Welcome to the policy loop – some thoughts on the latest industrial strategy
Author: Prof Ewart Keep
Posted on: 30th November 2017
This document, launched on a day when the UK media was obsessing about the engagement of the nth in line to the throne to an American actress rather than our economic future, did not appear trailing clouds of glory. Rather, it emerged cushioned by a set of fairly limited expectations. In the event, this was probably just as well.
Since the financial crisis of 2008, industrial strategy (vaguely defined) has been back in fashion at a rhetorical if not a practical level, and following New Labour and the Coalition governments’ efforts the current Conservative administration has been putting its own particular, rather minimalistic stamp on this policy area. January’s Green Paper has thus been followed by a more definitive statement of what the government hopes to achieve in terms of tackling low productivity, re-balancing the economy (spatially as well as sectorally), promoting better jobs, increasing earnings, supporting innovation and science, and ensuring that we are fit and ready for an exciting post-Brexit future as the go-to, leading edge, globally-facing, free market, free trade, buccaneering and entrepreneurial nation in the developed or developing world.
In presentational terms, the new industrial strategy is a retro affair – it recalls the glossy, full-length productions that one associates with New Labour publications. Long gone are the Coalition’s austere, black and white, no picture, white papers. Here colour photos (40 no less) of cutting edge technological artefacts and ethnically diverse young scientists, workers and businessfolk abound, as do shaded boxes providing examples of best practice and even better existing government initiatives.
Content-wise though much of the ground the strategy covers turns out to be very familiar indeed. In the recent past we had ‘eight great technologies’, now we have ‘four grand challenges’ (AI and data, clean power, transport [mystifying labelled ‘mobility’], and the ageing society). We also have a lot of space devoted to R&D and innovation (brigaded under the banner ‘ideas’). We now aspire to becoming the world’s most innovative economy. However, innovation still essentially means more scientific research and knowledge transfer and nothing else. The place of workplace innovation or employee innovation in process and product remains entirely absent in official thinking, which puts us a very long way behind many of our competitors who many years ago realised that incremental improvements were at least as important as the next ‘big science’ breakthrough (see Keep, 2016). For as long as we cling on to the outdated ‘science and science only’ model of innovation, our chances of becoming the most innovative economy are actually liable to be exceedingly slender.
The skills and employment section is an odd mixture of analysis and policy moves. The industrial strategy is at pains to endlessly repeat how successful and envied is our flexible labour market, but references to some follow-up actions to the Taylor Review (timescale unspecified) reflect the rather harder and less easily discussed reality that while we have been very successful at creating a lot of jobs, many of them have been low wage, low productivity openings that are being propped up by the tax credit system and a benefits crackdown. How socially and economically sustainable much of this employment will prove to be in the long run is a moot point. It is certainly hard to imagine many Scandinavian workers, or even employers, looking at our labour market model in admiration and wanting to copy it.
The skills measures in the strategy are an utterly predictable ‘blast from the past’ as all the old hits get replayed – more STEM, extra money for maths teaching, approving mentions of apprenticeship and T-levels, a small sum for some pilot work on FE staff development, another run at adult skills and re-training – with the time-hallowed overall aim that we will end up with, “a technical education system that rivals the best in the world”. At this stage it is impossible to speculate what degree of success will attend those of these measures that are new, as detail of their design and implementation is absent. One warning sign is that, with the exception of the maths teaching policy, the sums of money available to back up the good intentions are often vanishing small. What is clear is that any radical departures from the traditional policy menu are absent, and the implicit starting and finish point is the supply side, with the happy assumption that underlying levels of demand for skill and its effective utilisation in the workplace can be left to market forces and luck to deliver.
As ever, what is missing is what matters. Besides the inability to address workplace innovation, there is nothing about how to increase the internal capacity of firms to train their workers, nothing substantive about how work organisation and job design impact on productivity or job quality (Keep and Mayhew, 2014), and no overt recognition that to solve our productivity woes we cannot simply focus all our attention on knowledge-intensive sectors and hi-tech manufacturing (Jacobs et al, 2017). The performance of our foundational economy (such as retail, social care, retail banking, health, transport), where the vast bulk of our workforce is employed, is also of vital importance. Researchers at Sheffield Hallam University (Fothergill, Gore and Wells, 2017) who looked at the earlier green paper on industrial strategy calculated that its policies were mainly focused on 10 per cent of the manufacturing workforce, which equated to about one per cent of the overall UK workforce. The latest version of the industrial strategy is only a little broader. The only chink of light is the promise that a review of productivity and growth in SMEs will be undertaken – by whom and to what timescale is not vouchsafed.
The point of development to watch, at least from a skills policy perspective, are the emerging sector deals. The first four confirmed in the Industrial Strategy cover AI, construction, automotive and the life sciences, but more are expected to follow. These offer opportunities for collective organisation and action by employers based around a ‘something for something’ deal with government which could embrace job quality and skills as well as investment and innovation. In some sectors at least, these may form the template for more joined up thinking and action on job quality, inclusive growth, productivity, skills and new forms of innovation.
Given the medium to long-term challenges that the UK’s economy and society now face – Brexit, a living standards/real wage freeze potentially lasting two decades, exceedingly weak productivity growth, and huge public spending challenges around health, social care, housing, and welfare – the industrial strategy represents a small and rather faltering step up to the plate. At some point, rather more radical thinking may need to be entertained, not least around skills.
Fothergill, S., Gore, T., and Wells, P. 2017. Industrial Strategy and the Regions, Centre for Regional Economic and Social Research: Sheffield: Sheffield Hallam University, CRESR.
Jacobs, M., Hatfield, I., King, L., Raikes, L., and Stirling, A. 2017. ‘Industrial Strategy – Steering structural change in the UK economy’, IPPR Commission on Economic Justice Discussion Paper, London: IPPR.
Keep, E. 2016. ‘Improving Skills Utilisation in the UK – some reflections on what, who and how?’, SKOPE Research Paper No. 123, Oxford: SKOPE.
Keep, E., and Mayhew, K. 2014. Industrial strategy and the future of skills policy – the high road to sustainable growth, London: CIPD.