What's the strategy for industrial strategy?

Isaac Ward

10 September 2013

Industrial strategy is high on the Government's playlist of late, with reports being published for industries that the Coalition believe to be of high economic value. For energy, we have seen reports for the oil and gas, nuclear, and offshore wind sectors.

These are three very different sectors, to say the least: so what's going on? With three potentially conflicting industries, it begs the question, does the Government have an integrated plan for the economy? Or is it simply hedging its bets on industries that seem to promise high returns in the future?

Oil, gas and nuclear: old industries getting new money

The Government's strategies for oil, gas and nuclear appear to be throwing good money after bad.

The strategy for oil and gas is primarily concerned with extracting as much as possible from ageing oil fields in the North Sea, known as Brown Fields, by offering taxpayers' cash to firms for R&D and investment. The Government's stated aim is to maximise the economic production of the UK's offshore oil and gas resources. This is clearly not about helping a new industry or finding alternative energy sources, but about milking an existing one, and further taxing the proceeds gained through Government hand-outs to what is essentially a dying industry.

With 60 years of history, neither is nuclear new on the scene. The Government's strategy for nuclear focuses on R&D and investment in technological development, the goal being to become the go-to nation for building new reactors and decommissioning around the globe. Spiralling costs do not appear to concern the Government, and the strategy is primarily aimed at helping other countries build their nuclear capacity - little wonder given the struggling and expensive negotiations over just one nuclear station over here.

What about offshore wind?

At a recent TUC event attended by both the Business Secretary, Vince Cable, and Shadow Business Secretary, Chuka Umunna, the rhetoric was promising, with a heavy focus on benefits produced by relative newcomer, offshore wind. If the industrial policy for offshore wind were to reflect the strategies of the other sectors, we would expect the domestic wind turbine manufacturing industry and supply chain to be given considerable support, with a strong focus on R&D, supply chain investment, and tax breaks.

This is something we'd welcome with open arms. Friends of the Earth's Energising England work and programme of events has highlighted the necessity of industrial policy for offshore wind to create jobs, revitalise economically struggling parts of the UK, and build supply chains.

But the offshore wind strategy isn't all it could be. By just one yardstick - money being made available for developing supply chains - it pales against the others. Although there is some splashing of cash, with £46m invested over a five year period to drive innovation, this is a drop in the ocean compared to to the £1.6bn spent by the Nuclear Decommissioning Authority (NDA) alone each year directly supporting companies working the nuclear supply chain.

What and who is an industrial policy for?

As long as the Government cultivates deep uncertainty in clean energy investors by backing a dash for gas, including shale, we'll never make the most of our clean manufacturing potential. With support for both high- and low-carbon industries that are clearly in conflict, it doesn't look like the Government has come up with an integrated solution to the UK's energy needs.

The National Audit Office recently pointed out that there is no "overarching commitment to ensure that the [total] industrial strategy promotes green growth," and with the Government so far failing to sign up to a widely supported target for decarbonising electricity by 2030 ambiguity still reigns.

Industrial policy shouldn't simply direct money towards industries that may provide economic returns in the short-term, but should be about making the inevitable changeover to low-carbon, sustainable sources. All corners of the country should benefit from this industrial policy, not just a particular region. Regions like Humberside and Teeside, incredibly affected by the recession, should greatly benefit from support for offshore wind. The UK is currently a leading nation in offshore wind installation, but if we want to keep this competitive advantage we need to give further support to R&D and create a promising investment environment.

It's a good news story that we'll be stressing over and over again at the impending party conferences - like our fringe at the Labour conference in Manchester.

Isaac Ward, Economics and Resource Use programme