Mandelson's new industrial policy

There was a time - not so long ago - when the Treasury fully embraced market forces, was appalled at the very idea of "picking winners", and would never have imagined it would bail out banks. Here's what Gordon Brown said back in 1999: "The days of picking winners, uneconomic state subsidies and corporate fixes are over and cannot return."

Earlier this year, after Northern Rock, Brown started to adjust his hardline stance - and hinted at a more active, sectoral approach to government intervention:

"I do not believe that governments can pick out individual companies or industries, nor should they. But what we do can make a difference; supporting industries which are thriving and encouraging those that are developing and have the potential to succeed.

"We need a new approach. We are not talking of subsidies or protectionism. Rather we want, sector by sector, to look at how government action impacts on, and can promote, business success."

This month, with unemployment rising fast, Peter Mandelson has set out the Government's new (and more nuanced) industrial policy in more detail - with a speech on globalisation on 3 Dec, and another speech last night on "a new British industrial activism". See this from Peter Riddell in The Times, and other coverage from the Telegraph and Reuters.

Some of this stuff echoes our recent report on globalisation, where we talked about the need for Government to "back winners" and the case for big global brands like Greater Manchester.

Mandelson wants to reclaim the word "industry" from the 1960s and 70s - "when the government attempted to pick winners - or, rather, where losers picked the government". He is now promoting a new approach to industrial policy - not propping up failed companies (like Woolies), but helping out others (like Jaguar). In his words, "looking strategically at each sector in the economy", from manufacturing to creative industries.

Mandy isn't just talking about industrial policy in the old, narrow sense. He's going on about a "total business environment approach" - where skills, transport, planning, energy, migration, education and welfare policies all impact on business. (Look out for "total business environment approach" entering the lexicon of Whitehall jargon...)

Delivery of this new industrial policy will require much better joining up within Whitehall, and between the dozens of regional and sub-regional agencies - MAAs, LAAs, RDAs, HCA, PTEs, LSCs and JCPs. Unsurprisingly, as the Cabinet Minister responsible for them, Mandy spoke up for RDAs.

Targeted support for certain sectors is sensible in a recession - but high risk. As Robert Peston says today, the Government has to avoid becoming the "lender of first resort" to every potential victim of the downturn.

On the recession, Mandy said that the financial services sector will consolidate (i.e. shrink) and "public sector job creation will add far fewer jobs to the economy in the future" - a warning to any cities that are too reliant on government jobs.

All this stuff sounds like Mandelson is firmly positioning himself as the other big player at the top of the Cabinet. While Gordon plays the global stage, and Alistair deals with the financial crisis, it looks like he will play a very major role in shaping the strategy for getting us out of recession.