“There is something important missing: a compelling vision of where the country is heading beyond sorting out the fiscal mess; a clear and confident message about how we will earn our living in future.”

This was the frank admission in a letter from Vince Cable to the Prime Minister and Nick Clegg which appeared in last week’s FT (£).  The business secretary also urged the coalition to look beyond the electoral cycle and adopt a more strategic long-term approach which looks 10 to 20 years ahead.  At the heart of this approach is nurturing emerging industries whilst also anticipating potential structural threats to key existing industrial sectors.

This chimes with a speech made by Cable last year in which he made the case for a more sophisticated path to industrial policy which is neither wholly laissez- faire nor heavily interventionist.  This speech is well worth a read as it outlines the reasons why the business secretary has shifted his position in recent years.  As he concedes he was someone who made his name by criticising the role of industrial policy in shaping the economy.  Now he is calling for an approach which “works with the grain of markets but is not passive”.  It is not about ‘picking winners’ or propping up failing companies but is instead about government intervening where appropriate following “proper appraisal of costs and benefits” and avoiding the old mistakes of government interventions that “fell  victim to political favouritism or commercial vested interests.”

What is revealing about this article is the sense that whilst the coalition is confident in its deficit reduction message, they appear less sure about whether their message on growth is hitting home.  In addition, there is the inevitable coalition tension around the balance which needs to be struck between supply side measures and stimulating demand.  It will be interesting to see what happens in the March Budget and there will be the usual frenzied build up.  In reality I do not foresee any major announcements and the Chancellor remains firmly committed to Plan A.  In fact last night’s news of the UK being placed on negative outlook by the credit agency Moody’s was for the Chancellor “a reality check” for anyone who thought Britain could “duck confronting its debts.”

What is clear is that there is no instant solution to the growth dilemma.  Too often the issue gets sidetracked by political point scoring or by commentators seeking the next headline.  What we need instead is an evidence-based, rational and balanced debate.  We need to look at others have done in the past and are doing now to boost growth and learn from examples of best practice.  Above all we need to avoid short-term fixes that do not tackle underlying problems.

These are all points we make in our report ‘The Bootstrap Recovery’ which was released last week.  In this report we argue that a more coherent plan is needed which builds on the strengths of the UK economy and tackles long- standing structural problems across sectors and within sectors.  In addition we need to nurture emerging sectors, improve the performance of established sectors and exploit emerging markets.  Developing a long-term strategic plan for the UK economy is not easily done and will require not just government commitment, but also the buy in of the business community.  It is playing the long game however that will reap most reward – so that is the game we need to play.

Technorati Tags: growth agenda, industrial policy, The Bootstrap Recovery, vince cable

Tags: growth agenda, industrial policy, The Bootstrap Recovery, vince cable

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