Margareta Pagano: Don't tell anyone, but Britain has an industrial policy

Midweek View: The big test will be how politicians and business people nurture them future gazelles

If you had asked business leaders – and most Conservatives – before the last election what the Government should do to make the economy competitive, they would have said put a bomb under the Department for Business; blow it to smithereens or at least break it up. Indeed, there were secret plans being hatched among the more militant free-marketeers to do just this.

Then along came the Coalition, bringing Vince Cable as part of the deal as Business Secretary. Today it's Mr Cable who is throwing the grenades, and by far the most dynamic of these was the one he lobbied yesterday to lay out a new industrial strategy for Britain.

Reading the speech he gave at Imperial College, London, setting out this new policy, you'd be forgiven for thinking you were in Germany, or Singapore even.

In a nutshell, the Government will now put its clout behind high-growth sectors such as advanced manufacturing, the digital economy, the energy supply chain, construction, creative industries, life sciences and higher education.

How Mr Cable must have enjoyed himself – it's the "compelling vision" that he's been lobbying for since taking office. He could even afford to play to both the anti-red-tape and EU galleries by promising government will learn to be more like its continental partners in promoting procurement for domestic companies – in other words how to bend the rules to suit us – while not breaking EU rules about protectionism. Between the lines, read Bombardier jobs.

What Mr Cable also made clear is that this is no Soviet-command style strategy for backing winners with subsidies – everyone knows that government is hopeless at choosing them. Instead, it's about providing long-term partnerships to help build up supply chains – look at the success of the Automotive Council for inspiration – and ensuring that small and medium enterprises (SMEs) get the right access to finance with the new business bank also being proposed. It's about backing the gazelles – not lame ducks – the fastest-growing companies that need long-term money but find it hard to get this from the banks.

It won't be easy. Even with a new bank, getting finance flowing to SMEs in the supply chain is going to be the hardest nut to crack.

By any measure, this new strategy is an extraordinary about-turn in thinking and a great victory for Mr Cable, who has been arguing for months with Treasury colleagues for a joined-up approach. It may have helped that he's had the backing of many powerful industrialists such as Anglo-American's Sir John Parker, who have also been agitating behind the scenes for fresh leadership to provide business which much-need confidence. Something has clicked because he appears to have won over the Chancellor, George Osborne; well, for now. More of the politics later.

So what is the change in mood which has led to such an about-turn? Ever since Harold Wilson's experiment with Leyland in the 1970s, industrial policy has been one of the dirtiest phrases in British politics – on the left and right.

However, it's been blindingly obvious to most business leaders for decades that for the UK to compete successfully overseas, there has to be support for those industries such as life sciences where we excel.

Industry is now so complex that it needs forward planning; innovation needs support from universities and industry working together – and ensuring that our young have the appropriate skills.

If you take all this together – and then add in the financial crash, which wiped out chunks of industry and halted banks lending to the real economy – it's hardly surprising that politicians are now thinking out of the box.

Contrary to ideology, the state can also be entrepreneurial: it was the Government that gave Vodafone the 400MHz spectrum, the US authorities which gave Google its algorithms and the Medical Research Council which came up with a new generation of molecular antibodies.

So the big test for the politicians and businessmen and women will be precisely how they nurture these chosen industries; how and what they feed the future gazelles rather than les canards boiteux.

It's going to be fascinating to watch how this strategy emerges – watch out for Lord Heseltine's review on 29 October to put more flesh on the bone – but for now Mr Cable and Mr Osborne should be praised for getting their act together.

If the price Mr Cable paid to get the Chancellor's backing was accepting a few bombs to blow away some red tape in his own department, with the arrival of Michael Fallon and Matthew Hancock as ministers, then it was a fight worth winning.