Invest in change

In these time of constrained public spending, the UK should learn from Germany and Korea

Cutting the Budget deficit while helping the economy grow - that is the challenge facing us today. It is not only possible to do both, it is essential to do both. A growing economy will generate tax revenues and get people back into work.

Some forms of public investment are key to helping the UK achieve that econo­mic growth. We cannot compete internationally without high levels of ­public and private investment in so­phisticated skills, knowledge, technology and innovation.

We have to make choices about allocating the resources we have - where to spend the training budget, what kinds of science or research to fund. We have to make some strategic choices. We can't avoid that.

While we can't divine the future, we can recognise in a broad sense what Britain is good at and likely to become good at. We can identify the areas where the changing nature of the global economy makes it futile for us to try to compete - in economic jargon, our comparative advantage. We can and must allocate scarce public resources on the basis of this evidence.

What we should not do is try to micromanage the economy at the level of individual companies or so-called national champions: trying to supercede the judgement of markets.

The green technology revolution is a good example and potentially a huge opportunity for Britain. The government is supporting development in renewable energy technologies and environmental­ly friendly vehicles - as it should - but it does not have to be prescriptive.

By contrast, I recall debates with lobbyists in the 1970s who argued in all seriousness that it was strategic to have a protected underwear industry, or to revert to wartime food production. That kind of argument is far from dead.

Redefining growth policy

Going back even further, I think of the shipyards in Glasgow where I taught ­economics and worked as a councillor. I identified very strongly with workers trying to save their manufacturing jobs and skills. Now I have to ask how much we have to show for the grand and well-­intentioned attempts to stand in the way of what was economically inevitable. We should have been investing in change.

My general approach will be to support enterprise, but I will rarely select individual enterprises for support.

I think there are lessons to learn from countries such as Germany and Korea, which take science and technical education, infrastructure and long-term finance for industry incredibly seriously.

But when these policies are effective they almost always target capabilities, not companies. I think the last government blurred that distinction.

Our challenge is to redefine growth policy for an age of constrained public spending. I want a genuine audit of what the state has committed itself to do in business support, higher and further education, science and research over the past decade and how it does it. This is our window for transformational change. You'll see the results in the weeks ahead.

I've already announced that 13 of the 74 quangos which the Department for Business, Innovation and Skills (DBIS) had last year are being scrapped, merged or having their funding cut. I aim to merge or abolish another 20 or so within a year. We will keep scrutinising the others and I will act if they fail to perform or the world has moved on.

I also want DBIS to play a central role in putting higher and further education on a sound footing for the future and linking both better into the economy.

Bringing higher education, skills and enterprise together under one department­al roof is central to the "DBIS dividend". My priorities are an increased emphasis on lifelong learning, stripping out some of the bureaucracy around further education, and to end the outdated value distinction between blue-collar apprenticeships and further education on the one hand and university on the other.

I have already found £200m of DBIS spending to refocus into capital spending in further education colleges and 50,000 extra apprenticeships. It is shocking that we have only 250,000 apprenticeships to start with.

Education and learning are desirable in their own right. Education for education's sake - learning how to learn - benefits the individual, society and the economy.

A story from my own life makes the point. My mother and father left school at 15 to work in factories. My father eventually taught building trades in the local technical college: we need more people like him.

My mother was a housewife and when I was ten she had a major nervous breakdown and spent time in a mental hospital. When she recovered she saved her mind through adult education - learning for the first time about history, literature, philosophy and art. We need more people like her, too.

Getting from where we are to a highly skilled, enterprise-based economy will not be easy. There is no magic wand. Regions with long histories of mass industrial employment, or large-scale public employment, cannot be turned into entrepreneurial silicon valleys overnight.

To achieve that shift requires looking at enterprise in the widest sense. I have always believed the value of mutualism, ­co-operatives and social enterprise lies in how they help people to be self-motivated entrepreneurs with a clear stake in what they do for a living, while still remaining part of a supportive community of fellow workers. We will be encouraging more of them.

Our task is to build the foundations of a future economy that must look very ­different from the old one. It must be based on business investment, rising skills, rising entrepreneurship and strong exports - not consumption, asset price rises and a rapid expansion of the financial services sector.

That can't be done just by waving a chequebook, let alone by ministerial decree. It will happen only when there is confidence to invest, long term, in training, technology or to develop markets. There are no quick fixes. But that's the task we have to set ourselves.

Vince Cable is the Secretary of State for Businesss, Innovation and Skills