Not since Robert Donat clambered out of the Flying Scotsman to evade the police in Alfred Hitchcock’s 1935 film The 39 Steps will a crossing of the River Forth have generated as much excitement. In three years time, cameras will be in place to record the first wave of UK driverless vehicles – an autonomous bus service linking Fife with Edinburgh.
News of the pilots – another is planned for taxis in London – was carefully timed. The government launched its industrial strategy a year ago and wanted to be able to show there had been progress.
There is a paradox here. Theresa May stressed when she became prime minister that an industrial strategy was needed to spread prosperity across the nation and so deal with the reasons that people voted for Brexit. But Brexit has used up vast amounts of the government’s bandwidth to the extent that it has tended to crowd out everything else.
Just to take one example, it was rightly seen as important that progress towards meeting the aims of the industrial strategy would be assessed independently. An industrial strategy council to do the job was promised within months: in the end it took the best part of a year before it was set up under the chairmanship of Andy Haldane, the chief economist of the Bank of England. Industry bodies wonder whether the delay suggests that the government is not as fully committed to the industrial strategy (IS) as its says it is – and they have a point.
The low profile adopted by the business secretary Greg Clark hasn’t exactly helped either. Michael Gove’s proactive approach at Environment shows that it is possible – despite the noises off – for cabinet ministers to say things that draw attention to the initiatives they are interested in. But as one industrial policy expert put it: “Clark is a wallflower. He is not interested in promoting himself.”
In Clark’s defence, industrial strategy is a slow burn. Once the government has listed its priorities and provided some funding (which it actually has in this case) there is inevitably quite a long delay before anything happens. Sorting out Britain’s productivity problem – the aim of the strategy – is going to be a long, hard process in which there are not that many quick wins.
Few would quibble with the government’s list of issues that need to be tackled: Britain needs to innovate more, invest in people so that they can get better jobs; upgrade the nation’s infrastructure; create the right environment to set up a business; and make sure that prosperous communities are spread right across the country.
Quite clearly, the IS is a throwback to an earlier age, to the time in the early 1960s when the Macmillan government created the National Economic Development Council, a tripartite body that brought together politicians, trade unionists and employers. May’s idea that the government should build strategic partnerships with business through sector deals smacks of the corporatism that Margaret Thatcher loathed.
The emphasis on sectors working at the technological frontier is unsurprising and – up to a point – sensible. If the world is on the cusp of a fourth industrial revolution, there will be big profits for the companies that move quickly. That’s why the IS is big on artificial intelligence, driverless cars and clean growth.
But there are three problems here. One is that the focus on whizzy industries does very little to tackle productivity. Far more attention needs to be paid to the less glamorous sectors that make up what the IPPR thinktank called the everyday economy in its recent commission on economic justice.
Gareth Stace, the director-general of the industry body UK Steel agrees. He is disappointed that the government has not done anything about energy costs, which mean British firms pay £50m a year more than they would in Germany, and is deaf to pleas that investment in new plant and machinery should not be penalised by increases in business rates. “A year on, the steel sector is still waiting to see any benefits coming from the industrial strategy,” he said.
A second problem is that the new hi-tech fourth industrial revolution companies tend to be concentrated in the more prosperous parts of Britain, and that bias will become even more pronounced with the development of the Oxford to Cambridge corridor as a single knowledge-intensive cluster.
Finally, there is the question of whether the government is merely paying lip service to the need to back the industries of the future. Clean energy is supposed to be a priority, but renewable sources of power were not mentioned in Philip Hammond’s recent budget and the government is proposing to remove payments for small-scale suppliers who export power to the grid. Quite clearly, it is sending out conflicting signals.
Ultimately, the risk is that the IS tries to do too many things and does none of them very well. If, for example, the government wants to back an industry of the future, it should pick one – green technology – and really commit to it.
The warnings about the threat of climate change have come thick and fast in the year since the industrial strategy was first published. There is a pressing need to decarbonise the economy by building more energy efficient homes, improving the insulation of the existing housing stock, improving local transport links, and accelerating the switch to renewables.
Jobs would be created, skills would be upgraded, fossil fuel dependency would be lessened, and prosperity would be more evenly shared across the country
But it will only happen if the government uses its full range of policy tools – regulation, public spending, procurement, tax, and state-funded R&D. That requires far more commitment and focus than it has showed thus far.
