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Does growth come first for the Government?

by Paul Goodman

Earlier this week, I spoke on a panel with Mark Field and Matthew Hancock about the future of the Coalition at a joint Lexington Communications/ ConservativeHome event: Esther McVey chaired the proceedings.  The audience consisted mostly of business people - who, speaking generally, have never, repeat never, queued up to give Ministers standing ovations. (See Mike Craven's post this morning.)

As the last century drew towards a close, I watched the progress of Conservative Governments, and during the early years of this one I served in the Commons.  At no time during those years or between them did the complaints waver: Government doesn't understand business, the economy is unbalanced, taxes are too high, there's too much regulation, the transport infrastructure's neglected, Britain's skills base is poor.

More of the same came at this week's event - and I'm not saying that business is wrong to take such a view.  (Try asking who's succeeded the Michael Heseltines or Peter Walkers as big-hitting Cabinet businessmen.)  In which case, is there anything new to say about this Government's relationship with business?  I think there is, and will set out five observations more or less as they occur to me.
  • Business respected Mandelson.  During the 1980s and early 1990s, it was usually anti-Labour.  New Labour broke up business's anti-socialist front.  During its early years, the first Blair Government kept spending and borrowing under control, and persuaded parts of business that enterprise was "safe in our hands".  Even during the later ones, big business tended not to mind Labour too much - regulation was a threat to smaller companies rather than larger ones - and was neutral at least about mass immigration.  The City boomed under Labour.  A few of its tax changes - such as the capital gains tax reduction - went down well.  Even those sections of business hostile to New Labour had a certain regard for Mandelson as Business Secretary, since business likes People Who Get Things Done - and if he wasn't a Person Who Gets Things Done he was certainly a Big Beast.
  • In opposition, business had reservations about the Conservatives.  In the last Parliament, medium-size and small business tilted to the right: it was scarcely likely to do anything else.  But I detected an unhappiness which, were I to pack it into a few sentences, would run a bit like this.  "Not so long ago, we knew where we were.  The Tories were the party of business.  Labour was the party of the unions.  Now it's harder to see the difference.  They both tend to be led by members of the political class.  They're both preoccupied by winning the votes of small segment of liberal-minded floating voters."  Business people I knew looked with suspicion especially at the Cameron stress on carbon reduction.  His opposition to the proposed third runway at Heathrow became a symbol of their worries.  Whatever they thought of the proposals, they tended to think that Team Cameron's view was driven by short-term political tactics, rather than longer-term economic strategy.
  • In Government, business doesn't like Cable.  For better or worse, I hadn't clocked until earlier this week that enthusiasm for the Business Secretary is running very low (if it ever ran at all) - and that he's seen as an inert resevoir of gloom rather an active backer of business.  As I say, Mandelson was seen as a Big Beast.  Ken Clarke, who'd probably have got the Business brief had there been a Conservative Commons majority, was also viewed as a one.  After his indiscretions over the Murdoch bid for BSkyB, Cable is seen as a "foolish fond old man" rather than a Big Anything, let alone as a Person Who Gets Things Done.  Mark Prisk, his energetic junior Minister, is popular, and as a small businessman himself thought to understand the weight of the regulatory burden.  Cable, by contrast, is seen to be focused on banking reform and weighed down by University finance - to be a back-of-the-shop economist rather than a front-of-house business person.

  • Business wants long-term certainty rather than short-term manoevering.  Parts of the Government's programme are going down well.  I doubt if most business people will follow the detail of Iain Duncan Smith's plans to reform welfare or Michael Gove's to overhaul education. (Why should they?)  But on welfare, my sense is that many know that getting out of work British people into work must, in the medium to long term, be better than filling skills gaps by importing labour (even if this causes short-term problems, and EU immigration can't be restricted).  On schools, I think there's a recognition that Gove's trying both to drive standards up through the academies/free schools programme and follow the Wolf recommendations on vocational education.  What business doesn't care for are what it sees as tactical wheezes - what it views as bank levy details timed simply to embarrass Ed Balls or sudden oil tax hikes that fly in the face of previous assurances.
  • Business doesn't believe that growth comes first for the Government.  On the whole, the last budget got a good welcome from business.  It liked the petrol duty freeze, John Hayes's plans for apprenticeships, the corporation tax reduction, the hint of a cut in the 50p income tax rate next year.  But it thinks there's something missing.  The way some people put it is that there's no strategy for growth.  I wouldn't quite say that.  Instead, I'd say that there's no conviction that, for this Goverment, growth comes firstTim set out some of the issues recently.  So if setting carbon reduction targets will please Liberal Democrat voters, they'll come first.  If new labour laws will ruffle the unions, they won't happen.  If repealing all or part of the Equality Act would upset some vested interests, it'll be sidelined.  If scrapping more regulation would mean a fight with the EU, it must be put off.  If growth really does come first for the Government, Downing Street's going to have to prove it.

After all, it's not as though the international economic background is benign.


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