Industrial strategy shows Labour has a long-term plan for growth
One year into office, the Labour government faces a challenging economic landscape, but its new industrial strategy signals a serious, long-term commitment to addressing the UK’s productivity issues and unlocking economic growth through stronger partnerships with the private sector, says Claire Ainsley
Next week will be one year of the Labour government, and it just goes to show that a lot can happen in a year. Even Labour sources would admit that there’s been a sizable gap between expectation and reality for businesses who, on the whole, looked forward to a fresh new government. Many had been bruised by the later years of the Conservative government and a succession of challenges from Brexit, the pandemic, and inflation, and embraced the opportunity to work with a purposeful pro-business government.
The fiscal position has required some difficult choices for the incoming Labour government, not least the raising of employers’ National Insurance. Whilst Labour stuck to its pledge not to increase corporation tax beyond 25 per cent, and the Bank of England has begun to lower interest rates, business continues to face a challenging environment with global instability the new normal.
Beneath the headlines and immediate challenges, there are important signs that the Labour government understands the long-term drivers of Britain’s sluggish economic growth and is willing to take bold action to address them. This week’s industrial strategy is the surest sign yet that the government has an ambitious and detailed plan to unlock investment and create the conditions for accelerated economic growth across the country.
Low productivity and centralisation
The emphasis on addressing the underlying problems in the British economy – namely the low productivity and centralisation – is welcome. It is going to take a concerted and consistent strategy if we are to bring about a new era of British prosperity. Britain needs to maximise its advantage of comparative political stability by setting a course for long-term economic prosperity and sticking with it.
A large part of that is using the opportunity of our long parliaments by getting to grips with the longstanding challenges early. For the past 18 months, I have been chairing the Building Back Britain Commission, an industry-led group of forward-thinking businesses who have put their minds and resources together to come up with practical ideas to improve productivity with the backing of WPI Strategy. These businesses will welcome many of the measures in the government’s industrial strategy, as they chime with our analysis that actions need to target digital, health, skills, transport and housing policy to drive up economic growth across the country.
But Labour will need to go further if it is to realise its ambition to drive stronger economic growth, raise people’s living standards, and deliver tangible improvements to voters’ lives ahead of the next election.
Firstly, the government needs a dedicated focus on improving the specific drivers of low productivity in places if it is to succeed. The Commission’s local analysis shows that targeting interventions matched to a place’s strengths and weaknesses could help raise productivity by one per cent over the next five years, unlocking an estimated £82bn in growth. Where an area has poor mobile connectivity, there needs to be an urgent focus on unblocking the barriers that are holding back investment in gigabit broadband or 5G networks. If there is a shortage of housing, the business commissioners have recommended that the private sector could fund the placement of expert planners in the local council to help unblock the system. These are practical answers which cost no public money.
Secondly, the government has an opportunity, and an economic imperative, to reset how it works with the private sector. It is businesses and workers who will deliver economic growth. They need to be in the driving seat, along with our Mayors and local leaders. The Commission is recommending the government set up a new Productivity Council as one of its practical ideas to make this happen.
It is people who will drive the change that can make our economy flourish for the future. The Labour government, one year in, has a unique opportunity to set a stronger course for the country by establishing a new relationship with businesses who have shown they have the resources and motivation to contribute. It is a chance not to be missed.
Claire Ainsley is chair of the Building Back Britain Commission and former director of policy to Keir Starmer