Wednesday 19 January 2011

What's the plan for growth?

One issue that worries ministers and advisers is that the government is to a large extent associated in the public mind with just one thing: cuts in public spending. One of the political aims in 2011 is to put much more emphasis on a strategy for growth.

But they would need to come up with one first.

Labour's Shadow Business Secretary John Denham, in his first major speech in the role to the Smith Institute, suggests that the postponement of the publication of a growth strategy, promised last Autumn, reflects the lack of any coherent government thinking in this area, beyond the idea that the state stepping back creates the opportunity for the private sector to step in, and highlighting the removal of digital economy issues from the Business Department as prioritising headline-management over economic strategy.

In a response to the speech, Will Straw, writing for Comment is Free, sets out some challenges for Labour in creating an alternative pro-growth agenda of its own in its forthcoming policy review.

Here's a section of Denham's speech on what Labour got right and wrong - and how the Coalition government's approach differs in its understanding of where government policy can promote growth and business.

We need to have an honest and balanced assessment of our own record.

Many of Labour’s policies did enable business to flourish. For the last two years the UK has been ranked fourth in the world and first in Europe by the World Bank for “ease of doing business”. And the OECD has also found that the UK has the lowest barriers to entrepreneurship of all OECD countries.

But we have also acknowledged that we did too little to develop a better balanced economy. Many of the British or British based companies in advanced manufacturing or the creative economy or business services are genuinely world class - but that as a whole these sectors form too small a part of the economy that we need.

In the last few years we developed and began to implement a more active approach to supporting the sectors of the economy with the greatest capacity to compete and to grow. In my time at DIUS, for example, we focussed new attention on the role public sector procurement and regulation played in creating the market for new and innovative products, services and businesses. The gap between the UK and USA in translating university IP into start ups and licences was closing fast. We encouraged industrial leadership in key sectors and made it easier I hope for the private sector to work with government in areas like the nuclear industry and life sciences.

A fair assessment would have to be that this work was far from complete. Labour’s policy review must look at how, going forward, we build on that work, but reflecting fully the views of business and the demands of a rapidly changing world.

Instead of building on Labour’s approach, this Government has gone into low gear, if not into reverse.

The growth strategy which was originally scheduled for the CBI conference in October was dropped because, at least according to one government official, there was nothing to put in it.

The consultation on a growth policy set out before Christmas looks, at best, a wasteful exercise in repeating discussions business has had many times before and, at worse, a smokescreen to retreat on many of the measures that are needed.

The Business Department is greatly diminished. In the last few years BIS became a major player in Government. It took the lead in developing a new industrial strategy. Under the current incumbent, it is a department apparently without influence or clout. Indeed, whilst the record of failure in regional policy, higher education, bank lending and bankers bonuses is lengthy, it is hard to identify a single pro-business, pro-growth policy which BIS has successfully championed against the opposition of the Treasury or other departments like CLG.

And now, for no other reason than Vince Cable’s personal unsuitability to make a competition judgement, responsibility for an entire critical industry – the digital economy – is to be transferred to a non-economic department.

There is no public policy reason for placing the responsibility for digital economy in DCMS. Yes, the media and creative industries have a great interest in the digital economy, but so does the service sector, retail, advanced manufacturing and IT itself. Years of work, bringing industrial sponsorship together within Whitehall so that business can find it easier to work with government was swept aside in a crude act of media management.

We should all be deeply worried about the way this decision was taken.

The pattern I think is already established. What we can expect from the Government is a pattern of disconnected and inadequate announcements which are chosen more for their impact on the headlines than on the economy.

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