Autumn Statement: Economy — House of Lords, 2016-11-29
Topic: Macroeconomics
Peter John Hennessy (Crossbench, Unknown): My Lords, it may be that future economic historians will single out the new industrial strategy element in the Chancellor’s Autumn Statement as its most enduring and significant ingredient. I hope so, but my hope is tempered somewhat. Why is that? It is because we have form as an industrial strategy nation Watching from the House of Commons Gallery last Wednesday as Mr Philip Hammond anatomised what he called the "financial backbone" of the latest one, I could almost sense the ghosts of industrial strategies past flitting about in the Chamber with rueful if sympathetic smiles creasing their pallid faces. By my calculation there have been at least seven previous industrial strategies since 1945, and with the help of our ever wonderful Library, I have been revisiting them and savouring their hopes, their fears and their prescriptions. They coincide exactly, curiously enough, with my life living and breathing on our cherished islands. For in the papers on the morning of 28 March 1947, the day I was born, came the announcement that the Attlee Government had appointed the industrialist, Sir Edwin Plowden, to lead their Central Economic Planning Staff and to chair the new Economic Planning Board which would bring together government, employers and trade unions for the purpose of boosting output The second of the post-war industrial strategies was the Macmillan Government’s creation in 1962 of the National Economic Development Council and supporting staff—tripartitism once more but laced this time with a dash of French-style indicative planning. Its purpose was to tackle what a still later stab at strategy, the competitiveness White Paper of the noble Lord, Lord Heseltine, in 1994, called our "long-standing relative decline". The noble Lord, Lord Young of Cookham, was I think a young NEDO economist in the 1960s and has inside knowledge of that particular phase of this extraordinary story Between 1962 and 1994 three more Governments pitted themselves against this toughest of problems at the very core of our country’s political economy and industrial activity. The Wilson Government’s National Plan of September 1965 was by far the most ambitious. It was a plan, the incomparable Secretary of State for Economic Affairs, George Brown, declared in its first sentence, that would cover, "all aspects of the country’s economic development for the next five years"— I emphasise the word "all"—for the purpose of propelling the UK economy to a higher trajectory of growth of around 4% a year, which was way above the 2.5% it had thus far achieved over the post-war years. As we all remember, sadly, it failed. Growth stubbornly remained slightly below 2.5%, which had been the norm hitherto. The Heath Government, as part of what their critics called their U-turn from a less statist approach, produced a strongly interventionist White Paper in March 1972, out of which emerged the genuinely interventionist Industry Act later that year. The last of the Wilson Governments had another go in 1975. This time there was no grand national plan, but rather a more selective picking of winners through a strategy of state aid to promising and growing industries outlined in their Approach to Industrial Strategy White Paper which was published in November 1975 In more recent times, the White Paper of the noble Lord, Lord Heseltine, entitled Competitiveness: Helping Business to Win, published in May 1994, placed an unremitting quest to raise productivity and adapt to ever quickening changes in technology at the heart of the Major Government’s assault on this most deep-seated of problems. Finally, the coalition’s strategy concentrated on emerging technologies and the new Catapults to project R&D into UK-based production lines while turning its back on what Sir Vince Cable, the lead Minister on it, described as the "cack-handed" interventionism of the 1960s and 1970s In the Commons Chamber last week, the Chancellor could have been crying out for all those who had gone before at that Dispatch Box when he declared: "The productivity gap is well known … but shocking none the less—it bears repeating. We lag the US and Germany by some 30 percentage points in productivity, but we also lag France by over 20 points and Italy by 8 points" When the Chancellor outlined the Government’s welcome plan for, "a new national productivity investment fund of £23 billion to be spent on innovation and infrastructure over the next five years",—[Official Report, Commons, 23/11/16; col. 902.] he reminded me just a tad of Sir Stafford Cripps as Chancellor of the Exchequer in the late 1940s, enthusiastically backing the work of the Anglo-American Council on Productivity, set up as part of the Marshall Plan of aid, in dispatching groups of British businessmen and trade unionists to see the roaring production lines of North America to work out how they could do it in a way that we could not For all our post-referendum anxieties, which I in no way diminish, we are not in the perilous position we were in when Sir Edwin Plowden took up his post and I sprang into the world in the North Middlesex Hospital beside the North Circular Road in March 1947. Then, we were a heroic but nearly bankrupt nation that had lost a third of its wealth in the Second World War. What a time for a superpower to throw in its last hand. As Keynes said: "We threw good housekeeping to the winds. But we saved ourselves and helped save the world". It was a glorious enterprise but we were very poor and very worn out. None the less, how it matters that the Government’s new industrial strategy works. I keenly await the Green Paper in the next few weeks that will flesh it out, and I hope that a genuine national consensus will cohere around its contents, even though we do not quite know what they are yet. It will be, in my judgment, a crucial element in our rising to the level of events that we face as a country and as a people Am I optimistic after that litany of industrial strategies past? I am with the great Albert Schweitzer who said, whenever he was asked if he was an optimist or a pessimist that, "my knowledge is pessimistic, but my willing and hoping are optimistic" Every generation tries a new alchemy on industrial strategy, but the ever wished-for transformation becomes in some ways tougher to achieve as markets globalise and the possibilities for planning or strategising in a single country become more difficult. But I live in hope that this time, we will take ourselves and the world by surprise.