Government urged to put infrastructure at centre of industrial strategy

The UK’s people, places and businesses will only achieve their potential if there is a complete overhaul of how the government views industrial strategy, taking a long-term view with infrastructure at its heart, according to a major new report published by the independent Industrial Strategy Commission today.

The final report of the commission argues that the new industrial strategy must be an ambitious long-term plan with a positive vision for the UK and it must be rethought as a broad, long-term and non-partisan commitment to strategic management of the economy.

Chaired by Kate Barker, the commission is an independent joint initiative by Policy @ Manchester at The University of Manchester and the Sheffield Political Economy Research Institute (SPERI) at the University of Sheffield.

Commenting on the report, Kate Barker, chair of the Industrial Strategy Commission, said: “The UK’s people, places and industries have great strengths and untapped potential, but we must accept the reality that the economy also contains many long-established weaknesses.

“Industrial strategy needs to be embraced as a long-term plan to manage the economy strategically and embedded throughout government. If we get the new strategy right it can build on these strengths, tackle our weaknesses and above all have a positive, long-lasting impact on people’s everyday lives. This implies that sometimes it will be right to choose equity and long-term-gains over short-term efficiency.”

The commission’s new recommendations, outlined in its final report, include:

  • The new strategy should commit to providing Universal Basic Infrastructure. All citizens in all places should be served by a good standard of physical infrastructure and have access to high quality and universal health and education services.
  • Health and social care must be part of the industrial strategy. As well as offering potential for productivity gains and new markets, achieving better outcomes for people’s wellbeing must be placed at the centre of the strategy.
  • The new strategy should be organised around meeting the long-term strategic goals of the state. These include decarbonisation of the economy, investing in infrastructure and increasing export capacity.
  • Innovation policy should focus on using the state’s purchasing power to create new markets and drive demand for innovation in areas such as healthcare and low carbon energy.
  • A new powerful industrial strategy division should be established in the Treasury to ensure the new strategy is driven from the centre and embedded across government.
  • A new independent expert body - The Office for Strategic Economic Management - should be created to monitor the new strategy. It should be created on the model of the Office for Budgetary Responsibility.

Speaking at the report’s launch, business secretary Greg Clark said: “Our modern industrial strategy has an ambitious long-term vision for the UK that will build on our strengths as a country and deliver a high-skilled economy for the years ahead. It is encouraging to see the commission places equal value on an industrial strategy that boosts earning power, spreads prosperity and increases opportunities for all areas of the UK. We welcome the positive support for a new industrial strategy by the commission and share its ambition. We will carefully consider their contribution to this important work.”

The independent commission says the new industrial strategy must have an ambitious plan to tackle the UK’s major regional imbalances. Its report argues that an industrial strategy should not try to do everything everywhere, but it should seek to do something for everywhere. The commission calls for a national framework within which all places will need their own plan to suit their needs. Decisions are best made by people close to the ground so the new strategy calls for further and faster devolution to towns, cities and regions from Whitehall.

Commenting on the report, Nelson Ogunshakin, chief executive of the Association for Consultancy and Engineering, said: "We welcome the Industrial Strategy Commission's conclusions that infrastructure is absolutely central to the successful delivery of the UK's industrial strategy. We have been promoting the importance of good infrastructure as being a key driver of the economy and we totally agree with the commission's call for a longer-term approach. Politicians of all parties should take note of this report and act on it by taking that longer-term view."

Professor Diane Coyle, co-director of Policy @ Manchester at The University of Manchester and one of the commissioners, said: “Universal Basic Infrastructure (UBI) is a bold proposal to upgrade the UK economy’s productivity potential. Our version of UBI would give all people, places and businesses access to the physical infrastructure they need - such as transport, energy, and digital - and also to the ‘soft’ infrastructure of high quality health and education services that are essential to everyone’s well-being and capacity to find jobs.”

Dr Craig Berry, deputy director of SPERI at the University of Sheffield and another commissioner, added: “Industrial strategy isn’t just about supporting a small number of sectors. It should focus on big strategic challenges like decarbonisation and population ageing - and ultimately it should aim to make material differences to people’s everyday lives. This will mean rethinking how government makes policies and chooses its investments. Cost-benefit analysis should apply to the real world, not just to a spreadsheet.”

Professor Richard Jones, professor of physics at the University of Sheffield and one of the commissioners, said: “The UK needs to rebuild its innovation system, with more private sector R&D and more translational research, linking our excellent research base to the existing and new businesses that can create solutions to society’s problems and at the same time create value. We must make sure businesses everywhere in the UK can benefit from new technology, to drive up the productivity of our cities and regions.”

Professor Andy Westwood, professor of government practice at The University of Manchester and a commissioner, said: “The government has been keen to stress the importance of technical skills in the industrial strategy, but our track record in policy has been poor for many years. 

“To create a step change in skills and productivity, we must look beyond ‘T Levels’, Institutes of Technology and other supply side reforms and make sure universities and colleges are better linked to wider objectives including sector strategies and tackling regional inequality. This will require careful consideration of how recent reforms in further and higher education can complement, rather than contradict, an effective industrial strategy.”

Click here to download the full report and executive summary.

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