BIS: A failing department

By Ian Lucas MP

“Growth is the government’s top priority and every part of government is focused on it.”

BIS makes this statement on its website. But the recent cutting of the growth forecast by the Bank of England is just the latest example of the failure of the government department tasked with achieving it.
Without exception, every economic commentator is predicting lower UK growth than predicted 12 months ago.

Why is BIS failing so badly?

First, it is marginalised. Far from ensuring that every government department is focused on growth, BIS struggles to make its voice heard. The fundamental disagreements between the George Osborne and Vince Cable on bank finance mean that business has no strong voice in government. In contrast to when Lord Mandelson was at its head, BIS lacks political weight. Under Labour, policies such as the car scrappage scheme were introduced – and extended – fast. In contrast, this government dines out still on Labour initiatives such as the Automotive Council and the National Composites Centre. I challenge anyone to name one successful industrial policy introduced by this government. That is why growth is stalling.

Second, BIS is under-resourced. With a bizarre sense of timing, BIS’s head of manufacturing has left the department recently without replacement. The Regional Growth Fund, effectively England’s sole source of government business investment, has the same budget as the department’s support for Post Offices. The student finance package is swallowing up any money it can find, after higher education reforms that were more concerned with making up for an 80% cut in the teaching grant that improving the quality and access to university.

Thirdly, BIS is complacent. The Green Investment Bank has not yet happened, and won’t be able to access capital markets and invest at the level it needs to until 2015, by which point our main competitors will have steamed ahead in competitive green technologies. The Green Deal has not yet happened. Where policies are proposed which could foster growth in our hard-pressed construction sector, they are being introduced too slowly. There seems to be no appreciation of the urgent current dangers of growth failing.

Fourthly, the machinery for delivering growth is not there. Local Enterprise Partnerships are failing to deliver. In a little reported announcement, BIS has finally found some money to fund LEPs, as Labour has been urging for a year, but is too little too late. Lack of co-ordinating regional bodies, coupled with the palpable failure of the “National Insurance holiday”, is damaging economic activity in the regions. The “rebalancing” of the economy in a regional sense is a pipedream without the policy machinery to drive it.

As my colleague John Denham said recently, the current Whitehall machinery isn’t fit for purpose in the modern economy.

It needs to change.