Supporting business: let's follow northern Europe

The UK needs to raise its game.

As the UK economic recovery continues to stutter, calls for a return to an active industrial policy to restore the competitiveness of British business grow louder. We are increasingly looking to Germany and other northern European economies to understand how they have managed to weather the global recession more successfully than the UK.

One lesson that the UK could take from our northern European competitors is the way they support businesses to expand and innovate. Very little of this support has traditionally been available in Britain, with governments paying scant attention to the choices that employers make about how to compete, despite the impact this has on innovation, resilience, wages and the quality of goods and services. 

Labour’s Business Link service was designed to fill this gap but its impact was patchy, often lacking operational knowledge of local markets and a real understanding of how SMEs work. Instead of reforming Business Link into a service capable of promoting growth and innovation among British firms, the Coalition has simply reduced it to a generic website and phone line. This is in marked contrast to the tailored and practical business support available in a number of other European countries.

The failure of business support in the UK is rooted in the hands-off approach to industrial policy evident over the last three decades. Over this period, skills and training have been the only areas of business support deemed suitable for government intervention, an approach exemplified by the previous Labour government, which put adult skills policy centre-stage in its strategy for economic competitiveness and social inclusion. This was based on a misguided belief that a more highly qualified workforce would, by itself, drive innovation, competitiveness and resilience in the "knowledge economy". Substantial investment in adult skills coupled with targets to increase qualification rates among the adult population followed.

The impact of this new activity and funding was limited by Labour’s reluctance to consider how skills are used in the workplace, and what else drives innovation and competitiveness, like access to finance and market intelligence. As a result, a stubborn third of employers fail to invest in staff training and training rates have actually fallen over the last decade. Many UK firms have retained low-skilled, task-based production processes where training and workforce development are largely irrelevant to the bottom line. Studies suggest these kinds of business models are more prevalent in Britain than in many northern European countries. Such firms are profitable but could be less resilient to changing economic conditions. Levels of innovation also tend to be lower, and, for employees, the work is badly paid and repetitive. 

Countries like Germany, Finland, Norway and Australia have stolen a march on the UK by experimenting with different ways of supporting businesses to raise their game. Employers are supported to invest in new ways of working, access finance and develop new products, as well as to develop a well-skilled workforce. In one example in Finland, a local catering service was helped to restructure its business so that catering assistants took on a role in planning meals, budgeting and purchasing ingredients. Procurement costs fell and productivity improved, and the ability to use new skills raised motivation among staff. A simple training programme divorced from the need to reorganise the production process is unlikely to have delivered the same results.

Just like in welfare, extra support should be matched with extra conditions. To access public money for training and business support, employers would have to join local employer associations and commit to raising wages for trained staff or sharing the cost of training. But the specific deal would be left to local partners and employers to negotiate, taking skills policy and funding out of the hands of centralised quangos. In the UK, this kind of tailored business support delivered by people who know about business – whether in employer associations, professional bodies or local chambers of commerce – is the missing link that will ensure investment in skills delivers sustainable economic gains.

Kayte Lawton is Senior Research Fellow at IPPR. No Train, No Gain: Beyond free-market and state-led skills policy by Tess Lanning and Kayte Lawton is available here.

The Uk could take cue from Europe, Getty images.

Kayte Lawton is senior research fellow at IPPR.

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Find the EU renegotiation demands dull? Me too – but they are important

It's an old trick: smother anything in enough jargon and you can avoid being held accountable for it.

I don’t know about you, but I found the details of Britain’s European Union renegotiation demands quite hard to read. Literally. My eye kept gliding past them, in an endless quest for something more interesting in the paragraph ahead. It was as if the word “subsidiarity” had been smeared in grease. I haven’t felt tedium quite like this since I read The Lord of the Rings and found I slid straight past anything written in italics, reasoning that it was probably another interminable Elvish poem. (“The wind was in his flowing hair/The foam about him shone;/Afar they saw him strong and fair/Go riding like a swan.”)

Anyone who writes about politics encounters this; I call it Subclause Syndrome. Smother anything in enough jargon, whirr enough footnotes into the air, and you have a very effective shield for protecting yourself from accountability – better even than gutting the Freedom of Information laws, although the government seems quite keen on that, too. No wonder so much of our political conversation ends up being about personality: if we can’t hope to master all the technicalities, the next best thing is to trust the person to whom we have delegated that job.

Anyway, after 15 cups of coffee, three ice-bucket challenges and a bottle of poppers I borrowed from a Tory MP, I finally made it through. I didn’t feel much more enlightened, though, because there were notable omissions – no mention, thankfully, of rolling back employment protections – and elsewhere there was a touching faith in the power of adding “language” to official documents.

One thing did stand out, however. For months, we have been told that it is a terrible problem that migrants from Europe are sending child benefit to their families back home. In future, the amount that can be claimed will start at zero and it will reach full whack only after four years of working in Britain. Even better, to reduce the alleged “pull factor” of our generous in-work benefits regime, the child benefit rate will be paid on a ratio calculated according to average wages in the home country.

What a waste of time. At the moment, only £30m in child benefit is sent out of the country each year: quite a large sum if you’re doing a whip round for a retirement gift for a colleague, but basically a rounding error in the Department for Work and Pensions budget.

Only 20,000 workers, and 34,000 children, are involved. And yet, apparently, this makes it worth introducing 28 different rates of child benefit to be administered by the DWP. We are given to understand that Iain Duncan Smith thinks this is barmy – and this is a man optimistic enough about his department’s computer systems to predict in 2013 that 4.46 million people would be claiming Universal Credit by now*.

David Cameron’s renegotiation package was comprised exclusively of what Doctor Who fans call handwavium – a magic substance with no obvious physical attributes, which nonetheless helpfully advances the plot. In this case, the renegotiation covers up the fact that the Prime Minister always wanted to argue to stay in Europe, but needed a handy fig leaf to do so.

Brace yourself for a sentence you might not read again in the New Statesman, but this makes me feel sorry for Chris Grayling. He and other Outers in the cabinet have to wait at least two weeks for Cameron to get the demands signed off; all the while, Cameron can subtly make the case for staying in Europe, while they are bound to keep quiet because of collective responsibility.

When that stricture lifts, the high-ranking Eurosceptics will at last be free to make the case they have been sitting on for years. I have three strong beliefs about what will happen next. First, that everyone confidently predicting a paralysing civil war in the Tory ranks is doing so more in hope than expectation. Some on the left feel that if Labour is going to be divided over Trident, it is only fair that the Tories be split down the middle, too. They forget that power, and patronage, are strong solvents: there has already been much muttering about low-level blackmail from the high command, with MPs warned about the dire influence of disloyalty on their career prospects.

Second, the Europe campaign will feature large doses of both sides solemnly advising the other that they need to make “a positive case”. This will be roundly ignored. The Remain team will run a fear campaign based on job losses, access to the single market and “losing our seat at the table”; Leave will run a fear campaign based on the steady advance of whatever collective noun for migrants sounds just the right side of racist. (Current favourite: “hordes”.)

Third, the number of Britons making a decision based on a complete understanding of the renegotiation, and the future terms of our membership, will be vanishingly small. It is simply impossible to read about subsidiarity for more than an hour without lapsing into a coma.

Yet, funnily enough, this isn’t necessarily a bad thing. Just as the absurd complexity of policy frees us to talk instead about character, so the onset of Subclause Syndrome in the EU debate will allow us to ask ourselves a more profound, defining question: what kind of country do we want Britain to be? Polling suggests that very few of us see ourselves as “European” rather than Scottish, or British, but are we a country that feels open and looks outwards, or one that thinks this is the best it’s going to get, and we need to protect what we have? That’s more vital than any subclause. l

* For those of you keeping score at home, Universal Credit is now allegedly going to be implemented by 2021. Incidentally, George Osborne has recently discovered that it’s a great source of handwavium; tax credit cuts have been postponed because UC will render such huge savings that they aren’t needed.

Helen Lewis is deputy editor of the New Statesman. She has presented BBC Radio 4’s Week in Westminster and is a regular panellist on BBC1’s Sunday Politics.

This article first appeared in the 11 February 2016 issue of the New Statesman, The legacy of Europe's worst battle