A few hot tips to spice up the economy

The Brit-winning Spice Girls show what the UK is good at - so why not invest in this kind of success?

It is one of those weeks which convinces US magazine editors that London is the place to be. The Spice Girls duly and deservedly won their gong at the Brit Awards, and London Fashion Week is achieving wall-to- wall coverage in the newspapers. Even if you allow for the hype, a lot of economic activity is taking place.

To many people, pop music and fashion may seem manifestations of a candyfloss economy: that somehow it is wrong that we have created jobs in the clubs and on the catwalks rather than in the factories that make real things. It is very difficult to change the views of people who think that way, perhaps because they seem to want to make a moral statement about the nature of work rather than take a practical view of what the market seems to want to buy.

If, on the other hand, you incline towards the US magazines' judgement that something special is happening to this segment of the British economy, then here are three facts which demonstrate the importance of the entertainment industry in all its many forms. The first two come from the US where the trend is even more developed, but they make the point about where the new jobs are coming from.

Number one is that the US entertainment industry has created more jobs since 1990 than the automobile manufacturers, pharmaceutical firms and hotel industry combined - and this despite the fact that the last six years have been very successful for all three industries.

Two is that the US sports industry (which includes sports entertainment, sports clothing and so on) is far larger than previously reported and is now the 11th largest industry in the US, ahead of chemicals and electronics and just behind telecommunications.

Three, which comes from the UK, is that two of the largest (maybe the two largest) new fortunes built here in the last 20 years, that of Sir Andrew Lloyd Webber and Richard Branson, were both based on the entertainment industry.

It seems that entertainment, along with financial services and information technology, has become one of the great drivers of growth and employment in mature, developed countries such as the UK and US. If this is right, it has profound implications for public policy. The usual principle of marketing is to reinforce success. What should we do, as a country, to reinforce this success? What do we do to create opportunities for more success stories like the Spice Girls?

Industrial policy has such a dreadful record in the UK that anyone suggesting that there might be a role for government has to tread carefully. Even now, more than 40 per cent of the budget of the Department of Trade and Industry (pounds 1.4bn) goes on trying to rectify past failure: in support for the coal industry and for nuclear power. But here are five suggestions for a government eager to help develop the UK role in the world entertainment industry.

One, spend money on teaching music in schools. This has beensqueezed through the 1980s as an unnecessary luxury, but from an economic point of view it ought to be part of the core curriculum. It is the basic building block for a successful pop music industry. The relationship between the sort of music that will be taught and the sort that wins the Brit Awards may seem tenuous, but it isn't. The only other country, aside from Britain and the US, to have significant net exports from pop music is Sweden, and many Swedish people attribute this to the emphasis on teaching music.

Two, spend money on teaching sport. Sport is a "winner takes all" business: being good to average may be fun, but it does not capture global markets. With a population of 58 million we ought to be making a more significant impact on the big internationally traded sports. One area where we do, motor racing, should be a model for other sports.

Three, spend money on promoting education for art, fashion and design. This is not big money: just a case of feeding small amounts into training, to make sure that we extract all the talent latent in the country.

Four, remove bureaucratic blockages. No lastingly successful industry will want subsidies, but governments can unwittingly damage industries by obstructive bureaucracy. For example: Britain ought to be a prime location for filming, and it has been gaining market share. But film-makers complain that local authorities here are not as helpful as they would be in the US at smoothing the way for film crews.

Five, look at tax. That is not an incantation to a new Labour government to do a deal with Sir Andrew Lloyd Webber. It is to point out that the entertainment industry is very tax-sensitive and it might make more sense to spend a little money in tax breaks designed to keep the UK industry here rather than give more money to the Koreans to build some electronics plant.

This is not a grand, top-down business where the key players are all committee members of the CBI. It is a rough, bottom-up business - or rather a collection of very different businesses, some big, some small, united only by the talented people who work there. You cannot plan that. There is no role for a Ministry of Popular Entertainment. What you have to do is to give these talented people space to follow their own entrepreneurial instincts. Politicians should listen to entertainers - not what they say about politics, but what they say about their own business.