The change election – time for business to decide

With the election battle gathering pace in the UK, big business is keeping its head down, despite having much at stake. Mike Tuffrey reads the early runes as the contest unfolds.

The pundits will tell you that political parties adopt one of two positions in elections – either “it’s time for a change” or “things are getting better, don’t let the other lot ruin it”. This time, however, that isn’t the choice on offer; everybody seems to be promoting a change agenda of some sort.

As I write this, the parties are busy publishing their manifestos. I’ll do an analysis once they are all out. Still, enough has been leaked or deliberately trailed to hazard a prediction: this is not a change or status quo battle, or a conventional left/right choice where one side says we need more government and one argues for less.

Labour is doubling down on its interventionist instincts, with a big increase in public spending, state regulation and nationalisation of the commanding heights of the economy. The Conservatives are no longer arguing for laissez-faire or a retreat of government. Under Mrs May they seem intent on outflanking Labour in offering government intervention to protect ordinary ‘hard working’ families against exploitative employers and price-gouging energy companies. The Liberal Democrats want to stay firmly within the regulated European trading market (and the political union too, if only they could find a way back in) – actually, this is the closest to a status quo position on offer in the election, which may explain their lack of traction so far.

All this is in sharp contrast to the last time we were facing a melt down on the conventional left and a big swing to the conventional right. Think back to the 1980s, when the economy was also underperforming and facing big shocks, and when the Falklands War – rather than the Brexit vote – was challenging traditional loyalties. Then Mrs Thatcher was promising to roll back the frontiers of the state, and with her big majority, embarked on mass privatisation, big bang deregulation and council house sales.

Partly in reaction to all that, the business responsibility movement grew up. Companies would step forward into the gap created by the retreat of the public sector. Trust us, they said. Take the controls off and we’ll behave responsibly in the common good. It’s no coincidence that Business in the Community was founded in 1982, with an early focus on local enterprise agencies, small business start-ups and reskilling as old industries were shut down.

The era that followed, of light touch regulation, ended in tears, with the banking meltdown of 2007, state bail-outs, austerity, a decade of economic stagnation and a popular revolt against fat cats, elites and globalisation. This time, business has been strangely silent about what should be done.

Alas, the CBI’s ‘business manifesto‘ for the election is an unremarkable package of predictable asks. The closest they get to acknowledging the scale of the trust deficit is a call to support “responsible business through proportionate, evidence based reform” and a reference to firms reporting “publicly on how they have engaged with employees and stakeholders”. However, any case for real change is undermined by the manifesto’s first demand, for “minimal regulatory change” and a reversal of the “rising burden on business” – a hark back to the 1980s narrative if ever there was one.

One has to question what planet business leaders are living on. A popular revolt – largely about self-serving business behaviour, unfair economic outcomes and unsettling global trends – is now threatening massive disruption and risk to prosperity. Counter-intuitively, a right-wing government is asking for a big majority to drive it through.

I’d have thought the correct response by thoughtful people in business is to accept the scale of reform needed – and acknowledge the role of government in raising the bar and creating a level playing field so that well-intention firms don’t get undercut in the market place.

Thankfully, some on the pro-business side do get what’s needed. The Economist for example has taken to commending Marx for his criticism of capitalism – agreeing about a tendency towards concentration and monopoly, domination by finance that is increasingly reckless and crisis-prone, and the “immiseration for the poor even as it produces super-profits for the rich”. The same commentary points out that CEO pay at FTSE100 companies has grown from 25 times that of a typical employee in 1980 to 130 times as of last year. Meanwhile average pay in the economy as a whole has flat-lined for nearly a decade.

I’ve argued before that the roots of the Brexit revolt lie in such basic economic facts. The Economist’s prescription is a reform of capitalism, highlighting the need to update anti-trust rules to prevent monopolies forming, end the “CEO salary racket” and address the casualisation of labour. All this implies more government intervention, even if the free-market newspaper remains excoriating about the Conservatives’ plans for an energy price cap, remarkably similar to Labour’s proposal last time round.

We live in confusing times, to say the least.

Next time I’ll analyse whether the manifesto pledges from across the political spectrum do in fact add up to a coherent change agenda. I’ll reflect on the likely effect (if the polls are to be believed) of having lots of Conservative MPs representing areas of real social disadvantage, far beyond the comfortable suburbs and tranquil market towns of their current crop.

For now I’ll encourage you to hold on to your hats – we’re in for a bumpy ride.

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