David Sainsbury, Baron Sainsbury of Turville, is a Labour life peer and British politician, businessman and philanthropist. He served as Parliamentary Under-Secretary of State for Science and Innovation between 1998-2006.
This interview was conducted on 25 March 2022.
Q: Could you tell us about your role in growth and regional policy over the past few decades?
The most interesting response will be to talk about both personal experience and my role as a Minister.
I first got interested in this way back in the seventies when there was a huge issue about inner city decay and the problems of the inner city. I think there was a Home Office project looking at city centres where there seemed to be a concentration of all the pathologies of society: unemployment, ill health and so on, and I thought this was very interesting. I talked to a guy who was a property developer who I knew through our family business. He was called Nigel Mobbs and he wrote an extremely interesting pamphlet which was called ‘The Inner City: A Location for Industry’. No one really understood why there was this inner-city decay. He explained why this had come about. Today we forget that up to the beginning or even some way into the 20th century, people put manufacturing in the inner city. The reason for that was transport, by train, very largely by train, or canals or docks and not by road transport. You put your factory in the middle of the city. Because land was rather expensive and labour was very cheap, you built very large multi-story buildings with virtually no car parking around them and, of course, by the time you get to the 1970s this was the last place you wanted to put a factory, and so these were closed down and manufacturing moved out of the city centres into the outer fringes of the city and that was what was causing all this economic distress. I thought this was very interesting because it showed that this kind of economic distress – which was ill health, unemployment and so on – was caused essentially by the decline of industry in a very specific place.
Shortly after that I was asked to be on the Docklands Joint Committee as a representative of local industry. The Docklands Joint Committee was set up by the Greater London Council and was about the regeneration of the Docklands area which had fallen into complete decay, and had closed down because of economic change. This was a lot to do with containerisation which made the London docks uneconomic; because of that they moved downstream to Tilbury. It was another interesting example of where social problems had been affected by economic change and so that became a subject of great interest. We totally failed as a body to deal with the problem because everyone wanted to try and recreate the kind of jobs that the dockers had instead of realising that manufacturing would never come back to the inner city. The thing to do was to attract the services sector, people from the City of London, which is what in due course did actually happen.
That was pre-1979 and I then didn’t do very much in that area until I was in government, when I became very interested. It was slightly at arm’s length because I had no responsibility for regional policy. But I was interested in the issue of how to do knowledge transfer from universities into producing high-tech clusters around universities. That was the moment when I began to understand that if you were going to deal with these issues, then what you had to do was get back new high value-added businesses into these areas. One of the key ways of doing this was knowledge transfer out of universities. I did a lot when a minister to support knowledge transfer from universities by setting up the Higher Education Innovation Fund to support knowledge transfer. In the years before becoming a minister I also went to Boston a great deal because my family business had bought a chain of supermarkets in New England. It was headquartered at Portland but I spent a lot of time going over to Boston and I became interested in the whole Boston economy. You saw there what I thought was an extremely interesting story. Boston has rejuvenated itself on at least two occasions. It was the original birthplace of industry in America. When I used to go over in the eighties and nineties you could still see these huge multi-story factories, which were where the shoe and clothing industries had originally been in New England. Those industries had migrated to the South because of new transport links and desegregation – you had cheaper labour in the South and industry moved down there.
At the same time Boston regenerated itself on the basis of the universities, M.I.T. and Harvard. That came about because at the beginning of the Cold War government poured in very large sums of money to technology development at both places and that led to a lot of spin-off companies which took place around Route 128. Route 128 became a very famous place for the computer industry. But it wasn’t personal computers, it was small computers, companies like Wang and DEC. Then that industry was destroyed by the rise of Silicon Valley. What has been extraordinary about Boston is it then renewed itself again and became the home of biotech. It also continued to have a very strong financial base. The lesson I took away from all that was in all these cases of regional inequality or regional economic distress, the basis of it was a decline in industry, industry not reinventing itself. The reason Boston was able to reinvent itself was because of an extraordinary rate of innovation.
There have been some really interesting attempts to look at innovation performance across different countries by an American organisation called the Information Technology and Innovation Foundation (ITIF). If you took Boston as a country, Boston would be the most innovative country in the world. I think that tells you about how you get regeneration in cities which is through innovation, constantly moving to higher value-added areas.
Going back to the DTI [Department for Trade and Industry], the policy on Regional Development Agencies (‘RDAs’) was extremely interesting. But it seemed to me, following their progress and being involved in it, that there were two kind of major problems. First, no one told them what they were supposed to do. And, secondly, organisationally, it was a very difficult. The original idea, from John Prescott, had been that the RDAs would be attached to the regional assemblies. The problem was that the British public were not remotely interested in regional assemblies; they said we have no sense of regional identity – and so they voted it down. You were left with RDAs sitting between central government and local government and not really having any clear position or clear remit as to what they were supposed to do. The result was they achieved something, but not very much.
Q: What explains the difference in performance between London and the other regions?
The main thing I’ve learned since then is the importance of understanding why we have regional inequalities. If you’re going to deal with regional inequalities the first thing to understand is why we have them, and the reason is a historical one. There are various reasons the Industrial Revolution took place in the North of England. The first is that what you required in terms of power to drive the factories was either coal or waterpower – and coal and waterpower were in the North. This meant that the Industrial Revolution took place in the North.
There were other factors as well. The raw materials were also in the North. The potteries, where the ceramic industry took place, was due to the fact that there was the right kind of clay being there. Sheffield became the great centre of the steel industry because it had iron deposits and also waterpower. Those were very big factors. A lot of the northern cities were also not incorporated cities. If you were not an incorporated city, you couldn’t have guilds and, in this context, guilds were very unhelpful to economic development. The fact that there weren’t guilds was very important because the guilds went in for restrictive practices. There was also an issue about religious dissenters, because, again, if you were an incorporated city that prevented you having dissenting academies in your town and dissenting academies were part of the technological basis of the Industrial Revolution.
The reason we have very significant regional disparities is that those original industries have been hardest hit by globalisation. I’ll give you some figures because they are really extraordinary figures of the extent to which those cities, the northern cities, have been impacted. If you take the period 2008 to 2018 and you look at the North-East, between 2008 and 2018 the manufacturing jobs declined from 153,000 to 129,500: a decline of 15.9%. The North-West declined from 438,000 to 344,000, a decline of over 90,000 jobs: a 21% decline. You have the same picture in Yorkshire and Humberside, East Midlands and West Midlands. Those jobs had declined because they were labour-intensive and had become uncompetitive globally in the face of developing countries with low wages. If you take the clothing industry, its employment in 1995 was 200,000 by 2015 it was 70,000. If you take leather goods, it dropped from 200,000 to 40,000. Machinery dropped from 400,000 to 250,000.
This was devastating to many northern Labour Party constituencies. This is important because the reason we have social distress is because of the decline of these industries in those areas and the only way you’ll reverse that is if you get new high value-added industries to go into those areas. To the extent that they have had jobs which have replaced old ones, they’ve tended to be low value-added service jobs like distribution centres or call centre jobs. The whole challenge is to get the new high value-added industries into those areas. Poor health conditions very clearly relate to declining economic areas; and almost certainly low levels of skill also result from having low value-added industries there.
To give you what is a classic case, a good place to look is Blackpool. Blackpool was the holiday resort of a lot of industrial workers. Then you move to the 1950s and you have the beginning of cheap air transport to holiday resorts in Spain. The British public decided it wasn’t much more expensive to go to Spain rather than Blackpool and you have the advantage that it was sunny and you could go out on the beach in the sun. It pretty much really killed off Blackpool as a great holiday resort. And if you look at Blackpool now, it has appalling health problems. They are the result of Blackpool’s decline and you won’t turn Blackpool round unless you get modern industries there.
I think there are a number of devolution issues that have become very important in helping particularly the mayors of Mayoral Combined Authorities start getting economic activity back into those areas and that really should be one of the main focuses of government policy.
Q: When you were at the DTI, what was the objective of regional policy?
Government policy was neither clear nor effective. There was a sense that there was a regional problem and an economic problem. But I don’t think it was understood to what extent this was about bringing new industries to these areas. The focus was on, ‘Can we have more R&D, can we improve skills and so on?’ We didn’t really understand that it was only going to change if you could really bring new industries in.
Q: Which of skills, R&D, transport and wider industrial strategy are the most important in driving up productivity explaining inadequate productivity?
This is something the Centre of Cities has done a lot of very good work on. If you’re going to have new high value-added jobs in cities, one of the things you need is very good transport within the city. You require skilled jobs and to get the skilled jobs you need to be able to draw on the whole of the city region to o ensure that people with reasonable ease can get into the jobs.
One of the biggest problems is the question of organising the transport within city regions. It is obviously important that spatial planning and transport planning are done in the same place. But spatial planning is with local authorities while transport policies are in Whitehall. It is absurd not to have these two critical policies done by one person at one level in government, because you need to link up transport and spatial planning. Where you put the housing relates to where you put the transport and that relates to where the factories are.
Q: What is the right level of local government to make these kinds of decisions?
The Mayoral Combined Authorities are a pretty good place to use for this because the city region is economically quite a coherent entity for these purposes. Spatial and transport planning should be brought together under the mayor for the whole city. The second policy area is technical education. But there is a major problem with the way we run it. It’s been appallingly underfunded for years and years and therefore most FE [further education] colleges are pretty much in survival mode. What they’re concerned about is not producing the skills needed by industry but simply financially being solvent. The way you do that is to run large courses which are cheap to run and are popular. You do not run courses which are expensive for rather smaller numbers of people. So we produce hundreds and hundreds of hairdressers. I think every year we produce as many hairdressers as there are hairdressers in the country and we don’t produce enough technicians.
We have in England just introduced a whole new effective system of technical education. We have a national system of qualifications with proper quality standards. This is a real opportunity to devolve to Mayoral Combined Authorities the funding for FE and say ‘It’s up to you to work with your FE colleges and industry to make certain that the colleges run courses which link up to the needs of industry’. That would be my second proposal. You can help enormously economic growth in the area by getting the organisation right and devolving the funds for FE.
The third area is R&D spending. As you’ll have seen from all the policy documents, that it is very skewed to the south of the country. The reason for this is historical. The original great universities were in the south of the country. The universities where you can see the spin-off companies coming from are also hugely skewed towards the south of the country.
The question is, how can you deal with that? This is a case where there is a very good scheme: the Strength in Places Fund. Cities can bid into this and say we have the beginning of a high-tech cluster in our city, and we want to put more money into university research to support that. If you look at the Industrial Revolution in England, it is all about clusters: steel in Sheffield, cotton in Manchester. The way you’re going to regenerate is by having new clusters.
The only other point I would like to make is that America has an almost identical problem. The American problem has a slightly different historical basis, which is that most of the manufacturing industry in America started in New England and the north. Then you had Eisenhower’s great road programmes and desegregation and a lot of the labour intensive, low value-added industry moved to the south of the country before then actually going offshore. You had in quite a lot of places in the north experience this kind of economic devastation. In the case of New England, Boston because of the university system and other things, [it] was able to reinvent itself but many cities did not.
Q: What is the evidence that devolving decision-making is important as opposed to central government simply targeting resources in the right places across the country?
People sitting in Whitehall will have no idea what is going on the city level. The idea that someone in Whitehall is able to focus on the transport problems of, say, Manchester or Birmingham, and understand how that links into the spatial issues, or where you want to put industry, is unreal. Equally, someone sitting in Whitehall trying to say which courses should be taught in which Manchester FE colleges to meet the industry needs in Manchester is nonsensical. There’s no way that happens.
Q: How confident are you that the capacity exists at the local or sub-regional level to make those decisions better?
The answer is probably at the moment it isn’t very good. But the answer to that question is look at which European cities do this well and how they do it. It probably won’t happen spontaneously, but it’s a perfectly solvable organisational problem.
Q: What do you think about trying to have a comprehensive approach to combined authorities versus the current voluntarist model?
I think this is one of the areas where the government has got it right, which is that you start with the Mayoral Combined Authorities and try and get that right and then you do other deals outside the city regions. You have what I think they’re calling County Deals. We have this two-tier system across the whole of local government, across the whole country, which is extremely dysfunctional. So saying we’ll have Mayoral Combined Authorities and then county deals for other areas is very sensible.
Q: How do you think about the links between towns and cities?
Realistically, you’re not going to get the new industries springing up in the smaller towns. The role of the smaller town will increasingly be as feeder towns into the bigger cities. There’s quite a lot of examples of where you have towns which are quite prosperous, but they’re prosperous because they are feeding to cities. I think Abingdon is an example, which is quite prosperous but it’s prosperous because it’s a feeder town to Oxford. What you need to do is get the transport links right between the towns and the cities.
Q: Why has Whitehall been so reluctant to devolve economic decision making?
You always have people protecting their jobs who resist if you say, look, we’re going to take this away from the Department of Education (‘DfE’) and devolve it. You need to think about what you devolve because the discussion of devolving fiscal and tax issues is a huge other question and if you’re not careful that devours and stops anything else. This is about devolving things which are better done by people working together at a local level. You won’t get the DTI and DfE coming together to make sensible policies about how you organise courses for people in Manchester as between the different FE colleges. It just won’t work like that.
Q: How do you think about the role of London relative to the rest of England?
As a whole it’s irrelevant. London has done very well, mainly because it is the centre of our financial organisations, legal work, management consulting, and other things. By devolving the things I have mentioned you don’t harm London and you help the other areas. I don’t think it’s a question of taking jobs from London to these other areas. However, the distribution of university R&D spending, and transport spending has been quite London and South East biased over the last 30 years.
Q: What’s your overall assessment of progress in this area over the past 40 years, the key successes and frustrations?
I don’t think there are many successes. It’s all about frustrations. If you look at the solutions I’ve been talking about, which are basically about devolution, the one thing that has been very good has been the setting-up of the Mayoral Combined Authorities. That was a real step forward and we should build on that. Other than that, I think it’s a pretty bleak performance in terms of what has been done. We need really to build a lot on those Mayoral Combined Authorities and then extend that model across the country through county deals.
In terms of comparisons with America, one interesting question is why Boston has done so well and, say, Detroit done so badly? Ford never provided Detroit with a university. That was the first thing. Second, it’s very bad to have a single-industry city because what you do is you kill off all kinds of entrepreneurial activity because sons follow their father into whatever industry it is, they don’t go and set up a small business. So a spread of industries is good.
If you want to see that in practice, a very interesting thing to look at in the UK is Bradford vs Leeds which are only a few miles apart. Bradford was always a one product city. Leeds always had a more variegated base. It’s richer than Bradford. That’s because it’s got, for example, financial services. It’s got printing. It has had a clothing industry rather than the textile industry. It has now got a bit of a medical industry. The comparison of the two really exemplifies everything I’ve been saying.
ENDS