Cameron’s cashless industrial policy

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”

  1. Northern TUC

    RT @leftfootfwd: Cameron's cashless industrial policy http://bit.ly/dl5ht9

  2. Shamik Das

    Cameron's cashless industrial policy http://bit.ly/dl5ht9 reports @wdjstraw on @leftfootfwd

  3. Duncan Weldon

    RT @shamikdas: Cameron's cashless industrial policy http://bit.ly/dl5ht9 reports @wdjstraw on @leftfootfwd

  4. 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.

  5. 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

  6. Anon E Mouse

    Will – Come on you can do better than this…

  7. william

    If the ‘progressive left’is going to provide meaningful policies about industrial policy at the next election,it would help if it first came up with a reliable framework that ensured government borrowing NEVER gets into the mess that cost Labour the last election.

  8. John Lees

    Populist polititians are currently asking banks to a) pay more tax b) increase/repair their balance sheets abd c) lend more to small business. It does not take a genious to see that this can not work!

    It is a genuine sadness to me that Labour did not invest in manufacturing when in power – this could have provided the jobs that could help our poorest most disfunctional societies. But no. Where was the science budget for the last decade – the help with exports – the seed capital and smart government procurement policies? Other countries help maintain skills bases and grow new ones – we seem not to.

  9. william

    Well said, John Lees.The Gordon Brown experiment,post 1997,was to take a stable economy, and transform it into a nation of welfare junkies(tax credits, housing,incapacity benefit,with the work done by migrants.It was an utter betrayal of the working class.Seed capital, smart procurement, skills , the man did not understand the real world.When will we have our Kruschev moment and outlaw this latter day Stalin?

  10. Mr. Sensible

    1 way in which Cameron could have helped the private sector is by retaining the lone to Forgemasters…

  11. Anon E Mouse

    Mr.Sensible – Give the Forgemasters up dude. It’s a private company and the terminally useless Gordon Brown didn’t have the money to lend them.

    They should have gone to the bank’s like everyone else…

  12. Chris Talbot

    Can you explain how the figure for the decline in the real science budget is calculated as 9%? That is presumably based on predictions of general inflation? From running a lab my observation is that inflation for scientific consumables runs ahead of general inflation, and because so much is priced in dollars, it is highly dependent on the exchange rate. If the value of the pound declines then the fixed scientific grants buy less. The real decline could turn out to be much higher over four years.

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