DTI given muscle to help industry: White Paper to put focus back on manufacturing

THE Department of Trade and Industry is to be given powers over other government departments in an attempt to boost Britain's industrial base.

On Tuesday John Major will launch a White Paper on competitiveness that is expected to shatter one of the cornerstones of Thatcherism by putting manufacturing recovery at the centre of government policy.

Helping Business Win will be launched with the ministerial firepower normally accorded only to an election manifesto, to emphasise that all departments will now be expected to look at the industrial impact of their actions.

Mr Major will be flanked by Michael Heseltine, President of the Board of Trade, who is the White Paper's author, the Chancellor of the Exchequer, the Secretaries of State for Transport, Environment and Education, and the Minister of Public Service and Science.

The launch was postponed from last week, officially because of John Smith's death. But observers suspect the delay has also given the Government time to make last-minute revisions to the document.

This has been debated heatedly between guardians of the Thatcherite tradition and supporters of Mr Heseltine, who told the 1992 Conservative Party Conference that he would, if necessary, intervene before breakfast, lunch and tea.

Though the document's proposals are unlikely to add substantially to public expenditure, the Treasury has been suspicious of its tone, as has the Number Ten policy unit. 'They nearly went through the roof when they saw the first draft,' one insider said.

The Government will come close to laying out an industrial strategy by advocating a long- term view of where industry should be heading.

Last month's report on competitiveness from the Trade and Industry Select Committee showed a strong cross-party consensus in favour of a longer- term approach. The committee, whose views are thought to be in line with Mr Heseltine's, said the Government should increase aid where the market was unable to provide finance.

The paper will point out that Britain's productivity lags behind the United States by 70 per cent, and behind Germany and Japan by 25 per cent. It will say that the gap has been closing in the last 10 years, but it is unlikely to offer much government money to accelerate the process.

Instead, the DTI's programme to encourage 'best practice' by companies, particularly in the same supply chain, is likely to be boosted.

There is greater concern about the long-term ability of the industrial base to grow. The DTI has been bombarded with calls for more intervention.

Again, the emphasis is likely to be on the DTI's role as intermediary, rather than as a direct source of support. Observers believe it will be directed to help improve performance in sectors that are thought to have the greatest growth potential - for example, by encouraging co-operation between companies to spread technology.

There could also be more state money for fundamental research. The Government will be keen to avoid accusations that it is returning to a Wilsonian 'picking winners' policy. However, it already subsidises aerospace research and can argue that there are other areas where the market is unable to provide the finance needed. Mr Heseltine has said that he believes the Governmment should boost its R&D spending.

The White Paper devotes a complete chapter to training, and some observers believe it may introduce a radical new approach to encourage companies to spend more on this.

Trade unions have demanded a levy on those that do not spend enough on training, and the Trade and Industry Select Committee said this should be examined.

Early drafts of the White Paper are believed to have called for a review of the tax system to make it more supportive of industry.

Last month the Select Committee recommended that the Government consider changing the system to encourage insurance funds to invest in small companies, and to discourage the payment of artificially high dividends.

Stephen Dorrell, financial secretary to the Treasury, said last week that dividend payments had become too high and too inflexible. But he added that tax changes would not be made unless the Government established that they were the best way of controlling payouts.

(Photograph omitted)