Budget 2017: welcome support for the digital economy, but not enough for wider industry

It suggests that we can expect some well-needed support for high value, high growth sectors such as digital communications. But there is a risk that less glamorous everyday sectors are overlooked despite the enormous opportunities for productivity gains there too.

The TUC has campaigned long and hard for the launch of a robust industrial strategy. The Budget set out details the funding framework that will underpin the approach launched next week.

It is good news that the Government has extended the life of the National Productivity Investment Fund (NPIF) until 2022-23. This fund was set up in Autumn 2016 with a five-year remit and a budget of £23bn over that time. It has now been extended by a further year and its budget has increased to £31bn.

According to the Budget documents, the NPIF will target “areas crucial for productivity: housing …. transport, R&D and digital communications”. This money, according to the Budget, “provides the financial underpinning of a modern Industrial Strategy”.

At £7bn, research and development takes the largest single share of this funding. The Chancellor said in his speech that the NPIF money takes “the first strides towards the ambition of our Industrial Strategy to drive up R&D Investment across the economy to 2.4 per cent of GDP”.

However, this needs to be put in context. In 2016 the share of total investment spending in the UK was 16.6 per cent of GDP, with only Greece and Portugal spending less. The UK is nearly 5 percentage points of GDP lower than the OECD average of 21.4 per cent, corresponding to a gap of over £90bn a year.

Meanwhile, total public investment – including but not restricted to research and development – across the whole economy currently stands at 2.9 per cent of GDP; the OECD average is 3.5 per cent. So the TUC will not say no to an extra £7bn for R&D, but let us be under no illusions. The UK is still a laggard.

We also know from the Budget that the industrial strategy will set out the first set of sector deals that have been agreed. A sector deal will result from industry putting forward proposals that it believes will boost its productivity, along with asks of government to make that happen. We can expect one of these to be in the digital sector and the more general emphasis in the Budget on digital technologies is welcome, so long as the digital economy is not seen as a panacea for all ills. We need high quality jobs in a range of high productivity sectors if we are to succeed, especially after Brexit.

We also learned yesterday that the Government will create a new Centre for Data Ethics and Innovation. We need more details, but if this is designed to build trust in the safe use of data, it can only be a good thing. Data is a big driver of the digital economy; if the guiding principle of capitalism has historically been “follow the money”, entrepreneurs in the digital economy have a new mantra: “follow the data”. But what data? Fears relating to cyber-security as well as a more general reticence about sharing too many details of their lives have led to a lack of understanding as to when it is and is not safe – or appropriate - to share personal data. Getting our relationship with data right is crucial if we are to build a thriving digital sector and the role of ethics, as well as that of business, is important to this debate.

The Chancellor told us that the Government will invest £21m over the next four years to expand Tech City UK’s reach, making it ‘Tech Nation’. Tech City UK is a cluster of businesses, linked to a number of academic partners, based in the Old Street/Shoreditch area of London. Regional hubs to Tech City UK will be located in major English cities, as well as Edinburgh, Glasgow, Belfast and Cardiff. This is a recognition of the vital importance of an industrial strategy that benefits the whole of the UK, not just London and the South East. It is welcome, but on Monday the TUC will be looking closely at how a ‘place-based’ industrial strategy can benefit those regions without high tech sectors. We would be happy to help the Chancellor with this task and recommend to him our new report, ‘Great Jobs in Great Places’.

The extra money for maths and computer science teaching announced in the Budget is welcome preparation for the digital economy. At a cost of £30m in 2018-19 and £50m in 2019-20, this might be described as a small gesture rather than a game-changing announcement, but a step in the right direction nonetheless. There was also some limited good news on skills; the government seems to have recognised that unions have a key role to play here, with a leading role for the TUC informing the new national re-training partnership, and a last-minute reprieve for vital unionlearn funding, that helps support over 250,000 workers gain access to learning and skills opportunities each year.

For many years, the TUC has argued that we need to attract more women into careers in science, technology, engineering and mathematics (STEM). The Budget recognises this, but commits only to “explore how to improve the accessibility and transparency of data on this issue by [higher education] institution and subject”. This could be a good idea, but it is important to find out why so many girls and young women drop out of science before making university applications. The TUC has previously suggested better and more varied female role models and taking a look at careers advice, to ensure that girls are not directed towards stereotyped paths.

In all, these measures are to be welcomed, even if they are not as impressive as they first appear. However, they are all focused on high growth, high value sectors. It is important that the UK succeeds in such sectors and this is why the TUC has called for the UK to become one of the world’s top five digital economy by 2030.

However, we must not overlook the so-called ‘everyday economy’, such as shops, hotels and restaurants, based in communities, where so many people live and work. Where were the measures to improve productivity in those sectors? Action to help these communities will be one test of the industrial strategy on Monday.