Some nuggets about industrial policy (there isn't one) and policy flip flops - there are several:
Autumn statement: Ministers must decide what industry needs, set out a strategy and stick to it
The day before the autumn statement I whiled away a few minutes playing buzzword bingo: coming up with the words or phrases that might be used, a point for every one I got right. Not for the statement itself; that would be far too easy. Instead I tried to predict what business lobby groups would say in response to the chancellor.
“Wealth creation” seemed a good bet (bingo! Federation of Small Businesses). I thought “caution” would be everywhere, but struck out. My banker, though, was “detailed plan for growth” (back of the net! The first line of the CBI response talks about a “clear plan for growth”.)
That was a bit of a cheat, because trade groups and ministers are always talking about clear plans for growth and rarely arriving at one. The autumn statement, however, was clear, if only by omission. When Jeremy Hunt talked about the future engines of the economy, he listed five areas worthy of attention: digital, life sciences, green technology, financial services and advanced manufacturing. His model, and that of Rishi Sunak, he said, was Silicon Valley.
If you have a car plant in the UK — or any other type of traditional manufacturing business — you would definitely feel unloved. Manufacturing has been in retreat in Britain since the late 1970s but is still not, despite high energy costs, high carbon costs, a disinterested stock market and the myriad hassles caused by Brexit, dead and buried. Nor, though, is it worthy of direct government attention.
Make UK, the main trade body for manufacturers, caught the mood. It praised several items in the budget, including the business rates revamp and the abolition of some import tariffs, but it ended on a plaintive note: “There is little scope for growth and instead it is clear we are operating in survival mode.”
There have been many comparisons between this autumn statement and George Osborne’s 2010 budget. Both involved squeezes on public spending (a stealthy one this time round, with cash allocations flat and inflation left to do the dirty work) and a big fall in household incomes. Osborne, though, believed that a revival in manufacturing was vital to future growth. He ended his budget with the vision of “a Britain carried aloft by the march of the makers”.
The march never quite materialised and, although the makers have not gone into full retreat, several big sectors face an uncertain future. I wrote last month about the plight of traditional steel mills. Negotiations between the Scunthorpe-based, Chinese-owned British Steel about financial support have not concluded and Tata Steel, the Indian owner of Port Talbot in Wales, is still waiting to hear if ministers will help it to move to a green form of steelmaking.
Automotive, too, is beginning to slide. The calamity threatened by Brexit was staved off with a trade deal that gave car companies free access to and from the European Union but the recovery from the pandemic has been uneven. As my colleague Simon Nixon pointed out on these pages on Thursday, there is a worrying lack of progress on the battery factories needed if UK car plants are to have a decent chance of staying here after the transition to electric vehicles.
Nor is there much encouragement for smaller companies. One of the few specific business measures concerned tax relief for research and development by small and medium-sized enterprises. It has been made much less generous and Hunt made it clear that the Treasury was concerned about fraud. An investigation by this newspaper has revealed abuses of the scheme. Rather than tackle the fraudsters, however, the incentive has been made much less valuable, a move that the Federation of Small Businesses said would crush innovation. “This doom loop makes a mockery of plans for growth.” “Doom loop” was not one of my guesses in buzzword bingo.
What of Hunt’s Silicon Valley vision? This might be more inspiring had it not been trotted out by previous administrations and if there were not already detailed analyses of why the conditions that created the West Coast crucible of technology and investment do not exist here. That is not to say that the UK tech sector has to be inferior, but it will prosper by concentrating on its own strengths rather than copying others.
On Times Radio yesterday I spoke to Joni Rautavuori, chief executive of Tharsus, a robotics company in Blythe, Northumberland. Ministers often cite Scandinavia and Singapore as examples for industry and Rautavuori has worked in both. Their secret, he said, was consistency, their governments setting a strategy and adhering to it.
Britain has in the past had a formal industrial strategy, which waxed and waned in importance in sync with the political profile of whoever was business secretary. Last year, however, it was scrapped by Kwasi Kwarteng, then business secretary, and folded into the “plan for growth” overseen by Sunak, then chancellor. Rather than dream about Silicon Valley, it might be an idea for Hunt and Sunak to decide what is important for industry, set out a strategy and stick to it.
PS
An example of flip-flopping on industrial policy comes in the oil and gas windfall tax. Ministers were extremely cool on North Sea development on climate-change grounds and licensing rounds were suspended three years ago. Then came the Ukraine invasion and suddenly it was good again. Then came a windfall tax (which falls mainly on domestic production), then a big new North Sea licensing round and now an extended windfall tax. Chris Wheaton, oil and gas analyst at Stifel, had a succinct verdict. “Assuming the lights are still on, will the last energy companies to leave the North Sea please turn them off.”
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