With a change of occupancy in Number 10 later this year, there is much speculation about the future structure of government and in particular the DTI.
The arguments here are well-rehearsed - some think that the DTI is an anachronism and should be split-up, others maintain that it is vital for ensuring that business is represented in government - but like many important issues it is not that simple.
This debate should not be about the DTI, but rather what government needs to do to promote economic success. There appears to be consensus over the need to raise UK productivity, the question then becomes how government should best organise itself to support this.
The DTI is key to this agenda. Although its core functions - science and innovation, trade promotion, ensuring fair markets through competition and regulation, and schemes to improve business performance – appear disparate, there is clear economic evidence of synergies between them. Thus encouraging exports or getting companies to introduce modern management techniques can promote productivity. Likewise regulation can stimulate innovation in working practices so policy areas like employment legislation need to be closely linked to competitiveness not just social welfare.
To ensure a strategic and coordinated approach is taken to these interlinking functions it does not make sense to spread them around Whitehall. They also need to be kept close to their core target – the business community – and must be underpinned by a function of government which is responsible for engaging with and understanding the needs of business.
How then, you might think, is this any different to the current DTI model? The answer is: not much. EEF believes that it is less a case of splitting up or scrapping the DTI, but more where its functions should sit in government.
At present both the DTI and the Treasury have responsibility for productivity issues. The DTI’s problem is that it is usually seen as the junior partner in this relationship. It is strong on delivery of many of its specific tasks, but it works in an environment of reducing budgets, regular staff upheavals and constant speculation about its future. The Treasury, meanwhile, seems to develop and have the final say over the majority of strategic decisions in the productivity area. It is unsurprising, therefore, that people question the need for the DTI.
To overcome this there should be a single department responsible for the coordination of strategy and delivery of the economic agenda. This could be the Treasury. It could be the DTI. Or it could be, as some people have suggested, a new department which merges aspects of both and specifically focuses on economic growth but is distinct from the management of the nation’s finances. There are merits in all three approaches. Which department carries out these functions is less important than it has the political backing of the Prime Minister and is represented at senior level in Cabinet.
There is also a case for saying that other areas of productivity policy – such as skills and infrastructure - should be grouped together in one department. The Scottish Executive, for example, has a Department for Enterprise, Transport and Lifelong Learning.
However, skills policy, in our view, should remain with the DfES because skills and education policy are inextricably linked through the lifelong learning agenda and efficient delivery is better achieved through a single department. Nonetheless both areas require a significant focus on the needs of business.
Maintaining and encouraging investment in the UK’s infrastructure – particularly in energy and transport - is also a vital component of economic performance. Bringing these functions together, along with planning, into a single ‘Infrastructure Department’ could provide much needed focus to addressing the crucial challenges of improving the UK’s infrastructure.
We recognise that there is an argument that infrastructure issues are linked to the climate change agenda and could be moved to DEFRA. This would be a mistake. These policy areas are critical to UK economic performance and should not be dominated by the environmental agenda alone.
To conclude, the new Prime Minister must back the productivity and economic growth agenda by giving clear and unambiguous responsibility to a single government department. We don’t care what it is called as long as it delivers.
In order to end the uncertainty this decision needs to be taken early and it needs to be made clear that it is intended to last.
At the same time there needs to be a commitment across wider government to the promotion of competitiveness and economic growth. This must be enshrined in departmental business plans and targets and through greater efforts to improve engagement with business.