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| Preston's pride - BAE Systems at Preston Guild |
Sometimes I think I've spent so long away from the coal face
of business journalism that I've slipped into a new echo chamber where business
owners are the bad guys, where entrepreneurship is a dirty word and all they're
good for is to milk them for tax revenue. Yet I'm still a board director of
three overtly commercial organisations where that characterisation remains an
absolute and outrageous travesty.
The truth is it is the world that has changed. The concern
for the left-behinds, the people who haven't benefited from globalisation, who
live in communities riven apart by an economic and cultural decay, is
righteous. But it has elicited all manner of easy answers and wrong-headed
responses, not least that this anger ushered in Brexit, an answer to a problem
it can't solve.
Soul searching for a proper response is now proliferating.
The author Richard Florida's new book tests his own earlier theories of the
creative super-city (think London, New York and San Francisco) which
collectively have created 40 per cent of the world's GDP with just 7 per cent
of the population. He asks, as I do on a daily basis, where does that leave the
rest of us in a world of winner takes all urbanism?
The run-up to the CBI conference saw The Times report the
frustration of business in the glacial progress of the government’s industrial
strategy and whether it was being taken seriously in the heart of government.
Hinting that nice guy Greg Clark was the right man to lead the sort of
vocal industrial policy promoted in the past by the likes of Lord Heseltine and
Lord Mandelson, CBI’s Carolyn Fairbairn said: “We want to see a real
championing of business and of industrial strategy. It has to go beyond BEIS
[the business, energy and industrial strategy department] right to the top at
the Treasury and No10. We really do believe we are at a watershed moment.”
In the absence of anything concrete, usually down to civil
service inertia and political paralysis, it’s allowed a number of fierce
critiques of the entire system to grab airtime, many peppered with the code
words and trigger warnings about "neo-liberalism", "failed
models" and "alternatives to austerity".
There was a piece in the Economist last month about how
Preston has used the power of its "anchor institutions" (that's the
NHS, Preston's College and UCLAN to me and you), to create the model of a
smart-procuring, entrepreneurial state for a guide to how Jeremy Corbyn will
govern and encourage a thousand co-operatives to bloom.
It seemed like an attempt to do what economists (as opposed
to The Economist writers) often do, look for something that's working and apply
a theory to it retrospectively, but it has been the product of some interesting
work with the Centre for Local Economic Strategies and Preston City Council.
Lancashire is no stranger to experiments in economic
planning and innovation. In much the same way, Lancashire County Council in the 80s was
hailed as the cradle of New Labour. Under leader Louise Ellman in 1983, the
council created Lancashire Enterprises, whose chief executive was urban
regeneration visionary
David Taylor (no
relation). It was the very model of a pump-priming activist state, much of the thinking leading to the structure of the regional development agencies under Blair and Taylor's friend John Prescott. The longer-term corporate legacy was a utilities support business Enterprise PLC, now
part of Amey PLC, in turn, the UK subsidiary of Ferrovial. But it also spawned Enterprise
Ventures, now part of Mercia Technologies, an active venture capital investor
in growth businesses in the North, the Midlands and Scotland.
Preston City Council's recent ambition has been created out of a
response to local government cuts to its budget, just as Lancashire's response
in the 80s was to the wholesale collapse of northern industry. One is a brave,
necessary and innovative response, that feels strategic, but is intensely
tactical. The earlier one, similarly, fashioned an ambitious response that grew
and grew as it proved to have relevance and need. It's not to spot the virtue in a locally based procurement
strategy, supporting local businesses.
Much of the work on the Preston example, has been done by
Neil McInroy from the Centre for Local Economic Strategies, who has commented in the media that more of the £1bn plus public sector budgets are now spent
locally.
Taking that on a stage, Neil's outline case is
here,
where he argues for 'a new economic agenda', that can replace failed
neo-liberalism. But I found myself asking at the end of each paragraph, but
what about the businesses who'll create the jobs?
The four pillars of Neil's argument are: to recognise
decline; understand technological shifts; build on local strengths; and invest
in the economy of care. In many ways, it's a bold and suitably broad synthesis.
But I kept coming back to a common niggle I have with many conversations with
people on the left, wouldn't life just be so much easier if everyone worked for
the NHS?
And then the other question, but where are the businesses?
This is a blog, not a Masters thesis, or even an article
worthy of the Economist, so I'll restrict my criticism to the new economic
orthodoxy to one single baseline point. Where are the businesses? My starting
point is that wealth is created in a business by someone having an idea,
spotting an opportunity, selling that service or those value-added goods for a
surplus and growing that enterprise, employing people, their families spend
that money locally, pay their taxes, replicate that across the entire economy
and that's what makes the world go round. Larger existing businesses are
enticed to stay, to relocate, and careful coordination of their presence
almost certainly contributes to the conditions for even more people to take risks,
build another business, which in turn makes that place even wealthier. The fewer
people want to do that or do it well, then that place gets poorer.
There's a line at the end of paragraph three that says:
"Cities need to invest in social infrastructure and social enterprise
and above all, support indigenous small business activity." My
question, therefore, is how? To use Lancashire as an example again, the red rose
county isn't short of initiatives from the public sector to "support"
small business activity. There's the very noble
Boost Business Lancashire for
a start, which I should declare I have done some work for. But despite these
valiant efforts and more, many of the same systemic issues continue to hold
northern towns back and no amount of smart procurement can patch it up.
It brought to mind something Peter Mandelson said as long
ago as 2013, that all too frequently ambitious industrial strategies are little
more than 'pea-shooter' initiatives; haphazard and ineffective programmes too
small to make any kind of difference.
And in this context, are we facing something similar? And what does "democratise" the
economy mean, other than letting committees of part-time councillors decide where to spend money? Spending more state money locally isn't a new economic strategy, it's
arguably a good thing to do, but it isn't a paradigm shift it's been
cracked up to be.
There is also a need for a regulating, guiding and protecting
state, more than has been previously fashionable. But my sense is there are two elephants in the room that the
"new economics" thinking doesn't acknowledge. The first is big
business. In Lancashire, again, the major anchor institution of Preston isn't
even in Preston, but the city would be stuffed were it not for BAE Systems at
Warton and Salmesbury, and its supply chain.
The second is that hard infrastructure works. It's not
neo-liberal economics to build better roads, rail links and make housing an
integrated strategic plank of an industrial strategy, it's sound social
investment. The Treasury methodology needs fixing, and an industrial strategy
needs to reach deep into all parts of government, including the Treasury if it
is to be effective. After all, the return on investment model for Crossrail will
not be the same for the Todmorden Curve, but both are necessary.
How we solve a problem like the northern towns and smaller
cities haven't been taken seriously enough for decades. But we start from where
we are, not where we'd like to be.
