Lord Willetts is Chairman of the Resolution Foundation. He is a former Minister of Universities and Science.
Ten years ago, I launched initiatives to invest in Eight Great Technologies in a brochure for Policy Exchange. Rather than talk vaguely about industrial strategy, it was intended to test whether the government could successfully identify key general-purpose technologies and support them on their way to successful commercialization.
Ten years at Policy Exchange asked me to review that exercise to see if there really was any value in such technology foresight exercises, which of course many skeptics doubt.
My account of the Eight was as follows. The digital revolution is the great technological breakthrough of this century and we will invest in key applications where Britain has distinctive strengths and global business opportunities exist, such as AI and big data, space and satellite data, and robotics and autonomous systems.
It also happens that the greatest scientific discovery of the last 75 years, the genetic code, comes in digital form. So, the future is the interaction of dry digital technologies and the wet biological world. Britain has invented all the major genetic sequencing technologies and has a good regulatory regime for engineering genetics. We will invest in new technologies that these advances make possible, particularly in genomics and synthetic biology, regenerative medicine, and agriscience. But none of this will happen without also investing in foundational technologies: low-carbon energy to power it, and the advanced materials without which the kit and sensors won’t work.
Ten years later, it’s still not a bad list. My worst fear was that these technologies would go the way of Sean Connery’s personal jetpack in thunder. When I saw that movie as a kid, I figured this was how I would commute to work. Instead, for me it is still the train or the bicycle, two technologies of the 19th century. I’m relieved that none of my eight are as out of place as that.
The exercise is surprisingly topical again as there is renewed interest in supporting key technologies with the recent announcement of five priority technologies: Quantum, AI, Engineering Biology, Semi-conductors and Future Telecoms.
These “vertical” policies are different from the “horizontal” policy that is supposed to apply neutrally across sectors and technologies. The fear is that if the government really takes a stand and promotes specific places, technologies or sectors, it will end up wasting money. The lesson is supposed to be that we can’t pick winners: instead, losers pick the pockets of taxpayers.
The distinction seems clear but, in the real world of politics, the horizontal often tilts unexpectedly and ministers and their advisers find themselves sliding, rather bewildered and disoriented, towards a position that is surprisingly vertical. In the 1980s, even Margaret Thatcher herself was involved in one of the most conspicuously successful industrial policies.
After the dismal decline of the British car industry, he set about attracting Japanese car companies to set up shop here, linking them to another successful initiative of his: the Single European Market. He flew to Japan and directly supported his investments with strong financial incentives. That is not a solitary example. Vodafone grew to become a major global mobile phone company thanks to an extremely effective British official campaign during the 1980s to shape mobile phone standards in Europe and then globally around its operating system.
New technologies and companies are on a long and complicated journey to market. Relieving some of the risk burdens on companies as they innovate is one of the best ways that government can promote growth. It is a serious mistake for the government to withdraw its support too soon and then expect commercial investors to accept it. You can hide your mistake by complaining that business leaders are risk averse, but in reality you expect them to take more risk than in many other countries. Behind the American rhetoric of a Jeffersonian state of strong individualists is the reality of a Hamiltonian state that spends and regulates to promote national greatness through science and technology.
Ambitious initiatives are launched, only to be scrapped by new ministers, proudly announcing that they have gotten rid of these examples of failed industrial strategies from the past. In fact, the very terms industrial policy or, even more ambitiously, industrial strategy have such negative connotations that their use has itself become a source of instability.
At least the great variety of initiatives, many of which have had some evaluation of their economic impact, allows us to identify if any of them really worked. And some of them have. A study, conducted by Stephen Roper of the University of Warwick Business School, into the effects of public funding for corporate R&D on British companies found that they grew their turnover and employment six per cent faster in three years and 28 percent faster six years later, compared to similar companies. companies that did not receive support.
My new pamphlet ends with practical policy proposals.
Take the opportunity of the creation of the new Department of Science, Innovation and Technology to reform Treasury’s Business Case rules, which delay decisions for at least another year and make us move much more slowly than our competitors.
Our large public sector laboratories are tied to red tape, one of the reasons why much of our research is done in the academic environment of universities, which are outside of the public sector. Give them back the freedoms that George Osborne and I negotiated for them.
Liberalize Treasury regulations that currently stop government procurement of innovative new technologies before the product has been finalized.
Utilities regulators must be given a clear responsibility to actively promote investment and innovation.
There needs to be some kind of technology foresight exercise with key technologies where we have a national advantage and then backed up with supporting funding and regulations.
There are British unicorns and tech startups that wouldn’t exist if it weren’t for the original Big Eight Technology initiative. William Hague recently co-authored an article with Tony Blair in which he calls on us to do more to support new technologies. George Freeman, the Science Minister, is a longtime advocate. Such an agenda is key to boosting Britain’s economic performance today.
Policy Exchange publishes The Big Eight Technologies Ten Years Later: An Industry Strategy by David Willetts.