The government’s new industrial strategy needs to create a cultural transformation, as much as an economic one

Regional cabinets probably aren't going to fix this mess. Image: Getty.

It’s a chilly January day, and the government has just broken with its previous laissez-faire approach and announced a bold, interventionist plan to boost the UK’s economy at a time of great uncertainty.

But instead of it being Theresa May and Greg Clarke doing the speeches and media interviews, it was Gordon Brown and Peter Mandelson. The year was 2010 – a time beyond the reach of human memory in today’s Twitter-driven politics. But look at the ideas and aims of the Labour government’s Going for Growth paper and they could well have been lifted straight out of a dusty filing cabinet by the wonk charged with writing May’s “new” strategy.

The truth is that numerous governments of every party colour have announced interventionist strategies of remarkable similarity for decades: big investment for infrastructure, funding for university research, support focused on the “sectors of the future” and teaching of the skills required by disruptive technologies. Harold Wilson made such an approach the very heart of his 1963 election campaign with the slogan the “white heat of technology”. Even the supposedly staunchly laissez-faire Margaret Thatcher did a heck of a lot of intervention.

Which raises a rather challenging question for this government. These sorts of policies have been tried so often in the past, yet have failed to address the UK’s very long-term problems of low productivity and regional economic imbalances. So why have they not worked before? And how can they be made to work this time?

There are two answers, I think.

The need for cross-party support

Firstly, there is the fact that these policies are often not followed through. We only need to look at very recent history with Brown and Mandelson’s industrial activism being seriously watered down by George Osborne as part of his austerity drive. Too often growth strategy is the victim of changes of government, minister or priorities.

The truth is that deep-set, long-term problems like productivity and economic imbalance can only be resolved with the application of consistent policies over decades not years. Germany’s much vaunted success in this area is not down to the originality of its policies, but the fact they have been applied consistently by a series of governments ever since 1945. One of the most successful sectors in the UK, our pharmaceuticals industry, has flourished because it has in effect been in receipt of activist support in the form of NHS contracts since the 1940s.

This is why if May is really serious about her goals she should spend as much time building a genuine consensus and commitment across the whole of the party spectrum as will be spent on implementing the policy itself. Of course that means opposition parties playing ball – and the Conservatives being willing to lose whatever electoral advantage they think they can achieve by making this new strategy a Tory idea. I fear we will have to live more in hope than expectation on those.

The creativity of people and communities

But what ultimately drives the innovation and competitiveness of a nation over the long-term is the same thing that drives the innovation and competitiveness of the best companies: the mind-set of its people. There needs to be a deep creativity, openness to change and powerful sense of self-determination embedded in communities across the UK. Big investment and infrastructure plans will only go so far if the country – or, more importantly, certain areas of the country – don't have the requisite restless entrepreneurial spirit.

This is where local government could play its most important role. Councils are far better placed than Whitehall mandarins to create a sense of transformational mission in a place and its people by working collaboratively with schools, colleges, local business, civil society organisations and cultural bodies. Councils have the knowledge and connections to nuance and promote such a message in a local context in a way Westminster never could.

This all sounds horribly fuzzy compared to ploughing billions into some new rail track. But as the increasingly influential economist and historian Deirdre McCloskey has spent a career pointing out, the last two and half centuries of remarkable innovation and growth were launched not by big plans from above, but by a cultural shift from below that made the entrepreneurial lifestyle and mind-set respectable and aspirational.

As McCloskey says, this was a shift that began in Britain – ironically, in the very same parts of the country that now struggle to break out of cycles of low productivity and growth. We must recapture that spirit across the whole of the country if this industrial strategy is not to go the way of previous industrial strategies.

Adam Lent is director of the New Local Government Network think tank.

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The Adam Smith Institute thinks size doesn’t matter when housing young professionals. It’s wrong

A microhome, of sorts. Image: Wikimedia Commons.

The Adam Smith Institute has just published ‘Size Doesn’t Matter’, a report by Vera Kichanova, which argues that eliminating minimum space requirements for flats would help to solve the London housing crisis. The creation of so-called ‘micro-housing’ would allow those young professionals who value location over size to live inside the most economically-active areas of London, the report argues argues.

But the report’s premises are often mistaken – and its solutions sketchy and questionable.

To its credit, it does currently diagnose the roots of the housing crisis: London’s growing population isn’t matched by a growing housing stock. Kichanova is self-evidently right in stating that “those who manage to find accomodation [sic] in the UK capital have to compromise significantly on their living standards”, and that planning restrictions and the misnamed Green Belt are contributing to this growing crisis.

But the problems start on page 6, when Kichanova states that “the land in central, more densely populated areas, is also used in a highly inefficient way”, justifying this reasoning through an assertion that half of Londoners live in buildings up to two floors high. In doing so, she incorrectly equates high-rise with density: Kichanova, formerly a Libertarian Party councillor in Moscow, an extraordinarily spread-out city with more than its fair share of tall buildings, should know better.

Worse, the original source for this assertion refers to London as a whole: that means it includes the low-rise areas of outer London, rather than just the very centrally located Central Activities Zone (CAZ) – the City, West End, South Bank and so forth – with which the ASI report is concerned. A leisurely bike ride from Knightsbridge to Aldgate would reveal that single or two-storey buildings are almost completely absent from those parts of London that make up the CAZ.

Kichanova also argues that a young professional would find it difficult to rent a flat in the CAZ. This is correct, as the CAZ covers extremely upmarket areas like Mayfair, Westminster, and Kensington Gardens (!), as well as slightly more affordable parts of north London, such as King’s Cross.

Yet the report leaps from that quite uncontroversial assertion to stating that living outside the CAZ means a commute of an hour or more per day. This is a strawman: it’s perfectly possible to keep your commuting time down, even living far outside of the CAZ. I live in Archway and cycle to Bloomsbury in about twenty minutes; if you lived within walking distance of Seven Sisters and worked in Victoria, you would spend much less than an hour a day on the Tube.

Kichanova supports her case by apparently misstating research by some Swiss economists, according to whom a person with an hour commute to work has to earn 40 per cent more money to be as satisfied as someone who walks. An hour commute to work means two hours travelling per day – by any measure a different ballpark, which as a London commuter would mean living virtually out in the Home Counties.

Having misidentified the issue, the ASI’s solution is to allow the construction of so-called micro-homes, which in the UK refers to homes with less than the nationally-mandated minimum 37m2 of floor space. Anticipating criticism, the report disparages “emotionally charged epithets like ‘rabbit holes’ and ‘shoeboxes,” in the very same paragraph which describes commuting as “spending two hours a day in a packed train with barely enough air to breath”.

The report suggests browsing Dezeen’s examples of designer micro-flats in order to rid oneself of the preconception that tiny flats need mean horrible rabbit hutches. It uses weasel words – “it largely depends on design whether a flat looks like a decent place to live in” – to escape the obvious criticism that, nice-looking or not, tiny flats are few people’s ideal of decent living. An essay in the New York Times by a dweller of a micro-flat describes the tyranny of the humble laundry basket, which looms much larger than life because of its relative enormity in the author’s tiny flat; the smell of onion which lingers for weeks after cooking a single dish.

Labour London Assembly member Tom Copley has described being “appalled” after viewing a much-publicised scheme by development company U+I. In Hong Kong, already accustomed to some of the smallest micro-flats in the world, living spaces are shrinking further, leading Alice Wu to plead in an opinion column last year for the Hong Kong government to “regulate flat sizes for the sake of our mental health”.

Amusingly, the Dezeen page the ASI report urges a look at includes several examples directly contradicting its own argument. One micro-flat is 35 m2, barely under minimum space standards as they stand; another is named the Shoe Box, a title described by Dezeen as “apt”. So much for eliminating emotionally-charged epithets.

The ASI report readily admits that micro-housing is suitable only for a narrow segment of Londoners; it states that micro-housing will not become a mass phenomenon. But quite how the knock-on effects of a change in planning rules allowing for smaller flats will be managed, the report never makes clear. It is perfectly foreseeable that, rather than a niche phenomenon confined to Zone 1, these glorified student halls would become common for early-career professionals, as they have in Hong Kong, even well outside the CAZ.

There will always be a market for cheap flats, and many underpaid professionals would leap at the chance to save money on their rent, even if that doesn’t actually mean living more centrally. The reasoning implicit to the report is that young professionals would be willing to pay similar rents to normal-sized flats in Zones 2-4 in order to live in a smaller flat in Zone 1.

But the danger is that developers’ response is simply to build smaller flats outside Zone 1, with rent levels which are lower per flat but higher per square metre than under existing rules. As any private renter in London knows, it’s hardly uncommon for landlords to bend the rules in order to squeeze as much profit as possible out of their renters.

The ASI should be commended for correctly diagnosing the issues facing young professionals in London, even if the solution of living in a room not much bigger than a bed is no solution. A race to the bottom is not a desirable outcome. But to its credit, I did learn something from the report: I never knew the S in ASI stood for “Slum”.