If Labour is elected in 2015, it will face the most testing economic conditions since Harold Wilson beat Ted Heath to form a minority Labour government in 1974. But while that government’s term was characterised by more or less open warfare between Labour ministers and business, the approach of both party and industry today is much more strongly based on partnership. Over 30 years, relationships between Labour and business have improved. By the 1990s, business had largely stopped giving millions of pounds to the Tories while Labour had dropped talk of nationalisation. Businesses which operate in many countries with many different colours of government want dialogue, discussion and mutual understanding. That is why they welcome the open approach to policy discussions of the Labour frontbench.
As shadow business secretary Chuka Umunna told the Progress business roundtable this week, despite all the problems, the UK has a lot of economic and industrial strength. We enjoy competitive advantage in a number of sectors including food, automotive, aerospace, life sciences and creative industries. But to retain and build on these advantages in the medium to long term requires a much stronger relationship between the two sides and an active industrial policy to support those strategic sectors which will be important to economic growth.
The work on a more interventionist industrial policy was started as a response to the financial crisis by the previous Labour government. Joe Greenwell, chairman of Ford UK, told the meeting of the significant progress that had been made in the automotive sector because of the work of the Automotive Council established by Peter Mandelson when he was secretary of state for business. The industry had been able to face some of the difficult longer-term issues because the council, which brings together industry, government and academia, was able to focus on, long term, what is required to promote new technologies such as low-carbon engines. This form of sectorally based partnership could provide the model for a future Labour government for developing the sectors which can produce most growth and jobs.
If Labour wins in 2015, it has the opportunity of building on some of the real successes of the previous Labour government but also learning some of the lessons. Four important areas for further consideration came up at the Progress event.
First, government needs to get right those areas for which it has principal responsibility – education, training, transport, infrastructure. These are the necessary building blocks which allow UK companies to thrive and help build a stronger economy. The previous government did a lot in all of these areas but also made mistakes, including – as one speaker recalled – on skills training. More young people went into further and higher education but as Umunna said, more should have been done on vocational education which is why the party is now emphasising the importance of the technical baccalaureate as part of a stronger commitment to skills training.
Second, the Department for Business needs to be a powerful voice in government. As former Labour science minister Paul Drayson pointed out, Mandelson was an effective minister because he was powerful in Whitehall and could bring a jobs and business perspective to discussions with Treasury on fiscal and financial policies. But business policy isn’t just for BIS. Drayson recalled the lack of joined-up policy-making in government which led to decisions being taken by departments such as at health which directly undermined the life sciences policy being promoted by the business department. Decisions, including major procurements, should be coordinated so that there is a coherent, government-wide approach.
Third, the balance between legislation, regulation and markets is a delicate one. Business isn’t opposed to proportionate and sensible regulation. Often, bigger companies favour carefully considered regulation over a voluntary approach because as market leaders they know they will have to do what the government wants whereas their smaller competitors will happily continue as before. But the knee-jerk response of civil servants is often to promote regulation which frequently has unintended consequences. Regulation can be inflexible and end up costing jobs and economic activity. Governments need to focus on outcomes and work out the most effective way of achieving them.
Sometimes regulation will be necessary but often, discussion with businesses and consumer groups will produce a more effective approach.
Fourth, politicians often focus on small- and medium-sized enterprises. This is important because small firms are often the big firms of the future. However, SMEs grow on the backs of bigger companies which is why the supply chain is so important. Labour’s approach needs to recognise the inter-relationship of strong big companies to the success of smaller ones.
Finally, the partnership approach and dialogue between Labour and business needs to continue. The Progress initiative is welcome because over the last 30 years, the number of MPs in all parties with direct business experience – either as workers or managers – has declined significantly. So channels of communication need to be provided to allow greater understanding and a shared approach to promoting economic growth. Businesses appreciated the opportunities for communication with ministers during the previous Labour government.
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Mike Craven is partner at Lexington Communications which sponsored the Progress business event
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