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.
12 Responses to “Cameron’s cashless industrial policy”
Northern TUC
RT @leftfootfwd: Cameron's cashless industrial policy http://bit.ly/dl5ht9
Shamik Das
Cameron's cashless industrial policy http://bit.ly/dl5ht9 reports @wdjstraw on @leftfootfwd
Duncan Weldon
RT @shamikdas: Cameron's cashless industrial policy http://bit.ly/dl5ht9 reports @wdjstraw on @leftfootfwd
Adam Bell
This is both daft and disingenuous, and really betrays why Labour should never be allowed to make up industrial policy. First of all, business doesn’t care where its finance comes from – the GIB would simply be another way of providing the banks with tasty Government debt, incidentally raising the interest rate on the debt we already have. The way to attract investment is by having the appropriate policy framework in place – money will follow the possibility of making money. Cameron has achieved this – at least for my industry – with the funding for ports infrastructure to support offshore wind turbine manufacture. This was a Labour policy, and it’s absolutely right that the Coalition should keep it – while ditching other elements that simply didn’t work.
They’ve kept the FiT, with a review in 2012 – which is good, as it was too high. They’ve kept the RHI. They’ve said absolutely nothing about the RO, which is good, as it implies it’ll be retained following the energy market reform – they’d have announced any reductions now. In terms of what they could’ve cut, they’ve actually done really well. Assuming, that is, you see the role of Government as to enable private investment, rather than assuming that investment is what the State does, which is what you’ve done here. Welcome to the place where ‘evidence-based’ ends and ideology starts.
Will Straw
Adam,
Thanks for engaging but I completely disagree. Of course the “appropriate policy framework” is what matters and retaining the ports infrastructure is to be encouraged. But as you say, that’s just your sector.
I come from the view that it doesn’t matter where the investment comes from so long as it comes. And there is very little sign of it at the moment. The financial sector aside, credit is proving elusive and all the while the Government is able to borrow at a 1% real interest rate over 50 years. So why don’t we make use of that? The true ideologues are those who won’t even consider state-financed investment.
Best wishes,
Will