Labour's industrial strategy is a corporatist, state-led agenda
Within the strategy, the talk is of competitiveness, the answer is intervention. The document acknowledges that firms are concerned about high electricity prices and lengthy waits for grid connections, and the answer is that the current policy is right but can be tweaked.
The burden of regulation and the speed of planning are noted as barriers, so let's see if the government's actions back their words in trying to address these. I doubt it on regulation, but I am more hopeful of planning reform, which would indeed make a profound, welcome difference to growth prospects.
At their core, industrial policies reflect scepticism about markets and an aversion to supply-side reform. Instead of removing hurdles to growth as supply-side policies would, industrial policies often reflect the lethal combination of politicians driven by a belief that the state drives growth, academics who think they know best and lobbyists. This new strategy is unlikely to improve underlying business conditions.
Industrial policy is sometimes presented as a complement to supply-side reform, but more often, it becomes a substitute. One criticism has been that government spending crowds out the private sector, but this strategy hopes that funds directed to the IS-8 will crowd it in. Let's see.
There is also something amiss about these eight sectors in that they reinforce the imbalanced nature of the economy. The UK is a low wage economy because half the population work in low paid jobs. Outside London and the South East the numbers employed in these eight sectors is very limited.
The UK's approach to such strategies often leans towards tax credits. That remains a focus. This new strategy explicitly mentions the role tax plays in incentivising investment, innovation and growth. It then argues our current approach is competitive. Really?
In the 2024 International Tax Competitiveness Index, the UK ranked 30th out of 38 OECD countries and looks more likely to fall, than rise.
The last 12 months have been turbulent for the world economy and difficult for the UK. But instead of tax, spend and borrow, what we need is for the UK to save, invest and compete.
Gerard Lyons is a research fellow at the Centre for Policy Studies
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