Industrial Strategy Green Paper: the conflict with Government policy
Without wanting to make every post on here into a summary of a massive elsewhere document, the Industrial Strategy is important enough to make this a worthwhile exercise.
Here, I wanted to zone in on the conflict between current Government policy and this Green Paper. I hope it can be part of a wider discussion on the sort of response that cities and city regions should be making, or at least around questions they should be asking in order to get the value out of what is, at its heart, an Industrial Strategy that will be shaped by — to quote Mariana Mazzucato — “an entrepreneurial state”. We need to hold onto that — economies do not grow in a vacuum, they need boundaries, goals and leadership.
So, what could stop us from making this work?
Worthy goals undermined by current Government policy
Understandably, the Green Paper does not spell out the areas where its policy positions are actively undermining its own aspirations. That’s what an opposition is for. So, here are some key issues, arranged under the ten pillars for ease of reference:
Supporting businesses to start and grow
The Industrial Strategy pretty much plays one tune on regulation — get rid of the bad stuff. However, it seems to miss a trick on considering helpful regulation, which can shape a market, drive demand and deliver Government policy. Let’s take decarbonisation as an example.
I attended a UK Green Building Council event last year — along with developers, house builders, representatives from local government, LEPs, etc. The usual crowd. We spent two days together, and I was struck by how punch-drunk they were from the Government’s decision to scrap the zero carbon homes policy. “We’ve been preparing for this for ten years,” said one delegate, incredulously. Ten years of work, of passion, of building something great: gone.
Good regulation with a decent lead-in time for its introduction is actually welcomed by businesses. It’s not all “red tape” — sometimes, it enables you to innovate, to create better products and services, to better achieve your business objectives. Ultimately, then, the Government have made it hard to achieve their policy objectives by scrapping a perfectly sensible piece of regulation, and made it harder for businesses by undermining years of planning.
As such, I’d really like cities and city regions to be thinking of the sort of regulation (and new regulatory powers, where needed) that could help them build a strong, innovative economy.
Encouraging trade and inward investment
En bref, I think Greg Clark and Theresa May want different things. In his introduction, the Secretary of State says:
We will, of course, be ambitious in the upcoming negotiations and will secure the best possible access for businesses to trade with and operate in the European market. We aim for a smooth and orderly exit that works for the UK and for the EU.
The best possible access is, demonstrably, via the Single Market. That is possible, if only by virtue of the fact that it is happening now. But the Prime Minister’s speech makes it quite clear:
What I am proposing cannot mean membership of the Single Market.
Also:
I am equally clear that no deal for Britain is better than a bad deal for Britain.
It’s worth reading her whole speech, because for all of the reassuring words on avoiding “cliff edges”, no deal is a cliff edge. And for people running a business, ‘making stuff and selling it’, if you like, who are trading across borders, with different currencies, value stability. “[N]o deal” is incompatible with this strategy, as is rushing into triggering Article 50 without developing a framework for negotiation.
Furthermore, the Brexit issue spills out into other ‘pillars’, notably around the status of EU citizens who live here and work in universities and other research institutions. To deliver this strategy, we need to be consolidating and building on their work, not creating a climate wherein they are considering leaving the country, taking their valuable experience, expertise and relationships with them.
Our cities need to make a strong case for this. The ‘edge’ of strong research institutions will soon be lost if we lose the people.
Delivering affordable energy and clean growth
The framing of this pillar is, even if you assume purer motives than I have, misleading.
On climate change, the settled policy position is reflected in the Government’s commitment to meeting its legally-binding targets under the Climate Change Act. How we will continue to meet our legal obligations will be set out, as required, in the forthcoming Emissions Reduction Plan and we have an exemplary record of meeting our obligations.
This means that in the years ahead two important areas of energy policy require a higher priority: the affordability of energy for households and businesses, and securing the industrial opportunities for the UK economy of energy innovation.
The latter part is hard to dispute — affordability and innovation are critically important to the success of our economy.
However, our “exemplary record” is owing to a combination of policies that the Government has scrapped or weakened, and to the financial crisis, which undermined reasonably important things like housebuilding and manufacturing (see respective graphs from FullFact and This is Money):
I wouldn’t be speaking out of turn, I’m sure, if I said that the point of this whole exercise was to build a strong economy, not to return to the glory days of the financial crisis.
All of this is to say that this is by no means the time to ease off on our carbon reduction plans. As much as anything else (and the horrors of the potential impacts of climate change are their own blog post), why would you keep your economy hooked on something that it will one day, very soon, have to do without?
Moving on then, if the goal really is to ensure energy costs are lower, the deliberate policy decision to, effectively, not develop onshore wind at scale is a significant oversight. Onshore wind is currently the cheapest form of renewable energy, and the political position that the Government has taken on this is incompatible with lowering energy prices for businesses, or indeed anyone else.
Different regions will have different potential when it comes to renewables, but again, it is in the interests of city regions to work within a conducive regulatory environment for renewable heat, electricity and energy efficiency. We do not have that now.
Driving growth across the whole country
Improving pre-school education to close the gaps in achievement which exist between children in different areas even before they start school.
When it comes to pre-school, improvement is driven by qualified early years teachers with the time and space to focus on the children (and indeed, parents) who need extra support to keep up, or catch up with their peers. Logically, then, it follows that route to this involves investing into the training and hiring of qualified teachers in sufficient numbers.
That isn’t what is happening now — the funding formula is changing to accommodate a Government pledge to give parents 30 free hours of childcare a week. A good policy, but only if you pay for it, and the Government doesn’t wish to. So they are just moving around the existing money, which obviously is not conducive to hiring qualified teachers.
In Birmingham, the NAHT found that while nursery schools received an average of £8.36 per hour in 2015/16, this would fall to £4.44 per hour in 2017/18 under the new funding formula.
This point also holds for education cuts in the whole — but I’ll use further education as the second example, as there is a fairly substantial element of the Green Paper dedicated to the need to create focused, labour market-led, high-quality technical education.
While there is good provision, too many of our further education (FE) colleges only offer a broad, generalist curriculum at lower qualification levels; the sector has too little provision of higher level technical qualifications.
In the 2010–2015 Parliament, Further Education was subject to 14% cuts — since then, mergers and consolidations have been legion across the country. A narrow, generalised curriculum is certainly another function of this.
There is also a broader point on how hard it is to create education in the present that meets the needs of an economy 10, 15, 20 years down the line: it shouldn’t be taken for granted that this will be easy, even with robust “labour market analysis” (p41).
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Now, something different. Devolution. It runs throughout the Green Paper, and it is important to emphasise that Greg Clark has been consistent as its champion, first at the Department for Communities and Local Government, now again in the Department for Business, Energy and the Industrial Strategy. The paper is explicit — devolution is linked to prosperity and growth being widely shared.
…but not everyone in Government shares Greg Clark’s enthusiasm. Only last week, the West Midlands Combined Authority had to approve an amendment to the West Midlands Rail collaboration agreement because Chris Grayling (Secretary of State for Transport) “changed his mind” about full devolution. Department for Education has an explicit policy of centralising control of schools via the academies and free schools programme…but yet, adult skills are in the process of being devolved. This is deeply unsatisfactory.
While I agree that regions should take devolution at their own pace, the days of it taking place without a framework agreed by citizens, are numbered. Now more than ever, when Brexit threatens the Union and has thrown into question as to what power sits where, we need to be clear. What should always be in the remit of the UK Parliament? Do we need an English Parliament? What should Combined Authorities do, and local Councils? We have not worked this through, and now is the time.
Devolution and the Union has made some interesting recommendations on the above, and makes (in my view) a compelling case against an English Parliament. Cities need to push for this.
As an aside, the proposals around relocating Whitehall departments and having a regional presence to the Intellectual Property Office are interesting and could be of strategic importance to regional economies. Certainly, I would like to see Birmingham or Coventry making a pitch for the Intellectual Property Office, given the research strengths of the cities’ universities.
Other omissions
Is an absence of policy a position? I suppose it is, after a fashion. “We pledge to pretend that this isn’t happening,” etc. Anyway, in the same format as before:
Upgrading infrastructure
While this isn’t the National Infrastructure Delivery plan, I think it is reasonable to highlight the lack of reference to building in resilience to current infrastructure, other than via the frame of ‘flood defence’. However, that omits issues around overheating, disrupted supply chains, soil degradation, increased energy costs, and the impact of extreme weather, as oppose to flooding per se. All of which will has an impact on businesses, either directly or via the people who work for them.
(…incidentally, the dogged refusal of the infrastructure delivery plan to even reference climate change does not fill me with hope. The folk of the wizarding world refused to say Voldemort’s name, and it did not diminish his power.)
I’m increasingly convinced that climate change adaptation strategies should be one of the responsibilities of devolved areas. They could do that now. Thinking about land use or spatial planning without thinking about this is a roll of the dice, and unacceptably cavalier, given the known risks.
In all of these examples, there is no way around this — if you want the outcomes laid out in the Green Paper, these investments need to be made. That’s what public services are, investments into people and places. They should deliver outcomes and good value for money, but there is no virtue in spending less if it ends up costing more.
