It is not hard to imagine what will be in Rachel Reeves’ ‘industrial strategy’. There will be lots of ‘green industries’, along with plenty of ‘cutting-edge technologies’, all designed to nurture ‘national champions’ in the ‘sectors of the future’. And presumably Lord Alli, the Labour donor who has been footing the bill for Keir Starmer’s wardrobe, will be put in charge of overseeing all the details. Alongside the tax rises in the Budget planned for next month, the Chancellor’s promise of a full-blown industrial strategy is a troubling prospect.
‘Around the time of the Budget we will publish a green paper on a new industrial strategy focused on driving and shaping long-term growth so we can make every part of our country better off,’ Reeves told the Labour party conference today. That document will be followed by several months of consultation with the unions and businesses, and everything will be up and running by next spring. As it happens, you hardly even need to fire up ChatGPT to write an industrial strategy for the UK. With lots of ‘mission-led’ ‘private-public partnerships’ to capture ‘high-value industries’ these things more or less write themselves.
There is just one snag. All around the world there is plenty of evidence that industrial strategies are collapsing. The EU’s big bet on microchips is falling apart as Intel threatens to postpone a big, subsidised plant in Germany. Northvolt, which was meant to make Europe a world leader in making batteries for electric vehicles, has only this week announced that it is cutting a quarter of its workers. Over in the United States, president Biden’s $650 billion (£490 billion) programme of green and industrial subsidies is coming badly off the rails as projects run massively over budget or fail to deliver. Bidenomics has become so chaotic that even Kamala Harris barely mentions it anymore. Meanwhile, China, largely responsible for reviving state-led industrial planning, is slowing down, stuck with way more factories than it needs.
It turns out that picking winners is not so easy after all. An industrial strategy may sound good in a speech, but it quickly runs into very familiar problems. The politicians and bureaucrats in charge back the wrong companies, in the wrong markets, allow costs to run way out of control, and, even when it does work, simply create too much capacity so no one makes any money. In reality, the industrial strategy bandwagon is fast collapsing – and there is no point in the UK trying to get on board now.
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