Liz Truss and business are at cross-purposes
In these troubled times, spare a thought for Alex Edmans of London Business School.
Edmans is the author of a book called Grow the Pie. As Liz Truss has repeatedly declared her determination to “grow the pie”, Edmans has had to explain that, actually, hers isn’t the same dish at all.
He is offering a slice of what the government might dismiss as “woke” capitalism. Companies don’t need to choose between purpose and profit, he says: “If you start with how much value you create for society, then money comes as a byproduct.” A bigger pie means there is more for communities, the environment, workers, customers and investors.
The Truss pie being served at the Conservative party conference last week left a very different taste in the mouth. The prime minister has correctly diagnosed that the UK has a growth problem. But her recipe for a bigger economy seems to pit monomaniacal profit generators and one faction of the Conservative party against all political opposition, the media, unions, Remainers, environmentalists, local communities, north Londoners, podcasters and pretty much everyone else.
In her battle against the “anti-growth coalition”, business finds itself inside the tent against much of society — whether it likes it or not. “They love business their way, not our way”, bemoans one business leader. “This Conservative leadership thinks they know better than most of the businesses in this country.”
In part, the stench of chaos emanating from the party conference was simply off-putting: more than one chief executive told me they cancelled plans to go or left early. But there is also deeper discomfort. Much of what was announced in the “mini” Budget wasn’t on the business agenda: most lobby groups weren’t calling for a reversal of the hike to corporation tax or the removal of the cap on bankers’ bonuses. No one was asking for the axing of the top rate of tax. Few see the benefit in ever more drastic pledges to exorcise EU rules from the statute book.
Many doubt the ability of the Truss government to deliver on the ideas they do like, not least because of the resistance of many Tory MPs and local councillors to solar farms, wind turbines, building houses, building anything else or letting more desperately needed workers into the country. Even business leaders who applaud Truss’s pro-growth fervour despair of the tone-deaf delivery in a time of hardship, plead for consistency and stability above all else and see a politically enfeebled administration as incapable of providing it.
One concern is that, in the absence of progress on supply-side reforms to immigration, infrastructure and planning, the temptation to reach for ideologically compliant but largely pointless wins will prove overwhelming.
Take the determination to relax ratios of children to staff in pre-school care despite the fact that nine in 10 providers say they won’t implement them. Or the idea floated by the business department, alongside labour market reforms dismissed by Downing Street as “half-baked”, to end gender pay gap or diversity reporting. “Nearly every business will still report it, otherwise you can’t attract people,” says Kevin Ellis, UK chair at PwC. “It’s the most read section of our report by a mile. You’re advertising your wares in a tight labour market.”
Businesses from media to manufacturing complain about the need to mount a rearguard action to save important regulation from the promised torching of anything tainted by association with Brussels. Truss’s small state convictions, and the increasingly urgent need to find substantial savings ahead of this month’s fiscal plan, is prompting angst that publicly funded programmes, such as Help to Grow or technology scheme Made Smarter, will be axed.
More broadly, bosses bemoan the energy going into picking yesterday’s fights. The 1980s alignment between government and enterprise for a sharp break to consensus doesn’t exist today. “I cannot find you a serious employer anywhere who thinks it is good business to go after the trade unions. We employ these people. We value them,” says Paul Drechsler, former CBI president and outgoing chair of BusinessLDN.
A Thatcherite mix of union busting, tax slashing and privatisation isn’t a meaningful prescription today for a transformed economy and nor can 40 years of thinking about how business relates to society just be dismissed. Truss’s government has shown remarkable commitment to its willingness to be unpopular. It’s not clear why the business community would want to join them.