Stephen Temple

George Osborne is the first Chancellor of the Exchequer that I can recall for over 30 years that has both understood and risen to the challenge of sustaining and growing the UK’s dwindling manufacturing base.  I pick on the Chancellor in the knowledge that the Prime Minister has his heart in this and other Ministers such as David Willets (to name but one) are making an extraordinarily contribution – but it is the Treasury that makes or breaks these sorts of initiative. The nation should be applauding the imaginative proposals announced by the Chancellor. Instead the response has ranged from faint praise to outright criticism of their irrelevance to the current crisis. If this gulf of misunderstanding is not bridged quickly…the UK could be consigning itself to staggering from pillar to post for the next 10 years.

There are three main reasons why the Chancellor’s statement has not caught the nation’s imagination. First most people are totally preoccupied with short term palliatives to the exclusion of fixing the long term underlying structural problems that have led us here. Second, the government could do a lot better in communicating its growth strategy. Third, all the measures the government have announced are the equivalent to the components of an industrial growth machine. We have yet to be shown the big picture of how these various components will be made to function together as an industrial growth engine. A free global market has many good attributes but delivering a bigger share of the global industrial base for the UK has clearly not been one of them. Let me take each of these points in turn.

It is fairly evident why everyone is desperate for a short term fix. The economy is slowing, incomes squeezed and unemployment rising and this is all happening now. None of the £30 billion of infrastructure projects can conceivable have any impact on these issues over the next 6 months or even 18 months. Other measures such as support for R&D will not bear fruits for another 4-5 years. So the media and demand side economists have taken the public debate away from fixing the long term structural flaws to a debate on instant remedies…Plan A versus Plan B. Yet all a quick fix can do (at best) is to buy a bit of time at various risks and costs. And if that is all we finish up doing…in 18 months…or in 3 years…or in 5 years…we will still find ourselves in the same bind.  So we desperately need parallel actions…things that deal with the here and now and equal energy put into fixing the fundamental problems of a country too dependent on a single industry.

So just how good are the government’s proposals for re-generating our industrial base to secure a more balanced economy?

There is nothing in my background that qualifies me to offer an opinion on Plan A  versus Plan B. But I do have relevant background on what makes for a good industrial policy. I served under Michael Heseltine when he was President of the Board of Trade and trying to re-invent industrial policy at the DTI. I headed up the Branch dealing with the telecommunications, radio and broadcasting industries. We went up a huge learning curve over a very short space of time…enough for me to be able to recognise a credible industrial strategy from empty mantras and wishful thinking.  The things George Osborne announced in the Autumn statement taken together with some of the earlier initiatives (eg enterprise zones) clearly pass of the test of a credible industrial policy and even more so with the Treasury so ostensibly behind  them. In my days in the Civil Service the Treasury were the enemy for any enlightened industrial policies…how refreshing (even exhilarating) that we are seeing such strong leadership coming out of the Treasury. Why am I the only one cheering?

A lot of the muted reaction can be put down to the distractions of  what might engulf us if the Euro project crashes. However I suggest that the government could do a lot better in communicating its new longer term growth strategy.  The missing piece is a credible over-arching narrative that pulls all the initiatives together. Put another way the Government is delivering the components of a growth strategy (in dribs and drabs)…the next step I suggest is to set out the blue-print of how these components mesh into a long term national industrial growth engine. All the initiatives need to be put on time-lines of when they deliver (creating credibility as well as setting realistic expectation), the port folio of industry sectors with growth potential need to be set alongside (allowing ordinary people to relate to the growth strategy) and the horizontal measures (training and the imaginative financing ideas) can then to be brought underneath to demonstrate its solid foundation.  The picture is all there for the making. The Prime Minister’s recent NHS Life Science Partnership announcement is a first class industrial policy initiative…but where is the rest of the picture?

This brings me to my third and final point. Once we have all these new infrastructures in place, finance in all its form flowing and our skilled people flowing out of Universities and Apprenticeships …is the job of government done? Quite the contrary, the job will have only just begun. Ideology tends to channel our thoughts to the extremes of either leaving everything to market forces (which is one of the reasons for the UK’s industrial base contraction) and expecting the government to regulate everything (which contributed to the collapse of communism). The countries that have been the most successful in nurturing and then sustaining a modern industrial base have used a quite different mode of government and that is as an active catalyser of modernisation, innovation and the networking needed to seize complex new opportunities.  Michael Heseltine called in “industrial sponsorship”, Peter Mandelson called it “industrial activism” and Germany doesn’t seem to call it anything but make an exceedingly good job of doing it.

The UK prosperity of the past 20 years has been powered by Financial Services, North Sea Oil and Consumer Credit. The credit cards are maxed out, North Sea Oil production is declining and whilst Financial Services remains an important future contributor…the froth will not be returning anytime soon. There is much for the country to do to diversify is wealth creation base and the clock is ticking in a world that does not hang around for the losers and the wingers…