Nick Faith is the Co-Founder of the Westminster Policy Institute who are carrying a series of focus groups with business leaders on regulatory risk ahead of the next election.
On Monday, Ed Miliband will take to the stage at the CBI’s annual conference. It will be quite a tricky gig for the Labour leader. His interventions in numerous markets (the energy price freeze, a limit on the number of high street banks a single company can own, capping rental increases on privately owned properties) not to mention the mansion tax will not have enamoured him to many of Britain’s business titans.
While we can expect a fairly luke warm response to the Labour leader’s speech – mentioning the deficit or at least the economy would be my one bit of advice – I will be more interested to hear how the CBI’s members view the government’s record to date.
I imagine they will be delighted with the Coalition’s commitment to cut corporation tax (it will be down from 28 per cent to 20 per cent by the end of the parliament). Along with a major shake-up of the planning system to encourage more housebuilding and a commitment in the face of some fierce criticism to high speed rail, the CBI should be pretty with how things have panned out.
However, there are three main reasons why some of Britain’s biggest business leaders may not be sleeping soundly as election day approaches:
- EU reform.
- The ghost of Teddy Roosevelt.
The first two reasons are well documented and interlinked. Many of Britain’s leading businesses are concerned about the Conservative’s increasingly negative tone on immigration and any future renegotiation that may happen with Brussels. As a report this week from UCL showed, EU migrants are predominantly highly educated and possess the skills that British business is crying out for. There are also low skilled migrants on low pay who are willing to work in pubs, restaurants, building sites and hotels up and down the country. Talk to most chief executives in Britain and they couldn’t speak more highly of their international staff.
Likewise there is an increasing unease about the Prime Minister’s language towards the EU. Cameron has a clear position for the moment. Renegotiate a better deal and stay in. If the talks fail then Britain could be better off out. The meat of these renegotiations will revolve around a whole range of directives including fisheries, IP, energy, criminal justice and financial services. The detail is thin on the ground for the moment. Business will want to ensure their voices are heard especially if profitability is in jeopardy.
The third reason is much less understood and should not be seen as a threat by businesses which are willing to treat their staff fairly and, put simply, play by the rules.
Teddy Roosevelt, President of the United States at the turn of the twentieth century, was a progressive Republican who distrusted wealthy businessmen and made it his mission to break up monopolistic corporations. He was pro-market but not necessarily pro-big business. The reason some of the great and the good at the CBI conference might be shifting slightly uncomfortably in their seats is that there are a growing number of influential voices in the Conservative Party who see “Teddy” as the man to emulate.
These people realise that the free market is the best way of creating jobs, increasing wages and alleviating poverty. But they are also of the belief that any hint of “crony corporatism” must be dealt severely with and that the government along with the appropriate regulator has a critical role in ensuring fairness and transparency. In short, standing up for the consumer.
A recent Populus poll for the Financial Times found that two thirds of voters, including half of Conservative supporters, want the next government to be tougher with big business. Issues such as executive pay, dark pool trading, Libor rigging and other questionable behaviour by a minority of businesses (predominantly, it has to be said, in the banking sector) have dominated the headlines. Where abuse has taken play or is perceived to have taken place, the public demand heads on a spike. Politicians of all parties- including the Conservatives – have to be seen to act.
The CBI and larger companies have a hugely important role to play in turning this negative perception around. Without acknowledging the problem and playing a constructive and thoughtful role in issues that really matter to people – benefiting from a good education, having a job, being paid a decent wage, perhaps even becoming a part owner of a business or a shareholder in other companies – then a future Conservative government will, I wager, be more willing to publicly criticise big business.
The real success story of this government has been on creating the right conditions for entrepreneurs and SMEs to flourish. The Legatum Institute’s 2014 Prosperity Index recently concluded that Britain is one of the easiest places in the world to set up a business. That is partly down to the achievements of this government.
The Employment Allowance has cut the jobs tax of every business by up to £2,000. Over a quarter of a million small firms pay no business rates thanks to the doubling of small business rate relief. Nearly half a million businesses have been created over the past three years. A report for Octopus Investments this week showed that over a third of economic growth including two in three jobs last year was created by just one per cent of high growth small businesses. This is a fantastic achievement, and a future Tory government will want to continue to make it easier for people with smart ideas to commercialise them.
The single biggest problem for the Conservatives though is that they are seen to be the party of the rich. This creates a dilemma for Tory MPs. Standing up for the SME and the school leaver or graduate who wants to become the next Larry Page or James Dyson is admirable. But responding to public pressure to bash bigger business would be a mistake. By all means crack the whip when there are instances of abuse and monopolistic or cartel-like behaviour. But remember that the real challenge is turning these small and medium sized British businesses into the next world leading FTSE 100.
The men and women attending the CBI conference must be allowed to grow their businesses – just as the small business owner operating out of his garage should be free from onerous regulations to grow his. That means engaging with policymakers to ensure that Britain has a stable and competitive economic future. But it also means a more proactive approach – starting in the boardroom – to ensure staff are paid a fair wage, supply chains meet certain standards and that executive pay is linked to performance.
Without this two-way conversation, Britain’s corporate executives could end by being a piñata – a useful punch bag when the party needs to be seen to be standing up for the consumer against predatory business.