Big words, small ambition

This is my latest comment from Fund Strategy magazine.

The government’s self-righteous moralising over Libya seems to have distracted attention from its attempts to promote innovation. From the coalition’s perspective this is probably a bonus as its plans for “StartUp Britain” are unconvincing.

Since it became clear that the need for austerity was almost universally accepted – even if there are disagreements on the extent and timing of cuts – the government has launched numerous initiatives to promote growth. Its underlying assumption seems to be that the two sides of its policy are complementary. Rolling back the state will help generate a thriving entrepreneurial culture.

Along with its “budget for growth” the government released a 131-page Plan for Growth that mentioned the word “innovation” 86 times. The budget itself also extended the number of firms eligible to be included in venture capital trusts.

A few days later the prime minister helped launch the StartUp Britain initiative to promote entrepreneurship as well as a programme to help graduates start businesses. Soon afterwards the government launched the “Innovation Launch Pad”. In what sounds like Dragons’ Den meets Yes Minister it will involve small businesses pitching their ideas to a panel of civil servants. The government also backed a European Union initiative called “Let’s Choose Growth”.

Although much of the rhetoric of growth and innovation sounds great there are two fundamental problems with this approach.

First, the amount of resources involved is small. Levels of business investment as well as research and development are low. It is far easier to talk about encouraging growth than to pay for the infrastructure necessary to achieve it.

More fundamentally the desire to achieve growth will be thwarted by the prevailing precautionary culture. Even the most ambitious initiatives tend to be quickly undermined by environmental and other concerns.

Promoting genuine growth demands a cultural shift which the government is not equipped to provide.