Simon Haskel on the need for a new strategy for business
During April, two Populus polls were published on people’s attitudes towards business. One for the BBC, the other for the FT: both said that 61% of us don’t trust business. I’m not making a political point. Half of those who felt this way identified themselves as Conservatives.
Most of us know why this is happening. Mis- selling by the banks. Not getting a square deal from the energy companies, landlords, rail operators or pension managers. Suppliers of public services from the private sector have been disgraced. All in contrast with booming executive pay and a long line of companies who have arranged their affairs so that they almost cease to pay corporation tax. Meanwhile, the rest of us are left to foot the bill.
For years we have known that much of our corporate culture has been skewed to short term financial engineering rather than organic growth. But this behavior is not just confined to business. It applies to government too. As problems arise, so they are dealt with on an ad hoc basis. This constant fiddling not only adds to the uncertainty, it also contributes to the complexity and inefficiency of our public finances. A story continued in the latest Queen’s Speech.
So what can we do about this?
The answer lies in an intellectually coherent strategy which puts a framework around all these activities. To make sure it is adhered to throughout government, I would like to see it enshrined in law. We have laid out a strategy in law for health, climate change, education, and austerity. So why not one for business?
What should be in this business strategy with legal teeth?
Adopting the UN guidelines on ethical standards and a proper governance code will certainly help us stop the erosion of trust in business. Quite rightly business organisations call for certainty so that they can plan for the longer term. This means longer term institutions like the TSB are given the protection of law so that unlike the Regional Development Agencies they cannot be abolished on a whim.
Part of the answer is not just to regulate our economy, but also to rebalance. To win trust by making business less distant, more local.
We see many contributing to economic progress, but fewer benefiting. A proper legal industrial strategy will help break free from markets that work only for themselves. Break free from a financial system that concentrates our long term wealth in the hands of fewer people – and so build trust. Read the speeches by the Governor of the Bank of England and Christine Lagarde to the Inclusive Capitalism conference, stating clearly that tax allowances and incentives are for investment not financial dodges.
Public investment must also feature. After all we now know that the rate of return on public investment in science is around 20%.
In isolation we are carrying out bits of the strategy.
What about the politics? I think there is a lot of political support. A strategy of this kind reflects the politics of hope. Most importantly it faces up to the huge scale of the challenge facing us, instead of just tinkering with it.
Of course no law will build economic revival and growth. Business can, but the task will be infinitely harder if we fail to win back that 61% of the population who no longer trust it.
Lord Simon Haskel is a backbench Labour Peer in the House of Lords. He tweets@simon_haskel
Published 10th June 2014