Everybody knows about the welfare state for people. It was the system of cradle-to-grave provision set up after the second world war following the publication of the Beveridge report.
Less well known is the welfare state for companies, the system whereby large dollops of public money are handed out by the department of trade and industry to big corporations.
Sometimes these hand-outs are to foreign companies that say that they will invest in Britain providing the government offers them the right fiscal package - tax breaks, a greenfield site for nothing, a straight cash payment.
Sometimes as in the case of today's £250 million subsidy to Rolls-Royce the money goes to domestic companies in order to safeguard jobs.
In political terms, it is not hard to see why the trade and industry secretary, Stephen Byers, has dipped into the government's coffers. After the recent announcement by steel company Corus that it was planning major job losses, Labour needs to be seen supporting manufacturing industry.
In case anybody hadn't noticed, there's an election coming up.
There is also a good, solid economic case for the government backing Rolls-Royce, which is one of the world leaders in air engine production, in the development of the Trent 900 and the Trent 600.
Britain has precious few companies that could justly be classified as world class: Rolls-Royce is one of them. However, like much of the rest of British industry it has found the strength of the pound over the past few years uncomfortable, since a high exchange rate makes UK exports into a competitive world market more expensive.
While the government is unable or unwilling to do anything about the exchange rate, it is able to help Rolls-Royce in other ways.
But here's the oddity. This was a government that came into office converted to the delights of the free market. There was to be no government intervention, no bailing out of lame ducks, no picking of winners.
In one sense, it has been true to its word. Rolls-Royce was a lame duck when it was nationalised by the Conservatives in the early 1970s, but it is by no means a lame duck today.
Pre-tax profits, despite the level of the pound, more than doubled from £164 million to £365 million between 1995 to 1999, and the City is estimating a further rise to £435 million in 2000.
But this is definitely an interventionist policy. The real difference between now and the 1970s is twofold: the government has no desire to run businesses from Whitehall and companies are far more likely to get money when they are doing well than when they are doing badly.
Why? Because, in a world of mobile capital, they can always threaten to take production elsewhere. Whether this amounts to holding governments to ransom or simply good business, one thing is for sure. The payment to Rolls-Royce will not be the last.
Related article
10.02.01: Rolls staff strike over jobs move to Montreal
Related special report
Britain's car industry
Useful links
Rolls-Royce
Department of Trade and Industry
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