The Manufacturer meets Business Secretary Vince Cable at the 2012 Manufacturing Summit to discuss the latest round of the Regional Growth Fund (RGF) as he hints at capital allowances in the next budget.
TM: Following another £1bn investment in the RGF has the emphasis of government shifted from the financial to the manufacturing sector?
VC: We need to help businesses create jobs and this isn’t going to happen spontaneously, so it needs government support. The RGF is the mechanism we’ve adopted as combines with private investment making it the best way of using taxpayers money.
Parts of the country are highly dependent on the public sector and these are the regions most affected by the economic downturn. The North East is one of these and companies based there have benefitted massively from RGF, being awarded 66 out of the 176 national projects.
The government is focused on carrying out a sectoral shift so the economy isn’t dependant on the banking system for tax revenue. That kind of exposure is very dangerous. We want to boost manufacturing and other productive activities, particularly those that are export orientated ones. The RGF is shifting activity back into the regions that have been neglected.
TM: Is it feasible to have 100% capital allowances for businesses?
VC: The government is looking at how the capital allowance system operates. Our initial approach, set out by the chancellor, was to create a tax friendly regime based on cutting the rate of corporation tax on a systematic basis. This was instead of a capital allowance approach but we are looking at how to reconcile this as could get investment moving.
TM: Will the numbers going into apprenticeships suffer after the recent move by the Education Department to devalue engineering in schools?
VC: We are putting a lot more effort and resources into apprentices but I admit there is concern among manufacturers that the engineering diploma’s they crafted are being devalued because of the way it is measuring in government league tables. I have written a letter to Education Secretary Michael Gove communicating the concerns of the engineering industry because we shouldn’t let good vocational diplomas be disbanded or devalued. We are very conscious that the message needs to get down into the schools not simply post-school.
TM: Will there be changes to the way the government hands out its contracts after years of foreign-owned companies benefiting rather than British firms?
VC: We can’t be crudely nationalistic and protectionist. After the controversy surrounding Bombardier [missing out on a significant railway contract] it is clear that government contracts have been too mechanical in the past. They have been based on short term price considerations and haven’t taken into account the strategic benefits to industry. We have made a decision to change that so that future bidding of proper accounts is taken. There won’t be massive changes over night but it will change culture behind government procurement and I hope that over time we will see more British companies benefitting from that.
TM: What input has the Department of Business, Innovation and Skills had ahead of the Spring budget?
VC: Credit remains an issue and we are coming up with ideas on financial flows. We recognise that if the economy is going to grow it will need some kind of stimulus. We have limited amount of money but we will make the case for successful institutions, such as the Technology Strategy Board, to receive more funding and we will look at capital allowances. I can’t tell you in detail but we need to support business through the tax regime while realising that the government has a big deficit reduction plan.