Next week’s Budget is the Government’s last real chance to set the industrial agenda. It should grab that chance with both hands.
Our guest writer is Tim Page, senior policy officer at the TUC
With a Mandelsonian flourish, last year’s publication of “New Industry, New Jobs” changed the UK’s economic landscape. Many column inches have since been filled with discussion of the detail of NINJ, so sectors such as composites and industries such as plastics electronics are now part of the industrial lexicon.
What is more important, for the purposes of this discussion, is that it is no longer off-limits to talk about the role of government in identifying and supporting strategic industrial sectors. The Thatcherite philosophy of “market is king” has gone. In the forthcoming Budget, the TUC would like the Government to go to the next stage. Having made its commitment to less financial engineering and more real engineering, we would like to see it introduce NINJ phase two.
Specifically, we have called for a new strategic investment fund, borrowing from the French model, where an independent public sector body takes long-term minority stakes in strategic companies, with a view to supporting their development into world class players, building the British economy, reducing our balance of payments deficit and providing high skill, high value jobs.
We also wish to see the wider question of government support for industrial investment tackled head on. The problem has been well rehearsed. Some companies need to make investments that a risk-averse banking sector will not support. If those investments are in sectors such as green technology, where the outcomes are not proven, it is often understandable that regular banks will not take such a risk.
In such obvious cases of market failure, rival economies have industrial investment structures supported by government. This means that entrepreneurs with good ideas in strategic sectors with high start up costs take those ideas abroad – and other governments reap the economic benefits. The TUC has called for a Green Investment Bank to support the growth of a world class green sector, bolstering our industrial base and helping to protect our environment both at the same time.
Furthermore, Britain’s infrastructure urgently needs investment; government cannot possibly fund all of it, yet the public good derived from such investment is obvious. So there is a role for government as conduit or guarantor of private sector investment.
Let us be clear. Care must be taken to avoid government taking on functions that are best served by private sector banks. Government must certainly not hand out taxpayers’ money to every company that steps forward with a wish list. But at long last, the government has recognised that it has an interest in the types of company that thrive in the UK.
Post economic downturn, in the age of globalisation, there is a specific role for British industry. We must continue to do what we do well, so our aerospace and automotive sectors, and our pharmaceutical industries must continue to succeed. But consumers will demand that the planes in which they fly and the cars they drive are greener and more efficient.
Where our scientists, our technicians and our engineers have the know-how to make that happen, but the banking sector is not forthcoming with support, the role for government is obvious. As we branch into new, exciting areas such as wind, wave and tidal power, that role is even more obvious.
Next week’s Budget is the Government’s last real chance to set the industrial agenda. It should grab that chance with both hands.Like this article? Sign up to Left Foot Forward's weekday email for the latest progressive news and comment - and support campaigning journalism by making a donation today.