If you’ve heard the word “securonomics” at all, it has probably been with a disdainful sneer in a parliamentary sketch.
Rachel Reeves – the women who is likely to be our next chancellor of the exchequer, and – indeed – the first woman to hold that role, is keen to be taken seriously by the financial establishment. An economist by background (a Masters at LSE), with experience at the Bank of England and HSBC, she deserves to be.
She used her recent Mais lecture to spell out a little more of how a Labour administration would think about public finances differently. There are important implications for public services. And a strange word with a lot of thought behind it.
The meaning of securonomics
That securonomics buzzword underpins what Reeves sees as a UK version of an emergent economic consensus. In the US, the term is “modern supply-side economics”, and is closely associated with the Biden administration.
She characterises it as:
providing the platform from which to take risks; not to retreat from an uncertain future, but to embrace change and the opportunities it brings with clarity of purpose and stability of direction
Despite this being a change in the global trend, these ideas are positioned firmly as post-globalisation – fit for a world where geopolitical stability is a thing of the past. For a firmly globalised sector like higher education, the assumptions that have driven the past decades – international collaboration and recruitment, science as an open global project – similarly feel like they don’t hold in 2024, as much as we may wish that they did.
Securonomics can also be seen (though I doubt Reeves would put it quite like this) as a refocusing on the nation state as a unit of analysis. National systems, national productivity, indeed national infrastructure, is seen as ever more important. Though she carefully distances her ideas from calls to
embrace protectionism and to retreat from the world
There is a sense in which the needs and strengths of the UK should be paramount in all international engagement – be that trade, political collaboration, or cultural interactions – and that issues with the wilder excesses of globalisation should be swiftly and fairly addressed. It is a protection from the wilder impacts of global instability for key elements of national infrastructure – not, as Reeves is keen to emphasise, a retreat from global action.
I also want to note Reeves’ position on state intervention – though we’ve heard the old saw about partnership with the private sector and the state only intervening in markets when they fail to deliver before, the parallel emphasis on a jointly-owned and data-informed industrial strategy is new:
Accepting that a country the size of Britain cannot excel at everything. Acknowledging those sectors in which we enjoy – or have the potential to enjoy – comparative advantage and can compete in a global marketplace; those sectors where strategic concerns might shape our approach; and those sectors where we must rely on others.
Conditions for growth
In England the last decade and a half has been the aftermath of a political decision to see higher education as a recurrent cost centre, and an experiment in assigning large parts of these costs to individuals in an expectation of individual future benefits. This may have been a reasonable (if ideologically contested) plan in 2012, but the way it relies on a stable global economy (most capital investment in the sector has been borrowing sourced from overseas, huge chunks of recurrent funding come from international recruitment) and a predictable return on investment in personal skills makes it unfit for 2024 and beyond.
Reeves talks a lot about the role of institutions (more generally) and of infrastructure in providing the secure and reliable substrate that can drive innovation and growth. The idea of both public and private input into targeted investment plans (including a National Wealth Fund), via a strategic and selective industrial strategy. is a powerful one.
Institutions and infrastructures need longer term thinking about funding and investment – the proposed end of one and three-year investment cycles in research and development funding will be widely welcomed.
But for me the section on planning – and a promise of the rethink of the Nationally Significant Infrastructure regime and the National Policy Statements that underpin it – is surprisingly interesting. In the past, nationally significant infrastructure thinking has been focused on energy, transport, water, and waste: the baseline requirements for a modern competitive economy. If you were going to build a national hierarchy of needs these key substrates would underpin everything – and correspondingly, the planning and funding priorities of the government are predisposed to favour the expansion and security of this vital infrastructure.
There’s a bunch of things missing that have a similar feel: public/private collaborations that underpin any chance we have for innovation and growth. For example, in 2024 it seems odd that we don’t have a statement on connectivity – just about any business, of any size, relies on a fast and reliable connection to the internet. The much derided 2019 Labour manifesto idea of a nationalised internet provider made a lot of sense, as we still struggle to connect isolated rural cold spots and update creaking copper-based systems in towns and cities.
And the emphasis purely on planning consent rather than active involvement with design and funding is curious. Nuclear power stations and airports, it turns out, don’t just happen without significant government involvement and the use of public funds to leverage private investment. The government is already involved, but not in predictable or consistent ways. Infrastructure investment and support is shaped by political whim and special pleading. We could do better at joining this all together – a rethink of the planning infrastructure demonstrates how this might happen.
Innovation infrastructure
What I want to focus on is the argument for a national skills and innovation structure – within which universities and other providers would play a central part while remaining, in common with players in other nationally significant infrastructures, a diverse and independent sector.
We need skills and research as a pre-condition of productivity and growth – indeed, most of the growth we have seen in this last Lost Decade has come from productivity gains driven by a better trained and better qualified workforce. Research is a pre-condition for the kind of technical and systems innovation that has driven the remainder.
What has been missing from the productivity equation is strategic and sustained investment – the kind of capital that the government has historically been able to borrow cheaply via the gilts market, and that the availability of a skilled workforce and strong research base can bring in from overseas.
Recent thinking on place and the civic mission has highlighted the local and regional impact of the sector, a renewed focus on technology and innovation as a driver of national growth highlights again the contribution of the UK’s universities.
Making the survival of nodes within this national infrastructure (and thus the integrity and power of the entire network) subject to the vagaries of politics and the collective decision making of school leavers is not, in this calculus, just bad decision making – it recklessly endangers future growth.
All of this needs sustainability, and security, to work. Securonomics if you will.
Universities need to be “just there”
Reeves delivered her speech from the Bayes Business School at City, University of London. The Mais lecture series has seen politicians and economists of all persuasions step up to deliver a set piece since it kicked off in 1978 – she was only the second woman to be invited (the first was Anneliese Dodds in 2021). Bayes, and City, have the space, credibility, and capacity to pull this kind of thing off on an annual basis.
We already think of the higher education system as infrastructure in that we just expect it to be there. Need skilled staff to deliver public services or drive commercial profit? Universities train them. Need cutting edge research? Universities do it. A thriving world class export business? Who else. Need a contribution to local civic life? Again.
The trouble is, we fund it like a cost centre – where the funds needed to run it need to be recouped in the medium term from directly derived benefits All the while the indirect benefits, for the wider economy and society, are poorly understood. I’ve made enough noise recently about the interface between universities and the public sector for most to be aware that neither side of the equation there is holding up. The direct benefits of training to be a teacher, nurse, paramedic, or social worker are limited to an extent that the roles themselves become unattractive, and thus the ability to deliver the indirect benefits (say, of a working system of health and social care) is severely affected. And providers, like the Cathedrals Group, that offer students the skills and ethos that public service demands, are correspondingly struggling.
The security a change like this would bring for university staff dovetails nicely with Reeves’ focus on workers rights. Universities should be a good place to work – stability and reliability allows for more risks to be taken and thus (likely) more innovation to be supported. If economy-wide financial pressures lead to the need to cut costs in higher education providers, and the only costs of note are staff costs, then this degrades the quality of employment as well as the quality of the infrastructure overall.
A straight shift from a by student or by project mode of funding to one where we just assume we like higher education providers and would like to use state funding in order keep them is maybe an edge case for the ten year timeframe Labour is currently thinking about.
But we are long overdue a consideration of Reeves’ pet themes of security and consistency in funding universities – as a national skills and innovation infrastructure.
