Labour's industrial revolution

Market forces must make way for interventionism, says Mandelson

New Labour will today abandon 12 years of support for market forces by unveiling an interventionist strategy under which the Government will subsidise the growth industries of the future.

In an interview with The Independent, Lord Mandelson said the drive could create hundreds of thousands of jobs in hi-tech and low-carbon industries over the next 10 years, to compensate for the smaller financial services sector that will emerge from the current recession.

The new strategy marks a reversal of the Government's free-market approach since Labour won power in 1997, as ministers follow the bailout of Britain's ailing banks by intervening in other key areas of industry.

The Business Secretary said: "If markets fail or don't work efficiently, government has a role to play – as we saw in the financial markets." He insisted: "The Government's job is not to substitute for markets or displace the private sector. We are not into bailing out the past, but removing the barriers to investing in the future."

His "strategic plan" will be a central part of a "going for growth" Budget to be announced by Alistair Darling on Wednesday.

It could lead to hundreds of millions of pounds of taxpayers' money being used to fund the expansion of "green" industry. Projects funded could include wind, wave and nuclear power, and electric and hybrid cars. Digital communications, pharmaceuticals, life sciences, aerospace, business services and electronics may also be in line for such "green" funding. As well as providing direct aid, all government departments will shape tax and regulatory policies to help these firms.

Ministers will use the Government's huge purchasing power – £175bn a year – to buy as many British goods and services as possible. They insist that a "buy British" policy will not breach European Union rules on state aid and public contracts.

Today's "New Industry, New Jobs" report, to be launched by Gordon Brown, the Skills Secretary, John Denham, and Lord Mandelson, calls for "a new activism" in industrial policy.

It is designed to provide a more upbeat message, as Mr Darling admits the economy will not recover in the second half of this year as he forecast last November.

The Chancellor is expected to predict it will contract by about 3.5 per cent this year before starting to grow again at the end of the year. Another gloomy set of unemployment figures will be released three hours before they are overshadowed by the Budget.

In his interview, Lord Mandelson said: "It is not enough to limit the damage of the recession, however vital this is. We need also to provide a vision of the opportunities and advantages of the UK in the world economy at the upturn and beyond."

Claiming the interventionist approach would help Britain emerge more quickly from the downturn, he said: "We have to grow our way out of this recession, not simply sit back on our hands, do nothing about it and let events take their course." The shift is designed to answer criticism from business that other governments, notably France, are doing more to help their domestic industries than Britain is. "We cannot be the odd one out," Lord Mandelson said. He insisted the change would not mean "economic nationalism", because the Government still supported open markets and free trade.

The Business Secretary added: "To justify government action, there will have to be a real opportunity to make a difference, and any government initiative must make a genuine long-term impact to give value for money to the taxpayer."

Other proposals include: ensuring that high-growth, high-innovation firms get the financing they need; more government support for exporters; more aid to turn bright ideas into "world-beating" products; and exploiting opportunities created by university researchers.

The document insists the Government will not "pick winners", opt for state ownership of industry, "override market forces or ignore market signals". Its new activism "does not imply a fundamental change in our view of the relationship between the market and the state.... However, the way the Government sees its own role in the market needs to change in order to deliver a more coherent and effective approach." This means "a readiness to intervene where necessary" by "supplementing" rather than "substituting itself for the market" and "correcting significant market failures."

It says the credit crunch showed that markets cannot be relied upon to serve the public interest. "In future there should be no barriers of mind-set that hold back sensible and prudent intervention," it adds. "This is not activism for its own sake." While not denying Britain "the huge benefits of free enterprise," the Government recognises that the private sector "has important limits."

Lord Mandelson said that "government has to act, as other governments do, in removing the barriers holding business back".

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
Brendan O'Carroll as Agnes Brown in the 2014 Mrs Brown's Boys Christmas special
tvCould Mrs Brown's Boys have taken lead for second year?
News
news
News
peopleIt seems you can't silence Katie Hopkins, even on Christmas Day...
Arts and Entertainment
tvChristmas special reviewed
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Arts and Entertainment
Wolf (Nathan McMullen), Ian (Dan Starky), The Doctor (Peter Capaldi), Clara (Jenna Coleman), Santa Claus (Nick Frost) in the Doctor Who Christmas Special (BBC/Photographer: David Venni)
tvOur review of the Doctor Who Christmas Special
Life and Style
fashion
Arts and Entertainment
Japanese artist Megumi Igarashi showing a small mascot shaped like a vagina
art
News
i100
Arts and Entertainment
Left to right: Stanley Tucci, Sophie Grabol and Christopher Eccleston in ‘Fortitude’
tvSo Sky Atlantic arrived in Iceland to film their new and supposedly snow-bound series 'Fortitude'...
Arts and Entertainment
Jenna Coleman as Clara Oswald in the Doctor Who Christmas special
tvForget the rumours that Clara Oswald would be quitting the Tardis
Arts and Entertainment
tv
News
The Queen delivers her Christmas message
newsTwitter reacts to Her Majesty's Christmas Message
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Ashdown Group: Senior Marketing Executive- City of London, Old Street

£40000 - £43000 per annum + benefits: Ashdown Group: Senior Marketing Executiv...

Ashdown Group: Marketing Manager

£40000 - £43000 per annum + benefits: Ashdown Group: An international organisa...

Ashdown Group: Internal Recruiter -Rugby, Warwickshire

£25000 - £30000 per annum: Ashdown Group: Internal Recruiter -Rugby, Warwicksh...

Ashdown Group: Marketing Manager/Marketing Controller (Financial Services)

£70000 - £75000 per annum + benefits: Ashdown Group: Marketing Manager/Marketi...

Day In a Page

A Christmas without hope: Fears grow in Gaza that the conflict with Israel will soon reignite

Christmas without hope

Gaza fears grow that conflict with Israel will soon reignite
After 150 years, you can finally visit the grisliest museum in the country

The 'Black Museum'

After 150 years, you can finally visit Britain's grisliest museum
No ho-ho-hos with Nick Frost's badass Santa

No ho-ho-hos with Nick Frost's badass Santa

Doctor Who Christmas Special TV review
Chilly Christmas: Swimmers take festive dip for charity

Chilly Christmas

Swimmers dive into freezing British waters for charity
Veterans' hostel 'overwhelmed by kindness' for festive dinner

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

Yazidi girls killing themselves to escape rape and imprisonment
Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

Ed Balls interview

'If I think about the deficit when I'm playing the piano, it all goes wrong'
He's behind you, dude!

US stars in UK panto

From David Hasselhoff to Jerry Hall
Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

Grace Dent's Christmas Quiz

What are you – a festive curmudgeon or top of the tree?
Nasa planning to build cloud cities in airships above Venus

Nasa planning to build cloud cities in airships above Venus

Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect
Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

Clocks, rifles, swords, frogmen’s uniforms

Surrounded by high-rise flats is a little house filled with Lebanon’s history
Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

Four months after the bombardment, Gaza’s wounds are yet to heal

Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
Gastric surgery: Is it really the answer to the UK's obesity epidemic?

Is gastric surgery really the answer to the UK's obesity epidemic?

Critics argue that it’s crazy to operate on healthy people just to stop them eating
Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

Homeless Veterans appeal: Christmas charity auction

Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
Pantomime rings the changes to welcome autistic theatre-goers

Autism-friendly theatre

Pantomime leads the pack in quest to welcome all