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“We need to move away from the fax-machine age” - Professor Dennis Novy tells National Security inquiry that it is time to get serious about data

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“We need to move away from the fax-machine age” - Professor Dennis Novy tells National Security inquiry that it is time to get serious about data

Wednesday 31 Jan 2024

Speaking to a joint committee of both Houses of Parliament on the first session of its new inquiry into the UK’s economic security, Professor Dennis Novy highlighted the importance of the UK working with like-minded allies on trade policy and urged the government to “make serious strategic investment” in data skills and data availability in order to become “fit for the digital age.” He also called for greater clarity on the UK’s long-term international trade strategy in an increasingly volatile world.

The Joint Committee on the National Security Strategy (JCNSS) was created in the 2005-10 Parliament to assess and review aspects of the UK’s National Security Strategy.

Its new inquiry aims to take stock of the UK’s economic security, and ask whether the Government has the necessary powers and capabilities in place to intervene in the economy on national security grounds, to enforce economic deterrence measures and enhance economic resilience.

Professor Novy was invited to give evidence alongside Agathe Demarais, Senior Policy Fellow at the European Council on Foreign Relations, and John Gerson, Visiting Professor at The Policy Institute, King’s College London in a session focusing on foreign affairs and international political economy.

The session, chaired by Lord Butler and Dame Margaret Beckett MP, covered a broad range of topics from the rise of China as a global trade power, the effectiveness of sanctions as a diplomatic tool, the rules-based international system, sovereignty, and how the UK should adapt to an increasingly volatile world.

Professor Novy emphasised the importance of setting party politics aside and instead looking at data and evidence when considering the international economic architecture.

He reminded the committee members that when it comes to international trade, a great deal has changed since the 1990s. The previous “transatlantic consensus” has been challenged by the rise of autocratic governments in Russia and China; and the UK needs to work harder to influence trade policies from its position outside the EU.

Professor Novy advised the committee that the data shows the UK is now a “trade in services” superpower rather than a manufacturing centre, and recommended that serious thought should be given to how the UK can influence decisions on international regulation for services.

Describing international trade negotiations as “a game of bullies” he said “We are now living in a world where we have the big three - we have the US, we have the EU, and we have China. When it comes to economic policy, especially international trade policy, those three decide policy. The UK is no longer a central part of that. It is my view that the UK will have to follow the orbit of the EU. It is a fact we have to live with.”

Asked whether the growth of China was a threat to UK economic security, Professor Novy said that from an economic point of view, this was actually positive for the UK’s consumers and businesses, bringing lower prices and greater choice, but there was also a “wake-up call” for the government: “What China’s Belt and Road Initiative means to me is that the Chinese have a strategy of talking to other countries, and the UK and the US do not. I don’t see that as China doing something against us, I see that as a wake-up call for a country like the UK to enter that arena and think about its economic security as a function of what happens in other parts of the world.”

The Committee asked several questions around the impact of Russia’s full-scale invasion of Ukraine on the UK’s economic security. Professor Novy and Mme Demarais both highlighted the importance of building good relationships with allies. Noting that gunboat diplomacy is no longer a tool of international economic policy Prof Novy said the risk of violence was still “something to be taken very seriously, especially given what we are seeing in Eastern Europe and over Taiwan.” He also noted that trade data shows that there is “leakage” in the sanctions against Russia, with weapon components and high-tech manufacturing parts being re-routed through Kazakhstan, and urged the UK to stop the leaks and make sure all countries observe the sanctions.

Committee members also raised questions about economic security and hi-tech manufacturing.

Professor Novy said these questions could be more easily answered if the UK became more data-focused: “On the question of statecraft and institutional back-up, the civil service needs to become much more data-focused – we live in a digital world but many types of data are just not available in the UK, especially when compared to other countries such as France and Scandinavia.

“With that comes a need for the government and the civil service to have the skills to deal with this data. We need to move away from the fax-machine age, and make serious strategic investments in data skills and data availability. I see this as absolutely essential.

“We need to move away from talking about superficial big power politics and instead to talk about the granular detail of the economy. Which are the big firms? International trade is done by very large firms and multinationals. Who do these firms employ? What are they skills that they have? What skills do the people in the civil service have? How is the government thinking about this? How many people in the House of Commons and the House of Lords have a STEM background? How does this compare to Singapore and Japan and China?

“These are the questions we need to ask and I don’t think the UK is at the forefront of this. We desperately need a national debate – how can we become fit for the digital age, also in terms of statecraft? What is the quality of our information? I think there is a lot of room for improvement. This is not a party political point, I would like all parties to come together on this.

“We have the data in principle. We have VAT receipts, tax receipts. We need to harness it and to know what to do with it. And AI is coming. We need people who can harness these tools.

And the UK is very well placed to do this because the UK has the best universities in Europe. There is a lot of potential for the UK to do much better.”

Reflecting on the evidence session, Professor Novy said: "It is important that Parliament is launching an inquiry into the UK's economic security. We live in volatile and uncertain times, and our economy needs to be able to adjust to unexpected shocks and events. It will be a crucial part of the strategy to work with our allies and focus on the UK's economic strengths, especially in the services sector and in services exports. We also need to improve our ability to harness micro-evidence from large-scale data sets so that we have a more detailed picture of what is going on in the UK economy and how policy choices can make it more secure."