Business & politics - why Heseltine is wrong

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There's a sort of conservatism - let's call it the "business right" - that sees politics through the prism of a thing called either "business and industry" or else "business and commerce". This viewpoint produces familiar comments such as:

"We need more businessmen in politics"

And:

"Government needs to be more businesslike"

Or indeed any number of variants on this theme where the essential premise is that "business administration" is somehow a superior construct to "public administration". And, this being so, that we have only to introduce such administration to government to bring about a miraculous transformation in the efficiency and effectiveness of public services.

Moreover, by bringing in business people, we get a sudden rush of initiative, enterprise and other fabulous business virtues. Thus we get boards established, run on corporate principles and populated by private sector folk - the holy grail of public services and public investment being "business-led" is met. And we rejoice for it will be but a short while before the benefits of such initiative is felt by all!

This is the essence of Michael Heseltine's politics. The lion-maned, millionaire businessman (and politician) does not believe in free markets, free trade and free enterprise. Heseltine believes in "business", in industrial strategies, in subsidies, in picking winners. Above all, Heseltine believes that government should harken to the cries of the business establishment and fund their schemes (while putting those business 'leaders' on the boards that administer those programmes).

And it seems like the Coalition plans to adopt Heseltine's approach:

"In line with Lord Heseltine’s report, today we have also announced a package of wider support that is a big vote of confidence for our industrial strategy, particularly the aerospace, automotive and agri- technology sectors. This support not only gives businesses certainty, but shows the Government is determined to back those sectors where Britain can deliver and compete on a global scale in partnership with industry."

Weirdly, Heseltine pretends that all this is somehow radical, new and change-making. It's almost as if the old interventionist has written George Osborne's script for him:

 “We asked Lord Heseltine to do what he does best: challenge received wisdom and give us bold ideas on how to bring government and industry together. He did just that, and that is why we are backing his ideas today.”

I fail to see anything at all in Heseltine's proposals that "challenge received wisdom" or indeed do anything but repeat what Heseltine has proposed off and on since the 1970s. Hand control of planning to unelected boards, pour money into regeneration, create new regional quangos and define a privileged set of industries that benefit from government largess (chiefly the property development industry).

In the North we have had thirty years and more of this 'partnership with industry'. It hasn't delivered salvation - indeed with each passing year the North slips a little further behind the rest of the nation. It's true that some already successful business folk get to sit on grand boards - the latest being Local Economic Partnerships - but these boards achieve little even when (as with the Regional Development Agencies) they're given loads of money to spend.

Challenging received wisdom would have meant a very different approach. Rather than a snuggly little relationships with the grandees of big businesses, we might work instead with the real enterprise of millions. Instead of a grand board proposing sweeping nonsense about "green industry", "creating the technologies of the future" and other such tommyrot, we might have teams of coaches working with real people in the communities of the North. Helping people realise their aspirations, navigating start up businesses through the thickets of red tape, linking them to networks of other businesses and building a new economy on real enterprise rather than random guesses about "those sectors where Britain can deliver and compete".

This isn't about whether GDP or GVA grows but more about helping Mary, Steve, Iqbal and Samara to get their idea to work. It's about helping a bunch of young people without great qualifications to achieve something of their aspirations - whether that's to be a singer on a cruise ship or to run a successful computer repair business.

The "business right" - rather like the Fabian left - does not recognise free markets but only business markets. We're in a 'global race' rather than a peaceful, pleasant exchange of value with others. Countries, regions, cities, even neighbourhoods, 'compete' - that Porterian 'dog eat dog' philosophy dominates thinking. At no point do we consider that the object isn't actually competition but the successful operation of comparative advantage.

We have a government set in the belief - the hubris - that there are a set of levers that, if pulled in the right pattern, will result in success. And the rhetoric of liberty, of allowing people the space to succeed, is pushed aside in favour of a business-led quangos and investment in privileged sectors.

I have only one prediction. Just like every other time we've followed Michael Heseltine's advice, every time we've adopted "business-led" regional strategies, these policies will fail.

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Heseltine was wrong in 1982, wrong in 1992. He's still wrong in 2012.

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I don’t know where to start with Lord Heseltine’s review. Perhaps with the bits I agree with – elected mayors, for example. Or maybe with a witch’s warning about reviews that everyone seems to ‘applaud’. But I’m choosing instead to begin with the big fib that Heseltine starts with -  his claim that the proposals are innovative, radical & different.

If there is an upside to the worst economic crisis of modern times it is the emergence of an audience for deep seated and radical proposals. They distrust talk of isolated initiatives or quick wins. An ever more competitive world will only become more competitive not less. The structures and attitudes of yesterday did not work that well then and certainly will not cope with the new world order.

All this may be true but Heseltine doesn't offer "deep seated and radical proposals" but exactly the things he disdains - "the structures and attitudes of yesterday..." 

Anyone who has listened to Lord Heseltine over the years will know that the themes of his thesis remain constant. The specific context of these particular proposals may be different from that led to the urban development corporations in the early 1980s or to “City Challenge” in the 1990s but the prescription remains the same.

Competitive bidding:

All my experience confirms that competitive funding is key to unleashing the entrepreneurial spirit in local areas. It injects a surge of excitement and incentivises communities to seek a wider and much more ambitious vision to anything they had thought of before. A healthy rivalry between areas comes into play. It drives collaboration, creativity, commitment and ambition. I therefore believe that the single pot of central government funds for economic development should be made available to local areas on a competitive basis.

Plan-led investment:

The Government will need to set out the requirements that LEPs must meet in their bids to secure funding. It should consult LEPs, local authorities and the business community in doing so. It is important that this framework is focused on high level outcomes and does not become detailed and prescriptive. This would rein in the creativity of local areas and undermine the benefits of local empowerment. However, there will be some essential criteria which have to be met for government to devolve such significant funding.

Sidelining local authority planning departments:

LEPs should therefore be given additional funding, specifically to develop their new strategic plans. This must be used to hire professional private sector planners as part of a deliberate attempt to spread best practice, engage private sector expertise and avoid LEPs being entirely dependent on the already stretched planning departments of their local authorities.

Cross-department regional offices:

This leads to the conclusion that we should bring together civil servants from different departments whose work impacts on the economy into Local Growth Teams so they can work seamlessly together, closer to the people and agencies affected by their work. They should facilitate both economic development matters that straddle LEP boundaries and partnerships around and between functional economic market areas

These tired old policies are accompanied by a familiar litany of how business-style public sector management is need, how economic development is driven by “innovation strategies” and some ridiculous obsession with “British ownership” as if that is somehow significant in our economy. What Lord Heseltine presents is simply his inevitable dirigiste, managerialist vision of how government should be organised. And it’s presented with panache and conviction.

The problem is that this agenda failed to regenerate the North when Britain was booming. Why on earth does anyone think that this agenda will regenerate the North when Britain isn’t booming? There is nothing at all in Heseltine’s prescription that will take us one inch neared a more dynamic, entrepreneurial economy. Instead we’ll have an economy designed and run by a closed sect of business managers working hand-in-glove with a closed sect of public sector managers.

In the end these are tired old proposals from a delightful and eloquent old millionaire. They are policies that haven’t delivered regeneration when they were tried before – except for some shiny city centres. But ask yourself this. Those city centres – Manchester, Liverpool, Newcastle, Leeds – have they delivered regeneration for the wider community? Travel a few hundred yards to Newton Heath, to Harehills, to Kensington and look around you. That depressing place of high unemployment, poor education, rampant crime and unshiftable poverty wasn’t changed when Heseltine’s policies were tried before. What makes you think it will work this time?

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