JAMES CALLAGHAN was the last Labour politician to interfere with gusto in Britain’s industrial base. In 1977 he nationalised the aircraft industry, creating British Aerospace, the forerunner of BAE Systems, now one of our biggest engineering groups.

Tomorrow, John Hutton, the business secretary, will have more modest intentions when he unveils the government’s new manufacturing strategy.

“There is no going back to the 1960s and 1970s when governments tried to pick winners and support them. We are past that. The world economy is changing far too quickly,” he told The Sunday Times from Brazil, where he held trade talks last week.

These days industrial policy is about subtle coaxing and selective funding of research.

Hutton will promise £150m for a range of programmes, and present an upbeat vision for manufacturing in which a million new jobs in green technologies could be created within a decade.

In the 1970s manufacturing comprised the bulk of Britain’s economy, but it now accounts for only 15%. As in most Western nations, our manufacturers have shifted all but the highest-value or most time-sensitive operations abroad to low-wage countries like China.

Employment in manufacturing has fallen by a million to 2.88m since Labour came to power. Services, rather than manufacturing, have become the engine of growth for the economy.

But Hutton has little time for manufacturing doom-mongers. “I don’t buy this view that we live in a post-industrial society and that we are now only about services,” he said. “A lot of people forget it, but the UK is still the world’s sixth-largest manufacturer.”

One of the things Hutton thinks Britain can capitalise on is low-carbon technologies, such as nuclear power, electricity from renewable sources, and electric vehicles.

“Part of the strategy will be a long-term framework to support the low-carbon economy, which could create hundreds of thousands of jobs over the next decade,” he said.

Hutton thinks that British manufacturing should also capitalise on another trend — the emergence of global supply chains.

“There are very few countries now that make the entire finished item,” he said. “Instead you have parts made all over the world that come together for final assembly. We are going to make sure British companies are getting their chance to join these global programmes.”

An example combining Hutton’s enthusiasms came last week. Westinghouse, the Japanese-owned nuclear-reactor maker, signed a deal with BAE Systems, Rolls-Royce and Doosan Babcock under which the British groups may make parts for power stations all over the world.

Hutton would like manufacturing’s share of GDP to increase, but he is under no illusions as to how difficult it will be to achieve this. He knows other countries want to muscle in on Britain’s existing industrial base.

“Emerging economies will not be content with low-value, high-volume manufacturing — they always want to move up to higher-value work. We can’t kid ourselves; it’s going to be tough.”

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