John Rentoul: Quick, count the spoons

Mandelson's 'new industrial activism' could lead Labour down a well-worn garden path to electoral ruin
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The Independent Online

When you hear a politician talk about the role of the state, you know that he – in this case, it was Peter Mandelson – is devising new ways of wasting public money. When you hear Lord Mandelson talk about the mistakes of the 1960s and 1970s when governments "attempted to pick winners", you know that he is about to repeat them. Especially when he begins his speech: "The burden of proof is on anyone proposing a 'new industrial activism' to show that they have fully understood the failures of the past."

The thing about Mandelson is that he has Tony Blair's trick of describing the case against himself with apparent honesty and clarity, before setting out to disagree with it, to make it look as if he is engaged in a rigorous intellectual disquisition. Blair usually wasn't, and Mandelson certainly wasn't in his lecture at the Royal Society of Arts last week.

Lord Mandelson's speech was the perfect antidote to those who think that Gordon Brown's response to the financial crisis has united the Labour Party behind an ideological preference for the state over the market.

This is not to say that Labour's recovery in the opinion polls is a mirage. The Brown Bounce was first identified by a ComRes poll for this newspaper the weekend after the fall of Lehman Brothers. It has been sustained by the voters' understanding that the Prime Minister is taking action likely to mean that, in the short term, fewer people will be unemployed than otherwise would be.

But the idea that there is any intellectual coherence beyond this calculation was comprehensively, if unintentionally, debunked by Mandelson's lecture on Wednesday. It was a speech full of negatives. "Industrial activism does not mean propping up failed companies or running industries from Whitehall." It trailed off into treacherous abstractions and platitudes whenever the Business Secretary tried to set out what it does mean. He explained the purpose of his lecture as being "to explore further this activist role for government – not in busybody mode but in getting-it-right mode". Getting-it-right mode? As the winner of X Factor might say, Hallelujah.

The "new industrial activism" had to be strategic, Mandelson said, which meant it had "to assess how horizontal policy can secure maximum benefits across all sectors and reinforce our particular strengths". The more he talked of "value-added", the need to "diversify the specialist bases of the UK economy" and "smart regulation", the more his audience should have counted its spoons.

The true content of the lecture was betrayed in a typically waspish aside. Departing from his text, Mandelson said that ministers should "think in terms of outcomes, not in terms of the dividing lines between departments". This included "Her Majesty's Treasury taking the long-term view, even longer than it does at the moment. Even sometimes saying yes."

He was confirming, in effect, the reports that he was arguing with Alistair Darling about the terms of any government rescue of Jaguar Land Rover. That confirmation alone should refute the thesis that the Labour Party is united in its response to the economic crisis, except that it is possible to argue that Darling is an exception to that unity by virtue of the Treasury's historic role as the frustrator of socialism. Or it could mean that there was a difference of opinion between Cabinet ministers last week, in which Darling meant what Mandelson said about the Government not picking winners and Mandelson did not. We will have to wait for the Government's decision to be announced to find out how much of an ugly compromise it is between "propping up failed companies" – or, in this case, propping up the loss-making subsidiary of a successful one – and not doing so.

Mandelson's side of the argument may have been strengthened by the White House announcement on Friday of a $17bn bailout for US car makers. But that doesn't make it right. Why should we bail out an Indian company, Tata, because it cannot sell enough Jaguars, when we won't bail out whichever private equity fund ended up with Woolworths when the music stopped, because it couldn't sell enough tat? The worst of old 1960s and 1970s reasons, one suspects. Because making cars is a "strategic industry", and not making them, as the Society of Motor Manufacturers and Traders put it, "is a national emergency requiring urgent action".

We do not, as I say, know how far Mandelson has sold the pass to the most ancient of vote-losing instincts of the Labour Party, until he announces what he means by not having an "open cheque book". It is suggested that it would be all right for the taxpayer to underwrite loans to Jaguar Land Rover, because the banks won't lend. But that won't be all right. State guarantees for banks, which Brown has given as part of saving the world, have started to defrost the frozen credit market. To leapfrog that process by deciding to guarantee loans to individual companies is to go too far. If banks don't think it clever to lend to car makers, who is Mandelson to say that they are wrong?

It is one thing to work "with other countries to save the world's banking system", which is what Brown meant by saving the world. And it is another to borrow money to cut VAT to pump cash into the economy. But it is quite a different thing to decide that a specific firm is more important for employment or the national interest than any other, so that it deserves taxpayers' money and others do not. That is the road to ruin, whether you call it "new industrial activism" or smokestack Labour.

Voters support surgery for the world banking system and tend to back the "save jobs now, pay later" tax cut, to David Cameron's temporary embarrassment. But bailing out loss-making companies? The idea that all forms of state intervention are part of an ideological whole that is popular is a delusion that would be worse than a mistake; it could make sure that Labour lost the next election.