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6 March 2012

Cable and Miliband’s “industrial activism“

All three parties now believe in a more economically interventionist state.

By George Eaton

We are all “industrial activists” now. That’s the message from Ed Miliband and Vince Cable this morning. The Business Secretary has hailed Nissan’s decision to build its new compact car in Sunderland as vindication of the government’s manufacturing strategy, while the Labour leader will call for more economic “patriotism” in a speech to the Engineering Employers’ Federation..

“Too often opposition to protectionism became an excuse for believing the best way to help British business succeed was to stand aside,” Miliband will say.

In an interview on the Today programme this morning, Cable was at pains to point out that this wasn’t about the state “picking winners” but he added that “we have some broad sectors that are doing very well.” The Nissan expansion, which will create 2,000 new jobs, was underwritten by £9m from the government’s regional growth fund.

Asked what his Conservative colleagues made of his fondness for the “entrepreneurial state“, Cable replied that while there were “differences of emphasis”, “we are working as a team on this”. Indeed, anyone who has read George Osborne’s recent speeches will have been struck by the Chancellor’s renunciation of laissez-faire capitalism.

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He told last year’s Conservative conference:

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I’ve never believed the government should just stand on the sidelines, that it has no role in fostering enterprise and creating jobs. I will intervene when the market doesn’t work, and set it free when it does.

The question, of course, is what this all means for policy. In these straitened times, there’s a limit to how much support the state can offer. But after decades of neoliberalism, the new consensus that government has a legitimate role to play in reviving industry is a start. The policy, one presumes will follow.

Ahead of the Budget, Cable was also asked about the possibility of replacing the 50p tax rate with a “mansion tax”. He replied that there was a “broad understanding” that if the top rate were to go, “it should be replaced with taxation of wealth”. A mansion tax, he added, was “a very economically sensible way of doing it”. Indeed, as I’ve note before, a recent OECD report concluded that property taxes were the least harmful to the economy.

Intriguingly, Cable added that a mansion tax “can be done through local government as well as central government, provided that the principle is accepted – that taxation should be related to property”. A hint, perhaps, of the compromise George Osborne is preparing to unveil on 21 March.