Lord Heseltine today published his review No stone unturned in pursuit of Growth. The review is a welcome recognition of some of the key issues that are holding the UK economy back from the growth that the UK needs.
Lee outlined some of the aspects we thought this review needed to address in her blog yesterday, in particular the need for changes that lead to a reduction in the hurdles that companies face in successfully investing and innovating across our economy.
So what do we think?
Lord Heseltine’s review has provided some much-needed thinking on how we can create a more competitive and stronger economy.
Now the proverbial baton has now been passed to the government. The government needs to consider the proposals carefully to ensure that they offer value for money, that the proposals will not lead to unintended consequences that could adversely affect industry and how they can be made to work in practice.
Some of the review's recommendations in brief
The review is very wide-ranging and makes 89 recommendations focusing on how the government interacts and impacts industry. Recommendations cover issues ranging from the structure of the private sector to the structure of government, the link and relationship between central and local government, as well as specific policy areas such as skills and innovation. There is too much to cover effectively in one blog so I have summarised some of the key areas.
Improving the structure of government
The review recognises the lack of ownership of the growth problem across government, with many departments not placing a sufficient focus on the extent to which their policy impacts growth. The review recommends
Setting a clear economic strategy;
Establishing a growth council chaired by the PM with the aim of driving the government's growth agenda;
Establishing sector councils; and
A range of recommendations aimed at strengthening the civil service.
Establishing a central group to focus on and drive growth is a positive move and in line with the recommendations we set out in EEF’s A route to Growth. Making sure the group has the teeth it needs to make a difference is important – it should focus not only on strategy but also on implementation, and how it interacts with and works across government and with other areas of government (i.e. sector councils if established) needs to be clear so that it doesn’t become just another bureaucratic step in the policy process.
Increasing control at the local level
Lord Heseltine identifies a lot of the key issues at the local government level – the need to rationalise local government and simplify its funding, the need to get better value for money from expenditure and to improve the way it engages with business. Recommendations include
Giving LEPs the resources and authority to drive local growth and act as an effective ‘business voice’ on key issues;
Consolidating ‘growth-related’ local funding (e.g. business services, houses, infrastructure, skills) into a single pot and allocating on a competitive basis over a longer time horizon; and
Encouraging a local government landscape with fewer, single-tiered, authorities.
Heseltine rightly points to the need for simplification of local government. Dealing with one authority rather than several is easier for businesses. Giving LEPs the tools and funds to make a real impact on issues such as planning and transport, and the power to cut through the obstacles to growth at the local level makes sense and may well drive efficiency across areas like procurement.
Simplifying local funding and driving efficiencies by making it more competitive are good ideas. However, government needs to make sure that LEPs and local authorities are up to the task before giving them control of large pots of public money and there are areas where it should be cautious about giving them additional powers. Plus the government must not underestimate the administrative task of running and assessing a five-yearly competition for a £50bn fund.
Boosting science and innovation
Broadly speaking, the review correctly identified the problems with innovation and science: the UK spends less on R&D and innovation than many competitor nations and there are issues with the procurement of innovative goods, namely that public sector procurement can too often tend towards ‘best price’ and ‘off the shelf’ solutions rather than looking at long term value, and the impact of decisions on industry. Recommendations include
Committing to long-term stability of science funding;
Greater use of public procurement standards across government;
A role for LEPs in delivering innovation policy; and
Expanding the TSB’s area of responsibility.
While many of these are in line with current policy, the role of LEPs and an expanded role for TSB need to be carefully thought through to ensure the right level of resources are provided and incentives are aligned.
Improving support for businesses, including advice and support for exporting
The review identified problems with the provision of advice and support to UK businesses. It suggested access to and knowledge of the right advice and support are not helping UK performance, including the UKs export performance. The review suggests some solutions to address this issue including
Using the Chambers of Commerce to be one-stop shop for business with easy access to business services including advice and support on exporting.
Strengthen international chambers, especially in key growth markets.
The Review’s focus on support for improving access, advice and support for business services is positive. Industry will welcome the Review’s focus on support for exports which needs to be better resourced, better marketed and more accessible.