A crunch year for industrial policy

Peter Mandelson’s abrupt departure from Trade and Industry is unfortunate. This department has suffered too much from short ministerial tenures, and the situation is made worse by the fact that Mandelson seemed to be making his presence felt at the DTI unlike anyone since Michael Heseltine. Nevertheless, his Competitiveness White Paper contained much for industry […]

Peter Mandelson’s abrupt departure from Trade and Industry is unfortunate. This department has suffered too much from short ministerial tenures, and the situation is made worse by the fact that Mandelson seemed to be making his presence felt at the DTI unlike anyone since Michael Heseltine.

Nevertheless, his Competitiveness White Paper contained much for industry to applaud, and it represents a coherent strategy. His successor, Stephen Byers, is likely to take it as a starting point to build on, since it aligns both with his inclination as a moderniser in the Blair/Mandelson camp and with pressure from industry.

Apart from the White Paper, 1999 will be an interesting year for industry’s relations with government. Boosting productivity was the main theme of Gordon Brown’s pre-Budget report, while the engineering industry’s joint Budget submission called for counter-cyclical measures to counter the coming downturn. Brown has signalled that the temporary investment allowance may turn into a permanent tax cut; industry is calling again for 100% tax relief on investment for small and medium-sized firms. Expect incentives or consultation on an R&D tax credit for small business and for encouraging corporate venturing, where large firms aid high-tech start ups. Meanwhile, the engineering industry’s Budget submission proposal for an Applied Technology Scheme along the lines of the Teaching Company Scheme for sharing expertise between firms goes very much with the grain of the White Paper.

Not so welcome is the prospect of an energy tax: but a way to encourage energy efficiency is needed, and if funds are recycled to industry as the Marshall report proposed and the Treasury’s agreement to recycle road pricing funds to the transport sector is a precedent for this it will not affect competitiveness.

Nonetheless, no-one is under any illusion that the coming year will be an easy one for engineering. This will be the year in which the Government’s stated intention to work with industry will be put to the test. How strongly industry emerges as 2000 dawns will be a measure of the success of that commitment.