How place-based is the new Industrial Strategy?
Having announced the fact of the Industrial Strategy almost as soon as she assumed office, this week we finally got the first proper detail of the centrepiece of the May Government’s domestic economic strategy. That the devo-ally Greg Clark was convening it was a promising sign that we would see something more nuanced than the pulling of remote levers in Whitehall to tackle our national productivity puzzle.
As the Brexit vote laid bare the consequences of stark economic polarisation in our national economy, the impetus has been growing for a strategy that seeks to more fundamentally deal with regional imbalances in our economy. A growing coalition of voices have called for a more geographically sensitive approach to driving productivity, including business leaders themselves in the CBI’s recent Unlocking Regional Growth report, and NLGN’s own report Smarter Not Harder.
So how place-based is the Industrial Strategy? Devolutionaries are certainly used to substantive mentions of the local role coming towards the end of the priority list if and where they feature in other Whitehall departmental plans. And this strategy did not disappoint – devolution and local institutions feature as items number nine and ten of ten pillars (a step up, I can’t help but note, from Osborne’s National Productivity Plan which had “Resurgent Cities” as item 15 of 16). It is not mere frivolity to note where in the scheme of things the local role is identified – whether it is intrinsic or an add-on is telling.
Yet there are signs throughout the strategy that the solutions to kick-starting productivity growth do need to come from the ground up rather than top down. The explicit link is made between our centralised governance and our weak productivity, suggesting the analysis recognises the causation that might exist here – certainly our more devolved international comparator nations are also much more productive than us – Germany, France and the US.
In amongst the focus on sectors and skills, there is some recognition in the strategy that how they interplay across local economies, is important. And so, for example the development of industry clusters based around local expertise is proposed, as is R&D investment being more evenly channelled to support local innovation strengths. There is a relatively sophisticated understanding of the range of local institutions across higher education, business networks, trade associations and local investment funds which all need to be empowered and aligned to local objectives.
But there are key elements missing from an Industrial Strategy that is coherently place-based. Much of what’s proposed is spatially-blind, and does not seem to recognise that some of these systemic challenges play out differently in different areas, and require just as nuanced a response. There is a reliance on bilateral deals – between government and industry, between UKTI and business consortia – which seem to leave local partners out of the picture. There is an acknowledgement that devolution deals and new mayoral combined authorities will play a role, but their potential is certainly underplayed. For example directly elected mayors will undoubtedly be well-placed to forge international trade links in post-Brexit Britain, but currently a “Team UK” approach to trade is favoured, with a rather weaker commitment to “improve how the promotion of inward investment links up with local areas”.
Tackling our poorly performing skills system is clearly a priority within the strategy, specifically the need to advance technical education, address basic skills and reduce skills gaps which hold businesses back. But the solutions proposed are almost uniformly national: for example, the Government will produce “one single authoritative view” of skills gaps rather than locally specific analyses. New Institutes of Technology are to be placed in all regions – but it is not clear how these will interface with local governance and identified business needs. Germany’s vocational system is often held up as an exemplar – it is highly devolved through the Länder convening provision working with industry and trade unions – this is a lesson from international good practice the Government could take on board.
Finally, a massive missing piece is the financial incentives which sit underneath this. As things stand, plans for business rates retention mean that by 2020, the future sustainability of local government and the local services that support communities, will be directly linked to the health of local economies. Instead of reducing local government’s role to that of a walk-on part in all of this, the Government needs to recognise their role as a clear driver for productive growth.
References to local government still sit uneasily and infrequently in the strategy, as soon as there is a mention of the role of councils they are balanced out with allusions to LEPs or other local institutions who will be in the driving seat. Notably there is a suggestion to create the role of aldermen to bring business expertise into local government. Instead of structural fixes or centrally mandated posts, the Government needs to develop a more sophisticated understanding of how a devolved fiscal framework could embed these relationships more fundamentally. In our devolved counterpart countries, local business income or value-added taxes give local municipal authorities a more direct stake in creating an environment conductive to business profitability.
This is only the first step towards the Industrial Strategy which will develop further this year, and on balance the “place-based” rhetoric towards is promising, and a significant advance from previous similar national strategies. The challenge now is to go further so that genuinely all parts of our country realise their full potential.
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