The long-term challenges facing the UK – low productivity, increasing inequality, declining trust in politics – are all closely linked to the knowledge economy. To address them, the next government needs to change how the knowledge economy works – building an inclusive economy, preparing people for the future and transforming democracy, in particular by giving more people the power to shape the direction that new technologies and innovations take.

Labour’s manifesto sets out a vision for change, promising to ‘rewrite the rules of the economy so that it works for everyone’, and committing to significant investment to improve public services. It makes wide-ranging proposals to create a more ‘democratic’ economy, for example by promoting employee ownership, and making a strong commitment to rebalance the economy across different parts of the country.

Innovation has a lower profile than it does in the Liberal Democrats’ manifesto, although Labour sees it as important in delivering what it calls a ‘Green Industrial Revolution’. The party devotes considerable attention to the future of work and to promoting lifelong learning. The manifesto has little to say however about the impact of technology on society, and in particular about how the public might influence the directions that technology and innovation take.

R&D spending and innovation

Labour’s headline policy for economic transformation is the ‘Green Industrial Revolution’, which it claims will create one million new jobs while achieving substantial emissions reductions by 2030. The manifesto promises significant investment including a new National Transformation Fund and National Investment Bank to provide lending for enterprise, infrastructure and innovation.

Labour’s commitments on innovation are framed in the context of the ‘Green Industrial Revolution’. Like the other main UK parties, Labour want to increase the UK’s research and development (R&D) intensity, and has set a target of 3% of GDP to be spent on R&D by 2030. They say this will be achieved by ‘increasing direct support for R&D and reforming the innovation ecosystem to better crowd in ‘private investment’ but gives little detail about what this will mean in practice. As set out in Nesta’s Fuelling the Future series, we believe the next government needs to rethink how those increases in R&D investment should be allocated.

We advocate increasing mission-based R&D while giving people a say in how challenges are chosen. Labour’s manifesto alludes to mission-oriented approaches, committing to ‘targeted science, research and innovation’ to address the climate crisis and ‘other societal challenges’. But overall it has relatively little to say about innovation and the role it can play in economic transformation, nor does it consider the potential of innovation to address inequalities.

In contrast with its commitment to increase R&D spending, Labour's proposal to phase out large corporation R&D tax credits sets them apart from the Conservatives (who have committed to increasing them) and the Liberal Democrats (who pledged to expand their scope). Though there is evidence for the effectiveness of R&D tax credits, we believe they could be better targeted and accessed and we have concerns over the potential for waste, fraud and error. In addition, Labour’s move may negatively impact inward R&D investment, an area in which the UK performs comparatively well. As long as tax credits are replaced with other support for innovation this risk can be reduced, so we believe that Labour should present its move on tax credits within an overall strategy for R&D and innovation.

Decentralisation and rebalancing the economy

Labour’s manifesto makes some suggestions for how the party would deliver radical reform of the way public funding is currently distributed across the country, calling for ‘decentralisation of power in Britain so that local people and communities are given far greater control over their own lives and prospects’. There are some promising proposals in the manifesto which support the agenda we set out: a Local Transformation Fund in each English region; Regional Development banks to fund businesses with priorities set at and accountable to a local level; reinstating regional Government Offices (abolished in 2010); and moving part of the Treasury to the North. Nesta believes that funding for R&D and innovation should be high up the priority list for what these new institutions should focus on, but done well (and if duplication and waste are avoided) these proposals could have a transformative effect on parts of the UK.

The crucial aspect of this is how changes to the ‘machinery of government’ are connected to delivering the economic vision that Labour set out; in particular how places around the country contribute and benefit from the ‘Green Industrial Revolution’, the jobs that this could create and the skills needed by people to do these jobs: in short, how to effectively capitalise on this more devolved and holistic approach to the future development of cities and regions. There’s no proven formula or answer to this, suggesting that any new government should test and experiment with new approaches - Nesta’s work on ‘real world’ innovation testbeds highlights these, for example, as a useful tool for local and regional development.

Similarly, Nesta would welcome more detail on the commitment to ‘put British innovation at the heart of our procurement’, including how this may be achieved and how it will be reconciled with the proposed ‘presumption in favour of insourcing’. Whilst we agree that public procurement can potentially be used more effectively to stimulate innovative businesses, including startups, this is made difficult by the risk-aversion of many public bodies.

Spreading ownership and access to resources

Labour’s manifesto includes several proposals to more directly expand access to, and control over, productive resources. Some of the proposals are in line with ideas Nesta has explored around widening access to capital and democratising existing economic institutions.

For example, one idea we have previously set out is the potential for wider distribution of control within firms as a means of spreading the benefits of the knowledge economy. Labour will require one third of company boards to be reserved for elected worker-directors, and for large companies to set up ‘inclusive ownership funds’; this could constitute a significant shift in this direction. More detail about how this scheme would work would be welcome, along with proposals to pilot such a scheme before a universal rollout.

Meanwhile, plans to create a Post Bank to provide small loans to fund ‘start-ups, small businesses, local co-operatives and community projects in towns and villages up and down the country’ could potentially improve access to finance for some groups. However, as we detailed in our Paths to Scale and Motivations to Scale reports, it is important to address the demand for growth finance as well as the supply of finance itself. Additionally, as well as public provision of capital, we would have welcomed plans to cultivate other alternatives, such as mutuals, peer to peer lending and crowdfunding, as well as other innovations that have emerged over the past decade.

Labour grabbed headlines recently by announcing a plan to bring parts of BT into public ownership and offer everyone in the UK free access to full-fibre broadband by 2030. We welcome Labour’s commitment to a ‘world-class digital infrastructure’ across the UK, given the internet is a key productive resource in a knowledge economy and we have argued previously that delays in the roll-out of rural broadband threaten to further exclude rural communities. But there are a number of other ways in which this could be achieved, for example by supporting innovative, community-led projects like Broadband for the Rural North (B4RN) in Arkholme, which have demonstrated that it is possible to deploy super-fast fibre broadband to rural areas relatively inexpensively. We also caution that the benefits of digital infrastructure are unlikely to be fully captured by businesses or individuals unless this is accompanied by the provision of appropriate digital skills training.

Technology and its impact on society

Labour’s manifesto is largely silent on issues relating to emerging technologies, digitisation, artificial intelligence and data. Unlike the Liberal Democrats, they say nothing about ownership of personal data. Similarly, there is very little in the manifesto about how societal issues relating to emerging technologies might be addressed, apart from a commitment to ‘enforce a legal duty of care to protect our children online, impose fines on companies that fail on online abuse and empower the public with a Charter of Digital Rights’. As it stands, we feel that this is a significant missed opportunity.

We would welcome more detail about the proposal to introduce a legal duty of care to protect our children online, specifically around the scope of harms considered and mechanisms of enforcement. Whilst it is important that children should not be discouraged from digital innovation and online activity by potential online harms, this should be appropriately balanced with additional requirements placed on digital businesses and additional personal data being collected.

Education and the school curriculum

Labour’s manifesto sticks with its 2017 commitment to ‘create a National Education Service’, and the party promises boosts to school funding and more access to education at every stage of life, including for early years, further education and lifelong learning.

In Labour’s proposals for schools, the party takes some steps towards a broader curriculum with more space for creativity. The manifesto rightly points out that subjects such as art and music have been squeezed from the curriculum and have responded to the Nesta-led PEC’s call for investment in ‘creative skills’, pledging an arts pupil premium to every primary school in England.

However, while Labour raises concerns about ‘intensified testing’ and league tables, and confirms the policy of scrapping KS1and KS2 SATs along with the baseline assessment, secondary education is neglected. Given the strong influence that assessment at 16 years and the EBacc as a school performance measure has on the subjects taught in schools, we would like to see the next Government undertake a serious review of KS4 assessment and how it impacts on the breadth of curriculum studied. There is a missed opportunity to also focus on wider skills. Our research has shown that skills such as creativity, problem solving and critical thinking, as well as social and emotional skills, are essential. The proposed curriculum review lacks detail of how these important skills, alongside a broad knowledge base, will be part of the future curriculum or included in post-16 education.

Teachers and schools

The Labour manifesto pledges to ‘fund more non-contact time for teachers to prepare and plan’ to help reduce teacher workload. Technology has a key role to play in supporting teaching and learning, particularly in tackling workload and reducing administrative tasks, and any future government should invest in high quality technology for schools and colleges, as well as in the infrastructure and training to support its implementation. Crucial to supporting schools to make more effective use of technology is an improvement in the technology itself and also work to build the evidence base for what works.

Labour’s proposals to foster regional coordination between schools and peer-to-peer school improvement models are also welcome, although there is little detail given on who will be responsible for this coordination. Regional disparities in education are serious. The Social Mobility Commission reported in 2017 that ‘disadvantaged children in the North of England have substantially poorer access to quality secondary schools than in other English regions’. We have seen in our own research that children in the South of England are twice as likely to have opportunities to take part in invention schemes as those in the Midlands, and 1.6 times as likely as those in the North. An approach to school improvement that emphasises place-based cooperation is therefore promising, and may lead to the sort of local experimentation and distinctiveness that Nesta believes is crucial to an inclusive knowledge economy.

Careers advice

Labour promises a reform to careers advice, describing an integrated information, advice and guidance system that covers the entire education system. This is an ambitious proposal, but there is little detail on what this will look like in practice. We agree that access to quality careers advice should be universal, but rather than building a new system from scratch, it should build on existing models such as the Careers and Enterprise Company. Step change is needed in connecting data sources, career journey and learning tools, and real learning and job opportunities. The next Government should take inspiration from Nesta’s Open Jobs programme, which looks at how information on jobs and skills could be opened up and shared by employers, governments and other data holders, and used to inform career and learning tools.

Upskilling

Labour pays particular attention to supporting adult education through a £3 billion scheme, recognising the need to support retraining and upskilling people whose jobs are at risk due to automation. We welcome the promise of additional entitlements for these workers, although it is not clear yet what these would be. The proposals to restore the Union Learning Fund and the provision of 30 hours of free pre-school education for 2, 3 and 4-year-olds hint that workers might be supported to find time for education and training, but this proposed investment is lower than that promised by the Liberal Democrats. Nesta’s manifesto for work and skills proposes further entitlements to support reskilling and upskilling that the next Government could experiment with, including financial incentives for learning (such as individual learning accounts).

While the proposed package of workers rights doesn’t specifically include a right to re-train, Labour’s manifesto makes a significant commitment to engaging and incentivising employers to play a role in skill development and better job creation in other ways, particularly through green investment. For example, the party places an expectation on employers to direct 25% of apprenticeship levy funds towards climate apprentices. To encourage them to take up apprenticeships, Labour also promises bursaries to women, BAME people, care leavers, ex-armed forces personnel, and people with disabilities.

Recent research by the Nesta-led PEC highlights the gender disparity in the creative industries, especially in digital occupations and in how those who do them are reported. We therefore welcome the pledge from Labour to work with trade unions and employers to make creative jobs accessible for all.

Quality of work and jobs

An inclusive economy should provide good, rewarding work, and Labour make several proposals to this end, including introducing a ‘real living wage’ of at least £10 an hour (the current National Living Wage is £8.21 per hour for people aged 25 and over). The manifesto also mentions a plan to trial Universal Basic Income. While Nesta supports experimentation around potential policy interventions, we believe that the priority should be to ensure that innovative, productive economic practice is evenly distributed across sectors and regions. Otherwise, there is a risk that we will end up compensating people who will lose out as a result of changes in the economy, instead of bringing many more people and places to participate in the future of work.

A considerable extension of workers rights is proposed, notably including a reduction in working time, an increase in different types of leave, and measures to move people into more secure forms of employment. These proposals are coupled with new agencies to give workers a voice in shaping these policies, as well as to enforce these rights. The way in which the productivity gains that are needed in order to support a reduction in working time will be achieved is crucial. Technology and automation are likely to have a role to play, and it is important that these are introduced in such a way that does not negatively impact the quality of jobs.

The proposed legal right to collective consultation on the implementation of new technology in workplaces may be popular with workers fearing the impact of automation on their jobs. However, Nesta emphasises that this should not constitute a veto by workers on any automation which poses a threat to jobs, but a means to encourage firms to automate, wherever possible, in a manner that enhances and complements human labour. The UK is already behind many developed nations in the use of industrial automation, and further automation is needed to increase productivity.

It is also important that the new Government encourages the diffusion of innovations from ‘frontier’ firms to others. Where jobs are at risk of technological automation, we believe that it is important to find mechanisms to support people. For example, by understanding which jobs are most likely to be replaced and reskilling those in such roles, learning from our Future of Work programme.

Nesta has previously argued that a ‘high-energy democracy’ - where there’s a much higher level of organised popular participation in political life - is a prerequisite for a more inclusive knowledge economy. Labour’s manifesto devotes some space to ‘constitutional issues’, proposing to reform the House of Lords; a reduction of the voting age to 16 and extending the franchise to all UK residents. These proposals would give millions more people the right to vote.

However, apart from a commitment to run a citizens’ assembly about the constitution, the manifesto doesn’t have much to say about participative democracy - there’s no mention, for example, about the ways in which new technologies might provide more people with an opportunity to influence decision making. This seems like a missed opportunity, particularly when it comes to shaping the trajectories of new technologies for the benefit of society. Nesta believes that the public should be more involved in decisions about how innovations affect their lives, and we would like to see the next government take a more strategic approach to anticipating how new technologies might impact society and explore a wider range of creative ways to involve people in shaping visions of the future.

Labour’s manifesto sets out proposals for an inclusive economy, and promises a considerable number of changes both to workers rights and to lifelong learning to prepare people for the future. While the party makes commitments to creating a ‘democratic’ economy, the manifesto misses the opportunity to create more meaningful ways for the public to influence the direction of technology and innovation.

This is one of Nesta's responses to the manifestos from the main parties. How far do they each grapple with the challenge of changing how the knowledge economy works? We've been analysing how each party responds to the three key challenges we have outlined, as well as suggesting ways that the next government can use innovation to make the knowledge economy far more inclusive.