Continuing turmoil in financial markets means politicians are keener than ever to be seen to be supporting the “rebalancing” of the economy away from the service sector and towards those who actually make things. Whereas not so long ago senior Labour and Tory figures were forever chasing photo opportunities within the Square Mile, they are now more likely to be seen flashing their toothy smiles around manufacturing firms.
Step forward deputy prime minister Nick Clegg who grinned throughout a potentially embarrassing visit to Sheffield Forgemasters, the heavy engineering plant which was at the centre of controversy last year when an
£80 million government loan offer to fund a specialised forge to make parts for the civil nuclear industry was suddenly withdrawn.
Clegg insisted that Forgemasters’ management had told him their priorities in this area had changed in the wake of the Japanese nuclear disaster and decisions taken in Europe in its wake. And he announced that a new loan had been made available to the firm from the Regional Growth Fund and that this would allow the procurement of different equipment and help support apprenticeships.
“We had to do a kind of emergency rescue operation of the government’s finances the moment we came into power,” he said. “That did involve some really controversial decisions. We had to make some of those early decisions to pull the country back from the brink. And we’re now able, now that we’re slowly getting on top of the situation, to take more positive decisions.”
On the other side of the political spectrum, Labour leader Ed Miliband used a visit to machine tool firm Manthorpe Engineering in Ripley, Derbyshire to accuse the coalition government of not understanding the financial crisis after No 10 claimed that cutting capital allowances would aid the economy. Miliband said Prime Minister David Cameron’s assertion that the economy was being rebalanced by highlighting the impact of cutting capital allowances to fund corporation tax reductions did not support manufacturing or long-term investments.
“The government has made a decision to take away the investment allowances that people get for investing in plant and machinery and instead provide for an across-the-board tax cut,” said Miliband. “The people that will be helped most by this are the banks. I think that’s the wrong choice.
“The right choice to be making is to support companies to actually invest in the future, to invest in that plant and machinery that’s going to help them, our economy and their employers.
“The government has made the wrong choice and it shows they don’t understand the need to learn the lessons of the past, learn the lessons of the financial crisis and build the high-tech manufacturing economy that we need for the future.”
Analysis commissioned from the Commons Library suggests that the changes, planned for next year, will benefit companies making profits but not reinvesting. Banks are set to be among the biggest winners, while manufacturing and high-end engineering companies will be hardest hit, it said.