Appraising the industrial strategy

28 Nov 17

Joseph Rowntree Foundation economist Dave Innes has marked Greg Clark’s homework and asks if the industrial strategy will create better, higher-paying jobs in every part of the UK.

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Yesterday, Greg Clarke published the industrial strategy white paper, fleshing out more of details of the government’s flagship policy to “create better, higher-paying jobs in every part of the United Kingdom”.

The government has placed creating good quality jobs as one of the key aims of the industrial strategy. This is vital to tackle the growing problem of in-work poverty. In 1996-97, there were 2.3 million working households in poverty, today there are 3.8 million. Without action, poverty will rise over the next five years. Driving up the number of good jobs through an industrial strategy will help to lay the foundations for a post-Brexit economy that works for everyone.

In our response to the government’s industrial strategy green paper, released at the start of the year, we said that the government had set itself the right aim, but the set of actions proposed fell short of the goal.

We proposed five priorities that the government needed to address to truly create ‘an economy that works all’. How does the white paper score against these priorities?

1) First, in line with the other ‘sector deals’, we called for the government to proactively seek deals with low-pay sectors such as retail and hospitality. These are large employment sectors where workers are disproportionately likely to be in working poverty and in which productivity lags our competitors such as the US, France and Germany. The government has now promised to “work closely with sectors such as hospitality, retail and tourism on each of the foundations of productivity in order to be able to progressively drive up the earning power of people employed in these industries and enhancing our national productivity”. This is a promising step.

2) Second, we called for the government to set an ambitious target to meet adult basic skills needs by 2030. The white paper reiterates the commitment to a new adult digital skills entitlement, providing access to basic digital skills training free of charge. This is welcome, although it needs to go hand in hand with a renewed drive to improve literacy and numeracy among the 5 million adults that lack those basic skills. Delivering such a target would require a doubling of investment along with reform to how skills programmes are delivered.

3) Third, we called for the government to set out specific strategies for towns and cities that have seen the least economic growth in recent years. The government is now exploring the idea of supporting towns facing particular challenges through a set of specific ‘town deals’, beginning with a pilot in Grimsby. They also reaffirmed the commitment to launching a Shared Prosperity Fund following Brexit as a replacement to EU Structural Funds with a view to providing “flexible funding for their local needs”. Both of these are welcome commitments, although we await the detail to follow. We would urge the government to commit to the Shared Prosperity Fund having at least the same level of funding as is currently available via structural funds.

4) Fourth, we said the industrial strategy should ensure all parts of the country have the capacity, powers and institutions to deliver local industrial strategies, rather than simply focusing on the city regions with newly elected mayors. The white paper does include a commitment to make additional financial resources available to local enterprise partnerships that “demonstrate ambitious levels of reform”. However, it is not clear how big this commitment will be and it is clear that the overwhelming focus remains on cities. The ability of local areas to respond to the different opportunities and challenges in their area through a local industrial strategy remains in doubt.

5) Finally, we argued the government should revisit the allocation methods for national economic spending, such as transport and research and development, that currently tilt the balance towards London and the South East. The white paper commits to designing a Rebalancing Toolkit that will take into account the ‘dynamic effects’ of transport investment, supporting high value transport investments in less productive parts of the UK. This sounds promising, although it remains to be seen how much weight these considerations will be given in the planning process.

We cautiously welcome the direction the industrial strategy is taking. There is still plenty of room for improvement. For example, none of the agreed or forthcoming sector deals cover low-wage sectors, while the skills announcements fall short of a commitment to meeting all basic skills needs.

But, from the perspective of creating decent quality jobs across the country, the white paper is clearly an improvement on earlier iterations. The next step is deliver on what’s promised to show people struggling to make ends meet that this will bring about real change.

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