Stephen Haddrill began his career as a civil servant in 1978 in the Department of Energy and subsequently working in the Department for Trade and Industry and Trade, as well in the Governor’s Central Policy Unit in Hong Kong between 1990-1994. He was the Chief Executive Officer of the Financial Reporting Council between 2009 and 2018.
This interview was conducted on 5 November 2021.
Q: Would you tell us a about your role in growth and regional policy and your assessment of those policies over the past few decades, highlighting key successes and frustrations?
I started my civil service career in the Department of Energy in 1978, when Tony Benn was Secretary of State, but the election followed pretty quickly after that. I stayed in energy and I worked for the Minister of State, Hamish Gray, and others on oil policy. That was very much about developing the North Sea and bringing prosperity to Scotland in particular. After that, I worked for some years on nuclear power matters, particularly the decision to build the Sizewell power station; and then looking at the finances of Sellafield, which was very much in a deprived area – the area immediately around it was prosperous but the North West as a whole was not. Then I went to Hong Kong for four years, so I wasn’t around between 1990 and 1994. When I came back, the government had developed an approach to industrial policy, really, the competitiveness approach. I worked quite closely to Michael Heseltine on that between 1994 and 1997, then Margaret Beckett and then Peter Mandelson kept it going. It wasn’t the same, but the idea – that we would benchmark ourselves internationally and between regions – was at the heart of that policy prescription. I thought it was a powerful thing to do. And you think, why haven’t government done it before? Maybe we’d just been too introspective before then.
I worked on that until the end of 1998 and then I changed direction and had a series of more regulatory jobs. Working first on consumer affairs, then employment policy and then employment law. Then I took on the whole of the DTI [Department of Trade and Industry] main regulatory framework, the rest of it as well, trade and so on.
Looking back on it, where I think there was the most opportunity to make an impact was in that competitiveness period. Throughout the mid and late 1990s. I thought Heseltine, in particular, did a good job in trying to identify the strengths and weaknesses of different regions with a particular focus on Liverpool. It was quite evidence-based, evidence-driven. The idea was to have a much more coordinated approach region by region. So the government offices in each region which had been split – there was a government office for employment, there was a government office for industry, there were about four of them – the idea was to bring those together into the government regional offices, which seemed to me to be a sensible thing to do, but at the same time to bring business much more into the game.
We had the Technical and Enterprise Councils (‘TECs’), for example, which had a large business representation on them, some private money as well as public money, to look at the strategic educational skills needs in each region. Skills is a big issue in some regions. That was developed further with the Business Links network and so on.
The idea of ‘challenge funding’: we had the City Challenge, initially, at the beginning of the 1990s, and then that developed further with other challenge funds, both regional funds and sectoral funds. The concept of all that was quite strong, but the way it played out was not quite so good, frankly. Because it just got too complicated, you had funds for regions, you had funds with sectors, they never seemed to meet in the middle. You had enormous numbers of public-private partnerships forming in different shapes. I remember going to Nottingham once and talking to the local authority, who were part of one partnership and quite a big player, obviously in regional partnership. They said they were involved in 100 different partnerships of one sort or another. Any sense of leadership and drive to solve the key strategic problems just got dissipated behind so many different particular enthusiasms, and that undermined that programme.
It was an attempt to merge a regional focus with competition for money. I just think that we didn’t find a way of making the two work together very effectively. The one thing I would say that I think did work well for the UK, which started earlier, was the whole inward investment drive. And I think that worked partly because we got the cash coming in, the jobs being created, but also the transfer of management skill, which I think was a real weakness in the UK economy. The import of skills from Germany and elsewhere, Japan was really vital. We ended up with the UK being the biggest inward recipient of inward investment in Europe and being incredibly successful. So there were successes, but I think what I said about perhaps the programme as a whole was it never really got to the heart of what it should focus on.
Q: What were the overall policy goal during that competitiveness era for regional outcomes? And what were the successes on inward investment that spilled out beyond London and the South East?
It definitely was successful because Nissan was in the North East and Toyota in Derby and Honda down in Swindon. For the motor industry, I guess that was the flagship and that was successful. A lot of the inward investment did end up in London and in financial services. I wouldn’t say that was a bad thing because financial services, throughout the reforms of the 1980s, was a real driver of growth. It went wrong eventually. As to the goals of regional policy, the government now talks about Levelling Up. I don’t think it was really about Levelling Up, it was about bringing prosperity to each region and being able to see that there was a greater equality in terms of income and employment. The historical background was the early 1980s recession, which destroyed so much of manufacturing and left some really big holes. It was very much in the government’s mind to correct that, and fair to say that they caused it to some extent in the first place. So it was to address that, to make sure that there was a dynamic economy in each region, that they were improving and that their weaknesses – and there was quite a lot of benchmarking that went on – their weaknesses were being addressed. Skills weaknesses or innovation weaknesses or transport weaknesses were addressed. I think the goals were okay. I just think the implementation of policy didn’t follow on from it effectively.
Q: You were intimately involved after 1997 in the development of Regional Development Agencies. Do you think that the RDAs [Regional Development Agencies] aided or further complicated that delivery?
I think it was a good thing. The Government Offices, although they’d been brought together, were frankly still rather stuffy institutions. They were still rather old civil service driven, stuck together and the cultures were different. The employment department culture was quite different from the business culture. Progress was being made in the 1990s, but it was slow and I think it needed more of a shake-up. I think the development of the regions was a good thing. The TECs I thought were quite a good idea because that whole skills agenda needed a particular focus of its own. They disappeared, of course. I did get the feeling that some of the focus came off skills at that point. We’ve said exactly the same thing about the shortage of skills in the British economy for decades, and we’ve had various attempts to solve it, and we have not solved it. We’re saying the same thing now as we said back then in the 80s or 90s. None of these institutions really seem to me to have completely cracked that problem.
The RDAs, the Business Links disappeared. They weren’t doing everything they wanted to, but there was a lot of institutional change. One thing worth looking at is whether that disruption was wholly for the good? Or was there just a waste of effort? What struck me in the earlier period was just how hard people at local level were working for the good of their community, but how entangled they got in interagency warfare. Changing the agencies might have been part of the solution, but I don’t think it was a complete solution, and it probably just led to other fights breaking out.
I remember going up to Aberdeen, which was relatively successful, and having a discussion about investment across Scotland. The Aberdeen contingent were bitterly opposed to the level of government money that was going into Glasgow. It’s just pure kind of pork-barrel politics but it was a Conservative-led local authority in Aberdeen not wanting to have a penny spent in Labour Glasgow. There was a lot of that. Even when I went on to consumer affairs, everyone in Birmingham and the West Midlands agreed that there should be a joined-up approach to trading standards. There were six Conservative local authorities around the outer rim of Birmingham who decided to join and then Birmingham City Council refused to join. So we had this doughnut shaped partnership on trading standards. It’s quite frustrating because it wasn’t a particularly political hot potato. But there we are. That’s democracy, I guess. I shouldn’t really complain about it too much.
Q: You said that at a local level there was significant energy and enthusiasm and hard work. Are you reflecting there on the divide between officials, their capacity, and the political side?
Not really, I’m talking about some of the non-official organisations, groups that were partly funded by local government, groups that had some sectoral private money involved in them and so on. There was a lot of activity going on. I think what I was concerned about was that, particularly in that period before the RDAs come in, it wasn’t particularly focused. It should have been focused because there was a mechanism in place to focus it. You do the analysis of what the region needs and then that focuses things. But it didn’t work out that way because there was this focus on: here’s a pot of money, now compete for it. The sense of focus on what you really needed to do for Birmingham or Liverpool got lost in that competitive spirit; what then came about was everyone coming up with relatively small schemes, which might have benefited their town but didn’t really have much impact. I think a lot of impact was dissipated. Now where you’ve got a strong political lead, it could overcome that. That’s why I found Heseltine’s enthusiasm for this kind of competition – not competitiveness, but the competitive environment for funding – rather strange, because it really wasn’t his approach in Liverpool. His approach in Liverpool was to work out himself what he thought they needed and to make sure that that’s what they got. I think we sort of lurched in the opposite direction.
I also wasn’t convinced that the other part of DTI – a big part of DTI has regional factors, you also have sectoral teams, the car industry, whatever – I think they weren’t good enough, frankly. I don’t think they had enough real insight into what was going on in their industries. They tended to believe what they heard at the last lunch. I can remember senior people telling me what a tremendous success story was going on in Rover, not long before it completely went down the swanny. Can that have been good intelligence?
Q: How do you square that with your earlier point around the success of inward investment into the motor industry?
I think it was largely led from a different perspective, that inward investment, by the regional partnership network. There were agencies focused purely on getting money in and getting firms in. There was a lot of political clout that went on, particularly to get the car industry. [Thatcher?] herself put quite a lot of effort into that. I think that was quite successful. I was talking more about the kind of the central sectoral teams. I think if you look at DTI in that period, the regional stuff went on in one place and the sectoral stuff in another. I just don’t think it was well enough joined-up. Then there was another cut on it, big sectoral and small business sectoral. We had this complicated Venn diagram rather than a sufficient level of focus on what was the key thing to achieve.
Q: When you go back to that period pre-1997, how much did it feel that this was an agenda involving the Prime Minister, the Treasury, the whole of government, as opposed to something Michael Heseltine did?
Michael Heseltine, particularly once he was Deputy Prime Minister as well as President of the Board of Trade, very much stamped his own mark on that programme. He was really leading it. John Major backed him pretty strongly. The Treasury was kind of okay with it. Where the problems arose was with some of the other departments where the objective of growth through economic regeneration was not central to their remit. Heseltine struggled to get the Education department on board, I don’t think Gillian Shephard, for example, was interested in at all really. [Heseltine] struggled with employment, until he got some of employment put into DTI. As a result, some of the individual departments didn’t necessarily play ball and of course some of those were crucial – education was crucial to regional development.
Q: How does that change in 1997 – did you still have a united centre with the DTI, but other departments recalcitrant?
The centre of gravity changed from the DTI and the Cabinet Office, where Heseltine was, to the Treasury because of Gordon Brown and his strength there. DTI became much more of a second fiddle, really. That was the change I felt most strongly, as we were there to develop Gordon’s agenda from there.
Q: And does that change the DTI’s commitment to this agenda?
I think DTI became more sectorally focused. I think they felt ‘What do we bring to the party? We bring our regular engagement with big business and to some extent smaller businesses. The Treasury doesn’t do that in depth.’ I think it also started to focus rather unhealthily on how much money it could squeeze out of the Treasury. There’s always a risk that the relationship between a department and the Treasury is going to come down to the annual battle over the bucks, and, frankly, DTI played games. The Treasury may have been playing games as well, but it became a bit of a game, the annual spending round, where it was about how much money could you get out of Treasury rather than what the hell are you were going to do with it.
Q: At that time on the competition and regulatory side, there was a lot of alignment and it wasn’t fundamentally about money?
We didn’t need money. We had the law. But there wasn’t a huge alignment between the regulatory side of DTI and the so-called business focussed side of DTI. What DTI officials didn’t like then – I can’t speak for ministers, because I don’t think ministers are in the same place – but what officials didn’t like was having to go into a meeting with the CBI and defend the national minimum wage, for example. When what they wanted was a cosy chat about another scheme for innovation. They just thought they got it in the neck about regulatory policy, and they didn’t like that. They really didn’t want anything to do with it. That was the thing I found myself struggling with quite a lot.
Q: Was the Treasury under Gordon Brown keener on talking about regional policy than Ken Clarke?
Yes. I wouldn’t say that the Treasury was an obstacle to what Heseltine was wanting to do, but neither of them frankly were really powerful Chancellors bestriding Whitehall in the way that we got after 1997.
Q: You said in the Heseltine period it was basically about central pots which were given out to different partnerships, regionally or locally. Would you call it devolutionary?
No, I don’t think so. I think it’s just I would just call it messy, frankly. The pot was central. But I think it lost something in terms of direction as it got allocated. The high-level objectives of these pots of money tended to allow people to bid for almost any project.
Q: Did Whitehall speak with one voice point when it came to attitudes to regional development and devolution?
I don’t think there is such a thing as a Whitehall view. I don’t think there was then, and I suspect there isn’t now, I don’t know. I didn’t feel that there was a Whitehall view, no. There’s always been more of a Whitehall view in the ministerial sense. There are obvious tensions, different sides of the party, whatever party you’re talking about. At the end of the day, ministers are more likely to have a coherent view of things than the departments underneath them. I think if there were any cracks at a political level, the departments – I’m grossly generalising here – would tend to latch onto those and magnify them. If anything, they saw advantage in it.
Q: You described Gillian Shephard’s disinterest in regional or local outcomes in the use of the adult skills budget. Was that particular to education?
I might be stretching too far here, but I think the 1980s experience created a toughness in Whitehall, which was ‘We’re not here to care about localities’ – because the mines had to close, the unions had to be broken. ‘We’re not here to worry about the fact that there are pockets of real deprivation as a result in this town because if we worry about those things, we’re never going to get the job done are we? We’re never going to break the unions; we’re never going to close their mines.’ I think there was a cruelty almost in that period that dissipated a bit under the John Major government. It was not strong but it was in the culture. And then it changed of course. Heseltine wasn’t like that. There were one or two other ministers who weren’t like that. But part of the problem in the 1990s was a reflection of the single-mindedness of the 1980s.
Q: There were attempts to create more regional accountabilities or scrutiny mechanisms or to join things up above the local level, from the government offices into the RDAs and then into the current set of arrangements. What was the relevance of the Government Offices?
I think for quite a while they tacked together chunks of the departments that contributed to them, rather than becoming strategically joined-up organisations. Second, Whitehall at that time, and probably still does to some extent, had a lot of barons in it. The heads of the government offices were barons. They had mini-barons underneath the barons and they were all competing for cash. I feel that there was too much focus on that and I mentioned it earlier between DTI and the Treasury. There was this constant working out about how the success of the department was going to be measured by: getting the Treasury to unlock the coffers, give it some cash, have another scheme, do whatever, be able to tell British Aerospace that they were going to get a certain amount of money. Whereas regional policy I think requires two things, firstly it requires a real focus on what the problems of the region are, then a consistent and steady application of effort to solving those problems. It’s not going to happen in a year, in three years. It may happen in ten. I think there was too much short-term focus within the Government Offices. That’s what I felt at the time.
Q: When you were working on this policy, what would success have looked like?
Japan was a place to learn from in terms of managing big organisations. I remember going with Margaret Beckett to Toyota in Derby. The general manager, who was Japanese, had in his contract that he had to spend a third of every working day walking the floor, the production line. You did not hear that at Rover. Another example: Longbridge was building the Rover 600 Series, Swindon was building the Honda Accord. They were identical cars on identical lines. Both Honda plants started off by benchmarking themselves against each other. They quickly gave it up at Longbridge because it was such a miserable set of results at the end of every week. There was a feeling that British management had got a lot to learn, whether from them or from Germany, much less so from the United States. The US was much more about innovation and the enterprise culture. On that inward investment we learned there were things to learn and we expected Britain to pick up on that. I think it did, frankly.
Q: To what extent did London help or hinder the other regions of the country?
It was something to applaud. I remember writing a chapter about London in one of the competitiveness white papers. Heseltine felt that we couldn’t just go on about the regions, we had to recognise that London was a great strength in the British economy. It’s right in many respects. I don’t think in terms of policymaking that it did get in the way. I’m not sure it contributed a great deal but if I could go back to thinking about DTI, one of the things I was concerned about was that there was an insufficient focus in the DTI on the City. We left the City to the Treasury but I think we should have been engaging more with the City.
Q: It was obvious in the 1990s that there was a divide between London and the rest of the UK, are you surprised by the extent to which that divide has accelerated?
No. Because it’s just a money magnet. That was happening then, it was growing very strongly, very powerfully. But I don’t know that we saw London as just a great jewel in the crown. We were very aware of some of the problems in London, just as in the regulatory work I was doing on the minimum wage or on consumer policy. Southwark is one of the poorest boroughs in the country, we were quite conscious of that. I suppose the wealth was seen as being very much a City-Westminster thing rather than London as a whole.
I don’t think the whole apparatus of government that was looking at the regions was in any way dazzled by London or distracted by London. If anything, there wasn’t enough attention paid to what we could get out of London and spread elsewhere. When you think about it, ministers came from all over and had all sorts of perspective.
Q: In terms of the levers used in the competitiveness agenda, this heavily emphasised business support and innovation skills and infrastructure in particular. Is that the right policy bundle or are we missing important levers?
The bit that was missing in either employment or education was a willingness to engage properly with business, and think about what business might contribute, and how business could be helped. We had mechanisms to create that engagement. But it didn’t come naturally. A bit more naturally in transport, but that was the thing that got missed as a result. Whether it’s still the case or not, I don’t know. I would suspect not, things have moved on. I had plenty of friends in the Department of Employment, for example, based in Sheffield. A lot of people came from that part of the country. They weren’t bought into the Conservative agenda particularly. I don’t think they felt that business was part of the answer. I think they felt maybe government intervention was part of the answer. But they didn’t really see the connection with business in achieving government ends. I was quite conscious in 1997 when the Labour Party came into power, it was a surprise to much of Whitehall, we didn’t kind of quite appreciate how the agenda was going to work. I think there are a lot of people who felt that we were going to go back 15 years earlier or the 1970s or whatever. That isn’t what it was about. It was a new balance in policy.
There are always going to be little things that can be interpreted as part of an old-fashioned agenda – you remember the Trawler men’s compensation scheme? That was a Department of Employment thing, it fell in 1979 but John Prescott revived it in 1997, to compensate Trawler men who’d lost their incomes through the Cod War with Iceland. I can remember people saying, ‘Well, how’s that Blairite?’
Q: The agenda has developed over the past decade towards mayors and combined authorities, is that a step forward?
I do think it’s a step forward. Heseltine wasn’t the mayor of Liverpool, but some of the success happened because he was a strong figure in an area and was willing to do his best to make things happen. Having a mayor who can do that – I see it in Manchester and some other places. it hasn’t worked well everywhere, but I think the potential is there. I think that was a good step forward. The pan-regional approach of the Northern Partnership is good, again not totally successful. But these things are never going to be totally successful. Apart from anything else, that cuts across the baronies. Whatever aspect of government you’re talking about, baronies of officials are bad things. They can exist at the regional level just as much as a professional level.
ENDS