What does the new Industial Strategy mean for Scotland?
Nearly a year since winning an election landslide, and struggling to respond to public impatience for change, some of the Labour government's key policies have been published this month.The key one was the Spending Review for the next three years of day-to-day expenditure and four years of capital outlays.Linked with that, and dependent on it, are reviews of defence and infrastructure, the latter having not much to do with Scotland.The Industrial Strategy is the latest, and it does affect Scotland, perhaps quite significantly. So what is it all about, and what could that effect be?The idea of an industrial strategy is for government to support industries of strategic importance, which it needs to retain, such as defence, and those that offer the best hopes for growth and jobs.
Let's leave aside the history of governments trying to intervene in the market and support British industry. It's not an impressive saga - due to backing the wrong options, supporting declining industries at great cost, or failing to do enough for those showing most promise. And in doing so, there hasn't been much of a consistent strategy.The future, according to the new industrial strategy, is about championing eight sectors - for support, reducing some costs (primarily energy), boosting trade, optimising the market, getting obstacles out the way, and getting enough recruits in place with the necessary skills.Known in government jargon as the IS-8, these include clean energy (that means renewables and nuclear), advanced manufacturing, digital and technology, defence, life sciences, the creative sector, financial services and professional and business services.Scotland's economy has an interest in energy-intensive industries seeing their bills cut by quarter - around 7,000 firms making, for instance, steel, chemicals, cars, glass, ceramics and cement. But it's not the main outcome for Scots.Instead, Scotland could be in the sweet spot for other elements of this strategy across all the sectors targeted for support, if all the published strategy's intentions get followed up, and if UK and Scottish governments can collaborate on joined-up policy.
There's defence, including naval shipbuilding on the Clyde and Forth and missiles and radar in and around Edinburgh. Clydeside has a world-leading role in making small satellites. There's finance, in which Edinburgh and Glasgow jointly represent an important cluster for employment.There remains a lot of petro-chemicals going on at Grangemouth.The creative industries include Dundee's gaming and Edinburgh's festivals.And universities around Scotland punch above their weight, notably on life sciences, spinning out digital and technology firms, and playing a big part in attracting international investors.The strategy brings a reminder of a Spending Review commitment to reinstate £750m of funds for a super-computer in Edinburgh.
Clean energy
Clean energy is the one worth watching most closely. It has the potential to transform much of the Scottish economy as well as the view out to sea and across the landscape where more pylons will march.That requires co-operation from the Scottish government on faster planning, on which there's already some agreement, and the new strategy aims at an accelerated route to grid connections for growth businesses.Because the north of Scotland is set to produce much of the wind resource, there is an incentive to locate the most energy-intensive industries close to that resource, thus reducing the need for all those cables.One part of that is set to be the Acorn project of carbon capture and storage, centred on Aberdeenshire.Data centres could be a feature, as well as making hydrogen energy from Scotland's abundant wind power and fresh water.There may be strategic sites chosen, most likely by competition, to get government backing for clearance and pre-emptive grid links.
Co-ordinating policy between Holyrood and Westminster is more likely to founder on nuclear energy, at least so long as the SNP runs the show in Scotland.It has opposed new nuclear power for decades, which hasn't been much of an issue while Torness and Hunterston have generated through their lifespans.That's changing. The move to smaller, modular nuclear reactors could be part of the energy mix in Scotland, which is why the Scottish Labour leader, Anas Sarwar, chose the Industrial Strategy launch day to visit Torness power station in East Lothian and point to the jobs and investment that could come from the Scottish government embracing a new generation of nuclear power.It's a point of difference between Labour and the SNP, and enthuses industrial trade unions. But the SNP can point to the relatively high cost of nuclear power and to its very long legacy of radioactive waste.The SNP government also has a party policy of urging defence industries to diversify to more peaceful products. Labour has also taken aim at that, in an era of fast-increasing defence spend and opportunity to see that grow the economy.The Spending Review promised six munitions factories, always available to back up Britain's defence needs. Scotland could hope to secure one of them, but that might require a change of heart in Holyrood, to embrace the business of making weapons.The UK industrial strategy calls for Scotland to have a growth fund for defence. You can probably see how all this might play into next year's Holyrood election.There ought to be easier progress to made through collaboration on skills, mostly devolved to Holyrood but with signs that Westminster wants to do more on Holyrood's turf.
Oil and gas skills
On training, the strategy has been met with warnings from the oil and gas sector, including its training body Opito.They are pointing to the gap between declining jobs for those with oil and gas skills and the rise in employment for those in renewable energy. That strategy requires joined-up government as well. And with Whitehall's hostility to further oil and gas drilling, the energy lobby argues that it doesn't look very joined-up.There's also a big decision yet to come with big implications for investment in offshore wind due "shortly" from the UK government - whether to change the single GB market for power to one with zonal prices. That could cut prices in Scotland, but at the expense of investment.More hostile responses have come from those sectors that don't gain from this strategy. If government picks winners and priority sectors, it relegates others or it makes losers.Some of the strongest criticism is from hospitality, with its trade body saying today that this shows the government once again failing to realise the damage being done to the industry, following rampant price inflation, higher payroll tax and a higher minimum wage.From the Scottish government comes the response that parts of this were already in the innovation strategy set out more than three years ago by Deputy First Minister Kate Forbes. She is concerned that energy price cuts for industry won't happen for two years.Potentially less welcome parts will require Holyrood ministers to have a closer look at the detail and the implications - economic and political.
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