Free market not always good

21st June 1996 at 01:00
Competitiveness - Creating the Enterprise Centre of Europe is the Government's third white paper on the competitive performance of the UK economy.

Whether it will be the last remains to be seen, but the parliamentary exchanges between deputy Prime Minister Michael Heseltine and Labour's John Prescott suggest that a consensus is emerging about the benefits of an annual audit.

After all, the white papers are far more robust and informative than the media-hyped surveys of the World Economic Forum.

As annual audits, the white papers have focused attention on how the UK's performance compares with its main economic competitors, and the macro-economic factors which encourage growth and prosperity. For the Government, the most important of these factors are stable exchange rates, low interest rates, tight control of public spending, good industrial relations and the creation of flexible labour markets.

However, in addition to highlighting those factors which shape the UK's general financial and trading environment, the white papers have also emphasised inputs which are central to achieving long-term competitiveness.

High on the list are education and training, research and development, the quality of business investment, business support services and transport infrastructure. In areas, such as education and training, the audits have begun benchmarking the UK's performance.

But even though Creating the Enterprise Centre of Europe is based on the latest managerial techniques to measure the UK's performance in strategic areas, like other white papers it fails to propose additional public investment.

The main financial announcements are the refocusing of existing public spending to create a Pounds 200 million local competitiveness budget and a Pounds 40m sector challenge budget.

Instead of throwing money at problems, the white papers have concentrated on re-orientating public spending to finance reforms geared to improve the UK's competitiveness. Future reforms have been put on hold.

The Government is planning - or is in the process of completing - four consultations in the education and training, and business support field. Once again, ministers want to consult on entitlement credits for 16-year-olds. And the education and training community is still waiting for a Government response to the Consultation on Lifetime Learning published last November.

Perhaps the delay in publishing a final policy statement on lifetime learning is connected with the potential overlap with the other main investigation into the UK's education system, the Dearing review of higher education. Both are concerned with the funding of lifetime learning and the relative merits of income-contingent loans, learning TESSAs and tax-based individual learning accounts.

Meanwhile, the Government is planning a consultation on the delivery of business support services. In parallel with the publication of the competitiveness white paper, the Government published Your Business Matters - Government Response, one of the main outcomes of the consultation with small businesses initiated by the Prime Minister in March.

The new consultation exercise will consider how business support services can be simplified. Ian Lang, the President of the Board of Trade, has indicated it will cover the potential merger of training and enterprise councils, business links and chambers of commerce.

The prospect of ministers proposing fundamental reforms to our education, training and business support systems is remote. They will not budge from the assumption that free markets are "good" and state intervention "bad".

Ministers should recognise that state intervention in the work of markets is essential if the UK is to become the enterprise centre of Europe. There is a middle way between intervening in everything and intervening in nothing. Wisdom lies in using state intervention sparingly and in the right fashion.

Mark Corney is director of MC Consultancy which advises on education and training

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