There was much to welcome in David Cameron’s first major speech as Prime Minster on industrial policy. But his policies must now catch up with his vision.
Our guest writer is Rachel Reeves, Labour MP for Leeds West
There was much to welcome in David Cameron’s first major speech as Prime Minster in Yorkshire on Friday. Indeed much of it was consistent with the industrial policy Labour had been driving forward. On the need for a better-balanced economy – more regional and with a more diverse industrial base; reform of the banks so that they support, not hinder business; and on the need to bring down the budget deficit and build an economy based on investment and savings, there will be much agreement.
The question though is whether willing the ends is sufficient without also willing the means. Let’s take three examples – on unemployment, regional economic development and investment.
First, Cameron spoke in his speech about people on benefits. I agree that we must reform the benefits system to reduce the marginal rates of taxation and withdrawal rate of benefits, and will support Iain Duncan Smith if he pursues his aims carefully but radically – including penalising those who do not recognise that they have responsibilities as well as rights. But, one policy that was truly helping young people hit by the recession was the guarantee of a job or training place for any 18-25 year old out of work for six months – introduced last year by Labour. This policy has helped 8,100 young people in Yorkshire alone and around 200,000 nationally, ensuring that young people were not left to fend for themselves, writing off a generation of people who markets and a laissez-faire government forgot about. The Future Jobs Fund has now been scrapped by the new government – taking away the opportunities young people need and deserve to get on in life.
Second, Cameron emphasised his support for building strong regional economies. Yorkshire is proud of its industrial heritage and we are equally ambitious about our economic future. We want to drive our own future prosperity and that’s why we will defend our Regional Development Agency and local government. But the £1.2 billion cuts to local government grants will impact local economic development and regeneration. This is on top of huge cuts to the Department of Business, Innovation and Skills which had been supporting regional development, industrial policy and the new green technologies. David Cameron might say that he wants a more diverse economy, but that can only be done in partnership with an enabling government. It won’t be achieved through short term cuts that risk stalling the economic recovery.
Third, David Cameron talked about the importance of industry and investment. He says that government should “support growing industries”. But again, those ambitions are not backed up by policy. There is no date for when work on High Speed Rail – vital for the prosperity of our Northern towns and cities will commence. And when pressed the new government would not confirm that High Speed Rail would come to Leeds or Sheffield. Or take universities, where many of the new ideas, technologies and research come from. They are seeing their funding cut – hardly consistent with the opportunity economy. And while corporation tax is being cut so are allowances for investment, research and development. It is not at all clear how this will achieve David Cameron’s stated aim of building an economy based on savings and investment.
Yet, there are areas of common cause. If David Cameron is sincere about “transforming the economy” then we must support him and press that this is now backed up by constructive policies that help build the sort of economy that I argued for last year in my ippr pamphlet with Tony Dolphin and Jonathan Clifton. But as we argued then, this sort of economy will not develop by chance. It requires a supportive government to address the market failures associated with investment in skills, science and research and the uncertainty and risk surrounding investment in new technologies and the green industries of the future.
Out of the economic crisis we should seek to build a fairer, better balanced more equal society, with opportunities for entrepreneurs to flourish and for everyone to achieve their potential. Cameron’s speech shows he is half way there. His policies now need to catch up with his vision.
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