The Truss government has been urged to affirm its commitment to using research spending to drive innovation, particularly in the regions, after mixed signals on industrial strategy and the appointment of a secretary of state whose ideology may favour a “laissez-faire” approach.
The decision to appoint Jacob Rees-Mogg as secretary of state in the Department for Business, Energy and Industrial Strategy brings a potential tension between the concept of industrial strategy – the government using public investment to boost productivity by stimulating new markets or technologies – and the view of the ultra-Thatcherite wing of the Conservative party, from which he hails, that the state should have a reduced role in the economy.
Kwasi Kwarteng, now chancellor, had already said in his time as business secretary in the Johnson government that the industrial strategy “brand” was being dropped – although the government subsequently published an innovation strategy.
Richard Jones, chair in material physics and innovation policy at the University of Manchester and independent science adviser to the Innovation Greater Manchester project awarded funding in the Johnson government’s Levelling Up White Paper, said: “It’s clear the new administration has some ideological differences from the previous one, but I welcome the emphasis on the need to return the economy to the growth levels seen before the global financial crisis.
“To do this will need a restoration of productivity growth, and in my view, this can only happen through having a more innovative economy, with economic growth more evenly spread across the whole of the UK.
“The government’s manifesto commitment to raise the R&D intensity of the economy to 2.4 per cent of GDP is a necessary precondition for this, as is the commitment in the Levelling Up White Paper to increase public investment in R&D outside the greater south-east by a third by 2024-25.”
Phil Tomlinson, professor of industrial strategy at the University of Bath, said that while there has been much talk about Liz Truss’ “free-marketeer” credentials, “politics and economics will actually favour more state intervention – as seen in the response to the energy crisis”.
“Tory Red Wall MPs are unlikely to be happy if commitments to levelling up are suddenly ditched – after all, the Tories owe their majority partly to the promise of reducing regional inequities,” he added.
Nick Hillman, director of the Higher Education Policy Institute and a former adviser to Lord Willetts in his time as a Conservative universities minister, said of Mr Rees-Mogg’s appointment: “On the one hand, I welcome the fact that we have someone heading up the BEIS department who is a big figure in his party but, on the other, there has clearly already been a shift back to the status quo ante on industrial strategy rhetoric, which might play to Rees-Mogg’s wider political instincts.
“I remember, back in the early 2010s, being barred by Treasury spads from even using the term ‘industrial strategy’ in a political speech I was working on for a minister, but a few years later we even had a department with the phrase in its title. Now it does seem likely that we may be reverting to a more laissez-faire approach.”
Mr Rees-Mogg’s priority is likely to be deregulation in business or in employment rights, meaning that in practice he may leave research policy to junior ministers. But a secretary of state unwilling to mount a fight to preserve the commitment to increase research spending, as the Truss government searches for savings to help fund its spending on energy, would spell problems.
