2 Creating a culture of growth
Introduction
5. The Department's strategic vision for the
Parliament can be seen clearly by the fact that it now describes
itself as the "Department for Growth".[2]
Its written evidence explained that the primary focus in this
area would be to create "an environment that enables businesses
to invest with confidence and the conditions for businesses to
start out, invest, grow and be profitable".[3]
6. This approach has been articulated in a number
of documents. The joint White Paper A Strategy for Sustainable
Growth (published last year by the Department and HM Treasury)
highlighted a number of policy strands which included:
- Promoting the efficient operation
of markets to support growth;
- Smarter public and private investment in the
economy, including creating a highly-skilled workforce; and
- Encouraging entrepreneurialism and individual
engagement in the economy to support growth.[4]
7. That focus on the economy was more recently
reinforced in the Department's Business Plan for 2011-15[5]
which highlighted as two of its "Structural Reform Priorities"
the need to:
- Rebalance the economy across
sectors; and
- Rebalance the economy across regions.
It also reiterated the Government's desire to boost
enterprise and to make this decade the "decade of the entrepreneur".[6]
8. A Growth White Paper, which would set out
the Government's strategy in more detail, was due to be published
in October. However, at the time of writing this Report it has
yet to emerge.
The Department's strategy
9. To make a positive difference and meet these
ambitious objectives in a complex and challenging economic situation
the Department needs a clear strategy for growth. So at the start
of our inquiry, we asked Departmental officials to explain in
more detail the role that the Department would play. Philip Rutnam,
Director General of the Business Group in the Department, explained
that BIS had a "very clear responsibility for creating the
best possible environment for economic growth" and that its
responsibility for the skills system, higher education and funding
for science would "bear heavily on whether or not we manage
to create a positive environment for business and conditions in
which business in the UK can start and flourish".[7]
He explained that this would not be achieved in isolation and
that the Department would require cooperation from HM Treasury
on business and from Government Departments across Whitehall on
issues such as the regulatory environment for business, planning,
and infrastructure.[8]
10. This approach was confirmed by Mark Prisk
MP, Minister of State for Business and Enterprise, who at the
start of his evidence declared that "the key priority for
the Department is to continue to enable sustainable and sustained
growth".[9] He described
the principal role of his Department as being "a voice for
business in Government and the voice of Government and the key
contact point of Government for Business".[10]
11. Mr Rutnam confirmed that the Department would
continue to play a role at the micro-economic level in the form
of "schemes and other sorts of interventions that involve
support directly or very closely to business themselves"
but that a macro-economic approach would take precedence:
It is very important to see that our role as a department
goes much wider than individual schemes and interventions and
it really is focused on trying to create this environment for
business in which business can succeed.[11]
12. That change of emphasis was set out in the
Department's written evidence which stated that "rather than
supporting individual businesses, there was a role for BIS in
understanding the impact government has in delivering horizontal
policies and where the challenges are faced by certain sectors
and industries." When challenged on what this meant in practice,
Philip Rutnam clarified this approach in the following terms:
Many of the things that Government does that affect
business, really operate at that level, which I would call horizontal;
things that tend to run across the economy.[12]
13. That approach was, in general, welcomed by
our witnesses. Phil Orford, representing the Forum of Private
Business believed that the Department was now "less interventionist"
than it was under the previous administration. He saw this as
a positive development as he believed that the Department's focus
should be as a "facilitator" for business.[13]
In a similar vein, Tim Page, Senior Policy Officer from the TUC,
welcomed the Department's self branding as the "Department
for Growth".[14]
Matthew Fell representing the CBI agreed that "growth is
absolutely the right overall mission".[15]
He went on to say that a key role of the Department would be in
"influencing, championing and helping to create the right
environment for growth" which included "macroeconomic
stability, the regulatory climate, taxation and skills".[16]
14. Matthew Fell further argued that detailed
engagement with business was vital to the success of the growth
agenda and challenged the Department to consider government policy
in the following context:
What is its impact on growth? What does the business
community think about that?" so it can identify what those
impacts are, articulate them, so at the very least we are making
informed decisions about policy right across Government to say
how does that impact on growth.[17]
15. The Forum of Private Business also believed
that the Department had to take a "very strategic" view
of the economy and Phil Orford gave the following assessment of
where it should concentrate its work:
Small businesses particularly, but many large businesses
as well, are the innovators; they are the ones who adapt to change;
they will be the ones that will drive economic growth. But they
need a strategic lead. That is [...] where Government have to
come in. We need to understand long term and medium term what
the strategy is [...] we need to know that those sectors are going
to be focused on [...] so that the businesses ready to innovate
in those areas have the confidence to make those investments.[18]
16. When he came before us Mark Prisk MP, the
Minister of State for Business and Enterprise, explained that
the Department's role was not to "tinker and meddle in different
aspects of those things that shape decisions by business"
but to provide a business-friendly environment in which it could
thrive.[19]
Sector support
17. While the overall focus on growth was welcomed,
there was uncertainty over how that focus would translate into
support for the different sectors of the economy. Mr Rutnam explained
that the Department's strategy would need to address the different
circumstances and challenges faced by all of the different sectors
of the economy so that it would be able to "adapt policy,
in particular in sectors where there are potentially large economic
gains to be had, to help those sectors to succeed".[20]
18. Matthew Fell believed that it was vital for
the Department to build up in-house expertise and capability so
that it understood across all the parts of the economy. In particular,
it needed to gain specific knowledge on "what the particular
drivers are in that economy and what the roadblocks to growth
are in each of those".[21]
If that was achieved, Matthew Fell believed that the Department
would be able to respond to problems in an informed way. He summarised
this in the following terms:
The critical role for the Department is almost to
have an account management mentality, if you like; to be saying,
"In some of the areas where we know we have comparative advantage—pharmaceuticals,
creative industries, high value-added manufacturing, for example—we
are not picking winners and backing those solely at the expense
of others, but what we are doing is understanding what the investment
decisions that are going on in some of those companies are, what
is making them choose the UK over our international competitors
and where there are barriers or roadblocks to growth in those
sectors, understanding those and helping to unlock those barriers.[22]
19. Lee Hopley, representing EEF, was of a similar
view. He argued that the role of the Department in supporting
growth across the private sector, was to develop "a constructive
and strategic partnership with all parts of industry." It
also needed to build up a "really good understanding of the
sectors that make up our economy and understanding the different
barriers and road blocks that companies face at different parts
of their growth cycle".[23]
Ian Brinkley, from the Work Foundation, believed that a better
concentration of efforts on growth sectors or growth areas of
activity was necessary. He argued that it was clear that there
were areas in which the United Kingdom had a "comparative
advantage" [24]
over other nations, for example the low-carbon economy and believed
that this was where the Department should focus its attention.[25]
20. Although our witnesses supported the overall
aims of the Department, they also wished to see it continue with
targeted interventions at the sectoral level. Matthew Fell argued
that it was important the Department continued to provide a
"delivery function" for Government support programmes
for business, and specifically "support to SMEs, trade promotion,
investment and export support and building sector capability".[26]
21. Tim Page from the TUC highlighted
high value sectors such as aerospace, defence, pharmaceuticals,
nanotechnology, biotechnology and computer games as areas which
should be supported by Government. In particular, he argued that
the Department should focus on "industries where we can be
competitive, rather than trying to catch everybody, and recognise
that some industries, however much BIS might want to support them,
we are going to lose to other countries".[27]
This was reflected in the evidence given by the Minister who gave
the following areas of growth which his Department had already
identified:
We are looking, through the growth reviews, to focus
on six areas initially. These are our first areas. One is obviously
to deal with advanced manufacturing, and then construction, retail,
[...] the digital and creative industries, [...] professional
and business services and [...]health and life sciences.[28]
22. However, Roger Bibby from the Federation
of Small Businesses, while welcoming a sectoral approach cautioned
against too great a focus on what he described as niche areas,
for example green industries and argued that "there seems
to be a bit of a love affair with growth of niche markets and
technology". [29]
He cautioned against an obsession with new technologies at the
cost of support to established sectors.[30]
23. Despite the positive engagement by business,
Sir Richard Lambert, in his farewell speech as Director General
of the CBI, believed that the Government's rhetoric on growth
had yet to be matched by meaningful action. He was critical of
the fact that a proposed Growth White Paper, which was expected
last autumn, had yet to materialise because "the impression
was given that there simply weren't enough good ideas around to
justify such a publication", and argued that in its absence
"we are left with a few rather vague ideas about the scope
for supporting a number of predictable sectors, and the promise
that more ideas will be forthcoming at the time of the Spring
Budget".[31] The
importance of delivering growth was highlighted recently when
the Office for National Statistics announced that Gross Domestic
Product (GDP) decreased by 0.5% in the fourth quarter of 2010,
compared with an increase of 0.7% in the previous quarter.[32]
24. The branding of the Department
as the "Department for Growth" has sent out a positive
message that it will focus its efforts on creating the right environment
in which business can flourish but it will need to put significantly
more flesh on the bones of this strategy if its actions are to
match the rhetoric. The lack of a detailed strategy for sectoral
support is a good example of where there remains a worrying gap
between the Department's ambition for growth and clearly defined
policies to achieve that goal. The Department may be pointing
in the right direction but the recent disappointing growth figures
demonstrate that a positive message is not enough. What is needed
now is the delivery of tangible policies for business.
Judging Success
25. It is clear that the general direction of
the Department's strategy has been well received by business groups,
in particular, its focus on creating the right environment for
growth. Judging the performance of the Department in this area
will not be so straightforward. When we asked Mr Prisk how he
would assess performance over the next few years he believed that
primarily, it would be judged if, in four or five years' time,
there had been:
Sustained and sustainable growth that was recognised
across our key sectors where the UK has strong advantages; that
we saw the ability to start and grow a business, especially a
small business, actually made easier; and that we found ourselves
exporting more, both in value and volume.[33]
26. Individual interventions can be assessed
but it is more difficult to gain an appreciation of the extent
to which the Department has delivered sustainable growth. We are
aware that the Department is currently developing Key Impact Indicators
with which it will monitor its performance. These indicators will
need to be sufficiently intelligent to separate the Department's
influence in any outcomes from those over which it has no control.
27. We remain unclear about
how the Department proposes to assess its performance in delivering
sustained economic growth. Merely looking at the success or otherwise
of the economy will not give an objective view on the Department's
record. This should be of concern to the Department because economic
success could mask failures in Departmental policy while economic
hardship could mask excellent strategies or interventions. We
therefore recommend that the Government, in its response to this
Report, set out in detail how it will monitor its strategy and
set out the criteria under which that strategy will be assessed.
Furthermore, we believe that the Department's performance management
system must concentrate on outcomes and not processes if it is
to be of any relevance to the economy.
2 Ev 91 Back
3
Ev 91 Back
4
www.bis.gov.uk/growth Back
5
www.bis.gov.uk/assets/biscore/corporate/docs/b/10-p58-bis-business-plan.pdf Back
6
www.bis.gov.uk/assets/biscore/corporate/docs/b/10-p58-bis-business-plan.pdf Back
7
Q 2 Back
8
Q 2 Back
9
Q 295 Back
10
Q 298 Back
11
Q 2 Back
12
Q 7 Back
13
Q 153 Back
14
Q 123 Back
15
Q 152 Back
16
Q 152 Back
17
Q 158 Back
18
Q 175 Back
19
Q 298 Back
20
Q 7 Back
21
Q 174 Back
22
Q 174 Back
23
Q 288 Back
24
Q 124 Back
25
Q 123 Back
26
Q 152 Back
27
Q 148 Back
28
Q 306 Back
29
Q 156 Back
30
Q 156 Back
31
www.cbi.org.uk Back
32
www.statistics.gov.uk/cci/nugget.asp?id=192 Back
33
Q 297 Back
| 
