From the TUC

What is industry policy for?

12 Sep 2012, by in Economics, Environment

Vince Cable is right, of course, to argue that Britain needs a modern industrial policy. But what is industry policy for? The Carbon Disclosure Project provides one answer in its new study of the global top 500 companies. They are making about a quarter of the effort needed in cutting their carbon to meet the UN’s 2020 climate objectives. Since the very idea of a UK industry policy has been unmentionable for decades, it perhaps seems churlish to ask straightaway, What is industry policy for?  Yesterday, the Business Secretary defined the role of government, which gets near to answering this question.

The Business Secretary argues that governments should:

(1)  plan for the long term; and

(2) “work together to deal with genuine market failures, whether the benefits of education or the costs of environmental damage.”

Given the Coalition’s apparent green U-turn, the Business Secretary seems here to be reasserting the role of government in tackling the market failure of climate change, driven by carbon emissions.

And he asserts the important principle of stakeholder engagement in policy making in his speech, or in his words, “building collaborative strategic partnership with key sectors”. This resonates with the TUC. Our study, German lessons, argued for “a new economic system that brings management and workers together, rather than pushing them apart.”

Cable’s vision of an industry policy involves five big asks:

  • New Government backed bank to help companies invest.
  • Government and industry strategy partnerships in specific sectors by 2013.
  • £165 million boost for the skills
  • New Innovation and Knowledge centre to boost commercialisation of research.
  • Reforms to government procurement, to encourage long-term investments.T

The idea of building collaborative strategic partnership in key sectors is an interesting proposition for the TUC and affiliates interested in opportunities for consultation and genuine partnership with government and employers to rebuild our industrial base. The examples he provides are aerospace, automotives, and life sciences sectors, sectors “that require a long-term, strategic partnership with government.” Some £6bn of investment in the automotive industry over the last two years was facilitated by government support. “Low carbon vehicle development,” he argues, “requires research in intelligent mobility and support for building up supply chains.”

With under 40,000 low carbon vehicles on the road now against a target approaching two million by 2020, all stakeholders – local councils, energy companies, investors, trade unions, skills bodies – would seem to have a role to play in this huge industrial opportunity.

Cable cites the Automotive Council and Aerospace Leaders Group as examples of the current sectoral institutions. Welcome these bodies are, as constituted they are limited in membership and scope. But the Business Secretary has set out a range of other sectors where government support will be focused, arguing that “All sectors that invest over a long time scale demand a constant flow of new knowledge, skilled engineers and scientists, and often are very heavily affected by government regulation.”

He identifies a disparate group of sectors – energy, including green energy, the information economy, construction, and the digital and creative sectors – which provide key inputs to our internationally traded activities. “To give clarity to this approach, we will develop and deliver a number of partnership sector strategies in the coming year, ” he suggests.

Meanwhile, a further round of UN talks to reduce carbon emissions long-term will take place at the end of November in Doha, Qatar. The Carbon Disclosure Project found that the average longer-term target for companies’ emissions reductions is currently only 1% per year. That’s well below the 4% required by countries to limit global warming to 2 degrees, the UN’s high level target to tackle global warming. This is the central challenge for industry policy.