A WATCHDOG has criticised the Conservatives for ‘neglecting industrial strategy’ in a recent report.
In 2017, the Government issued a White Paper on Industrial Strategy – a long-term plan to boost productivity and earnings in the UK.
The independent Industrial Strategy Council’s first Annual Report provides an evaluation of the success of that strategy two years on.
Andy Haldane, Chair of the Industrial Strategy Council, commented on the report: “An effective Industrial Strategy is central to tackling some of the deep-seated structural challenges facing the UK economy, among them the climate crisis, ‘levelling-up’ the regions, the skills deficit and the productivity puzzle.
“The Government’s Industrial Strategy, set out in 2017, has made good progress in implementing policies that support these objectives.
“But, at present, these policies are not yet operating with the consistency and coordination, nor with the scale, necessary to meet these challenges.
“With a new Government in place committed to meeting these challenges, there is a great opportunity to refresh and renew not only the Industrial Strategy but the entire economy.”
Given the long-term nature of the policy commitments in the Industrial Strategy, the Council states that it is too early to reach definitive judgements on their success but the Report provides an initial assessment of progress.
Having a strategy for industrial policies is, the Council believes, a positive step when tackling the challenges facing the UK economy, including the climate crisis, the skills deficit and the productivity puzzle.
A strategy can help in ‘providing the longevity, scale and co-ordination needed for success.’
The report states that progress has been made towards implementing the 142 policy commitments made in the 2017 White Paper.
Most are now in delivery phase and, in total, around £45 billion of financing is assigned to Industrial Strategy initiatives.
Most of this financing is, however, allocated to a small number of projects, including R&D and transport.
This means many of the policy initiatives in the Industrial Strategy have little, or no, financing attached to them.
As such, they are ‘very unlikely’ to have a material impact on the economy’s performance.
Also the report states that there is little evidence, so far, of the Industrial Strategy having led to significantly improved policy co-ordination across government.
The Council believes a refresh and reprioritisation of the Industrial Strategy would be desirable if it is to meet its longer-run objectives.
Having an Industrial Strategy that is more tightly focused on a core set of Grand Challenges, financed at scale, co-ordinated across government and committed to over the longer-term would not only improve the chances of the strategy meeting its longer-term objectives.
Iwould also make it easier for people to understand, engage and support it.
The Report focuses on a number of more specific aspects of the Industrial Strategy where the Council believes further progress would be desirable:
The Grand Challenges are an innovative cross-cutting approach to tackling recognised global mega-trends, such as climate change, AI and longevity.
However, so far, only ‘modest progress’ has been made towards meeting these challenges.
The Council believes a much greater degree of focus, financing and policy co-ordination is needed to meet those challenges.
The Grand Challenge for which this is most pressing is the Government’s net zero by 2050 target.
The Council believes the Government’s target for R&D expenditure is a positive step.
At 2.4 per cent of GDP by 2027, it is also an ambitious one.
Based on past trends, there would need to be a significant step-up in R&D spending, by both the public and private sectors, to meet this target.
The R&D target should be one of a broader set of actions aimed at supporting and promoting science and innovation in the UK, including the proposed new advanced research agency.
The UK is facing an unprecedented skills challenge.
Without policy action, this challenge will grow significantly over the next decade.
Supportive policy initiatives are underway, including T-levels, the new apprenticeship system and extra financing for Further Education.
Still, the Council believes a strategic overhaul and expansion of training policies and institutions is needed to meet the future skills challenge, including by reviewing and introducing greater flexibility into the apprentice system.
Addressing regional disparities is a critical element of a successful Industrial Strategy.
The target for every Local Enterprise Partnership and Mayoral Combined Authority in England to publish their Local Industrial Strategies in early 2020 is ‘unlikely to be met.’
Also it remains unclear how these strategies will be taken forward and brought together.
The Council stated it welcomes the new Government’s commitment to ‘levelling-up’ the economy.
This needs now to be turned into an implementation plan which is consistently applied, appropriately financed and focused on those areas ‘left behind.’