The Budget: Balancing Business, Bolsover & Beaconsfield 03 | PORTLAND PORTLAND Contents Introduction

PORTLAND’S groundbreaking analysis has for the first time exposed the 03 INTRODUCTION dilemma facing Prime Minister Boris Johnson – does he deliver for Conservative GEORGE PASCOE-WATSON voters or business leaders? Our research shows Tory voters and captains of industry have very different views 04 THE KEY BATTLE AHEAD OF THE BUDGET ISN’T about how far government should interfere in the economy. BOLSOVER V BEACONSFIELD…IT’S VOTERS V BUSINESS And if the PM chooses to back “the people” over “the producers”, there will be NICK HARGRAVE a need to work hard to protect and promote sectors from regulatory or legislative threat.

08 THE NEW POLITICAL AND ECONOMIC IMPERATIVES The common view is there’s a chasm between leave-supporting voters in new, northern Conservative seats like Bolsover and remain-backing Tories in LORD JAMES O’SHAUGHNESSY Beaconsfield. But the findings of our detailed work have exposed a new and very real schism 10 DELIVERING FROM THE CENTRE: THE NEW which could impact the economy. POLICYMAKING PROCESS The analysis highlights the dilemmas faced by not only ministers and their ELLIE LYONS advisers – but by the business community as it seeks to engage with the Johnson administration. 12 NEW LEADER, NEW PATH FOR LABOUR? Firms who plan their strategic approach to public affairs without this kind of cutting edge research risk making the wrong choices. ANOUSKA GREGOREK In this publication our authors assess how this dynamic will come to define UK politics for the next decade. They have all worked at the sharp end of British politics, advising a string of Prime Ministers and Cabinet ministers. Our team also looks at how the next generation of the Labour Party might respond to this structural realignment of UK politics. They dare to dream of building an election-winning offer themselves. ‘The Budget: Balancing business, Bolsover & Beaconsfield’ is a critical read for any business seeking to understand and interpret the new political and economic imperatives shaping our governance. Portland’s team of best-in-class consultants have the knowledge, experience and can-do attitude ready to help you navigate a new political reality.

By GEORGE PASCOE-WATSON UK Chair PORTLAND PORTLAND 02 05 | Since the General Election in The real chasm, the polling suggests, December, much ink has been is between Business on the one spilled by commentators on the hand and Conservative Voters on

different types of Conservative voter the other. While Business wants PORTLAND that Boris Johnson must hold onto. government to get out of the way – a majority of Conservative The argument supposedly goes Voters across the board want the that voters in Leave supporting Government to tax more, spend seats like Bolsover – that went Tory more and intervene more. for the first time last year – want a more muscular and interventionist Beyond the slogans and soundbites, government. next week’s Budget will offer the first set of real clues on which side Meanwhile voters in Remain of the argument Boris Johnson’s supporting seats like Beaconsfield – Government chooses to fall down that the Tories clung onto because on. But looking to a five year of fear of the alternative – want a horizon, the tide of public opinion more ‘traditional’ Tory government towards a more interventionist that backs business and prioritises Government is one that business laissez-faire economics. leaders cannot afford to ignore. It’s a neat enough theory but bears Business can exert influence in little resemblance with how most many ways but voters hold the voters today view politics. ultimate sanction for a politician at the ballot box. New polling by Portland, released today on the eve of the 2020 The strategic dilemma that every Spring Budget, shows there is far business will have to grapple more unanimity amongst both with is whether to contest this sets of Conservative voters than argument, concede it – or find commonly supposed. some level of compromise. By NICK HARGRAVE Partner and Head of SPARC – Portland’s dedicated research & strategy unit

The polling in detail: In Portland’s poll we surveyed 1,500 people between 28th Feb - 1st The key battle ahead of Mar 2020 from three distinct groups: the Budget isn’t Bolsover • 500 senior business decision makers in large companies v Beaconsfield…it’s • 500 Conservative voters in Remain supporting constituencies Voters v Business • 500 Conservative voters in Leave supporting constituencies PORTLAND PORTLAND 04 07 | Conservative voters are twice as likely to believe that the government should intervene more in the economy than less – the opposite of business decision makers. Conservative voters see a perceived lack of government spending on Believe the government should intervene more… public services as a top concern – but business decision makers are

much more worried about the uncertainty caused by Brexit. PORTLAND

Lack of government spending on public services… 49% 47% 18% 43% 39% 24% Of 2019 Conservatives Of 2019 Conservatives in Of business in Leave seats Remain seats decision makers Leave voters Remain voters Business decision makers

A majority of Conservative voters are comfortable with tax rises for those earning over £80,000 – in contrast to business decision makers. of business decision makers were most concerned Those who earn over £80,000 a year should pay more in taxes… about the uncertainty caused by Brexit, as 67% opposed to spending on public services.

59% 53% 39%

50 per cent of business decision makers believe that the Government should not take measures to reduce low skill immigration – a view not shared by 2019 Leave and Remain Of 2019 Conservatives Of 2019 Conservatives in Of business Conservative voters. in Leave seats Remain seats decision makers

The Government should not take measures to reduce low skill immigration…

A clear majority of Conservatives from across the country favour investment in areas that haven't received it before, while business leaders prioritise investment that leads to the highest returns. Agree that government investment should go to areas of the country that had not received it before… 15% 33% 50%

Of 2019 Conservatives in Of 2019 Conservatives in Of business decision Leave seats Remain seats makers 60% 59% 45%

Contact: [email protected] for any questions, full data Of 2019 Conservatives in Of 2019 Conservatives in Of business decision tables and further details of the methodology. Leave seats Remain seats makers PORTLAND PORTLAND 06 09 |

towns and larger cities, where the marginal investment and then – crucially – making sure pound of public investment provides the most that every corner of the country benefits, not PORTLAND PORTLAND economic bang for the taxpayer’s buck. It’s in just Dublin. For the UK, not only would that the places that have the least, many of which involve making sure we have low Corporation have been in decline for decades, and where Tax rates and rank more highly on ease of doing investment appears – according to the Green business, it would also involve working closely Book’s cold, remorseless logic – to generate the with every LEP (or equivalent) in the UK to lowest return on investment. make sure the forgotten towns of Britain see tangible results. This is the exquisite balance that the Chancellor has to strike: how to reinvigorate a national We know the Chancellor is intending a massive economy where productivity has barely infrastructure spree, and that is important too. By improved for a decade and where the new Just the sight of seeing a crane in situ gives LORD JAMES O’SHAUGHNESSY norm of annual growth seems to be less than 2 people confidence that something positive Member of Portland’s Advisory Council, former Director of per cent, while engaging in a rebalancing – or is happening to their area, but what is really Policy for David Cameron and Parliamentary Under-Secretary levelling up, if you prefer – of economic activity needed is a commitment to provide the kind of of State in the Department of Health and Social Care towards those who need it most. connectivity – physical and digital – that you would find in places like Germany and Japan. The Treasury has always been suspicious of such redistributive ideas. It has never liked enterprise Finally, the Chancellor should be looking zones, originally created in the 1980s, and has to address Britain’s chronic skills shortages, been slow to embrace the freeports proposal for and this is where business can make the most the same reason. Treasury orthodoxy argues that difference. The politics of the UK in 2020 mean all these programmes do is spread economic that immigration will be tightly controlled post- The new political and activity around rather than generate growth, and Brexit, even if the rules will be relaxed for a so they don’t repay the tax breaks they cost. To small number of the ‘brightest and best’. Many economic imperatives which the answer might well be “Yes, so what?”. in business are concerned about this – the care Research I carried out for Onward last year industry and agriculture, to name just two – but Rishi Sunak has more to worry about than most cities and their suburbs. man, Worcester showed that the public are prepared to sacrifice the truth is we have more than enough domestic new Chancellors. Not only was he thrust into woman, Mondeo man – these archetypes economic growth for a fairer distribution of the capability to meet our needs. The problem is the role – and his predecessor’s half-developed speak to an upwardly mobile kind of voter spoils, and one might assume that this is even that 5 million adults are illiterate and only one- plans – with just days before a Budget, but he who was attracted to the aspirational politics more the case if the losers are people living in in-four have acceptable levels of numeracy, and also has to contend with a No.10 operation of Thatcher, Blair and Cameron. This fitted London. But these are hard arguments for pro- all the while artificial intelligence is disrupting that is as powerful and interventionist as any neatly with the economic drivers of Britain’s business Tories to stomach, so how might they the labour market at an increasing pace. The since ’s heyday and without the renewal – the cities and their hinterlands, square the circle? answer to our skills challenge lies primarily on our doorstep, and it is concentrated in the places countervailing force that Gordon Brown had and the service economy. This is where the For inspiration the Chancellor should look to that are now the most politically contested. assembled. And, of course, the near-term productivity gains could be made, growth and the Irish Development Agency. By pursuing a If business wants to help the new Chancellor economic impacts of the coronavirus pandemic jobs generated, and elections won. Politics and highly-aligned (from the Taoiseach downwards), to bridge the gap between his economic are still to be determined. If that wasn't enough, economics in perfect synchronicity. activist trade policy over 60 years, it has been he is being forced to deal with a highly complex imperatives and his political masters, there is no How different things are now. The politics of the incredibly successful in bringing in foreign direct structural issue in our political economy which better place to focus. 2019 General Election was, more than anything, is that, for the first time in 40 years, the politics about the completion of the democratic process and the economics of Britain’s future seem to unleashed in the 2016 referendum that gave point in different directions. voice to Britain’s disenchanted citizens. What do I mean by this? Since the early 80s, For the first time in 40 years, the politics and the That means that the politics of Britain is no elections have been decided by the votes of longer where the Treasury wants it to be. It isn’t economics of Britain’s future seem to point in a few hundred thousand people living in the in London and the South East, the university different directions. PORTLAND PORTLAND 08 11 | Delivering from the centre: the new policymaking process PORTLAND

A critical question for the new these choices he will need to coordinate administration to address has been how between the differing fiscal views of his to translate its ambition for the country to advisers to decide on his priorities and delivery across Government and tangible approach in Budget. However, with a new outcomes for its new electoral coalition. Chancellor, large electoral victory and a strong centre, the Prime Minister’s team are Centralisation of power over the in a position to deliver the Budget they want. policymaking process has been an identifiable trend – but the continuing To ensure the Prime Minister’s views are By role of individual departments and their represented in the Budget we have seen a ELLIE LYONS Ministers should not be understated. new joint No. 10 and No. 11 Special Adviser Director, former Special Adviser and adviser to team established. This is a shift from past Boris Johnson’s leadership campaign. The resignation of former Chancellor administrations where the Chancellor had Sajid Javid and the appointment of his their own advisers. This team largely reports replacement Rishi Sunak marked an into No. 10 and makes sure that the centre’s opportunity for No. 10 to increase its wishes are prioritised in the Treasury. And, influence over the Treasury. This has given whilst the Treasury machine will still be the Prime Minister the chance to have taking day-to-day spending decisions that more direct control over the fiscal rules, tend not to require direct political attention, spending decisions and upcoming Budget this Special Adviser team can focus on investing in the NHS, tackling crime and eyes and ears in departments tasked with than his predecessors who are usually more ensuring the upcoming Budget aligns with levelling-up the country. And, in the run-up directing policy, managing budgets, ensuring constrained by their Chancellor’s priorities. Downing Street’s ambitions. to Budget, the Policy Unit has been working the day-to-day running of Government and It has placed the Prime Minister and his top hand-in-glove with civil servants and the driving policy implementation. team of advisers in a unique position to take The Policy Unit within No. 10 has long joint No. 10-No. 11 Special Adviser team to control over both the policy and spending acted as a vehicle for delivering the Prime When looking at influence within this shape some of the policy we can expect to agenda of this administration. Minister’s policy objectives, coordinating administration and where policy is originated, see next week. across Departmental civil servants and understanding the Prime Minister and his With this increased influence, the Prime Special Advisers to provide advice and But, whilst we can expect the Budget to be top team’s priorities is important, they want Minister faces difficult decisions around policy moments. Now, with the move to driven more directly from No. 10 than past to show progress against his pledges to the policy and spending priorities. He will take more centralised control over policy, administrations, this should not detract country and particularly the new electoral need to decide if he wants to focus on the the influence and importance of the No. 10 from the fact that Departments and their coalition. But, this is not the end of the new northern electorate, delivering against policy unit has increased. fiscal and policy priorities still hold huge power and importance of departments. The manifesto commitments, taking difficult sway. Governing and directing policy Ministers and advisers across government decisions early in the electoral cycle, or a They are in a position to shape the Prime across the machinery of government and will continue to hold significant sway over business-as-usual Budget. Whilst making Minister’s key domestic objectives, including complex structures is not an easy landscape policy and delivery. Beyond the increased to navigate. Even with No. 10’s move power and influence at the centre, Ministers to increase their influence, mastering a and departments remain key in making sure complete grasp on everything that Whitehall this administration delivers for their new does is a difficult feat. Ministers and Special electorate, for both Bolsover and Beaconsfield. Now, with the move to take more centralised Adviser teams remain crucial – they are the control over policy, the influence and importance of the No. 10 policy unit has increased. PORTLAND PORTLAND 10 13 |

The contents of the Budget – and how it is received

– will be clarifying for the Labour Party on the PORTLAND scale of the challenge to win back the voters who were lost to Boris’s election-winning coalition.

electoral coalition. McDonnell, for his part, the government to account and this time – to has set out tests in advance for the Budget to get the credit for this from voters. meet. These are on fair taxation; investment An urgent issue for the to end austerity; on the climate emergency leadership will be how to win back those and a social emergency he says is due to a ‘Red Wall’ voters that deserted them. The chronic lack of investment in public services local and mayoral elections in May will be an By by the Government. The Party has published early test for the new leader. Reuniting the new analysis showing what they claim is a ANOUSKA GREGOREK party is seen as a priority and many of the £194bn hole in Government infrastructure Senior Consultant, former Labour Party official and Head of Policy proposals set out by the Labour leadership Development under Jeremy Corbyn. spending that has massively weakened the candidates include measures to tackle UK’s flood defences, and left bus services issues internally such as: changes to party and the rail network fragmented – issues that committees; addressing Anti-Semitism; as are felt across the country, including in those well as to look at how to broaden appeal to key lost seats. voters beyond London and urban centres. How will a new Leader approach building But other wounds must be healed too. New leader, new path their own election-winning formula? Since the election, much has been made of for Labour? All three remaining hopefuls for the Labour how much Brexit, and Labour’s seemingly leadership have set out some detail on convoluted position on it was (or was not) the direction of travel if they should win. to blame for the loss of seats for the party However, there has been a disciplined focus in December. Many former Labour voters, This Budget will be the first opportunity for That Labour’s response to the Budget next on who the electorate is in this leadership including many of those in the so-called the Prime Minister and his new Chancellor to week will come from its outgoing duo of contest – it is not the wider country – and Red Wall seats, saw it as a final straw, deliver some substance for voters who backed Jeremy Corbyn and John McDonnell says none of the candidates have strayed too far symptomatic of how much the party didn’t their Party at the election – and show they were something. It’s been almost three months from the previous manifesto’s economic listen to them, and had coalesced around the right to do so. since Labour’s worst election defeat in 84 platform. Even frontrunner Starmer, seen as middle-class city-dweller vote. Many of these years and the lengthy timetable agreed by its Front of mind for the Prime Minister and the most centrist of the trio, has committed voters will have held their nose and voted National Executive Committee means there Chancellor will be the realisation that their to support the Green New Deal, to common Labour in 2017 but found themselves unable is still a month to go until its contest for a long-term majority is dependent on delivering ownership of rail, mail, energy and water, to to do so this time. new leader is over. This has been criticised for – in particular – on the expectations of those increase income tax for the top 5 per cent of compounding the party’s problems with its For the new Leader – whoever that may be Labour voters in the ‘Red Wall’ who lent the earners and reverse cuts in corporation tax. focus being elsewhere when there have been – there is much housekeeping to do and to Tories their vote. many opportunities for an effective Opposition Whichever vision wins out, it’s worth do quickly. If the Party is to exert influence The contents of the Budget – and how it is to hold to account a government that no-one remembering that some of Corbyn’s ideas and win power, it needs a strategic response received – will be clarifying for the Labour could say was without its issues. did chime with the public and contributed to Boris’ formidable capture of seats from Party on the scale of the challenge to win back to a shift in the Government’s agenda in key Beaconsfield to Bolsover. The coming months Labour’s response to this Budget is unlikely to the voters who were lost to Boris’s election- areas, such as the energy price cap and water will demonstrate whether the broader Party be strategic – or tell us much about how they winning coalition. companies being told to slash bills. Labour’s really has moved on from Corbynism. intend to go about building their own winning new team will be keen to continue to hold PORTLAND PORTLAND 12 LONDON • WASHINGTON,DC • NAIROBI • DOHA • SINGAPORE

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