David Prosser: How to get Britain making things again

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The Independent Online

Outlook By going with the decidedly old Labour strategy of industrial interventionism over the past 18 months, Lord Mandelson left himself open to exactly the sort of accusations of statism that Ken Clarke, his opposite number, has thrown at him during this election campaign. To which the Business Secretary must now be tempted to reply: "But it's working."

Yesterday's positive update from the manufacturing sector is especially welcome in the context of the consensus that Britain's economy needs rebalancing away from its dependence on the City. Mr Clarke may not share his rival's view that a new emphasis on manufacturing requires the Government to become an industrial activist, but he too wants a return to a Britain that "makes things".

In truth, the demise of British manufacturing is a story that has been overtold. We still have genuine champions – from BAE to Rolls-Royce to GlaxoSmithKline – that lead the world in hi-tech manufacturing, even if the mass production industries have now disappeared. And for every one of the big names you'll have heard of, there are countless more small and medium enterprises that have remained profitable even in the toughest of times.

But how can we do more? Like it or not, Lord Mandelson has set out Labour's approach to industrial policy. It has to be said that Mr Clarke, who looks likely to replace him, has not yet offered a coherent Conservative vision.

The Tory fallback position is less government. To that end, the "regulatory budgets" the Conservatives would introduce would see the introduction of any new red tape offset with cuts to regulation elsewhere. Music to industry's ears, but the pullback from funding for regional development agencies – the sort of quango Mr Clarke is scornful about – is much less popular with business leaders.

As for tax, the headline Conservative policy is a 3p reduction in corporation tax. But this, it seems, would be at least partially funded by a big cut in capital allowances, which has caused real concern in some parts of industry.

The low value of the pound has given exporters a boost this year. But with global demand recovering slowly, British manufacturers will need more help. Can they be confident Mr Clarke will deliver it?