FST JOURNAL

Summary:

• In a world characterised by change, the government and the country must be clear and explicit about their intentions
• Instead of adopting a "Year Zero" approach, the current government is building on our previous efforts
• A strategy should also serve as a means to integrate various strands and policies within the government, aligning different perspectives on the future

I would like to make three observations regarding the new approach to industrial strategy and briefly highlight five challenges that I believe need to be addressed.

First, it is beneficial to have an industrial strategy. Back when David Willetts, Professor Mariana Mazzucato, and I, along with many others, were working on the 2017 strategy, we had hoped it would be established for the long term. Despite our efforts to embed it, that did not happen. Therefore, it is fortunate that we can convene now in the context of a new industrial strategy.

This is not merely a formality; I believe that in a world characterised by change—where international competition and cooperation coexist—it is crucial for the government and the country to be clear and explicit about their intentions. We cannot expect people to read our minds; articulating our strategy allows others to understand our direction and assists us in refining our own policies, investments, and priorities. Some members of my party, the Conservative Party, have expressed scepticism about industrial strategy, arguing that it is not something a Conservative government should pursue. I find this perspective rather puzzling, given that the party prides itself on being in tune with business. I can easily envision a scenario in which a chief executive addresses shareholders at an annual general meeting and, when asked about the company's future and plans for prosperity, responds with, "We have not really thought about it; we will just play it by ear." I do not believe that such an inadequate response would be well-received. Similarly, any government adopting a comparable attitude should not expect a favorable reaction from the electorate. Thus, it is advantageous that an industrial strategy is back on the agenda.

Second, it is reassuring that there is an intention for this strategy to endure in the long term. While it may require adjustments over time, the government's commitment to establishing an industrial strategy council on a statutory footing means that it cannot be easily dismantled, unlike the council I previously set up and persuaded Andy Candi to chair, which was abolished by one of my Conservative successors shortly after its introduction. This seriousness of purpose, aimed at ensuring the strategy endures, is commendable. Third, I recognise and appreciate that the government has sensibly drawn upon the work we did together in this room, where many have contributed valuable time and thought. People from various sectors, including businesses, universities, research institutions, trade unions, and local authorities, have significantly contributed to this effort. Instead of adopting a "Year Zero" approach, which is often the case with new governments—where previous work is dismissed—the current government is building on our previous efforts. Jonathan Reynolds, the Secretary of State, has commendably referenced our work on multiple occasions, explicitly stating that it will be utilized moving forward. The green paper presented, clearly acknowledges and draws from our previous contributions. I would like to celebrate the way the government intends to approach industrial strategy and emphasise the challenges that we, as a community committed to its success, need to address.

Integrative approach

Many of the points I will discuss have already been touched upon by my colleagues, which is not surprising and, in fact, is a positive development. The first key aspect is that our strategy needs to be integrative. When most people think of a strategy, they typically view it as a plan for the future, which it certainly is. However, I believe there is another important interpretation of the term "strategy." It can serve as a means to integrate various strands and policies within the government, aligning different perspectives on the future. This integrative approach is crucial to ensure that all policies point in the same direction and do not contradict or undermine each other. As several speakers have noted, government tends to be organised into departmental silos, which can operate like separate baronies. These departments may pursue policies that are not aligned and can sometimes be incompatible. When I served as Secretary of State for Business, Energy, and Industrial Strategy, I had a substantial portfolio to manage. However, the title did not encompass a vital aspect: science, innovation, and technology, including the research budget, which also fell under my department's responsibilities. Many of the tools and policy instruments for industrial strategy were consolidated in one department. Yet, there have been changes to the machinery of government that have led to the creation of the Department for Business and Trade, incorporating trade but separating energy into another department. The Department for Energy and Net Zero, along with science, innovation, and technology, were also moved to different departments. While I understand the rationale behind this focus, the fragmentation that has occurred makes it more critical than ever to pursue an integrative approach within government. I hope that this will be the guiding principle for the government moving forward.

Consider the example of the future of mobility, which includes electric vehicles and autonomous vehicles. This area clearly involves the Department for Business and Trade, but it also requires collaboration with the Department for Transport regarding energy, as well as the Department for Energy and Net Zero. Innovation will involve the Department for Science and Technology (DSIT), and likely other departments, including the Treasury concerning operational matters like charging points. Additionally, the Ministry of Housing, Communities and Local Government will be relevant. With so many interconnected aspects, it is vital to recognise that we cannot send innovative businesses on a wild goose chase through Whitehall, knocking on multiple doors and expecting them to compete effectively on the global stage. Therefore, an integrative approach is paramount.

What to do about resource

The second challenge we face is the reality of limited financial resources. Recently, we had the budget announcement, and David Willetts, during his time as Minister for Universities and Science, made notable efforts to protect the science budget even amid austerity measures. As a result of a persuasive industrial strategy, I was able to secure what was then the largest percentage increase in the science budget, raising it from £9 billion to £12 billion annually. After my tenure, it increased further, from £12 billion to £20 billion per year. Thus, we have seen a rising public sector investment in science.

The research and development budget is a topic of interest, but I find it hard to believe we will see significant increases. While I would be delighted if that were the case, I think we should manage our expectations regarding new funding. The additional resources we have had in the past helped us establish initiatives like the Industrial Strategy Challenge Fund, which supported many significant missions. These funds did not require reallocating existing resources; they were genuinely new money. Moving forward, however, I believe securing such additional funds will be more challenging. One idea I have is to leverage other tools that the government possesses, particularly regarding the regulatory environment. The government has proposed establishing a new Office of Regulatory Innovation (RIO), which could provide valuable opportunities that we may not have fully considered in the 2017 Industrial Strategy. We should explore how innovative regulation can effectively address the country's challenges and support various industries.

Another crucial point is that delivery will be vital for any newly elected government. The Labour manifesto prominently featured the word "change." Such a bold slogan demands tangible results, and voters will certainly ask what has changed come the next election. Although we may feel like we're at the start of a new parliament, these processes evolve rapidly. Without a fixed-term parliament, there is always a chance of an election within a few years—potentially as early as May 2018. This reality leaves us with limited time to make impactful changes. Reflecting on my nine years as a minister working in various government roles, I've learned that effective governance often relies on partnerships. Whitehall departments typically do not operate in isolation; they engage in collaborations with businesses, local councils, mayoral authorities, and academic institutions. The fourth challenge I see for the government is addressing "levelling up"—ensuring prosperity across the entire country. This has been a significant focus for me, particularly during my ministerial career, in which I worked extensively to create mayoral authorities and decentralize power to them. My advice would be for the government to take a more active role in these regions. If there is an opportunity for growth in an area that lacks capacity, the government should partner with local authorities, roll up its sleeves, and offer assistance. Finally, one of the enduring challenges is maintaining and strengthening excellence in science, research, and technology while ensuring equitable benefits from public investments and policies across the country. I believe the partnership approach has considerable merit and will be crucial in meeting these challenges.