Bart van Ark, Anna Valero and Andy Westwood argue that a new statutory body for growth and productivity would facilitate policymaking across government.

As the UK gears up for a General Election, there is no lack of advice on what any new government’s priorities need to be. While the margins for policy manoeuvre are perceived to be rather narrow, we can be certain that growth and productivity will be at the heart of the economic policy agenda irrespective of what government will be in power.

Last November, we made the case that a new growth and productivity institution would be a useful addition to the range of advisory bodies to government, provided it is broad-based in its approach to productivity, independent and put on a statutory footing. In fact the UK had a brief experience of having an independent Industrial Strategy Council (ISC) which was focused on monitoring productivity and other objectives of its (also short-lived) Industrial Strategy.

While the current Conservative government has not (yet) indicated that it aspires to a change in what we see as a rather fragmented policy landscape, some direction has been provided by Labour in their policy statements to-date.

What can we learn from the Shadow Chancellor’s recent Mais Lecture?

In her recent Mais lecture, Rachel Reeves outlined of her approach to growth, and indicated where and how policy advisors could help a potential future Labour government. She reiterated her vision for “securonomics” as the basis for managing the economy. A key focus is the promise of stability – an appeal for replacing damaging policy churn (which has been particularly an issue since the Brexit referendum, multiple growth plans, reshuffles and short-term political fixes) with a more long-term and stable approach.

Indeed the Economy 2030 Inquiry and TPI’s Productivity Agenda argued that stability helps, and that a new growth institution would help to achieve it. In her Mais lecture, Reeves re-emphasised Labour’s previously announced commitment to reinstate the ISC and place it on a statutory footing. She also reasserted the role and importance of the Treasury and particularly a planned revitalisation of its Growth and Productivity Unit.

But it’s important to note that to move the dial on growth, stability would need to be accompanied by a range of reforms to boost business investment as well as increased and well-targeted public sector investment. Labour, like the current government, are placing much emphasis on supply-side reforms to increase business investment – for example in planning and pensions and indeed, stronger growth-focused institutions, and more emphasis on the long-term in decision making, could help inform such policies and their implementation. Ambitions on public sector investment are now more muted compared with previous iterations of the Green Prosperity Plan, though Reeves did open the door to more of a focus on long-term value creation in fiscal frameworks while underlying the importance of economic institutions – from the Bank of England to the Office of Budget Responsibility.

Another key issue relates to how stronger growth can be delivered given today’s challenging and uncertain global economic and political environment, and this does require a clearly articulated strategy. In this vein, industrial strategy remains an important strand of Labour’s thinking, with an emphasis on supporting the industries that deliver this security as well as those where the UK has (or has the potential to develop) comparative advantage. In other words, Labour still plans to be a very active state.

What institutional support is needed for growth and productivity?

We have previously argued that a dedicated and lasting institution focused on growth and productivity would be a key part of the solution to the UK’s economic challenges. Such an institution could focus on identifying the key policy levers to revive productivity-driven growth, make recommendations to government on how to best shape policies which are sustainable in the long-term, and monitor the effectiveness of policy solutions.

We suggest putting this institution at some distance from day-to-day policy making as a location of deep and continuous expertise on productivity, and stakeholder coordination. Crucially, an active state taking a strategic approach has to make difficult choices on where to channel support to maximise impact – independent analysis and monitoring can help to inform decision-making frameworks and maximise the likelihood that public support is channelled wisely. In this way, it would help with the politics of making decisions where positive outcomes are likely to be seen over the long term (and beyond the political cycle), as well as highlight synergies and trade-offs between different strategies and between growth, sustainability, and inclusivity objectives at different timescales.

The new institution should be placed on a statutory basis (for longevity), and be accountable to the level of government where socio-economic policies get coordinated and guarantee is that sufficient breadth – something that echoes recent recommendations from the Institute for Government for strengthening the centre of government.

Additional accountability to parliament would further aid transparency. It would also be important that the work is directly connected to that of key policy stakeholders representing business, workers and the third sector as well as from devolved nations and combined mayoral authorities. Comparisons with what works in other countries, such as Australia, France or Germany could also provide lessons for the UK.

The institution should complement, support and help to coordinate work on productivity and growth at HM Treasury and at other relevant departments. In fact, this type of approach would mean that government departments and ministers at various levels of government could all benefit from strong, evidence-based advice across “horizontal” as well as sector-specific issues.

An Industrial Strategy Council “Plus”?

Would Labour’s proposals to bring back the ISC fulfil the role of the institution we describe? So far, little detail has been set out, but the ISC’s original agenda seems a good fit with what has the aims of Labour seems to be, as described above.

The ISC’s agenda was explicitly aimed at monitoring and evaluating government’s progress against both horizontal and more targeted policies set out in the 2017 Industrial Strategy, including Ideas, People, Infrastructure, Business Environment and Places; sector deals and cross-cutting challenges such as “clean growth”. Improving productivity was a key focus.

Bringing the ISC back is therefore welcome, and so too is placing it on a statutory footing. A more critical improvement would be to broaden its remit, so that it can inform government’s approach to the growth of the economy overall as well as to the specific activities and sectors in its industrial strategy.

While improving productivity was already core to the remit of the original ISC, there is value in reflecting this focus in the name of the institution – our suggestion is an Industrial Strategy and Productivity Council (ISPC). This would help to clarify the emphasis on broad-based productivity as the driver of growth, as opposed to only a narrower sectoral focus that is often associated with the term industrial strategy.

All articles posted on this blog give the views of the author(s), and not the position of LSE British Politics and Policy, nor of the London School of Economics and Political Science.

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