Understanding the role of the state: regional innovation policies in recession Helen Lawton Smith and Rupert Waters, CIMR, Birkbeck 15 th October 2012
Contents • Introduction • Regional development in the UK • Innovation policies • Conclusions
UK Output, Inflation & Unemployment 10.0 15.0 20.0 25.0 -5.0 0.0 5.0 1948 1949 1950 1951 Inflation (YoY) Unemployment Rate GDP Annual Growth (%) 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
The ending of regional imbalance has been an objective of successive Governments in the United Kingdom for nearly four decades. Much has been achieved but no solution is yet in sight.
Keeble (1971, 24) “ Successive post-war Governments have placed on the statute book at least eight major Acts concerned wholly or in part with encouraging the movement of economic activity within Britain … witness to the importance attached by politicians to promoting employment mobility on the inter- regional scale.”
GDP per capita (England = 100) 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 Max Min 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 60.0 80.0 100.0 120.0 140.0 160.0 180.0
The West Midlands DEA (1965 ) “At present it remains true that the West Midlands is both well situated and well-structured industrially for meeting the future. Because of this, its freedom from any sustained regional unemployment would, in particular, seem fairly well- assured … it must be hoped that technological advance within many of the region’s factories, workshops etc. will enable them to economise in the use of scarce labour .”
The North East DITRD (1963, 13) “at the beginning of the year the region’s natural increase of population was greater than the national rate; there was too great a dependence on a narrow range of industries; unemployment and migration were rising; and there was the prospect of a serious worsening in the employment situation in the years immediately ahead ” DITRD (1963, 5) “The North East is not a region in decline. It is a region in transformation … The problem is one of adjustment … The aim will be to promote a steady rise in economic activity as the basis for the continued growth of employment in the region . The overriding need is to diversify the industrial structure, and for this the new grants and tax incentives introduced this year will give a powerful stimulus ”
GDP per capita (selected years) 1971 West Mids North East South East 1979 1983 1988 1996 85 90 95 100 105 110 115 120
UK National Economic Priorities DTI (1972, 1) “The Government’s overriding purpose is to achieve a sustained and high rate of national economic growth … the conditions for achieving sustained growth now exist. It is a main purpose of the measures outlined in this White Paper to help British industry seize them ”. HM Government (1985, 1) “There are two key elements in the Government’s economic policy: to keep down inflation and offer real incentive for enterprise, in order to generate jobs. Low inflation is the very bedrock of an expanding economy but it is not sufficient in itself. It is the growth of enterprise, the effort of millions of our people engaged in the creation and development of businesses large and small that is the real driving force of our economy ”
UK National Economic Priorities DTI (1988, 29) “The Government’s policies in increasing competitiveness, encouraging innovation and improving the skills of individuals are even more relevant to depressed areas and the inner cities than they are to the rest of the country. Those policies will therefore be intensified in areas which have suffered the greatest industrial problems. For example, the work on creating a more effective relationship between education and industry will be intensified in inner cities, including stronger schools/industry links and the use of colleges for enterprise training”
UK National Economic Priorities HM Government (2007, 3) “The Government’s central economic objective is to raise the rate of sustainable growth and achieve rising prosperity and a better quality of life, with economic and employment opportunities for all. Unfulfilled economic potential must be released to increase the long-term growth rate of the UK. The Government’s vision is that every region in England should perform to its full potential and become more competitive in an increasingly global economy ” … HM Government (2007, 71) “Economic growth will increasingly depend on enterprise and innovation and the ability of places to build on their indigenous assets. It will be critical that places can develop, attract and retain a skilled workforce which is able to be successful in the globalised economy”.
UK National Economic Priorities HM Government (2009, 25-26) “The right balance between central Government and the bodies that deliver industrial policy in the nations, regions and local communities is critical for ensuring that we match a clear national strategy with the expertise and local knowledge that are central to effective delivery. … the Regional Development Agencies (RDAs) will have a key role to play in driving sustainable economic growth within the English regions. The new responsibility of RDAs for developing regional strategies in partnership with leaders of local authorities will create a new and powerful means to align regional and local partners in delivering a coherent economic vision for their region, rooted strongly in the responsibility to generate sustainable economic growth.
Innovation Policy HM Treasury & ODPM (2003, 23) Innovation – the invention and application of new technologies, products and production processes – is the fifth key driver of productivity growth. The majority of the UK’s productivity gap with the US can be accounted for by differences in the level of innovation. At a more localised level, studies have shown that under-performing regions and localities have particular problems in absorbing new technologies … the ability of firms to adopt innovative products and processes depends on the other drivers of productivity, especially skills and investment. This highlights the importance of improving the skills base in all localities to help enable firms to take advantage of new innovations
Innovation Policy DIUS (2007, 79) “ In the UK, innovation performance varies considerably from place to place. This is somewhat dependent on sectoral specialisation and history. Traditionally , the UK’s innovation policy has been concentrated on high-tech manufacturing. In the future, spatial innovation strategies must build on each region’s distinctiveness. Moreover, because of the internationalisation of knowledge production, many UK regions will increasingly depend not on the creation of knowledge but on its absorption from elsewhere. The challenge for policy-makers is to create a framework, at a national and sub-national level, where activities to support innovation are focused on co-operation between the different actors involved, are responsive to different places and spatial levels and work across administrative boundaries”.
Policy in the late 1990s DTI (1998, 7) “The Government’s aim is for British business to close the performance gap with its competitors, in terms both of productivity and of its ability to produce innovative new products and create high- value services … The UK’s distinctive capabilities are not raw materials, land or cheap labour. They must be our knowledge, skills and creativity… Crucially, this challenge is for all industries, not just new ones. Businesses in all sectors need to exploit new sources of competitive advantage and respond rapidly and flexibly to change. All businesses in the UK, large and small, manufacturing and services, low and high-tech, urban and rural, need to marshal their knowledge and skills to satisfy customers, exploit market opportunities and meet society’s aspirations for a better environment .”
Localism and the Coalition (Conservative Party 2009) Under Labour, a distant and remote tier of ineffective regional government has been given increasing control over people’s lives. We want to devolve power from regional quangos back down to local councils … We will strip the Regional Development Agencies of their powers over planning; and give local governments the power to establish their own local enterprise partnerships to take over development functions from RDAs (HM Government, 2010) “ We will support the creation of Local Enterprise Partnerships – joint local authority-business bodies brought forward by local authorities themselves to promote local economic development – to replace Regional Development Agencies ( RDAs)”.
Governance of the North East Source: Tomaney, 2000
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