The Conservatives and the media are currently making hay by calling Labour out on its business credentials.
As the debate on Labour’s relationship with business continues, there has been surprisingly little scrutiny of what is behind the headlines, especially given the real possibility of Labour winning the most seats after the May election, and being invited to form a government.
The Conservatives and the media are currently making hay by calling Labour out on its business credentials. Adding fuel to the fire this week was Jon Cruddas, Labour’s policy review chief, when it was reported that in a new book out next month, he argues that private sector companies should not be able to bid for public sector contracts. He reportedly believes that it is a scandal that public contracts go to a small number of big contractors and that, instead, government should forge cooperative ties with ‘ethical’ enterprise – such as cooperatives, mutuals, and social businesses. Though Oliver Letwin has been talking about spinning out public services into employee owned social enterprises for years (interestingly, a policy which is criticised from the Left as a step towards wholesale privatisation) the added edge to Cruddas’s comments with regard to bigger contractors is likely to generate another round of ammunition for Labour’s critics.’
Though this is not Party policy, the comments have resonance with Labour’s opponents as more evidence for those contending that Labour is anti-business. Yet underneath the surface it is a more complex picture and businesses should ensure they are scrutinising the detail carefully to prepare them for any potential change in Government.
There are few points to consider beneath the headlines.
Firstly, it’s fair for Labour to point to its robust stance on the EU as a flagship example of a pro-business, pro-growth policy. Many would argue that this single position is the most significant business issue facing the country in the next Parliament, and even that it could outweigh the impact of almost any other domestic policy.
Secondly, shadow ministers have shown themselves to be open to fostering a positive conversation with the business community – if on their terms. Toby Perkins, Shadow Business Minister, told Weber Shandwick last year that Labour ‘recognise[s] the importance of working with big business on the key issues which will make our future.’ And there is evidence that Labour understands the nuance and complexity of business issues – for example, the Sir George Cox review, which the Party commissioned on tackling short-termism, is thoughtful about balancing the needs of investors whilst also incentivising longer term planning in business.
Finally, all politicians have a tendency to downplay their closeness to business when the timing suits, including Cameron and Osborne, and especially in an election period. Most of Osborne’s budgets have arguably been masterstrokes on managing the headlines – the 2011 fuel duty cut paid for by an extra tax on the oil industry is one example. To win the election, Labour obviously needs to demonstrate that it is on the side of ordinary voters and policies such as freezing energy bills are unquestionably popular with hard pressed voters at this point, even if they are unpopular with business.
This is not to play down that there will be changes afoot should Labour come out as the biggest party at the election. Labour has shown that is more than willing to intervene robustly in markets and business practices it considers to be broken – be that banking, energy, or M&A. It’s also true that when Labour has talked about supporting business, it has tended to focus on “the hedge cutters, not the hedge funds”, in Miliband’s terminology. There is a strong focus on supporting small businesses, including through an extension of small business rate relief funded by an increase in corporation tax.
Miliband himself has framed his overarching concept of “responsible capitalism” as being about whether political decisions create an economy with “more Charlie Mayfields or more Mr Burns“. Anyone would agree that they want dangerous and irresponsible corporate practices to be punished and disincentivised, but there has been surprisingly little progressive debate about how companies themselves could realise the aspiration of ‘responsible’ capitalism, and what that actually means. Though it’s easy to find examples of business doing good things for society and the economy, this wider concept presents challenges and generates competing views of how it should be defined and realised.
Businesses should be conscientious about the detail and ensure they are looking at how to engage proactively should Miliband wake up as Prime Minister on May 8th.