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Reinventing the wheel makes for bad industrial strategy

The government needs to slow down the parade of initiatives and organisations if it wants its policies to have an impact, says Emma Norris.

Government has a tendency to recreate policies and organisations on an alarmingly regular basis. New organisations replace old ones, and one policy ends while a remarkably similar one is launched.

Since the 1980s, further education has seen 28 major pieces of legislation and 48 secretaries of state. In regional government, meanwhile, there has been so much change it has earned its own academic term: redisorganisation.

The same goes for industrial policy. Here, churn has been less dynamic but just as significant. In the last decade, there have been at least two industrial strategies and we are moving onto a third. This has profound implications for effectiveness.

The ideological shifts between the 1940s and 1980s about the role of government in industry are widely recognised. But there has also been substantial change in the last 20 years. From 1997 onwards, New Labour sought to support industries to generate skills and increase productivity, first through the Sector Skills Councils, later through business secretary Peter Mandelson’s pledge to support industries such as low-carbon technologies and hi-tech manufacturing.

Vince Cable, the coalition’s business secretary, introduced a more active industrial strategy, pledging to provide finance, invest in technology and skills, and open up government procurement. Sector Councils were formed to help business and government collaborate and agree opportunities for intervention. The next business secretary, Sajid Javid, favoured more horizontal support, including the reduction of red tape for business.

Now, prime minister Theresa May has committed to an active industrial policy. Success, however, will depend on maintaining greater stability and learning from what has worked in the past.

Why has it been so difficult to maintain stability? Researching the Institute for Government’s report All Change, released this week, we identified three factors. First, there has been enduring political disagreement about the proper relationship between industry and government. Recent business secretaries have often wished to shift course away from their predecessor.

From 2008, Mandelson looked to rebalance the economy away from one focused heavily on financial services. He called for targeted government intervention to support particular enterprises. After 2010, Cable sought to use government to support themes such as skills, technological development and creating conditions for investment and growth. From 2015, Javid shifted towards a more deregulatory and small-state role for government. This is now set to change again.

The second factor is the use of resources. The withdrawal of resources has caused fluctuations in the power, influence and even existence of some organisations. Before 1979, the Department of Trade and Industry and its variant manifestations were well resourced. But from the 1980s onwards the department was progressively stripped of power and funds, as the Treasury assumed greater control over discretionary budgets. 

Finally, the institutions and organisations asked to deliver industrial strategy have struggled to have impact. Sector Skills Councils, Sector Councils, Industrial Partnerships, Growth Partnerships and Leadership Councils all exist, but it can be difficult to distinguish their roles and work out how much is duplicated. Frequent turnover or expansion of these bodies has weakened their impact and industry’s confidence in their roles.

 Despite all this change, certain features of the UK approach have remained the same for 60 years. Foremost among these is the belief in supporting certain ‘special’ industries. Two other perennials have been that industrial strategy must have a spatial dimension, and that skills lie at the heart of future industrial success.

Regional policy has been central to industrial strategy since at least the 1972 Industry Act, which established the hierarchy of assisted areas in existence today. It returned as the primary focus of Cable’s industrial strategy, underpinning Enterprise Zones, Local Growth Hubs and the funding provided to Local Enterprise Partnerships through the Regional Growth Fund.

The desire to use industrial strategy to address the mismatch between skills and jobs has likewise been a long-standing ambition. The Sector Skills Councils were partly there to address skills gaps and improve productivity, continuing much of the work originally carried out by Industry Training Boards.

All three ideas live on in the current industrial strategy. But if May wants to make progress, Westminster must focus less on overturning the work of previous governments and more on committing to a clear and consistent industrial strategy for the long term, learning lessons from the past and giving organisations and policies time to perform.

Emma Norris is programme director at the Institute for Government.

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This article also appeared in Research Fortnight