David Cameron appeared to use his CBI speech to launch a state-financed industrial policy. But the money is not there to back it up.
David Cameron’s speech today to the CBI avoided mention of the direct impact on growth of the Coalition’s rapid deficit reduction plan. It did appear, however, to announce a state-financed industrial policy. The problem is that the rhetoric – well supported by groups on the progressive left – does not match up to reality.
Half way through the speech, the Prime Minister said:
“All over the world, governments are identifying dynamic sectors in their economy and working strategically to strengthen them…
“What they understand is that when you’re looking for growth opportunities you don’t stick a pin in a map and drop down a research centre here or arbitrarily back an industry there – you go with the grain of what is already working. We understand that too.
“We have great industrial strengths across our country, underpinned by world-beating companies. Green technologies in the North East. Creative industries in London, Manchester and Glasgow. Financial services in Edinburgh. In retail, pharmaceuticals and advanced engineering. We have made the strategic decision to get behind these strengths. You saw the evidence of that in our Spending Review.
“Yes, money is incredibly tight. But we protected the science budget in cash terms. And we are also investing £220 million in a new world-class Centre for Medical Research and Innovation, £1 billion to create one of the world’s first Carbon Capture and Storage demonstration plants, with three more projects to follow and £200 million in low carbon technology, including offshore wind.
The difficulty for the Coalition is that the rhetoric does not quite match up with the reality:
– A cash terms freeze in the science budget equates to a 9% real terms cut;
– £1bn for Carbon Capture and Storage would, according to the Guardian’s Damian Carrington, “get one CCS demo built … there’s little hope for the other three“; and
– The Centre for Medical Research and Innovation will not open until 2015;
In addition, despite hints that the Government “will not impede” business recruitment, the damaging immigration cap – which the CBI and many many businesses oppose – remains in place. A mystery persists over funding for four large transport infrastructure projects. And the lack of funds for the Green Investment Bank prompted Greenpeace Executive Director, John Sauven, to say, “A poorly financed fund is not a green bank. It doesn’t have the financial clout or the independence to do the job, and will end up as nothing more than an ill-equipped quango”.
An alternative was set out last month by Gerry Holtham who called for:
“a parastatal body with full government guarantee of its debt. It would borrow to invest in infrastructure projects via preference shares in a series of joint ventures. A series of “little Neddies” might be required to develop broad sectoral plans for transport and energy.”
The time has arguably come for a properly funded approach to state-financed investment.
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