Vince Cable is right to support British business in procurement

Have Britain’s politicians finally realised that EU rules are not an impediment to an active industrial policy?

Today Vince Cable told the BBC that the British government must be more "strategic" in how it procures, so that "as much as possible goes to British businesses". Far from incurring the wrath of the European Union, the evidence suggests that this new course of action would see Britain finally joining the European club.

Since 2000 the European Commission has initiated only 10 infringement proceedings against the UK for procurement violations. In contrast it has initiated 63 against Germany, 52 against Italy, 31 against Spain, 20 against France and 12 against the Netherlands. Infringement proceedings are initiated when the Commission believes that a member state has broken the rules. Britain is an outlier when it comes to procurement; strategic support for domestic firms is the norm.

Not only is "strategic" procurement the norm but it does not necessarily result in a protectionist "race to the bottom". Despite Germany topping the infringement rankings, German firms are also the most successful in winning foreign procurement contracts in Europe. German firms captured 26 per cent of the market between 2007 and 2009, Dutch firms captured 10 per cent, Italian firms 7 per cent and French firms 5 per cent. British firms came in second with 17 per cent of the market.

As well as procurement, Vince Cable also talked about supporting strategic industries, such as aerospace, where the UK has a comparative advantage. Financial support for domestic firms or industries, like discriminatory procurement, is also supposedly banned by the EU. However, here again the evidence suggests that Britain’s approach is out of kilter with the rest of Europe.

According to the European Commission, in a typical year between 1992 and 2010 Britain spent only 0.45 per cent of its total public spending on the economy on manufacturing, including many of the sectors, such as life-sciences and aerospace, which the Business Secretary touted. In contrast, in a typical year over the same period France spent 7.67 per cent, Germany spent 13.29 per cent, Italy spent 8.66 per cent and Spain spent 16.36 per cent. In terms of total spending in support of their economies, Germany spent, in a typical year between 1992 and 2010, £16.64 billion more than the UK and France spent £9.17 billion more.

In supporting their manufacturing sectors many of these countries incurred the ire of the Commission. As of June 2010, the last data available, Spain had 15 cases of state aid that had been determined illegal by the European Commission and needed paying back, Italy had 14, Germany had 7 and France had 5. The UK had only 1 case of state aid declared illegal. Once again, Britain is an outlier.

It is ironic that the UK, a country regularly singled out for its ambivalence, even opposition, towards the European Union is often found to be one of the most committed adherents to EU rules. When Bombardier failed to win the Thameslink procurement contract last year, politicians of both parties blamed one another and the EU rules. Vince Cable’s pronouncement today hopefully indicates that British politicians are finally realising the folly of this. When it comes to conducting an active industrial policy, EU rules are no impediment, just ask Europe.

Stephen Clarke is a Research Fellow at Civitas

Vince Cable. Photograph: Getty Images

Selling Circuits Short: Improving the prospects of the British electronics industry by Stephen L. Clarke and Georgia Plank was released yesterday by Civitas. It is available on PDF and Amazon Kindle

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How Theresa May laid a trap for herself on the immigration target

When Home Secretary, she insisted on keeping foreign students in the figures – causing a headache for herself today.

When Home Secretary, Theresa May insisted that foreign students should continue to be counted in the overall immigration figures. Some cabinet colleagues, including then Business Secretary Vince Cable and Chancellor George Osborne wanted to reverse this. It was economically illiterate. Current ministers, like the Foreign Secretary Boris Johnson, Chancellor Philip Hammond and Home Secretary Amber Rudd, also want foreign students exempted from the total.

David Cameron’s government aimed to cut immigration figures – including overseas students in that aim meant trying to limit one of the UK’s crucial financial resources. They are worth £25bn to the UK economy, and their fees make up 14 per cent of total university income. And the impact is not just financial – welcoming foreign students is diplomatically and culturally key to Britain’s reputation and its relationship with the rest of the world too. Even more important now Brexit is on its way.

But they stayed in the figures – a situation that, along with counterproductive visa restrictions also introduced by May’s old department, put a lot of foreign students off studying here. For example, there has been a 44 per cent decrease in the number of Indian students coming to Britain to study in the last five years.

Now May’s stubbornness on the migration figures appears to have caught up with her. The Times has revealed that the Prime Minister is ready to “soften her longstanding opposition to taking foreign students out of immigration totals”. It reports that she will offer to change the way the numbers are calculated.

Why the u-turn? No 10 says the concession is to ensure the Higher and Research Bill, key university legislation, can pass due to a Lords amendment urging the government not to count students as “long-term migrants” for “public policy purposes”.

But it will also be a factor in May’s manifesto pledge (and continuation of Cameron’s promise) to cut immigration to the “tens of thousands”. Until today, ministers had been unclear about whether this would be in the manifesto.

Now her u-turn on student figures is being seized upon by opposition parties as “massaging” the migration figures to meet her target. An accusation for which May only has herself, and her steadfast politicising of immigration, to blame.

Anoosh Chakelian is senior writer at the New Statesman.

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