The DTI needs to get its hands dirty

Less help for boffins and more for small businesses, please, say critics of the DTI
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The Department for Academic Research. This rather spurious-sounding Whitehall outpost doesn't actually exist, but if the Secretary of State Patricia Hewitt was honest with herself, this is how the Department of Trade and Industry should be renamed.

The DTI is a misnomer. It employs 10,000 people and has an annual budget of £4.5bn. But just £1.7bn is allocated to what can be described as private-sector trade and industry work.

In contrast, a whopping £1.8bn is spent, through a plethora of different bodies controlled by the DTI, on providing science and technology grants to universities in the UK.

What's more, the time and money the DTI does spend on trade and industry is increasingly being regarded by British business as a waste of resources. All this comes as the Treasury, in the grip of the power-hungry Gordon Brown, is growing ever-more dominant, capturing ground that the DTI once occupied. Friday's announcement of 5,000 job losses at Rolls-Royce left the DTI looking leaden-footed and impotent.

The pressure on the department to justify itself is mounting.

Tomorrow, the Centre for Policy Studies, a think-tank, will publish a detailed investigation into the DTI. It will conclude that the department is in need of radical change if the Government is to retain is pro-business credentials.

The report will come as Ms Hewitt is conducting her own internal review of the DTI. And already, business groups, once fearful of criticising the department, have privately written to the DTI arguing that change is necessary.

Perhaps because so little of the DTI's budget goes on promoting business, industry feels let down by the department.

Ruth Lea, head of the policy unit at the Institute of Directors, says: "I don't think that the DTI is a particularly good business advocate. Sometimes it seems more interested in protecting employees than [protecting] employers. I would like to see it as a strong business advocate at cabinet level."

Against this background of growing discontent, the DTI's budget over the last two years has risen by 58 per cent, partly as a result of new social policies introduced by Labour.

But the CPS argues that the department should go back to its roots, being remodelled as a department for commerce, similar to its US counterpart. Out would go its social agenda and science research funding, leaving it lean and focused on business.

Stuart Lyons, author of the CPS report, says: "In America, the central government is far more effective in leveraging support from commerce and the community for its business development programmes."

Mr Lyons also argues that the Office of Science and Technology, which drains 39 per cent of the DTI's annual budget, should be hived off. "Any idea that the Office brings a vast array of scientific and technological know-how to the heart of industry is misplaced. The DTI is not equipped to manage the nation's science base," he says.

The department also comes in for criticism for the way it handles a "core" function – the Small Business Service. Costing £340m a year, this is run through 45 regional Business Links.

While the DTI has recently attempted to boost the profile of the links through spin doctoring, they are regarded by the both the CPS and the IoD as ineffective and overly complicated.

"The firms Business Links were meant to help have not been helped," says Mr Lyons. "The firms which Business Links were not set up to help have received some service." According to the CPS, the Business Links last year helped just 1.2 per cent of firms employing between one and nine people. However, they provided a service to 55 per cent of firms that employed more than 250 people.

The fact that Ms Hewitt has made it one of her first jobs as Secretary of State to review the role of the DTI is positive. Unlike her predecessor, Stephen Byers, Ms Hewitt has already developed a rapport with industry after a successful stint as e-Commerce minister. The plans she announced last week to put directors' remuneration packages to a shareholder vote will bring her the further support of the City.

And Ms Hewitt's new permanent secretary, Robin Young, has also made a good first impression. One senior FTSE 100 company director says approvingly: "He seems to understand that business is genuinely ready for change."

But change there will have to be if the DTI is to shake off its commonly known tag, perpetuated by Private Eye magazine, as the Department for Timidity and Inaction.