The government’s new White Paper on Industrial Strategy has been a long time coming.
Under David Cameron’s Conservative Government of 2015, the Business Secretary, Sajid Javid, refused to even speak of industrial strategy.
Today, the Prime Minister’s foreword to the document sets out a belief in a “strong and strategic state that intervenes decisively wherever it can make a difference” and recognises the importance of “industries that are of strategic value”. That we’ve got here at all is a significant step forward.
And there’s plenty to think about in the strategy.
The White Paper sets out four ‘grand challenges’, designed to focus government and business effort in the coming years:
The idea of ‘grand challenges’ is a good one and shows the influence of the innovation economist Mariana Mazzucato, who has led the call for ‘mission oriented industrial strategy’.
To be clear, a grand challenge is not the same as a mission. Put simply, we know when a mission has been achieved. The US mission to put a man on the moon was achieved when Neil Armstrong took that one small step for man, one giant leap for mankind. The mission was either achieved or it wasn’t. So how will we judge if our grand challenges have been achieved? How much of the needs of an ageing society will have been met before we can tick off this challenge? Defining success will be important here.
Having said that, it is welcome that two of the grand challenges focus on artificial intelligence and the data revolution, and clean growth. The TUC has already recommended specific missions for those two areas.
In our policy document, ‘Powering Ahead’, we called for 50 per cent of the UK’s energy to come from renewable sources by 2030. And in our recent discussion paper, ‘Shaping our Digital Future’, the TUC called for the UK to be come a top five digital economy by 2030.
But while it’s big on grand ambitions, the White Paper misses several tricks when it comes to delivering them. First, the level of investment just isn’t sufficient to move the dial.
Last week’s Budget announced an extra £7bn for research and development. That’s obviously a large sum of money, but as I wrote last week, total public investment across the economy stands at 2.9 per cent of GDP, compared to an OECD average of 3.5 per cent. If the White Paper really wants the UK to be the world’s most innovative economy, that £7bn isn’t nearly enough.
When it comes to ‘people’ the focus is mostly on skills, including the delivery of a world class technical education system, driving up digital skills and creating opportunities for all throughout life. These are important; it has long been recognised, that we need to do better in developing science, technology, engineering and maths (STEM) skills in the UK, especially when it comes to addressing regional and gender disparities. But people need not only to develop skills, they also have to have the chance to put them into practice. And that means a voice at work, and a say in how they can best put their skills to use.
The White Paper says it wants to “establish a technical education system that rivals the best in the world to stand alongside our world class higher education system”. That’s an excellent idea.
So which systems are the best in the world? China and South Korea are among them, but these countries are at a different stage of economic development and have more state influence than is usual in Europe.
That leaves Germany – and what distinguishes Germany’s technical education system is the role of unions in setting apprenticeship standards. So if the government really wants to match Germany’s success, it needs to consider how Germany achieved that success.
The White Paper also promises an artificial intelligence council to take a leadership role across sectors. But this work will be done “in partnership with industry and academia”, again with no mention of unions, despite the fact that both the TUC and CBI have called for employee representatives, not least because AI is likely to change the nature of the world of work.
Finally, there is the proposed independent Industrial Strategy Council to make recommendations to government on taking the Industrial Strategy forward. “It will be drawn from leading business men and women, investors, economists and academics from across the UK.”
Without engaging the workforce, it’s hard to see how the strategy can be truly comprehensive.
The section on places is also disappointing. Starting at page 216 in the White Paper, it is hard to avoid the impression that places have been tagged on to the end.
More important, this section is woefully short on detail. We are told that Local Industrial Strategies will be developed locally and agreed with government. These strategies will “guide the use of local funding streams and any spending from national schemes”.
These strategies will also “identify local strengths and challenges” and will “establish new ways of working between national and local leaders”. Is that it? The first Local Economic Strategies won’t even by agreed until March 2019.
Furthermore, while high tech sectors are important, if we want to boost the ‘earning power’ of workers in most communities in Britain, we need to focus on the jobs where most people work – jobs in restaurants, care homes, and the hospitality industry. Raising job quality and productivity in those sectors would go a long way to reducing the UK’s overall productivity deficit.
In conclusion, the White Paper on industrial strategy is an important step forward. It recognises the role of strategic government in development a modern economy, the recognition for which many of us have battled for years.
It needs to be backed with more money, especially for research and development, and to do better on devolution to local areas and on supporting the everyday economy.
Most of all, the voice of business needs to be matched with that of workers if the UK is to survive and thrive in the uncertain world that we face as we leave the EU.