Don’t cut growth: Andy Westwood says that Labour got it right

‘We’ve got to get the economy moving’ urged David Cameron ad nauseam during the election campaign. But beyond his condemnation of the ‘jobs tax’ and his desire to shrink the size and the role of the state, the detail was nowhere to be seen. He claimed then that what government spent or did was not the same thing as the economy – visibly incredulous as Gordon Brown warned about endangering the recovery by cutting expenditure too quickly.

A few weeks into the coalition government and the headlines are still about cuts, because in Cameron’s words ‘growth won’t be enough’. That may be because he has yet to give it any serious thought, or it may be because they just prefer to talk about the deficit. But there’s a third possibility: it may be because the Tories and Lib Dems don’t want to admit that they have retained Labour’s new industrial policy.

Key to this was the formation of the Department for Business, Innovation and Skills and ‘NINJA’ – the ‘New Industries, New Jobs’ white paper jointly written and conceived by Lord Mandelson and John Denham. Which document was published in Budget week exactly two years ago, providing a narrative for a more optimistic economic future amidst the fast developing recession in 2008.

Mandelson deserves credit for articulating a strong economic story amidst the gathering gloom in the run up to the General Election. Indeed, he lobbied Gordon Brown to create the BIS empire, and his loyalty to the PM during the coup attempt (June 2009 if you can’t remember which one) meant that he got what he wanted. The election result was closer than everybody expected.  And this industrial policy was one of our strongest and most convincing stories.

So far, both BIS and the notion of “new industries, new jobs” have survived. Vince Cable has had the luck to land in this department – quickly, and rightly, describing it as the department for growth. Liam Byrne’s wasn’t the only note left for incoming ministers and nor was it the most important. Peter Mandelson left Vince a note too – it said ‘don’t let them break this department up’. For BIS is anything but a department of paper clips.

The Tories were oblivious.  Perhaps they were looking the other way, salivating about cuts and dogmatically reducing the size of the state. Or perhaps, not actually having many ideas about how to ‘get the economy moving’ it seemed like a department worth offering to the Lib Dems as part of the coalition deal. At least it would ensure that Vince wouldn’t be Chancellor – reassuring City bankers and their own party at the same time. Did they know that they were missing a trick? And did Cable know what he was getting his hands on?

In his first major speech, Vince Cable said that the audience may have noticed that he wasn’t Peter Mandelson. Given what he has been saying – and what David Cameron said in his first major economic speech last week – you could have fooled me. BIS has been retained in its entirety – its responsibilities, its budgets and its defining story. Against popular expectation, higher education and science stayed in the department rather than rejoining Michael Gove in the refashioned Department for Education.

David Willetts with his two portfolios (one brain working on each) will continue to be harnessed as part of the push for economic growth. Cameron reaffirmed the sectors and assets that will drive economic growth in what he described as his first major speech as Prime Minister. Obviously he talked about cutting the deficit and liberalising the economy first (he’s a Tory after all) but then he turned to industrial policy.

‘That doesn’t mean picking winners’, he said, ‘but it does mean supporting growing industries – aerospace, pharmaceuticals, high-value manufacturing, hi-tech engineering, low carbon technology. And all the knowledge-based businesses including the creative industries.’

The very same sectors that the NINJA white paper described two years ago. And this new industrial activism will prove to be a major legacy of the Labour party’s thirteen years in Government.  And not just the last two years – it may even turn out to be the most significant of all.

Fundamentally this is and has been a Labour story: long term investment in science, universities and in the skills of the workforce.  British science was on its knees in 1997.  Universities and colleges were hugely underfunded and housed in antiquated facilities, while millions of adults simply couldn’t read or write. The numbers, the investment and the Labour policies to turn these around are there for all to see. The irony, given the Tory jibes, was that this really was fixing the roof while the sun shone.

Mandelson understood the power of this approach and articulated it well. But others also deserve credit for building these foundations for economic growth and the vital role of Government.  Gordon Brown as Chancellor commissioned the Sainsbury and Leitch Reviews into science and skills. He wrote the cheques that overturned decades of under-investment. On his first day as Prime Minister he created the new Department of Innovation, Universities and Skills with a brief to make it and the record levels of investment underpinning each area, much more than the sum of its parts. The combination of research, science, technology and skills at all levels would drive Britain’s economy in the future.

John Denham as Secretary of State at DIUS laid the ground with the detailed thinking and policy. In ‘Innovation Nation’ and ‘New Industries, New Jobs’ he and DIUS set out the key sectors and industries that would both rebalance and make a fairer economy tick. He also set out how public policy and major Government investment would continue to support these sectors of the economy.

Pharmaceuticals and Bioscience are mutually dependant on government investment in health and the NHS. Creative and digital industries partly depend on regulation and continuing public investment in the BBC, the arts and in our digital infrastructure. high speed rail and crossrail, defence procurement, low carbon energy and major political decisions like rebuilding schools and hosting the Olympics underpin competitive industries and skilled jobs today and in the future.

But only if you consciously bring together the investment, regulation and policies that make it happen. Best value and the bottom lines of departmental spending don’t tell anything like the whole story.

There is a vital geographical dimension to this too. Cameron also described his wish to ‘breathe economic life into the towns and cities outside the M25’.  If this happens it will be because of Labour’s record and its vision for economic growth, not because of a lower national deficit. Better foundations and assets now exist in every constituency in the country.  There are more apprentices and graduates, more adults who can read and write, universities and colleges with new buildings, facilities and new knowledge and innovation.

These assets and legacies of the Labour government are fairly distributed throughout the country – in cities like Manchester, Birmingham and Bristol and in Wolverhampton, Oldham, Doncaster and Middlesbrough.  Labour heartlands playing major parts in our industrial history, our Labour movement and now in turn, our industrial and political future. Rebuilding support can move hand in hand with rebuilding the economy, but we must remind voters (as well as Vince Cable and David Cameron) that it was our idea, our values and our record in Government that will make it happen.

All are reasons why Labour’s investment in schools, hospitals and in research and science did and continues to amount to exactly the same thing as the economy – especially in these towns and cities up and down the country. Even before the credit crunch, Government procurement accounted for between a third and a half of the overall domestic markets in IT and construction. Making a conscious effort to get the most out of this investment and providing support invariably leads you to a major state role in getting the economy moving – both locally and nationally.

This is precisely where Vince Cable finds himself today – with the serendipity and new found knowledge that BIS brings him. The Department for New Industries, New Jobs and Growth.  The department that understands that the state has a leading role in making the economy move.

Cameron simply didn’t get that in the run up to the election.  All of his Conservative instincts tell him that it can’t be true. He was wrong when he said that spending wasn’t the same thing as the economy. What Government does, says and spends money on matters deeply. Perhaps Vince Cable, with Peter Mandelson’s advice ringing in his ears, will persuade him otherwise.  But to preserve the vision for a rebalanced and growing economy with a major role for the state, he has an almighty job on his hands.

Andy Westwood was a special adviser to Labour ministers

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2 Responses to “Don’t cut growth: Andy Westwood says that Labour got it right”

  1. Postlethwaite says:

    Clearly author is living in a parallel universe to the rest of us.
    Tax, tax, tax and spend on the public sector is not a way forward.
    Eventually you will realise you cannot run a country on insurances and burger bars.


  2. very interesting article. Andy raises important questions about where growth comes from, and the role that the public sector plays in that. We can’t just ignore it, or pretend it’s not part of the economy.

    Kitty Ussher at Demos is doing some very interesting thinking on good growth, and on what the new economy might look like.

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