When Philip Hammond delivered his Budget last week he acknowledged the forecasts for Britain’s economic future were grim. But he failed to recognise that much of the blame lies squarely at the Government’s door.
Two of the most startling and sobering realities of the last seven years have been the lack of productivity growth and real wage growth. Startling because their flat-lining is unprecedented since at least end of the Second World War and sobering because it is productivity and real wage growth which are the key to lifting living standards across Britain.
The Chancellor stated that the Industrial Strategy would “raise productivity and wages in all parts of our country [and] guarantee the brighter future we have promised to the next generation”.
Today, the Government has one last chance but unless its Industrial Strategy White Paper meets Labour’s key tests it will most definitely fail to achieve these goals.
Firstly, it must be more than a repackaging of existing policies. This Government has a long line of PR gimmicks that simply don’t deliver. In 2011 Osborne announced a March of the Makers but UK manufacturing has grown at less than half the European average since then. The Government’s industrial strategy must deliver sustained action to strengthen our economy’s foundations, not business as usual repackaged as something new.
Secondly, an effective strategy must be a partnership between Government and the private sector; that requires meaningful investment in the tools business needs to succeed.
The Government have allocated a £31billion pot of money to increasing productivity but the TUC has shown that this raises investment to just 2.9% of GDP whereas the average for leading OECD industrial nations is 3.5%.
In contrast, Labour’s Industrial Strategy is supported by £250billion direct investment and a National Investment Bank and regional development banks to mobilise £250billion of lending.
It is not just the level of investment that is important but also where it is spent.
Britain is the most regionally imbalanced country in Europe and the Centre for Cities recently found that London and the South East were up to 44% more productive that other regions. Labour urged the Government to meaningfully level up investment spending in our regions in the Budget but sadly, there was no such attempt.
Thirdly, the Government must realise that focussing on a few elite sectors and technological development alone will not drive growth across the entire economy. The Government has identified a range of sectors for support but Sheffield Hallam University found that they ‘account for little more than 1% of the whole economy (by employment) and 10% of UK manufacturing’.
Additionally, focussing on research and development whilst not reforming where and how investment is spent actually risks widening regional divides. To quote one Conservative MP ’’if we just put more money into the same funding streams we will have the same outcomes and continue to spend half the science budget in just three cities”. The Strategy must address the fact almost half of research funding goes to the South East.
Investing in new research to create new industries is not enough, boosting the take up of innovation in existing sectors is key. Traditionally ‘low productivity’ sectors, like retail, care and hospitality, are a major source of employment in the UK and any industrial strategy which truly wishes to transform the economy cannot ignore them.
Neither can the Government ignore the big societal issues of our time. They must follow Labour’s lead, and the work of Mariana Mazzucato, in setting national missions to drive innovation in the private sector to meet challenges like climate change and an ageing population.
Finally, the Government must ensure that its strategy starts from the bottom up. Only 11% students in England take IT GCSE and only 30% are at schools that provide it. Creating a highly skilled workforce ready for the technological revolution starts with a properly resourced education system not one which has had to battle through swingeing Government cuts.
Central to Labour’s industrial strategy is a National Education Service to ensure people are equipped with the skills business and industry need now and in the future.
Today is an opportunity for the Government to set out a bold vision for Britain’s future but unless the Industrial Strategy White Paper addresses these key challenges it will have failed and consigned to history as yet another Conservative gimmick.
Rebecca Long-Bailey is the Shadow Secretary of State for Business, Energy and Industrial Strategy and Labour MP for Salford and Eccles