Industrial Strategy

Lord Mandelson Excerpts

Monday 8th January 2018 Lords Chamber

[Lord Mandelson (Lab)]

My Lords, I am very glad to follow the Minister, who set out the vision of the White Paper rather well. I hope noble Lords will forgive me if I do not dwell at any length on Brexit. That will at least allow me to agree with the Prime Minister on one thing—that the UK is facing much deeper economic challenges than simply its poor cyclical economic growth or squeezed living standards, bad as these are.

In the Prime Minister’s words—and, incidentally, Jeremy Corbyn’s—we need,

“an economy that works for everyone, not just the privileged few”.

We do not have that at the moment in our country.

For me, progressive politics is about demonstrating that we can advance as a country by mobilising the strengths and disciplines of the market, and by using the unique capacity of the Government in tandem. Those things go together, stimulating enterprise with a sense of responsibility and having rewards with fairness. Industrial strategy, in my view, has an important part to play in achieving these things by helping ensure that all parts of the country are able to benefit from economic growth. We need industrial policy working hand in hand with actions to achieve more fairness in society including, importantly, across the generations so that, for example, owning your own home again becomes a real prospect for most people in their 30s. At the top, we need a lot fewer pay awards being given that are out of line with the rest of society and with business performance. A tweak of the policy dial will simply not be enough to address these challenges. We really have to adapt our economy, our whole economic model, so as to restore faith in it. That is why industrial strategy is important.

The White Paper we are debating today is a good start and I come here to praise Greg Clark, not to bury him. I very much hope that the Prime Minister feels similarly. Greg Clark and his officials have actually produced a very thorough piece of work. He is right to focus on the Government’s role in promoting investment, in business fundamentals, in ideas, place and people and in infrastructure, as the Minister said. But we also have to get other fundamentals right, such as the free flow of talent into and out of our country and having high-quality vocational as well as higher education—including, I might say, pioneering design education. It is the design of how we use and apply technology to how we live that is central to what we will produce and market in the future, and to our whole competitive advantage as a country.

Your Lordships can see the global industrial trends which Britain has to make a national mission to participate in. As the Minister said, they include artificial intelligence and data analytics, clean growth, medical science in the context of the ageing society and the transformation of mobility. Britain is present in these trends but it is not present enough. In the FTSE 100, oil, mining, finance and retail companies dominate; few advanced technology companies and businesses are emerging to scale. Yet we have huge opportunities all around us. The National Health Service, for example, will eventually be transformed by the use of artificial intelligence and data. We should be market leaders in this, investing now in the businesses that will drive it and then exporting their knowledge, expertise and success in the rest of the world.

The point is that it is the Government’s job to use their unique power in the economy—as they do in relation to the NHS, for example—to help create such new markets, making it worth while to commercialise and to grow our know-how here in Britain rather than seeing it transfer abroad when it reaches a certain point of development. That is what our industrial future depends on in this country. It is not about substituting business decisions for those made by Ministers, but about Ministers helping to make a reality of those business decisions, including occasionally by facilitating long-term commercial finance. Government has to think of itself, in other words, as literally a partner with business, networked into the country’s science and technology base, spotting potential for market development and growth, leveraging the Government’s role as purchaser, as customer, as regulator, as market maker.

In this context, the Government’s commitment to raise spending on research and innovation is highly desirable in order to raise productivity and move on from an old economy to an advanced-technology one. But spending in itself is not a panacea. Innovation does not in itself create business growth, regardless of what else is going on in the economy. You need businesses to be sufficiently confident of new market growth and opportunities in Britain, and of their ability to cross borders easily in supply and value chains and to trade freely in the large markets nearby.

It is no accident that the biggest sustained post-war growth in Britain’s productivity came from our joining the then European Community in the 1970s, followed of course by the single market in the 1990s and thereafter. The liberalisation of our trade with Europe brought huge market opportunities and a tremendous spur to competition after decades of relative protection and sluggish reliance on Commonwealth markets. As a result, flows of cross-border investment and international R&D spending in Britain were greatly stimulated, bringing with them innovation and higher productivity, buoyed by confidence among businesses about their ability to supply both our own and our largest, closest market. That is why, if we leave the European Union, our highest priority should be to remain in the European Economic Area.

This year is the 20th anniversary of the publication of my first industrial strategy White Paper at the DTI, Building the Knowledge Driven Economy—I have form. It will be 24 years since the publication of the first competitiveness White Paper, published by the grandfather of modern industrial strategy—by whom of course I mean not Tony Benn but the noble Lord, Lord Heseltine. More recently, I pursued five drivers of productivity in my second White Paper, New Industry, New Jobs, and this was followed by the industrial sectors approach of Vince Cable.

One central thing that has not been properly resolved in any of this litany of strategies is the tension between a national, centrally planned approach and doing the job instead through devolution of power and resources to regions and communities, notably but not only in respect of skills and mobility.

In my view, the northern powerhouse initiative was an attempt to combine industrial strategy with devolution, but it was an incomplete one and it now seems to have been discarded in a fit of vindictiveness towards the previous Chancellor, George Osborne. I think that is a great mistake. We cannot rely on Whitehall knowing best or policy being revised on the basis of every Whitehall-based ministerial fad, fashion or passing reshuffle, as I hope the Prime Minister is bearing in mind as we debate.

This leads me to three concluding remarks based on my experience of industrial strategy. First, it is vital that Ministers collectively—not just in the business department—take ownership of the strategy. When Michael Gove talks about the future of food and farming, that industrial future is the responsibility of his department, not of BEIS. The research budgets, procurement plans and regulatory frameworks of all departments need to be used to build the markets and competitive advantages of businesses based in Britain. The Prime Minister needs to take some responsibility in driving this, otherwise it will not happen.

Secondly, publishing a White Paper is not a job done. It requires painstaking, practical and detailed follow-up; that is when the real slog begins. Let us face it, most Ministers are not natural business people or entrepreneurs, so they must use actual hard evidence, not wishful thinking, in implementation. The chief economist that I had in the business department, the inimitable Vicky Pryce, would ask at some point in almost every policy discussion that I had: “What is the evidence base for this proposal, Secretary of State?”. I must say that this got rather irritating, but you have to be careful that through either ignorance or naivety you do not end up with a lot of industrial losers finding the Government rather than the Government finding winners.

My third remark is about continuity of policy. To be effective, industrial policy has to be sustained through political cycles, not just through one Government. It is one thing having a long time horizon—this White Paper’s horizon is 2030—but quite another to develop a genuinely long-term approach, one that will take us well beyond 2030, which is not actually very far away. Look at Germany and France. There is continuity in their systems when it comes to business and investment policies, which permits long-term planning and the development of competitive advantage over many decades.

Theresa May and Jeremy Corbyn may sometimes use different language but there are clearly points of agreement between the contents of this White Paper and Labour’s plans drawn up by Rebecca Long Bailey, Greg Clark’s shadow. I have read both and am struck by the overlap between them, which is rather encouraging. There needs to be mutual understanding and convergence of policy wherever we can achieve it.

I realise that this flies in the face of adversarial, zero-sum-game modern politics, but I hope that the Government will work hard, as I believe has already been started, to take the Opposition with them on the White Paper, and I hope that my party fully reciprocates. In these very troubled and divisive times, frankly, we need to take any consensus where we can find it, however difficult Brexit makes that.