Ed Balls: Strong recovery needs long-term investment

WHAT will deliver the strong and balanced recovery we need is long-term business investment. In the 21st century, we know that the companies and countries that will succeed will be those who invest in skills and innovation and can exploit the huge opportunities that the new global digital network and the era of big data are bringing – in high-value manufacturing, digital media, clean energy, education and medical technology.
Olympic ParkOlympic Park
Olympic Park

The question is whether we will seize this opportunity or squander it? You know in your own businesses you have no future trying to undercut emerging market economies like India, China and Brazil on cost and wages. And we cannot succeed as a country and win the global race through a ‘race to the bottom’ on wages and standards. That way is doomed to fail.

Because Labour is determined to learn from successful British businesses, we have asked Mike Wright, executive director at Jaguar Land Rover, to lead a review for us on how we can help strengthen our manufacturing supply-chains and deliver the skills and innovation Britain needs to succeed, small and large businesses working together to invest and export.

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Some of you will say government should just get out of the way. And let me say, if government action is undermining confidence and investment then that is what government should do. But on innovation, skills, planning, infrastructure – for government to walk away would be for government to abandon the long-term partnership we need to succeed.

As Labour’s last Business Secretary, Lord Mandelson concluded: “Ministers and markets can and should mix – selectively and strategically.”

So to drive innovation the next Labour government would continue to support the technology strategy board and its catapult centres successful initiatives we started. And we will make Local Enterprise Partnerships fit for purpose.

To promote long-term investment, we are studying former IoD director-general Sir George Cox’s proposals to reform takeover rules and our tax system.

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And we should use revenues from the planned increase in the licence fees for the mobile phone spectrum, expected to be over £1bn in the next parliament, to capitalise the British Investment Bank so that, region by region, we can get small and growing businesses the finance they need to grow and create jobs.

And following the path-breaking report by the chairman of the Olympic Delivery Authority, Sir John Armitt, we will set up an independent infrastructure commission to end dither and delay in infrastructure planning and build the consensus on infrastructure that we need to invest for the long-term. Of course, the test for any such reform is how it would affect big decisions currently on the table. So let me address two.

First, on airports, we welcome the Howard Davies review and it is Labour’s view that it should report before the General Election and not after. Under the Armitt plan, it would not have been possible to set up the Davies review without proper cross-party consultation, or kick the report into the next parliament. And if any future government then were to sit on the recommendations, the Armitt plan would give a clear remit to the independent commission to chivvy and chase.

Second, on HS2, the whole purpose of the Armitt plan is to ensure that in future the case for and the costs of any large project is properly and thoroughly and independently investigated.

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Labour supports HS2 and the idea of a new North-South rail link because of capacity constraints on the existing rail network. But our support for it is not at any cost.

The Labour Party cannot – and will not – give the Government a blank cheque. That is what you would expect from any credible official opposition seeing a Government desperately mismanaging a project. And that is what is happening here with the costs having shot up to £50bn.

Indeed, the costs have gone up by a staggering £10bn in the last year, so I of course welcome the Prime Minister’s belated recognition that he needs to get a grip.

As you at the CBI have said recently: “The increased costs of HS2 are a matter of concern. For HS2 to go ahead it has to wash its face. The value for money test has to be properly applied.”

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We agree – and we will put the national interest and the taxpayer interest first. We will take a hard-headed look at the costs and benefits of the scheme to ensure this is the best way to spend £50bn for the future of our country.

As Chancellor, I would be a strong advocate for infrastructure investment. And I believe the Government should be acting now to bring forward that long-term investment, as the IMF has also argued. But the Chancellor should never simply become a cheerleader for any particular project. Building a consensus about long-term infrastructure does not mean turning a blind eye to value for money.

* Ed Balls is the Shadow Chancellor and Labour MP for Morley and Outwood. This is an edited version of his keynote speech to the CBI yesterday.