Reform of the tax structure to encourage high-value areas of manufacturing – perhaps through a revamped system of venture capital trusts – would be a priority for a Conservative government, Ken Clarke said on Tuesday.
The shadow business secretary said problems in channelling development money to new companies in manufacturing and other high-tech areas added up to a “market failure” that a new Tory administration would be keen to address, in an effort to “rebalance” the economy towards production industries.
In comments that strayed into environmental policy, Mr Clarke also said mainland Britain was “not suitable” as a site for wind farms – in spite of official Conservative policy that both offshore and onshore turbines were to be encouraged in the cause of boosting the UK’s commitment to green forms of energy.
“My view is that those few wild and open [land] spaces that we have left in Britain should not be used for wind turbines,” Mr Clarke said, adding that he thought those structures should be sited exclusively offshore, where they were much less obtrusive.
He was speaking at a conference in London organised by the Policy Exchange research group. He said one way of boosting manufacturing would be to introduce a new system of venture capital trusts that gave tax breaks to investors channelling money to fledgling businesses.
He thought a “more sophisticated version” of these trusts, which Mr Clarke introduced in 1995 as chancellor in the last Tory government, might be needed as a way to increase the availability of finance for new businesses, specifically in technology-based manufacturing.
A big problem for the UK in the past decade was that too much venture capital had been channelled into funding management buy-outs of existing businesses, in his view, as opposed to aiding the start-up of companies based on new ideas in potential high-growth areas.
“Manufacturing has got to play a bigger role in the economy than anyone in recent years has acknowledged,” Mr Clarke said.
In his positive tone towards manufacturing, Mr Clarke echoed many recent speeches by Lord Mandelson. For much of this year, the business secretary has been extolling the virtues of “industrial activism” to lessen the UK’s dependence on services.
But Mr Clarke scorned some of his Labour opponent’s thinking, saying that many of Lord Mandelson’s schemes to help manufacturing, such as a £150m programme based around new research and development projects led by the Rolls-Royce aerospace company, were “work in progress”.
He also suggested a Conservative government might take a broader view than Labour of the areas of production that it wanted to help. Too many of Lord Mandelson’s projects, he said, were aimed at encouraging the “fashionable” area of low-carbon manufacturing.
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