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Putting regions at the heart of industrial activism

Rt. Hon. Lord Mandelson,  First Secretary of State, Secretary of State for Business, Innovation & Skills, Lord President of the Council
Business Breakfast Manchester, Lowry Hotel, Salford,  08 January 2009

I am not going to pretend that 2009 isn’t going to be a challenging year for the global economy – and that includes the UK. As the Prime Minister has rightly said: this is the first international economic crisis of the global age. Those who fail to understand this and its implications will not understand the responses we need to take.

You may not feel that we have got everything right, in content or scale. Over the coming months we will continue to learn from our own and others’ experience as we adapt to the unique combination of economic problems we are facing. We will want and need a constant dialogue with business on the ground to fine tune what we are doing. The Government will be with you every step of the way.

Because just as it is true that this is no ordinary downturn, it is also true that it is not a uniquely British phenomenon, as some would like to suggest.

The action the Government is taking is being replicated across Europe and the world, including in China and India. Indeed, the benefit of stimulus action is multiplied by effective international co-ordination. Hence the importance of the leadership Britain is giving as this year’s chair of the G20 group of the world’s leading economies.

Real help now

The Government’s aims are clear. We used the banking recapitalisation programme to save the banks from collapse. Now, we have to help get them back on their feet, and lending properly again. This will take time. But we will do everything we can to ensure that tight credit does not drive viable businesses to the wall.

We used the Pre-Budget Report to deliver financial help to small firms in the form of billions of pounds worth of loan guarantees and trade finance guarantees. We’ve brought forward billions of pounds worth of infrastructure spending in the regions, including here in the North West. That means jobs here this year, and strengthened regional economic capacity for the long term. We raised the threshold on business rates for empty properties – meaning relief for more than three quarters of empty properties in the North West.

And I’m pleased to announce today a new £35m Business Start Up programme through Business Link North West that will help entrepreneurs in the northwest to get new companies off the ground and access the support they need to grow and flourish. The five year fund has the target of helping more than 12000 companies and creating almost 23000 jobs.

This is real help now, and it is what your region needs. But I want to make a broader and equally important point about the long term.

Avoiding stop and go

It would be easy but incredibly misguided to assume that the right response to this crisis was general retrenchment. Government has made that mistake again and again over the last fifty years. In previous recessions, it has cost us more because short-term unemployment has been allowed to become long-term unemployment. Because ‘stop/go’ in our public infrastructure investment and public services has blighted our competitiveness. And because allowing our vital skills base to wither or atrophy has left us poorly equipped in a rapidly changing economic world. The Government is determined not to repeat these mistakes.

It sounds right for thrift and austerity to go with tough economic conditions. But that principle of personal economy just doesn’t translate to public economy in the current circumstances. It misses a basic reality about the role of demand in the economy and the role of investment for our future. When private sector demand falls this sharply the only pockets deep enough to make any difference belong to government. That applies in the UK. It’s going to apply in President Obama’s America. It is applying across Europe and around the world.

That doesn’t mean a “splurge”. The government belt will tighten with everyone else’s. Additional borrowing means public spending growth will slow to little more than 1% after 2011. The obligation to improve efficiency and productivity in the public sector is stronger and more important than ever.

The need to keep investment high where it needs to be high will mean making some choices about government priorities. That’s unavoidable. But what we cannot and must not fail to invest in now is our people and our industrial future.

From real help now to real investment in the future

Real help now is vital, even if we cannot turn around the situation overnight. But industrial success is also a long game. The investment we maintain now in skills, transport and science is not only the ladder by which we will climb out of the downturn – it is also critical to our success in the upturn.

The doubling in size of the global economy over the next decades will offer huge opportunities to Britain. We are on the edge of a global industrial revolution in green technology and also the way we power our societies. The enterprise and entrepreneurialism of the private sector has to be the main driver of this success. But in these and other areas business needs a stable framework of government policy and policies that ensure that we produce the skills and infrastructure that business will need.

That’s why we need to take a much more strategic approach to industrial policy in government. Melding the different strands of government policy into a much more focussed sense of our industrial future, and what both government and the private sector need to do to get us there. In the next few weeks you’ll see initiatives on digital technology and low carbon industry designed to do just that.

The role of the regions

The role of the regions is absolutely crucial to this. Whitehall can handle the big picture. But the next industrial revolution will, once again, be driven by the regions, just as Britain’s first industrial revolution was. We need to train, and nurture and support the Richard Arkwrights of the future. It won’t be cotton, but it will be bioscience, or green tech, or precision engineering or creative industries.

Industrial activism has to be built on precise regional knowledge of what is needed in terms of infrastructure, investment and training. I see the RDAs taking a leading role in this. Indeed I believe it should now be their defining role. Driving a jobs and growth agenda with regional partners, regeneration and infrastructure bodies, and, importantly, local authorities. Working closely with the Regional Minister and other lead agencies to drive forward agreed regional action. Working with the Learning and Skills Councils in assessing and meeting regional skills needs with local businesses and employers, schools, FE colleges and universities. Working with Job Centre Plus in meeting the needs of the newly redundant, but also equipping the region for long term success by developing and maintaining a highly skilled and flexible labour market. Making sure that the array of regional, sub-regional and local bodies partnerships and agencies adds clear and distinct value and doesn’t translate into a lack of coherence or impact in delivering policy. And directly responsible in these goals to the Department of Business, which will back them to the hilt in getting it done.

I would like to thank regional and local partners for what they are doing now to deliver real change. I welcome the NWDA’s £10million package of finance support options for businesses in the North West. Also the extension of the small loans scheme for SMEs and the creation of the Transition Loan Fund to provide loans to businesses from £50,000 to £250,000. But the hardest work is yet to come.

You know, it’s easy to fall into a mindset that sees only bad news and empty shops on the high street. But what I see every day from business and employees is resilience, perspective, and a willingness to pull together. That belief in Britain’s power of renewal is at the heart of the Government’s new industrial activism. I look forward to working closely with all those in this and other regions to bring it about.