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The outcry from business leaders at the market intervention in the Conservative manifesto triggered a charge of being ‘anti-business’. This is far too simplistic and misses three main drivers of business polices in the manifestos: markets, industrial strategy and Brexit. The first charts new ground but reflects changes some business leaders have not woken up to; the second firmly offers consensus in the manifestos and the third presents the biggest divergence across the parties and perhaps challenge.
There is undoubtedly a shift in past orthodoxies. May’s manifesto hones in on corporate reform such as bringing in votes on executive pay and changing fiduciary duties so companies reflect wider interests including employees. Changes are also likely for private companies. Proposed new takeover rules would gives more ability to block negative consequences, while there is a renewed focus on consumers with regulators given more remit to protect the vulnerable and specific market interventions; see our energy section.
Labour similarly eyes corporate reform with gender and equal pay audits, pay ratios enforced in public contracts and a levy on companies with very high executive pay, while their takeover code would protect workers and pensioners.
The Lib Dems share executive pay votes and widening fiduciary duties. Under the Lib Dems workers would be on remuneration committees, a right given to employees of a PLC to be represented on the board, and German style two-tier boards permitted which include employees. Labour’s market intervention is heavy on public ownership; including rail, energy, and water and Royal Mail.
The coalescence on corporate reform signals a shift that corporate failure has been living on borrowed time Purposeful businesses that embed value are to be championed, an agenda ResPublica supports. The missed opportunity in the manifestos is to push this agenda further, embedding the outcomes all the parties desire through supporting different business models. The Conservatives offer a brief single mention of mutualising public services, while Labour wants to double the co-operative sector of the economy and enable energy co-operatives but that begs the question: why seek nationalizing Royal Mail, water and railways and not pursue a mutual option?
This election is a moment to finally build a consensus on the country’s industrial approach – the failure to do so has held back our economic success. All three manifestos back an industrial strategy but it is a cornerstone of the Conservative and Labour plans. Building consensus means new governments don’t rip up policies and institutions. Whatever Government is elected a shared industrial approach means working with parts of the UK, including the administrations in Scotland, Wales and Northern Ireland and elected mayors which are not necessary of the same political hue.
This is a golden opportunity to build an industrial strategy that delivers the certainty and long-term approach, backed up by institutions, that gives business confidence and unlocks investment. This is an approach ResPublica champions.
While there are differences within the manifestos on business approaches, such as significantly on the rates of corporation tax (higher for Labour, lower for Conservatives), key areas of alignment in the manifestos underpinning the industrial strategy include:
Innovation: Both the Tories and Labour will meet the OECD target of three per cent of GDP on R&D. The Lib Dems will double R&D spending in the long-term.
LEPs: Local Enterprise Partnerships survive the manifestos, a welcome example of maintaining institutions that underpin industrial approaches. As ResPublica has argued, LEPs need more powers and as all parties prioritise regional growth this should happen. The Lib Dems want LEPs to support the development of innovation clusters and the Conservatives will put LEPs on a statutory footing as well as enable them to lead local industrial strategies aligned with the national strategy.
Local finance: All parties focus on regional financial institutions.The Tories commit to opening new offices of the British Business Bank in six parts of the UK. Labour would support a network of regional development banks that support local growth, small businesses and co-ops. The Lib Dems would require major banks to fund a new local banking sector dedicated to local SMEs. A question is how are these financial institutions connected to LEPs and the industrial strategy?
Procurement: All see procurement used actively in the industrial strategy – the Lib Dems and Labour for underpinning local growth and Tories to drive small business development
Business rates: A commitment to reform the broken business rate system is offered by all, and further commitments to reduce the burden on small businesses (Lib Dems) and exempting investment in plant and machinery (Labour).
Trade: Labour would create a network of regional trade and investment champions and regional representation on overseas trade missions. The Tories would create a network of Trade Commissioners to head nine new regional overseas posts to lead export promotion, investment and trade policy overseas.
Digital: Digital features significantly in the Conservative manifesto warranting a whole chapter which recognises the huge transformative power of digital advances. Labour and the Lib Dems are supportive but fail to capture the same focus.
The biggest divergence for business policy is on Brexit. The Conservatives commit to leaving the customs union and single market and adopting WTO rules ahead of any new agreement with the EU which as implications for many sectors. Labour gives a whole chapter to Brexit, committing to retaining membership of the single market and customs union and protections to specific sectors. The Liberal Democrats make Brexit centre stage with a campaign against ‘hard Brexit’ and a similar commitment to remain in the single market and customs union as well as many EU programmes. They will also hold a second referendum on the deal.
The removal from the Conservative manifesto of decarbonising energy as a guiding strategic objective and a focus instead on supply-side and consumer pricing raises questions of a May administration’s willingness or ability to meet the UK’s legally binding carbon budgets. Specific references to growing the UK’s market share in offshore wind is nevertheless a welcome Tory nod to future energy requirements and a key technology Labour fails to mention in its manifesto. Special Conservative attention to shale gas at the expense of renewables and nuclear power however is at odds with the Labour/Lib Dem positions which both pledge to find 60% of energy demand through clean or zero-carbon sources by 2030.
On energy pricing, May’s introduction of a ‘safeguard tariff cap’ for customers on the worst value energy deals identifies the right problem but is unlikely to invoke the systemic change desired. Labour’s equivalent response of a £1,000 cap on household energy bills mean that we enter the short campaign with unlikely cross-party consensus on the need for at least some degree of state intervention in energy retail. Yet while intervention of this nature might help consumers in the short-run, it is likely to restrict market competition and customer choice which in turn could inflate costs in the long run. Further thinking is required to ensure well-intentioned Government interference is not ultimately counter-productive.
Conservative manifesto commitments to progress High Speed 2, Northern Powerhouse Rail and Heathrow Airport expansion are reassurance for flagship projects that have in the past struggled to attract critical support. The green light from Labour for all these blueprints bar Heathrow expansion (a policy heavily opposed in the Lib Dem manifesto) reflects cross-party agreement on the need to drive through long-planned big ticket infrastructure. Beyond a promise to invest £40bn on transport by 2020, with caveats to ensure funding is not disproportionately concentrated in London, the Tories shy away from providing closer transport policy detail. Labour on the other hand offers a comprehensive rail package with the re-opening of branch lines progress, Crossrail 2, East-West Rail, a second Brighton Main Line and South-West rail electrification.
Both the Conservative and Labour manifesto promise to deliver and fund new rail services and extra capacity although Labour argue this is best achieved through re-nationalising the railways. All parties make reference to the need to boost uptake in ultra-low carbon emission vehicles with the Conservatives allocating £600 million to the cause, Labour calling for support for the sector and the Lib Dems banning sale of all diesel cars by 2025. What is notably missing from all three manifestoes is, as we advocate in our report Ticket to Ride, an overarching strategy that recognises that urbanisation and future and rising connectivity demands will require a joined-up approach to transport planning.
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