Osborne's speech - More innovation please
Authors: Andrew Sissons
03 October 2011
George Osborne’s speech to the Conservative conference was heavy on intellectual content, but light on detail. He set out a weighty defence of his tough fiscal strategy, and made much of his “monetary activism”, promising to keep the supply of credit flowing to businesses and households. But he made much less of another, equally important theme: how to help British businesses develop and make money out of new ideas. Despite his promise to help the “innovators”, there was little detail in his speech – beyond a couple of extremely valuable funding announcements – on how he might do this.
The Chancellor referred to financial services as Britain’s “biggest industry”. It is certainly a key player in providing finance for investment and innovation, but it accounts for less than 4% of all jobs and little over 10% of economic output. That makes it smaller than manufacturing, among many other industries. and we’d like to see much more attention being paid to potential growth sectors like advanced manufacturing, business services and the digital economy.
Of course, there are a number of good reasons to focus on financial services besides the million or so people employed in them. Osborne’s most interesting announcement, a promise to look at “credit easing”, was billed as a much-needed dose of relief for small businesses, and should be welcomed. However, according to Robert Peston, this easing will largely be directed at larger businesses, not the smaller ones that so desperately need it.
There is another problem. Even if you improve the credit conditions for businesses, there’s no guarantee they’ll invest it. At a time of global turmoil, where consumers are feeling the pinch and investors are fleeing to safe investments like gold and government bonds, it is hard for businesses to invest with any confidence. They need confidence that they can make money from their investments, and at the moment that is hard to come by. In such circumstances, it is more important than ever for firms to have good, innovative products and services. And that means the government needs to focus on its innovation policies.
What Osborne did say about innovation was good. He announced funding for the commercial development of graphene, an exciting new material, as well as investment into high performance computing. This type of funding, which builds on the best of the UK’s knowledge base and aims to turn it into viable business opportunities, can be extremely valuable.
But beyond these two announcements, there was little else of note on innovation. That is a shame. We want to hear more about how UK business can benefit from universities, more about government allowing new markets to develop, and much more about how the state can work with the private sector to create jobs. Until the government starts talking more about these issues, it will continue to feel that we are sitting back and hoping for the best.
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