From the TUC

Defence, science, transport and NHS can all support British industry

30 Sep 2010, by in Economics

Writing in today’s FT, Nick Butler and Jeffrey Sterling, take a wider view of the spat between Liam Fox and the Treasury about defence cuts. In doing so, they highlight the possibility, indeed in my view the responsibility, of supporting British industry through a variety of government actions, some interlinked and some not.

Butler and Sterling are quite right to remind us that the 2005 defence industrial review identified areas where Britain needed to protect and develop engineering and technical strengths to meet its needs. Some activities, from the integration and protection of complex information and cryptography to some advanced weapons systems, provide spin-offs from “a sector that represents Britain’s largest remaining investment in advanced manufacturing and high level engineering skills”. UK companies, from Rolls Royce to Detica, “hold world leading positions, and this does have a big effect on our industrial base and future growth potential”. If the defence budget is cut to less than 2% of GDP, as seems likely, according to Butler and Sterling, many in the sector will wither away: “The result will be that Britain loses one of its few remaining areas competitive advantage”.

The argument about spin-offs seems to be understood by everybody except the Treasury. David Willetts, the excellent new Science Minister, has made clear his respect for the spin-offs from blue sky research that permeate our economic and industrial landscape, yet the omens for UK science funding do not look good if newspaper reports are to be believed.

Under the last government, former Treasury Minister Angela Eagle tried to use public procurement to promote greener industry before the ‘Policy through Procurement Action Plan’ made specific the role that procurement could play in promoting economic growth. Now, the Office of Government Commerce, which governs procurement policy, has been moved from the Treasury to the Cabinet Office, thereby breaking the link between procurement and economic/industrial growth.

Meanwhile, next month, the Government will publish a White Paper on economic growth. Shortly afterwards, we are expecting a new Manufacturing Framework. I don’t want to pre-empt the result of the Comprehensive Spending Review, and I hope I am wrong here, but I don’t expect there to be much, if any, money to support that Manufacturing Framework. In that scenario, any other ways the Government can find to support industry will be vital.

One of the most important ways would be to recognise that whilst the Department of Business is the custodian of industry policy, many other government departments can support our strategic industrial sectors. From defence and science mentioned above, to the NHS and the Department of Transport, which are just two government departments that spend large amounts of money on goods and services, many of which could be made in the UK. How they spend that money, within EU rules, can have a crucial effect on our industrial fortunes.

If the Government continues to insist on these crazy spending cuts, it has few tools in its locker to promote and develop British industry. For heaven’s sake, it needs to make full use of those that it has.