Don’t believe the rhetoric – this is a supremely industrial-strategy minded government

The UK goes through a regular cycle of promoting and then repudiating industrial strategy. The clock-speed appears to be accelerating. When Sajid Javid banned the phrase in 2015, industrial strategy had enjoyed five or six years of renaissance under Vince Cable and Lord Mandelson. They in turn had resurrected the term after 10 years of neglect under New Labour, following the departure of the great interventionist Michael Heseltine. He himself followed almost 15 years of Thatcherite hostility to economic intervention.

The latest phase began in 2017 under Greg Clark, then business secretary, with his Green and White Papers. ^[1] That being over three years ago, we should not be surprised to read of a minor repudiation from the Treasury. According to the Financial Times, the impending Budget in March will not feature an industrial strategy document, but instead focus upon the more Treasury-minded “Plan for Growth”. ^[2]

The government’s main objectives are industrial strategy-flavoured

Coinciding with the advent of Kwasi Kwarteng in the business department, it is tempting to read this as decisive turn in a new policy direction. Mr Kwarteng made himself well-known eight years ago as a co-author of the decidedly ‘dry’ Conservative polemic Britannia Unchained, which was more about deregulation and free-trading than state control of the economy.

But it is too soon to declare the end to the latest phase. It is always tempting to read a deeper meaning into every Whitehall event, some noise from a hidden battle between departments, officials or politicians. However, what happens is as often the result of time-pressure and disorganisation as ideological choice. Moreover, while documents are important markers of a government’s direction – this is Whitehall we are talking about – they are not all that matters. Industrial strategy is about what a government does and how it does it. This is still a supremely industrial-strategy-minded government, no matter what it publishes.

First think about what this government intends to do. By now, even casual political observers know the agenda of the Johnson administration almost by rote. Levelling up the regions, making an economic success of net zero, bringing Britain back to the forefront of scientific excellence, the pursuit of new markets for British companies – all of these are emphatically industrial strategy-flavoured objectives. Whether the Treasury allows them to be described that way or not. Sitting behind all of them is the perennial need to restore productivity growth – the pre-eminent objective of the Greg Clark industrial strategy.

Levelling up does not mean being more laissez-faire; Brexit doesn’t mean backing off

Moreover, none of these are objectives that can be pursued through exclusively free-market means. Whatever "levelling up" means, I doubt many traditional Conservative thinkers believe that left-behind places can catch up with London if they were only allowed a little more laissez faire. Net zero will likewise involve a high degree of intelligent state intervention, working hand in hand with reformed markets. ^[3]

This leads us to the question of how the government intends to act, which is even more unambiguous. As I discussed in my industrial strategy report, the very rational for Brexit – “take back control” – is a call for government intervention; it is the UK government in Westminster that is meant to be gaining the control in question. The EU Free Trade Deal was in its later stages almost derailed during a tense argument about controls on state aid, the subsidies, tax breaks or other help a government might direct to a business or sector in pursuit of some goal. It would be odd to go through that process and then emerge with a less interventionist approach, particularly given the considerable help parts of the economy will need in the months and years ahead.

This manifests itself in other tools of economic influence the government intends to wield, such as a UK development bank, the redirection of government offices towards the regions, or the new research agency aimed at scientific breakthroughs. The National Security Investment Bill marks a clear turn towards more political involvement in the market for ownership. Observers will be looking out for how easily the ostensible cause of national security blurs into one of economic advantage. In a recent IfG event, Kwasi Kwarteng even mused about how if we are to have British Steel, we ought to have British Coal to supply the coking material. These are not thoughts anyone might expect to hear from a pure free marketeer.

This is a uniquely difficult time for the government to set out an enduring industrial strategy

Sometimes, one should take explanations at face-value. The unnamed source in the FT story talked of how Net Zero, Covid and Brexit have changed the circumstances for making a government plan. Normally, this would be a terrible excuse – events are always intervening, your plans should be robust in the face of them. But events are not normally as monumental as a covid pandemic, the structural repercussions of which are likely to reverberate for many years after it has hopefully died down. ^[4] The Budget is consumed with questions around the timing of massive support packages, and neither the fiscal situation nor the shape of the economy in a year’s time are at all clear. Remote working makes it much harder for officials to interact with industry to the degree you would want when creating a plan. 

Now is a uniquely difficult time for the government to set out an enduring industrial strategy, particularly as the secretary of state is new in the role and might reasonably ask for more time before charting a course. The vaccination programme may be going well, but there is still a huge amount of uncertainty; as I write, we do not even know if the health secretary will be allowed a trip to Cornwall this summer. The government has an industrial strategy to pursue whether it calls it that or not. Better to take time getting it right than rush it when minds are occupied with other matters.

1.  https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/611705/building-our-industrial-strategy-green-paper.pd https://www.gov.uk/government/publications/industrial-strategy-building-a-britain-fit-for-the-future
2. “UK industrial strategy refresh ditched as ministers set out plan for growth”, 9 February 2021  https://www.ft.com/content/013ce682-09c8-4132-9a14-232f7e9f311a
3. See this excellent (long) blog from Guy Newey of the Energy Systems Catapult for an introduction to the sort of institutional and market reforms needed https://guynewey.medium.com/devolving-power-strategic-choices-for-the-future-net-zero-energy-system-1ba3cff5bf5f
4. For a sense of all the different ways in which this might affect just the question of office work patterns, this Twitter thread https://twitter.com/chris_herd/status/1359135080753614854 is very illuminating