John Banham: Britain can forge ahead, but it needs more from the top

It has been a surreal summer of discontent for those with longer memories than the average think-tank associate and other confident commentators on recent events. In 1987, the Audit Commission, of which I was the first chief executive, warned of the need to prevent the emergence of an urban underclass. Its recommendations for avoiding the South Bronx in New York coming to south London have been ignored for the past two decades – not least by the soon-to-be-abolished Commission itself. Sadly those of us who have long argued for the need to rebalance the economy and of the folly of confusing financial engineering with the real thing have grown used to the polite condescension of senior politicians and bankers alike.

Now, as Sarah Sands writes today, fear rather than greed stalks the City. The flaws in the euro project, evident from the outset, have finally come into focus, and the impact of government and household debt on retail spending has underlined the shift eastwards of the world's balance of economic power. Small wonder that policy-makers seem paralysed by indecision. As a result, in New York, London and across the eurozone, traders are desperately seeking safe havens for their bemused clients – and selling great companies short in the process. In Winston Churchill's chilling phrase, these have been the years that the locusts ate.

Now what is urgently needed is hope: confidence that there is life beyond cuts and that there are serious plans in place to secure economic growth without recourse to yet more public spending. Each area of the country has its own particular strengths and needs, but I suggest that the approach that needs to be nationwide – with any luck, with government encouragement – is illustrated by a plan for growth prepared recently for the new Cornwall and Isles of Scilly Local Enterprise Partnership. Cornwall, for example, should be doing more to realise Falmouth's potential as a centre for off-shore renewables. Five other principles can be identified with possibly wider, certainly rural, application.

All local businesses that can and want to grow should be helped to do so by existing organisations. For example, if 10 per cent of Cornwall's Vat-registered businesses each added four people to the payroll, private-sector employment in the county would increase by more than 10,000, more than offsetting looming job cuts in the public sector.

Ten thousand affordable and energy-efficient homes should be built, where they are needed. A desirable home using natural gas to deliver electricity for less than half the wholesale price can be built with local labour for less than £100,000.

The local-production green energy should be expanded, and viable without continued public subsidies. Micro-hydro power from mill streams, tidal power, anaerobic digestion, ground-source heat pumps, and fuel cell combined heat and power could easily deliver 20 per cent of local energy needs – and address the growing local fuel poverty problem.

Finally, new technology can eliminate the rural cost penalty of more than £50 a week per household. And each of these initiatives could be privately financed. The era of grants has gone; the era of the social entrepreneur has dawned. In short, as the new mayor of Chicago put it, "never waste a good crisis". But the Government needs to help inject some hope.

Sir John Banham is a former director general of the CBI and chairman of Johnson Matthey plc