The Independent View: One of Vince Cable’s greatest actions to date

Sunday saw some good news. It was announced that Jaguar Land Rover (JLR) is to set up a new engine plant factory in the West Midlands, creating up to 750 jobs. This coup was delivered in no small part thanks to the Business Secretary Vince Cable plucking up the courage to intervene directly and offer JLR government money. It could even be argued that this is one of his greatest actions to date.

What part did Cable play? He helped JLR secure a £10 million grant for the plant. Clearly, this was not the be all and end all of JLR’s decision, given the overall £355m factory cost. Instead, the grant was more a symbol of appreciation of their commitment. This interventionist approach has been badly needed for a long time: it clearly draws business to the UK. In addition, it signals the British commitment to the much-maligned manufacturing sector, which had been neglected by government for over a decade.

Of course, giving away £10m to a multinational corporation might ruffle a few feathers, especially amongst the Business Secretary’s Conservative partners. Cries of ‘picking winners’ or ‘protectionism’ are never far off when the sacred cow of laissez-faire economic management is ignored.

However, all too frequently, the Coalition government had been willing to snatch defeat from the jaws of victory by refusing to offer companies incentives to set up plants in Britain, because this ‘wasn’t playing by the rules’. The simple fact is though that many other countries are doing this, and at levels far greater than £10m. In Portugal for instance, the state offered to provide a chemical company with 20% of the costs of building a factory, which unsurprising then emigrated there from Britain. If other countries actively go out searching for business, why shouldn’t we? It’s not playing dirty, it’s evening the odds.

As ever, Cable is thinking about the long-term. In deciding to deliver these funds, he clearly recognised that far from being a grant, this was an investment. The JLR plant will provide 750 jobs at the plant, and thousands more indirectly. These employees will of course provide income tax, and JLR itself will pay corporation tax, so the financial rewards are obvious and the initial outlay will be recouped many times over.

There are intangible benefits as well. Each manufacturing firm in Britain is a cog in a national industrial wheel, and the more there are, the stronger our overall ability in the sector. Skills that would otherwise be lost are maintained. Given a surprising level of innovation comes informally from those on the shop floor (just look at Toyota, Nissan, Honda etc) this entrenches a usually overlooked level of our national competitive advantage.

By securing JLR, Cable’s interventionist approach has already proven itself. This gives him, and the Liberal Democrats as a whole if they agree with his approach, a credible economic image. This comes at a time when confidence in the Tories’ old-school laissez-faire management is crumbling. The recent Bombardier scandal and the loss of Pfizer back in February are both major disappointments that could have been avoided with a little active nurturing of British industry, and thousands of jobs have been lost as a result as a result of adherence to this ideology.

Vince Cable has recognised having an ‘industrial policy’ no longer means a 1960’s heavy-handed approach. His is a much more subtle policy about creating the right industrial environment and actively displaying that Britain is ‘open for business’. If he can continue this, by bringing in more big-name firms, this could be the single strongest economic laurel Lib-Dems to could point to, as evidence of their ability, come 2015.

David Merlin-Jones is a research fellow in economics and industry at independent think-tank Civitas.

The Independent View‘ is a slot on Lib Dem Voice which allows those from beyond the party to contribute to debates we believe are of interest to LDV’s readers. Please email [email protected] if you are interested in contributing.

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4 Comments

  • David Wright 25th Sep '11 - 4:05pm

    How nice to know that my taxes are subsidising Jaguar exports and helping future balance of payments.

    Which will in turn make the pound in my pocket worth slightly more, (did you know the pound is only worth 75% of what it used to be in Euros, despite the Euro’s current weakness?).

  • Simon Foster 25th Sep '11 - 6:07pm

    This would be the same Jaguar factory that’s smack in Solihull (LD held marginal v Con) and is a major employer in the area? 😉

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