Economy: Growth

Lord Mandelson Excerpts

Thursday 6th December 2012 Lords Chamber

[Lord Mandelson]

My Lords, I warmly congratulate the noble Lord on securing this debate and on his report as a whole. It will not surprise him that I strongly agree with the bulk of it. When I returned to the Government when the financial crisis struck in 2008, my eyes had been opened by my continental experience to what most other sensible Governments do in placing their weight behind the growth of new markets, sectors and technologies in their economies.

This is not, or need not be, dirigisme of the clumsy and counterproductive kind. It is about identifying an economy’s comparative advantages and then maximising the public and private investment in those advantages; removing unnecessary barriers to new and growing businesses; making sure that all the available national and local instruments or interventions of government are acting, as far as possible, in harmony; pump-priming with additional government resource where the market is failing to provide adequate finance; doing some of the heavy lifting in attracting foreign investment in R&D and building domestic supply chains based on this activity; or helping British manufacturers and service providers to enter global supply chains.

The kinds of frustration that the noble Lord will experience in achieving his report’s implementation are, I suspect, the same that I faced. I want to comment briefly on them. Broadly, they are of three kinds. First, there is lethal short-termism—the bane of British government and corporate life, neither of which have a sufficiently long-termist view inculcated into their perspective and working methods. When I embarked on my own policies of industrial activism, I am afraid that the policy horizon of many in government seemed to stretch from the day of policy announcement to around a couple of months before interest was lost. The hope of those who never signed up to the policies in the first place seemed to be that the policies would die through indifference. It therefore requires strong political will in government to counter this. I regret that such stop/go short-termism kicked in again when the change of government came. The coalition, rather than building on what I started, decried Labour’s growth policies and pinned all its hopes on deficit reduction instead.

The second obstruction lies with the Treasury. Its long-held attitude is that smart, strategic, interventionist policies do not work because, in principle, Ministers and markets do not mix. This is coupled with deep scepticism about public borrowing for extra investment which, in its view, simply adds to the country’s borrowing requirement without delivering anything of very much value. Its approach, I am afraid, is to kill the policies at birth when it can. Then, if this fails, it severely cash-limits the measures and makes access to them by businesses so difficult that they are soon shown to have failed. This inbred Treasury attitude simply has to be conquered in order to make any progress.

The third source of obstruction is more latent than malign, and possibly the most difficult to overcome. It is the sheer lack of experience and capability inside government to design and implement the sort of market-based interventionist policies and instruments we need, especially in the financial area. We need to prioritise this capability and recruit it with government—by which I do not mean, incidentally, collecting further centrally based Whitehall officials.

In conclusion, we can and should learn from others, so if I had one piece of advice for my own party, it would be to spend its time while it can looking at others’ experience internationally and, at home, be inventive; build on what exists rather than returning to ground zero and be prepared to take a major leap in ambition, intervention and organisation in government. Nothing short of that will be needed in the huge economic battle we have to continue to take on.