Developing an industrial strategy for the UK

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On Monday the IPPR hosted an event where Vince Cable spoke about his thoughts on ‘an industrial strategy for the UK'.

This was very much in the mould of thoughts rather than an actual set of policies.

In essence, so far, industrial policy for Cable seems to mean:

• A selection of sectors with good future prospects or existing UK strength;• ‘Technology Policy';• Better procurement practice.

But before hares are sent running, it's worth peering underneath each of these to see what they actually mean in practice.

A selection of sectors may scare some people off with memories of failed policies in years gone by, most commonly grouped under the heading ‘picking winners'.

To be clear, I don't think anyone talking about industrial policy means bureaucrats picking out individual companies to receive government funds.

At the most it means picking sectors that ‘go with the grain of the market' and even then there seems to be relatively little implication for the allocation of government resources.

So on Monday for example Cable talked glowingly of the automotive sector with the Automotive Council as something he saw as a ‘good model'. The Council allows the sector to communicate to government its policy frustrations and priorities for reform e.g. improving the supply of skilled apprentices – but it's not a receptacle for government slush.

‘Technology policy' may mean coin for the TSB. Last time I checked this is circa £300 million per annum. A one off £125 million for ‘supply chains' seems headed its way this year too. Compare that with total business investment of about £110 billion in 2011 and you can see the sums aren't staggering even if they were tripled for argument's sake.

And in financially straitened times tripling doesn't seem that likely.

But perhaps there is another aspect to technology policy that I think Cable favours. And that's its ability to transcend the Parliamentary cycle and give certainty of support to entrepreneurs and investors looking to develop ideas and technology into marketable business returns.

It seems we may already be on safe ground here - the Coalition hasn't taken an axe to the TSB it inherited from Labour and indeed with the demise of the RDAs it seems to have picked up responsibility (although given its small scale we need to be careful not to ruin what the TSB does well by swamping it with extra activity).

The last area is procurement where recent controversies following large scale government purchases have got a lot of people asking whether we're mugging ourselves a bit compared with other countries on the continent i.e. the French and Germans seem to give more/all their government contracts to nationally owned companies.

The idea here is that perhaps the UK government needs to be taking into account a fuller range of costs and benefits than it currently does it – for example the impact on UK industrial supply chains. Maybe not a bad idea you might think.

But almost immediately after saying this, Vince Cable qualified his statement by stressing there would be a tension with securing the best price on procurement for the UK taxpayer. That leaves it pretty open as to what the net effect of a new approach might be.

So in summary, I'm not sure we're much clearer on what industrial policy means in the UK today or how much different it looks in practice from what already happens.


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