Margaret Thatcher, Theresa May and industrial strategy

James Silverwood - Lecturer in Emerging Markets, Coventry University

Thatcher presented her case for industrial strategy in speeches on July 9th and October 8th 1976 via a narrative pertaining to the post-war ‘British sickness’ of economic decline. The cause of the ‘British sickness’ identified by Thatcher in these speeches, made a year after becoming Conservative party leader, was the post-war UK economic growth model, particularly, the excessive role played by the state in the economy.  Here, Thatcher blamed poor economic performance on the mis-guided industrial and fiscal policies implemented by previous Labour governments, which had led to too high public spending and government borrowing and excessive state and trade union intervention in the market mechanism.  The solution to the ‘British sickness’ presented by Thatcher in her July speech was her nine-point policy plan for industry and manufacturing, which was repeated in abbreviated form in October that year in her speech to the Conservative party conference.  Thatcher proposed to restore profitability and incentives to industry by reducing public spending, taxation and ‘over-manning’ in industry.  Meanwhile, Thatcher asserted that entrepreneurship would be stimulated via a programme of de-regulation, relaxation of price controls, halting nationalisation, and by introducing policies to stimulate small businesses and a new skills agenda in higher education.

The industrial strategy implemented by the Thatcher government after the Conservatives’ victory in 1979 broadly corresponded with the nine-point point policy plan she had articulated three years earlier. This is readily identifiable and a well-known story, which need not detain us beyond a few examples.  For instance, the Thatcher governments not only brought the nationalisation of industry to an end, but reversed the process through a series of privatisations of the utility and energy industries. In other areas, however, the link between Thatcher’s rhetoric in 1976 and subsequent industrial strategy was less clear.  For example, the Thatcher governments continued to use industrial policy to ‘pick winners’ and support the growth of selected economic sectors, which included the financial services, housing and auto industry. Despite this continuity in policy, the 1979 general election represented a radical turn in industrial strategy towards liberalism and away from the state-led interventionism that had been embedded within a liberal global economic order during the post-war period.

In contrast to the 1976 speeches of Margaret Thatcher, the turn towards industrial strategy by Theresa May in her speech in July 2016 was couched in a narrative that focused overwhelmingly on politics rather than economic performance (although the speech did acknowledge the troubling deterioration in the UK’s productivity since the Global Financial Crisis of 2008). For instance, the pledge to implement industrial strategy rested on the desire of May to differentiate a future Conservative government under her leadership from that of the government led by David Cameron and George Osborne.  Thus, May asserted that whilst ‘great strides’ had been made ‘in the last six years dealing with the debt crisis, reducing the deficit, and presiding over an economic recovery’ it was ‘striking that, by comparison, there has not been nearly as much deep economic reform’.  Given its centrality within May’s speech – it being the only area of public policy discussed with any substance – it must be assumed that it was through industrial strategy that May envisaged a government under her leadership would represent ‘a different kind of conservatism’ that ‘marks a break with the past’.  We must further assume that industrial strategy is central to May’s stated aim to build ‘an economy that works for everyone, so we don’t just maintain economic confidence and steer the country through challenging times – but we make sure everyone can share in the country’s wealth’.

The failure of May to root her appeal to industrial strategy within a through-going critique of the financialised UK economic growth model, however, suggests that industrial strategy under the May government will be limited in its scope and ambition compared with that pursued after the 1979 general election. In particular, it should be feared that the May government’s industrial strategy will fail to rectify the UK’s appalling economic performance in recent years in areas such as productivity, the current account deficit, trade in goods and services and wages. Sadly, the opening six months of the premiership of Theresa May confirm this fear with her government passing up two early opportunities to establish a robust strategy for industry in the very areas identified by May in July.

First, the May government allowed a £24billion takeover of Cambridge-based technology firm Arm Holdings by Japanese company SoftBank. Second, after announcing an initial pause on July 28th 2016, the May government then gave the go ahead on September 29th to the development of the nuclear power station at Hinkley Point in Somerset, which has been condemned as a poor example of industrial policy on the grounds of cost to the taxpayer and consumer. More recently, the lack of a cohesive plan by the May government was confirmed by the ‘letter of assurance’ given to Nissan, which persuaded the company to build two new models of car at their factories in the North-East of England. However welcome, an alternative interpretation of May government’s reaction to Nissan is of an ad-hoc and piecemeal extension of corporate welfare to the uncertainties caused by the Brexit vote, rather, than evidence of a coherent strategy for industry. Finally, whilst the creation of the new Department for Business, Energy and Industrial Strategy and Cabinet Committee for Industrial Strategy seems impressive, it falls far short of calls for more radical institutional reform that challenges the Treasury’s predominance within the machinery of government. The likeliest outcome for industrial strategy under the May government will constitute a re-heated form of the ‘modern industrial activism’ pursued by the Brown and Cameron-Clegg Coalition governments from 2008 onwards.

The significant differences in the discursive appeal to industrial strategy of Theresa May and Margaret Thatcher are not merely differences in rhetoric, but provide us with a guide as to what we can expect from industrial strategy in the contemporary era. The available evidence thus far suggests that the prospect for industrial strategy over the next few years is likely to be significantly different to that witnessed after 1979.  The Thatcher governments marked a turning-point in UK industrial strategy with the implementation of radical change from the policies pursued during the post-war era.  In contrast, the May government appears to so far be offering continuity with the industrial strategy in place since 2008.  However, the May government is only six months old and it could be considered premature to pass judgement on their industrial strategy at this early stage, especially given that the government will release a white paper during 2017, which we are told will establish a plan for industrial strategy.  It is hoped this white paper will provide much needed clarity and coherence.  The formation of the May government could still be viewed as a point of departure for industrial strategy akin to the election of Margaret Thatcher in 1979.