Industrial strategy inquiry
Closed
What the inquiry looked at
“The Committee will consider what the Government means by industrial strategy and questions how interventionist in the free market it should be, such as whether it should prevent foreign takeover of UK companies. Priorities for the private sector, in terms of what businesses want from a revamped industrial strategy, the pros and cons of a sectorial approach and possible geographical emphasis will also be explored by the Committee. It will also look at the industrial strategies of previous governments and of other countries to see if there are any lessons to be learnt.”
The committee's words, from the inquiry page on parliament.uk ↗.
What it found
The Government’s re-found commitment to industrial strategy provides a significant opportunity to set a clear vision for what an “economy that works for everyone” should look like in practice, and put the UK on a path to reach it. We strongly support the Prime Minister’s aspiration of a stronger, fairer Britain “where wealth and opportunity are spread across every community.”
The Prime Minister’s rhetoric marks a significant shift away from that of previous Governments; consciously or unconsciously, it implies that the Government is willing to exchange some element of headline economic growth for more evenly distributed and resilient growth. At a time when Government is already having problems in balancing the books, any decision to slow the rate of short-term economic growth for other objectives (with a longer-term return) will make that task more difficult. Furthermore, success will only be achieved if policies are of a scale to match the Government’s ambition and clearly drive forward economic rebalancing.
But while the Government’s rhetoric marks a step change, and the creation of a new Department for Business, Energy and Industrial Strategy has significantly raised expectations, the Government’s approach appears to be evolutionary and reflects a continuation of policy approaches introduced from May 2015—a focus on horizontal policies, regional devolution, and sectoral “deals”. As it stands, there is a real risk that certain proposals benefit incumbents while lacking the multiplier-effect that a good strategy can deliver through bringing greater coherence and focus to policy objectives.
Despite being over six months in preparation, with publication repeatedly delayed, the Green Paper has little discussion of the implicit tensions and conflicting demands that exist in policy making and provides little clarity on how regional rebalancing and sectoral deals will work in practice. It provides a long list of policy interventions but little by way of ground rules to provide a framework for future decision-making which, we would argue, should be the core of any long-term strategy. While we recognise that this is a Green Paper and the Government’s position is still developing, the weaknesses we have highlighted in this report leave us concerned that the Prime Minister has not yet been able to harness the political will across Government to truly drive forward her ambition and that the strategy will fall short of providing a clear framework for decision making in the long term.
We recommend that the Government reconsider giving sectoral strategies priority and instead focus on horizontal policies and specific ‘missions’ to meet UK-wide and local public policy challenges. This will make clear that the function of the Government’s industrial strategy–and of industry itself–is to solve societal problems and it will provide a clear focus for activity across Government and industry.
In conclusion, we urge the Government to continue to be ambitious developing its industrial strategy and ensuring that it remains true to the vision of achieving an economy that works for everyone.
What the government said
The government responded on 18 September 2017.
The government says its response is informing its developing thinking on the Industrial Strategy, with emerging themes to be set out in a White Paper later this year, and it agrees with some recommendations while declining others.
- On metrics and progress updates, it is "considering the role of metrics" and "the most appropriate mechanisms to update on progress", without committing to the Committee's specific proposals.
- It agrees with the importance of horizontal policies and with a mission-based approach, but says there is also advantage in sector-specific work through 'Sector Deals'.
- It does not accept a joint unit or an independent tax review. It does "not believe" a formal joint unit would provide sufficient added value, and does "not see the case for an independent review at this time".
- On R&D, it sets a vision of 2.4% of GDP within ten years and 3% "in the longer-term". On skills, the full transfer of adult education functions to combined authorities in 2019/20 is "subject to readiness conditions".
Read the government's response ↗ Read the report ↗ Report an error
How the inquiry ran
Each dot is a dated item listed on this page, from the inquiry's opening on 21 July 2016 to 18 September 2017.
- Oral evidence 6 sessions
- Report 3 Mar 2017
- Government response 18 Sep 2017
What it recommended 26 recommendations · 28 conclusions
1In recognising the extent to which economic growth has failed to trickle down to many...
2We strongly welcome and endorse the Prime Minister’s aspiration of “an economy that works for...
3We agree with the Government’s vision that we should aspire towards an economy which is...
4Successive governments over many decades have correctly identified long- term challenges and weaknesses within the...
5An explicit industrial strategy recognises that many Government policies inherently have an impact on the...
6The Prime Minister’s rhetoric marks a significant shift away from that of previous Governments; consciously...
7In its response to this Report, the Government should outline a set of clear, outcomes-...
8We recommend that the Government publishes annual updates to its action plan outlining progress in...
9Horizontal policies form the backbone of effective industrial policy.
10Sectoral policies appear to have worked well for the automotive and aerospace industries.
11We recommend that Government reconsider giving sectoral strategies priority and instead focus on horizontal policies...
12In in its response to this Report, the Government should set out the process by...
13Whereas a sector based approach is essentially another form of “picking winners”, a mission-based approach...
14We recommend that specific support for industry be guided by a targeted ‘mission- based’ approach,...
15“Missions” need not be inconsistent with the Secretary of State’s vision of deals focussed on...
16We strongly support the Prime Minister’s leadership in chairing the Cabinet Committee on the Economy...
17We recommend that the Government consider establishing a joint unit bringing together civil servants from...
18Industrial strategy needs to provide a clear framework for how government will make policy choices.
19The Government needs to clarify the relationship between its industrial strategy and its strategy for...
20It is clear that for a strategy to be genuinely long-term, Government will need to...
21It is crucial that the Government’s industrial strategy sets out strong mechanisms for dialogue and...
22While it is to be expected that some of the UK’s largest employers and most...
23We recommend that the Government improve the transparency of its engagement with business by publishing...
24A weakness of previous strategies is that they have largely engaged with top-tier companies but...
25We recommend that the Government work with industry and local government to conduct a holistic...
26The Government needs to retain the flexibility to engage with businesses individually to encourage and...
27As has been the case with its efforts to support the steel industry, the Government...
28We agree with the Secretary of State’s assessment that the UK needs to do more...
29We are disappointed that the Government’s response to our Report on the Productivity Plan did...
30We repeat our previous recommendation that the Government should set a target to increase R&D...
31As part of its review of the tax environment for R&D, the Government should not...
32In line with the Secretary of State’s stated aim to support disruptors and economic innovation,...
33A skilled workforce is an essential foundation of economic success.
34We recommend that the Government consider the potential for greater devolution of responsibility and funding...
35In the context of negotiations over free-movement as part of withdrawal from the EU, Government...
36We recommend that the Government exclude university students from immigration totals and promote high skilled...
37We presume that the Government has always prioritised “the highest value-for- money projects”.
38The decision not to place the National Infrastructure Commission on a statutory footing risks creating...
39We are surprised that the National Infrastructure Commission gets little prominence in the industrial strategy...
40The problem of impatient capital and the UK’s poor track-record on scale-up have been subject...
41Evidence on the impact of Growth Hubs is mixed.
42Fiscal levers can play a key role in shaping business behaviour.
43We recommend that the Government conduct a fundamental review of the outdated structure of the...
44We welcome the fact that the Government is considering opportunities to better utilise public procurement...
45We welcome the review of the Small Business Research Initiative that the Government has commissioned;...
46Given the Prime Minister’s previous comments about foreign takeovers, the Government needs to provide much...
47We recommend that the Government takes steps to ensure it has the power to retain...
48While we welcome the industrial strategy’s support for energy innovators, taking advantage of the economic...
49The Committee welcomes the positive signs that the Government will look to work closely in...
50While variations in perceived performance of Local Enterprise Partnerships are to be expected—that is part...
51The Government needs to provide clarity on the respective roles and responsibilities between national, local...
52We recommend that the Government set out a clear plan to close per head spending...
53While the Government is experimenting more with fiscal devolution, such as the planned devolution of...
54While recognising the importance of the services sector, and the UK’s comparative economic advantage, supporting...
Evidence
Oral evidence sessions 6
- 15 Dec 2016No witnesses recordedparliament.uk ↗
- 8 Dec 2016No witnesses recordedparliament.uk ↗
- 22 Nov 2016No witnesses recordedparliament.uk ↗
- 8 Nov 2016No witnesses recordedparliament.uk ↗
- 27 Oct 2016No witnesses recordedparliament.uk ↗
- 11 Oct 2016No witnesses recordedparliament.uk ↗