Industrial Strategy

Lord Heseltine Excerpts

Monday 8th January 2018 Lords Chamber

[Lord Heseltine (Con)]

My Lords, it is 25 years since I had the privilege of becoming President of the Board of Trade and my first question on arrival, unsurprisingly, was “What is our strategy?”, to which the very surprising reply was, “We’re not allowed to use those words here”. When I had the remarkable opportunity to produce my report No Stone Unturned about wealth creation, it took a week to negotiate an agreement with the Prime Minister and the Chancellor that the words “industrial strategy” should be included in the remit. That was possible only if I was prepared to say that it was with reference to other countries’ industrial strategy.

I say to the Minister how much I appreciate the fact that this debate is taking place and how important it is that there is now a broad agreement, led by the Government and the Prime Minister herself, that we need an industrial strategy. The fact of the matter is that every Government of whom I have had any knowledge over the last 60 years have wrestled with the complexities of what that actually means.

There have been many attempts to find a way to balance the conflicting arguments that go around this subject. I came from a small-business background. There were two of us, but I ended up presiding over some of the largest public expenditure programmes in some of the most advanced, sophisticated fields, of space, aerospace, housing and of course urban deprivation. Without any difficulty at all, one realised that the simplistic language of getting off one’s back, sacking a few civil servants and undoing the red tape is a million light years away from the responsibility of presiding over major technologically advanced programmes on which our industrial well-being depends.

The debate today has revealed, and will continue to reveal, the extraordinary complexity and the range of subjects involved. There is a tendency to talk about industrial strategy as though it was about industry—12% of our economy. That is nothing like sufficient as a concept. If you are really going to talk about wealth creation across the economy, you have to talk about the economy, which includes efficiency in the public sector just as prominently as excellence in the service sector.

I will concentrate on just three issues that run through the whole of this debate, starting with competitiveness. Anyone who has served in government knows that in this country the overarching responsibility of the Treasury hangs over all decisions. I have no complaints about that: if one is faced, as the Treasury is, with the voracious appetites of the public sector, it is very important that there is someone there to try to hold a degree of control. This problem is built into our system. In my lifetime, I have seen two PMs try to institutionalise change on a significant scale. The noble Lord, Lord Hollick, referred to both of them. First, Tory Prime Minister Harold Macmillan created Neddy and, perhaps even more importantly, the Nicys that supported it. Following on from that, a Labour Prime Minister, Harold Wilson, created the Department of Economic Affairs. They recognised, rightly, that in the monopolistic structure of our functional departments, when those departments discuss their industrial strategy in collective fora such as a Cabinet committee, there is a need for a third voice to apprise the committee and the Government of the competitive position of this country on a world scale.

One sees this pre-eminently in the situation of, say, the Secretary of State for Health. It is the most stretching of jobs: every day there is a headline. I will not trespass in any way on the validity of many of the accusations or exaggerations that are made but if you are a politician—as we all are—seeking to do a decent job and to pursue a career, you cannot divorce yourself from the realities of the headlines that besiege you every day. To suggest that that particular person is going to divert away from the urgency of those controversies into wondering about a five-year, 10-year or 20-year industrial strategy is to miss the essence of what human beings are all about.

I believe that each government department has a responsibility to explain what its industrial strategy is—as indeed is recognised, because they all sponsor industries in different ways. The noble Lord, Lord Kakkar, was very eloquent on the subject of the medical opportunities. My noble friend Lord Maude was eloquent on the subject of the nuclear opportunities. The noble Lord, Lord Mandelson, who followed me into the Board of Trade and was a conspicuous holder of that office, was eloquent about the complexity and range of these matters.

If a department sponsors an industry, and the sponsorships are all set out clearly in public, one has to ask oneself how it carries that out. I believe it should have to answer to a collective forum of Ministers as to what it sees its opportunities are in furthering wealth creation, often incidental to the main function that it may have of running a health service or whatever it is responsible for. The problem with this analysis is that there is no capability in government to monitor or question that particular assessment. The monitoring that takes place is by the Treasury, which, quite rightly and properly, is trying to contain public expenditure. There is a need for a competitiveness unit under the control of the Prime Minister and based in the Cabinet Office.

My noble friend, in a very eloquent introduction to today’s debate, explained about Britain’s position in leadership possibilities in one field or another. Let us be frank: we are fighting for our economic survival against ruthless, highly motivated, highly disciplined, highly skilled and competitive nations, and there is no remorse. That will go on. So when we use language about “being ahead”, “winning” and “leadership”, someone needs, if only in private, to tap us on the shoulder and say, “Look, it’s not quite that easy”. The reality is that we are up against extraordinary, clever and energetic communities, using all the resources of modern government to win for them. We need to know what they are doing and how they are doing it. We need to know reality—where we stand in international competitiveness. We need a unit in government drawn not just from Whitehall, although Whitehall must be there, but from academia and the private wealth-creating sector as well, in order to be part of that Cabinet analysis of Britain’s competitive standing and the industrial strategy that should flow as a consequence of that analysis.

That is the first issue that I want to raise. I recognise at once that the Minister can say to me, “Yes, but we’ve covered this in the White Paper”. So they have but, with respect, in a way that dodges the issue. The White Paper says there will be a review body; that is fine, but the body will not be part of the discussion that takes place. So the review will take place after the mistakes have been made, when they have become apparent and it is too late. I urge the Government to recognise the need for a competitiveness analysis at the time of decision-making when people are looking at the industrial strategies of individual departments.

My second point is born of excellence. We are so good. We have proportionately far more than our fair share of the world’s great universities. We have wonderful schools, great teaching facilities and world-class training and skills facilities. The problem is the tail. There are too many people running organisations at the unacceptable bottom level of attainment in skills and schools. I am not making this up; this is merely to quote Ofsted reports, which are chilling. They indicate a degree of complacency across the country about the failure of schools in particular, although I think training colleges are now to be included as well. If this were the private sector, there would be no capability to tolerate 15% to 20% of your branches failing to deliver; that would be an end to your ability to run the company. In endless conversations that I have had up and down the country, the moment that you confront this issue, everyone knows where those schools are—their names are published—but when you ask, “Why do you not do something?”, they say, “Oh, it is the cuts … it is them … it is someone else … it is too difficult”, or whatever.

It is morally and economically unacceptable that we are training a proportion of people who will never produce the skills that we need to fill the gaps that already exist. That is doubly so if we are to obtain the supply of skilled labour that is now part of government policy.

Something needs to be done. This is not a debate about whether we have more or fewer grammars or whether the academies will do this or the other. This is looking at the individual schools that are failing and co-operating at local level—I would say with local enterprise partnerships and the newly elected mayors in the seven conurbations—for local communities to address the issue. It may mean that you will sack some governors. It may mean that you will get rid of some head teachers, but the acceptance of this level of failure in our skills provision is unacceptable in any language to do with world competitiveness.

My third point is the overcentralisation of our Administration. We all know that Governments take decisions in London which, by a variety of means, are spread out across the country. We have a local authority system that, let us be frank, was relevant when the horse and cart was the means of communication. The Redcliffe-Maud report of 1968, looking at this issue economically, stated that we needed about 60 self-contained autonomous authorities. We still have about 350.

I am the first to recognise the political arithmetic which means that we cannot get legislation through to streamline our local government arrangements. To that extent, and against that background, I must praise the Government for having managed to get seven conurbations with directly elected mayors. I say to the noble Baroness, Lady Randerson, that the reason why directly elected mayors are so important is that one person is accountable who is elected by the people and who can use their influence to make decisions on a far wider scale than the present councillor-led arrangements. That is one great thing that has happened: seven conurbations now have directly elected leaders, three led by Labour, four by the Conservatives. To answer the point made by the noble Lord, Lord Mandelson, that, at least, gives some hope that this will not become a party political divide: “What they did is wrong and we have to change it the moment we get in”. It looks as though we may now have found a way to move—rather late from 1968—to something like an objective analysis of where economic power should be shared.

My question for the Government is: if you look at what we have achieved in those seven areas—including Birmingham, Bristol, Liverpool, Manchester and London itself— what about the other conurbations? What is happening in Newcastle, Yorkshire, South Hampshire and the East Midlands—great areas of economic importance? What are the Government going to do to achieve what has been achieved in the seven conurbations in those that currently lag behind? It is politically charged—I am the first to recognise that—but the price that will be paid by those economies where people are not led effectively and do not enjoy sufficient local autonomy is politically unacceptable.

There is a very clear principle here. Central government must have the responsibility of determining what services are provided and the quality with which they are provided. The more they can delegate the execution and administration of those services to the people who live, eat and breathe the community of which they are members, the more effectively they will engender the support, enthusiasm and involvement in the partnerships that are central to getting the benefits that we want to a wider community.

I ask one final question of the Minister. Everyone knows that this is a long-term problem and that you have to start from where you are and keep at it. But is this White Paper the last one, or could we have one every year, just like every company provides, explaining how it got on? We are beginning on a journey of vast significance. It will be more enthusiastically monitored and pursued if we are told every year how well we did.