12 June 2015

Labour needs to recognise that business isn’t the enemy of society


“The nation, has got to possess the right of supervision and control as regard the great business combinations which derive a portion of their importance from the existence of some monopolistic tendency. The right should be exercised with caution and self restraint; but it should exist, so that it may be invoked if the need arises.”

Teddy Roosevelt

At the recent election, Labour was 11 points behind among private sector workers.  The risk now is that prospective leaders will answer the need to rebuild support among these voters by kowtowing to their bosses.

While Labour certainly does need a major change in its approach to business, it is more about tone than policy. The strident language of “predators and producers” did not penetrate people’s living rooms, but it rang loud and clear in Britain’s boardrooms.

However, the lesson from the New Labour era is that if you get the tone right, you can safely propose challenging policies. In 1997, the party’s pro-business rhetoric went hand-in-hand with a windfall tax, the introduction of the minimum wage and signing up to the EU’s Social Chapter. In the mouth of a less carefully managed brand, those policies could have been just as challenging as Labour’s more recent proposals to reform the energy market, limit zero-hour contracts and extend parental leave. Parties of the right find it even easier to challenge business – the Tories even managed to get CBI support for their crackpot plan to give every worker an additional three days paid leave to go volunteering.

The task of Labour’s next leader, whoever it is – is to get the party brand in a position where proposed regulatory changes are seen as moves to strengthen capitalism, not replace it.

The key to this repositioning is the recognition that workers are not in opposition to businesses. Policies that boost competition are good for both, as it is only when markets operate competitively that entrepreneurs get a fair crack of the whip, consumers get fair prices and society benefits from the incentive to innovate.  Labour needs to understand that to be pro-worker, you have to be pro-business. Indeed, a third of people claim to ‘often think about ideas and ways to start a business’ according to the RSA.

Once you recognize that business isn’t the enemy of society, but a core part of it, it becomes easier to argue for changes in the rules that shape the relationship. The failure of government to exercise its regulatory responsibilities allowed the banking failures that happened under Labour’s watch at the turn of the 21st and hurt virtually every business in Britain. As Iain Martin argues, it is pro-business and pro-market to ensure regulations are followed, and government can find innovative ways to encourage that, for example by encouraging shareholders to use the courts.

When it comes to policy, the idea that voters’ were alienated by Labour’s stance on business is excessively generous to Labour’s ability to communicate its stance on anything. The truth is that voters didn’t know what the party stood for, not that they were put off by it. Just 19 per cent of private sector workers saw Labour as ‘radical’, 5 points below the Tory score. That doesn’t mean voters are looking for ‘radical’ –  by a margin of more than 40 points they prefer steady change. But it does mean that Labour did not lose because of perceived radicalism.

Far from being repelled by parties willing to take on companies that rip them off, private sector workers want more of it. By a margin of 21 points they say Labour is too soft on big business, not too tough. The margin among Tory voters who considered Labour is 20 points. Even the core Tory vote is divided roughly evenly.  For all these groups, the biggest doubt about the Tories is that they are on the side of the rich and powerful.

But Labour’s lack of perceived economic competence meant it wasn’t trusted with business, much more than the other way round. So, to win real trust, it has to find a more direct route to economic competence than photo-ops with CEOs.

First, it needs to get distance from its past.  This will take more than a quiet acknowledgement of past structural deficits. Voters need to feel that Labour will take as much care of the national budget as they do of their stretched domestic budgets.  They need to know Labour hates waste and will do whatever it takes to make sure government doesn’t spend money it doesn’t need to, on causes that don’t merit the spending.

Second, it needs a clearer story about growing the economy and ensuring Britain can compete. The challenge is finding ways to argue for investment that don’t seem fiscally profligate. Labour needs to decide what will work, whether it is willing to argue for capital investment from borrowing or not, and then make the case consistently and strongly.

From that basis it can propose market reforms that are necessary and let the Tories be the defenders of a status quo, which favours a lucky few businesses over mainstream voters and companies.

James Morris is a pollster and former advisor to Ed Miliband and the Labour party.