Industry and the regionsby Iain Wright / October 12, 2017 / Leave a comment
The received wisdom is that industrial strategy has been out of fashion since the 1970s. That’s untrue: in the 1980s, Michael Heseltine pursued an interventionist policy at odds with the Thatcherite economic view. Since the financial crisis of 2008, successive governments have accepted a more interventionist role for the state. Industrial strategy has been fashionable now for a decade. Whether it has achieved its intentions is another matter.
We now have the white paper from Business Secretary Greg Clark, just as we had Peter Mandelson’s in 2009 and Vince Cable’s 2012 speech at Imperial College.
There is much to commend in it. The select committee that I chaired urged the government to embrace a vision, rather than pick winning sectors and I’m pleased that the government seems to have listened to that point. The white paper’s “five foundations”—ideas, people, infrastructure, business environment and places—are a good start, although they still run the risk of trying to do everything for everybody. The government’s aim to put the UK at the forefront of the industries of the future, are even better: AI & Data; Future of Mobility; Clean Growth; and the Ageing Society, are probably the right targets of policy.
It’s also encouraging that the government has tried to set out a vision. I thought that there was something important in Theresa May’s phrase “an economy that works for everyone” when she was bidding to become the leader of the Conservative Party. That has now been revised: the aim of “creating an economy that boosts productivity and earning power throughout the UK” is hardly Kennedy’s “we choose to go to the moon,” but it distils, into a single sentence, what the industrial strategy needs to achieve.
Having been a Labour MP for Hartlepool since 2004, I decided not to stand for parliament at the last election. I assess the publication as Chief Executive of NEPIC, an organisation based in the northeast of England which advances the interests of chemical-using companies. The region has about 60 per cent of
the country’s chemicals and process industries, important for a whole range of other sectors such as pharmaceuticals, clean tech, automotive and aerospace. By providing the means of collaborating and co-ordinating the work of companies, and encouraging the transfer of talent, skills, knowledge and supply chain efficiency, clusters can embody industrial policy.
One of the novel elements in the white paper has been its emphasis on place. It’s refreshing that the government has recognised the importance of economic clusters, and how they can bring higher employment and inward investment.
But for all of its potential, there is much that the industrial strategy has to do. The government has been honest in recognising the long-standing weaknesses—the regional imbalances, the stubbornly low productivity—but the paper gives surprisingly few solutions. Speaking to managers at chemical plants on Teesside, they see little that is relevant to them. Warm words alone won’t enhance their long-standing competitiveness.
In order to see real results, the industrial strategy has to address several key structural weaknesses in the British economy. Even though as an MP I always lived in my northeast constituency and knew just how imbalanced the country’s economy had become, my new job has made even more clear to me just how centralised Britain is, not only in terms of policy-making, but also in terms of the concentrations of media and cultural power. London still dictates everything. No other modern democracy has such a centralised state, and no other high performing economy has such regional imbalances. Devolution is starting to change this, and there are elected mayors in Manchester, Liverpool, the West Midlands, and Tees Valley; but these are small steps.
The success of the industrial strategy will undoubtedly come down to how well trade-offs and priorities will be managed. At this stage, industrial strategy can still be everything to everybody. Addressing low productivity? Industrial strategy. Regional imbalances? Industrial strategy. Addressing low pay and precarious employment? Industrial strategy. This tendency to use it as a magic wand cannot last. The government will have to make choices. The question is, whether, without a parliamentary majority and stripped of authority, and beset with uncertainty over Brexit, the government can make big decisions and embed industrial strategy for the long-term.
There is no greater illustration of this policy dilemma than infrastructure. The current system for assessing projects is clearly at odds with sparking economic development in the north. The rules and guidelines on evaluating transport capital spending on things like transport mean that a project for easing rail congestion in London and the southeast such as Crossrail 2 will clearly win out over a rail project like the electrification of the Trans-Pennine link between Leeds and Manchester, which was delayed—again—this summer.
There is a growing acknowledgement that industrial policy, a framework in which government intervenes in the economy in a strategic and co-ordinated fashion, can help to raise living standards across the entire country. The white paper is the clearest manifestation yet of what can be achieved, building on the work of successive governments over the past decade. It will make some progress.
But for all of its welcome rhetoric and clear purpose, it is unlikely to be transformational. And transformation is what we need to address Britain’s longstanding
economic weaknesses and take full advantage of the opportunities in the 21st century.
Brexit Britain: the future of industry is a publication which examines the future of UK manufacturing through the prism of the recently released Industrial Strategy White Paper. The report features contributions from the likes of Greg Clark MP, Miriam Gonzalez, Richard Graham MP and Frances O’Grady.
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