Time for the DTI to RIP

In the final episode of Yes, Prime Minister, the PM's political adviser Dorothy Wainwright explained the symbolic function of much of Whitehall. ‘Government departments are tombstones,' she said. ‘The Department of Industry marks the grave of industry. The Department of Employment marks the grave of employment. The Department of the Environment marks the grave of the environment. And the Department of Education marks where the corpse of British education is buried.'

by Richard Reeves
Last Updated: 06 Nov 2012

As with most of the brilliant series, there was enough Orwellian truth to the statement to make it darkly funny. (No wonder the show was Mrs T's favourite.) Departments of State are often tackling the absence of whatever is in their departmental title: Health really means Illness; Work means Unemployment; and - now perhaps more than ever - Defence means Attack. But at least these Departments have something to do. It is much harder to see what the Department of Trade and Industry spends its time on.

Its mission is to ‘create the conditions for business success and help the UK respond to the challenge of globalisation', which is either absurdly ambitious or utterly vacuous. ‘In this world of rapid change and intense competition, the Department of Trade and Industry (DTI) plays a vital role,' continues the blurb. A case of protesting too much, methinks. At any rate, it is apparently Gordon Brown's view. By the time you read this, the DTI may be a corpse itself.

If so, it is not before time. When he became head of the department in 1989, the blunt-speaking Nicholas Ridley asked: ‘What is the DTI for? I've got bugger-all to do, and thousands of staff to help me do it.' Ridley's question has haunted the Department ever since. Perhaps it should have been haunting him. After all, as Secretary of State he could have recommended abolition of his own department, a move that would have made him or any of his successors a political hero. But such is the inertia of politics that the DTI remains. There was of course, that four-day re-branding in 2005, when it became the Department for Productivity, Energy and Industry, immediately shortened by Fleet Street wags to ‘penis' and ‘dippy'. (Incoming boss Alan Johnson sent out a ‘man with a screwdriver' to put the old name-plate back.)

In some ways, the U-turn was unfortunate. Productivity should indeed be at the heart of what the department is about. Neither industry nor trade needs a government department any more. The days when the Government propped up failing companies are long gone. When closure first loomed over the Rover plant at Longbridge (now back in business, thanks to the Chinese car industry), there were no voices calling on the DTI to throw money at it. ‘Industrial policy' is now an oxymoron. And trade seems to be getting on quite nicely without much help from government. Indeed, the main role of the state with regard to trade is to get out of the way of it.

This is not to say that the changing dynamics of trade should not be a concern of government. What the former Fed chairman Alan Blinder has dubbed the ‘Third Industrial Revolution' is changing the nature of trade. The first revolution replaced the farm with the factory; and the second replaced manufacturing with services. The third revolution is being driven by the fall in cost and rise in speed of information movements over long distances. What this does, according to Blinder in ‘Fear of Offshoring', a paper for the Center for Economic Policy Studies at Princeton, is dramatically reduce the distinction between tradeable and non-tradeable commodities.

‘In the future,' he writes, ‘the key distinction for international trade will no longer be between things that can be put in a box and things that cannot. It will, instead, be between services that can be delivered electronically over long distances with little or no degradation of quality, and those that cannot.' Medical services, financial services, IT, creative industries - all of these can be digitised and ‘shipped': it is surely only a matter of time before MT's sub-editors are in India.

The implications of this revolution on the wages, skills and opportunities for people around the world are complex and profound - and should be a central focus of the government. It is certain that increasing the productivity of British citizens and British firms is necessary in order to seize the opportunities presented by Blinder's revolution.
But it is less clear that the DTI is the body to pick up this challenge. One problem is that it usually only gets the half of any pie. So energy sits (or perhaps, by the time you read this, sat) in the Department - but the environment is DEFRA's concern. It gets employment regulation, but not employment; science but not skills; innovation but not R&D. It's a dog's breakfast. Given that improving the skills of employees is at the heart of the challenge, the fact that education, skills and work all sit elsewhere in Whitehall poses more than a slight difficulty. (In the 1960s, Labour briefly introduced a Department for Employment and Productivity; it would actually make more sense now.) But the other problem is that since Brown handed monetary policy to the Bank of England, the focus of the Treasury has shifted from macro-economics to micro-economics. The Treasury is the one with a Productivity Unit.

Time for the axe to fall. Vital issues on trade, innovation and productivity should go to the Treasury; energy to DEFRA, science to the DfES; and employment regulations to DWP. John Reid, the outgoing Home Secretary, declared his department as ‘not fit for purpose'. At least, unlike the DTI, it still has one.

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