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Labour sets right tone for industrial debate

Terry smiling headScottish Labour’s new industrial strategy, outlined in a 24-page document, is a curious mix of old fashioned party values and a realisation that the world has changed.

It reminds us more than once of its historic commitment to full employment, to equality and a fair wage, while arguing the need for new thinking around automation and re-skilling for a data-driven economy, rather than one in which workers got their hands dirty.

As such it poses questions as part of what it calls “the start of a new conversation” with industry, business and other economic stakeholders. A conversation as opposed to the more typical trading of insults is a good start and gives us something to work on.

Inevitably, the document questions the current government’s track record, and accuses it, and the Conservatives, of lacking an industrial strategy. But it does not set out to strip them bare. This is also encouraging. Any attempt at preparing the country for the changes ahead and finding solutions to underlying problems will fail if politicians merely resort to adversarial positions.

Indeed the paper welcomes some of the current government’s actions and some of its own recommendations offer little more than beefing up a number of current models and policies: the enterprise network,  digital skilling, encouraging exports.

There was a fear that this paper would amount to a wish list requiring a substantial increase in spending and taxation. It doesn’t. An absence of any spending commitments may be seen as a weakness, but this paper is not designed as a budgeting exercise, more as a discussion paper, an examination of some ideas about how to grow the economy.

The issues are complex and an important part of a transition to a different kind of working environment that will produce new industries and new jobs that no one even knows about.

The paper notes how it has fundamentally changed from one which 40 years ago employed 28.8% of the workforce in manufacturing and now has just 8.6% who work in that category.

Some would question this figure as it depends on how you define manufacturing. In 1979 it was still dominated by what we used to call metal-bashing. Within a few years it was embracing the new electronic industries involved in such things as microprocessors and mobile devices which some number crunchers would discount.

Whatever measure is used the decline in numbers should not alarm anyone. Many of those manufacturing jobs have been replaced by less labour-intensive roles which are achieving the same outcome and are just as valuable, and almost certainly healthier.

The “fourth industrial revolution”, as the next phase is described in Labour’s strategy paper, will create new kinds of jobs and demand new ways of educating the young and the party argues that there is a need for “active” as opposed to “reactive” management of the economy.

Underpinning the strategy is a commitment to improving productivity and it notes that Scotland is one of the better performing parts of the UK. However, it also notes that the rate of productivity growth consistently lags many of our competitors.

It recognises that it is business, not government, that has failed. Rates of investment lag almost all other OECD economies, impacting on productivity. It states that to match the best, “business investment in Scotland would need to be 90% higher, or increase by £10 billion. Yet most businesses based in Scotland do not consider external funding”, it says. “This raises questions about the extent of growth ambition.”

This is pretty damning, particularly as it goes on to accuse businesses of “poor competitiveness in productivity, innovation and capital investment” which, it says, “hinders the scope to drive up export sales”.

Port of Grangemouth
Just 15 businesses account for a third of exports

It’s certainly the case that Scotland’s export record is poor. This accounts partly for the country failing to benefit from the fall in sterling. All the low pound has done is add to import costs. According to this report, only 15 businesses account for 30% of all exports, and 70 firms for half.

These are shocking statistics. But it is the sort of data that is required, says Labour, to “start a conversation”.

There are a few points in this document that need to be challenged. It refers to a “disconnect” between academic innovation and industrial application “with opportunities all too often going to overseas competitors”.

There may still be some of this, but there is also evidence that investors and individuals are being drawn to Scotland because of the opportunities to build businesses around the cluster of universities that are turning out quality research and graduates in computer science skills. The unicorn businesses – Skyscanner and FanDuel – made exactly that connection.

There is also a curiously outdated reference to a “small competitive core” of companies contributing disproportionately to Scotland’s growth. This name-checks Wolfson Microelectronics, a company that was acquired by Texas-based Cirrus Logic three years ago and no longer trades under its former name.

A more fundamental issue within the paper relates to something I have mentioned here previously, namely the ability of any Scottish government to really affect change in the economy without the sort of powers possessed by those rival economies to which Scotland is repeatedly compared. It does not have its own central bank or independent treasury to control interest rates, currency, fiscal policy, and so on. While different parties rule at Holyrood and Westminster this is doubly troublesome.

Labour’s economy spokesman Jackie Baillie told me that all the party’s proposals in this document could be achieved without the need for a Labour government in Westminster. I doubt that.

For a start, it acknowledges that the proposed strengthening of the Scottish Investment Bank – with “£20bn of capital to lend” – would rest on Labour being in power in London and setting up its National Investment Bank, of which SIB would be an offshoot.

Talk of a 48-hour maximum working week grabbed a few headlines immediately the document was published, but the pledge is conditional. First on the UK repatriating employment laws, then on those same laws being repatriated to Scotland.

A Scottish Labour government may therefore struggle to implement many of its recommendations without a huge dollop of support from London.

However, it deserves credit for producing a paper that presents a holistic view of the new economy and should form the basis of a nationwide debate.





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