Brexit or not, it is overdue that Britain has a more Germanic economic model – and the political consensus behind it, argues Peter Kyle
If Angela Merkel had lost the recent German election a lot would have changed. But every business in Germany knows one thing that would not: the country’s industrial strategy.
Inward investment and most measures of industrial health remained remarkably stable throughout the long election cycle, even during the period earlier this year when it looked like there was a faint chance social democrat Martin Scultz could possibly win. Among other reasons lay the fact that whoever had won, the long-established consensus on core industrial policy would have remained intact. This meant businesses could continue to invest in research and development, new equipment, and its workforce without having to second guess what an election outcome would mean to the policies that matter most to their sector.
Germany’s success at delivering a long-term vision for industry has long been the envy of we British. At a recent seminar, former minister for science David Sainsbury showed that the British government first released a policy document talking of the need to emulate Germany’s industrial success way back in Victorian times. And yet here we are, 150 year later, still pondering.
The problem is that we are really good at understanding the problem, but seem institutionally incapable of acting on it.
Just consider the last decade alone. Peter Mandelson’s interventionist, muscular leadership at the business department picked winners like the aerospace and backed them, and strategically important losers, like steel and Royal Mail, and stopped them failing. Then Vince Cable came along, unexpectedly, and brought in a ’12 sector plan’ to narrow down government’s focus and give it a framework through which to assess where to invest and support.
This was followed by a bizarre period, led by Sajid Javid and the volatile Anna Soubry, in which the phrase ‘industrial strategy’ was banned altogether seemingly because it was either too old-fashioned or too linked with a meddling state. And then, almost surreally, we move from not being able to mention industrial strategy to waking up the next day, under a Theresa May government, with a whole department named after it.
You can see why business are frustrated. In the two years I have spent on the select committee covering business – the name seems to change regularly – and chair of the parliamentary Labour party committee for business, not a single business who has been asked what they want from government has failed to say ‘policy stability’.
And what do the Tories give them? Brexit.
Brexit changes everything. Even best-case scenario where our economy does not tank and we retain workable tariff-based access to the single market and other global markets, everything will change. After all, if it did not change what was the point of doing it in the first place?
From access to export markets and supply chains, to skills and labour, right through to the regulation that frames all aspects of their operations, things will be different. In most cases, though, if Brexit occurs it will not be different in a good way.
Consider exports. In 2014 the government set the target for £1tn worth of additional exports by 2020. After asking repeated questions, I have finally managed to get an answer that the target has been dropped. Quietly, with no announcement, ambition for our wealth-producing private sector slips by the wayside.
Think about the implications. The ability to export more freely around the globe was the cornerstone of the economic argument put to voters last year. And now the Brexiteers sheepishly admit that Britain will not even match the aspirations of pre-Brexit Britain as far back as 2014.
At the same time as ripping us from the single market and customs union, there is a perfect storm brewing that is wholly predictable and entirely preventable should Labour choose to act in the best interests of our economy.
Brexit is the dark cloud that looms over every business-related policy. We as a nation could have the very best, most stable and resourced industrial strategy in the world but it would count for zero if Brexit goes ahead in the manner that seems likely.
But let us assume, to enable us to cover other issues, that the British people stare long and hard at the paltry deal our weak prime minister delivers after her humiliating round of grovelling dinners is complete, and say ‘thanks, but no thanks, we’ll stay right where we are please’. What would a Labour industrial strategy look like and how could it regain the faith lost over the last decade.
First and foremost is skills. George Osborne’s apprenticeship levy was the right policy but poorly implemented. His obsession with short-term political gain forced it to get off the drawing board and into action before we knew where its strengths and weaknesses lay. It needs to evolve.
The technology sector, for example, is not all that interested in post-16 skills development because by then it is too late to develop the kind of programming agility and creativity they need. That is why companies like Samsung in the United Kingdom invest in primary school level upwards. For them and others the levy could mean they are forced away from this investment in young children and look to foreign labour markets instead for the skills they need. Hardly what we want.
But in general we as a nation lack the ambition for our young people that they themselves have – and that is a crime. We need to shift away from judging young people by their ability to repeat memorised texts and equations and focus much more on aptitude and the social skills needed to thrive in the modern British workplace.
So why are we in Labour so obsessed with funding institutions rather than young people themselves? It is becoming inexcusable that technical and sixth form colleges get two-thirds less funding than universities and if we agreed to write-off student debt and maintain university funding without any student contribution at all then that inequality would grow massively higher. Baring in mind that further education is where the biggest gains are to be found in terms of skills. Business knows this and it is about time we caught up.
Companies that have experimented with recruitment that is based on aptitude but is blind to educational and socioeconomic background have revealed remarkable results and a potential boost for productivity. Government policy needs to learn from this and rethink skills from the ground up.
Eighteen months ago government released a much-heralded productivity plan, but it was a plan without a plan of action. It was simply impossible to figure out how any of it was going to be delivered as it was devoid of anything measurable and little that could be tied back to ministerial responsibility. It is not a surprise then that this month productivity slipped to a 10 year low. Some plan!
Labour must attempt its own productivity plan but it should be light on rhetoric and heavy on deliverable policies that are measurable and practical.
Finally, infrastructure. From the internet to road, rail and airports, we need to keep up the pace of investment. On the internet, reliability is as important as speed. On roads, we need to make sure that freight can travel the main arteries as free of congestion as possible and workers can travel and park easier than they can now. And considering the biggest rail challenge lies in getting people to and from work in the southeast, Labour must level the investment inequality which has landed the Southern franchise into the catastrophe we have today and figure out an ownership and operational model that is fit for the future.
Business has fallen out of love with a Tory party that is hellbent on shutting them out of their biggest market and limiting the pool of labour they can access. They are open to listening and engaging with Labour in a way not seen for well over a decade and it is an opportunity we must seize with both hands because the prosperity of the majority of working people in our country depends upon it.
Peter Kyle MP is a member of the business, energy and industry strategy select committee and chair for the PLP backbench committee on business. He tweets at @
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