From the TUC

Labour’s Plan for Business: a TUC response

16 Feb 2015, by in Economics

Labour’s new industrial policy document, ‘A Better Plan for Britain’s Prosperity’, is an important step forward in thinking about the world of work in the coming years. I’ve just taken a quick look through the full 79 page document. There’s much that we knew before: Labour promises, for example, a freeze in business rates for small business properties, a British Investment Bank, the reform of takeover rules to strengthen the role of long term investors, and the encouraging of more employers to pay the Living Wage.

But in some areas policy has been strengthened and in others, new thinking emerges.

On procurement policy, it had already been announced that all firms wishing to win a large government contract would need to offer apprenticeships under Labour proposals. But today’s document goes further, as this section highlights:

“Procurement can also be used more strategically, for example by taking into account local social and economic benefits when awarding contracts and supporting small business growth. And we need to ensure that in departments such as Health, Energy, Culture, Media and Sport, Defence and Transport, data and public spending streams are being used strategically to support growth and innovation ….”

The TUC has long supported the use of procurement to provide local social and economic benefits. For years, we were told this could not be done under EU rules. Labour could go still further and use procurement to boost green technology, for example. And the call on government departments to spend their budgets strategically means breaking some of the silo mentality of government, but that would be no bad thing.

Labour plans a new gold standard Technical Baccalaureate and promises new Technical Degrees delivered by universities and employers, so that apprenticeships lead on to higher level qualifications. That sounds a bit like a return to polytechnics, which still exists as a successful part of the Singaporean higher education system and which many in industry were sorry to see go.

My main focus here, however, will be on, in the documents words, “a new broader direction for industrial strategy, so that it includes domestic sectors with the highest shares of employment and output, alongside those in which the UK has an established comparative advantage in international trade.” Supporters of industrial policy, like me, have been on quite a journey in the last decade. Were I writing this in February 2005, not 2015, the political consensus would have rebuffed calls for an industrial strategy, likening this to “picking winners”. The market, we were told, would identify the key sectors on which to focus. The market duly prioritised financial services massively over other sectors – and we all know what happened next.

The return to government of Peter Mandelson, whose time as an EU Commissioner will have shown him first-hand how well industrial strategies can work, led to the policy document, ‘New Industry, New Jobs’. Mandelson spoke of “less financial engineering and more real engineering”. Modern industrial strategy was taken up by the new Business Secretary, Vince Cable, after the 2010 election and in the five years since, the former Deputy Prime Minister Michael Heseltine, Cable’s Labour Shadow Chuka Ummuna and the Labour Peer Andrew Adonis have all supported this idea. The TUC, an early convert, had called for an industrial strategy focused on those industries where the UK was or could become internationally competitive in the age of globalisation.

But today, even that isn’t enough. Those R&D intensive, knowledge-based, exporting sectors are crucial, of course, but they do not employ enough people for us to make them central to our industrial strategy, to the exclusion of other sectors. In the TUC report, ‘The Way of the Dragon’, we highlighted how full employment is a central tenet of economic policy in China and we called for a similar approach in the UK. So today’s report from Labour, which talks about the importance of sectors like retail, hotels and restaurants, and transport, storage and distribution – covering seven million people, or nearly one in five workers in the UK – is welcome.

The report gives three examples from the retail sector – QuikTrip and Trader Joe’s in the United States, and Mercadona in Spain – that combine low prices with well paid employees, who are also knowledgeable staff offering excellent customer service. All three companies enjoy healthy profits, giving the lie to the argument that they and companies like them could only compete in this aggressive sector on the back of low pay and low skills. Of course, many other companies adopt a much less enlightened strategy. Labour will need to flesh out how it can encourage more companies to adopt high value strategies, in retail as in other sectors. Its promise of a tax rebate to those companies that sign up to become Living Wage employers in the first year of the next Parliament is an important step. I like the idea of hypothecated tax cuts generally: why not offer favourable tax rates to those that skill their workforce, invest in the future and live up to their role as a force for good in the community?

If I have a complaint about today’s document, it is perhaps the predictable one, but no less important for that. I’d like to have seen some commentary on how modern trade unions, as the voice of people at work, can play an active part in the industrial strategies of tomorrow. ‘A Better Plan for Britain’s Prosperity’ highlights the UK’s productivity gap and Labour’s Chuka Umunna told the BBC this morning that we trail France and Germany on productivity. He could have added that France and Germany engage union representatives in developing their industrial strategies, as the TUC document ‘Democracy in the Workplace’ highlighted. I am pleased that Ed Miliband launched today’s document at Jaguar Land Rover: this is a fine company and an excellent employer, one where modern trade unions have an active role to play.

So Labour is right, the UK needs to widen its industrial strategy to embrace sectors like retail alongside those like aerospace and automotive. But if it develops sector councils for these new parts of industry, it is critical that unions are invited to the table. As well as deepening industrial democracy, this will ensure that high skills and decent pay remain central to discussions about the future of UK industry.