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Lord Mandelson speech to New Industry New Jobs Conference

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Issued 14 October 2009

Secretary Lord Mandelson Driving forward industrial activism in a global economy speech to New Industry New Jobs Conference, Wednesday 14 October

Thank you all for coming. It’s great to see so many eminent faces. This is a conference that almost certainly wouldn’t have taken place two years ago. It is about questions that we weren’t really asking in government two years ago.

They are post-banking crisis questions about the roles of government and the market. About how we build a balanced recovery.

I think they are questions that the acceleration of globalization was starting to force us to take more seriously anyway – but the banking crisis has focused our minds. And that’s a good and necessary thing.

I wouldn’t go so far as to say that industrial policy is making a comeback – at least not in the way that some of us might remember it.

But the challenge of long term, low carbon recovery and growth have pushed us to look more carefully at the way in which government can drive growth. How government policy can equip our country and our companies and our people to compete in a global economy.

Our New Industry New Jobs paper removed a negative check on the subject that has been there for two decades or more. It sometimes seems as if there are only two positions in this debate – pro-market and interventionist. Especially in the financial media. Well, New Industry New Jobs was the first small step towards a synthesis.

In my view, building that synthesis could not be more important. It will shape how we see the recovery, how we respond to the challenge implied by the public deficit. It is fundamental to how we see Britain maintaining and developing comparative advantages in the global economy. That’s why we called it New Industry New Jobs. Because that’s what it is there to achieve.

I don’t think the arguments behind New Industry New Jobs are earth-shattering, but they do have some pretty big implications for government.

One is that the choices government makes and the actions it takes are a huge part of what actually defines the shape of the market, and the capabilities of our people and companies when they compete in it.

The more conscious we are of that, the better government will be at shaping the environment in which businesses are created and grow. In part this is about setting the right frameworks for the private sector to make its investment decisions. But it can also be more ‘activist’.

For example, it should be the stratgeic context of our approach to skills and higher education policy. Which is why we are publishing new frameworks in the next few weeks for higher education and adult skills policy in this country that explictly increase the focus of policy on producing the skills we need to maintain existing comparative advantages and build new ones in areas like low carbon.

We’ve also been piloting programmes that use our multi billion pound procurement budget as a way to incentivise innovation, by opening the tender process wider to to smaller and more innovative companies and making government a lead user of innovative technologies. The successful pilots in the NHS in the East of England show that there is huge potential to expand this across government.

And it matters more than ever right now, because the better we are seeing the knock on effects of all policy in terms of growth, the better our return on any form of public investment or public spending is going to be.

The creation of the department of Business Innovation and Skills consciously puts a large number of these policy levers in a single department with a clear remit for investing in growth. And it’s the first time to my knowledge that that has been done.

But this is a challenge for all of government, at all levels, not just the department of business. That’s why we will be publishing a new framework later in the autumn which will set out more clearly than ever before how national, regional and local delivery partners should work together to deliver key national priorities.

So, my argument is that certain kinds of market interventions to shape our industrial capacities are a good and necessary thing. That doesn’t mean state direction of industry, it means strengthening our basic capacities. I know well from my time as EU Trade Commissioner, in development economics it is routine to assume a role for public policy in capacity building. Yet we rarely use that language for our own developed economies. I think that limits us as policymakers.

Capacity building simply means recognizing that while the market is irreplaceable as the ultimate arbiter of what is long-term viable in Britain, or anywhere else, industrial strength can be lost – or never built – for reasons that are totally avoidable and that have nothing to do with long term viability and competitiveness.

What might that mean? Well, it can be a lack of growth or start-up capital. It can be a lack of information about opportunities. It can be the lack of a workforce with niche skills. It can be a lack of the right partnership between researchers and industry.

A couple of examples from BIS’ work this year make the point.

We have a very strong biosciences sector in the UK, and most analysts agree that renewable chemicals is one of the key frontiers of this sector. Now, no small UK biotech firm can sensibly bear the cost of an industrial biotech demonstrator facility, but Britain will struggle to develop strengths in renewable chemicals without one. So in June we funded one, and will create a fund to help small companies use it.

We’ve committed to funding similar technology testing facilities for plastic electronics, low carbon wind and wave power. Just yesterday we committed to funding a pharmaceutical demonstrator facility at Stevenage alongside the Wellcome Trust, the RDA and Glaxo Smith Klein.

We’ve also part-funded the world’s biggest demonstrator programme for ultra low carbon vehicles – which is an important step towards shifting consumer assumptions about what is viable in low carbon transport. We’re also going to support lead users of ultra low carbon cars from 2011 with a contribution to the cost of a vehicle. Because we can’t afford to cross our fingers and hope that these technologies get off the drawing board.

There are lots more examples in the report in your conference packs that sets out where we’re investing most of the £750million strategic investment fund created at the 2009 Budget.

We’ve also started to take a much more critical look at the way in which financial markets in the UK too often fail to provide long-term risk capital for innovative small firms – a structural problem that is going to be made worse by the banking crisis and the natural risk-aversion that will come with the first few years of recovery.

For this reason we are developing new solutions to address this – the Innovation Investment Fund and the National Investment Corporation. In both cases the aim is to use public seed capital to draw in private investment for investing in innovative small firms.

The goal of today’s conference is to continue a debate around the way we can take these ideas forward. It’s a chance to look at the way other developed economies have tackled these problems – where they have got it right and where they have gone wrong. To ask where and how the UK should be targeting limited resources to get the best outcomes in terms of sustainable strengths and growth. In what sectors and what markets? In what horizontal priorities?

Today’s unemployment figures are a reminder that a genuine recovery is marked not the return to growth alone, but by a return to sustained rising employment. While we don’t know exactly what those jobs are going to be, we do know that a disproportionate number of them are going to come from innovative firms. They are going to come from new market entrants pioneering new technologies and low carbon. They are going to come from new investment.

To argue that there is no role for active public policy in reinforcing this growth seems to me either dogmatic or complacent, or both. To argue that government is essentially the problem for competitiveness seems to me to make the same basic mistake.

We’ve started to make the counterargument, and we’ve put some serious resources behind it. The point of today’s conference is to widen and deepen our thinking and to ask where we might go from here to secure Britain’s economic success.


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Article Published/Sorted/Amended on Scopulus 2009-10-15 13:56:05 in Business Articles

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