Friday, 3 September 2010

Investing to fail?

At the meeting of Northumberland County Council on Wednesday, we reflected on the County Councils investment last year of £250,000 to help Northumbrian Foods in Amble get a management buy out. At the time councillors knew it was a risky decision and I know many of us thought there was more chance it would not go well than the chance it would be a successful investment.

But we did it anyway, because 200 jobs in a vulnerable town were at stake. It may be that some of the money is reclaimed as the administrators are talking about selling the business but even if it now closes and we knew that this would happen a year ago, I think many councillors may have been tempted to lend them the money anyway. For 200 people and their families they have had an extra year of employment, which at about £1,000 a job is less than what unemployment benefits would have cost.

But that causes people like me problems who believe we should let the market work effectively and that state subsidy doesn't really work. Long term, this kind of support is not the way to turn an area around. We need to look to areas like Germany, where long term mentoring of manufacturing has resulted in a much more resilient sector. But I still think the Council made the right decision.

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