Industrial policy is back in favour. Both Labour and the coalition now agree that we need a more active industrial strategy. But what should a modern industrial strategy look like? And how should Labour’s version differ from the coalition’s?
Labour has changed its mind on industrial policy. Back in the pre-recession days of Gordon Brown’s Treasury, the Labour government fully embraced market forces, was opposed to the concept of ‘picking winners’ and balked at the prospect of bailing out failing industries. The cross-party consensus then was that the market knows best.
The financial crash changed all that. By late 2008, Peter Mandelson was restating the case for ‘a new British industrial activism’. He rejected the 1960s and 1970s approach, ‘when the government attempted to pick winners – or, rather, where losers picked the government’. Instead, he began to sketch out a more comprehensive ‘total business environment approach’, where government supported business through a wide range of policy levers including skills, transport, planning, migration, education and energy.
But Mandelson didn’t have time to realise his ambitious new vision. Under the coalition, the focus shifted from industrial activism to deficit reduction, and a misplaced assumption that the private sector would grow organically wherever the public sector was shrinking. Rebalancing the economy became the mantra, geographically and sectorally, but without a detailed plan for achieving it.
Two years later, in a double-dip recession, it’s clear that private sector growth has disappointed, and that rebalancing requires a more visible government hand. Now, the cross-party consensus is in favour of a modern and more active industrial policy. In the last month, MPs Pat McFadden and Damian Collins have published two separate pamphlets, both saying that government needs to do more to support business growth. Thinktanks from across the political spectrum – including Policy Exchange, the Social Market Foundation and IPPR – are all calling on the chancellor to do more.
Andrew Adonis is now on the case, advising Ed Miliband and Jon Cruddas on the future direction of Labour’s industrial strategy. What should he say to them? And how can Labour’s vision differ from those frustrated Tory backbenchers’? Here are a few suggestions:
1. Labour’s industrial policy has to be sensitive to the new fiscal reality, and can’t become a blank cheque for extra public spending. Even under a Labour government, public spending would still be very tight from 2015 onwards. Labour’s industrial strategy needs to be focused less on announcing new initiatives and more on boosting private sector growth through carefully targeted interventions – including in areas that have depended too much on public sector jobs.
2. Labour needs to spell out a new rationale for government intervention in this new economic climate, whether that’s supporting emerging new businesses or helping out those in difficulty. We need to move beyond the tired ‘picking winners’ argument, and focus on ‘supporting success’. Gordon Brown’s five drivers of productivity (competition, enterprise, investment, innovation, skills) were a good framework during his time at the Treasury, backed up by rigorous evidence and benchmarking. Something similar would be useful now.
3. Adonis should take advantage of Michael Heseltine’s current audit of UK industrial performance. By this autumn, Heseltine will report on how the UK compares with our major competitors on supporting R&D and infrastructure investment, school education and adult skills. Some useful points are bound to come out of this audit that could form the basis of Labour’s new industrial policy.
4. Rather than ‘industrial’ strategy (which smells too much of chimneys and is a bit old-fashioned), Labour should talk more about ‘business growth’. This would include manufacturing, but not exclusively so. Labour should talk about ‘making things’, but as Pat McFadden said, that isn’t just about cars and airplane engines, it’s about music and video games, retail and, yes, financial services too.
5. Finally, one specific suggestion that could differentiate Labour from the coalition’s approach: Labour should encourage a more positive pro-enterprise culture among young people – in schools, FE colleges and universities. We need more effective enterprise education in schools, more interaction between FE students and business, and a real injection of vocational skills into university campuses. This isn’t a cue for lots of initiatives, it’s about motivating young people to choose the private sector – in all its forms – as a career option.
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Dermot Finch is head of public affairs at Fishburn Hedges and is a former director of the Centre for Cities. He tweets @DermotFinch
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Dermot – do tell me what vocational skills you think I should teach my LSE students…
perhaps Tim you could teach them to bang heads together!
Over the last year, in our regeneration scrutiny, I have had the experience of interviewing small to medium size business people. Almost to an individual, they said that in terms of taking on young people, educational skills were not necesarily a barrier, but lack of soft skills, people skills, were. It would also seem that industry has some way to go in providing young people with a realistic idea of what work entails and what they value in an employee.
Business growth is not, it would seem averse to risk, as one individual put it, “being in business IS risk”. But getting finance to expand and grow is difficult. This finance could be as low as £2K.
Lastly, in Walsall we have recognised that we are light on creative industry and yet, we have a small but flourishing gaming sector, but there is little in the way of natural centres around which they can coalesce and network. Encouragement of superfast broadband hubs/small business sectors may encourage this growth.
It is correct to say that manufacturing has a dated image in my view and yet, it is probably one of our most innovative sectors. We should focus then on creative and innovative industry policy, not manufacturing solely. Though as a manufacturing employee and union rep I will bang the drum for it!
two very interesting articles in Scientific American this month ,one on brain/computer the other on THE ALL
IMPORTANT BUT MIGHTILY BUNGLED THUS FAR FUSION RESEARCH ! sorry didn’t mean to shout.
The public sector procurement is worth over £200 billion per annum, this should be used as a start. Recently in the North West of England the scandalous decision was made by the police forces of Gtr Manchester, Merseyside, Cheshire, Lancashire and Cumbria to block purchase their squad cars from S. Korea, the reason being was EU competition rules. In no other country would this happen, the police forces could have ordered Vauxhall Astras made at Ellesmere Port .
Let’s be frank, the eurozone is in the mess it is in because countries fiddled the books to qualify to join the Euro, so let’s have no more on “EU rules” or “competition law”, that’s the talk of the spineless, the bean counters and the lazy.
We should have told the police force not just in the North West but in the UK that they can have any squad car they like as long as it’s made in the UK, any motorbike they like as long as it’s a Triumph made in Leicestershire, and any SUV they want as long as it’s a Range Rover or Land Rover. Also any van as long as it’s made in the UK.This is what the French do, what the Germans do and what everyone else does. The UK has the most open procurment policy in the world and the world laughs at us. When Airbus won a multi billion dollar order to supply the US air force with tanker aircraft it was blocked in Congress.
As well as the Bombardier fiasco where the Crosslink train order was given to Siemens in Germany instead of Bombardier in Derby we’ve had a helicopter order given to Boeing in the US when they could have been made in Yeovil under licence from the Americans as we have done with the Apache and Sea King aircraft.
Recently the MoD ordered tanker ships to refuel our warships from S. Korea, the reason being that under “competiton law” they don’t qualify as “warships” so have to be given out to tender. Despite the fact that they have a helicopter landing pad on them, despite the fact that will support the navy during amphibious landings, despite the fact they fly the white ensign thay are not “warships”. Well it can’t be hard to bolt a machine gun to the deck and make it a “warship” can it?
The sda fact is though that this process was started by the last Labour government, so basically our lot were as clueless as the tories or were persuaded by civll servants that it was illegal to stick up for shipbuilding in the UK.
In the future we may have thousands of wind turbines both onshore and offshore. Energy companies should be told that they will be built in the UK or they will not have their wind farm licence granted.
Another example is building infrastructure projects. For example, say we decided to build the Severn Barrage, part of the contract should be that all materials should be locallly sourced and that apprenticeships come as part of the contract. With big building projects granted by government or local authorities you could have 16 yr olds starting an apprenticeship and by the time the project is finished they will have qualified as tradesmen (or women).
Another problem we have is that politicians have come straight from university via focus groups or think tanks, in other words they’ve never had a proper job in their life, never seen a factory floor and have never experienced the benefits that having a factory in your area brings and the devastion that its closure does to that community. In that part it is up to business to drag MPs around their facilities and for unions to invite them too.
Finally, manufacturing should be debated at this years party conference, not at a fringe meeting , not in some side room but in the main confernce hall at a time when the general public can see that we talking about something that matters because if we don’t show that we do have a modern industrial stategy that includes procurement, start up capital, identifying companies that need protecting, need nutruring and finding the companies of the future so that we don’t invent products and then let others develop them we will see voters flock to the extremists or not vote at all.
Alan Quinn, skilled aircraft fitter.