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March 13, 2013

Theresa May and Tim Montgomerie show David Willetts' ideas are becoming the new normal for Conservatives

Whether she ever gets to be Prime Minister or not, Theresa May's speech on Sunday deserves to be remembered.

For 30 years, economic orthodoxy in the Conservative party has been in thrall to the convictions of Margaret Thatcher. But Sunday looks likely to be remembered as the day the party finally moved on. If so, Conservatives will have David Willetts to thank for it.

For more than a year, Willetts has waged an intellectual and political campaign to slaughter the muddled yet sacred cows of the 1980s such as "no picking winners". It has taken courage, for at the beginning he understandably feared a backlash from the right of his party. Thanks to grammar schools, he knows how pitilessly any mis-step may be punished. But the backlash has not materialised and Sunday was the day his argument for an industrial strategy went mainstream within his party. For May did not simply name-check the Willetts' approach. The Home Secretary made it a central plank of her vision for Britain. 

This is what May actually said:

"In the longer term, we need to build on the work the Chancellor has already done through local enterprise partnerships and enterprise zones, as well as the efforts of David Willetts in the Business Department, and expand our nascent industrial strategy. Now, before you think I’m about to reach for the beer and sandwiches, I’m not talking about failed seventies-style corporatism. Nor am I talking about a different type of big government. I’m talking about a more strategic role for the state in our economy. Let me give a few examples of what government could do.

First, it should map out the established and developing industries that are of strategic value to our economy, so policy can be designed to promote those industries. We effectively do this on an ad hoc basis in trade negotiations and when we make tax changes – mostly for the financial services industry – but we should do it on a wider and more systematic basis, working with our best businesses in key sectors. That’s how we’ll improve our record in infrastructure, skills and training, and research and development.

Second, and building on this work, government should identify the training and skills capabilities we need, and tailor its policies accordingly. It could encourage the establishment of more technical schools. It could work with schools and business to get more young people studying science, technology, engineering and maths. It could fund deep discounts in tuition fees for students who want to study degrees like engineering, where we have a shortage of skilled workers. This kind of planning already takes place in the immigration system, with a shortage occupation list in key sectors, so I don’t see why we shouldn’t apply the same logic to our own workforce.

Third, government should identify geographical clusters of industry – like biotech in Cambridge, the semiconductor industry in the South West of England, or the Formula One corridor in Oxford, Warwick and Birmingham – so we can help develop these clusters further, put British businesses at the forefront of industrial innovation, and create thousands of new jobs.

Fourth, government should change its approach to public procurement, so we can strike a better balance between short-term value for the taxpayer and long-term benefits to the economy. I don’t mean we should always award contracts to British companies, regardless of price or quality, but we could produce a clear framework that explicitly takes into account the effect of procurement on British jobs, skills and the long-term capacity of our economy.

And fifth, we should pursue a relentless campaign to support entrepreneurs and wealth creators. This might mean traditional solutions, like granting generous tax exemptions for start-up businesses. But imagine if, as our public service reforms develop, we broke down the artificial divide between private and public sectors and allowed hundreds or even thousands of organisations to provide public services. Not only would we be improving those services, we’d set free world-beating British education and health providers who could use their expertise to win business in foreign markets. As George Freeman, who’s done a lot of thinking in this area, says, “we need a recovery that allows us to unlock the full enterprise potential of the best of our public sector.”

To those who say this is wrong, this is about picking winners, I say it’s no such thing. It’s about the state taking a strategic role, deploying our funds and resources in the wisest possible way. It’s about doing everything we can to get Britain trading its way out of trouble and towards prosperity."

This is not just endorsement of an interesting idea. It is commitment. And in May, Willetts' cause has found an articulate communicator. There is something about her no-nonsense way that cuts through the abstractness of the issues. She manages to make this sort of policy sound exactly like what it actually is - plain common sense.

On Monday, Tim Montgomerie, the influential founder of the ConservativeHome website, welcomed May's speech in his Times column, endorsing also the need for an industrial strategy.

Further battles lie ahead. It is still for David Cameron and George Osborne to decide whether they are prepared to match the vision of an industrial strategy with the corresponding resources. Can they imagine, for example, giving the Technology Strategy Board anything like the budget it would command in comparable economies, a good £1 billion a year or more? But for now we can reflect on a momentous Sunday. The economic debate in Britain is unlikely ever to be the same again.


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