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Jo Johnson’s job is harder now, but the change brings benefits too

David Willetts explores how industrial strategy might be made in a government where science and universities are in different departments.

In 2010, on his first and only visit to the Department for Business, Innovation and Skills, the new prime minister David Cameron committed to keeping the big department that the previous Labour government had created for Peter Mandelson to deliver industrial strategy. Now, paradoxically, BIS has gone just as industrial strategy is rehabilitated.

My years in government convinced me of the importance of industrial strategy. The former business secretary Vince Cable and I both started off pretty sceptical. Vince had called for the abolition of the old Department of Trade and Industry. I had worked for Nigel Lawson and Margaret Thatcher in the 1980s, and saw industrial policy as a way for failing businesses to waste taxpayers’ money. We both travelled a long way in the years after 2010.

Vince focused on areas such as the aerospace and automotive industries, convincing, for example, General Motors not to close a UK car plant. I focused more on general-purpose technologies where Britain had a scientific lead and where there were business opportunities. The evidence is that such technologies only get to market with sustained support from governments. I identified eight great technologies that met these criteria, which were then funded to the tune of £600 million. 

Have recent changes in the machinery of government made this sort of intervention easier or harder? Splitting responsibility for universities and science between two departments, with universities going back to the Department for Education, will make life for Jo Johnson tougher, although not impossible. 

For most of the twentieth century, universities were run directly from the Treasury. One goal of Lionel Robbins’ inquiry into higher education in the early 1960s was to find them a better home. Robbins argued against putting universities in the education department, because they were so much more autonomous than schools; he wanted them treated as independent institutions, not just another public service.

Robbins envisaged they might belong somewhere more like today’s Department for Culture, Media and Sport. They went to education, however, and remained there until Gordon Brown’s ill-fated experiment with creating separate departments for schools and families and another for innovation, universities and skills. The last of these was later fused with the DTI to create BIS. 

It is understandable to see universities as the culmination of the education system and hence put them back in the Department for Education. But there are problems with this. Universities are important economic players. They shape the local economy, attract businesses and drive innovation. They host much of our research. They are a crucial part of any industrial strategy. Back in 2010, I asked the prime minister specifically for the ministerial post combining universities and science because they seemed closely linked. Making these connections across two different departments could now be harder.

The department has not just lost powers, it has absorbed the Department for Energy and Climate Change, to become the Department for Business, Energy and Industrial Strategy. High energy prices have harmed Britain’s energy-intensive businesses. Driving steel production offshore, to places where less regulated industries allow far more carbon is released in steel production, can make climate change worse. So there is a logic to bringing energy into the business department.

I wish that the digital economy had also been brought into the new department. Much of this was in BIS, and it would be great to have this area back, because digital services are crucially important to the economy.

There is one other issue: trade. For an economy as open as ours, trade is fundamental. Who we trade with and why emerges from deep economic factors ranging from comparative advantage to transport costs. As a believer in free markets, I do not believe that politics can override such factors.

We will need our trade negotiations to be rooted in an understanding of how our economy works and what the big opportunities are. Much trade policy is now not about tariffs, but about regulatory non-tariff barriers. Tackling them needs an understanding of how technical standards are set and where they are being used to protect domestic producers. Bodies such as the National Physical Laboratory are crucial here and the new Department for International Trade will need not just a cadre of trade negotiators: it will also need scientific and technical advice.

To make the business of government manageable and ensure democratic accountability, you must define boundaries and hence responsibilities. There is no right structure. The real need is to ensure proper coordination between departments with different priorities. With his role straddling two departments, Jo Johnson is the man to make these connections.

David Willetts was universities and science minister from 2010 to 2014. He now sits in the House of Lords and is a visiting professor at King’s College London.

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This article also appeared in Research Fortnight