Industrial Strategy Commission: it is time to address UK’s major regional inequalities

The final report of the Industrial Strategy Commission is published today and marks the conclusion of some 12 months’ work by researchers at the University of Sheffield and the University of Manchester, under the guidance of chair, Dame Kate Barker.

Independent from government, the Commission has followed the evolving industrial strategy agenda very closely and today makes a series of recommendations designed to influence the forthcoming White Paper as well as the autumn Budget. 

Among these is the rather obvious need for government to take it seriously over the long term. To make that happen we recommend it as a new focus in the Treasury, equivalent to its fiscal responsibilities, with an Office for Strategic Economic Management – similar to the Office for Budget Responsibility – measuring progress and offering advice. Straightforward enough, you might think, but “industrial strategy” is still not a phrase that passes the lips of either chancellors or Treasury officials very easily.

As Ken Clarke once said, industrial policy is a phrase that “sends shivers down his spine”. But ultimately, like devolution under George Osborne, if we want significant long-term policy change, the Treasury has to drive it. 

It might for example, make the Department for Education rather more interested in regional economic policy as well as industrial strategy than they currently are. This is another focus for our report as major regional inequalities continue to widen. Political concerns have now overlaid the economics. After the EU referendum and this year’s general election, our “left behind” towns, cities and regions can no longer be ignored.  

This requires a step change in government thinking, and the DfE needs to make sure that FE and HE policy is able to help rather than hinder these aims. Neither the Office for Students nor the teaching, research and knowledge excellence frameworks can afford to be “place blind”. Yet the HE White Paper, before it became the Higher Education and Research Act, contains no mention of cities and regions, nor our uneven economic geography.

Labour market outcomes disadvantage those institutions working in weaker regional economies, especially when many graduates stay and work in them. This in particular is a problem because the Department for Business, Energy and Industrial Strategy would like more of this to happen. Because they know that human capital helps to strengthen regional economies and to increase productivity. 

To put it another way, the OfS and TEF need to find better ways of caring about places such as Bolton, Wolverhampton and Bognor – and the institutions or campuses that are based there. The same is true of the forgotten “mixed economy” institutions of FE and HE that exist in many places without universities such as Blackpool, Grimsby, Southend and Dudley. 

Revisions to the TEF include the halving of the National Student Survey weighting as a concession to London institutions that tend to perform badly in it. But in other terms – and certainly for an Industrial Strategy focused on regional inequality – the challenges in other regions are rather more pressing. 

This extends to funding for science and research, and particularly to the £4.7 billion of extra funding announced by the chancellor in the 2016 Autumn Statement. UK Research and Innovation needs to find new mechanisms more focused on “place” for these funds as well as those allocated through quality-related funding and the research councils. Typically this is met with concerns about undermining excellence and “jam spreading”. But with care, both can be avoided.

We have enough research excellence around the country and sufficient strategic awareness to avoid duplication or unjustified investment.  

But we must also realise that regional inequality is a pressing national issue and should not be easily dismissed as someone else’s problem. While no industrial strategy should seek to do everything everywhere, this particular moment in time demands that at least some benefits are felt everywhere. In prime minister Theresa May’s words in the Industrial Strategy Green Paper, it must help to build an “economy that works for everyone”. 

In this sense, the Industrial Strategy must do more than just deliver improved productivity and economic success. If that isn’t a big enough task, it must also try to restore faith in business, markets and our broader economic model. Many in higher education might worry that this will lead to more expectation and intervention from government. That could well be the case, but it might also offer a way of rebuilding public trust in universities too.

Andy Westwood is professor of government practice at the University of Manchester and a member of the Industrial Strategy Commission. The report is available online.