It's time for Osborne to use the I word - 'Intervention'

We need the state to invest in business innovation and infrastructure that commercial investors fear

It's not looking good for Osborne. Output, employment, sectoral data and confidence all point to an economy either on the brink of recession or stuck deep in the doldrums. Inevitably, the debate about how to escape this very nasty patch intensifies and the battle lines dividing fiscal hawks from doves become ever more stark. But it is a debate that masks an even nastier truth for the UK economy. Even when we are through this crisis, we will still be an economy unfit to fight the big global economic battles ahead.

As a new paper published this week by IPPR and written by myself and David Nash shows, the UK is a serial under-performer compared to our competitors on those OECD, IMF and other international economic indicators which are most vital for successful competition in the global market.

On investment in business, on skills, on innovation and productivity, and on presence in emerging markets we are decidedly mediocre and, in some cases, worse than mediocre when compared to similar economies.

This should be troubling at any time but at a point when new, confident players from the East are striding into global markets and as business practices and markets are being turned upside-down by web technologies, fear and trepidation should be stalking Whitehall and the business world.

But because of the intense focus on the short-term crisis there is a real risk that once the economy is growing healthily again, a 'job done' mentality will seize policy-makers. It would hardly be a surprise. There is a long history of complacent back-slapping in British economic policy-making: Macmillan's "never had it so good" as inefficiency ate away at the economy, Nigel Lawson's self-satisfaction at rapid growth in the late 1980s just before the property market crashed under its own weight, and Gordon Brown praising the City to the skies in his 2007 Mansion House Speech while the credit crunch (and worse) rumbled in the distance.

A continuation of this ignoble tradition could prove equally disastrous now.

We can avoid the potential crisis of the future not just by acknowledging the threat but also by moving beyond ideological shibboleths about the state as the enemy of enterprise that has gripped government for too long. Instead we need a new pragmatism that learns from those economies that have long out-performed us on business investment, skills, innovation and exports. These are countries have a hugely healthy respect for the free market and intense competition as the main drivers of growth and innovation but also recognise that the market simply is not very good at delivering some of the fundamentals.

Germany, Japan, the Scandinavian economies and, yes, even the USA use the state to invest in business innovation and infrastructure that commercial investors fear. At their best, they take an active role in predicting skills needs and so can shape their education and training systems to get ahead of the curve. They positively target innovative firms not just with tax breaks but with world class generously funded research. And when firms want to export they get generous credit guarantees plus a whole range of other supports. In short, they intervene. Not out of some ideological love of the state but because it works. Of course, these economies have their own problems and they are far from perfect but on the measures mentioned above, they consistently do better than us.

Intervention has, of course, had a very bad name in the UK. This is partly because the Thatcherite world view became so successfully embedded into Whitehall and into Party political debate (even though Thatcher herself could be quite the intervener when she wanted). But it is also because intervention became confused in the public mind with the economic planning of the 1940s and 1950s when the focus was actually on controlling employment and prices, not on the modernisation of business, as it was in the rest of Europe. The only time when intervention was seriously tried in the 1960s, it was all too late and ill-conceived to save out-dated British business and it degenerated in the 1970s into support for lame duck firms and fading industries.

The intervention we need today should have a very different focus. It is not about predicting the economy of the future and plotting a path there. It needn't even be about identifying high growth sectors and giving them special support. It should focus instead on the very significant long-term weaknesses of the UK economy relative to our competitors by building a bold policy framework to address those weaknesses before it is too late and we find ourselves once again in decline mode. In short, it is the opposite of our tradition of complacency replaced by an embracing of the pragmatism and common sense displayed overseas.

Adam Lent is Associate Fellow at IPPR.

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I'll vote against bombing Isis - but my conscience is far from clear

Chi Onwurah lays out why she'll be voting against British airstrikes in Syria.

I have spent much of the weekend considering how I will vote on the question of whether the UK should extend airstrikes against Daesh/Isis from Iraq to Syria, seeking out and weighing the evidence and the risks.

My constituents have written, emailed, tweeted, facebooked or stopped me in the street to share their thoughts. Most recognised what a difficult and complex decision it is. When I was selected to be the Labour candidate for Newcastle Central I was asked what I thought would be the hardest part of being an MP.

I said it would be this.

I am not a pacifist, I believe our country is worth defending and our values worth fighting for. But the decision to send British Armed Forces into action is, rightly, a heavy responsibility.

For me it comes down to two key questions. The security of British citizens, and the avoidance of civilian casualties. These are separate operational and moral questions but they are linked in that it is civilian casualties which help fuel the Daesh ideology that we cannot respect and value the lives of those who do not believe as we do. There is also the important question of solidarity with the French in the wake of their grievous and devastating loss; I shall come to that later.

I listened very carefully to the Prime Minister as he set out the case for airstrikes on Thursday and I share his view that Daesh represents a real threat to UK citizens. However he did not convince me that UK airstrikes at this time would materially reduce that threat. The Prime Minister was clear that Daesh cannot be defeated from the air. The situation in Syria is complex and factionalised, with many state and non-state actors who may be enemies of our enemy and yet not our friend. The Prime Minister claimed there were 70,000 ground troops in the moderate Free Syrian Army but many experts dispute that number and the evidence does not convince me that they are in a position to lead an effective ground campaign. Bombs alone will not prevent Daesh obtaining money, arms and more recruits or launching attacks on the UK. The Prime Minister did not set out how we would do that, his was not a plan for security and peace in Syria with airstrikes a necessary support to it, but a plan to bomb Syria, with peace and security cited in support of it. That is not good enough for me.

Daesh are using civilian population as human shields. Syrians in exile speak of the impossibility of targeting the terrorists without hitting innocent bystanders. I fear that bombing Raqqa to eliminate Daesh may be like bombing Gaza to eliminate Hamas – hugely costly in terms of the civilian population and ultimately ineffectual.

Yet the evil that Daesh perpetrate demands a response. President Hollande has called on us to join with French forces. I lived in Paris for three years, I spent time in just about every location that was attacked two weeks ago, I have many friends living in Paris now, I believe the French are our friends and allies and we should stand and act in solidarity with them, and all those who have suffered in Mali, Kenya, Nigeria, Lebanon, Tunisia and around the world.

But there are other ways to act as well as airstrikes. Britain is the only G7 country to meet its international development commitments, we are already one of the biggest humanitarian contributors to stemming the Syrian crisis, we can do more not only in terms of supporting refugees but helping those still in Syria, whether living in fear of Daesh or Assad. We can show the world that our response is to build rather than bomb. The Prime Minister argues that without taking part in the bombing we will not have a place at the table for the reconstruction. I would think our allies would be reluctant to overlook our financial commitment.

We can also do more to cut off Daesh funding, targeting their oil wells, their revenues, their customers and their suppliers. This may not be as immediately satisfying as bombing the terrorists but it is a more effective means of strangling them.

The vast majority of the constituents who contacted me were against airstrikes. I agree with them for the reasons I set out above. I should say that I have had no experience of bullying or attempts at intimidation in reaching this decision, Newcastle Central is too friendly, frank, comradely and Geordie a constituency for that. But some have suggested that I should vote against airstrikes to ensure a “clear conscience” ’. This is not the case. There will be more killings and innocent deaths whether there are UK airstrikes or not, and we will all bear a portion of responsibility for them.

A version of this article was originally sent to Chi Onwurah's constituents, and can be read here