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Wednesday 31 October 2012

The market can’t deliver growth without government help

Like so many of The Daily Telegraph’s readers, I am an entrepreneur. And when I first left the small business I had created to join government in the 1970s, I was convinced that the best thing government could do was get off our backs – cut red tape, deregulate, lower taxes. These things are still important. My time in business still shapes my outlook. I believe there are many areas where government should stand aside completely. But I have learnt that there are some things that only government can do to drive growth.
In March, the Prime Minister asked me to report to the Chancellor and Business Secretary on how we might more effectively create wealth in the UK. My report has been shaped by my belief that in the vast majority of cases, we will only get the very best results if government, business and local leaders work together in partnership.

When producing recommendations, I have always asked: “Does this make us more competitive?” There are no easy ways to do this. Competition from an ever more educated, motivated and capable world is facing us every day. We do, however, have much to celebrate – from the very smallest of businesses striving on the street to the large multinationals headquartered here, from inspiring local leaders to a government that encourages enterprise. We have many strengths and should be proud of talking them up. But how do we go that extra mile and make sure we can beat our global competitors for generations to come?

There is no easy answer – we must face the reality that we can’t be complacent and rest on our laurels as a country. I have not selected a handful of popular suggestions. I make 89 recommendations – each one important. Taken together, they provide a blueprint for the future.

What does that future look like? Above all, it is a world with stronger local leadership. We must continue to reverse the trend of the past century by unleashing the dynamic potential of our local economies. Key to this are Local Enterprise Partnerships, which should be given a much greater role in supporting their business communities. Much more of the inspiration for our economy should be based on the strength, initiative and ambition of our cities and their communities.
There are those who hanker for the old rules of free trade, for the market to look after itself, who want to shut the Business Department and for government to have a minimal role. This is a clear and simple message. To some it is attractive. But it has one major weakness. No other leading country or emerging nation believes it can work. The US, our European cousins, the BRICs – they certainly don’t practise it. Why should we be out of sync with the rest of the world? You can close your eyes to the threat of an ever more competitive world, but that threat will not go away.

We need a number of significant changes to provide a stable yet flexible architecture for the future. These include: creating a National Growth Council chaired by the Prime Minister, to ensure all parts of government play their part; inviting local business partnerships to bid for significant funding from central government on a competitive basis every five years to build local economic growth; an enhanced role for chambers of commerce in helping develop the capabilities of businesses; devolving funding for the skills system to improve its alignment with the needs of local economies; injecting greater urgency into the planning system; improving public procurement by employing an experienced chief procurement officer in every department; allowing all county councils to move to unitary status; and incorporating business engagement far deeper into the school curriculum.

The location of Birmingham Town Hall could not be more fitting to announce my report. It is a city with a proud tradition of civic leadership, going back to the days of Joseph Chamberlain. It is vibrant, entrepreneurial and prosperous: it saw tough economic problems in the past and faces challenges in the present. In this, it is a microcosm of Britain as a whole.

The drivers of our economy – business, central government and local leaders – should be organised and structured for success. I have therefore reassessed the way that we, as a country, conduct business. I’ve re-evaluated each of their roles with the single overall aim of embedding a culture of wealth creation. As the saying goes, we are all in it together.

It has been a privilege to produce this review for George Osborne and Vince Cable. The Government has shown strength and confidence by commissioning and facilitating this exercise. The Coalition is fundamentally on the right track, and in many areas I praise its work: Vince Cable for announcing the recent industrial strategy plans; Greg Clark for pioneering city devolution; Michael Gove and Iain Duncan Smith for their revolution in education and tackling unemployment. These initiatives need to be built on.

What I suggest is challenging – but it is not just a challenge to central government. It’s a challenge to the public and private sector, boardroom and business leaders, and to us as individuals. The end goal has to be wealth creation. There are debates as to how wealth should be divided, but ultimately these are sterile until it is created in the first place.

I am positive that if we work together, we can build a strong, sustainable future for the British economy – one we can be proud to pass on to our children and grandchildren.
 
Lord Heseltine is a former deputy prime minister

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