases such as this do not have a dramatic effect on investment appetite.

Often the most cutting-edge innovation, especially in the digital sphere, is carried out by small teams and growing start-ups – not just multinationals. To encourage more micro businesses and SMEs to pursue more R&D, new and much higher rates of relief should be introduced. For example, a rate of 25 per cent for SMEs with fewer than 150 employees, and 35 per cent for SMEs with fewer than 50 employees.

What qualifies for relief must also be broadened to include more of the digital tools that software developers use, including software testing tools and data analytics software. In addition, cloud storage fees, user experience development work and the cost of buying data sets needed to train algorithms for AI-driven start-ups should also be tax deductible.

Britain is currently 19th out of the 37 industrialised nations in the OECD when it comes to R&D investment, spending 1.7 per cent of GDP against the OECD average of 2.4 per cent. To match world leaders including Germany and Japan, who invest over three per cent, we must urgently update and expand our R&D tax relief regime.

This is the second in a three-part series on how to boost our economy after Coronavirus.

Alan Mak: Britain should champion a new Five Eyes critical minerals reserve system

30 Jun

Alan Mak is MP for Havant and Founder of the APPG on the Fourth Industrial Revolution.

The on-going trade dispute between the US and China has put the spotlight on so-called “critical minerals”. We in Britain cannot afford to be passive observers. Instead, we should take an active interest in this key strategic and economic issue, and play a leading role in safeguarding access to critical minerals, both for ourselves and our Five Eyes allies. Ensuring our scientists, manufacturers and technology businesses have a secure and reliable supply of critical minerals is vital for Britain’s leadership of the Fourth Industrial Revolution.

Critical minerals consist of the 17 Rare Earth Elements (REE) recognised by the International Union of Pure and Applied Chemistry, with names such as promethium and scandium, plus other economically valuable but relatively rare minerals such as lithium and cobalt (used in batteries), tungsten (used in defence products including missiles), bauxite (the source of aluminium) and graphite (key to battery production).

The REEs have unique magnetic, heat-resistant, and phosphorescent properties that no other elements have, which means they are often non-substitutable. Whilst used only in small quantities, they are key components in a wide range of consumer products from mobile phones, laptops and TVs, and have widespread defence applications in jet engines, satellites, lasers and missiles.

Although they are more abundant than their name implies, REEs and critical minerals are difficult and costly to mine and process. Converting critical minerals embedded in rocks from under the Earth’s crust to separated elements is a complex and costly process which often involves the use of highly concentrated acids and radiation.

China hosts most of the world’s processing capacity and supplied 80 percentemploy of the REEs imported by the US from 2014 to 2017. On average, China has accounted for more than 90 pe cent of the global production and supply of rare earths during the past decade, according to the US Geological Survey.

By contrast, the US has only one rare earth mining facility, and currently ships its mined tonnage to China for processing. Lynas Corporation, based in Australia, is the world’s only significant rare earths producer outside China. Other critical minerals are similarly concentrated in a small number of producer nations. For example, the Democratic Republic of the Congo was responsible for around 90 per cent of the world’s cobalt production in 2018, whilst Guinea dominates bauxite, with around 35 per cent of the world’s reserves.

As globalisation and industrialisation accelerate around the world, critical minerals have become a highly sought-after resource for the high-technology, low-carbon and defence industries. They will play a vital role in Britain’s future plans for economic growth, innovation and green industrialisation, especially as we renew and expand our manufacturing base in the wake of Coronavirus.

Given the national strategic and economic importance of critical minerals, the UK needs to act now and lead efforts to protect our national supply for the future. Neither we nor our Five Eyes allies can remain reliant on one producer for anything, including critical minerals. Here are four steps we should take:

Establish a New Five Eyes critical minerals reserve stockpile

The Five Eyes intelligence sharing partnership between Australia, Canada, New Zealand, the USA and the UK has been in existence since 1941 and provides the perfect foundation on which we should develop a new critical minerals reserve that would end our collective vulnerability of supply.

The reserve would consist of inter-connected physical national stockpiles of critical minerals, and then extend to become a processing chain that all partners could draw on. The US already maintains stockpiles, and creating others including in Britain would lead to new jobs. The UK is never going to become resource independent, but through international co-operation we can diversify supply and refine, through innovation, the processing of these elements.

Use our international aid budget to secure critical minerals supplies

As the Foreign Office and DFID merge, the UK can align its development goals alongside diplomatic priorities. We should deploy our international aid to unleash the untapped supply of critical minerals in developing countries, effectively funding the start-up of new critical mineral mines and processing plants. This would enhance our supply of these elements and create jobs, transforming communities around the globe through trade, not just aid. China has already implemented a similar strategy in Africa, for example providing Guinea with a $20 billion loan to develop the country’s mining sector.

Create a new National Critical Minerals Council

The Government should establish a new National Council composed of metallurgists, scientists and foreign policy experts to monitor global trends in critical minerals, and advise the Government on rare earths and its strategic stockpile. Given the national security and defence procurement implications, the National Council’s establishment would help to keep this issue at the forefront of future policymaking.

Become the world’s greenest stockpiler by incentivising private sector involvement in critical minerals processing

The Government should provide funding for greater research into how we can improve the processing chain of critical minerals with a focus on how we can tighten environmental controls in this sector internationally.

The UK should establish itself as the world’s “greenest stockpiler” of critical minerals by offering incentives that encourage private sector investment in recycling processes and reward companies that contribute to the UK stockpile. We need more facilities like the University of Birmingham’s Recycling Plant at Tyseley Energy Park, which is pioneering new techniques that are transforming the recycling of critical minerals such as neodymium, which is commonly found in hard disk drives.

The Coronavirus pandemic has taught us the importance of supply chain security, whether for PPE or critical minerals. With our reputation for scientific excellence, global alliances and diplomatic networks, we can help ourselves and our allies strengthen our access to the key minerals that will power our economic growth and innovation potential for decades to come.

This is the first in a three-part series on how to boost our economy after Coronavirus.