After much delay, at the beginning of the year Prime Minister Theresa May finally unveiled the government’s plans for an effective Industrial Strategy. Whilst still at the Green Paper stage and open to consultation, the Strategy focused on creating world leading sectors (including digital), improving productivity, investing in infrastructure, developing skills and investing in science and research.
However, MPs on the Business, Energy and Industrial Strategy Committee have been fairly critical of the Strategy in their first review of the document. The Committee points to a lack of focus on cross-government execution, a lack of targets to measure success against and a poor understanding of what the new ‘sector deals’ will look like.
Whilst Iain Wright MP, Chair of the Business Innovation and Skills Committee, said that the Prime Minister’s focus on an economy that works for everyone was a “very welcome development”, he added:
However, an Industrial Strategy can only begin to help tackle these issues if it recognises that an economy can have a direction of travel, has a vision, and is ambitious, and co-ordinated right across Government.
As a Committee, we are concerned that with Government announcements the approach seems to be "business as usual" and a silo-based approach in Whitehall which will not achieve the step change the Prime Minister aspires to and that as a result the industrial strategy will fall short in providing a clear framework for industries and businesses to deliver future success.
As a country, we have not invested enough in infrastructure or innovation. Our skill levels remain poor despite significant spending. Too many people have not felt the benefits of growth. To achieve an economy that works for everyone the Government needs to bring together a much sharper focus on horizontal policies, such as skills and innovation, whilst adopting an ambitious mission-approach which could tackle challenges such as decarbonising energy intensive industries, tacking health and social care, or automating and electrifying transport infrastructure, which will create prosperity and employment for the UK and its citizens for the long-run.
The Committee’s report states that whilst the Strategy provides a long list of policy interventions, it does little to provide ground rules that provide a framework for future decision making. And adds that the Committee is concerned that the Prime Minister has not been able to “harness the political will across Government” to truly drive forward the long-term goals.
Where are the targets?
One of the primary concerns outlined by the Committee’s report is that the Industrial Strategy Green Paper skirts around providing any hard targets or ambitions. The Committee believes that whilst arbitrary targets are unhelpful, it argues that clearly articulated targets are necessary to ensure government and industry are able to align their priorities.
The report states that it is “hard to comprehend how policies can be designed to deliver a strategy in the absence of a clearly articulated and measurable set of outcomes”.
It also warns against the government being selective in how it measures its success. It points to the coverage of 4G networks across the UK as one example of how the government picks and chooses data to measure its achievements. The report reads:
One of the measures of success, the percentage of UK premises with 4G coverage from at least one operator, sounds impressive on the face of it, with the latest figure standing at 97.8 per cent. However, this inputs based metric is a questionable measure of success given that the National Infrastructure Commission has found that Britain is 54th in the world for 4G, with the typical user only able to access 4G 53 per cent of the time.
This is a clear example where Government has defined “success” on its own terms, rather than in a way which reflects the real experiences of the UK’s businesses and citizens, just as pronouncements on the UK’s overall economic growth have previously disguised the fact that too many people have not felt the benefits of this.
The Committee wants the government to outline a set of clear, outcomes-focussed metrics that can be used to frame its goals and to measure progress in meeting this. It recommends the government consider including metrics relating to: improving UK productivity, improving the UK’s position in international rankings on basic skills, improving the UK’s rankings on infrastructure, and improving the proportion of businesses which scale up.
The Committee also calls into question the governments proposed approach of making sector specific deals, in areas including industrial digitalisation, life sciences and the creative industries. The report notes the importance of these areas of the economy, but is unclear why they have been given a “privileged status”.
It also argues that the use of the term ‘sectors’ is unhelpful, and that specifically that ‘industrial digitalisation’ as a sector is “a vague term that could cover many things”.
MPs also questioned the government’s preferred approach of naming key individuals to lead different deals, where it suggests that this could create a “cult of personality” where individual leaders come to the fore at the expense of areas where a potentially greater impact could be made.
The report reads:
In in its response to this Report, the Government should set out the process by which it agreed to prioritise “deals” with the five sectors listed in the Industrial Strategy Green Paper, whether it held discussions with any other sectors about doing ‘deals’ and, if so, why those “deals” were not progressed at this time or referred to in the Green Paper. The Government also needs to clarify how it will evaluate future sectoral definitions, priorities and targets if it continues to pursue sectoral deals.
Unsurprisingly, the Industrial Strategy has a heavy focus on skills as a priority. The UK has a skills shortage when it comes to STEM subjects and there is a huge demand for workers in digital roles. This could become a greater problem in the future if access to talent in Europe becomes restricted as a result of the intended exit from the EU.
The Committee notes that whilst a focus on the UK’s approach to automation and digitalisation is welcome, it added that there is little sense on how government will work together to ensure efforts are aligned to tackle these problem areas and how it will work together coherently.
The report reads:
We take seriously the advice of the former Chancellor of the Exchequer that in order to make industrial strategy something which all departments across Whitehall engage in then “you do need to drive it from the centre.” We would suggest that adopting cross-cutting missions could provide a focal point for bringing together activity from across Whitehall and add value in identifying and maximising business opportunities for UK-based firms.
The Committee also questions why the report does not include a focus on adults retraining for new roles and argues that the priorities it includes don’t go far enough.
It is a shame that the more specific proposals on adult learning were not developed to inform discussions around the Green Paper. This is a significant omission given the OECD’s estimate that 9 million working-age adults in England have low literacy and/or numeracy skills. In the context of increasing automation and digitalisation of manufacturing and services, our education system needs to be nimble and able to adapt to future skills requirements. A significantly greater emphasis on whole-life reskilling will be essential to support people to stay in or gain meaningful and high productivity employment.
A skilled workforce is an essential foundation of economic success. Given the weaknesses identified by the Government in the UK’s skills base, the proposals contained in the industrial strategy Green Paper leave much to be desired. After six months in development we expected more than a disappointing combination of re-announcements, continuations of existing policy, and vague aspirations.
It is deeply disappointing that the Green Paper fails to outline any detailed proposals for discussion in relation to encouraging the uptake of STEM subjects, and improving the skills of those already of working age.
Whilst we are pleased that the outline for the Industrial Strategy is here, it’s clear from the Committee’s report that there is room for lots of improvement. With Brexit proving to be a huge distraction for government already, there is potential that this won’t be given the focus it needs - at a time when its success has never been more critical to the future of the UK.