MAGGIE PAGANO: Benefits Britain is a tragedy of wasted talent

If you had landed on earth from Planet Zog yesterday, you would think Britain was about to go down the Swanee.

First out of the block came the head of the UK’s manufacturing association with a withering attack on successive Conservative governments, accusing them of mismanaging the economy and flip-flopping over policy for the last decade.

A former civil servant, Stephen Phipson chose Make UK’s annual conference to go on the offensive.

And he didn’t mince his words, slamming the procrastination over introducing British-built small nuclear reactors and the failure to attract gigafactories for the transition to net zero, which has left the country without an energy policy. 

He criticised the inconsistency of quick-fix publicity stunts launched with great fanfare that means business lacks long-term certainty. 

And he took to task the ping-pong game of switching higher education and skills policy between departments, which has resulted in a huge skills shortage and so on.

Phipson should know. His trade body, Make UK, represents 22,000 companies from multi-nationals to start-ups which employ around 3m people. 

More galling is that these companies are desperate to employ more. There are 95,000 manufacturing vacancies which cost the UK some £7.7billion a year in lost revenue. 

Even more galling is that half of our manufacturers say they cannot source talent locally. That’s a tragedy and totally unnecessary.

What all this means, claims Phipson, is that the UK is way behind in the race to be ahead of the curve in the green revolution, a race recently put on steroids now that the US has invested $370billion into its Inflation Reduction Act (IRA).

If the UK matched US subsidies going into the IRA, our manufacturing sector could easily grow back to 15 per cent of the economy from its present 10 per cent.

Next off the block lambasting the Government was Liam Condon, chief executive of Johnson Matthey, one of Britain’s biggest companies which makes most of the world’s catalytic converters. 

It claims to have the intellectual property to make the UK a world leader in the production of green hydrogen to power batteries. 

But Condon told Sky News we risk losing the race to become a global champion because of the lack of government support and the big subsidies the US is ploughing into its companies which will leave an uneven playing field.

It is hard to disagree with a word of what either Phipson or Condon have said. In an attempt to improve policy, Make has come up with its own plan – to set up a Royal Commission on industrial strategy agreeing certain targets and ambitions.

This would draw on cross-party consensus across economic policymaking, and one option is to re-establish the Industrial Strategy Council. 

To avoid turf wars, this new body would work within the Cabinet Office. Every other big economy – from Germany to China to the US – has an industrial strategy.

So should we? The answer is of course we should. What we call it is another matter. Joined-up thinking would do for now.

There are examples of where joining the dots worked well and that tends to work best in specific industries. The Automotive Council chaired by Lord Mandelson in 2009 being an example. 

Yet much of what industrialists are calling for can be done within the existing framework. 

More quangos can be a way of kicking tricky topics into the long grass. Rather than the Treasury only ever looking at ways to raise revenue and close down incentives, it should start by asking what the country needs the most and work backwards to achieve the ambition.

If No 11 were to approach policy like this, it wouldn’t have raised NI or corporation tax to 25 per cent thus sending companies like AstraZeneca to Ireland or losing out on billions in tourism by abandoning the VAT levy on tourists. This was backward, deeply counter-productive thinking.

Yet the biggest elephant in the room which needs radical reform is the size of the welfare state. The numbers are mind-blowing: there are one million job vacancies yet 5m people on out-of-work benefits.

This costs £100billion a year, a figure that has soared by £33billion over the last three years.

For most people, being out of work is neither good for their health nor their status. Which is why improving the educational and training chances of those out of work and helping them stay healthy should be the Government’s top priority rather than relying on costly immigration.

That would be the best industrial strategy we could come up with.