The government’s vaunted industrial strategy represents little more than a codification of current practice, writes IPPR North director Ed Cox

The government’s industrial strategy is welcome – but by trying run the economy from Whitehall, it misses the devolved framework that makes similar approaches successful overseas.

The prime minister has been keen to impress upon us that her ‘modern industrial strategy’ represents a new, more progressive and active role for government that ensures that wealth and opportunity are more evenly spread across the country. But is it really a new approach?

Most of its 10 pillars are little more than a codification of current practice. If you could point to one new policy idea then it would be the ‘open door challenge’ to industry to develop ‘sector deals’. But even here, this ‘deal-making’ with central government is something that has characterised the relationship government has nurtured with local enterprise partnerships and city regions – with mixed success. This could be worse than government picking winners – it could be winners picking themselves.

But more fundamentally, the problem with 10 pillars or numerous sector deals is that there is little sense that the industrial strategy will allow the whole to add up to more than the sum of its parts.

The problem government faces in attempting to be strategic is that the national economy is just too diverse to be more prescriptive. To this extent it is right to recognise the importance of place. Greg Clark long promised a ‘place-based’ approach but on this score the green paper bitterly disappoints.

Pillar nine concerns ‘Driving growth across the whole country’. Its lowly position in the pillar hierarchy immediately tells you something, but far from linking sector strengths together with regional assets and opportunities in a strategic fashion, instead it simply promises dollops of cash for infrastructure, skills and local growth projects. The local growth fund, for example, is little more than old Michael Heseltine-style centrally-controlled competitive bidding.

This is the real missed opportunity that needs to be sorted in the strategy’s next incarnation. Rather than try to develop a strategic approach across an economy comprising 60 million people, we need to learn from overseas and from the academic literature about the optimum scales for economic strategy. For some issues like education, skills, housing and planning a more local approach is right; but for identifying sectoral strengths and clusters, for investing in infrastructure and innovation, for organising major finance, trade and investment, local enterprise partnership areas are too small, yet England is too big.

In each of the countries that the green paper highlights as exemplifying good industrial strategy – Germany, the United States, South Korea – there is a regional tier of strategic planning. In fact, industrial strategy and regional policy become one and the same thing.

While acknowledging that the country is ‘one of the most centralised in the world, with institutions that are often too fragmented to provide the most effective leadership in shaping successful places’, it is striking that the green paper seems so timid to do anything about this. Pillar 10 calls for the creation of the right institutions to bring together sector and place and yet dissolves into suggestions for strengthening local enterprise partnerships. If government is seeking lessons from overseas it needs to look more carefully at the powers and finances held by the German lander and US states and city regions.

Ultimately the test of this modern industrial strategy will be whether it succeeds where others have not. In his 500-page epic on the United Kingdom’s national-regional economic productivity problems, Professor Phil McCann chronicles several decades of industrial strategy and addresses each of the most common explanations for the UK’s productivity problem. None, he concludes, is more significant than governance. Devolving the relevant powers and fiscal autonomy to a regional tier is the only way for sub-national economies to respond in a strategic fashion to the diverse challenges and opportunities that globalisation demands. For as long as we attempt to fix the economy out of Whitehall, we will keep on failing.

———————————

Ed Cox is the director of IPPR North, the dedicated think-tank for the North of England. He tweets at @edcox_ippr

———————————

Photo