Department for Business, Innovation and Skills: Lord Mandelson’s speech at the New Industry, New Jobs Conference

It’s now a year since we published our policy framework New Industry New Jobs. The work that has flowed from that agenda can’t really be done justice in a 15 minute speech.  But I would like to say something about the context for it, and where we have taken it. And where I see it going from here.

New Industry New Jobs was partly aimed at removing a negative check on thinking seriously about the role of active government in driving economic growth and building our industrial capabilities.

That check has been fairly strong in Britain for the last three decades. It was part of a wider distrust of state ownership and state intervention in industry that too often reflected an economic fatalism and laissez faire, do-nothing, approach to our regional economies and manufacturing decline, and falling goods exports, rather than seeing them as something that public policy and private enterprise could and should address.

So although we have some bad memories of the way we did industrial policy in the 1970s, we should also be clear that, in certain respects, the dogmatic free market approach of the 1980s represented worse failure, and one that spilled over too far into the 1990s. Both visions belong in the past.

This government consciously rejected a lot of the industrial fatalism in 1997. We argued that you could renew regional economies, renew and reinvent the manufacturing base, build new competitive strengths in technologies, services and creative industries - if you invested in the capabilities that support them.

A decade of publicly supported investment and the creation of the Regional Development Agencies have paid huge dividends. It has restored our universities and science base to undoubted world status. It has closed a lot of the backlog in investment in Britain’s transport system and infrastructure. There has been a huge investment in apprenticeships and skills. We are a far stronger country because of it.

But the instinct that made us suspicious of the economic fatalism and dogmatic non-interventionism of the 80s and 90s did not really produce the required new ways of thinking, let alone a coherent alternative approach, that enabled us to generate high value jobs in the globalized economy.

And I have been struck by the way in which the more recent debate we launched was ripe to be had. There was a real appetite for it.  Partly as a reaction to the banking crisis and the desire to rebalance the economy. And partly to get back to long termist values over short termism.

We have a plan for paying down the borrowing necessitated by the banking crisis and the recession. But we also have – and need to have - a growth plan.

Not just because growth is how you drive down the deficit. But because the economy that is emerging from this crisis is going to look different – and needs to look different - from the one that went into it.

Over the next decade Britain’s economy is going to need a new wave of private sector investment in business creation and job creation, especially in technology-driven and export oriented industries.

We need a transformative wave of private investment in Britain’s infrastructure and strategies for ensuring that this work is a big industrial opportunity for UK-based firms and workers.

We need new and reinforced niche positions at the very top of global value chains in sophisticated and innovative manufacturing, the creative industries and services.

And of course we are going to have to do all these things while progressively decarbonising the economy.

Industrial capabilities

All this private investment requires government encouragement and incentive and New Industry New Jobs is about how we deliver that. It has three basic arguments; three pillars if you like.

The first is that we need to see the key role of government as investing in the basic capabilities UK firms and workers draw on when they compete in markets - skills, science and technology, infrastructure and access to financial support for enterprise.

Markets won’t always deliver these supply-side strengths in the way we need, and government has an important role in filling the gaps.

To help do this we have created the new Department of Business Innovation and Skills, which brings together many of the key levers of competitiveness and supply-side policy in a single department for the first time.

We’ve established new strategies for adult skills and Higher Education both targeted at how we fill strategic skills gaps in the UK labour market.

We’ve established Infrastructure UK to provide new strategic leadership across government in setting and meeting ambitious targets for renewing Britain’s infrastructure.

We’ve established the Innovation Investment Fund and set out plans for a Growth Capital Fundwhich will create important new sources of investment capital for innovative British companies.

Sectoral strengths

The second pillar of New Industry New Jobs was focused on the value of targeted interventions in individual growing markets and sectors.

We have set out a range of sector strategies, backed with investments from the Strategic Investment Fund created at the Budget last year. This Fund has earmarked almost a billion pounds for investments, for example, to develop the UK’s demonstrator facilities and centres of excellence in cutting edge pharmaceuticals, wind and wave power, low carbon vehicles, industrial biotech, composites, plastic electronics, videogame development. This is basic infrastructure that the private sector would not have paid for.

Later today we’ll publish emerging findings from the construction industry on the potential for its growth from exploiting low carbon opportunities.

We’ve helped ensure that Rolls Royce builds its next generation of advanced manufacturing facilities for aerospace and civil nuclear manufacturing in this country with a £45million public investment towards the company's 300 plus million pounds investment programme.

We’ve partnered Mitsubishi, ClipperWind and the UK offshore wind sector to help ensure that the UK won’t miss the boat in the way we did twenty years ago on onshore wind.

The UK is now the biggest market in the world for offshore wind and is developing turbines on a commercial scale unmatched anywhere else in the world.

Looking to the future, we need to knit Britain’s growing network of university expertise and specialist researchers into a genuine innovation infrastructure. One in which the commercialization of research is core to the whole purpose of our research and development model. Roy Anderson, formerly of Imperial College, is reporting to us on how we can do more to exploit the commercial opportunities presented by the work of the research base.

I’ve also asked the Cambridge venture capitalist Hermann Hauser to report back to me on how we can develop an institutional framework to bridge the research, venture capital and enterprise sectors, drawing in particular on the example of the Fraunhofer institutes in Germany which have build up a formidable network of ties between research and industry. We will be responding to his recommendations in the forthcoming Budget.

Smarter government

Finally New Industry New Jobs argued that we need a wider, more sophisticated understanding of supply chains in the UK, so that policy makers learn both how to create jobs and business opportunities at home – and how not to destroy them - when they legislate, regulate or procure.

We are running pilot projects across Whitehall to encourage policymakers to think through the industrial and supply chain implications of the policies they make.

My basic point is this: you can insist on the need for a strategic and developmental role for government without turning your back on the principles of open trade and free competition, and without rejecting the ultimate role of the market in testing and proving what is long term viable or not.

Our ambition now is to embed this approach firmly across government.

Today the Government is making a number of important announcements that take the New Industry New Jobs agenda forward.

Skills

The first is that today the UK Commission for Employment and Skills is publishing the first annual UK Skills Audit.  This gives us the most detailed breakdown yet of the UK’s skills profile and future needs.

We must ensure the skills system meets those needs.  Not through micro-management or reintroducing manpower planning – but by ensuring that students, business and employers make their needs clear, and universities, colleges and trainers respond to produce the right supply of skills.

We are publishing today a progress update on the implementation of the new adult advancement and careers service, which provides  students with information about the skills and qualifications that will best boost their employment prospects, underpinned by professional advice and guidance.

The UKCES report positions us to strengthen the skills system in the two pillars I described earlier. Building economy-wide capabilities, and unlocking the potential of sectoral strengths. We need generic and transferable skills, and specialist niche skills. For example, there is a shortage of Science, Technology, Engineering, and Mathematics – STEM – graduates.

This is why we are earmarking £10 million to incentivise the teaching of STEM and other priority skills at English universities. These incentives will be strengthened for 2011/12 when we get advice from the Higher Education Funding Council and business leaders, on the best way to encourage universities to help meet our strategic needs and priorities.

The UKCES audit also confirms another economy-wide priority - creating a new class of technicians - people trained to use science practically, in factories and laboratories, helping to develop and improve new products and processes - through strengthening the advanced apprenticeship system.

We have already driven a renaissance of apprenticeships. We now have a quarter of a million apprentices in England – five times more than 1997.  We are doubling the number of advanced and higher level apprenticeships for 19-30 year olds over the next two years, adding another 35,000 places by 2012.

To boost the status of technicians, David Sainsbury is advising the government on the establishment of a new Technician Council to create new accreditations for these employees.

The Skills Audit also enables us to target sectoral priorities.  Today we are launching a £50million joint investment programme that will be used to match pound for pound employers investing in the areas highlighted by the UKCES report and New Industry New Jobs.

We are also announcing up to £16million pounds for the development of new sector skills academies in rail engineering, logistics, biotechnology and composites process industries, and green building services technologies.

I can also announce £5million public funding towards an Academy for Underground Construction in Ilford, London, run by Crossrail, to train up to 1,000 people a year in the complex engineering and technical challenges of tunnelling.

Later today the National Skills Academy for Power will also open its doors, helping us prepare our workforce to exploit low carbon energy.

Civil Nuclear

And on the subject of power, I am pleased today to announce a major development of the UK’s civil nuclear supply chain.

Today, Government has conditionally offered an £80m loan to Sheffield Forgemasters – backed with support from the US firm Westinghouse – which will enable the company to commission the construction of a 15kilotonne press and associated finishing workshop.

Forgemasters makes heavy-forged castings for advanced engineering projects – especially in the civil nuclear supply chain. There are just one or two other companies in the world with the kind of capability the new forge will provide and the accreditation needed to supply the global nuclear industry – and no others in Europe.

Its availability in this country will boost UK deployment of new nuclear. It is brilliant news for the civil nuclear supply chain in Britain, and will help them compete against the best in the world. It will strengthen British technological leadership in this sector.

We’re reinforcing this investment with the creation of the Nuclear Advanced Manufacturing Research Centre in South Yorkshire, a strategy for building our nuclear skills base through the Nuclear Skills Academy in Cumbria and a comprehensive strategy for engaging UK small and medium sized engineering companies in the huge opportunities in the nuclear supply chain.

Civil nuclear energy is not only a growth market, it is a global market. The IAEA believe that at any one time between now and 2030 there will be up to 50 reactors under construction around the world. Our investment, therefore, will pay big dividends.

I can also announce today that as part of our joint work with the Energy and Climate Change Department on Low Carbon Skills, the Government will co-fund up to 1000 apprenticeships per year in the Nuclear Energy sector, and the development of new higher level apprenticeship frameworks.

This is an iconic investment and to me Forgemasters and the work we have done on the civil nuclear supply chain is pioneering and captures one of the key approaches behind New Industry New Jobs.

Expanding civil nuclear energy in Britain is not just a mechanism for cutting carbon emissions. It is a decision with huge implications for British supply chains, and it is vital that we think about thatnow, and that we plan for it with business now.

And we make sure that the high value jobs in that supply chain are not lost abroad because we think too short-term or because we haven’t thought about how we develop the capabilities that underwrite them. It’s happened too often before.

This kind of decision in government is routinely made in Germany, France, Korea, Singapore. We have not been bold enough. That needs to change.

Conclusion

Of course a lot of what New Industry New Jobs is about is the medium and long term. It is about setting the policy and investment frameworks for a decade at least of industrial and economic renewal in Britain.

That means not just getting the economy growing again, but asking and answering the big questions about how we are going to pay our way in the world ten years from now. About where the new jobs are going to come from. The scale of the investment we need from the private sector which demands that kind of stability and certainty.

New Industry New Jobs is about how you seed and nurture future strength. Where we are investing in strengths, we are investing in them at the critical early points in their commercial viability.

To allow these capabilities to fail for reasons that have nothing to do with competitiveness or viability is to put too much faith in the infallible power of the market, and to give too little credit to our ability collectively to invest in our future strengths. The agenda launched by New Industry New Jobsis ultimately about how we do that.

It is vital that we do not abandon this path. If we do, and if we return to the unimaginative and old-fashioned thinking of the past, we will not only impede Britain’s economic recovery – we will simply fail to put in place the conditions for our future economic success.

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