No more blank cheques for UK firms, says Cable

The days of direct government support for companies are over - or are they?

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Last Updated: 31 Aug 2010

Business Secretary Vince Cable appeared to suggest yesterday that from now on there would be no more direct Government support for specific companies, as under the previous Labour regime – both because the UK can't afford it and because it's bad policy.

We're inclined to agree. But if the Government really is keen to re-build our manufacturing base, particularly in new areas like low-carbon car-making, it may need to provide some extra incentives to get these industries up and running...

'We don’t want to go around waving a chequebook,' the Business Secretary told journalists on the way to the launch of Toyota's Auris hybrid in Derbyshire (no sign of braking problems, you'll be pleased to hear). Admittedly he was talking specifically about the car industry, a big beneficiary of Government loans in Labour's latter days, courtesy of Lord Mandelson's sudden conversion to industrial activism. But presumably the same point holds across the board.

Although this puts clear blue water between the Coalition and the previous Government, it's also true that we're living in different times, as Cable himself pointed out. 'We’re moving out of an emergency time and support will come in more indirect ways,' he told the FT. 'Not in direct support for companies – we don’t have the funding to do that and it isn’t good policy anyway.'

This suggests the emphasis will be on things like lowering corporate taxes across the board and paying for more apprenticeships and training – rather than ministers and civil servants trying to pick winners.

Quite right too, in theory. But in a competitive world, where other governments are lining up to ‘incentivise’ multinationals to invest in their countries, it may cause a few problems.

For instance, there's been talk that GM wants a grant to build its new electric Ampera car at the Vauxhall plant in Ellesmere Port. Cable said this should be a suitably attractive business proposition in itself – and he's right that since this is GM's most productive factory, it makes sense to build the new model there. On the other hand, if some other country is willing to provide a subsidy for GM to manufacture there instead, it would be a brave politician who let all those jobs go somewhere else…

Cable wouldn't be drawn on the specific issue. But he did suggest he might support the idea of providing incentives for an 'infant industry' like low-carbon vehicle production, particularly if it would help make the UK a centre of excellence. 'There is a market failure... If we are going to overcome that, we need something to get it off the ground.' So maybe Mandelsonism isn't quite dead in the water just yet...

In today's bulletin:

No more blank cheques for UK firms, says Cable
Lambert to leave CBI in 2011 (whence Government?)
Government commission calls for new Green Investment Bank
New sop to China in Google censorship row
Don't expect so much from the board, says Northern Rock chairman

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