Industrial Policy

Abstract

This article looks at the economic and political history of industrial policy under the Labour government of 1997–2010. The theoretical debate over industrial policy goes back to the 19th century, but the Labour government used neo-classical economic theory to justify state intervention in the market. It was also heavily influenced by European policy, including the Lisbon Agenda. While New Labour continued to favour some industries, there was no industrial policy as such. Instead, the government used tax revenues to create public jobs and jobs dependent on public sector spending. While the economic crisis and the change of administration will remove many of the distortions of this policy, the challenge is to create a new approach to economic revival in less prosperous regions of the UK.