In an effort to boost the regional economies of the UK, improve productivity and defend the government from accusations of being London-centric and elitist, new regional economic and industry policies will be introduced in a White Paper.
No, this is not the prelude to the introduction of the Theresa May’s government new White Paper on industrial strategy for the UK. It is a description of the thinking behind the first Blair government’s (1997-2001) policy on regional development and the introduction of regional development agencies.
The public could be forgiven for thinking that the current government’s ideas for regional economic development, in the form of a new industrial strategy, is a new idea. In reality, this is the latest attempt by a British government to create joined-up thinking in the areas of manufacturing, services and related infrastructure such as transport and housing. It is, crucially, the latest in a series of efforts by successive governments to boost the economies of the regions and reduce the reliance on London to drive the UK economy.
The coalition government of 2010-2015, dominated by Conservative cabinet ministers who demanded a ‘bonfire of the quangos’, effectively ended regional policy as a core government concept or responsibility. In place of the regional development agencies came a series of Local Enterprise Partnerships and Enterprise Zones – selected through government organised competitions to encourage local business leaders, universities and local authorities to work together and devise local plans for economic growth. The LEPs and Enterprise Zones were backed by government financial support and incentives to grow businesses in these designated areas. Of course, the devolved powers in Scotland, Wales and Northern Ireland has limited central government’s implementation of Conservative Party enterprise policy to England. As the powerhouse of the UK economy as a whole, the Cameron government and indeed the May government could reasonably argue that enterprise policy in England is the flagship of government support for regional enterprise policy and economic development.
For almost ninety years British governments have struggled to address the issue of regional policy. In recent economic history, the governments of Edward Heath and Harold Wilson addressed regional disparities in economic growth by attempting to decentralise government ministries and agencies, creating administrative headquarters in key regional cities. The Institute of Government and London School of Economics produced an insightful report into how successive governments used the structures of government ministries and agencies as an agent of reform and policy from the 1950s onwards.
At the time this brought perceived benefits of job creation in areas such as Tyne and Wear, South Wales and Scotland that were suffering from industrial decline. Many economists and politicians consider this period as an abject failure in terms of the development of regional economic policy. In the early nineteen eighties, the Thatcher government(s) attempted to address rising social unrest across the country by creating enterprise zones. Again, though politically desirable for a party in government, most economists suggest, in pure financial terms, these enterprise zones were extremely costly to the public purse per job created. And so, it seems, in 2010 the coalition government took the UK full-circle with the introduction of enterprise zones. Time will tell whether these have been as successful as the previous and current government has claimed. What is clear is that they lacked the cohesion of a genuine regional structure, given that they were based on competitive bidding by individual geographical partnerships.
Will the new industrial strategy White Paper take us full-circle again? Perhaps we might see a new regional policy launched, with regional structures such as government agencies, physically based in each of the English regions? This is doubtful. The speech by the Secretary of State, Greg Clark, to the Institute of Directors annual conference, placed more emphasis on the need to address the productivity gap between the UK and its main competitors such as Germany than it did on decentralisation of government ministries or establishing new agencies.
What can we expect from the new Industrial Strategy White Paper?
The focus will be on two or three key areas:
Science, research and development and the exploitation of technology
The relationship between cutting-edge science and research and its application to business and industry. Put simply, the government will invest billions of pounds of public money into the development of research and research facilities, but crucially, only in areas of science and technology where the chances of the UK capitalising on the end results of this investment are high. If the government invests it will do so if the chances of creating new products, jobs and businesses are high.
In an attempt to address low productivity, so that economic growth is accompanied by a rise in productivity, the government will create a new National Productivity Investment Fund. While details on how this will work are yet to be outlined by ministers, it is likely that part of the investment available will be earmarked for focused studies to understand why there is a problem with productivity in the UK. It’s an issue that has dogged successive governments. Indeed, the Blair governments from 1997-2007 tried to address this issue, not least by the dispatch of senior government ministers to productivity challenge roadshows across the country and funding to assist companies to improve productivity. The second strand of funding under the NPIF will be for practical measures to help companies improve productivity and to measure these improvements.
Reinforcing government investment in existing initiatives
These include the drive for innovation and research in low-emission vehicles, a revamped scheme to provide tax incentives for businesses which invest in research and development, support for venture capital funds to enable access to venture capital for a larger number of new and early-stage enterprises and, possibly, funding to offset the risks and potential financial losses to businesses, associated with possible restrictions on EU market access after Brexit.
All of these are initiatives that will be welcomed by businesses, universities, research centres and business leaders.
The creation of a new industrial strategy will provide a signal of political intent – namely that the government is serious about getting its act together to address the challenges caused by the prospect of leaving the European Union in two years’ time. It symbolises a government that is creating cohesive policies to support industry, the services sector, the UK research base and higher education. Combined with new investment in national infrastructure and transport systems, an industrial strategy is viewed as being of central importance to Theresa May’s government.
The problem for the government, notwithstanding these very laudable initiatives, remains the same problem that the previous government faced and which psephologists suggest was largely responsible for the EU referendum result – alienation of much of the population outside of London.
An industrial strategy and associated investment is, by definition, a long-term plan. It is not expected to achieve results in the form of thousands of new jobs, new companies, increased wages and improved living standards for the government defined ‘just about managing’ population outside of London (or indeed inside London).
For this reason it might be expected that Greg Clark will announce some form of regional industrial policy, perhaps even some form of visible presence associated with this long-term plan, in towns and cities outside the capital. There is no indication of what form this might take. It is not inconceivable that the new industrial strategy will include local hubs of some description – perhaps new enterprise hubs or technology hubs to attract new entrepreneurs and young people interested in careers in key technology sectors such as the games industry.
It is almost certain that the new strategy will involve existing networks across the country – such as individual industry sectors and their representative bodies. Governments have long sought to get the ‘buy-in’ of key industry sectors in new policies and initiatives. The harder challenge for the government is in finding ways to generate the enthusiasm and involvement of the wider working population across the country and to give hope to young people in particular that the potential risks to their future prosperity, created in part by the vote to leave the EU, is being addressed in a clear and coordinated way by the new government.