8 Industrial Policy

Question 1

What is industrial policy?

Answer 1

A narrow definition would suggest it involves targeting particular firms or sectors

A broader definition is that it is any policy that shapes the competitiveness of firms and industries

Any policy that influences the competitiveness of industry

Question 2

Fiscal instruments (of industrial policy)

Answer 2

Reduction in taxes on:

	- research and development
	- employment
	- profits
	- reductions could be universal or selective (applied to particular regions or sectors)

[Firms can be ‘creative’ in how they define RnD, to reduce tax bill.
Employment – less national insurance contributions for firms]

Question 3

Grants and subsidies provide support to:

Answer 3

• investment -employment

- training -innovation

Question 4

Direct action (instrument of policy)

Answer 4

direct investment by government in specified areas:

	e. g. public funded labs or resources
	e. g. state locating part of public sector in 		particular regions

Also includes tariff policy
And regulation of privatised industry

Question 5

Benefits of Enterprise Zones

Answer 5

waiver of business rates, simplified planning applications, allowances for investment

Superfast broadband also rolled out more rapidly in Enterprise Zones

Question 6

Where are enterprise zones focused?

Answer 6

Focus is on sectors where the UK has a competitive advantage, or is likely to in the future (precision engineering, defence, green technologies, biotech, pharmaceuticals, creative industries)

Question 7

Do enterprise zones work?

Answer 7

Evidence from the earlier Enterprise Zones points to limited success

They did create rapid job growth and investment in the Zones
But the Zone jobs displaced other jobs within the same region

Question 8

Potential benefits of enterprise zones

Answer 8

may attract business into a depressed area swiftly:

• Create regional economic momentum
• Improve regional competitiveness
• Address local market failures

Question 9

Potential costs of enterprise zones

Answer 9

may displace most of their jobs from other areas

• Temporary incentives reverse when scheme ends
• Tax breaks may not be a cost effective way to stimulate growth
• May disadvantage the knowledge economy