The government’s work-in-progress industrial strategy will only be a success if it has private-sector buy-in, is embedded throughout the public sector, and learns lessons from the relocation of Whitehall operations outside the capital, a new report has said.
The Industrial Strategy Commission, an independent body founded by the Sheffield Political Economy Research Institute and the University of Manchester, said there is a strong political consensus for the creation of an ambitious industrial strategy focused on growing the nation's economy outside of the South East.
However, the commission’s first major report – published today – cautions that the strategy cannot hinge on hand-outs of out government money to chosen businesses or sectors, but must instead be built on strategic economic management geared toward creating the conditions for long-term investment in productive and innovative business.
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The commission – which is chaired by economist and former member of the Bank of England’s Monetary Policy Committee Dame Kate Barker – argues that a long-term set of institutions created specifically to “determine, implement and monitor” the new strategy is one of seven essential foundations for success.
The other six are: recognition of the importance of place and the need to increase growth and productivity everywhere; a joined-up approach to science, research and innovation; a strong competition regime; an increased investment rate; a comprehensive effort to improve skills, and effective use of the state’s purchasing and regulating power.
In relation to “place” the report says attempts to relocate Whitehall departments to other parts of the country should provide core lessons for a future industrial strategy – underscoring that “politicians are often tempted to spread government interventions too thinly, ignoring the importance of agglomeration economies for success, thereby wasting public money”.
The report, named Laying the Foundations, says targeting different cities for different parts of the civil service to be moved out of London carried a risk of “diluting the know-how and career flexibility that would have made them more attractive jobs and genuinely helped the economy of one location”.
It said a current example was the relocation of Channel 4 from London, arguing that while Birmingham, Manchester, or elsewhere were options, economic arguments pointed “decisively” to the Manchester region because it was already the biggest media cluster outside the capital.
Commission chair Dame Kate said summer 2017 was a “critical moment” for the UK economy, but that last month’s snap general election had resulted in political fragility that added to growing economic concerns following the EU referendum.
“Now more than ever we need long-term strategic economic management to enable the UK to respond to current challenges and invest in our people, places and industries to achieve greater future prosperity,” she said.
“This is what industrial strategy is and how it should be thought about by the government as it prepares its new strategy.
“This will only be successful if it has the correct foundations and offers a positive vision for our country’s future. This report sets out how that can be achieved.”