Being proactive about industrial strategy, for once.

I have spent much of my time these last few months trying to compose bits of advice of the form “so you want to do an Industrial Strategy? Here is what I learned”.

For I am meant to have a unique perspective here: special adviser TWICE when the government was trying to get a strategy going (in 2011, and 2017). Policy spads are meant to sit neatly in the intersection between technical wonk and political fixer. Ideally, we are able to evaluate what the proper objectives of industrial strategy should be, work with officials to think up policy ideas to achieve them, have encouraging and challenging engagements with business, but also know how to work the system: bargain with the Treasury, find zones of possible compromise where deals can be done, get the right work out of the department. It’s brilliant work.

The General Election may have messed with publication plans, but not the fundamental driving motivation. My reflection on how things went during my time in government (six and a half years in total) often returns to one overriding failing: being reactive. Every Monday morning there is the impulse to choose, consciously and strategically, where to put your efforts – and then you find the next five days taken up with stuff that arrived in your diary and inbox without any deliberate intent. Much of this is how it *should* be; spads are a flexible resource, and as my 2014 piece argued, a useful part of the connecting tissue enabling other bits of the system to operate (the very worst instead see themselves as Gurus, there to spit out ideas for a grateful bureaucracy to implement). But in my case I regret that the whole experience was too reactive.

In fact, this “reactive” charge applies to the genesis of the first industrial strategy itself. I was recently reminded that one of the first sparks to ignite Vince Cable’s strategy was the failure of a UK-based manufacturer, Bombardier, to win a contract to make train carriages. The biggest initial intervention, the Aerospace Technology Institute, was motivated in part by the failure of a big merger in that industry. The whole demand for a “plan” for growth was boosted by criticisms from the likes of Sir Richard Lambert that the Coalition had none. And the whole topic of growth was raised up the agenda by concern that we were in a Double Dip Recession, blamed on austerity (it was revised away). Creations like the British Business Bank were opportunistic (we seized on Osborne calling for a Small Business Bank and twisted it into something bigger, some classic low political cunning). We got powerful support from the uncontrollable, wonderful Michael Heseltine, always a fan of intervention.

The Cable industrial strategy had to fight indifference or hostility from the rest of government. I am mildly surprised to be reminded that the PM David Cameron used the term, but it was not a regular preoccupation of his No10. Chancellor George Osborne mentioned it briefly but allowed Vince’s successor Sajid Javid to gut it in short order. What money we won for Cable’s strategy had to be bargained for in a rather tactical manner, which was no great way of reassuring business that it was going to last. I spent a fair amount of time in 2013-14 trying to reassure some businesses that the Government’s promises in areas of green growth in particular after particular hostile noises from the Chancellor.

Theresa May’s strategy was much better from that point of view: it was Business Secretary Greg Clark’s priority from the outset, supported in No10 by first Neil O’Brien and then me, and given a fair amount of resource, in theory. But Brexit and an inherent sense of political mortality meant it was always going to struggle to convince industry it was staying for long. We sort-of hoped that Johnson, with his Brexity Hezza brand, would want to keep the thing going – surely the “take back control” slogan meant intervention? But there was also a real concern that he would put Truss in the Business Department, and her hostility to the very idea ran deep – lobbying against particular interventions I won’t name here. I spent time in the closing weeks of the May regime wondering how I could Truss-proof the strategy.

Should Labour win the election they would be the first government proactively choosing industrial strategy from day one, the first with the PM and Chancellor both gladly uttering the term and speechifying on what it means. They have no excuse to do it entirely reactively, which means they are under far more pressure now to be thinking about what their early policymaking will consist of. (The normal pressure of government will make them more reactive than they expect, anyway: that is just the way of things, there is a reason every political columnist remembers the phrase “Events, dear boy” uttered by Macmillan.)

What would being less reactive mean? Here is how I would break down my regrets:

Going into power with clearer goals. I think Labour will probably not suffer from this. They may in fact be overly stuffed with goals, and actually want clearer prioritisation.
Understanding the levers better. There are myriad ways a modern industrial strategy can try to influence the conditions for an industry’s success. See the IPPR work, Table 2.1 for one kind of taxonomy. But that only gets you so far. “If I wanted to achieve X, what levers Y and Z might I pull, how much do they achieve” – this sort of blunt understanding just isn’t present. Maybe it is always too early to know! The mental image one has of industrial strategy is of big blunt subsidy just causing things to happen – and maybe Biden’s is achieving this. But for the subtler, “remove the barriers and make the environment right” UK version, the effects take so long that often within any political timescale what you end up measuring is just whether you achieved an input, not an output. I know we managed to set up the ATI – I do not know how much extra aerospace business we now have. Likewise for Catapult Centres, the British Business Bank, and much more.
In particular, a challenge to how funds work. Since 2010 there have been myriad: just from memory, a Regional Growth Fund, an Exceptional Regional Growth Fund, Levelling up fund, Shared Prosperity Fund, Towns Fund, Strength in Places Fund, – these are just the ones with regional rebalancing in the idea. Does any politician understand how long the chain is from conception to design to competition to bids awarded to money spent to actual shovels going into the ground? How different is it for tax measures?
Establish relationships early. Loads of arms’ length bodies matter and do the actual delivering of interventions. Innovate UK and UKRI, for example. Skills bodies, infrastructure delivery ones, the funds that support specific technologies, the people supporting trade … They often really WANT to meet the political class that funds and governs them. In my case, these relationships just occurred as they popped into the diary – not good enough!
In particular with business! I may have met more businesses in my time than any other comparable politico. But nearly always at THEIR initiation. Surely a strategy means identifying in advance who are the really big players that will be driving the investment you need? You should know them?
Establish cross-government understanding of the strategy early. A strategy will not just be a DBT (or BEIS or BIS) thing. What DHLUC, DESNZ, DSIT, HMT and others do will matter too – but for none of those departments will the Strategy be a priority. That problem – a problem for many policy issues – needs to be worked on regularly and consistently if it is to be solved.
Win secure funding in advance. If the decision tree basically has as its last branch, “now see if HMT thinks you are mad or not”, you will never make industry certain.