Britain requires a new economic framework that relies less on the financial services industry and under which the City would wield less power, according to a confidential briefing given by the Business Secretary, Peter Mandelson.
By Mark Kleinman
Last Updated: 12:46AM BST 19 Oct 2008
Peter Mandelson wants the British economy to become less reliant on the City
At a meeting in Westminster on Friday, Lord Mandelson is understood to have told senior officials from the Department for Business, Enterprise and Regulatory Reform (BERR) and Shriti Vadera, the Business Minister, that they must go on to a “war footing” as they prepare to deal with the economic fallout from the banking crisis, which has seen tens of billions of pounds of taxpayers’ money being used to recapitalise some of the country’s largest banks.
This weekend, the banks are negotiating with the Treasury over whether they will be allowed to make dividend payments while the Government holds preference shares.
According to Lord Mandelson’s briefing, the Government is concerned that the financial crisis and a subsequent recession will lead employers to slash discretionary spending on skills, training and innovation, dampening the prospects for a strong economic recovery. (AtW's comment: it's okay Gov, the upside (or
side?) is that guru's of this world got their bonuses, so that's okay then)
“He believes this is the greatest danger to the economy in the long-term and wants the Government to gear its policies to reduce the risks from that. He has asked the department, and others, to produce proposals on how this can be achieved,” said an official who attended the meeting.
Lord Mandelson, who stepped down as the European Trade Commissioner to take his Cabinet post, is also understood to have met Richard Lambert, the director-general of the CBI, in recent days to discuss his concerns about the impact of the banking crisis on the wider economy.
According to a memo produced by BERR officials, a copy of which has been seen by The Sunday Telegraph, the Business Secretary has acknowledged that the City, which accounts for a greater proportion of national income than rival financial centres such as New York, will emerge from the current crisis “significantly smaller”.
“While growth in this sector will resume…financial services is unlikely to make the same contribution to GDP growth as it has in the last decade,” said the memo. “[Lord Mandelson] has therefore decided to examine new approaches to business growth in Britain and the Government’s role in formulating strategies that will enable Britain to take adv of opportunities offered by globalisation and the doubling in size of the global economy in the coming decades. [Lord Mandelson] thinks Britain has leant too heavily on financial services growth and that it is time to widen the economic scope to other industrial sectors.”
The Secretary of State’s views about how the financial crisis may play a role in recalibrating the British economy will provoke intense debate among the business community, given the broad decline in manufacturing industries during the past 20 years and criticism about the lack of Government investment in the country’s private-sector skills-base.
This weekend, Lord Turner, the chairman of the Financial Services Authority, agreed that the City was likely to shrink in the years ahead.
“What I think has been illustrated is that we have to make sure that over the next 10 years that a vibrant financial services sector is balanced by fashion, by tourism, by creative industries?” (AtW's comment: by the time all layoffs in the City are over this will be the case, pretty soon - before 2012.)
The Business Secretary is also considering reviving a White Paper published in 1998 while he was at the helm of the Department of Trade and Industry. Revisions to the paper, called The Knowledge-Driven Economy, are likely to focus on collaboration between the public and private sectors, according to officials.
Lord Mandelson was unavailable for comment this weekend. However, a source close to him said: “He has not changed his free-market spots but he has benefited from his four-year continental experience.”
By Mark Kleinman
Last Updated: 12:46AM BST 19 Oct 2008
Peter Mandelson wants the British economy to become less reliant on the City
At a meeting in Westminster on Friday, Lord Mandelson is understood to have told senior officials from the Department for Business, Enterprise and Regulatory Reform (BERR) and Shriti Vadera, the Business Minister, that they must go on to a “war footing” as they prepare to deal with the economic fallout from the banking crisis, which has seen tens of billions of pounds of taxpayers’ money being used to recapitalise some of the country’s largest banks.
This weekend, the banks are negotiating with the Treasury over whether they will be allowed to make dividend payments while the Government holds preference shares.
According to Lord Mandelson’s briefing, the Government is concerned that the financial crisis and a subsequent recession will lead employers to slash discretionary spending on skills, training and innovation, dampening the prospects for a strong economic recovery. (AtW's comment: it's okay Gov, the upside (or
side?) is that guru's of this world got their bonuses, so that's okay then)“He believes this is the greatest danger to the economy in the long-term and wants the Government to gear its policies to reduce the risks from that. He has asked the department, and others, to produce proposals on how this can be achieved,” said an official who attended the meeting.
Lord Mandelson, who stepped down as the European Trade Commissioner to take his Cabinet post, is also understood to have met Richard Lambert, the director-general of the CBI, in recent days to discuss his concerns about the impact of the banking crisis on the wider economy.
According to a memo produced by BERR officials, a copy of which has been seen by The Sunday Telegraph, the Business Secretary has acknowledged that the City, which accounts for a greater proportion of national income than rival financial centres such as New York, will emerge from the current crisis “significantly smaller”.
“While growth in this sector will resume…financial services is unlikely to make the same contribution to GDP growth as it has in the last decade,” said the memo. “[Lord Mandelson] has therefore decided to examine new approaches to business growth in Britain and the Government’s role in formulating strategies that will enable Britain to take adv of opportunities offered by globalisation and the doubling in size of the global economy in the coming decades. [Lord Mandelson] thinks Britain has leant too heavily on financial services growth and that it is time to widen the economic scope to other industrial sectors.”
The Secretary of State’s views about how the financial crisis may play a role in recalibrating the British economy will provoke intense debate among the business community, given the broad decline in manufacturing industries during the past 20 years and criticism about the lack of Government investment in the country’s private-sector skills-base.
This weekend, Lord Turner, the chairman of the Financial Services Authority, agreed that the City was likely to shrink in the years ahead.
“What I think has been illustrated is that we have to make sure that over the next 10 years that a vibrant financial services sector is balanced by fashion, by tourism, by creative industries?” (AtW's comment: by the time all layoffs in the City are over this will be the case, pretty soon - before 2012.)
The Business Secretary is also considering reviving a White Paper published in 1998 while he was at the helm of the Department of Trade and Industry. Revisions to the paper, called The Knowledge-Driven Economy, are likely to focus on collaboration between the public and private sectors, according to officials.
Lord Mandelson was unavailable for comment this weekend. However, a source close to him said: “He has not changed his free-market spots but he has benefited from his four-year continental experience.”
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