Creative solutions

Britain is a nation of makers and creators. As a young girl growing up in Newcastle, the examples of Stephenson, Parsons – that’s Rachel Parsons, the pioneering engineer and founder of the Women’s Engineering Society – Armstrong and other greats of our industrial past inspired me to study electrical engineering.

But in the last 40 years, much of our industrial heritage has been lost. It was the Conservative government of Margaret Thatcher that forced deindustrialisation on much of the country in the 1980s, creating an avoidable source of social trauma that affects us to this day. My own region of the north east suffered hugely. No one who lived there in the Thatcher era will ever forget that combination of neglect and malice which destroyed our economic livelihood.

In the 1980s alone, these policies led to the loss of two million jobs and a fifth of the UK’s manufacturing capacity. Today, only 2.9 million people work in the UK manufacturing sector, compared to 8.9 million 50 years ago.

Dire economic straits

Since Thatcher, successive Conservative governments have been obsessed with cutting, deregulating, and reducing the size of the state. And for seven years now the UK’s potential has been choked by austerity in the shape of Osbornomics, which continues to stalk the corridors of Westminster like a zombie even though the former chancellor has departed.

We are now one of the slowest growing economies in Europe, with GDP growth in the second quarter of this year only 0.3 per cent. What little growth we do have is being fuelled by consumer debt – a point underscored in the recent Financial Stability Report from the Bank of England.

This dismal long-run performance is underpinned by levels of productivity that are the second worst in the G7, and a third lower than France, Germany and the United States. Improving our country’s productivity would go a long way towards generating greater economic growth

and paying off the deficit. Instead, we’re losing billions in underutilised human capital.

These bleak figures impact on what really matters to most people – wages. Between 2007 and 2015, the UK was the only big advanced economy in which wages contracted while the economy expanded. And now 3.8 million workers in the UK are in poverty, one in every eight. Work does not pay.

Regional inequality

With the decline of manufacturing we have seen a boom in regional inequality. Britain is now the most unequal economy in Western Europe, with median earnings in inner London a whole third higher than those in Tyne and Wear.

The proposals the government have released are smallscale and ad-hoc – industrial strategy without the strategy. They have made a decision to focus on a small selection of industries, with insufficient attention paid to key sectors such as retail, the UK’s largest source of private employment. And as Sheffield Hallam researchers have found, funding commitment that have been made so far target only 10 per cent of our manufacturing base and only 1 per cent of the whole economy.

This means that their strategy will largely benefit facilities in affluent parts of southern England. Britain’s older industrial areas – the places most in need of a successful industrial strategy – have very few of the research and development (R&D) facilities that are likely to be first in line for funding. To take one example, the Cambridge area – population 285,000 – has almost as many R&D jobs as the whole of the north of England – population 15.2 million – and more than Scotland and Wales combined. That’s before you count any of the R&D jobs associated with Cambridge University.

This government’s focus on elite science – and its emphasis on headline-grabbing trends at the expense of industries seen to be less glamorous – will only widen the gulf between the most and least prosperous areas of this country.

Creative solutions

But this doesn’t need to be the case – for a long time, our country’s economy was driven by areas of enterprise and industry across the country. These places can be our engines of prosperity again. There is a culture of building, creating and innovating in this country – a culture that the Labour party has always championed. With the right balance of government support and private sector investment,

this culture can be nurtured and its potential unlocked. And this is what industrial strategy is for. It is about building the economy we want, choosing our own national future rather than leaving it to the caprices of the market. Investing to create jobs and growth not just where it will be immediately profitable but in a way that benefits us all.

Challenge-led

Labour’s industrial strategy is challengeled, which means it’s informed by the big challenges that our economy and society will be faced with over the coming decades. It is also mission-oriented, establishing targets to respond to these challenges. We’ve set out two long-term goals or ‘missions’: building an innovation nation by ensuring we have the highest percentage of high-skilled jobs in the OECD by 2030; and drawing 60 per cent of our energy from low carbon sources by 2030.

And we are developing others, looking at ways to respond to large-scale societal challenges such as the dramatic infrastructure gap between towns and cities, and the growing care needs of an ageing population. These missions will galvanise private and public sectors to work together across departments and sectors creating jobs in the long term – transforming every sector and region of the British economy. And crucially, the strategy is also driven by Labour’s values, putting people first.

Building an innovation nation

Labour is clear, of course, that innovation and science have to be at the heart of our industrial strategy. We are the party that can give people confidence in the future, with a proud history of embracing change and making it work for ordinary people. But as Harold Wilson remarked in his famous 1963 ‘white heat of technology’ speech, harnessing the productive potential of modern technology also requires new social and economic attitudes. Or, as world-leading economist Mariana Mazzucato argues, innovation has both a ‘rate’ and a ‘direction’.

We agree with the government that the ‘rate’ of innovation must increase. Since the 1980s we have consistently been at or near the bottom of the league table of public and private R&D spend across developed countries. As a percentage of GDP, we spend 1.7 per cent of GDP on R&D compared to an OECD average of 3.4 per cent. This needs to change – which is why we are pledging to raise combined public and private R&D spend to 3 per cent of GDP by 2030. Had a Labour government been elected in June, we would have immediately raised public R&D spending to 1.85 per cent of GDP, by committing to an additional £1.3bn of public investment in our first two years in office.

But the ‘direction’ of innovation must change too, so that it benefits communities across our country. That’s why we have pledged to build an innovation nation, democratising the benefits of science and technology so they work for everyone. Backed up by our £250bn national transformation fund, the national investment bank and a network of regional development banks, our industrial strategy will spread wealth across the country – not just concentrate it in pockets of affluence.

We will also engage with sectors – setting up sector councils modelled on successful examples such as the Automotive Council, but unlike the Conservatives this won’t be limited to a favoured set. And we have signalled our commitment to creating prosperity across the entire country with our pledge to found a new Catapult Centre for retail. Every part of the country has jobs in the retail sector, and boosting the take-up of innovation will be necessary to create higher-wage jobs and raise productivity. I like to say I went into politics for exactly the same reason I went into engineering two decades earlier: to make the world work better, for everyone. I still believe that politics and technology are the two greatest drivers of progress. Our industrial strategy will support the technologies of the future, but it will do so in a way that is driven by the politics and values of the labour movement. This is what the Conservative party does not understand. To quote Alistair Heath, deputy editor of the Telegraph, their industrial strategy is ‘little more than show business, with a sprinkling of activity’. It is not grounded in the values or needs of the British people.

A strong industrial strategy can revive our manufacturing sector. It can unlock productivity and create growth across the country. But it will only do so if investment in research, innovation and elite science is matched by an ambitious strategy to improve skill levels and uptake of technology in sectors across the country. Labour’s industrial strategy will develop and mobilise the technologies of the future to transform the economy for the many, not the few.