Governments come into office brimming with confidence. They say their election win is a mandate for change, and that work on its manifesto pledges will start immediately. Invariably, there is talk of sleeves being rolled up.
Sooner or later, there is a rude awakening. Ministers push buttons and pull levers expecting things to happen instantly, and are shocked to find that they don’t. The reason for that is simple: the British state is big – and getting bigger – but as an agent of change it is not up to the job.
This is true at both central and local levels. Over the years, the capacity of government to intervene has been pared back and professional expertise has been lost as council services have been outsourced. The main job of the state is now to alleviate the consequences of failure, which are becoming ever more pressing.
Obeisance to market forces explains part of the problem. For the past half-century, there has been a neuralgic aversion to anything that smacks of picking winners. The misguided idea that countries only really thrive when governments get out of the way of the private sector has taken root. There are, though, other factors at play. One is the dominance of the Treasury, which has tried – unsuccessfully – to be both a ministry that looks after the public finances, and a ministry of the economy. Another is the British cult of the amateur, which has fostered the belief that somehow or other things will work out.
Other countries have decided that winging it is perhaps not the best approach, and have done things differently. East Asian countries such as South Korea made conscious decisions to establish companies in certain sectors – computer electronics and shipbuilding for example – and forced through change.
Nor did China’s domination of the solar panels market – and clean energy more generally – come about by accident. It was the result of the authorities in Beijing identifying low-carbon technology as a global growth opportunity, and then making sure the investment and the people were available. While Britain has talked about a new industrial strategy built around a net zero future but done little to turn that rhetoric into reality, China – and other countries for that matter – have got on with it.
Even the US – supposedly the ultimate expression of the free market – has a mechanism for delivering an industrial strategy: in part through the money pumped by the federal government into universities, in part through the links between defence companies and the state, and in part through good old interventionism. Last year, for example, the US government took a 10% stake in chipmaker Intel: a clear case of picking winners.
Only rarely, and then usually as a result of extreme circumstances, has the British state been geared up for transformative change. One reason why the 1945 Labour government was able to be so radical was that it inherited a fully functioning planned economy at the end of the second world war. Key industries were run from Whitehall, and labour was directed to where it was needed.
In the 1960s, Britain flirted with indicative planning – the idea that governments should set broad targets, and work out how to achieve them through cooperation with private companies and organised labour. A National Economic Development Council (NEDC) was created to bring together politicians, business leaders and trade unionists. Later, a new ministry, the Department of Economic Affairs, was set up to oversee a national plan for growth. Neither survived.
And yet, the record of other countries suggests that the devotees of indicative planning in the 1960s were on to something. Britain will only emerge sustainably from its current economic torpor if the machinery of government is reformed to make the state more effective. That means breaking the power of the Treasury by creating alternative economic power bases within Whitehall – either by beefing up the power of the prime minister’s office, or by creating a standalone ministry with real clout. Something akin to the old NEDC should be brought back, with a remit to identify and nurture potential growth sectors.
Money matters, but it is not the only thing that matters. Britain has the weakest record for investment of any of the G7 nations, and that needs to change. Yet the investment will only really be effective if the state is willing to experiment and accept that not all projects will end in success. Other countries have shown the benefits of a pragmatic, trial-and-error approach. Repeating that success here requires substantial culture change, which is a big ask, but worth the risk.
The alternative is that other countries continue to leave Britain for dead in the growth industries of the future, and that ideas that stem from here are commercially exploited elsewhere.
Failure to reform the state to make it more dynamic will also entrench public cynicism about politics. Voters zone out when they hear about the latest government initiative because they suspect – quite rightly – that it is just so much hot air. Their day-to-day experience of the state, whether it is unfilled potholes, long waits for treatment in A&E, or draconian fines for minor littering offences, is not positive.
There was a time when people had a more benign view of the state, but that was when it was seen as doing things for people rather than to people: establishing the NHS, putting new health centres next to schools, building homes. Without a makeover, the state will continue to appear not just big and useless, but also mean. It’s not a good look.
