Adam Smith Institute

78. "Government investment is vital to protect industry and jobs."

It's a matter of historical record that government investment is reasonably fatal to industry and jobs. What government does is to take taxation from those industries which are successful, and redistribute some to those which are not. In doing so, it takes away resources which would otherwise be available for investment in expansion or the purchase of goods and services.

It puts these resources into industries for whose goods and services there is not enough private demand. Government tends to choose industries for political, not economic reasons, and to make bad choices. "Picking winners" means picking losers. For all of the public jobs created by public investment, rather more jobs will quietly disappear from the private sector in consequence.

Government investment in industry involves spending other people's money on somebody else. Since it is not their own money, the politicians and bureaucrats do not have the same incentive to make good and wise decisions as do those whole livelihood or reward depends on success. They do not have the same drive to ensure that the goods produced will be of the quality and price to hold their own in the marketplace.

Furthermore, government investment is usually called for when private investment has failed to materialize in support of certain industries. There is a very good reason why it did not appear; it is because private investors had low expectation of any returns to be made by doing so. When government does invest, the industries concerned become dependent on continual state handouts and unable to attract private funds in its place. The graveyard of Britain's industrial history is littered with the corpses of failed state investments, whether in steel, ships or motorcycles. Government investment in an industry is the kiss of death.

Or, at least, how to try and replace the profit motive. One of the things that can be very hard to get across is the idea that making a profit isn't simply or solely a manifestation of human greed: it's also information. Making a loss is the market's way of telling you that you're doing something stupid.

But what if you don't actually want to make a profit? What if, say, you're a charity? How do you get that same information, about whether you're doing to right thing or not? Jamie Oliver's charity, the restaurant project Fifteen, is working hard on this problem:

But perhaps the most surprising aspect of this warts-and-all assessment is that it was commissioned by Jamie Oliver and Fifteen itself, who wanted to know exactly where they had gone wrong and how to improve. Few charities assess their work in this systematic and critical way. Fifteen will publish the report, Life in the Present Tense, next month in the hope that it emboldens other charities to do the same.

“Second, there is a a straight business case. If you don’t understand what you are doing, if you don’t get someone from outside the culture to verify it, how do you know how to improve things?” he said.

I might also note that the Public Accounts Committee and the National Audit Office investigate the actions of government in very much the same manner. One question I have though: has either body ever looked at any branch or activity of said government and reported "Yes, well done, top marks"?

The UK's new 'Department of Business and Regulatory Reform' isn't exactly living up to its name. New figures from the British Chambers of Commerce show that the cost of regulation on Britain's businesses has risen more than £10 billion (yes, billion) from last year, to a staggering £65.99 billion.

The Chambers have produced another of their annual 'Burdens Barometer' wallcharts, showing where all the costs mount up. There's data production, groundworks regulation, working time regulations, student loan rules, part-time worker initiatives and flexible working shemes, the stakeholder and occupational pensions rules, disability law, buildings regulations, use of animal by-products, water use and environmental regulation, new financial accounting, corporate responsibility requirements, working at height codes, and innumerable others.

It's not really a burdens barometer, it's a burdens escalator, because the Chambers' bar-chart shows a steadily increasing burden, up from a 'mere' £10 billion in 2001 to more than six times that today.

Often, there is only one way to 'reform' things. That is to pick your target and focus on achieving that. With the whole emerging world eager to compete with us, we need to make sure that we don't regulate (and add cost to our business base) unless we really need to. Sure, we should lead the world in having high production standards. But you can do that without smothering yourself in red tape. Department of Business and Regulatory Reform's target, for the second half of its name and mission at least, should be to focus on the damage that over-regulation does and commit to cut the cost of regulation on business. It's about time the barometer started to fall.