View From City Road: Hidden benefit of the DTI's bribes

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The Independent Online
Attracting inward investment to these shores seems to be Britain's last great growth industry. Few countries in Europe can compete with us when it comes to persuading foreign companies to come in and set up shop.

Low labour costs, a fairly well educated workforce and good labour relations are usually cited as reasons, but the case of Samsung and a string of other major coups makes clear that cash is a big reason for Britain's attractiveness. On top of about pounds 10m in local grants, Samsung is getting pounds 58m in regional selective assistance from the Department of Trade and Industry. Although not as much as Spain was offering, it is still half of one entire year's RSA grant budget.

Tempting foreigners with such bribes has become one of the DTI's few notable skills. To qualify, a company must propose to base its project in an assisted area where unemployment rates are among the worst third in the country. The project must create new jobs and only gets a grant if it would not have gone ahead without one.

Ostensibly, the aim is to create jobs. In practice, the rules are written in a way that is designed to help the balance of trade. Foreign manufacturers planning to export from Britain stand about the best chance of anyone to qualify for a hefty grant. They get more than 40 per cent of all RSA money allocated.

It is a strange anomaly that while European Union members are not allowed - officially, at least - under European Union rules to pump state funds into their own native industries, the European Commission makes no attempt to interfere with grants Britain gives to businesses from outside Europe.

But as long as the freedom to do so exists, the DTI is right to make the most of it. Japanese manufacturers such as Nissan were attracted here partly through the offer of government grants, and the success of that policy is there for all to see.

The jobs they provide have grown from the hundreds into the thousands, and Nissan's success has forced British companies to get their act together to remain competitive - a hidden benefit that in the best cases more than justifies the outlay of taxpayers' money.