Scrapping Industrial Strategy a ‘retrograde step’, MPs say
The Business, Energy and Industrial Strategy (BEIS) Commons Committee has criticised the government for the way in which it scrapped the 'Industrial Strategy', which was intended to address long-term economic challenges in the UK.
The flagship Industrial Strategy policy of 2017-19 was intended to address long-term economic challenges, such as regional variation in pay, productivity and high-quality employment opportunities. It was constructed around national missions (so-called 'Grand Challenges') and brought together a mixture of policies which applied to individual industries and those applicable across the broader national economy.
According to MPs, the government has failed to lay out its new approach to industrial policy, following the scrapping of the Industrial Strategy and its replacement by the 'Plan for Growth'. While the economic outlook has been shaped by Covid-19, the long-term challenges addressed in the Industrial Strategy are just as relevant today as they were in 2017. The Plan for Growth is notable for its absence of mission-based targets, as were featured in the Industrial Strategy and which the MPs credit with creating “a shared sense of purpose across government and industry”.
The report said: “In response to our inquiry, the government almost immediately said it would revise the Industrial Strategy to take into account Covid-19, Brexit and its climate change commitments.
“It was sudden and unexpected, therefore, when the government announced in March 2021 that the Industrial Strategy would be scrapped and replaced with the new Plan for Growth, intended to reflect our new economic circumstances.”
“The manner in which the Industrial Strategy was scrapped underlined concerns about the government’s commitment to long-term industrial policy, as it inherited it from the previous administration.”
The government’s actions have left many businesses having to make guesses about the direction of industrial strategy, the report said. While it acknowledged that many businesses found the Industrial Strategy esoteric, its absence could leave a “fragmented” approach to securing industrial growth.
The report specifically described the axing of the Industrial Strategy Council (ISC), which had been chaired by Bank of England chief economist Andy Haldane, as a “retrograde step” that removes independent scrutiny, insight and expertise. This lack of expert oversight, compounded with the scrapping of the Industrial Strategy, risks widening the gap between government and business, it said. The BEIS committee concluded that “the government has offered no convincing rationale for the council’s abolition”.
Chair of the BEIS committee, Darren Jones, said: “The Prime Minister and Chancellor’s Downing Street coup of industrial policy from the Business Department has resulted in a short-termist, unclear and unwelcome approach to industrial policy when business is crying out for long-term consistency and clarity.
“We were told the Plan For Growth has replaced the Industrial Strategy, but the reality is that it is nothing more than a list of existing policy commitments, many of which are hopelessly delayed.
“Long-term cross-economy challenges – from problems in productivity and our ageing workforce to the opportunities presented by new technologies and the net-zero transition – no longer appear to command ministerial support as long-term, cross-party whole-of-government policy priorities. To make it worse, the scrapping of the [ISC] has removed expert, independent oversight that provided important guidance on how to shape industrial policy to meet the country’s objectives.
“All of us – business owners, investors, trade unions, workers, parliamentarians and others – are now left guessing what the government’s approach is to industrial policy, with no expert oversight reporting on what ministers have actually been able to deliver.”
The report has made a series of recommendations, including a call for clarity on who is leading industrial policy; a commitment to developing industrial policy with devolved administrations, and regional and local leaders (noting that the government’s “levelling-up” agenda could be undermined by uncertainty around the how local economic opportunities will be delivered and supported). The MPs also reported that lack of access to long-term finance meant many businesses are seeking capital from the US rather than the UK and that the Industrial Strategy Challenge Fund is too small and focused on large businesses to fill this gap for all businesses.
A government spokesperson said: “Since the Industrial Strategy was published over four years ago, we’ve legislated to end our contribution to climate change by 2050, we’re forging a new path outside the EU and we continue to fight the Covid-19 pandemic. That’s why it was right to change our approach, too, with our new Plan For Growth setting out the opportunities we’ll seize across the UK to drive economic growth, create jobs and support British industry.”
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