The new leadership team in the UK government plans to drive the devolution agenda more aggressively, which depends critically on translating fiscal and monetary priorities into policies which directly impact commercialisation clusters in regional eco-systems.
The challenge in doing this as that treasury orthodoxy has been based on macro-economic levers, which do not translate easily into drivers which operate at the meso-economic level where innovation-driven growth is generated in practice. The problem, as many economists now acknowledge, is that idealised macroeconomic models are not fit for purpose when it comes to actionable policy interventions.
The RDS Macro-Meso-Micro model directly addresses this, allowing explicit execution of the devolution agenda. Policy makers now have a powerful tool at their disposal to make these decisions based on data-driven analysis.
This approach formed the basis for the detailed critique of the Government’s industrial strategy published by the RDS earlier this year, which was largely ignored by the Treasury, DBT, DSIT and other ministries.
The new approach needs to explicitly tackle the following areas:
- Signalling: Policies on ideological orientation, the narrative and messaging will have a significant impact at the meso-economic level. Businesses need to confidently predict upcoming policy so that they can prepare and develop their own practices even if these policies are still under development. Effective messaging and a consistent narrative can boost awareness of the available opportunities for businesses
- Regulation: Policies around regulation have the potential to affect Proposition Framing, Customer behaviour and the shape of the Products and Services and how they are deployed. This is why we need clarity around regulation and how it is implemented
- Taxation: The impact of macro-economic tax policies needs to be ‘converted’ into differences in the relative importance of meso-economic vectors. For example, ‘devolved’ taxes and indirect taxation will likely impact the funding and investment vector quite significantly
- Procurement: Macro-economic policies around procurement could affect the shape of products and services and how they are deployed; for example, preferential treatment of innovative SMEs could drive devolved growth, rather than ‘uniform’ procurement environments
- Global Drivers: This is one of the most volatile areas, given the experiences of the last few years, but taking a more explicit position could help to shape policies for UK companies in highly distorted global markets
- Infrastructure: Macro-economic policy towards infrastructure funding and procurement could have a significant impact on market structures and funding and investment, particularly in hybrid structures - but how this could affect different regional clusters could help to drive growth
- Talent: Governments are good at recognising skills gaps and putting in place long-term policies to address them; but some of the more dynamic changes around specific technologies and products require more clarity at a devolved level
- Funding: This is obviously a key area, but the macro-meso coupling should allow a more nuanced view on crowding-in funding beyond simply exhorting large investors to be more patient; understanding how these patterns are implemented at devolved level could help to shape better policy decisions.
The change in leadership now offers an opportunity for a faster and more agile response to delivering on the national growth challenge, based on this rigorous approach to generating innovation-enabled growth.