The Government has published its much awaited Industrial Strategy. This is its plan for how the economy will be more productive and more balanced, both in terms of manufacturing rather than favouring financial services, and in terms of the North and the Midlands rather than concentrating solely upon London and the South East.
Many people think that the Government shouldn’t have a plan or a strategy. The role of the state, it is sometimes argued, should be mostly to get out of the way; provide an education system to ensure the workforce is skilled, provide infrastructure so that goods, people and data can be transferred efficiently, but the Government should emphasise low taxes and cut red tape to allow the free market to thrive.
It is right that enterprise should be assisted, but it is somewhat a false picture of the economy to say that government shouldn’t or couldn’t play a key role. Governments intervene in the economy every single day by making laws, rules and regulations. They can do so in a chaotic way, uncoordinated and often contradictory, which causes uncertainty for businesses, or it can try to make decisions based upon a plan or a strategic framework. Government can use its significant purchasing power to make decisions that strengthen British businesses, making them more innovative and competitive. The United States, despite its reputation as a free market nation, does precisely this: the US Department of Defense uses tax dollars to push American companies to make better products. Much of the technology in an iPad, for instance, came from defence competitions – an industrial strategy in action.
The crash in 2008 exposed the limitations of an economic system which had prioritised financial services over manufacturing. That’s not to say we shouldn’t as a country value what we are best in the world; the City of London is the centre of the world’s financial system, providing a large proportion of tax receipts for this country. However, the decline of manufacturing over the past 40 years has made the country deeply, even dangerously, unbalanced when it comes to the economy and life chances. A failure to value manufacturing and to recognise that this is the base on which improvements can be made throughout all parts of the economy is probably a key reason for why Britain’s productivity lags behind most of our competitors.
Somewhat closer to home, a belief that a modern and innovative economy has a steel industry from which other products can be derived, and that such capabilities should be preserved for the good of ongoing prosperity, could have preserved steelmaking in Redcar. Had we had a proper industrial strategy a couple of years ago, perhaps the tragedy of SSI could have been avoided, or at least managed as new owners were found.
So, is this new industrial strategy, or is too little, too late? The rhetoric is good, and the structural weaknesses in the UK economy are well defined. However, there is no true explanation outlined as to how improvements will be delivered or actioned. Crucially, an industrial strategy needs to have a long-term perspective, one that thinks about the next 30 years and what the British economy will look like in the year 2050. There’s not much evidence of that. The Industrial Strategy is probably a six out of ten, but more needs to be done to ensure it delivers and ultimately raises living standards and improves the competitiveness of British businesses.