Does Rishi Sunak have an industrial strategy?

This is an audio transcript of the Political Fix podcast episode: ‘Does Rishi Sunak have an industrial strategy?’

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George Parker
Here’s a question: is Labour leader Keir Starmer starting to sound a bit, well, conservative?

Keir Starmer
We’re not just a pro-business party. We’re a party that is proud of being pro-business, that respects the contribution profit makes to jobs, to growth, and to our tax base.

George Parker
Welcome to the Political Fix, your essential insider guide to Westminster from the Financial Times with me, George Parker. Coming up, if you want to understand just how conservative Britain really is, you need only take a look at Keir Starmer’s recent speeches. So argues the FT’s chief political commentator, Robert Shrimsley. We’ll be discussing Starmer’s conservative path to power later with Robert and our Whitehall editor, Lucy Fisher. Plus, Labour says it has won; the Tories, critics say don’t. We’re talking about an industrial strategy. Three former business secretaries from all parties say the Government’s lack of an industrial strategy is failing to prepare Britain for the future. And one of those ministers joins me in the studio today. The Conservatives’ Greg Clark, along with the FT’s industry correspondent Sylvia Pfeiffer.

This week, car maker Stellantis warned it may be forced to close its Ellesmere Port factory unless ministers manage to renegotiate a key part of the UK’s Brexit deal with the European Union. That story drew attention to the fact that Britain’s falling behind its competitors in the race to develop electric vehicles and the battery gigafactories needed to run them. To avoid tariffs, carmakers in the UK and the EU need to build up their so-called local content. Business and Labour agree, Britain needs an industrial strategy to develop these industries of the future and fast. America and the EU are locked in a subsidy battle to develop new clean industries. How will Sunak’s government respond? Here’s the Labour MP for Ellesmere Justin Madders in parliament this week.

Justin Madders
We know what needs to be done to secure jobs in Ellesmere Port and in the wider automotive sector, because the sector have been telling the government, as have we, that there needs to be a proper industrial strategy. So where is that industrial strategy?

George Parker
Well, Jeremy Hunt, the chancellor, was asked that very question later in the day at a British Chambers of Commerce conference, and here’s how he answered.

Jeremy Hunt
We do have an industrial strategy. We’ve been very clear about that. I call it the four E’s: education, enterprise, employment and everywhere as being the way that we are gonna make ourselves the most prosperous, innovative and dynamic economy in Europe. So I think it’s actions, not words.

George Parker
Greg Clark and Sylvia Pfeiffer, thanks for joining me. Greg, you heard there a rare outing of the phrase “industrial strategy” from the mouth of a government minister. Did what Jeremy Hunt was describing there sound like an industrial strategy to you?

Greg Clark
Well, they were the components of one. When I was responsible for developing an industrial strategy, we described five pillars that could drive productivity: they were ideas, people, infrastructure, business environment and places. But that’s the beginning of it. It’s then the policies that underpin that and the explicit commitments that are needed drawn together in a plan that people can read and talk about so that the rest of the world and investors in particular know what you’re doing. So the elements are there, but it’s all rather subterranean at the moment.

George Parker
And you’re right, I mean Rishi Sunak I think has never, at least in an approving way, mentioned the phrase industrial strategy. And you’ve called this whole area the government’s guilty secrets, haven’t you?

Greg Clark
Well, for this reason, George, you’ve heard Jeremy talk about his forays in actual fact, some other components of it. So the funding for science and research, yeah, Rishi Sunak has increased spectacularly. You know, I’ve boasted to the world that I’d had the biggest ever increase in the science budgets, increasing it from £9bn a year to £12bn a year. He’s increased it to £20bn a year. That’s a phenomenal commitment that has been made there. He’s identified technologies like quantum computing and AI and is putting money into that. We have the components, but to bring it into a form in which people can have the confidence to invest on the back of I think is missing. Now whether it’s called an industrial strategy with a capital I, capital S, I’m less bothered about that, but I think there should be one.

George Parker
Sylvia, what’s business been saying about the government’s approach to industrial policy?

Sylvia Pfeiffer
Well, I think they’re pretty despondent about it. I mean, again, thinking about those four E’s, there isn’t a formal industry strategy at the moment. The last one was abolished back in March 2021 and the UK, as was pointed out recently, is the only major economy not to have a long-term manufacturing plan. So business is despondent. And again, Greg just mentioned growth sectors that Jeremy Hunt has identified — AI, quantum computing and semiconductors — but that misses out a whole lot of other sectors that people would regard as manufacturing. So aerospace, steel, cars, and we know cars at the moment of the sharp end of things, but they’re not mentioned anywhere. So business is pretty despondent.

George Parker
And what does business exactly want? Is it just about subsidies or is it something much deeper than that?

Sylvia Pfeiffer
There’s been a lot of mixed messaging over the past decade or so. I mean, Make UK, the manufacturers’ organisation, talk about flip-flopping by successive governments. Recently we’ve had lots of change of ministers, we’ve had lots of growth plans since 2012. I think what they do want above all is continuity, so on things like policy, funding and people so that they can invest for the long term.

George Parker
So Greg, Sylvia just mentioned this. Your original industrial strategy was binned by Rishi Sunak when he was chancellor back in 2021. It was described by Kwasi Kwarteng, who was business secretary later on, as a pudding without a theme. What was wrong with it?

Greg Clark
Well, it was actually very well received by business, by manufacturers, by investors. I took it around the world and we got some major investments on the back of it. I don’t think it was Rishi personally, to be fair, but I do think it was a mistake. Sylvia’s right when every other competitor country around the world is doubling down on industrial strategy, competing with each other to show what their long-term commitments are, to show how they can work in partnership between universities, researchers, industry regulators and the government. Just at that point, to decide to abolish it and not replace it with anything else is very eccentric. I think it was a real piece of vandalism. And a strategy should endure. A short-term strategy is worthless.

George Parker
I mean, this is political history now but you described it as an act of vandalism when the strategy was dumped back in March 2021. But I was told that people inside Number 10 Downing Street working for Boris Johnson were surprised when this happened. And so it did seem like it was being driven from the Treasury by Rishi Sunak.

Greg Clark
I don’t know who was behind it. All the conversations I’ve had with Rishi, I’ve never had anything to indicate that he was opposed to it. In fact, I’ve had lots of conversations about increasing investment in R&D, and I would say he gets it on that. But it was bizarre. It was a surprise because it was one of the things that I think did carry respect from that administration. That 2016-19 period, as you will remember, was pretty torrid. But the one thing to come out of it that actually did get nods from across the party divide, from business and industry and universities and overseas countries was the industrial strategy. And to get rid of it without replacing it was all wrong in my view.

George Parker
So Sylvia, if you look across the industrial landscape at the moment, which are the areas do you think are suffering most from the absence of a viable industrial strategy? Where are we being left behind?

Sylvia Pfeiffer
Oh, that’s a tricky question. Where is Britain still a world leader? I think it’s certainly in the heavy manufacturing areas we are being left behind. I think, if you talk to the steel companies or the chemical companies, they all talk about the support that their rivals on the continent are getting. They also want an energy policy that supports them. Again, they talk about the cost of power is higher in the UK than it is on the continent because their peers are getting help on that front. I think aerospace is an interesting one. The UK always has been a world leader in aerospace. We’re investing quite a lot in R&D into aerospace and into clean tech, clean aviation, hydrogen and so forth. But I spoke to somebody, an aerospace executive, who made the point that at some point, the UK will have to move into manufacturing or commercialisation of this and will there be the money for this? And that’s gonna be a tricky question to answer for the government.

George Parker
And there’s a really big test coming up for the government’s commitment in this area, which is the Jaguar Land Rover decision, Tata Motors, whether to build a new battery gigafactory in the UK, probably in Somerset, or whether to build it in Spain. How fast over do you think the government will go to try and get this plant built in Britain?

Sylvia Pfeiffer
Well, I think the signals coming out from the government this week were reasonably positive. I think they are talking to them — Britain’s largest steelmaker, Tata Steel, that owns Port Talbot and Wales, and Tata is heavily invested in the UK. They are seen as quite a good long-term employer. So I would have thought the odds are that something will happen. But again, whether it’s gonna be enough or not to swing it, I wouldn’t know.

George Parker
Greg, if you were still in your old job, would you be pulling out all the stops to get that factory built in Britain?

Greg Clark
I absolutely would. But just to a point that Sylvia makes, industrial strategy should not be defensive. This is one of the most exciting times for innovation and new technology since the frst industrial revolution. And what we see in AI, in clean energy and the future of mobility, in satellites and the data that can be gathered from them and used. All of these areas, we’ve got great strengths in. And the purpose of industrial strategy was to make sure we avail ourselves of those opportunities. But to do that, you do need to be active. It’s not sufficient simply to have the right policy environment. In my experience, you’ve got personally — if you’re a secretary of state — to talk to the companies, to persuade them to invest because other countries are doing that. President Macron spends a great deal of his time courting big investors and making the case for locating in France. I think we need to have that degree of activism here.

George Parker
Can I finally ask both of you? It feels a bit like at the moment that we’re caught between two big trade blocs — the US and the EU — particularly when you look at things like President Biden’s Inflation Reduction Act and the EU’s attempt to catch up with that. Has Brexit made the need for an industrial policy even greater, do you think? Sylvia.

Sylvia Pfeiffer
Yes, I think if you talk to any manufacturing company, I mean Brexit has brought more bureaucracy, a lot more friction for anybody in any sector. You’ve got the decarbonisation on the table. The UK could be a leader in some of those areas. So absolutely, it’s now or never.

George Parker
Greg?

Greg Clark
Yes, People need to know what you’re about. If you’re no longer part of the European Union they want to know what’s the business environment gonna be? What are the priorities, how the government is working with universities and businesses to make the environment attractive. If this is hidden from view, if it’s subterranean, how can you expect the rest of the world to know about it? You need to sing it from the rooftops.

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George Parker
Greg Clark, Sylvia Pfeiffer, thanks to both of you for joining us. So just how conservative do you need to sound to win an election in the UK? Well, if you listen to Keir Starmer at a Progressive Britain conference last weekend, your answer may well be quite a bit.

Keir Starmer
The British public want politics that gets the value of respect and service. They want stability and change, security and hope. And that’s why I’m here. That’s my project.

George Parker
Lucy Fisher and Robert Shrimsley join me now. Now Robert, you wrote about this conservative path that Starmer is beating. What do you mean by that?

Robert Shrimsley
Well, if you look back over the history of the Labour party, all of its successful leaders, all the people who actually win elections, have been very effective at offering a reassurance about themselves, about their values, about what they stand for, and marrying that to often a quite transformational economically left-wing programme, from Attlee to Wilson and most obviously to Blair. They understood that you need to offer voters a degree of reassurance because voters are quite small c conservative, even if they’re not Conservatives with a capital C and they’re concerned about the things that matter to them — their communities, their country, the values of society. And so the trick for a Labour leader is to make sure that you project to voters firstly that you share those and then secondly, using them to justify a Labour programme. And in his speech, Starmer talked consistently about offering hope through stability and security. And this is quite a neat trick for a Labour leader that is sort of in one sense obvious, because actually the people who most need stability and security are often those who have the least because they’re the least sheltered from economic and global forces. But by couching the Labour programme in those terms, it’s possible to be quite radical and quite reassuring at the same time. So it’s not that Keir Starmer is becoming a capital C Conservative, but that he is using Conservative language and Conservative values to reassure and essentially get cover for a Labour programme.

George Parker
Is it all that different to what Tony Blair did because he wrapped himself in the flag, he was tough on law and order, defended the armed services. Isn’t that what you need to do to win over socially conservative working-class seats?

Robert Shrimsley
Well, I think Tony Blair has become an increasing role model for Keir Starmer. When he won the Labour leadership it was all about Harold Wilson and not mentioning Blair, and Blair’s got more and more mentioned the closer Keir Starmer thinks he’s got to power. But it’s all they believe. Clement Attlee was able to trade hugely on the fact that he’d been deputy prime minister in a wartime cabinet, that his patriotism, that his loyalty of values, obviously he’s a public schoolboy as well, which always plays well with Conservative voters in those days. These things allow you to be that person. There was a bit at the end of Keir’s speech where he said something like, people will accuse me of being conservative. I don’t care about that at all. And of course, the point is he cares deeply about it because it’s absolutely fundamental to the strategy of reassurance.

George Parker
So Lucy Fisher, should the Conservatives be worried about Starmer parking his tanks on their lawn?

Lucy Fisher
In a word, yes. I thought it was fascinating, the signalling from Starmer when he addressed business leaders at the British Chambers of Commerce on Wednesday, saying the party is all about growth. And there are other external factors that I think have helped to bolster some policies they were already planning. I’m thinking in particular of Joe Biden’s Inflation Reduction Act, which really serves to make Labour’s own green prosperity fund pumping absolutely billions into newer green technologies and energy sources over the next decade or so make a lot more sense in a global context.

I think also policy-wise this week from Keir Starmer, absolutely a blinder to go after housing as a key issue. It’s obviously something the Conservatives have really failed to deliver on. It was a key manifesto pledge that they would build 300,000 new homes a year by the mid-2020s. Completely failed to do that and indeed have dropped the target quite embarrassingly. And beyond that, you know, businesses in the construction industry stop objections from local residents. Also sounds very business-friendly and it does serve to drive a wedge in this already very painful subject for the Conservatives because at the moment there is this sort of internal war in Tory circles between the Nimbys in the affluent southern seats who don’t want to see building take place on the greenbelt, which is something Starmer and Labour are now advocating. And Northern Midlands red wall Tories were very keen to see more and affordable housing built quickly.

George Parker
But it’s fascinating if one were to use that expression we’re gonna back the builders, not the blockers. And you’re right, it’s gonna drive a wedge into the Tory party who are split on this. Do you think it works electorally for Labour though?

Lucy Fisher
I do, because I think it’s a huge problem for younger people. Now, listeners, you may say, well, we all know that younger people are more likely to vote Labour. That’s been true of successive elections in the recent past. But of course young people have parents, grandparents who are very concerned. And it comes back to what Robert was talking about, that security and home ownership, the dream of home ownership that is core to sort of the security and stability that many people of all ages long for, for themselves and their family.

George Parker
The question, I suppose, is whether young people come out and vote for this kind of policy, because we have seen in recent by-elections in particular the power of the Nimby argument, admittedly mainly in southern seats. I think housing’s gonna be one of those fascinating issues, isn’t it, at the next election. Now, Robert, is there a danger, and we’ve seen this play before, haven’t we, that as a sort of strong or relatively strong opposition party moves towards the centre, that the Conservative party feels obliged to navigate out to the clear blue water out to the right of British politics?

Robert Shrimsley
It oughtn’t to be a danger. Dillinger was supposed to say, you know, why do you rob banks? It’s because it’s where the money is. So, the logic electorally is you go where the votes are. But you’re absolutely right. I mean, the Conservative party looks like an organisation of men which is in its endgame, where everybody thinks they’re going to lose the election and they’re all busy fighting the next election, which is the leadership election. And what do they do in opposition trying to reshape themselves? And when that happens, parties tend to move away from the centre towards their activist base and you can see that to some extent that’s what’s happening in the Conservative party. And I think one of the reasons is that the Tories always had sort of three constituent parts in this broad church of the Conservative party. You had the free market economic liberals, you had the traditionalists, you know, nostalgics. Once upon a time there were the Monday Club Empire faction, and the third one was sort of the social liberals. And what happened is that third group’s sort of been chased out the party a bit and the free marketeers allied with the traditionalists because of Brexit. So consequently, all the gravitational forces are pulling them away from the political centre. It’s a great danger for them, I think. Yeah.

George Parker
And Lucy, you had a first hand glimpse of the base of things to come over the last few days actually, and you’re writing about it for the FT Weekend. Tell us about the two separate events you went to.

Lucy Fisher
Well, first off, I should caveat that they were quite sort of idiosyncratic and can’t necessarily be said to be representative of the views of all Conservatives or members or supporters. I think that they were a magnet for the disgruntled in Conservative circles. But I went to Bournemouth last Saturday to the Conservative Democratic Organisation. It’s a new organisation that was set up by Lord Cruddas, a key ally of Boris Johnson, following Johnson’s ousting from Downing Street by MPs. It’s been caricatured as a bring back Boris front group. It denies that. And actually what I found is that while many people there that I spoke to did like Boris Johnson, some would like to see him return to the helm. It was actually a deeper anger at the direction of the party. They think it’s far too socially liberal on social and cultural issues. They’re unhappy about high taxes. They think they’ve been betrayed on Brexit. So they’re very much clamouring for Rishi Sunak to tack right. And they were very, very pessimistic about the party’s prospects at the next election. The best sort of prediction, the most positive that anyone gave was a hung parliament and they felt that it would be difficult for the Conservatives to stay in power in that scenario. Now the second event I went to, which Robert you also went to, I’m dying to hear your views, was the National Conservatism UK Conference, the NatCons.

George Parker
It’s an international movement, isn’t it?

Lucy Fisher
Yeah. So it originated in the US. It has this deeply religious flavour which I don’t think is easily transposed to the UK, but it’s this curious mix. It’s far more to the right on cultural issues than most centre-right parties in the west. And then on economics, it’s actually much more protectionist, a bit more to the left, I might say. And there were quite an eclectic group of firebrand speakers, some very much beyond the pale of the capital C Conservative party. But if we focus on the Conservative party for a minute, you know, Suella Braverman, was there, 4,000-word speech that set out her whole biography, how her parents came to the UK in the 1960s.

George Parker
What journalists like to call a thinly disguised leadership bid?

Lucy Fisher
Well, absolutely. Michael Gove was there; the evangelical Christians, Miriam Cates, Danny Kruger with very striking calls to try and boost the birth rate to save the normative family. A really fascinating sort of set of demands that feel out of whack with where the current party is, but could be a sign of the battle over the soul of the party to come.

George Parker
What do you make of it, Robert?

Robert Shrimsley
It was such a strange event. It was like a cross between a sort of Tory think-tank event and an episode of The Addams Family. (Lucy laughs) We were thinking, well, that’s recognisably Conservative and I see what’s going on there. And then somebody would prop up some of these speakers who’ve never lived in Britain explaining British conservatism to a British audience and not doing a very good job of it, it has to be said. It was very odd.

Lucy’s talked about the really strongly religious flavour. I mean, the main organiser of national conservatism is this modern Orthodox Jewish thinker and he gave this speech very early on. He talked about your job as a responsible citizen is to marry young, have lots of children, find a church you can belong to. And you just sat there thinking, this is not the country we’re in. And what was interesting about it, number one, this is a movement that is divorced from the Conservative party. Unlike the other conference which Lucy went to, this is not of the Conservative party. This is an attempt to build an international of conservatism in the same way we talk about international of socialism. So there’s that.

Secondly, all of it was very much in the language of crisis. There was a crisis of conservatism, there was a crisis of population, there’s a crisis of faith, there’s a crisis of social responsibility. And you find yourself sitting there thinking, look, I know there are problems, but you know, are all these things actually crises? But that’s the language that’s being used. And then at the end, you have this attempt to re-form an alliance between, as I said, the free market, economic liberals and sort of traditionalist conservatives. Suella Braverman’s speech, for example, was actually a mainstream speech relatively within the terms of this conference. She at the end saying, you know, we can’t engage in fratricide. We’ve got to find a way to work together. It was a very bizarre event, but I think I would look at it as sort of the cautionary tale for Conservatives.

George Parker
And coming off the back of a very bad set of local election results for Rishi Sunak, Lucy, should the prime minister be worried about all this?

Lucy Fisher
Yes, I mean, there is this sense of panic that has started to grip quarters of the administration and MPs. There is this increasing sense of fatalism and one of the things I’ve written about this week is the sort of unhelpful paradox for Sunak, which is it’s a truism of British politics that divided parties don’t win elections. The panic that people are feeling is leading to these ill-disciplined bouts of public infighting, soul searching, recriminations over the local election losses. And yet it’s those very same public displays of strife that make the idea that the Conservatives are going to lose the election almost a self-fulfilling prophecy.

Robert Shrimsley
Just on that point, the lack of discipline at the moment. There was a very striking moment at the conference when Jacob Rees-Mogg was speaking. It was meant to be an attack on Labour and their electoral plans. But he actually talked about the voter ID reforms that the Conservatives imposed for elections, and he said it’s a very bad idea to go gerrymandering. This was a serving Cabinet minister.

George Parker
Mmm. Extraordinary.

Robert Shrimsley
When this idea was put forward, you just find some thinking all internal messaging discipline has completely been lost in this party at the moment.

Lucy Fisher
I think we’ve seen that even though, as you point out, George, this was not a formal or official Conservative-linked conference, Rishi Sunak has nonetheless had to answer questions about it, you know. Does he agree with Danny Kruger that normative families are important? Does he agree with thinkers like David Starkey, who’ve appeared fine in different sessions, but at the same conference making very controversial statements? So it is putting the prime minister on a back foot, having to react to his MPs and others linked to them in the same events, making comments that, you know, are not in keeping with government policy.

George Parker
And we have seen in the past, haven’t we, when the Conservative party have lost power after many years in office, that they go through a phase where they disappear off to the right and we saw it obviously in 1997 William Hague, then Ian Duncan Smith, then Michael Howard, before they eventually come back to the centre ground, where as you were saying, Robert, where elections tend to be fought and won. Are we seeing a foretaste basically of what’s going to happen after the election?

Robert Shrimsley
Well, I think it’ll slightly depend on what happens in the election assuming the Conservatives are out of office. A big question with just how badly they lose and the more substantial the defeat, the more likely I think this becomes. It is the tendency to revert to purity to pacify the activist. That’s obviously how someone wins the leadership in the first place. And then at some point they recognise that it might be handy to compromise with the electorate.

George Parker
And Lucy, finally, if the Conservatives were to lose the next election, do you think Suella Braverman, who we saw in action this week, is certain to be one of the candidates, if not the frontrunner?

Lucy Fisher
Yeah, I think she is. You know, I’m not saying there is significant amount of support behind her at this stage, but certainly I’m aware of MPs who seem very closely allied to her — John Hayes, who leads the Common Sense Group, which sets its face against what it calls political correctness that’s infected this nation. But I think it will be wide-open field. I think every sort of wing of the party will enter candidates. There are already so many names doing the rounds: Kemi Badenoch. Tom Tugendhat. James Cleverly.

Robert Shrimsley
Underpriced.

Lucy Fisher
Underpriced, yeah. You said that to me early this week, Robert, I think you’re absolutely right. So I think that there will be many, many runners and riders if it comes to pass.

George Parker
If it comes to pass. Lucy and Robert, thanks for joining me. And Lucy, before you go, stay on for a moment, because this is where I officially hand over the reins of the FT’s Political Fix podcast to you. My side hustle has lasted a little longer than expected, but I’m delighted to confirm that from next week you’ll be officially taking over.

Lucy Fisher
That’s right, George. I’m very excited. There’s a lot that will change about the sound of the podcast, but there’s also a lot that will stay the same. We will, of course, have all the FT heavyweight contributors joining us. Stephen Bush will be here weekly and then there’ll be a rotating cast; people like Robert, Miranda Green and others who’ll be giving us their take on the week’s events in Westminster. They’ll be taking me through their political moment of the week, and I’m also keen to try and press them for cultural recommendations — things that I can rip off and try myself. And we’ll be bringing you the best scoops and investigations that FT reporters and correspondents have been working on. And George, I hope, of course, whenever you have time, you’ll grace us, too.

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George Parker
That would be a pleasure. And that’s it for my final episode in the hot seat of the FT’s Political Fix. If you like the podcast, we’d recommend subscribing. You can find it through all the usual channels to receive episodes as soon as they’re released. And we also appreciate positive reviews and ratings. Political Fix was presented by me, George Parker, and produced by Anna Dedhar. The executive producer is Manuela Saragosa. The sound engineer is Breen Turner. Until next time, with Lucy in charge, thanks for listening.