Stephen Phipson, CEO of Make UK, explains why the association UK has proposed establishing a Royal Commission on Industrial Strategy.
Over the past fifteen years, there have been fifteen different Secretaries of State responsible for industrial strategy (when combining the various different iterations of ministries and departments now housed under the current Business Secretary), who together have launched six different plans for growth. And the Whitehall department responsible for managing industrial policy has been re-organised and re-named five times in that same period.
This endless chopping and changing masks a myriad of other remit reforms, the most prominent examples being the bouncing back-and-forth of higher education and skills policy (including apprenticeships) between the education and business departments. The same can be said for energy policy. While trade has sometimes been the responsibility of the business ministry and, at other times, of its own bespoke trade department.
When it comes to industrial strategy, the UK government has commitment issues.
As a new report launched recently by Make UK shows, many businesses are warning that a habitual short-term focus on quick fixes and political publicity stunts from successive governments is impeding economic development.
One of the main problems is a lack of commitment. In the same way, erratic parenting is poor practice, too often, new government schemes are announced with great fanfare, only to be abandoned or forgotten almost immediately. Though initiatives like Freeports or the Northern Powerhouse can be well intentioned and well designed, such policies need to be part of a broader and more coherent vision.
Inconsistency in public policy breeds uncertainty in private industry. That prevents businesses from planning effectively, so instead of incentivising investment, it incentivises intransigence.
This tendency to focus on short-term tactics at the expense of long-term strategy is understandable, given the pressures of electoral cycles and the need for quick wins. But short-sightedness stifles success. Instead of constantly changing direction depending on the latest economic indicators or political pressures, an effective industrial strategy requires investing in education and training, infrastructure, and innovation, even if the benefits may not be felt for years or even decades.
Of course, a long-term industrial strategy is not without its challenges. It means making difficult decisions about where to allocate resources, what to prioritise and what to sacrifice. It requires the political will to take risks. Yet the alternative, as we are now seeing, is stagnant productivity, increasing inequality, and low or zero economic growth.
A modern industrial strategy will require a significant, game-changing shift in the way policymakers approach business and economic policy.
The first step must be to agree on our industrial and economic ambitions. Over the last few years government’s approach to international trade has been to prioritise the quantity of our new partners rather than the quality of those relationships. Attachment theory is instructive about how to form more productive partnerships. It is imperative we set clear expectations from the start about what we wish to gain in future trade deals, as well as what we’re willing to give in return. Make UK has proposed establishing a Royal Commission on Industrial Strategy to help determine a cross-party consensus on these issues. That knowledge should then inform and underpin all economic policymaking.
A strategic approach also means sticking to the plan. One option might be to re-establish the independent Industrial Strategy Council to oversee and guide industrial strategy. The Cabinet Office could then be given responsibility for working across government, business, trade unions and other stakeholders to agree on firm goals and targets and put in place policies and practices to monitor progress and ensure accountability across all levels of government and industry.
The UK needs a stable policy environment to support businesses and workers and create the conditions for sustained growth. Through a long-term industrial strategy, we can build an economy that works for everyone, now and into the future.