John Hayes MP: We must use this economic crisis to engineer a moral capitalism

John Hayes, co-founder of the Cornerstone Group, is MP for South Holland and The Deepings and is Shadow Minister for Vocational Education.

Economic gloom makes people fearful. At present they are particularly worried about the impact of the financial crisis on job security, mortgage costs and the future of pensions. Conservative proposals to reinvigorate the nation’s skills are at the heart of an effective response to the economic downturn, improving productivity, competitiveness and sustainability.

The truth at the heart of this crisis is that markets are not enough - they never have been. Without an accompanying sound ethical framework a free economy simply doesn’t work. Because the flow of capital cannot be separated from the tide of human affairs, markets and civil society are intrinsically linked.

Yet for more than a decade the sound values needed to guide the practice of capitalism were neglected, as temporary economic success was built on the unsteady pillars of excessive borrowing and spending. Mountains of corporate and personal debt have grown alongside a bloated, spendthrift public sector.  Worse still these fragile pillars were built on a foundation of sand; insufficient infrastructural investment, poor productivity and an eroded skills base.

Meanwhile, while the City is insufficiently regulated; paradoxically, small and medium enterprises are burdened by red tape and regulation. So, as the bedrock of our economy has been chipped away, we are left excessively dependent on financial services, themselves at the mercy of the global ebb and flow of capital.

Public policy makers need to know that the real strength of the British economy lies a long way from the square mile.

In normal commercial transactions integrity still matters; deals between small firms are routinely agreed on the basis of trust backed by a handshake. That’s just what happens in my Lincolnshire constituency and across the nation every day. The way we do business matters as much as the business we do. In commerce, values should count as much as money. 

Where does all this leave us?  The cocktail of rising unemployment and falling house prices is an unhappy mix. Yet this shock provides an opportunity for change; a chance to redefine the limits of economic freedom; to re establish order through greater responsibility. To create a new set of contextual values for the free market, we must engineer a moral capitalism - an ethical economic order in which growth does not come at the expense of civil society, but is built instead on the firm and unshakeable pillars of skills and values, underpinned by commercial integrity. 

Following the welcome recapitalisation of Britain’s banking system - necessary to increase liquidity - other practical measures must follow to refresh the relationship between markets and civil society, by re-negotiating the nature of capitalism. We should stimulate SME’s to bolster the economy beyond financial services, in particular by ensuring public sector suppliers pay their bills on time and by cutting red tape; we ought to increase the infrastructural investment necessary for business success; and  we must engineer a skills revolution in which basic skills, apprenticeships and adult learning are prioritised. In particular, we want to help SMEs to take on apprentices through a range of policies including: providing a £2000 bonus per apprentice, paying employers directly, cutting back on paperwork and helping employers pool their resources through Group Training Associations. These policies are vital to strengthening the position of SME’s, building a truly sustainable economy.

Skills are the tool to craft more sustainable economic performance because they shape productivity and so competitiveness. There is no doubt that we face tough times, but if we adopt these policies I am confident that Britain will prosper.