FABIAN POLICY REPORT ALL OF OUR BUSINESS

Building better partnerships between government and industry, with Peter Kellner, Rachel Reeves MP, David Walker, Sonia Sodha and many more

Contents EDITORIAL 2 For the future At in 2011, made a clear distinc- Peter Kellner tion between ‘productive’ and ‘predatory’ forms of capitalism. Since 6 Lessons learned then, all political parties have, to a greater or lesser extent, expressed Rachel Reeves a desire to engage more directly with the way the economy functions and build a more ‘responsible capitalism’. Companies should serve the 8 Root and branch interests of a wider group of stakeholders, and not just shareholders, Sonia Sodha promoting long-term strategies for growth while being rooted in com- 10 Fulfilling the potential of every area munities and recognising their wider obligations. Jessica Studdert Clearly, Britain must begin to map out a new relationship between government and industry. Previously, business policy has been seen as 12 Contracts with a conscience a choice between two opposing pathways: burdensome government Hazel Blears regulations that risk stifling growth; or a laissez-faire model of untram- 13 The global village meled market freedom. Stefan Stern But this dichotomy is no longer tenable. As new YouGov polling for this report demonstrates, the reality is that people are wary of building a 14 A real partnership new political economy on the foundations of ideology. Instead, they call David Walker for a much closer partnership between state and business – one where 16 Smart companies responsibility is shared, where there is collaboration as well as competi- Natan Doron tion, and where the needs of local communities are met. Government needs a much more subtle, symbiotic and strategic relationship with businesses, big and small, built on trust and shared endeavor. But how can this be achieved in practice? Can governments make a difference to the private economy? How are government and industry going to work more closely and more effectively together to create a responsible business model? Various pathways are explored here, from initiatives that provide more skills and training to the smart companies who are bearing the torch for innovative and sustainable business models. These are ideas that help make business work for all of us – employees, consumers, savers, communities and companies alike.

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General Secretary, Like all publications of the Fabian Andrew Harrop Society, this report represents not The Portman Group is the social Deputy General Secretary, the collective views of the Society, responsibility body for alcohol producers in Marcus Roberts but only the views of the individual Head of Editorial, Ed Wallis the UK. Its role is to regulate the promotion writers. The responsibility of the and packaging of alcoholic drinks sold Editorial Assistant, Society is limited to approving its Anya Pearson publications as worthy of consider- or marketed in the UK, to challenge and 61 Petty France encourage the industry to market its products Report Editors, Ed Wallis, ation within the labour movement. London SW1H 9EU Anya Pearson responsibly and to show leadership on best 020 7227 4900 (main) Printed by DG3, London E14 9TE practice in alcohol social responsibility 020 7976 7153 (fax) through the actions of member companies.

1 / All of our Business Eirikso © For the future A new YouGov poll for the Fabian Society finds that people think Britain’s old political economy has failed us, but are wary of building a new political economy on foundations of ideology, writes Peter Kellner

Peter Kellner is president of YouGov

2 / Fabian Policy Report e know what we are against, but “Britain’s recent problems have exposed TABLE 1 what are we for? Ed Miliband fundamental problems with the way our W Which four or five of these, if any, do struck a chord with many people when he economic system works. The ways in which contrasted the evils of ‘predatory capitalism’ government, banks and major companies you blame most for Britain’s economic with the virtues of ‘productive capitalism’. operate will have to change radically before problems? Almost all of us hate the banks’ obscene prosperity is likely to return to British bonuses, irresponsible lending habits and families”: 67% Bad behaviour scandalous mis-selling practices of recent Banks lending recklessly 55 years. We despise international companies Neither/don’t know: 18% that dodge national taxes. We can’t stand People generally borrowing too much 48 employers who exploit their workers, cheat However, answers to the next question and living beyond their means their customers and pollute the environ- suggest that ideologically-minded people Politicians who are out of touch with 39 ment. We want a new settlement between on the left and right have a different view ordinary voters government, capital and labour. But what than normal voters of what “fundamental” Banks not lending enough 12 should that settlement look like? means. We listed 16 possible causes of The answers to that question are impor- “Britain’s economic problems” and asked Policy mistakes tant for their own sake: the market system people to pick up to “four or five” that they Excessive immigration 48 is plainly not working as well as it should. blame most. The first point to make about Interference in British life by the 32 But, in addition, the answers are politically the results is that this was a question that European Union urgent. Across the spectrum, smart politi- fired up our respondents. Far fewer than cians are grappling with the issues – Vince normal said “none” or “don’t know” – a mere A poor education system 12 Cable in his work as business secretary, for 6 per cent. Too restrictive immigration rules 4 example, or Jesse Norman, a Conservative MP who has written with real insight about Ideological failings – left-of-centre the need to replace ‘crony capitalism’ with Precisely because the critique a version that will serve the interests of the political competition in Growing inequality between rich and 34 country as a whole. poor True, any prospectus for a better capital- this area is now intense, Globalisation destroying jobs in Britain 17 ism will require intellectual heavy lifting. Major companies not investing 17 But precisely because the political com- public opinion matters enough for the long-term petition in this area is now intense, public opinion matters more than ever. Ordinary more than ever. Ordinary Successive governments taxing too 5 voters may not supply the expert witnesses, voters may not supply the little but they will provide the jury. What do they Ideological failings – right-of-centre think, after five years of economic weak- expert witnesses, but they critique ness, three years of coalition rule and two major conference speeches by Ed Miliband will provide the jury Successive governments spending too 35 seeking to redefine Labour’s purpose? The much Fabian Society asked YouGov to explore The second point is that the three causes Excessive welfare payments to people 35 public attitudes to predatory, crony and pro- that outstripped the others, and by some dis- of working age ductive capitalism. Where do voters think tance, had nothing to do with the ideology Successive governments taxing too 11 things have gone wrong, and what would of the market. As Table 1 shows, two of them much they like done now? concerned people behaving badly (banks Trade unions obstructing reform 9 First, we asked respondents to choose lending recklessly and people living beyond between two views of Britain’s recent their means) while one flows from a policy problems. Do they flow from some specific that the public thinks successive govern- True, the picture is slightly different mistakes that need to be corrected, or from ments have got badly wrong: immigration. when we look at the results by party loyalty. more deep-seated failings in our society? The table shows the full list. I have Labour voters are concerned about growing The answer seems emphatic: grouped them into four groups of four inequality (cited by 56 per cent). But this is – bad behaviour, policy mistakes and on a par with, rather than miles ahead of, “Many people, including governments ideological critiques from both the left and the two big behavioural errors to do with and the banks, made mistakes; but there right (respondents were not shown these bank lending and out-of-touch politicians. was nothing fundamentally wrong with four headings: they simply saw the 16 And Labour voters are almost twice as likely Britain’s economic system. Once the items in a randomised order). Failures of to cite “excessive immigration” (39 per cent) present period of adjustment is over, we ideology make an appearance, but are not as globalisation (21 per cent). should be able to return to steady growth generally thought to be central to Britain’s If anything, this analysis overstates per- and low unemployment”: 15% problems. ceptions of ideological failings by including

3 / All of our Business TABLE 2 Table 3 There are various ways in which different Here are some specific policies, including new laws, that different people have governments interact with private suggested, to regulate British companies. Do you think each of the following will business. Which two or three of these, improve or worsen the living standards and future prospects of you and your family? if any, would you most like Britain’s government to do in the next few years? Improve Worsen Neither % Educate 55 Requiring large companies to employ and 68 3 19 Do more to make youngsters “work- train apprentices so that they reach set skills ready” – through schools, training, and or qualifications apprenticeships Raise the national minimum wage to a 58 9 21 Invest 44 “living wage” – (currently around £2 an hour Help business by developing a better above the legal minimum wage) infrastructure (e.g. transport, internet Breaking up the big six energy companies in 53 8 23 networks etc.) order to increase competition and encourage Encourage responsibility 42 new companies to become energy providers Name and shame irresponsible Change company law so that directors have 53 7 24 companies and encourage businesses to the duty to consider social, community and change their practices environmental objectives, as well as the interests of shareholders Provide long-term certainty 33 Give business long-term certainty Requiring large companies to include 49 7 26 about how their business environment workers on their boards, and the will change (e.g. through interest rates, remuneration committees that decide taxation etc.) directors’ pay

Regulate 19 Use of public procurement to promote 46 8 29 Create rules telling business what they can responsible practice (that is government and can’t do to protect the public interest buying goods and services only from companies that conform to social and Get out of the way 17 environmental standards) Government should reduce regulation and Establishing innovation groups for city 41 4 33 let businesses take their own decisions regions, where companies can pool money Create institutions 16 and ideas to help the region as a whole Create institutions where businesses Make the minimum wage system more 29 23 29 and employees work together to set flexible, so that it is set for each industry, employment, training and business according to an agreement between standards companies and workers

government spending as part of the right- Once again, we find that people have passion for new institutions in which busi- wing critique of our economic condition. a specific view of what it means to solve ness and employees work together. Only 11 per cent blame excessive taxes. This fundamental problems: they want the The centre of gravity of public opinion is a better indication of whether people think present mixture of market forces and state is a desire for a capitalism that avoids both the balance of public and private spending action to work better, not a new ideological the perils of complete laissez-faire and the is fundamentally wrong: the relatively high direction. burden of an overly intrusive state. Had the figure for government spending is probably Thus, the top four broad-brush solu- label not been tried, mocked and spat out, a reaction more to Britain’s current huge tions to our problems are deemed to be one would be tempted to call it a third way. government deficit than to a deep-rooted education, infrastructure spending, more But what are the specific features of a better judgement about the size of the state. corporate responsibility and long-term capitalism that would win public approval? We then offered seven strategic options stability for business. The remaining, more Table 3 supplies some of the answers. for the future: broad principles rather than ideological propositions lag some distance We tested eight proposals for government detailed policy ideas. Respondents were behind in the last three places: the left’s call action and asked in each case whether people invited to select up to three options they for tougher regulation, the right’s call for thought it would improve, worsen or make most supported. Table 2 shows the results. leaving business alone and the corporatist no difference to “the living standards and fu-

4 / Fabian Policy Report Figure 4 Thinking about businesses operating in the area where you live (including local branches of national and international businesses), here are some things they might do. Which three or four of these things, if any, do you think would help people in your area most?

Do more training and take on more apprentices Give their employees better pay and career prospects Buy more of their services and supplies locally When taking on new staff, give priority to people who have lived locally for some years Keep prices down Helping smaller local businesses Work more with local schools and colleges Do more to support local community and charity projects Offer employees free advice on issues such as health, pensions, savings Do more to reduce pollution and improve the local environment None of these Don’t know

0% 10% 20% 30% 40% 50% 60%

ture prospects of you and your family”. Four most of us want an NHS that give us access doubt if many people think this can defend proposals are extremely popular, with more to the same drugs and the same operations local communities against the challenges of than half the public saying they would make no matter where we live. We don’t want globalisation. I suspect it is more to do with a positive impact: making large companies medical priorities to be decided locally: we a sense that our lives are now often buffeted do more training, lifting the minimum wage fear that this would reduce our rights rather by forces beyond our control – forces that by around £2 an hour to a “living wage”, than enhance our care. demonstrated their awesome power at the breaking up the six big energy companies But if we don’t want national priorities time of the global banking crisis in 2008 and to increase competition, and changing com- to be challenged locally, what things can in the recession that followed. We welcome pany law so that directors have a legal duty be done in our own communities? Table whatever small steps can be taken locally to to consider the social, community and envi- 4 shows the top priority to be the same as fend off these larger forces. ronmental consequences of their decisions. for national government: more training All in all, people think Britain’s old In each case, fewer than 10 per cent think the and apprenticeships. This is significant. political economy has failed us, but they are change would make life worse. Whether we ask about broad strategy (Table wary of building a new political economy on Three more proposals also meet little 2), specific policy (Table 3) or local action foundations of ideology. Most people want resistance, but with fewer than half saying (Table 4), training emerges as the people’s fundamental change, but not the kind of their family would benefit, and a large top priority. radical change that people on the left (or, in- minority declining to take sides: putting One of the most persistent features of deed, the right) often demand. Rather, most workers on company boards, using public the financial crisis has been the difficulty of us want a society that is fundamentally procurement to reward companies that of young people getting a good job – and, better educated, has a fundamentally better behave well, and innovation groups for city often, any job. Any party that can seize this infrastructure, promotes a fundamentally regions. agenda will be well placed to win over float- more socially responsible business culture The final proposal has more supporters ing voters at the next election. A slick policy and has fundamentally better-run banks. than opponents, but provokes a hostile and a single speech won’t be enough: an in- These are all huge challenges. The party reaction from a significant minority: mak- telligent and sustained campaign is needed, that is seen to rise to them won’t be the one ing the minimum wage more flexible, so and of a form that demonstrates seriousness that offers neat and simple prescriptions that it is set for each industry by agreement of purpose and does not use the issue as a but the one that can persuade voters it has between employers and workers. Among stick with which to beat other parties. practical ideas – and also demonstrates the Labour voters, a flexible minimum wage is There is also widespread support for competence and commitment to provide an the one proposal that provokes more oppo- what might be termed local patriotism, effective government that actually imple- sition than support. This is consistent with such as buying supplies locally, giving jobs ment them. F other YouGov polls that show a widespread to people who have lived locally for some reluctance for local communities to be able years, helping smaller local business and Full polling available at to amend national standards. For example, working with local schools and colleges. I www.fabians.co.uk

5 / All of our Business Lessons learned The public overwhelmingly believe the economy needs a radical overhaul. Labour is determined to reform the institutions of our economic life to deliver social justice even when there is less money around, writes Rachel Reeves

Rachel Reeves is the MP for Leeds West and shadow chief secretary to the Treasury

n his first speech as leader of the Labour flat-lining economy seems to be benefiting caps on fare rises on every rail route, and Iparty, Ed Miliband said “we face a choice: only a few at the top. This is an economy introduce a new legal right for passengers we can return to business as usual or we that still isn’t working for ordinary families. to the cheapest ticket for their journey. can challenge old thinking to build a new In the midst of falling or stagnating wages, On housing, we have said we would cre- economy”. This polling published by the energy bills are £300 a year higher. It’s ate a register of landlords to clampdown on Fabian Society shows that the costing more to get the train to work, as rogue landlords ripping off tenants and have share Ed’s thirst for change: a clear majority rail fares are rising by up to 9 per cent. We called on the government to act now on the agree that “Britain’s recent problems have are seeing more households renting in the IMF’s recommendation to bring forward exposed fundamental problems with the increasingly expensive private sector, whilst £10bn of capital investment, which could way our economic system works”. housebuilding under the coalition is at its support a major affordable housebuilding The poll results are corroborated by my lowest levels since the 1920s. programme. experience talking to people in my constitu- People want action. In the Fabian poll, This polling emphasised another con- ency and up and down the country. People more than half the public say that increas- cern that I hear about across the country: are fed up with ever spiralling costs. They ing competition in the energy sector would the lack of quality jobs for the future. A are working hard and putting in the hours, make a positive impact on their living disproportionate number of the new jobs but their pay is falling. They worry about standards. A ‘one nation’ Labour govern- created since 2010 have been temporary, what the future holds for their children. ment would abolish Ofgem and create a part time, or low paid. Youth unemploy- Most fundamentally, they want to know if new energy watchdog with the power to ment is almost at one million, long-term the causes of the crisis have been reckoned force energy suppliers to pass on price cuts unemployment is at a record high and the with, and the lessons learned. when the cost of wholesale energy falls and number of apprenticeships for young peo- The much delayed recovery we are seek to open the energy market, to ensure ple are falling. Average wages have fallen finally seeing after three wasted years of a competitive pricing. We would apply strict in real terms in 37 out of 38 months under

6 / Fabian Policy Report an increase in the quality of work. Reports show that productivity can improve, as employees develop skills, take on more responsibility, and are better engaged with the aims of the enterprise. It’s a powerful example of what can be done to build a fairer, stronger economy if everyone shares the responsibility.

To crack down on bad practice in the City, we should be toughening the rules on ring-fencing retail from investment arms with a threat of full separation

To get more young people into work, gaining the experience and skills they need to be able to play their full part in our economic future, a government would use a bank bonus tax to create a compulsory jobs guarantee. To boost apprenticeships, we should be using the power of public procurement, requiring firms winning large contracts to offer ap- prenticeships – something the Fabian polling shows strong support for. To help small busi- nesses around the country access the finance they need to invest, grow and take on new workers, we would be creating a business © therealmikeyboy investment bank. To boost job creation in the green industries of the future we should leg- the coalition government – leaving workers when there is less money around. We see islate for a decarbonisation target for 2030 to £1,500 a year worse off. And the number of this in ’ work with Sir George Cox encourage investment in renewable, nuclear, people earning less than a living wage has on overcoming short-termism and raising and clean gas and coal technology. surged from 3.4 million to 4.8 million over levels of business investment, and with Another significant finding in the poll the past three years. Larry Summers on the economic reforms is that the public were most concerned by Ed Miliband and Ed Balls have argued needed to more fairly share prosperity; Ste- banks and businesses behaving irrespon- that we need a recovery made by and for phen Twigg’s work with Chris Husbands on sibly. To crack down on bad practice in the many, securing long-term growth that revolutionising our skills system; and Chuka the City, and get it working for the wider is balanced, sustainable, and with benefits Umunna and Andrew Adonis’s work with economy, we should be toughening the fairly shared. And as I argued in my contri- small enterprises and key growth sectors. rules on ring-fencing retail from investment bution to last year’s Fabian publication The And it’s why I have asked Alan Buckle arms with a threat of full separation, and Shape of Things to Come, this is even more of KPMG to lead a consultation on what tightening the regulation of professional important in the face of the tough fiscal government can do to help businesses cre- standards making reckless misconduct a inheritance the next government will face ate more living wage jobs. The living wage criminal offence. as a result of the Tories’ economic failure. movement has shown how we can tackle It’s clear that the government has failed That’s why one nation Labour is deter- in-work poverty and deliver savings to the to deliver the change we need. The Con- mined to work in partnership with employ- Treasury at the same time as supporting servatives will never be the party to fix the ers, employees and civil society to reform businesses moving towards a higher-value problems in our economy and build a fairer the institutions of our economic life so they model. 80 per cent of employers that have future. Only one nation Labour has a plan are hardwired to deliver social justice even signed up to the living wage have reported to put things right. F

7 / All of our Business Root and branch Sonia Sodha explores the policy ideas that could bring about long-term reform to our economic ecosystem

Sonia Sodha is a former senior policy adviser to Ed Miliband and writes here in a personal capacity

t took a big bang financial crisis to act as 2015 if it is not going to suffer the same fate assumption is you can go and get another Ia catalyst for our political leaders to revisit as the coalition’s vision for the economy. one. If you buy a poor-value product or some of the basic assumptions that have In many ways, responsible capitalism has service, the assumption is you can switch underpinned British competitiveness for misleading connotations of businesses act- suppliers. the past 30 years. In the wake of the crisis, ing in ethical or moral ways. A better label However, there are significant problems questions were raised on all sides about would be inclusive capitalism, because at its with the model. Competitive pressures don’t the sustainability of long-standing trends: heart is an economy that works better for always work in improving the lot of employ- growing wage inequality and rising living more people: not just for the management ees or consumers if there is an over-supply standards funded through increasing debt of large companies, but also for employees, of labour, or markets are dominated by a levels; historically-low levels of investment for consumers, for savers, and for small few big suppliers where switching is dif- and short-termism in markets; the growing businesses. ficult – think the ‘big six’ energy companies housing asset bubble; and regional and sec- Sacrosanct in British capitalism since that control 99 per cent of the energy in- toral imbalance. And a political consensus the 1980s is principle of shareholder dustry. Moreover, the theory of shareholder was quickly arrived at: returning to business value: companies are run with the aim of capitalism translates into something more as usual was not an option. maximising profits for their shareholders. like corporate-management capitalism in Yet five years on, there is still no con- Much of the economic ecosystem flows practice. Corporate boards are supposedly sensus about what this actually means. All from this principle, including our system responsible to shareholders, which include the fragile signs of recovery, as welcome as of corporate governance; a flexible labour many members of the public via their pen- they are, suggest that old habits are dying market characterised by relatively low sion funds. Yet the asset-managers who hard in the British economy. Although the employee rights, a high share of low-skill actually represent long-term pension inter- coalition ambitiously talked of rebalancing jobs and low employer investment in skills; ests in the boardroom chase annual results the economy back in 2010, this agenda and the assumption that while government from trading shares, rather than long-term has quietly sunk without a trace as they can regulate and incentivise, what goes on return by growing companies. Fragmenta- desperately try every old-school measure, inside what Ewart Keep has called the ‘black tion means it is not in a pension fund’s including subsidising home ownership, to box’ of firms is not something the govern- interests to go it alone using a different ap- get the economy moving again. ment can or should influence. proach – returns would be distributed right The Labour party, in contrast, has started Central to the working of the system is across the industry. This results in endemic to shape a vision for long-term structural the assumption that competitive markets short-termism in equity markets that rip- economic reform in opposition. But the facilitate a fairly even distribution of power. ples across the rest of the economy. party needs to flesh out the agenda for a If you have a job where your employer does An agenda to make growth more more responsible capitalism in the run up to not invest in you or pay you properly, the inclusive would need to tackle these root

8 / Fabian Policy Report issues. But while we can look enviously at nised this problem: the US and Germany customer, supplier, community and envi- economies like Germany and Japan, where have had schemes in place since the 1950s ronmental interests in its decision making. business decisions are based on more than that catalyse rather than replace the market Yet it has made little impact because boards maximising quarterly profit, the question is by making finance available to businesses are not formally accountable to these what can Britain learn from these systems affected by credit rationing. They do so by groups in the same way they are to share- given how different they are? harnessing private sector intelligence so holders. Changing the rules of the game Embracing this agenda means accepting that investment decisions are not made by is important, but is not enough by itself. that government could and should shape government officials or banks or investors Indeed, putting an employee on a company what goes on inside companies. Skills with nothing to lose, but by those that have board is merely a tokenistic gesture unless policy is a good illustration. It has three leveraged skin in the game. This stands in they can genuinely represent the interests levers: supply of skills, demand for skills, contrast to schemes in the UK. of all fellow employees through recognised and how companies themselves utilise and The third lever at the government’s workplace institutions. Trade unions, pen- develop the skills of their own workers. In disposal is to facilitate collaboration as sions funds operating in the public interest the UK we have stepped back from the last well as competition. One of the reasons and consumer associations are also needed and pursued the first two. It has resulted that the dual apprenticeship system in to collectivise and represent employee, in a polarised labour market that has more Germany is so successful is because there saver and consumer power. high-skill jobs (although we still have skills are institutions that facilitate sector-wide A lot of work is needed before we have underutilisation) but also the large number collaboration, for example on skills. Hence a manifesto-ready agenda in tune with of low-skill, low-pay jobs they create, largely businesses are happy to invest in transfer- public opinion. There is still a gap between ignored by skills policy. able skills via apprenticeships and the qual- the vision – an economy that works better There are a number of potential policy ity of apprenticeships is consistent across for most people – and a clearly-enunciated mechanisms to address this. Regulation and small and large businesses. In Britain, there agenda that will convince people that this incentivisation has historically been used is huge variety in the quality of apprentice- is something that can actually be delivered, in a minimal way, for example regulation ships because employers are more reluctant and which has a direct link to people’s lives. to prevent rogue businesses failing to meet to invest in a collective system that values This agenda is destined to fall at the first minimum standards the majority already transferable skills. The last Labour govern- hurdle unless it can convince some of the meet. Similarly there are employer training ment set up Group Training Associations UK’s business community to embrace a subsidies like ‘train to gain’ that ended up to try and facilitate more collaboration and more symbiotic relationship between the subsidising the certification of existing skills economies of scale. Building on their role state and the market. Yet key business lobby and did not engage with the quality of train- will be important. groups tend to take a reactionary view, while ing offered by employers. Fourth, the government need to restruc- businesses that are exemplary in embed- But businesses can be regulated and in- ture rules of our economy to empower ding employer and consumer interests at centivised to enable deeper systemic change employers, savers, consumers and small the heart of what they do rarely speak up to occur. For example, the national mini- businesses and better embed their inter- to support broader systemic change that mum wage improved productivity by forcing ests into economic decision making. For might support more businesses to be like low-wage employers to improve the skills example, reforms to corporate governance them. utilisation of their employees. Committing might put employers on company boards Finally, if this agenda has even a hope to all new homes being zero carbon by 2016 or give extra weight to votes cast by long- of succeeding it requires long-term com- created markets for new technology. Regu- term shareholders, and consumers could mitment. This is true of individual policies: lation establishing rights to train, or licences be empowered through rights to collective small business financing schemes in the to practise in low-skill sectors like social class action. US and Germany have existed since the care, could drive further improvements in However, there are limits and challenges late 1950s and have become part of the skills, productivity and wages. Employer to this agenda of long-term structural ecosystem itself rather than a policy to national insurance contributions could be reform. In truth, measure-by-measure the try and affect the ecosystem. But it is also restructured at the bottom of the income suggestions here do not feel equal to the true about for the broader agenda. It’s distribution, to remove the tax disincentive mammoth task of creating an inclusive easy to forget that Thatcherism enjoyed a for employers to increase pay between the capitalism where growth is shared by the 30-year governing consensus. Long-term minimum and the living wage. many, not the few. What’s required is a and structural economic reform only has a Another consideration is the important deep commitment to structural economic chance of success if it can eventually buy in role for government in catalysing markets reform; a shift in our economic ecosystem, cross-party support. The national minimum where failure exists. For example, even not a tweak in a particular area of policy like wage is an excellent example: it was fiercely at the top of the economic cycle, market vocational skills or investment allowances. opposed on its introduction but its abolition failure impedes the ability of fast-growing In order to succeed, this agenda requires quickly became unthinkable. So perhaps businesses to access growth capital. This is institutional reform. In its time in govern- most challengingly of all, if a long-term because the fixed costs of due diligence on ment, Labour made significant reforms to responsible capitalism agenda is to be suc- a small company quickly erodes the incen- corporate governance, including the 2006 cessful it would need to secure the support tives for lenders and investors to take a risk. Companies Act, which gave company direc- of a broader political coalition spanning left Our global competitors have long recog- tors a legal duty to incorporate employee, and right. F

9 / All of our Business Fulfilling the potential of every area Different areas have particular histories, specialisms, resources and capacities. There is a great opportunity for local government to work with businesses to ensure every area can reach its full economic potential, writes Jessica Studdert

Jessica Studdert is a political adviser to the LGA Labour Group

he English economy does not exist not fall into the trap of adopting a reverse evidenced by the prudential borrowing of Tin any meaningful sense – it comprises psychology of private bad, public good. Wolverhampton, along with South Stafford- city regions, county economies and sub- In this regard, Ed Miliband’s intention to shire and Staffordshire councils, to leverage regional labour markets. It is characterised build a more ‘responsible capitalism’ charts a £400 million private sector investment by wide disparities: between thriving tourist a welcome, more nuanced approach. It is in the Jaguar Land Rover low emissions areas and struggling seaside towns, between predicated on the understanding that the engine plant. They can work proactively to emerging tech hubs and former industrial private sector can and should recognise attract new investment, such as Sunderland areas, and between a finance-dominated social obligations beyond shareholder bot- city council’s direct talks with the Lear Cor- capital with a devolved administration and tom line, while those who govern can and poration, which convinced them to locate other major cities with different sectors should demand more from the business a new manufacturing plant in the area, who increasingly seek similar rights to self- world for the benefit of all. bringing 300 jobs. And they can ensure new determination. Despite the government’s cuts to local investment secures maximum benefit for In this context of significant geographi- government funding of over 40 per cent, their areas, as with Durham county council’s cal imbalances, a purely centre-led growth many Labour councils are supporting their partnership approach to coordinate local strategy will not be sufficient to meet the local businesses to kick-start growth and cre- resources around a new Hitachi production scale of the overall challenge. Different ate jobs in different ways. Their approaches facility and R&D base, which will allow local areas have particular industrial histories, demonstrate the benefits of local leadership, small businesses to establish or grow in the sector specialisms, natural resources, cur- which can secure more productive value for ensuing supply chain. rent capacities and future opportunities. By local areas from growth, since they have bet- An indication of how a more responsible devolving some of the levers to boost and ter local knowledge and a direct stake in se- capitalism might work in practice is already sustain growth to local areas, there would curing positive outcomes for their residents. being pioneered by many Labour councils, be greater potential for local government, Councils already use various models to who use their buying power to secure more who understand their specific situation, to help businesses access finance and shape community responsibility from local com- work with businesses to ensure every area the development of their local economy. For panies. Liverpool city council’s procurement can reach its full economic potential. example, Calderdale council has been work- board, for example, ensures all decisions have The Conservative ideology framing ing to diversify its local economy away from a positive impact on jobs and skills within the the government’s macro-approach to the a traditional reliance on financial services city. Sandwell council includes community economy can be simply put: private sector and manufacturing, creating a fund to invest benefit clauses in major public contracts to equals good; public sector equals bad. This in small projects to stimulate the economy. ensure that job and apprenticeship offers are illogic is the guiding principle underpinning This has created 150 new businesses, over made to local residents. Preston city council their austerity drive, whereby if they are not 500 jobs and attracted £3 million of private is exploring how local public bodies such as explicitly cutting the public sector, they are sector investment. health and education institutions can keep seeking to inject the ‘principles’ of the pri- Councils can use the strength of their a greater proportion of spend in the local vate sector into it. However, Labour should balance sheets to secure investment, as economy supporting local businesses and

10 / Fabian Policy Report co-operatives, in the process creating more or childcare support. This could contribute top-sliced from Whitehall departments, local ownership of wealth and opportunity. to our understanding of how accountability as outlined by Michael Heseltine’s recent And at time of writing, 53 Labour councils to local place, rather than to the Whitehall growth review. This set out an approach to are committed to being living wage employ- hierarchy, can better meet the whole range devolving economic power which would ers, setting a strong local example and sup- of people’s needs which often don’t fit within give local areas more resources and tools porting demand in local economies. service silos as designed at the centre. to drive growth. The main mechanism to These cases demonstrate the appetite A more coordinated approach between achieve this is a single, unringfenced local and capacity of local government to drive national and local infrastructure planning growth pot comprised of growth-related growth and work with business to ensure can maximise value, where currently the funding from Whitehall Departments. community benefits. Yet this is happening vehicle for investment is the institu- However the government has thus far failed despite the ideological constraints of the tion – Network Rail, Highways Agency or to match this ambition – while Heseltine current government, and the institutional broadband – rather than the place itself. Lo- identified between £58bn and £70bn of constraints of a centralised system led from cal government’s net asset base of £250bn funding streams that could be devolved, the Whitehall that hampers local initiative and could be used more effectively to invest in spending round earlier this year confirmed creates perverse incentives. community goods – as the cross-party LGA that the single local growth fund would The current national-led approach to un- has argued, freeing councils from Treasury comprise only a fraction of this at £2bn. employment demonstrates these restraints. restrictions would create headroom to invest This comparatively small sum reflects the There are 35 national skills and employment in local infrastructure while still complying nervousness of the centre at truly letting go schemes, spanning 13 different age ranges, with financial regulations. For example, re- of the reins, but there is a risk that while while youth unemployment stands at 20 per moving the cap on the amount councils can actions fail to match rhetoric the measures cent. The logic of skills funding encourages borrow for housing would allow them to will simply amount to passing the buck further and higher education institutions to deliver 60,000 new homes in five years and for lack of growth rather than genuinely be accountable to Whitehall departments unlock £20bn of wider economic impact. enabling local areas to drive it. rather than to their areas. This leads to a sit- The institutional architecture in 2015 will The other aspect of sub-regional archi- uation in which skills provision is detached be much changed from that in 2010. Regional tecture that will be increasingly important from local employers’ labour requirements: development agencies have been replaced is in relation to city regions. The combined LGA research found that in one year 94,000 with new sub-regional structures, local en- authority model was pioneered by Greater people completed hair and beauty courses terprise partnerships (LEPs) and combined Manchester, and other city regions are pur- despite there being just 18,000 new jobs in authorities. Although the loss of regional suing similar collaborations. City deals have the sector. investment vehicles was certainly felt, the old created a new model through which the Devolving skills and apprenticeship regional boundaries seemed to make more centre and local areas agree priorities around budgets could build a greater shared endeav- sense from the centre that in the localities growth – skills, transport, infrastructure and our between local government, business and themselves. New sub-regional structures are trade – then the former devolves the funding educational institutions, better blending local more likely to be better aligned to functional and lets the latter get on with delivering it. economies and social objectives. Skills provi- economic areas – including labour markets The Greater Manchester city deal’s ‘earn- sion would be better aligned with local labour and journey to work areas. back’ principle, whereby the authorities’ market requirements and so have more of an Bringing together councils, businesses investment in growth can be earned back impact on job outcomes, whilst also driving and other local stakeholders – like educa- from the Treasury as the proceeds of growth longer-term local economic productivity tion institutions and trade unions – to de- are realised, is a potential model for better and sector development. LGA calculations liver economic growth through LEPs makes incentivising and rewarding local growth based on the evidence of what councils are sense in principle as part of a modern that could be developed and extended. already doing show that a localised approach industrial strategy. But they are failing in There are many areas Labour can explore could achieve savings of £1.25bn a year and practice to achieve anywhere near their full to drive sustainable growth, such as how exist- cut youth unemployment by 20 per cent in potential. Such will be the urgency to drive ing plans for regional investment banks might three years. and sustain growth, it would be difficult share risk with local government to secure The long-term unemployed are also being to simply turn back the clock or start an- infrastructure investment, or how the busi- failed by a centre-led approach and there is other top-down structural overhaul of sub- ness rates system could be reformed to better evidence that those furthest from the labour regional architecture. There are presently incentivise actual business growth rather than market can be better supported by locally- concerns over the democratic accountability just the growth of business premises. sensitive approaches. In Manchester just 2.8 and financial transparency of LEPs, which Of course, there remains a role for per cent of the Department for Work and could be resolved by strengthening the role national government to set out a growth Pensions’ jobcentre plus referrals recorded of local authorities as delivery partners, strategy with clear ambition and leadership. sustainable job outcomes last year. The and there remain issues of geographical Within this, however, the flexibility to adapt council is now developing a new delivery inconsistency, whereby in some places investment and initiative to local needs will model with prime providers, which will LEP boundaries are not aligned to local provide the greatest potential for all parts integrate support with other local services economic functional realities. of our imbalanced economy to develop so that it can address issues which may be Once they are all fit for purpose, LEPs effectively and sustainably, for the benefit barriers to work – such as health problems would make better vehicles for funding of everyone. F

11 / All of our Business Contracts with a conscience Businesses that win the respect of local people are far more likely to Puuikibeach

win their custom, writes Hazel Blears ©

infrastructure works are not yet covered by mitment to helping local people through the Public Services (Social Value) Act. improvements to health, education and eturning Labour to power is essen- Extending the Act to cover infrastructure the environment in 1943. And the Co-Op’s Rtial if we are to lift Britain out of the could have huge benefits when it comes vision, dating back to the mid-nineteenth doldrums and secure an economic recovery to schemes like the Northern Hub, which century, is about meeting the economic and which benefits everyone. But money will be will improve rail links between Greater social needs of members and communities. scarce for the first few years and the public Manchester, and Yorkshire. It is Today, companies like British Gas, sector will need to spend it wisely and in expected to be worth up to £4bn to the re- which is investing £5 million in social en- a way which really benefits communities. gion and create up to 30,000 jobs. Applying terprises through the Social Business Trust, The idea of responsible public spending social value would help ensure these jobs are also embracing the idea. It hopes to get is not new, but the Public Services (Social are spread throughout the area and provide 1,000 unemployed young people into work Value) Act, which I supported last year, has clear benefits for local communities. by 2015 through Transform, a collabora- given public authorities a real opportunity City Council is currently mapping tion with the charity Global Action Plan, to help local people. out what skills all local developments with management consultancy Accenture and When public bodies like government planning permission require so that the JobCentre Plus. Young people are recruited departments, councils and hospitals award area can meet demand for the likes of local from communities in which energy effi- contracts to provide services, they must builders, plasterers and electricians. Again, ciency upgrades are offered and are trained now consider social, economic and envi- that is preferable to a workforce travelling in in sustainability, securing qualifications ronmental benefits, not just cost, and need from afar or temporarily relocating. and given a guaranteed interview with to consult communities about the kind of In fact, some companies already apply British Gas. services they would like to see. social value to infrastructure works to great Businesses hoping to polish their public These considerations should enable so- effect. Construction firm CH2M HILL, image should take note. Companies spend a cially-aware businesses and social enterprises which was involved in building London’s great deal of money on public relations, and to compete for contracts, and incentivise Olympic Park, supports people in deprived occasional projects to demonstrate ‘corporate private companies to act in the public interest. communities through its Pathways to Work responsibility’. But what could be better PR But how might public authorities benefit, scheme. This provides free training to young than a whole ethos based upon care for their especially if they are paying a little extra? people and the long-term unemployed. communities and responsible, sustainable A council awarding a contract to supply In my constituency, another large construc- procurement through local supply chains? In school dinners, for instance, might choose tion company, Keepmoat, is sub-contracting the face of recent high profile failings – think a company or social enterprise which to Salford firm B4Box through a multi-million tax avoidance, payment protection insurance specialises in healthy food grown locally. pound regeneration scheme. B4Box brings and bankers’ bonuses – businesses that win This could establish the habit of a healthier empty homes back into use, trains local peo- the respect of local people are far more likely diet for children at a young age, potentially ple in construction and recruits 80 per cent of to win their custom too. easing the burden on the health service. its workforce from those on benefits. By making social value the norm, we can But it could also mean more local jobs, and But not all businesses are this forward- make money go further and get the public reduced transport costs and pollution. thinking, which is why we must extend the and private sectors working together and So how can Labour develop this concept Act as well as ensuring its existing provi- with the community. It is the right thing of ‘social value’? Capital spending will be sions are implemented. And because many to do and will help to get our economy crucial to economic recovery, but the coali- contracts are awarded by the private sector moving, benefiting everyone as we work tion has failed to use it to drive growth. the idea that ‘doing good is good business’ towards fulfilling our Labour vision of a Among other things, we need more is one worth pushing in its own right. one nation Britain. F new homes, better transport links, and It is far from a new idea. Healthcare com- public buildings fit for the 21st century. But pany Johnson and Johnson set out a com- Hazel Blears is the MP for Salford and

12 / Fabian Policy Report democracy. This is about the survival of away from the south east of England. It democracy,” he said in February this year. can intervene intelligently in the hous- That may sound extravagant, but he’s got ing market, encouraging the building of a point. The underpayment of tax by big affordable homes where people want to companies is in effect an attack on the idea live, preserving rather than hollowing out of the state itself. communities. It can support those local So here is the boss of one of the world’s authorities that are establishing living The global village most prominent economic institutions wage zones. It can improve transport links telling us that the local and the national and infrastructure, and work with the Regional growth and localised are losing out to the global. There may be a private sector to link up remote parts of economies are not necessarily “global race” going on, but if so it is being the country through broadband internet at odds with global companies, won by global corporations and financial connections. It can also provide some writes Stefan Stern powerhouses. incentives to big businesses that commit to It follows, therefore, that the local needs investing in specific regions. to be actively promoted and supported. The concept of “shared value”, the idea After all, globalisation, being a man-made that businesses can make money and help phenomenon can be regulated, improved with the work on social problems at the ow’s that “global race” working and adapted to suit local communities bet- same time, is worth exploring – although Hout for you, then? Keeping ahead ter – if the will, imagination and resources any descent into PR-driven “CSR”-type of Portugal, are you? Have the Danes left are there. activity must be guarded against. you reeling in their wake? Look out – here The “predatory” view of capital holds comes Belgium. The local businesses that it can leave at any time, relocating to David Cameron’s favourite phrase for suit its short term needs – the flip side of describing the economic challenges facing that emerge may well a flexible labour market. The “responsible” Britain is, shall we say, a little bit grandiose. be social enterprises view is that a good global company has an Perhaps at Davos, or Bilderberg, talk of a interest in developing the local workforce “global race” seems normal, but not many and not-for-profit – not and investing in place and community. In- commuters stop to reflect on their place business as usual, but telligent big businesses know they have to in global competitiveness league tables tread carefully when they operate locally as they board the 8.15 into town every independent, personal and at (apparently) smaller scale. Many morning. businesses that place more supermarket managers are given some In fairness, though, it is a struggle to importance on volume of freedom to adapt their offering to appeal find the right language in which to talk to local community groups. But when about our economic lives. It defeats most of trade and customer loyalty Tesco buys a big stake in an independent us. ’s “white heat of technol- than on short term profit coffee shop and turns it into a national ogy” speech in 1963 was one of the few to brand, as with its Harris and Hoole out- capture the public’s imagination as far as maximisation lets, it should expect some scepticism at political economy is concerned. In its own the very least. way, Norman Tebbit’s “on yer bike” party The UK suffers from an imbalanced In some high streets around the country conference speech of 1981 did the same economy, not just in terms of industrial sec- the desire to support and recreate local thing, from a Tory perspective. tors but in terms of geography. Germany, economic activity is building. But the local Ed Milband’s “producer/predator” by contrast, is enviably decentralised, with businesses that emerge may well be social speech two years ago received pretty mixed (crudely) finance happening in one place, enterprises and not-for-profit – not busi- reviews. It, too, presented a perhaps rather national politics another, industry another ness as usual, or simply the micro-level too grand, too abstract and too binary and the constitutional court in another. Ev- manifestation of global players, but inde- concept of business and working life. Few ery region counts, or at least has a decent pendent, personal businesses that place companies are wholly wicked, and few chance to flourish (former East German more importance on volume of trade and wholly good. Running a business involves states included, although they clearly start customer loyalty than on short term profit trade-offs and compromises. Making sur- from further back). maximisation. vival the first priority doesn’t necessarily But in the UK we know that there are The next general election may well make your business a predator. regions where private sector activity is turn out to be about living standards. But And yet, listen to the words of Angel limited, where people depend heavily on it will also be about how we live in our Gurria, head of the OECD. He has taken the public sector to provide employment local communities. All politics is local, a dim view of the role of big business, and economic stimulus. As public spend- after all. F especially as far as the issue of tax avoid- ing cuts continue it is these regions that ance is concerned. “If big corporations will suffer most. Stefan Stern is visiting professor in fail to pay tax and leave it to SMEs and Government is not a powerless management practice at Cass Business middle income groups, it will undermine bystander. It can relocate some activity School, London

13 / All of our Business A real partnership For the government to be an effective entrepreneur, Whitehall has to mobilise talent, wherever it can be found, and reinvigorate of the relationship between state and markets, argues David Walker

David Walker, former council member at the Economic & Social Research Council, is the co-author with Polly Toynbee of The Verdict – did Labour change Britain, and is on the Fabian Society commis- sion on spending choices

conomic history shows time and again either been fired for poor performance, had not comparable. The accounting conven- Ethat private enterprise depends on gov- their companies charged with fraud or, for tions that often stifled their investment ernment. Not just government as regulator the sake of retaining any equity value at all, programmes are finagled into principled and guarantor of property and contractual had to be bailed out by the state. reasons why state enterprise never works. rights, but government as provider of infra- All that gets obscured. Will Hutton justly Take EDF, for example: a French state- structure, education and the social supports complains of the “relentless drumbeat” and owned company that Cameron’s govern- (including tax credits) that allow households the “determined way the national conversa- ment is pleading with to stay and keep UK to participate in the labour force. tion is skewed towards the inadequacies of nuclear electricity alive. The Dutch and Ger- Even folk on the centre right come thus the public sector, without any parallel focus man governments run British trains, albeit far. But their red line is crossed when we on the inadequacies of the private”. at one remove; in London the 148 bus will describe the state as an economic actor. But when you flip the coin you find that whisk you to White City thanks to its own- Over that threshold, they say, lie the corpses certain markets (energy, transport) and ers, the Paris regional transport network. of nationalised industries and the rusting certain technologies (nuclear) seem unable As for the British state in entrepreneurial hulks of civil service-directed firms stranded to support private ownership, except in mo- action, examples abound. Remploy was a in a desert of planned enterprise. The state nopolistic forms. The fate of the Fukushima decent company marrying social purpose lacks the wit and wisdom to understand plant owned by Japanese nuclear company and commercial acumen, while the Forestry market dynamics and its officials the tem- Tepco is instructive: certain risks are just too Commission owns, conserves, develops and perament and fleetness of foot to survive great for companies to bear, even if they markets woodland and countryside. Local competitively. Right wing thinktanks join are well run. In some sectors, for example authorities are still substantial developers, economists imprisoned in equilibrium water and sewerage, the nature of the assets seeking and often winning added value for theories to form a propaganda industry on and the critical part they play in sustaining their holdings of land and property. State this point. The incapacity of the state as a urban life mean private ownership becomes enterprise, in the shape of development market player freezes into dogma. a permanent struggle between necessary corporations, created Milton Keynes and But let’s unsay this ‘private good, public regulation and profit maximisers. the other new towns, and Canary Wharf. bad’ catechism. The state a bad corporate The history of the nationalised industries The coalition government doesn’t like it, player? Of the chief executives who featured gets rewritten, their performance removed but East Coast shows a publicly-owned on lists of the highest-paid US directors from its technological and cultural contexts rail franchisee can reach high standards of between 1993 and 2012, 40 per cent have – pre and post-privatisation BT are simply performance and profitability.

14 / Fabian Policy Report But such companies exist, if they survive economy is not the Treasury but Business, built up from public accounts committee at all, in a kind of dim half-light. It’s time for Innovation and Skills. Civil servants tend hearings about Whitehall’s lack of project a reappraisal, as part of a general reworking to dismiss any suggestion that they have management, financial and organisational of how the state interacts with markets. ideas, let alone ideology: their public credo skills on its own behalf. He will sympathise We have started using ‘predistribution’ as is keeping government going. But depart- with the attempt the Tory chair of the public a coy phrase to describe the state’s necessary ments do have dominant paradigms and administration committee, Bernard Jenkin, role in shaping – and intervening in – private house styles. Since the Thatcher govern- is making to give civil service reform a non- markets. We are coy because prevailing dog- ment in the 1980s, the Department of partisan and comprehensive base. ma still decrees markets are always efficient, Trade and Industry and its successors have The problem is time. Governments live despite the crash and manifold evidence to eschewed active models of the relation- in the here and now but reshaping the way the contrary. Markets are (for example) not ship between state and markets. It long public officials are recruited and trained is a efficient or effective in supplying high-speed ago gave up responsibility for how other long-term task. Devising a system in which broadband to rural and remote areas, with- departments and agencies manage the they are encouraged to move between sec- out which economic opportunity, education state’s dealings with the private sector – tors and deepen their experience will have and culture in those areas may be blighted. among them transport, energy and local to be balanced with the essential, ethical Only government has been able and willing authorities. The quality of directors, plans dimension of public service. to secure vital services such as this. Clearly, or investment strategies is monitored in no Nonetheless, the talent pool able to predistribution is a wide category. As well central location in Whitehall, meaning that conduct state enterprise is large. Govern- as offering consumer protection, the state ‘the state’ rarely exists as a coherent entity. ment will always trump mere profit-making enforces product standardisation, without Its power and purposes have been allowed in its intellectual and ethical rewards and which inter-area trade becomes impossible. to fragment. so attract people from the corporate sector, Opponents of the European single market especially those with technological and pro- have never quite made clear how they fessional skills beyond ‘business’. First-rate can trade incommensurable products and By now Ed Miliband’s human resources advice is a pre-requisite services – and so avoid the regulations that thoughts are turning for success and Miliband should begin com- have accompanied the expansion of the missioning now. common market. to the condition of the Predecessor governments, Tory as well as A frequently heard story from the right is Labour, have been able to draft in business that public officials are bureaucrats, forever machine he might inherit, executives from Richard Beeching through tempted to aggrandise their departments Monty Finniston to Chris Haskins, who and over spend. But, miraculously, in the and the accumulating have the versatility to operate models in same narrative one class of public official evidence of its unfitness which the state is both share and stake- turns up as heroic and virtuous. These are the holder. People with such talents and values central bankers, to whom (and the advent probably still exist, but they need to be of Mark Carney as governor of the Bank of All this forms the backdrop to the pos- identified and persuaded; they also have to England seems only to have reinforced this sible arrival of a Labour or part-Labour be paid. Ironically – because words such as temptation) the keys of the kingdom should government in 2015. Say Labour were to mission and crusade are uncool – the more be given.So state officials can do (central) take a more active or muscular view of the an incoming Labour government can bang banking. They also do science, technology state’s role in making markets, not just as the drums of necessity and emergency, the and innovation. Mariana Mazzucato says regulator or mopper-up of market failure more likely it could attract erstwhile busi- the state has not just supported markets but but as an entrepreneur, developer and ness people. actively created them. Citing the internet investor in its own right. Would it be able As for the wider public sector, excellent and nanotechnology, she argues the state to command the necessary personnel and people in both local government and the has created growth long before potential is capacity from the ranks of what by then NHS know about development and how realised by the private sector. would be a severely depleted civil service? markets can be planned and energised – and The state also does broadcasting. Even Could Business, Innovation and Skills that’s no Hayekian paradox, but a daily fact the BBC’s multiple enemies, gathered and rise to the challenge, let alone a desic- of life for chief executives, elected members led by Rupert Murdoch and his editors, cated Treasury, its staff either cynical and and boards. In the regions of England are admit the organisation produces extraor- detached or intellectually enslaved to the groups of survivors of the Blair and Brown dinary output, within the framework of a failed doctrine of austerity? machine for regional development, many public entity.However, ultimately what tells By now Ed Miliband’s thoughts are with skills and flair. All this can be done, but against the state as an economic actor, in turning to the condition of the machine he a prime directive for Whitehall has to be to modern British political circumstances, is might inherit, and the accumulating evi- mobilise talent, wherever it can be found; less the antagonism of the right and busi- dence of its unfitness. Labour would be left reinvigorate each department with a sense ness leaders than a loss of faith on the part a deficit in civil service skills and experience of professionalism and a renewed ethos of of the state officials themselves. that the coalition government has made public benefit; and break down old barriers In Whitehall, the department that worse. In addition the Labour leader will be by integrating the civil into a generic public most obviously links government and the assaying the evidence Margaret Hodge has service. F

15 / All of our Business most honest reporting of climate change is often found in the business press. Labour’s policy review has already gone some way to demonstrating that upon returning to government it would do much to fulfil the promise of the Climate Change Act – an act that was brought into law Smart companies when Ed Miliband led the Department for Energy and Climate Change. Ed Balls has Businesses are often ahead of committed to giving the green investment politicians in recognising the value bank power to borrow as early as pos- of sustainability, writes Natan Doron sible. Labour has also committed to a 2030 decarbonisation target for electricity that will provide some of the certainty needed to assure those investing in low-carbon If everyone in the world lived like the aver- technology. age European we would need three planets to live on. The challenge to shift the char- In communications, © John Picken acter of our economic activity to reflect this places great responsibility on all nations the emerging interest in BT and Kingfisher have made an im- but particularly on rich countries like the smart cities will see new portant symbolic step by pledging a ‘net UK. In this context, the responsible capi- good’ sustainability strategy. This strategy talism agenda has to have a fundamental products developed such as aims to not just limit environmental impact presumption in favour of the environment applications to coordinate but actually seeks to replenish the natural to prove credible. environment where possible. This should This will mean an approach by govern- electricity use in large be the mindset throughout government, ment, business and communities that buildings the private sector and at community level respects environmental limits, truly values in a mission to sculpt a more responsible nature and ensures the safe transition to a But the responsible capitalism agenda capitalism. low-carbon economy. should provide a platform for government This mission will demand much of Ed Miliband and others have argued to show even more ambition. Again in government. It will at times require strong that responsible capitalism involves recog- some regards the private sector is currently regulatory action to ensure that the pol- nising the importance of long termism in leading the way. Companies such as Uni- luters in the private sector not only pay our economy. There can be no long term lever, Kingfisher, Marks and Spencer and to limit damage but pay to replenish the if we squander our natural resources and BT are demonstrating that sustainability environment. It will also require public fail to maintain the stability of the climate makes good business sense. For large com- spending to ensure that there is support for system. To put it bluntly, all economic ac- panies such as these, cutting emissions and communities as well, as those employed in tivity ultimately depends on the health of other forms of waste is leading to more the public sector, to direct efforts towards the environment. When we take this view, efficient supply chains. These efficiencies improving the environment. The link be- any argument that environmental concerns often reflect positively on balance sheets tween your local green spaces and global are a block on economic ambitions quickly too: if you are using less energy then you biodiversity may be abstract, but business unravels. are bringing down your company energy and government can do more to make it In many ways, business in the UK is far bills. clear. These community environmental ahead of politics when it comes to the low The concept of waste is also being initiatives will be essential for cultivating carbon transition. Research undertaken reframed by some companies through the a more popular environmentalism that by the Green Alliance into the top twenty idea of the circular economy. An example people can relate to. infrastructure projects in the UK has dem- of this would be manufacturers who see The success of a responsible capitalism onstrated that private investment in low- repairing their products as part of their that takes the environment seriously will carbon projects such as renewable energy service to extend its lifetime. Instead of ensure future generations inherit an econ- has dwarfed that of private investment in designing in obsolescence, businesses can omy to be proud of. An economy where high-carbon projects such as coal-fired recalibrate to design it out. everyone plays their part in ensuring the power plants. Furthermore, while one Companies are also finding ways in health and flourishing of our planet. One could easily identify Conservative cabinet which their expertise can be leveraged to nation Labour must also be a one planet members who are sceptical about the sci- create new markets in sustainability. In Labour party. F ence supporting climate change, it is very communications, for example, the emerg- difficult to find chief executives of private ing interest in smart cities will see new Natan Doron is senior researcher at companies who share their views, as Busi- products developed such as applications to the Fabian Society where he leads the ness Green has pointed out. Indeed, the coordinate electricity use in large buildings. environment and citizenship programme

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