The Truss government, after mixed signals on industrial strategy and the appointment of a foreign minister whose ideology might favor a “laissez-faire” approach, has been urged to reaffirm its commitment to using research spending to boost innovation, particularly in the regions .
The decision to appoint Jacob Rees-Mogg as Under Secretary at the Department for Business, Energy and Industrial Strategy brings a potential tension between the concept of industrial strategy – government using public investment to boost productivity by stimulating new markets or technologies – and the view of the ultra-Thatcherist wing of the Conservative Party from which he hails that government should play a smaller role in the economy.
Kwasi Kwarteng, now Chancellor, had already said when he was Economics Secretary in the Johnson government that the “brand” industrial strategy would be dropped – although the government subsequently published an innovation strategy.
Richard Jones, Chair of Materials Physics and Innovation Policy at the University of Manchester and Independent Scientific Advisor to the Innovation Greater Manchester project, which is funded in the Johnson Government’s Leveling Up White Paper, said: “It is clear that the new government has some ideological It differs from the previous one, but I welcome the emphasis on the need to bring the economy back to pre-global financial crisis growth levels.
“To do that will require a restoration of productivity growth and I believe that can only come through a more innovative economy where economic growth is spread more evenly across the UK.
“The government’s commitment to raise the R&D intensity of the economy to 2.4 percent of GDP is a necessary prerequisite for this, as is the commitment in the White Paper ‘Leveling Up’ to increase public investment in R&D outside the Greater Southeast by a raise third to 2024-25.”
Phil Tomlinson, professor of industrial strategy at the University of Bath, said that while Liz Truss’ credentials as a “free market economist” have been talked about a lot, “politics and business will become more supportive of government intervention – as evidenced by the response to the energy crisis.” .
“It is unlikely that Tory Red Wall MPs will be happy if alignment commitments are suddenly dropped – after all, the Tories owe their majority in part to promises to reduce regional disparities,” he added.
Commenting on Mr Rees-Mogg’s appointment, Nick Hillman, Director of the Higher Education Policy Institute and a former adviser to Lord Willetts when Conservative Minister for Universities, said: “On the one hand I welcome the fact that we have someone at the helm of the BEIS department, who is a big figure in his party, but on the other hand there has clearly already been a shift back to the status quo ante in industrial strategy rhetoric, which could benefit Rees-Mogg’s broader political instincts.
“I remember in the early 2010s I was prevented by the Treasury from even using the term ‘industrial strategy’ in a policy speech I was working on for a minister, but a few years later we even had a department involved this expression its title. Now it seems likely that we will revert to a laissez-faire approach.”
Mr Rees-Mogg’s priority is likely to be deregulation of the economy or workers’ rights, meaning he may, in practice, leave research policy to junior ministers. But a Secretary of State unwilling to fight to keep the commitment to increase research spending while the Truss administration seeks savings to fund its energy spending would spell trouble.