Economy: Budget Statement

Lord Heseltine Excerpts

Thursday 22nd March 2012 Lords Chamber

[Lord Heseltine]

My Lords, yesterday in another place, the Chancellor of the Exchequer announced that the Secretary of State for Business, Innovation and Skills had invited me to look at aspects of the Government’s industrial strategy and, particularly, at the interrelationships of that strategy with other parts of the economy. I thought it might be for the convenience of the House if I was to expand on this remit at rather greater length than would have been appropriate for the Budget speech itself. I am extremely grateful to have the chance to share my thoughts directly with your Lordships at the earliest opportunity.

The coverage of the Budget inevitably focuses on the economic forecasts and tax changes that represent the Government’s strategy. The tax, regulatory and spending decisions of the Budget are obviously of prime importance in the execution of that strategy, and it is well known that it is a strategy to restore the economy to growth and to enhance competitiveness. Competitiveness is measured against other economies’ performance. I have been asked to undertake a benchmarking exercise to compare our approach with that of our competitor countries and to look at the way in which those countries pursue the implementation of their industrial strategies.

I am the first to recognise that it is no easy task to define the concept of an industrial strategy. They may differ widely from country to country dependent on those country’s histories, their culture and the precise involvement of government. What cannot be denied is that one way or another all Governments play a crucial role in determining the effectiveness of their economic performance. In this exercise, we cannot, of course, look at every economy with which we compete, but I shall try to examine those that are our most formidable competitors.

There is one point I should make—although as a former Minister I was, I think, responsible for more individual acts of privatisation than any other Minister in British history—which is that wasteful subsidy or unnecessary lame duckery is not part of any thinking of mine. Competitiveness is not about headlines, and it is particularly not about headlines that imply that it is all somebody else’s fault. It is often about grinding detail over long periods of time. There are no quick wins and no easy options because all other countries are watching us, just as we watch them. Best practice is rapidly copied, so we have to look ahead. We have to determine to get ahead, and we have to have policies to keep us ahead.

I thought it might be helpful today if I simply asked some rather obvious questions that will preoccupy me in the months ahead. I do not need to be told, and nor do your Lordships, that we have some of the best companies in the world. They are out there winning every day, but is our average performance good enough and how can the underperforming tail be persuaded or encouraged to catch up? Do we set our industrial standards high enough in the modern world?

Of course, as many of your Lordships have reflected, we need to improve our infrastructure, invest in research and development and think long term, but our competitors are doing this all the time. All of us can list the new growth markets. We can put forward the exciting technologies of tomorrow. Of course, everybody is doing just that, so we have to do it just in order to keep up with where we are now, but if we want to get ahead, we have to do it better, and no matter how successful our companies may be in creating jobs in the industries of tomorrow, only a tiny proportion of our young generation now at school will actually find jobs in those exciting new industries.

There is a very proper focus on the quality of our education, and I have to say that I am one of those who is very critical of the past 100 years of government responsibility for education. Our industry depends on world-class results if it is to create and sustain first-class jobs. So can our industrialists expect to see the necessary improvements in our attainments quickly enough to meet the challenges that the markets thrust on them? As important is the need to attain standards in literary and numeracy simply to sustain jobs in the traditional industries, such as housing, retail, construction and logistics, where many more people will continue work than in the newer industries and the ones with fashionable titles. Is our training and skills agenda in line with our industrial expectation and is higher education playing a big enough role in converting the inventive genius of leading academics into jobs here in the UK?

At the heart of the growth strategy is increased priority for the private sector—quite rightly so. It is therefore important to recognise the potential for the LEPs—local enterprise partnerships—in their challenge to rebalance local decision-making towards the creation of wealth in the same way as that which underlay the rise of our cities 200 years or so ago. Over 200 years, the balance in local government has swung decisively towards social provision. There were very good political reasons for this, but it is has happened at the expense of local initiative, as more and more decisions are effectively taken by the functional departmental monopolies of Whitehall. We need to be confident that the LEPs are doing the job that the Government intended.

Every industry in this country is sponsored by a government department. What does that mean in practice? Do the government departments have the people with the skills and experience to sponsor industries effectively? Can our chambers of commerce and trade associations give their members the support that is commonplace in competing economies? Are those who claim to speak for industry and commerce prepared to tell the slowest ships in their industrial convoys that their failure may actually be their fault and not that of government or the economy?

There is much concern about what is called short-termism in our approach to industrial investment. Who owns British industry and do such owners see themselves as having any responsibility for anything other than the short-term valuations of the shares that they own? There has been a continuing debate about the destructive effect of regulation but it appears that those who express the greatest concern are reluctant to convert frequent generalised criticisms into detailed examples of the changes that they would support.

Everyone knows that we face huge challenges in this country in enhancing our competitiveness, but in practice, in everyday life, does the scale of the threat transmit itself into any sense of urgency to get decisions taken or results achieved? Your Lordships only have to think of our planning system to realise that that is a rhetorical question.

Many other issues will be raised as we seek to fulfil our remit, which, according to the letter of invitation, is to:

“undertake an independent review of how spending departments and other relevant public sector bodies interact with the private sector, and assess their capacity to deliver pro-growth policies”.

I have been asked to report by early autumn and such a timescale must act as a valuable discipline on the scale of our work. It will not be possible to visit every factory, meet every representative group or travel extensively. However, I am extremely grateful for the support not only of the Secretary of State and the Chancellor but of the Permanent Secretaries of the Whitehall departments for their co-operation in making available to me a formidable team of officials. We shall do our best to involve the private and relevant sectors extensively in the work that we undertake.

Finally, I should stress that this is not a government inquiry. I have been asked to give my views. It can therefore be only a very partial contribution to a debate about the quality of our national performance, in which we are all involved.