The Prime Minister has stated that she wants an economy that works for everyone, not just the privileged few. Developing a new industrial strategy will be part of the policy mix for achieving this. But if this is to truly make a difference, it will have to confront past failures and create new solutions.
Theresa May reiterated her commitment to inclusive growth at the Conservative Party conference this week in Birmingham, pledging to make a country that works for everyone. Under her leadership, she promised, UK economic policy would be “driven, not by the interests of the privileged few, but by yours”. Neil O’Brien, former Special Adviser to George Osborne when he was Chancellor, is now leading the development of a new industrial strategy – part of the story when it comes to making the economy stronger and more inclusive.
To make a real difference, the industrial strategies and wider inclusive growth policy will have to be based on an understanding of why previous attempts to tackle the longstanding, complex and diverse issues have failed. It will need to confront the fact that the assumptions of our local economic development model are flawed. For example, and despite the rises in national wealth, many of the neighbourhoods affected by deindustrialisation and economic restructuring in the 1980s are still experiencing the after-effects.
Our education system has been a persistent part of the problem, failing to support almost half of young people to achieve the benchmark standard of 5 A*- C grades at 16 years. Moreover, as Sir John Rose, former chief executive of Rolls Royce and an Inclusive Growth commissioner, argues “we have neglected vocational training rather than embracing it as an excellent educational option that can provide a route to a career and to academic qualifications. Plus, we do not prioritise vocational training that meets the needs of industry and therefore have a mismatch between job opportunities and skills.”
This had often had a particular impact on white-working class children where attainment has fallen behind, in many cases undermining their aspirations for their future and eroding their sense of self-agency. Over the years, this has entrenched a sense of disempowerment and marginalisation within many of our communities. Little wonder the appeal to ‘take back control’ during the EU referendum resonated so strongly.
The structure of our economies and labour markets have also changed dramatically, as seen in the emergence of an ‘hourglass’ labour market, the challenges of low pay and insecure employment (temporary work, zero hour contracts), and a surge in self-employment. Any industrial strategy that is going to help create an economy that works for all must address the realities of the modern world of work as well as encouraging firms to invest in work-based learning and progression for all their employees.
Employment support programmes also need to be geared up to support individuals overcome a range of complex barriers to work, not just based on the assumption that people don’t want to work and only need the threat of sanction to compel them into sustained employment. As Tony Tweedy, lifelong learning director at Sheffield City Council said at a seminar for the Inclusive Growth Commission, “We design standalone, one-size-fits-all programmes that are meant to fill the skills gaps and miraculously turn people’s lives around after twelve weeks”.
We need a whole new model of industrial strategy.
Lessons from the past
Industrial strategy in the UK has had a chequered history. In the 1960s and 1970s we had a collective system of sector engagement and industrial policy. This was the ‘golden age’ of corporatism, when state and industry worked together on the demand and supply side to create jobs and skill people sufficiently for them. It worked to a point, but the UK’s productivity lagged markedly and the 1980s and 1990s saw a new laissez faire approach (with some large scale notable exceptions, including British Leyland).
The Sector Skills Councils (SSCs) of the New Labour government were then meant to provide a more strategic, network-based infrastructure to support key industries. But SSCs were left to die a slow death, and while never being formally abolished have had to adapt as their funding - which quickly wasn’t enough to cover the remit asked of them – was cut and cut again over the years. Under the Coalition and Tory majority government emerged the development of industrial partnerships, some of which involved SSCs successfully adapted to the new policy landscape, in which industrial strategies were out right opposed by then Chancellor George Osborne and Sajid Javid when Secretary of State for BIS (2015 – 2016).
Successful examples include the digital sector, which was originally E-Skills under Labour, but evolved into the Tech Partnership led by Phil Smith, Chair, CISCO, with a range of high profile and smaller businesses (including SMEs) across the sector. They have sought to enhance the overall productivity of the whole ecosystem, including, for example, by creating occupational standards from which to shape new Apprenticeship programmes supporting SMEs. This is a rare example of how sector groups (Sector Councils under the Vince Cable era) can connect industrial strategies with the labour market. The businesses themselves have also co-invested, further deepening their commitment to making an impact.
Now industrial strategies are being resurrected by Theresa May and Greg Clark, but in ways yet unknown. We need to ensure there are coherent, national sector-based strategies that are applied – as appropriate – at a spatial level. We also need to ensure that government is committed to getting behind the new strategies for the long term. One key lesson from the past has been a failure to see strategies and structures through. As one expert told the Inclusive Growth Commission:
“By the time we get initiatives moving, the funding is then cut so results don’t follow through and have the impact they could have. We need to invest in the long term for our country. We need to build trust and confidence with our business leaders so that they too invest for change. We need to persuade employers that they need to invest in quality jobs so that we lift the tide and all boats, impacting on the bottom line of UK plc.”
In picking winning industrial sectors, investment projects or firms (think Tata Steel in Port Talbort, for example) we need a new approach that will create inclusive, place-sensitive growth. This will only happen if it:
- Involves strategies that invest in both physical and social infrastructure (such as health, education and skills) – with these components valued to the same degree in terms of their impact on economic growth and inclusion.
- Goes beyond high-tech sectors. We must make sure that our new industrial strategies speak to how we can generate jobs at the lower and middle end of the skills distribution, as well as enabling progression from entry level upwards.
- Enables people across the UK to access these jobs, including via skills and skills planning (from 14 – 24 years and life-long learning), transport, housing and planning, pre-employment support and health (particularly, in many instances, mental health).
The Inclusive Growth Commission welcomes the return to favour of industrial strategy. But any new approach must learn the lessons from the past and make clear its intention to be part of the building block for more inclusive, place-based growth.
Read the Inclusive Growth Commission's interim report
Find out more about the RSA Inclusive Growth Commission
Charlotte is Director of the Inclusive Growth Commission. You can find her on Twitter @calldritt.