Mandelson to spend on hi-tech industries

The Trade Secretary is set to reveal his 'manifesto' as Harvard professor tells ministers to close productivity gap

PETER MANDELSON, Secretary of State for Trade and Industry, will next week unveil a major overhaul of his department's pounds 1bn-a-year budget designed to focus more resources on innovation and knowledge-based industries.

The DTI also intends to launch 10 new industry forums to encourage best practice and co-operation between manufacturers and suppliers in sectors regarded as key to Britain's economic growth. The proposals will be contained in a White Paper on competitiveness, to be published next Wednesday and billed as Mr Mandelson's "manifesto for industry".

Another initiative in the White Paper will be to give ministers responsibility for fostering "clusters" of high-technology companies and easing planning restrictions on the development of such clusters in certain parts of the country when it is deemed to be in the national interest. There will also be a series of programmes designed to encourage greater commercial exploitation of technological know-how.

The initiatives are likely to see the redirection of a large part of the DTI's budget away from areas such as regional selective assistance and towards the promotion of entrepreneurship and enterprise. At the heart of Mr Mandelson's approach is a belief that Britain's future lies in becoming a knowledge-based economy, promoting sectors such as electronic commerce and biotechnology.

The White Paper will also be seen as an attempt by Mr Mandelson to wrest the initiative back from the Chancellor, Gordon Brown, who has taken the lead in the Government's drive to raise levels of productivity across the economy.

Speaking yesterday, Mr Mandelson said the White Paper would spell out how New Labour intended to help markets work more efficiently and more openly. He said his approach was based around the "three Cs" - greater capability in skills, more competition among companies and increased collaboration in key industries.

Mr Mandelson will also publish a consultation paper in the New Year exploring the idea of removing political involvement in merger decisions. The idea has the backing of the Prime Minister and would mean merger policy being determined independently, as monetary policy now is.

Mr Mandelson said: "My first instinct is that we should go in this direction." But he accepted that there could be instances where the public interest justified the involvement of politicians.

Meanwhile, it has emerged that last week's agreement giving the Post Office more commercial freedom and reducing its cash payments to the Government only came after Downing Street intervened and instructed the Treasury to back off. The Chancellor had wanted to maintain much stricter control over the organisation and keep dividend payments from it at around current levels of pounds 320m a year, but was overruled by the Prime Minister.