No industrial strategy in the Chancellor’s Autumn Statement? We were promised one, weren’t we?
Well, perhaps, but as it turns out Theresa May outlined something along those lines three days ago to the CBI – and there was that commitment to boost R&D.
Either way, for those of us who are following events from the Inclusive Growth Commission bunker at the RSA, the emergence of a new kind of industrial strategy – and it does have to be a new kind – is pretty key to the future. R&D is important, but one R&D bung does not make a summer.
Nor is that, plus the various tweaks to Treasury policy in Philip Hammond’s statement, quite enough to address the problem of the so-called JAMs – the ‘just about managing’ who the new Prime Minister has designated as her touchstone economic group.
And here lies the problem, because it is clear that the Treasury is still approaching the JAMs issue as an aberration, rather than the canary in the mine. Their chosen solution is to tweak a little money here and there off the welfare cuts or off the fuel tax bill, or off rural business rates. The JAMs are not yet Exhibit 1 in Theresa-nomics – the economic doctrine that makes spreading prosperity the prime objective.
So the Autumn Statement reveals that the Treasury is still in the old mindset, that wealth will trickle down, that concessions to the wealthiest will benefit us all, that investment in cable and other infrastructure will inevitably lead to higher investment and growth. When all the evidence of recent decades suggests that trickle down doesn’t trickle.
From the point of view of inclusive growth, you have to wonder about the following issues in the autumn statement:
The Treasury seems to be stuck with the doctrine of If You Build It, They Will Come. There is considerable evidence that transport infrastructure, by itself, does not spread prosperity. If that’s all you do, they won’t come. It may be necessary, but it certainly isn’t sufficient – as the excluded sections of Newcastle or Dagenham will attest. And transport infrastructure by itself may sometimes just suck the economic life out of a place.
Again, the Treasury is stuck with the idea that the success of the innovative scale-up companies is enough to drag the rest of us into the future. Of course, they are important, and so is the new support for innovation. But, if prosperity is to spread, it will need enterprise to take root much more widely, with support from banks and mentors for very ordinary small business which provides the economic backbone of the nation.
It is increasingly clear that the real engines of inclusive growth are likely to be the cities. That implies we need a more ‘grown up’ phase of devolution which allows local authorities to join up economic and social policy more effectively. And using the Autumn Statement to announce measures on traffic pinch points rather misses the point.
The problem for the Treasury is that they still appear locked into the old pre-Brexit world, where the solution to the problem that prosperity doesn’t travel very well was a few bungs to the welfare and transport department, followed by the satisfaction of a job well done.
It is increasingly obvious, in our new devolved cities, that this isn’t enough anymore. The failure of prosperity to spread is holding back our great cities – they are earning less than they could do because they are not using their assets to their full capacity. They are spending more than they should do because they are having to pick up the pieces broken by entrenched economic failure.
If every area in the UK had a GVA per capita at least as high as the national average, the narrow economic value would be an extra £191.5bn. That is the scale of it – but also the scale of the opportunity.
It is time the Treasury shifted their world view enough to tackle the challenges of the new world a little more directly.
You can find out more about the direction we are charting for inclusive growth by reading our Emerging Findings report.
Find out more about the RSA Inclusive Growth Commission