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Critical Friends

Labour should be careful about being too hostile to the private sector, warns Stephen Beer

The dotcom boom at the beginning of this century saw companies jump onto the internet bandwagon, many issuing shares backed by optimistic business plans and promoted by investment banks. Billions of pounds were wiped out as the shares plummeted. The crash in share valuations revealed questionable accounting and management practices and sharply reduced the value of pension funds. Recent travails of companies linked to private finance initiatives and the transport system have revealed the limits of business expertise, yet executive pay remains out of touch with reality.

It is no surprise that anti-business rhetoric is being heard once more in the Labour movement. Yet Labour must cease oscillating between hostility to business and uncritical support. We need a more stable relationship.

A major achievement of the modernisation of Labour was the transformation of our economic and business policy. It is easy to forget that business and the City saw us as not just incompetent but plain ignorant with regard to economic affairs. Our trade and industry policy was considered a joke. Only ten years ago, Labour supporters who worked in the City often had to keep their allegiance quiet for fear of their jobs. The same was true for parts of the business community.

Of course, this worked the other way. To confess to being a businessperson in the Labour party was, for years, to invite suspicion and be regarded as having ‘sold out’. The low point in the party’s relationship with business must surely have been the 1983 election and the battles on the left twenty years ago, though the 1970s had also been terrible. Labour frontbenchers often sought the quiet advice of friendly businesspeople such as those in the Labour Finance and Industry Group, whose members were often unable to reveal their loyalties.

I recall a Labour activist telling me years ago that many of the world’s problems would be solved if the financial centres in London, New York and Frankfurt were ‘nuked’. I told him that I worked in the City – as did thousands of other voters who earned their living working in a range of jobs connected with the financial sector and including cleaners, shop workers and caterers. I wondered how he expected us to pay for better public services without generating wealth and jobs in the commercial sector. Digby Jones, director general of the CBI, claimed in a recent Tribune article that many in the Labour movement are still prejudiced against business.

However, we have now embraced business as never before. Sound economic management has produced years of steady growth and Bank of England independence has introduced stability to interest rate policy. Both are essential for long-term investment. Furthermore, in addition to help for small firms and tax breaks for research and development, businesses are providing services for the public sector.

In turn, business has warmed considerably towards Labour. A simple test is the number of stands at the annual conference over the years. Business has proved eager to sponsor our events and business people keen to donate. However, companies are fair weather friends. Changes in the ratio of stands between Labour and Tory conferences will be an indicator of when business begins to hedge its bets. We need still more MPs and ministers who understand how business works.

We also need civil servants and local government officials to understand the commercial sector. Local government is still regarded as a soft touch when it comes to negotiating commercial contracts, including PFI deals.

We should support business while at the same time being critical of bad practice. Some of the most ardent supporters of the private sector are City pension fund managers. Yet they are often also the most critical, having seen both business failure and success. We should learn from them. To be critical of business is not to be anti-business.

Our provision of a stable, pro-investment and growing economy enables us to challenge business where necessary. Our mandate is to govern for all the people, not just for one section. But we rely on good business: our public services and many pensions depend upon it. It is also a natural expression of human creativity. It is in our interest to cherish the private sector while making it work for all.

This article previously appeared on the Progress Online web site.
Stephen Beer, Saturday 9 October 2004

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