Are knives being sharpened for the Business Department?

Fears are growing that BIS could be dismembered by the new Government. What do those in the private sector think about the prospect?

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The Independent Online

Threats to the future of the Department for Business are nothing new. Back in 2003, Vince Cable proposed abolishing the old Department for Trade and Industry because “it doesn’t perform a function”. Happily, Mr Cable had cooled on the idea by the time he was made Secretary of State for Business, Innovation and Skills (BIS) for the Coalition in 2010.

But the rumours are back in the wake of last week’s Tory election triumph. Adrian Bailey, the chair of the BIS Commons Select Committee in the last Parliament, believes David Cameron’s Government’s plans for some £30bn of Whitehall cuts could eventually mean BIS – led by Sajid Javid after yesterday’s reshuffle – will be abolished and its responsibilities distributed across Whitehall.

The Taxpayers’ Alliance lobby group recently estimated that closing and parcelling out the functions of BIS (along with Energy and Culture) to other departments could save £7.5bn over five years. The Tory backbencher, Dominic Raab, is one of those who have lobbied for the end of BIS in recent years: “Some departments … don’t merit separate bureaucracies with all their associated costs, churning out red-tape,” he argued in 2013.

It’s possible to see the logic of the dismantlers. BIS performs a very diverse range of functions, from banging the drum for British exports, to sponsoring apprenticeships, administering employment tribunals and funding missions to space. They are functions that don’t always fit together naturally.

Labour has also provided some ammunition for the anti-BIS brigade. “It is an indifferent champion of business, particularly small business, and relates poorly to many key industrial sectors,” concluded Labour’s Andrew Adonis in a review of the department two years ago. “It is also far too centralised on London, and lacks outreach to – and sufficient knowledge of – the real economy, particularly outside the capital.”

So would BIS be missed if its Victoria Street headquarters, in the shadow of Westminster Abbey, was wiped off the face of the earth? Most business lobby groups say that, actually, it would.

“It is extremely important to have a department that advocates specifically for the interests of business and business growth in Whitehall,” says Adam Marshall, director of policy at the British Chambers of Commerce. “It is also very important that the department makes sure others can understand why the business perspective needs to be taken seriously. For that reason alone, having a business department has a certain importance.”

Calls for a break-up of BIS are “a little crude”, says Simon Walker of the Institute of Directors. “There’s always a case for reform, but a lot of the public expenditure from BIS is in areas that are of great importance to IoD members.” John Cridland, director general of the CBI, says BIS plays a “vital role” in supporting growth and job creation.

The lobby groups credit BIS in recent years with enhancing UK innovation through its “catapult centres”, which assist private companies to test inventions and collaborate with research scientists.

Others say BIS has helped finance industry. “The single most important area where BIS has been a force for good is championing access to finance for growing businesses,” argues Mr Marshall of the BCC, citing the creation of the British Business Bank by Mr Cable.

The City also has supportive things to say: “We value the work UK Trade and Investment [part of BIS] has done promoting our industry overseas, in areas such as attracting foreign money into UK funds,” says Daniel Godfrey, chief executive of the Investment Association, whose members manage more than £5trn for clients across the world. “BIS has also been integral in helping us promote a long-term investment culture in the UK. The bits we work with aren’t broke, so I don’t see a need to fix them.”

Amanda Blanc, chief executive of AXA’s UK Commercial business, agrees. “No government department is ever likely to garner universal acclaim and BIS is no exception – but the SME [small and medium-size enterprise] sector has grown over the past five years, and the efforts of the department have certainly been a contributing factor,” she says.

One of the areas where one encounters some grumbling is in the field of regulation. “If you look to the last Parliament there was a significant amount of employment regulation from BIS,” says Mr Marshall. “You want BIS to be a champion of reducing or containing regulation, rather than adding to it.” Others say the skills promotion focus should shift to vital areas such as engineering.

But if abolition is a non-starter, what about those budget cuts? BIS has a £27bn budget and 50 “arms’ length bodies” that cover everything from copyright law to weather forecasting.

With the Tories committed to make £30bn of departmental cuts to hits their deficit reduction goals, it looks very vulnerable. Ministers might well see BIS as a tempting target, since the public are unlikely to march in the streets to protect funding for, say, the Groceries Code Adjudicator or the British Hallmarking Council.

Mr Marshall stresses that it makes no sense to demand cuts on growth-promoting departments such as BIS while ring-fencing health and pensions. Simon Walker from the IoD is keeping a watching brief on the threat: “There are going to be areas that have a higher return than others, such as research and higher education, but we will wait and see what is proposed,” he says.

If the Treasury axe does look as if it is about to swing brutally in the direction of BIS in the run-up to the next spending review, the department will not be without some vocal private-sector  defenders.

Sajid Javid with the Chancellor George Osborne, Nicky Morgan and Theresa May

From Deutsche to BIS: Sajid Javid’s progress

What sort of Business Secretary will Sajid Javid be? The appointment of the  45-year-old former Deutsche Bank investment banker was warmly greeted by the CBI yesterday: “He will be a strong voice for the business community, helping to make its voice heard loud and clear at the Cabinet table,” John Cridland said. Simon Walker of the Institute of Directors said Mr Javid’s immigrant background (he is the son of Pakistani bus driver who came to the UK) will help him to do the job well. “He understands not only the reality of operating in the private sector but also the motivations,” Mr Walker said. The UK’s banking lobby is hoping that Mr Javid’s background will incline him to be less combative with the financial sector than his predecessor, Vince Cable. But what if the Treasury demands deep cuts to BIS? Hopes that Mr Javid will put up strong resistance might be misplaced. He is often described as a protégé of the Chancellor, George Osborne.