When it comes to the economy, the Government has two tasks. The immediate priority is, of course, to re-start flagging growth. But there are also longer-term concerns to be addressed: how can Britain maintain its position in an increasingly competitive, highly globalised world? On the second question, the Coalition is showing considerable insight, even courage. All the more disappointing, then, that efforts to bounce Britain back out of recession continue to be so much more bark than bite.
The latest, much-vaunted plan for a state-backed small business bank is a case in point. The proposal – formally announced by Vince Cable yesterday – has much to recommend it. Access to finance is indeed a problem, not helped by newly stringent regulations on banks. And the Business Secretary’s suggestion that the scheme be delivered via challengers to the so-called “big four” – such as Aldermore or the Co-operative – is also a good one. All efforts to increase competition in the sclerotic, highly centralised banking sector are to be commended.
But there the promise ends. Without a considerable slug of cash, Mr Cable’s new project is little more than a one-stop shop for the array of existing government lending schemes, none of which has yet made much of a difference. Unless the Chancellor can be persuaded to put his money where his mouth is, the initiative looks like yet another example of big talk with little substance.
Rather more encouraging is the shake-up of employment rules due to be announced later in the week. To the annoyance of the Tory right, the Liberal Democrats have neutered many of the more controversial recommendations from venture capitalist Adrian Beecroft. But Mr Cable is, nonetheless, expected to announce changes making it easier for companies to get rid of staff, and cutting the time and cost of doing so.
Insofar as such tweaks make Britain both a more competitive economy and a more attractive business location, they are to be applauded. But since red tape cannot be blamed for the double dip, slashing it cannot realistically be expected to lift us out of it.
If the Government’s growth plans are lacklustre, however, the implications of the broader industrial strategy set out by Mr Cable are anything but. Given that the very term “industrial strategy” was politically unmentionable for decades, tarred by the excoriating experiences of British Leyland et al, the admission that “pure laissez faire” is not the way forward is quite a watershed.
In fairness, it was Peter Mandelson who began the reversal, when he was parachuted back into the Brown government in 2008. But for a centre-right Coalition to take up the baton (albeit after a two-year hiatus) signals a fundamental shift in thinking across the political spectrum. It is also an admirably clear-eyed acknowledgement of the economic realities of globalisation, and one that sits well alongside the Government’s wider efforts to champion British business abroad.
On paper at least, Mr Cable’s plans are on the right track, giving the nod to government support for research investment and skills development, and to the more considered use of the state’s vast purchasing power, all with a view to boosting potentially world-leading sectors such as life sciences. It can only be hoped that in practice the Government’s activities will be sufficiently light-touch to exorcise the demons associated with “picking winners”, yet substantial enough to provide the direction and continuity so long lacking. If so, they will be welcome indeed. What they will not do, though, is help Britain out of its current doldrums.Reuse content