Margareta Pagano: It's a shame more don't share the vision of Vince
Cable's right to care about planning for industry
Margareta Pagano is a former business editor of the Independent on Sunday who now writes columns and business interviews for a range of publications, including the Independent, Independent on Sunday and London Evening Standard.
Sunday 11 March 2012
I've just come back from visiting a country where the people are so nervous of their politicians that they daren't even say the name of their president out loud; instead they make signs with their hands. It doesn't matter which country I was in.
So flying back to the storm over Vince Cable's leaked letter to David Cameron setting out his views for a more coherent industrial policy, I couldn't help but laugh out loud at the media circus which this provoked. But it was refreshing too; we forget at our peril the freedom to criticise and you could even forgive the headline writers for getting a little over-excited with the way they presented the Business Secretary's letter as a "split" in the coalition.
Let's be careful not to exaggerate – this looks more like an old-fashioned argy-bargy about tactics and a healthy part of what, we all too casually, call our parliamentary democracy. Trading views is the oxygen of the political process, and it's often through argument that the best ideas evolve; only one-party states suppress competing ideas.
We should be reassured the Business Secretary cares enough about the country's industrial renaissance that he puts pen to paper setting out his criticism, and his recommendations. It's been evident for some time that Vince Cable has been frustrated with his coalition partners, mainly George Osborne at the Treasury, about the lack of a more joined-up industrial policy. What he says in the private letter is not new, but sets out in a more robust form the concerns he's been expressing for months. It also fits with what he told EEF, the Engineering Employers' Federation, at its annual conference last week.
He supports the strategy of cutting the deficit, keeping interest rates low, trying to promote exports to emerging markets, but fears there is something missing, "a compelling vision of where the country is heading beyond sorting out the fiscal mess; and a clear and confident message about how we will earn our living in future". He's right and it's surprising more of his Cabinet colleagues don't agree with him as there is no disagreement that growth is the only way to economic recovery.
It's odd that they are so against spelling out such a vision; what are they scared of? Cable is not calling for a Soviet-style command structure that backs lame-duck industries. Quite the reverse – he wants to pick our finest and back them to the hilt – the automotive industry, pharmaceuticals and high-tech engineering to name a few. What's more, he says we should be looking ahead, bringing together schools, apprenticeships, training and universities to peer into the future and take appropriate action.
At the same time, more should be done to protect companies such as BAE Systems and EADS that are being threatened by European overcapacity. Whether Cable's right on all these ambitions is academic; the point is we need the debate to arrive at solutions.
Nor is it a Lib Dem left-wing view. Indeed, most of Cable's concerns are echoed by many senior Tories as well as whole swathes of British industry, including Sir John Parker, chairman of Anglo American. It's interesting to note that Cable wrote his letter to the PM on 8 February, the day after Sir John called on the Government to do more to create a long-term industrial strategy to guide UK plc. If you change the names, it could have been Parker who penned Cable's letter as he also urged government to take a more dynamic role in economic growth and do more than just "cutting overheads, important as that is".
Industrial policy is still a dirty word in the UK, partly because there have been so many disasters carried out in its name by Labour and Tory governments. But times have moved on; industry is now so sophisticated it needs forward planning. Innovation needs backing in universities, and companies need more relief for R&D.
And it's a myth that the state can't be effective as an enabler – look at how the Automotive Council has been so effective with the Government working together with industrialists and companies in the supply chain.
One of the most common complaints about governments is that they are short term in outlook, that they only exist to win again. If this coalition is to survive, it should seek to prove us wrong and listen to Cable. We have some of the world's top businessmen and women – people like ex-chief executive of Rolls-Royce Sir John Rose and Sir John Parker – and they should be asked by the Cabinet pronto to set out their vision.
In return for giving industrial policy a makeover, maybe Cable can be persuaded to drop his mansion house tax. Now that would be a trade.
Barclays can feign deafness until investors decide Diamond is paid too much
You couldn't make it up. Barclays boss Bob Diamond is to get £17m in pay, shares and perks for last year despite profits falling. He is also to be awarded even more in shares which will pay out in up to three years' time and the bank is to pay £5.7m to cover his tax bill.
Barclays justifies paying its top executives so much by claiming it has never received direct taxpayers' money. This is baloney since Barclays has benefited from the Bank of England's measures ranging from the early Special Liquidity Scheme to the latest quantitative easing programme which has kept the financial system afloat. Thus, arguing that it's not a beneficiary is disingenuous in the extreme.
Barclays also justifies paying such high bonuses because executives have fulfilled their roles on improving capital ratios, deleveraging the balance sheet, meeting lending targets and return to shareholders. But has it? As Andrea Leadsom, Tory MP and scourge of the banks, points out, return on equity is down while dividends to shareholders have been reduced.
But the bigger issue is that the banks are still not lending to the real economy. Leadsom points out that only 2 per cent of the balance sheets of the UK's four biggest banks is lent to personal customers and small business. The rest is used to trade the more lucrative sovereign debt, corporate bonds, forex and derivatives products which are zero-rated. So long as it's more profitable to trade such risk the banks will keep lending to such activities rather than to small businesses that are 100 per cent rated.
That's why Leadsom backs breaking up Royal Bank of Scotland – not as Vince Cable proposes – but by splitting it into constituent parts to create more competition.
She's right; introducing more competition into banking is also the best way to shake-up Barclays, and to wake up its shareholders. Sadly, it doesn't matter how much the public rants and raves because Barclays is clearly deaf. It's only when investors decide Diamond is being paid too much there will be any change.
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