Thursday 14 July 2016 10:53 pm

Concerns raised by free market advocates in Westminster after new Prime Minister Theresa May unveils a department of industrial strategy

Prime Minister Theresa May set out her stall yesterday by merging two Whitehall departments into a giant new office that promises to deliver an “industrial strategy” for Britain.

The Department of Business, Energy and Industrial Strategy will replace the departments of Business, Innovation and Skills (known as BIS) and Energy and Climate Change (known as DECC).

The new office will be led by former communities and local government secretary Greg Clark, who said that the department was “charged with delivering a comprehensive industrial strategy.”

The plans raised eyebrows in Westminster, with one former BIS adviser saying that the department had banned the use of the term as recently as 2012. “We were barred from using the words ‘industrial strategy’ in speeches,” said Nick Hillman, a special adviser until the end of 2013.

“There was an occasion when we were ordered by the Treasury to remove it from a speech.”

Industrial policy is commonly seen as a more interventionist approach to the economy than that adopted by market liberal-leaning governments. Former BIS minister Sajid Javid told the Financial Times last year: "I don’t particularly like the word strategy coupled with industrial. I thought it created an impression that there are certain sectors that the government wants to do well and other sectors it couldn’t care about."

Free market campaigners at the Institute of Economic Affairs, famed for being Margaret Thatcher’s favourite think tank, expressed concern. “It sounds pretty menacing; like a gigantic licence to engage in central planning,” said IEA boss Mark Littlewood. “Neither economic theory nor historical experience offers any ground to believe that politicians are any better at picking winners than entrepreneurs and business.”

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Tory MP Mark Garnier added: “I have never thought of the government of being in the business of picking winners in terms of industries. We need to see what it means and what is the 21st century definition of industrial strategy.”

Most Conservatives were broadly supportive of May’s plans, however.

“I don’t think this is 1970s Labour mark two,” said John Redwood MP.

“This could be an enormous department for trade promotion backed up by supply side measures especially around energy. One thing we need is a lot more cheap energy.”

Former environment secretary Owen Paterson remains confident that the government will take the right path following last month’s referendum. “Once we get full Brexit it will put power in our hands to turn the UK into a supercharged monster Singapore of the western world,” he told City A.M.

And backbench MP Chris Chope added: "The name may be using socialist language, but let's hope it refers to a hothouse of deregulation in parallel with Brexit."

Business groups such as the CBI and the British Chambers of Commerce (BCC) welcomed the move. "We welcome the fact that BIS and energy are in one place, and hopefully the industrial strategy will reflect a focus on on long-term thinking," said a BCC spokesperson.

The new PM was in a ruthless mood as she continued to shape her government yesterday, with Michael Gove, Nicky Morgan, John Whittingdale and Oliver Letwin all leaving their posts.