Towards a market-driven, investment led, economic recovery

The Chancellors’ Autumn Statement is a delicate balancing act between action to prevent melt-down, (by keeping HMG’s borrowing costs under control), and the need to win the next election (so as to avoid a return to the policies that brought us to where we are today). Candour about the scale and nature of the problems we face (and how they came about) would probably not help achieve either objective.

Meanwhile agreement that the actions proposed need to be complemented by an “industrial strategy” masks disagreement as to whether this should be based on top down government-led planning or on removing the obstacles that prevent “market forces” from operating constructively. Neither is a panacea and the failure of previous UK central government planning (from picking winners to regional policies) gives little confidence that the officials, advisors and consultants of today will do any better than their predecessors.

The UK is the last of the “20th century, steam age, centralised nation states”. Over a third of the members of the European Union (and nearly two thirds of US states) have smaller populations than Yorkshire or Scotland). Most of those that are larger and do not have Federal Constitutions (like Germany), are in the process of decentralising (like France or Spain) or are effectively bankrupt (like Greece and California).  The most credible way forward is to take the “big society” approach seriously, using on-line products and services world to enable and support devolution, diversity and local democratic accountability. The use of IT as an excuse for centralisation, standardisation and bureaucratic regulation should be history.

As chairman of the Conservative Technology Forum I have therefore e-mailed the members asking for comments on a research strategy that focuses on six main policy themes:

1)    The use of technologyto help focus public funding on services that meet local needs

Thiswill entail not just the reform of planning and procurement routines but achange of attitude to policy formation and implementation to include a mix ofpolitical and professional peer review before the “doctrine of ministerialinfallibility” kicks in, as well as improved scrutiny of secondary legislationand departmental and regulatory “guidance” (e.g. that on security and data protection).

An orderly and affordable transition will entail stopping the haemorrhage of tens of £billions in fraud andwaste that could otherwise be used to help reduce our debts and improve publicservices. Hence the second theme:

2)    Making a reality ofpartnership in the fight against cyberfraud and waste

Thecurrent agenda is largely focussed on cyberwarfare, anti-terrorism and thetheft of defence related intellectual property. These are indeed important butmust be better linked to the agendas of those seeking to defend themselves andtheir customers against organised crime (now one of the world’s largestindustries) before we seek to encourage the most vulnerable in society totransact with government via centralised on-line systems. We need to consider therisk of large scale suffering (not just expense) were the identities of thosedependent on benefits to be systemically compromised.

3)    Removing theregulatory overheads that are driving on-line businesses off-shore

Organisationsface conflicting requirements to keep information confidential, (deleting itwhen no longer required for the original purpose) and to retain it, in case aregulatory or law enforcement agency might want it. The sharing of informationis mandated or forbidden according to circumstances that require judgements onwhich few can agree, and where the consequences of a wrong decision by anover-worked and under-trained junior member of staff can lead to personaltragedy or corporate bankruptcy.

Weneed urgently need regulatory regimes that attract and foster reputable,wealth-creating businesses by supporting and encourage good practice, includingsecure interoperability with trusted partners in other parts of the world underdifferent legislative and regulatory regimes.

4)    Local access to aworld-class, sustainable education and training infrastructures

TheUK is now a net importer of English language education and training materials,let alone skilled staff. That is testament to the failure of a regime based onexperts planning public funding to meet future needs.  The fundamental disciplines of learningchange slowly, if at all. But the skills for employability are changingincreasingly rapidly. We need to better distinguish between education andtraining and move towards market-driven solutions to deliver the latter where,when and how needed. We urgently need to remove the current incentives to employers to recruit rather thanretrain, import skilled staff from abroad when they cannot recruit locally andmove jobs off-shore if they cannot get visas to import.

5)    Linking theCommunications (Broadband), Network Resilience and Green Agendas

Massive sums are quoted for newsmart metering, smart grid and fibre networks as our utility networks, including for fixed and mobile communications, come under increasing pressure. But 80% of the costis for physical infrastructure that could be shared. More-over the UK targets for 2015 are modest compared to whatcould be achieved if currently agreed public funding and that available fromindustry were joined up, regulatory and planning obstacles removed and 4Gspectrum made available at the same time as the rest of Europe. We need to lookat what can and should be shared, what cannot and the obstacles to drawing infunding from those investing overseas rather than in the UK

6)    Liberating directinvestment in the infrastructures, industries and jobs of the future

Theindustrial revolution, canals and railways were funded by local tradesmen andland-owners, with bills of exchange and municipal bonds, issued and tradedlocally, not by banks or government. We need to once again free up such directinvestment (angels, public prospectuses, community enterprises and co-partnershipsand well as conventional venture capitalists), allowing businesses to grow onpositive cash flow and ending incentives to invest in property rather than jobcreation. We need to remove the layers of regulation and distortion that routeour savings into government stock and property.  

Some of you will note that these themes overlap with those in the “prospectus” issued by the Information SocietyAlliance in June. That is because the objectives appear common to all parties. Theremay be some divisions along traditional political fault lines about how to achievethose objectives but the bigger divisions will come between those who believe intop down planning, “co-ordination” and regulations and those who believe in”bottom up initiative”, market forces and informed choice. Of course we needboth approaches but we currently have the balance wrong between nationaland local government as well as between “compliance with regulation as adefence against liability” and  “clarityof legal responsibility for the consequences of abuse”.  Where and how that balance should be drawn is one of the areas for policy debate – and “going political” may be needed to get that debate going. 

Moreradically, I believe we also need to move away from an implicit assumption thatpublic sector systems will be designed to serve “planned and regulated” markets.This automatically favours incumebent suppliers who are large and profitable enough to have “Public Affairs” and “Compliance”departments. Instead we need to assume “open” markets which will give level playing fieldsfor the small and medium size businesses and for not-for-profit charities,co-operatives and community enterprises who may well be better at providingcustomised services at lower cost to meet local needs. That entails a differentperspective on standards for interoperability and performance measurement aswell as for procurement. This poses even more challenging topics for debate – particularly because those with most “interest” in changing the current status quo have least funding available for lobbying. 

Thefeedback that I have received so farhas been favourable but the devil will be in the detail. Meanwhile I aminterested to know just how much of agenda is likely to be shared acrosspolitical boundaries. I also wish to identify who disagrees with what and why – so that we can begin by making rapid progress on that which we can all agree.  

P.S. If you wish to receive a copy of the full draft (summarised above) you will need to visit the CTF website (in the process of being updated), download a membership form and join. It will then be e-mailed to you as a member.