Green Paper on Industrial Strategy: a good start and more work to do

The Government has now launched its long-awaited Green Paper on industrial strategy. This could turn out to be a significant moment in the fortunes of Theresa May’s Premiership: with Brexit placing, at the very least, a question mark over the UK’s economic prospects in the near future, an active, intelligent industrial strategy is the best way the government, acting on its own, can strengthen our economic base.

The TUC will make a full submission to the Green Paper in the coming weeks. But from a first glance, how does it look?

First, let us welcome the strategy as an important event in itself. In the modern political era, Labour’s Peter Mandelson, the Liberal Democrats’ Vince Cable and the Conservatives’ Michael Heseltine have all championed industrial strategy. The Conservative Government of David Cameron suffered a serious setback when its Business Secretary, Sajid Javid, refused to commit to an industrial strategy at all. We have now turned that page.

At a first glance, today’s Green Paper is a serious and ambitious document. The devil will be in the detail, in terms of its implementation, and some areas will need greater financing, but the document is a fair start. What’s more, the stated goal of the strategy isn’t a million miles from the priority we set out last week for ‘an increase in decently paid jobs, raising the level of wages across the UK’: The Government Green Paper states:

“The objective of our modern industrial strategy is to improve living standards and economic growth by increasing productivity and driving growth across the UK.”

How far will the proposals go towards meeting this aim? We set out our key priorities in a blog last week. How does the strategy measure up?

On, investment there is much food for thought in the green paper. For example, it states:

“Our competitors have also grown their investment in research and development relative to the UK. The UK invests 1.7% of GDP in private and public funds on research and development. This is below the OECD average of 2.4% and is substantially below the leading backers of innovation – countries like South Korea, Israel, Japan, Sweden, Finland and Denmark.”

The TUC made a similar point in our 2013 document, ‘The Way of the Dragon’, which reported from dynamic South Korea. Our more recent report, ‘Powering Ahead’ learnt from the sustainable industrial revolution taking place in Denmark and offers important lessons for the development of UK industry.

It is good news that Sir Mark Walport, the Government’s Chief Scientific Adviser, has been asked to consider the case for a new research institution as a focal point for work on battery technology, energy storage and grid technology. Battery technology is the biggest barrier to the development of Ultra Low Emission Vehicles and it would be a significant win for UK plc if we were to steal a march in this technology. Germany and Denmark are more advanced in their green industries than is the UK because they got in there first and reaped the benefits of early technological development; it is high time the UK started to do the same. This may also help with what the TUC believes must be an important plank of our strategy; meeting our climate commitments.

In line with this, the TUC also welcomes the Green Paper’s commitment to:

“secure the economic benefits of the transition to a low-carbon and resource-efficient economy by making sure next generation technologies are created and harnessed in the United Kingdom.”

The TUC’s ‘Powering Ahead’ report considered in some detail how to move forward on this agenda. What is essential is a fair or just transition to a green economy, so that workers losing their jobs in higher polluting sectors benefit from new opportunities and retraining for new sectors. This must be a government priority.

When it comes to infrastructure, the government is making the right noises. Creaking railways and slow broadband is no way to compete in 2017 and the TUC gave a cautious welcome to the National Productivity Investment Fund, announced in Autumn Statement 2016. But Britain’s level of investment is feeble compared to our major competitors.  And even after the Autumn Statement announcements, but Britain’s public investment is still set to be lower than in the last Parliament. We cannot take our foot off the gas here, and this must be a priority in the March Budget.

Similarly, who could disagree with more global trade, especially in the era of Brexit? Our report, ‘The Way of the Dragon’, mentioned above, highlighted how Germany exports much more to China than does the UK, so leaving the single market wasn’t necessary for more trade with dynamic Asia: we simply need to produce the goods and services that consumers in emerging economies wish to buy, as well as to develop cultural links with those economies.

The Department for International Trade must ask: what are the goods and services that China wants to buy but will not be able to produce for itself for the next 10, 20, 30 years? Therein lies our route to more trade with growing markets.

Of course, our biggest market, Europe, is right on our doorstep: as noted yesterday, the TUC was a strong supporter of the UK remaining in the single European market and we are concerned that Theresa May seems to have closed off this option. If we really are leaving the single market, we need to negotiate maximum access to that market, without tariffs and without rules of origin and similar requirements.

What about investment in the workforce? My colleague Iain will be setting out our views on skills in a separate blog. But its worth noting here that the TUC welcomes consideration of how to boost STEM skills at all levels. As well as covering all levels, it is good news that this consultation will look at why girls and young women are so prone to drop out of science subjects in their teenage years, compared to boys and young men. There is probably no simple answer; more female role models and better careers advice would certainly help, but consideration of this problem is long overdue.

More disappointing are the proposals –or absence of any proposals – to help workers use their skills more effectively at work. We know that workers who are more engaged at work are more productive – so though the document mentions the Green Paper on corporate governance, it says far too little about the potential to improve productivity through improving workforce engagement in decision making – including by fulfilling the Prime Minister’s promise to put workers on boards.

Improved corporate governance is also vital to address Britain’s culture of short-termism – rightly mentioned in the Green Paper alongside OECD research, which states that the UK ranks third for business start-ups, but thirteenth for the number of businesses that successfully scale up. As we’ve set out elsewhere, reforms to shareholder primacy are necessary alongside proposals for workers on boards to address this problem, and we hope that this is something the the Patient Capital Review will consider.

Worker involvement is needed at the institutional level too. As my post from yesterday argued, there is too much imbalance between the economies of London and the South East on one hand and the rest of the UK on the other. It is welcome that today’s Green Paper seeks to address this. City deals, growth deals and mayoral devolution could all help to overcome this gap. If economic development is to be devolved, it is essential that trade unions have a voice in the debate at regional level. Any new bodies designed to pursue this agenda must include trade union members.

Finally, what about our call for government to make sure that every penny it spends is working towards the aim of the strategy? Here there is genuine good news: –  today’s Green Paper states:

“The Government is rolling out the ‘balanced scorecard’, an approach recently developed by the Cabinet Office, across all major construction, infrastructure and capital investment projects over £10 million, including those in the recently published National Infrastructure and Construction Pipeline. The scorecard will ensure the impact of procurement on the growth of small business and UK supply chains, skills and apprenticeships is taken into account when considering the value for money of different bids.”

This is a major step forward in procurement policy. The TUC has long-argued the case for a more strategic policy, using the power of government spending to leverage better skills, cleaner and greener goods and employment opportunities for those disadvantaged in the labour market. We were told for years that this could not be done within EU rules. Today’s announcement doesn’t cover all of those things, but it does accept the principle that procurement is about more than low cost and the smart use of £268bn of public spending each year could have a major effect on our skills base.

So all in all, a good start was made today on industrial strategy. It will need more balance, in some cases more money and a lot more focus on how the workforce can be involved in decision-making about how to ensure that every business can deliver decent jobs. The TUC will continue to make this case in the weeks and months ahead.