In 2001 the then Prime Minister Tony Blair proclaimed that New Labour’s “top priority was, is and always will be education, education, education”. Twenty-two years later, the Chancellor Jeremy Hunt has defined the four pillars of the Conservative government’s plan for prosperity as being “Enterprise, Education, Employment and Everywhere”. We have gone from three Es to four, but the general direction of travel remains much the same.

Blair and his Chancellor Gordon Brown wanted Britain to ride the wave of finance-fuelled globalisation powered by modern science. Hunt is keen to “turn the UK into the world’s next Silicon Valley” where start-ups and technology clusters deliver boundless innovation on which a high growth, high wage and high skill economy apparently rests.

It takes us back to the early 2000s

Hunt’s vision of making Britain a “technology superpower” sounds futuristic but it takes us back to the early 2000s when New Labour promised to lead the country to the sunlit lands of the “global knowledge economy”. This economic model, as academic Nick O’Donovan has shown, was based on public investment in workers’ cognitive capital, which could compensate for the loss of skilled blue-collar jobs that had occurred since the deindustrialisation of the 1980s and the rise of finance capitalism in the 1990s.

That was the future once, and we all know how it ended. First, the dot.com bubble burst in 2001 and then the financial boom was followed by a major bust – the global financial crash of 2008. Ever since, the UK economy is stuck in a vicious circle of low growth, low productivity, low investment, low skill and low wage.

At every juncture, Britain’s economic model proved to be less resilient and more vulnerable in the face of shocks. After the global financial crisis, economic output contracted by more than in most other advanced economies, and the subsequent snap-back did not amount to a full recovery. Deepening disparities between and within regions are worse in Britain than in any other G7 country and most of the 38 OECD members. The largely self-inflicted wounds of hollowing out the country’s manufacturing base and outsourcing industrial capacity have left long-term scars that depress not just growth and productivity but also social bonds, community cohesion and trust in government.

Meanwhile successive governments have applied little more than sticking plasters. This was as true for New Labour as it was for the Coalition government. Neither tackled the fundamental problem of a lop-sided economic model that is over-reliant on finance and related service sectors located in London and the South-East. Far from being Singapore-on-Thames or Taiwan-on-Trent, the UK economy resembles the ex-industrial regions of Belgium with the financial services centre of Luxembourg in the south.

The test for Chancellor Hunt’s ideas is whether they challenge the old orthodoxy that has so clearly failed. As with Blair and Brown, the risk is that Hunt is too optimistic about the current model and not ambitious enough about building a better one. 

Take one of the four Es — education. Hunt is right that the UK needs to do much better for the 50 per cent of school leavers who don’t go to university. But while there has been some progress on T-level qualifications and apprenticeships, what is the government’s plan and strategy to deal with the growing skills shortages in manual and caring sectors? The country requires building workers, machinists, engineers, nurses and carers far more than yet more graduates in gender studies.

Yet as long as the secondary and tertiary education system privileges all-round minimal competence and transferable skills over rounded knowledge and subject-specific skills, the UK will remain as addicted to importing manufactured goods as it is to importing skilled workers.

On enterprise – another of Hunt’s four Es – there was little recognition that Britain lacks companies that grow from being small start-ups to larger national or even international corporations capable of competing with the best businesses. The UK is very good at research but really poor at diffusing and disseminating innovation to the longer tail of enterprises that are not currently at the frontier.

One reason is that Britain has failed to build an institutional ecology linking research to commercialisation, for example the German Fraunhofer Society, which consists of 76 institutes with nearly 30,000 employees (mostly engineers and scientists) and an annual research budget of almost €3 billion to fund applied research and its diffusion to the German business community.

The UK lacks sufficient financial firepower

The other reason is that the UK lacks sufficient financial firepower to support public investment across the country. Like the political system, Britain’s financial system is over-centralised in London and the South East, while other parts are starved of bank loans on competitive terms. The country needs not only a series of regional and sectoral banks constrained to lend within certain areas or sectors. It’s equally vital to set up a National Development Bank bringing all public investment programmes under one umbrella. That would enable the finance of large-scale housing and transport projects and also help unlock private investment through export finance.

Chancellor Hunt is rightly determined to confront the “Structural issues like poor productivity, skills gaps, low business investment and the over-concentration of wealth in the South-East [that] have led to uneven and lower growth”. The fundamental problem with his four-pillar plan is that it assumes technology is the main driver of the economy and human history. This deterministic embrace of technological innovation risks detracting from the urgent need to provide vocational and technical training for fast-growing sectors such as health or social care. Empathetic, social skills and practical abilities will be as if not more important as academic aptitude and cognitive competence.

A new Silicon Valley does not just smack of hubris and ignores the model of monopolistic surveillance capitalism it has given rise to. Such an ambition also fails to address the main political and economic task – how to reduce regional inequalities and rebuild not only Britain’s cities but also her suburban, rural and coastal areas. Like New Labour and the Coalition government, the Conservatives led by Sunak and Hunt lack a convincing vision for the country that can combine economic reconstruction with social renewal.