Ed Miliband has been urged by one of the left’s leading thinktanks to counter corporate hostility to Labour by softening his anti-business rhetoric and stressing the pro-enterprise parts of its economic programme.
A report by the Fabian Society calls on the opposition to publish a business charter outlining what firms could expect from a Labour government and say that it plans to work in coalition with the private sector. As part of a “big, comprehensive offer” to business, the Fabians say Labour should announce a “no surprises” approach that uses tougher regulation as a last resort.
The study, to be published at the thinktank’s new year conference on Saturday, says that instead of seeing markets as “socially destructive”, Miliband should show how they can be shaped to do good.
“But there are currently two major obstacles to this happening,” it says. “The first is relationships. Simply put, business doesn’t trust Labour. The second obstacle is perverse incentives. Short-termism is entrenched in parts of the British economy and damaging to our competitiveness. But maximising profit in the short term, rather than maximising value for the long term, is often a rational response to the institutional incentives that present themselves to business.
“So a Labour government would need to start by making it clear that it will take business to heart, not keep it at arm’s length. It then needs to focus its agenda on working with business to make it easier to do the right thing.”
After the failure of John Smith’s so-called “prawn cocktail offensive” in the City during the early 1990s, Tony Blair sought to build stronger links with business after he became Labour leader in 1994. But the relationship has cooled in recent years as Miliband has called for a different form of capitalism and announced plans for an energy price freeze and tougher curbs on the banks.
The Fabians said their report, titled “In It Together”, had been produced in light of the “persistent concerns” about Labour’s relationship with business and was designed to rebuild trust. This could be achieved by policies designed to show that Labour was serious about creating wealth.
The study says that if new regulations are necessary, Labour should try to secure the endorsement of the companies affected first. It also wants Miliband to appoint a business partnerships manager in his office with a comparable status to the trade union liaison officer, and for the Labour leader to start praising companies that do the right thing “rather than shaming those that don’t”.
A new Labour government should also re-establish the National Economic Council – set up in response to the financial crisis – to improve the coordination between Whitehall and business and develop a national strategy for sustainable economic growth, the Fabians say.
Ed Wallis, co-author of the report, said: “The financial crisis of 2008 provoked an outbreak of soul-searching about the way we do business. Yet much of our post-crash reality has strengthened the old rather than unleashed the new. As Britain moves out of recession and into recovery, our economic fundamentals remain essentially unchanged.
“We need a new way to do business in Britain, one that makes economic long-termism, public health, environmental sustainability and strong local communities integral to a profitable British business model.
“And there is a real challenge for Labour in doing so. While business likes Labour’s noises on skills and industrial policy, they’re worried by the rhetoric over markets. It doesn’t have to be this way. If Labour is going to make the changes it wants to as the next government, it needs a new partnership with business.”
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