Sheffield Forgemasters, David Willetts and the difference between R&D and Picking Winners

David Willetts clarified the government’s thinking on state support for hi-tech industries in an interview at the weekend, extending support up to and including R&D - but no further. He told the Daily Politics show on Sunday:

“We have to be clear here about what the role of government is. Government absolutely have a role in investing in skills, government have a role in universities, in backing R&D. I think it gets a bit trickier when government goes around making loans to individual companies that really ought to be able to finance themselves in the marketplace by a combination of investments from the people who own equity in those companies and by access to finance from banks and others. And I do think that when it comes to the role of government in rebalancing our econonomy, that sometimes Peter Mandelson went too far in trying to pick individual companies he was going to back.”

Willetts support here for “R&D” is the first time he’s strayed beyond funding universities into the kind of territory occupied by the Technology Strategy Board. If that language (all three words of it) is reflected in spending decisions, then it would mark a difference between the last Conservative government - which by the end of the 1980s didn’t do R&D at all - and today’s coalition government.

At the same time, the decision to withdrawn the loan from Sheffield Forgemasters last week emerges as an unambigious signal that the new government is not going to pick winners. I have the impression that Mandelson went quite a lot further in that than his Labour predecessors. So it will be interesting to see how the coalition’s programme ends up differing from that of pre-Mandelson Labour.