Industrial Strategy: May government needs to match it's words with public investment if it wants to unlock missions potential

When Theresa May took over the leadership of the Conservative Party, she heralded a change of approach. There has been a lot of talk of government being willing to get more involved - on May's part, expressed in her insistence on restoring the Unionist part of the party's legacy, including invoking Joseph Chamberlain and a more activist government.

The issuing of an industrial strategy was seen as a statement of intent - an act of intervention that broke with the pro-business, laissez faire brand of 'liberal conservatism' of her predecessors David Cameron and George Osborne.

However, follow through has been limited. So too has money. Once published, the government's strategy looked less about shaping markets and supporting innovators, and more about propping up Britain's failing industries with deals and deregulation.

Theresa May's latest step was to reference the UCL Institute for Innovation and Public Purpose (IPPR), who along with it's director Mariana Mazzucato have been pressing hard for a reshaping of how we understand the role of government in innovation. But her warm words toward the potential of strategic missions will mean nothing without the funding to match.

Mazzucato's work has argued, the state can be the risk taking pioneer - a role expected of the private sector, but which it is never willing to fulfil. By funding R&D, by offering long term, stable public investment, government can open up and shape entirely new markets.

But it can't do this without money - at either end. Projects need investment and support to be there from the start and need the private sector not be able to simply walk away with unlimited potential earnings at the end, with no restitution for the public role. Big ideas should fund new big ideas.

Theresa May's government, however, has yet to be willing to match big words with big funding. Today's speech was no different. There was a lot of praise for public institutions that engage in research, but little mention for how they have been strangled of funding.

May set out her four missions - within four 'grand challenges' facing Britain taken from the Industrial Strategy - and praised the potential of missions to drive innovation forward. But that was the extent of it.

Both the IPPR and the thinktank OECD have argued that increased public investment, and the infrastructure to implement it like a National Investment Bank, is a golden opportunity that the UK is not taking advantage of - despite Britain investing well below 3% of GDP.

Without funding, potential will remain unexplored. Mission statements represent step one in a coordinated approach. The Prime Minister herself acknowledged that progress is born from collaboration and cooperation. There needs to be a lot more of it, and something more: coordination.

Theresa May is committing to the big visions/big speeches aspect of the call for strategic thinking. Will the government wake up and start to put in place the rest of the infrastructure needed to maximise the potential that can be unlocked by long term strategic thinking?

Cameron & Osborne reached Easter Recess having survived another tough short term battle, but longer term dangers linger unaddressed from failure to invest

Approach of UK Conservative and Canada Liberal governments to their respective 2016 budgets were worlds apart. Photograph: Parliament of Canada in Ottawa from Pixabay (License) (Cropped)

As Parliament went into its Easter Recess on Friday, it appeared that the Cameron Government had weathered the political storm caused by the budget. Controversies had weakened the government's position, but had not toppled it. Yet Prime Minister Cameron and Chancellor Osborne have only won the week, as tends to be their criticised focus (Kuenssberg, 2016).

While they manage the short term, there are larger, longer term, dangers they're not addressing - not least of which is the long term danger of failing to invest. Cameron and Osborne like to talk of not leaving our debts to the next generation, yet there are debts other than fiscal to leave to the next generation. One deficit they are sure to leave behind is infrastructural (Yalnizyan, 2016).

It is interesting how different priorities can be on either side of the Atlantic. In Canada, their new Prime Minister Justin Trudeau unveiled his first budget. As promised during the election, it involved deliberately running deficits in order to fund public investment in rebuilding Canada and setting it up for the future (CBC News, 2015).

John McDonnell's focus as Shadow Chancellor has been to try and undermine the perception of the Conservatives as the economically competent party, that can be trusted with the national finances. In his response to the budget, he paid special attention to the Conservative habit of over-promising and under-delivering, especially when it comes to public investment (McDonnell & O'Connor, 2016).

McDonnell has expressed particular and repeated concern that the Conservatives keep sending out press releases launching projects and yet, as argues McDonnell, don't provide or secure adequate funding. Meanwhile, against the recommendations of the OECD and the IMF, Osborne has continued to let investment consistently fall as he pursues a budget surplus (McDonnell, 2016).

What is interesting this is not a trend that Osborne began, but is rather just fitting into. Public investment in the UK has been falling steadily for the better part of fifty years (Thornsby, 2016). At the last election, both Labour and the Lib Dems wanted to put aside money for public investment, exempt from the efforts to balance the budget, but their efforts were timid due to lingering doubts about ignoring the debt or deficit in the short term to pursue a longer view.

While these doubts are being harboured in the UK, in Canada the situation couldn't be more different. At the last election the Conservatives were defeated by the Liberals coming from third place into a sweeping majority while promising to run deficits in order to fund economy growing public investment (CBC News, 2015).

Now there were certainly other aspects of the Liberal approach that helped them over the finishing line - not the least the fact that none of the parties leaders were Stephen Harper. The Trudeau campaign was open, relaxed and friendly with the public and the offer of limited-deficit funded public investment in infrastructure cannot be discounted as a factor (The National, 2016).

Yet it would seem to have only been possible to propose those deficits because the Liberals did not have the weight of a reputation for fiscal irresponsibility on their shoulders. Pre-election polls suggested that the public not only trusted the Liberals the most on the economy, but also believed they would be the most likely to have a positive impact on the economy (CTV News, 2015) - and aligned more with their promise to invest in infrastructure rather than simply cut taxes and balance the books.

While tackling the Conservative reputation, Shadow Chancellor McDonnell has also been trying to rebuild one for Labour. Bringing on a team of advisors, he has taken them on tour where, speaking across the country, they have explained how negative austerity has been and what might be possible in its place.

No one has typified this more than economist Mariana Mazzucato. In her own work, and in her work advising Labour, Mazzucato has consistently argued that the private sector is too risk averse and too short term in its thinking to handle the kind of positive long term investment that the public sector excels at (Mazzucato, 2013{2}).

In fact, if anything, she suggests that the private sector leeches off of public investment - privatising the rewards (Mazzucato, 2013). For those wedded to the fear of progressives forever being labelled as high spending, controlling statists, Mazzucato's call if not for a bigger state, but for a much easier to stomach smarter state (Mazzucato, 2014). A state that promotes growth by making smart investments where the private sector only hinders or won't take the risk; a state that promotes justice by seeing more of the reward for public efforts returned to the public.

The second, and maybe harder, part that follows the building of a reputation, is maintaining it. In Canada, the Liberals have been smart, deliberately managing expectations (Evans, 2016). While every $1 of infrastructure spending can lead to much bigger revenue returns - what Willie Rennie, leader of the Scottish Liberal Democrats, refers to as a virtuous cycle of investment (Taylor, 2016; Gray, 2016) -  they have nonetheless managed their forecasts down, leaving themselves plenty of headroom for showing the positive impact of their policies.

Public investment is important. In infrastructure, in education, in housing, in healthcare. All of these materially benefit everyone, even tackle inequality. Yet despite the Chancellor's obvious pleasure at announcing investment projects, there has been little to back it up (Pidd, 2015; Boffey, 2015) - with announcements seemingly serving as publicity to encourage private investment instead of the making of public commitments.

Sooner or later, the public will have to face the reality of the Conservative failure to invest - in education; in affordable housing; in technology, science and research. Long term public investment will be missed when the reality of selfish, short term, private investment is grasped. In the meantime, progressives have to do what they can, building the credibility of the argument for a smarter state that invests in the common good.

Labour need to start winning battles on the airwaves if their anti-austerity policies are going to win on the ground

At some point John McDonnell has to turn his academic focussed New Economics tour into well publicised campaign events, for audiences both live in the flesh and live online, if his counter-narrative is going to take hold. Photograph: John McDonnell MP with Grow Heathrow in London in 2012, by Jonathan Goldberg/Transition Heathrow (License) (Cropped)

Yesterday evening, Labour Shadow Chancellor John McDonnell made the latest stop on his New Economics tour at the London School of Economics (Kirton, 2016). As with previous events, the audience was packed out to hear his arguments, not just against austerity but for an alternative.

The first New Economics tour stop saw Mariana Mazzucato argue, at the Royal Society, for a smarter state (Mazzucato, 2016) - defending the state as an often abused innovator that takes the risks that the private sector won't, but which shares little of the rewards. The second saw several speakers tackle how technology will affect work in the future (Srnicek et al, 2016).

At the LSE event, McDonnell spoke directly against austerity as an ideologically motivated policy - as a choice made by Conservative politicians in pursuit of a their own political goals (Kirton, 2016). The Labour Shadow Chancellor said that his priorities were to put democracy and decentralisation at the heart of his economic approach (Sheffield, 2016) - and positive statements that Labour were giving serious consideration to backing a basic income (Sheffield, 2016{2}).

What has been missing, however, is promotion. Beyond those in the loop or paying close attention, there has been little pomp and ceremony to draw attention to the Shadow Chancellor's efforts. In the face of apparent media hostility to the Corbyn-McDonnell project, the low key approach might well be understandable.

The trouble is that these are precisely the battles that Ed Miliband lost as Labour leader. Labour lost control of their own message, of their own identity, and left it to others to define them.

Economics has been the outstanding issue. The key to getting Labour back in power, according to many commentators both internal and external over the last six years (Umunna, 2015; Eaton, 2015), is to rebuild Labour's reputation as an effective and reliable manager of the economy - to regain their economic credibility. The Shadow Chancellor himself has acknowledged that reality (The Herald Scotland, 2016).

John McDonnell's idea of bringing on the world's most famous, rockstar, anti-austerity economists as advisors was a bold move. Taking them on tour to make their arguments, to build a counter-narrative in opposition to austerity, was bolder still. But the low key, low profile, approach can only reach so far.

Right now, the Corbyn-McDonnell team is fighting battles within small circles of onlookers. Scrapping for party policy positions, introducing an alternative narrative by increments to interested and sympathetic audiences at cosy events. Yet, sooner or later, the boots of campaigners will have to hit the ground and bring them face to face with the voters who live far outside of those circles.

The Corbyn-McDonnell team have shown that, within their own party, they have a pitch that appeals to a broad cross-section of society - from young to old, from poor to wealthy (Sayers, 2016). As with Bernie Sanders in the United States, there is the potential for a winning coalition. But that won't automatically translate into public sympathy.

To reach those people, New Economics will have to start winning battles on the airwaves. Promotional ideas like the New Economics tour will have to be prepared to put a spotlight on its rockstars, promote them and get them playing to bigger crowds - crowds that are maybe more sceptical and who need the grand ideas distilled and condensed.

John McDonnell and his advisors are presenting a compelling vision of a very different, more humane, economy and society - not least in their acknowledgement of the basic income. The next step is to turn up the volume and stop conceding control over the airwaves.