Coalition contortions

Today, we got our first indication of how the coalition government, or at least the Department of Business, Innovation and Skills, will deal with the tricky issues on which the Lib Dem and Conservative partners disagree.

Universities minister David Willetts gave a speech at Oxford Brookes University this afternoon on the funding of higher education, following his widely reported remarks to The Guardian that the cost of so many students on degree courses were a "burden on the taxpayer", widely interpreted as hint that tuition fees were likely to rise. Fees are, of course, one of the major sources of conflict between the two coalition partners, with the Lib Dems securing the right to abstain from any vote on raising them.

So when we asked to see the text of Willetts' speech, BIS had to go through some painful contortions to demonstrate that Willetts' boss Vince Cable was not a party to any of the sentiments expressed. First, we were told that it was a "political" speech, so the BIS press office could not provide it and would have to pass our request on to Willetts' special adviser Nick Hillman (this despite the fact that it was the BIS press office that alerted us to the speech, and invited us to attend). Then, when the text arrived, the name at the top was "the Rt Hon David Willetts MP"—no mention of his ministerial job. And the BIS press release on the event does not include the full text or a video of the speech as it would for a "non-political" speech.

The speech itself is fairly tame (Download a copy of it here)—no repeat of the "burden" comment—generally criticizing the existing fees regime but not really suggesting what a future one might look like. But it is an indication of how sensitive the issue is within the coalition that these efforts are made to keep some distance between the two partners, even within the same department.

The real fun, though, will start when the Browne review reports this autumn.

Impact headaches

We've just been hearing at the Association of Research Managers and Administrators meeting in Manchester from two of the universities taking part in the Higher Education Funding Council for England's impact pilot exercise—a session which seemed to raise more questions than it answered.

Staff from University College London and Bristol told us about the challenges they have faced in the programme, during which they have each prepared two practice impact submissions to the Research Excellence Framework. The task involved gathering case studies in four disciplines—English and clinical medicine for UCL and physics and social policy for Bristol.

UCL found the exercise “very, very time consuming” and struggled to separate academic impact from wider impact. English was a particularly problematic field. Its researchers were also unhappy that HEFCE does not consider that the training of skilled people counts as impact. The university sees this as an essential part of its work.

Sarah Chaytor, research associate at UCL, said that there needs to be a sector-wide debate about where the lines should be drawn on this issue. For example, if a piece of research is used as a recommendation for policy, does it count as impact, or can it only be included if the policy is actually adopted?

Bristol ran into problems with its physicists, some of whom had been working with industry. Understandably, the companies involved were not happy for commercially sensitive information to be put into the public domain, which meant that some information had to be blanked out in the submission.

Petford knocks impact assessments

A “whole useless industry” could be created if impact assessment continues to be given such a predominant place in the proposed Research Excellence Framework, quipped Nick Petford during this morning's plenary session here at the 2010 Association of Research Managers and Administrators conference in Manchester.

Petford, the outgoing pro-vice chancellor for research at Bournemouth, came to ARMA to present the views of the University Alliance on research funding. He suggested that universities could end up spending valuable QR funding on impact studies and even predicted that we will start to see professors of impact studies cropping up.

The Alliance wants the REF to be divided into 15 per cent impact, 70 per cent outputs and 15 per cent environment. Impact considerations are certainly essential when undertaking publicly funded research, Petford suggested. But he questioned its use in the REF.

Also speaking at the plenary was Nancy Rothwell, acting president and vice chancellor of the University of Manchester. She shared her thoughts on the REF and described a detailed exercise that has been going on at her institution to log research impact. She also warned that as public spending is cut, research managers might find themselves on increasingly shaky ground. Less money means less research being conducted, she said, which could lead to a reduction in the number of research managers needed.

Open to whom?

Bill Hubbard,  head of the University of Nottingham's Centre for Research Communications, has just revealed a figure that many will find rather surprising—just 40 per cent of Wellcome Trust grantees comply with the charity's open access requirements, even though they are supposed to be mandatory.

Hubbard says that compliance among research council grantees is even lower. Yet failing to publish research openly under these circumstances can have negative repercussions for an institution as it seeks funding in the future. One delegate suggested that academics simply don't appreciate the negative consequences, which can appear to be an empty threat.

Hubbard has several anecdotes to back up his support of open access, including the interesting tale of the discredited medic Andrew Wakefield. He says that Wakefield made his research available to the press but that the papers that counteracted his claims about a link between the MMR vaccine and autism were much harder to obtain. So that was why his paper got so much unchallenged coverage. I'm not sure that a little extra effort on the part of the journalists wouldn't have turned up some other views, but an enlightening story nonetheless.

Dear David Cameron,

Speakers shared with their colleagues at the ARMA funders’ forum on impact, one key message they would give to our new Prime Minister David Cameron about university research.

Dear David Cameron...

“... don’t cut the Research Council budget, but if you do, don’t simply focus on the short term impacts or let cuts affect blue skies research.”
Steven Hill, head of the RCUK Strategy Unit

“...reduce bureaucracy in medical research. High levels of bureaucracy are bad for universities; their funders and ultimately it negatively impacts on patient treatments and care.”
Simon Denegri, chief executive of the Association of Medical Research Charities

“...continue to support collaborations in research. Even blue skies research should have external stakeholder collaboration. “
Fiona Nightingale, senior adviser at the Knowledge Transfer Partnership

“...do not underestimate the impact of social science research.”
Alan Warde, University of Manchester

Turf wars between university administrators bad for research

Friction between a university’s research office and its development office can result in missed funding opportunities for researchers. For some funding schemes, it is unclear which of the two departments should handle particular funding applications and so this is causing internal clashes at many institutions, ARMA members were told.

For sources like the AXA Research Fund and the Bill and Melinda Gates Foundation, it is debatable whether the funding is a research contract or a gift agreement and so these opportunities may fall between the remits of the two offices. However, research administrators at the meeting are looking at ways of addressing this issue to improve internal co-operation and provide better support for their institution’s -academic staff.

Much of the conflict comes from a divergence in mission, values and staff backgrounds between those working in the different offices. Inward facing research offices are often process-driven and see their role in supporting research staff and protecting academic freedom to maintain funding. Development offices are outward facing and so are focussed on building relationships with external donors at the cost of engaging with academics. Research office staff will usually have backgrounds in research or finance, while development offices often prefer to recruit staff from charities or experienced fund raisers from US universities. So this creates two quite divergent cultures in university administration, members heard.

However, Chris Cox, director of development at the University of Manchester, described the changing role of development offices and their interactions with research offices at the meeting. He said donors now ask for clear agreements on how their gifts will be spent and how this will make tangible differences to the institution that they are supporting. So their working practices are gradually converging with the model that development offices are accustomed to working with. Hence, development offices are now trying to “be more consistent, co-ordinated and safeguard ethical integrity”, he said.
Heavy pressure on development offices to perform, combined with a lack of dialogue with academics can be major contributor to these internal disagreements. But many development offices are now following the research office practice of recruiting staff with experience of working in research. This enables administrative staff to communicate more effectively with academics. Although development offices remain facing outwards, “a university development officer who can’t work with an academic is no use” said Cox.

Other speakers agreed that it will be essential to develop closer ties. “We either need to come together as one function or work much better in co-operation,” noted John Montgomery, research manager at the Cass Business School, City University London.

Why the Right should fear not sneer at Vince Cable

Over at the Spectator, Fraser Nelson has yet to come to terms with the fact that the Conservatives did not win a majority at the election. His article at the weekend writing off Vince Cable and the Department for Business, Innovation & Skills as “fairly powerless” ignores the reality of Lib Dem power within the coalition. It’s also spectacularly ill informed about Cable’s scope for intervention at BIS. Consequently, the article will leave the Spectator’s following in a dangerously false paradise.

Example 1 - One of the central questions for the government is how to make Britain an attractive place for businesses to develop. A big part of that for George Osborne, as outlined in his speech to the CBI, is a flat rate of Corporation Tax that is the lowest in the G20. But the cost of that during a time of severe cuts, as advocated by Policy Exchange before the election, is not spending money on the kinds of active support for business that are not only BIS’s responsibility but also for which Cable sees a role.

So there is a tension in the coalition between two different approaches. The tension has an almost physical form. There is about £1.5 billion a year of generic support for hi-tech firms through schemes such as the R&D Tax Credit and the Technology Strategy Board - all of which could be cut to pay for Corporation Tax cuts.

But this tension is unresolved. Osborne’s aspiration for Corporation Tax is not in the Programme for Government and has not been agreed by the Lib Dems. Likewise for Cable’s views. Both sides are going to have to compromise.

Example 2 - The Takeover Panel is reviewing its rules, with the narrow objective of ensuring all shareholders are treated fairly. Cable has already signalled in his speech to the Cass Business School that he intends to inject into this review questions about how the rules might better encourage economic growth. In this way, the British economy could be made more German.

Those, like Nelson, on the right ought to be a lot less smug about Cable being confined to a “cage” at BIS, and a lot more worried about his capacity for intervention.

NESTA's failed quest for balance

NESTA was the intellectual fulcrum of Gordon Brown’s attempts to use government spending on science to strengthen the British economy. Endowed with a generous £200 million of National Lottery money, it is the think tank that thinks about “innovation”, often for the Department of Business Innovation and Skills.

Yet the new coalition ministers at BIS have made clear that innovation is now an un-word. It is thought too woolly. At a stroke, it seems that NESTA has become irrelevant. But within a month of the election, it has today produced a thick report on the new government’s buzzword of choice - “rebalancing” the economy. Will this be enough to win the hearts of a sceptical coalition, already “auditing” Labour’s NESTA-friendly schemes for cuts?

The NESTA report considers four scenarios of future growth patterns - business as usual, manufacturing renaissance, hi-tech growth and general support for innovation across the economy, even in lo-tech firms.

The report delivers one concrete and useful insight - that manufacturing is incapable of leading Britain out of its current malaise. To do that, the rates of growth in manufacturing would be higher than anything the UK has achieved since 1945, and we lack the skills to do it.

But beyond that, “woolly” is precisely the word that come to mind. There’s a lengthy chapter devoted to the unanswerable question of whether Britain’s economy is unbalanced, which seems a naively literal take on the current debate. And the report repeats the huge claims NESTA makes for the economic benefits of innovation, skipping over the unresolved questions of what innovation is and how it’s impact can be measured.

Equally damaging is the failure to consider what we might call the George Osborne scenario - slashing business support to pay for sharp cuts in Corporation Tax. The key question at this point for BIS is for any given £1 under the government’s control, what is the best use of it - eg tax cuts, deficit reduction or business support? And yet this too is unconsidered.

Indeed, it’s hard even to see what the difference is in government policy between the different options. For example, business as usual suggests the government carries on doing what it is now, presumably including its existing range of support for innovation, currently running at maybe £1.5 billion a year. But the hi-tech option only advocates maintaining support at current levels. So what actually is the difference? Are we really looking at four meaningful scenarios, or four different fantasies?

These fogs of reasoning are wrapped up in massively complex economic modelling, which is not intrinsically bad but which involves so many assumptions and such long lines of reasoning that the validity of each scenario is at best tentative. This is just how things were under Labour, but it doesn’t stop it being a massively complex source of woolliness.

This is not a piece of work, as NESTA acknowledges, that should be relied upon; it’s a stimulus to thinking. But even that small role is further undermined by the woolliness (again) of the ultimate recommendations for policy.

Besides business as usual, our options quickly narrow. The manufacturing option NESTA says is not economically viable. The innovation option is not politically viable. The hi-tech option, with a focus on a small number of hi-tech, hi-growth businesses is all that is left. This is labelled “Targeted policies for high-potential sectors” which sounds attractively like the kind of thing advocated by James Dyson. But we are given only glimpses of what the government needs to do to follow this road, and no explanation of how such a policy would avoid falling into the trap of picking winners.

I’m not convinced, and I don’t see how the coalition can be. This is a report that seems predicated on far too many assumptions that Labour bought into but which are now being questioned by Vince Cable and David Willetts. In this way, it fails to make NESTA relevant to the current debate. If NESTA needed to rebalance itself for the new government, then with this report it has surely fallen off the tightrope. Indeed, the question Cable and Willetts are probably asking themselves is, is there any way we can retrieve the £200m that Brown's Lottery gave to NESTA?

More seriously, all that spending on hi-tech support that Labour ushered in is still waiting for someone -anyone - to make a coherent case for it, let alone a compelling one. And if NESTA can't, who can?

[I revised this on 8 June to clarify the National Lottery's role. Thanks to http://twitter.com/xmalik.]

How to read Vince Cable's speech to the Cass Business School

or - Two big cheers for Vince

Vince Cable gave a speech at the Cass Business School today. It’s the first speech by the self-styled minister for growth that actually starts to flesh out how he intends to encourage that growth. What follows below is an annotated version of the speech, with my comments in red.

Cable gets two big cheers from me. One for shooting the paper tiger of “picking winners”, one for taking the question of economic growth into the rules of the Takeover Panel. Both suggest the beginnings of a serious attempt to work out what we’d have to do if we really wanted to rebalance the economy, and not just in the narrow Mervyn King way.

*

Well, the first thing you may have noticed is that I am not Peter Mandelson. For one thing, I am a better dancer. Or at least I have actually passed some exams, which may or may not be the same thing. 

It’s been an interesting month…I teased David Cameron the other day by suggesting that it may be too provocative to describe a Conservative leader as a revolutionary. 

But this government is revolutionary – at least for anyone less than pensioner age. A full coalition. A policy platform based on compromise rather than first-past-the-post force majeure. And it’s a good thing. The British public clearly see it as a good thing – in marked contrast to some of the carping, tribal commentators. 

But we face deep-seated problems. A very fragile recovery – both at home and in our continental European neighbours. A massive budget deficit. A dysfunctional banking system. An economy that is seriously unbalanced both in its sectoral mix and in its regions.

This is the same formulation used by David Cameron in his speech on the economy at the weekend, combining regional and sectoral balance. But Cameron also talked of “rebalancing” the economy. Cable - the man with the department that actually would have to do any rebalancing - doesn’t go quite so far. Is he trying to dampen expectations? [1]

 

That’s why we have deliberately projected this coalition’s ambitions over a full Parliament, because the task is that big.  

I don’t want to just set out a work programme today. You’ve had a Queen’s speech. I want to complement and develop the ideas which David Cameron set out in his speech on the economy last week.

As this is my first speech in Government I want specifically to say something about the approach I plan to bring to the department of Business, Innovation and Skills. Or ‘BIS’, in the inevitable Whitehall abbreviation. This will not be a speech about policy detail. It is necessarily broad brush.  But it will tell you what kind of policy you can expect from me.

BIS

Now, I used to work for the Department of Trade, one of the forerunners of BIS, as a Special Advisor in the 1970s.  I worked for the late John Smith, whom I much admired.

Some of you might remember that I actually later called for the DTI to be abolished. I think I said it was “drifting with no sense of purpose”. It drifted, subsequently, under a succession of Ministers for the best part of a quarter of a century.

Well, today BIS is very different. So my civil servants can relax. Briefly.

In part because the mission of the department and its mandate have changed radically since the DTI days. And the key to this is that it is no longer just a department of Business and Trade.

By bringing together university policy, skills policy, business, regulation and competition policy, science and research policy, it has become in effect, the department for economic growth. When Ed Balls used the phrase post-neoclassical endogenous growth theory he was, unwittingly, explaining the rationale for my department.

This is odd. Labour adopted “post-neoclassical endogenous growth theory” and then created BIS to do the kind of things that theory suggests. There doesn’t seem to be any any lack of witting there. Even more intriguingly, this seems to suggest Cable is quite happy fulfiling the role that Labour identified for BIS. Did he really mean to say that? [2]

 

It is, in any event, a major economic department, complementary to the Treasury.  A key measure of the success of this government is that both succeed. We cannot have sustainable growth without fiscal stabilisation. And fiscal stabilisation will only be successful if it leads to growth.

There is a critically important issue of timing. There is a balance of risk. If deficit reduction comes too rapidly there is a danger of deeper recession and even bigger deficits. But like the Governor of the Bank of England, and like the OECD, I have been persuaded that early action on the deficit is essential. Going forward, policy must be driven always by the same rational calculation of economic risk and benefit.

Early exposure to the agenda of cuts means that from day one I have been looking at ways of saving money in my own – very big – department which spends more than £20 billion a year. It is a good discipline: forcing me to think clearly about what BIS is for in an age of austerity.  

The right balance

The Department’s central task, and my central task, is making sure that Britain is a place where enterprise and innovation are made easier and can succeed. Where ideas are generated and are turned into jobs. Where people have the skills we need.

The basic reality is simple: government is no longer in a position to promote growth through fiscal stimulus. Private consumers are debt-laden. Growth will have to come from the business sector. It will need to come from trade.

This is rebalancing as defined by Mervyn King, not Will Hutton. Again, he’s taking a narrow, cautious position. [3]

 

And of course that means making this country a good place to do business. Where it’s easy to start a business or invest from abroad. Where regulation is proportionate (and there is less of it than now.) Where starting an enterprise or creating a job – even just one job – is genuinely valued by society.  

And the reality is that sometimes that means standing up to business. Arguing for more competition instead of cosy cartels. Arguing for better protection for consumers from shady practice. Rejecting special pleading.

This is standard Lib Dem fare. It will be interesting to see what comes of it when push comes to shove. [4]

 

Radio 3 listeners – I believe they do exist – may have heard my recent lecture on Adam Smith, whose ideas I taught to economic students in Glasgow early in my career. Amongst his many wise words which have stood the test of time is this: “the interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer”. And the consumer is all of us.

Smith – and this is often forgotten – also argued trenchantly that successful capitalism rested on a sense of morality, not on unfettered greed.

So I see my role as weighing the needs of small businesses and big businesses, sole traders and multinationals, the City and regional manufacturing. The short against the long term.  Getting the right balance.

Banks

And yes, that means taking a tough line with parts of the banking system, which have not served enterprise in this country as well as they could. Or operated in the long term interests of our economy.

I respect and admire a lot of what is done in the City – much of which has nothing to do with banking. I do believe that it is one of the UK’s most valuable clusters of specialist expertise.

Yet I know that my insistence on pushing this agenda is being presented by some as a grudge against the City. So it is important to draw a distinction very clearly between financial services as an industry and those banks that are trading and making substantial profits with an implicit promise of public rescue if it all goes wrong.

And in some cases of course it did go terribly wrong, inflicting huge costs on the British taxpayer – who are ultimately paying the costs of the banking collapse and the recession it caused.  

That is a situation that should outrage the most red-blooded capitalist every bit as much any left-leaning radical. Few people are more outraged than those responsible bankers who managed their depositors’ money carefully, were content to pursue long term shareholder value, maintained close relationships with their business, customers and were not tempted by the lure of the casino.

So as part of the coalition I have three big priorities here. First – the question of structural reform - separating retail and investment banking, which we will address through the Banking Commission whose membership and terms of reference will be announced shortly. This exercise matters not only to make banks safe but to ensure that our banks are equipped to provide a range of funding streams, on a competitive basis, for the UK economy to function successfully.  

Second - the question of a levy on the banks to reflect the fact that – at least until banks are made safe through structural reform – the taxpayer is providing insurance: protection for which the banks should pay.

And third – perhaps most important for early economic recovery, I will redouble our efforts to ensure that bank lending agreements from banks that have benefited from taxpayer subsidy are being honoured – especially for SMEs. We do not expect to see viable businesses deprived of credit or working capital by banks that are largely owned by the taxpayer, or the general beneficiaries of wider public support.

The banks claim that there is no demand. That is not right. If the bar is set too high, of course no one is willing to jump. The current risk aversion by banks in the SME sector will stifle recovery and, if it does, will actually rebound on the banks through bad debt.

The right role for government

I hope what is emerging from this is a clear sense of how I see the market and the government and the limits of both.

I’m not sure there’s anything here that Tory, Labour or Lib Dem would disagree with. The interesting bit is where the limits are, and that can only really be answered in the detail, and on that we’re still in the dark of early days. [5]

 

Why I think being pro-enterprise, pro-trade and competition – doesn’t just mean being the voice of business.

I sometimes find myself described in the unfriendly press as some kind of socialist.  They should refer back to the Orange Book I co-authored with David Laws six years ago.

Hmmm. True he’s a Liberal not a Socialist, but...

 

I am a liberal. I am a free trader. I believe in open markets. Anyone who doubts the clarity and consistency of my views should look up my writing on trade policy from the 70s, attacking protectionism.

I think the WTO is a good thing, not a neoliberal conspiracy and I will be pushing hard to get the Doha world trade round revived this year and next.

Nor do I have a philosophical problem with big business. I spent years working for one – a big, controversial oil company no less - and I’m proud of the world-class managers and engineers I worked alongside.

I do however think that the market economy has to deliver opportunity rather than constrain it. It has to spread wealth around, not concentrate it at the top or siphon it off to tax havens.

...that kind of language is why he gets labelled left wing! [6]

 

It should be a place where value and reward are transparently linked. I think that it has to be a route to social justice as well as economic efficiency.

For example, Government invests in the education and skills that build up human capital and aim to make the job market a level playing field for all of us.

And it helps provide the infrastructure and science and research that the market exploits but won’t always fund itself. And which are critical to our competitiveness in a knowledge economy.

I go back again to Adam Smith, who acknowledged the importance of public goods two and a half centuries ago.

The debate about industrial policy always raises the spectre of ‘picking winners’. But in a globalised economy its time to move this debate on a bit – be clear about what this means. Because in some ways we have to be picking winners.

We have to make choices about allocating the training budget, or funding certain kinds of science or research, or promoting science, technology, maths or engineering degrees for higher education. We have to make some strategic choices. We can’t avoid that.

But the ‘winners’ in this sense are the skills we judge we will need for the future, and the sectors they support. Because while we can’t divine the future, we can recognise in a broad sense what Britain is good at and likely to become good at, and the areas where the changing nature of the global economy make it futile for us to try to compete – our comparative advantage in economic jargon.  We can and must allocate scarce public resources on the basis of this evidence.

What we shouldn’t be doing is trying to micromanage the economy at the level of individual companies or so-called national champions: trying to supercede the judgement of markets. 

“Picking winners” is a big deal. The phrase dredges up the ghosts of Tony Benn and Margaret Thatcher and has scared the wits out of Conservatives for a generation. It can easily be invoked even now by the Conservative right to discredit precisely the kind of sectoral intervention Cable is enthusing about here. Even after 13 years, I feel Labour still lived in the shadow of this phrase and I don’t think Mandelson or any of the others said anything nearly as clear as Cable has here. So this seems to me quite a significant departure for Cable.

As a statement of government policy, this phrasing would pave the way for the development of policy in many spheres aimed at rebalancing the economy. But is it a statement of government policy? When are we going to hear Willetts or Osborne or Cameron saying the same thing?

At the Royal Society in May, Willetts only emphasised the other side of the coin, that we have to avoid picking winners (by which I think he meant individual companies). That night, both Herman Hauser and John Browne were at pains to draw the kind of distinction that Cable has here. But the Conservative minister, unlike this Lib Dem one, didn’t bite. [7]

 

The green technology revolution is a good example, and a potential source of huge opportunity for Britain. The Government is, and should, support development in a variety of renewable energy technologies and a variety of environmentally friendly vehicles – it does not have to be prescriptive.

By contrast, I recall debates with lobbyists in the 70s arguing in all seriousness that it was strategic to have a protected underwear industry, or to revert to wartime food production.  That kind of argument is far from dead.

Going back even further, I think of the shipyards in Glasgow where I taught economics and worked as a Councillor and as someone who identified very strongly with workers trying to save their manufacturing jobs and skills, I have to ask how much we have to show today for the grand and well-intentioned attempts to stand in the way of the economically inevitable when we should have been investing in change.  

My general approach going forward will be supporting enterprise, but rarely selecting individual enterprises for support.

I do think we can look at countries like Germany and Korea that take science and technical education and infrastructure and long term finance for industry incredibly seriously and learn some lessons.

The issue of long term finance for industry is new. Germany’s banks have been famous for it, but the whole industrial ecosystem works differently there - up to and including rules on takeovers. I think in the British economy we need to get more capital invested in manufacturing, and less in housing, shopping and financial chicanery. This seems to open the door a crack to that. [8]

 

But when these policies are effective they almost always target capabilities, not companies. And I do think the last government blurred that line.

The coalition seems to believe Mandelson was guilty of chucking money about to individual firms at the end. No names have been named yet. But it will be interesting to see if and when Cable actually cancels some of the promises Mandelson made. [9]

 

Part of the problem more widely is what I’ve called the New Interventionism – the philosophy that interprets the banking crisis as a failure of markets in general rather than financial markets in particular. That leaps straight from a discredited approach based on the naivety of “efficient markets theory” to a statist approach based on economic nationalism and protectionism.

And that has to be resisted, especially in our European backyard, where the protectionist instinct is often worryingly strong. In my book ‘The Storm’ published at the height of the crisis I warned of this threat. The fact that it has not yet materialised does not mean that the threat has gone away.

Some priorities

So on the basis of this general approach there are a few things you can expect from me over the months ahead.

First, as I’ve already argued, an agenda for cuts has to be offset by a clear focus on policy designed to be a stimulus to growth.  Our challenge is to redefine growth policy for an age of constrained public spending.  I want a genuine audit of what the state has taken upon itself to do in business support, higher and further education, science and research over the last decade and how it does it. This is our window for transformational change. You’ll see the results in the weeks ahead.

This audit puts a huge amount of activity at risk. Tax credits for R&D and the RDAs we already knew about. But this covers a whole range of innovations Labour put in place to support business in various ways, including the TSB, NESTA, KT spending at the research councils, RAE incentives for academics to engage with industry, dedicated funding from HEFCE in various forms. We’ve yet to hear any minister say anything positive about the TSB. [10]

 

I’m specifically committed to getting rid of some of the BIS quangos. We had 74 last year. 13 are now being got rid of, merged or having their funding cut. I aim to merge or abolish another 20 or so within a year – that’s a third of the rest.  And we will keep scrutinising the others – if they fail to perform or the world has moved on, I will take action.

Second, I will take a tougher line on regulation, because I believe that often the most useful thing governments can do is simply to get out of the way. Every small business can tell a story of how they could do more and hire more people if they spent less time on form filling. Regulation is too often the creature of big businesses with the resources to handle it forcing out the small.  The cost to business of regulation currently in the pipeline is around £20bn: far in excess of any direct help the Government does or can give.

Of course regulation can be necessary to protect consumers, the environment and the labour force.  But it must be proportionate.  I used a statement to Parliament yesterday explaining how this Government will embark on radical steps to remove and stop unnecessary and costly regulation.

Third, I want BIS to play a central role in putting Higher and Further Education on a sound footing for the future and linking both better into the economy.

OK, so we know Willetts doesn’t like Labour’s “clunky” plans for impact in the RAE, but now it seems Cable is thinking of developing his own plans for linking universities with business. Should academics be afraid? He could do worse than copy the new ultra-light American approach - see http://bit.ly/aOWacL. [11]

 

Bringing HE, skills and enterprise together under the one departmental roof is central to the ‘BIS dividend’. My priorities are an increased emphasis on lifelong learning, stripping out some of the bureaucracy around FE and making sure that the outdated value distinction between blue collar apprenticeships, and further education on one hand and university on the other is disposed of for good.

In the last few weeks I found scope within my department to refocus £200 million in capital spending in FE colleges and 50,000 extra apprenticeships. Indeed, it is shocking that we only have 250,000 apprenticeships to start with.

Education and learning are of course desirable in their own right.  Education for education’s sake – learning how to learn - benefits the economy in the long term. Philistinism is bad economics. It is also fundamentally unacceptable.

A story from own life makes the point. My mother and father left school at fifteen to work in factories. My father eventually taught building trades in the local technical college: we need more people like him. My mother was a housewife and when I was ten she had a major nervous breakdown and spent time in a mental hospital.  When she recovered she saved her mind through adult education – learning for the first time about history, literature, philosophy and art. We need more people like her too.  

Fourth, I want to make sure that we are maximising the economic benefits of our science and research sector in the same way.  BIS is the Ministry for science, and science is a vital public good - one that the market unprompted will not provide at the level needed in a modern knowledge economy.

He reiterates the point I highlighted above - for academics, the pressure for economic benefits is not going away even now Labour has gone. This seems to imply that the cuts won’t be designed simply to leave the responsive mode alone - which is the impression Willetts has managed to give. [12]

 

My younger son, who works in a particularly recondite area of quantum physics, is a one man lobbying industry for scientific research. I also have the National Physics Laboratory in my constituency and the Laboratory of the Government Chemist. So I don’t have any doubt about the importance of support for science.

Making sure, however, that groundbreaking science makes the long step to commercialisation is one of the things Britain is relatively bad at, and the mechanism of innovation is still poorly understood. I know from first hand experience of constituents like Trevor Baylis, the inventor of the wind-up radio, how difficult it currently is to translate invention in to commercial application.

Finally, I also plan to crack some of the intractable problems which defeated previous governments. I want to resolve the nagging problem of the Royal Mail. I want to see private capital and worker share ownership in the Royal Mail – commercial discipline alongside employee involvement.

Takeovers

There are a few other areas where I want to see action and change in the same spirit.  One is reform of the UK’s takeover rules.  The Takeover Panel’s current review should play an important part in this agenda.  

Too many takeovers in the UK fail even by the limited criterion of shareholder value – and often with serious implications for the people who work for the firms on both sides.

The Takeover Panel is not reviewing the rules in order to help the economy grow faster. Its central objective is to simply to ensure fair treatment for all shareholders in takeover bids - a much narrower objective. In my book, Cable’s purpose here is more radical than anything Labour did in its 13 years of post-neoclassical endogenous growth theory. And I will be stunned if he makes the slightest bit of progress against the City establishment. [13]

 

For me this is not about foreign or domestic ownership – it draws no distinction between the two.  One of the most important – and positive – decisions made by the DTI when I was there was to welcome inward investment by Japanese companies in the car industry.

So it is not about protectionism or strategic industries. It is certainly not about protecting bad management by blocking takeovers. It is about changing the way in which unfettered short term speculation can have damaging long term consequences.

It is also about responsibility. It is renewing a sense that a company is an enterprise, not just a set of paper assets. It is about insisting that running a company and owning shares in a company should be an important responsibility, and never more so than when a company changes hands. This is an important issue for me because I think in many ways it captures something simple and important about the economy we want to build. 

Conclusion: The future

Britain has to ask and answer some pretty fundamental questions about how it is going to pay its way in the world. We’ve had a decade of consumer-led, debt-fuelled growth based on inflated property markets that was not sustainable. We have an economy that is still too dependent on hydrocarbons, too wasteful of energy, too vulnerable to the excesses of some of its banks. Too dependent on public services for job creation in some of its regions.

Getting from where we are to a highly-skilled,  enterprise-based entrepreneurial economy is a lot more difficult than making speeches about it. I recognise that we can’t make this leap from one day to the next. Regions with long histories of mass industrial employment, or large scale public employment can’t be turned into entrepreneurial silicon valleys of private enterprise overnight.

To achieve that shift requires looking at enterprise in the widest sense. I have always believed that the value of mutualism, cooperatives and social enterprise lies precisely in the way they help people be self-motivated entrepreneurs with a clear stake in what they do for a living, while still remaining part of a supportive community of fellow workers. We will be encouraging more of them. 

I started by saying that this coalition has defined its ambitions for a full Parliamentary term. But in one sense we have to set our sights much further ahead than that. Our task is to build the foundations of a future economy that must look very different from the old one.

That can’t be done just by waving a chequebook let alone by Ministerial decree.  It will happen only when there is confidence to invest, long term, in training, technology or to develop markets. There are no quick fixes. But that’s the task we have to set ourselves.

A recession is in part a failure of confidence, just as the banking crisis was a failure of trust. We have to repair both those deficits, as well as the pressing one in the Government budget.

That means being more than just ‘pro-business’. It means finding the right blend of responsible capitalism, and leaner but more effective government.