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Conservatives accused of holding back economic recovery

Shadow business secretary Chuka Umunna to argue that party is wedded to ‘old orthodoxies’ and that state should stand aside

David Cameron is holding back Britain’s economic recovery because he is wedded to “old orthodoxies” that say the state should “stand aside” and avoid helping to stimulate the economy, the shadow business secretary Chuka Umunna will argue on Wednesday.

As the prime minister blamed “blockages” on planning and regulation for holding back the recovery, Umunna will say that Britain needs more than a “market alone” approach if it is to boost economic growth.

In a speech to the CBI at lunch on Wednesday, the shadow business secretary will say: “Proponents of business as usual – roadblocks to reform, reluctant to accept the need to change and modernise, wedded to the old orthodoxies – argue that the best government can do is to stand aside and leave it to the market.

“This is the overwhelming view of the Conservative party. But this attitude has held British business back from reaching its full potential for too long – I know this because you tell me so.”

Umunna’s speech follows what Downing Street described on Tuesday as an “unusual” cabinet meeting, which was devoted almost entirely to economic growth. Cameron told ministers that a series of blockages, ranging from restrictive planning laws to the “gold-plating” of EU directives, are holding back economic growth. The meeting showed that ministers are nervous about Britain’s slow rate of economic recovery ahead of the budget on 21 March.

The shadow business secretary will say that the government can and should do more to stimulate growth. He will cite the examples of:

• The car scrappage scheme introduced by Lord Mandelson as business secretary, which helped the car industry.

• The Small Business Investment Company (SBIC), which helps provide private equity capital for small and medium-sized businesses.

Germany’s KfW national investment bank, which has almost doubled investment in small and medium-sized enterprises since 2009.

Singapore’s SPRING agency, which targets help at startup companies.

Umunna, who has visited all three institutions in Germany, the US and Singapore, will say that Britain should follow their example. “We have seen on our visits to Singapore, the US and Germany how, where there is market failure, they have a set of public institutions like the Small Business Administration, prepared to step in, fill the gap and adopt active government strategies and solutions.

“In fact, since I got this job I have been struck by how business leader after business leader has told me they want to see an active government working in partnership with business in different sectors to step in and fill the gaps where there is market failure. That is precisely what Ed Miliband, Ed Balls and I will do.”

He will add: “The challenges facing the nation are changing. We need a new set of policies to build a better, more responsible and productive capitalism, fit for our times and for the future – a New Economy to deliver the fairer outcomes at home and greater competitiveness abroad, for the British people and British business. As a nation, we have a job of work to do to modernise our economy. The market alone won’t get us there; government alone can’t do so either. But is must be a national mission where productive business and active government work together in partnership.”

The shadow business secretary will criticise David Ruffley, the Tory MP, who called on Monday for the abolition of the department for business, innovation and skills to free up £1bn for tax breaks for enterprise. Ruffley was speaking at an event organised by the Free Enterprise Group of Tory MPs, which is supported by George Osborne.

Umunna will say in his speech: “Unlike today when senior government backbenchers are arguing for the abolition of the business department – business’ voice in government – when Peter Mandelson was in charge the department had real clout across government.

“I intend to follow Peter’s example and, I should say, that as a pro business party we would not dream of abolishing the Business department.”

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