Having seen the joint presentation on re-balancing the economy this week from a group of industry organisations, the choice facing the government as it prepares its spending review next week is simple: either stick to its plan of handing out an extra £16bn per year by 2004 in vote-winning public spending, or use the money for investment projects to kick-start a much-needed boost for British industry.
It is easy to imagine policy advisers arguing that the first option is the safest bet. Spending on our schools and hospitals is desperately needed, and guaranteed to be the popular choice across the UK. However, a moment’s thought is enough to recall that voters care about our manufacturing industry too – and probably a good deal more than many in the Treasury would like to admit.
There are many marginal constituencies where jobs have been steadily eroded since Labour came to power. A switch into `new-economy’ jobs is just not happening fast enough. Too many people are facing the uncertainty of their own companies’ under-performance, plus the constant and depressing news of other neighbouring firms closing down, or shedding labour, or relocating production abroad. For such constituents, a package of spending aimed at boosting investment will be welcome, clearly understood, and worth voting for.
Investment really is the key to any kind of recovery in British industry. It was slipping back before the weak euro created chaos for companies selling in the eurozone, and it has got even worse since then.
`Soft’ investment, which concentrates on organisational changes to boost efficiency, may give some relief. But it is no substitute for companies which are spending hard cash on new technologies that reduce costs, cut time to market and improve quality.
The figures released this week show that if the government embarked on some publicly-funded capital expenditure projects, it would be less inflationary than its planned public spending bonanza.
The government has an opportunity to do something vital for the UK economy: so let’s hope they don’t blow it.
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