Catherine Bell was a Civil Servant from 1975 to 2005, ending her career as Permanent Secretary of the Department for Trade and Industry.
This interview was conducted on 8 December 2021.
Q: Could you tell us about your role in growth and regional policy over the past few decades?
I joined what was then several departments, but in effect, the Department for Trade and Industry [DTI] in 1975. I left in 2005. I was one of the Private Secretaries to Sir Keith Joseph when the Thatcher administration came in. That was a seminal moment, as you can imagine, in terms of industrial policy as we then termed it. I then, like most senior civil servants, did a variety of jobs. Having spent time in Keith Joseph’s office in 1981 and 1982, I then went to deal with mechanical engineering as a sector. I then had one of the lead jobs on the privatisation of the Rover Group.
There’s a thread in my experience, which is very much about the vehicles sector. It is quite an interesting example of some of these issues that you’re looking at. I spent a lot of time in the mid 1980s on inward investment into the vehicle sector – for example the establishment of the Nissan plant in Sunderland, and then subsequently many stages in the privatisation of the Rover Group. I then went to deal with competition policy in about 1990, and around the year 2000, I headed the corporate services group in the DTI. In 2005, I spent some time in the interim Permanent Secretary role. That too was very interesting, including our old friend Rover remerging just before the 2005 elections.
Q: What do you think have been the key successes in regional and industrial policy over that period and what are the main frustrations?
The big, long theme through those decades has been, in many ways, backing the market rather than government intervention. Of course, with the Thatcher administration, there was a very, very sharp change of not only industrial policy but a whole political philosophy. The focus was very much on getting behind the private sector driving change. A lot of the political issues were about the rundown of old manufacturing industry, or at least those were the issues which were quite politically difficult then in DTI. The consequences of that, in terms of the evolution of the UK economy, is towards dominance by financial services focused in the South East and in the City, and the squeeze down on the importance of manufacturing industry in the economy. I do not know what the figure is now, but 15% or something like that.
It was also the policy that the UK, and this was directly in my area of responsibility, has had a very open posture on mergers and acquisitions. Not only general political support for the market and the private sector being the primary driver, but also a very open posture in terms of inward investment.
If you put all that together, you might say that is an extraordinarily strong push on the market as the driver. Policy was pitched in a different place under the Labour administrations, but I would still say that was the main thrust – if you look at what really mattered and where the money went.
I think the one interlude where the policy thinking differed in many ways, was in the period when Michael Heseltine was, first, Secretary of State in DTI, and then Deputy Prime Minister, because he had a very different viewpoint in terms of more development of technology in the manufacturing sector; a drive to have a policy focus which would be looking at manufacturing exports. In the big scheme of things, that was really, to my mind, a relatively short interlude.
Q: What’s your evaluation of how effective those policies have been in achieving their goals?
I think the primary consequence was to release the UK economy from the sorts of constraints which were thought to have prevailed in the post-war period towards strong government intervention to drive economic output to make the UK a serious competitor to France and Germany. For significant periods from 1980 to 2005, when I left the civil Service, the UK economy was moving forward. So that was a success. But underlying this are the concerns we are still talking about now: productivity, efficiency, the skills base and so on.
It’s an interesting question as to why the emphasis on the private sector necessarily produced this dominance of growth and wealth in the South East? In terms of where government focused its attention, if you look at the big inward investment projects in manufacturing, it’s quite interesting that Nissan, Toyota, Honda, absolutely did not want to go to the Midlands. You could have seen a different scenario if the government had said, ‘Yes, please come, but we need to build up an industrial heartland in the West Midlands.’ In fact, in truth, I don’t think they would have come if we had taken that position. They were very clear that they wanted to go greenfield. A lot of the big manufacturing investors went greenfield, to relatively small new developments. They didn’t agglomerate in one place.
They have been very important contributors in terms of manufacturing best practice. Nissan is still one of the most efficient car plants in Western Europe. They wanted to go greenfield, and ministers of all persuasions were comfortable with that, by and large. I think that was another reason why there wasn’t an industrial heartland counterbalance to the growth of the South East and, in particular financial, services in the City.
I don’t recall myself that there was a significant challenge in the end from ministers on that aspiration of inward investors to go greenfield. Certainly, there wasn’t in the Thatcher period. I wasn’t dealing with quite the same issues in the Blair-Brown period – I was more working then on competition policy – but I don’t recall that there was actually ever that real aspiration to build a big manufacturing agglomeration, which would be a counterbalance to the South East.
Q: Why was Nissan so keen for a greenfield site? Is this counter-intuitive, given the usual emphasis on agglomeration we see elsewhere?
They were very concerned that they were able to establish their own manufacturing culture, and it was a very strong and distinct view that they wanted to go greenfield. They did not want to be, in any way, embedded in what they perceived to be the manufacturing culture in the West Midlands. They looked at lots and lots of sites right around the UK.
It’s also interesting, in terms of what drives productivity, that they saw opportunity to reskill some of the workers out of the shipyards and the coal mining industry. They saw their opportunity in being able to choose very carefully who they were willing to offer jobs to and to, in effect, completely reskill those people. Those were key factors in their choice of location. The North East was not the West Midlands, and they saw opportunity to rebuild the skills of a section of people coming out of the old industries. In terms of exporting opportunities, they were extremely focused on entry into the Single Market and on that side of the UK it was a good, practical supply line into Europe.
I think greenfield, the chance to reskill people, and to ensure that they could get a government agreement on free circulation of their goods in Europe, and all the intricacies of that in terms of EU content and so on – my best recollection is that those were the three drivers, and I dare say it was not very different for Toyota and Honda, but I didn’t deal with those so directly.
Q: Was the government essentially taking a UK-wide view on efficiency? Was it neutral on where exactly inward investment went?
It was broadly neutral. If you put it in the context: how do we revolutionise the vehicle sector and actually create a future for the vehicle sector? Given that global competition was going to intensify, and these are discussions going on in the early 1980s, the broad view, probably from both DTI and the Treasury economists, was that the costs and difficulties of operating in the way that the West Midlands vehicle sector had operated was not likely to create a future. So how do we create the future? We need to bring something very new in, hence the commitment – after a lot of sucking of teeth within the Conservative Party about the pros and cons – of welcoming the Japanese. There was quite a sensitivity about Japanese inward investment, but it was that opportunity to really lift up efficiency. It was certainly an important plus that Nissan would be able to offer a number of high-quality jobs to people coming out of steel and shipbuilding. But my recollection is that they were given a pretty free rein, finally, on where they judged was the best place for them to go. I don’t recollect that there was a lot of pushing saying, ‘But wouldn’t it be better to go to, let’s say, to Scotland or South Wales or wherever?’ My best recollection is that they were given quite a free rein.
Q: So in the 1980s regional policy was thought of in terms of compensation and transfers rather than production and efficiency?
I think that’s probably a fair comment. I have never actually expressly worked on regional policy. I’m giving a view from having worked in the manufacturing side of DTI. But I think you’re right and I think that the whole issue of what was going on with regional policy was probably running alongside this, but not with the same political elevation in terms of the debate.
I think the whole push on ‘How do we find the investment?’ was a very strong theme. You look at the themes behind the privatisations. A lot of this was about recognising the constraints on government investment, including in infrastructure, ‘Let’s privatise it, let’s open this to private sector investment that will help drive the underlying strength of the whole national infrastructure that we can offer to investors in the UK economy, whether they’re indigenous or coming from outside.’ That big push on ‘Get the investment in’ was, I think, one of the key themes.
As it happened, I moved from the industry side of the department to the competition side in about 1990, driving on the privatisations and that whole thread of thinking. I don’t recall any serious discussion about where the investment would go in terms of regional policy.
Q: How did things feel different after 1997?
When the Labour administration came in in 1997, I went to do a big review of utility regulation, so I wasn’t dealing with either industrial or regional policy. But my sense was that there was still a strong view that we needed to keep strengthening the City and regional policy was probably secondary to that.
I didn’t really directly deal with that until I was in the Permanent Secretary role looking across the whole range of policies. Awareness of regional inequalities was probably growing, as a consequence of the fact that the private sector, the market, had driven this buoyancy of the South East and that manufacturing industry had constantly declined, apart from these shining lights of very high productivity in specific places.
The whole focus was on the ‘information economy’, as we thought about it and in the White Papers that were written for Peter Mandelson. The mindset was, ‘This is looking forward’, beyond financial services, almost to fintech and so on. This is absolutely not about supporting manufacturing industry. That was the general thrust. It took the conversation more to ‘What are the skills which are needed for that new information economy?’ I don’t recall that there was a regional dimension to that. I might be wrong.
Q: How did you engage with local government and, later, Regional Development Agencies [RDAs]?
For most of the time that I was in DTI we didn’t have regional mayors and all that now exists. The voice of the RDAs was certainly important when we looked at, ‘What are the statistics telling us about the pattern of growth in the UK’ and thinking of that regional dimension – as indeed was the voice of the Scottish Office, the Welsh Office, the Northern Ireland Office. They became much more connected to the debate about inward investment when you were talking about less high profile pockets of inward investment than the big vehicle industry projects…the competition between Welsh Office, Scottish Office, Northern Ireland Office to press for that investment to come to their area, that was most certainly a strong thread in the debate around inward investment.
Q: And local authorities? Was Birmingham, as a large local authority, a player?
That’s a very interesting question. It was certainly the case, going back to the 1980s, that the West Midlands was an important factor because there was a big mix of Labour and Tory constituencies in the West Midlands. It had sensitivities in that purely political sense. In terms of people speaking with one strong, coherent voice about a forward-looking economic policy, I don’t recollect that being a big part of the debate. I think things have obviously moved a lot in terms of the strength of the mayors, Birmingham, Manchester and so on. I think that is the new and different factor, which is now in play.
Q: Did you anticipate how this political geography would develop?
As close as we got to it was in the Heseltine period, because of the work on the international competitiveness of the UK that was done. Stephen Haddrill, Mark Gibson, and Bob Dobbie worked a lot on this. Looking at Germany, it wasn’t only, ‘Here is a different model, which values manufacturing much more highly and has a very strong view about how you create the skills to have a manufacturing sector which is globally successful.’ There was also an element of, ‘Here is a very devolved model that spreads prosperity across the country, and that is very different.’ I don’t think ministers collectively then took the step of saying that’s very different and valuable, and that if we don’t do something different in the UK, we are going to have this dislocation between the buoyant South East and the rest of the country in political terms. But when I say the German model was viewed as a very much more balanced model, I mean in every dimension, including arguably in that political dimension.
Q: What do you think are the key takeaways for today from that 1980s to 1990s period?
This question of ‘let the market drive’ was very strongly debated between Treasury and DTI, particularly in the Heseltine era. Did we look forward enough, in terms of where will this take us if we continue to pursue this model, in economic and political terms? I think that is always a question that the policymakers should be asking. Arguably we didn’t look forward sufficiently, either in economic or in political terms, given Brexit.
I think another reflection is that, whichever model you favoured, it clearly was sensible to get pretty tight alignment between the policy issues which DTI dealt with and the policy issues that were dealt with by the Department for Education. There’s a question there about the ability of Whitehall to pull together really important lateral thinking on those issues which connect to future economic prosperity in the UK. If you look at the German model, you probably would have seen much more alignment between economic thinking, industrial policy, skills, and where do you put your infrastructure investment? I still think we’re struggling with that in the UK.
Q: Is there anything that you think has really worked to drive that join up across departmental policies?
Whitehall tends to be very vertical. I think that the Public Service Agreements, which tried to get much more grip on Whitehall working together on the top priorities, was a very good thing. To get back to something that looks like that would be a very good thing.
The one other thread which we haven’t spoken about is moving government jobs to the regions. It was very relevant to DTI. I had responsibility for a long time for Companies House and the Intellectual Property Office. Moving these Government agencies out of London undoubtedly created good jobs in South Wales. In terms of ‘what works’ in the hand of government, I’d just encourage a look at that one further thread.
ENDS