Getting the business done: after the CBI
If the main forum and voice of British business dies, what comes afterwards, and how does the government respond?
Earlier in April, in my weekly City AM column, I wrote, just after the dismissal of the director general of the CBI, Tony Danker, that it might not just be one individual career which has juddered to a halt. It might turn out, I thought, that the Confederation of British Industry itself, the lapel-smoothing titan of British business for nearly 60 years, was facing a final farewell. I sensed a mood of panic and despair at the CBI, a hurried attempt to make a burnt offering in the form of its Belfast-born former head, and even as the organisation welcomed back its sleek, crisply spoken ex-chief economist, Rain Newton-Smith, as director general, there were mutterings that an insider was not the right person for the job, and it might all be too late. Newton-Smith only left the CBI last month, to spend a few weeks, as it transpired, as Barclays managing director for strategy and policy, sustainability and ESG.
A half-formed suspicion has now become mainstream thinking. Freddie Hayward has just written in The New Statesman that support for the CBI is bleeding away, that it has had the doors to Whitehall closed in its face (at least temporarily) and the chancellor of the Exchequer himself, Jeremy Hunt, has said that there is “no point” in dealing with the organisation. He argues, I think correctly, that the CBI’s current agonies leave a vacuum between government and business, and suggests that this space must be filled by one of three things: a government-organised forum, a heavily reformed CBI or a “right-wing lobbying group”. With some of this I agree too, but I see the options for progress rather differently.
I am more sceptical than I was a fortnight ago of the prospect of repairing, renovating or re-imagining the CBI. The reputational damage which it has suffered over accusations of very serious misconduct and the confused and fitful handling of Danker’s suspension and dismissal. But I think there is a deeper issue: the CBI should be allowed a merciful death, because it no longer performs the role for which it was designed.
The Confederation of British Industry was founded in 1965, in the early days of the first Wilson government. It merged three smaller organisations: the Federation of British Industries, an employers’ association which had grown out of the major metal-bashing enterprises of the Midlands and was run for much of its early life by the Ulsterman and former diplomat Sir Roland Nugent; the British Employers’ Confederation, a smaller organisation which had focused on industrial and labour relations; and the National Association of British Manufacturers, another First World War innovation which represented particularly small and medium-sized concerns.
The idea of the new CBI was that it would be a strong, effective and unified voice for all business, particularly for employers, and the world into which it was born had an enormous effect on how it worked and what was expected of it. It was created by Royal Charter in July 1965, less than a year into the Labour government, and Harold Wilson had come (narrowly) to power in an atmosphere of excitement and innovation. The new prime minister had created a Ministry of Technology, the purpose of which, according to the Labour Party’s 1964 election manifesto, “to guide and stimulate a major national effort to bring advanced technology and new processes into the industry”. It brought together the Ministry of Aviation, the Ministry of Power and the Department of Scientific and Industrial Research (part of Quintin Hogg’s Department of Education and Science).
The first minister in charge of this very Wilsonian department was Frank Cousins, the general secretary of the hulking Transport and General Workers’ Union, and the government propelled the Member for Nuneaton, Frank Bowles, into the House of Lords to force a by-election which Cousins duly won by a relatively comfortable margin of 5,000 votes. Cousins had been an influential supporter of Wilson when he had secured the leadership of the Labour Party in 1963, and the inclusion of the head of one the UK’s biggest trades’ unions was a distinct signal that the tectonic plates were moving in industrial and innovation policy. Another change was the creation of the Department of Economic Affairs, an attempt by Wilson to create a centralising, dirigiste body in Whitehall to counterbalance the power of the Treasury (and, helpfully, to find a berth for his deputy leader, the intellectually sharp but wayward and increasingly drunk George Brown).
The intention was that the DEA would look after the long-term planning of the economy from the centre, while the Treasury undertook financial management and revenue-raising under the chancellor, James Callaghan. As part of this function, the DEA undertook the preparation of a National Plan, an almost-stereotypically 1960s document which aimed to create targets and strategy for industry, emphasising cooperation and realistic, long-term forecasting. The document was published in the summer of 1965, around the same time as the establishment of the CBI, and both organisations fitted into Wilson’s larger overall plan which foresaw prosperity and productivity coming from rational, deliberate, consensus-driven negotiations between the interested parties, namely the government, the employers and the trades unions. It was the zenith of the post-war political settlement, and an eloquent articulation of the progressive belief that the key to economic success was getting everyone round a table and taking all their points of view into account.
This whole conceptualisation of the economy seems very dated now. In the CBI’s first decade, the underlying assumptions on which it was based would face a series of challenges which were seismic in scale: the sterling crisis of 1967, the failure of 1969’s In Place of Strife to change union relations with government, Heath’s economic U-turn of 1972, the Three-Day Week. The critique offered by monetarists steeped in the Austrian School and inspired by the University of Chicago seemed to offer a plausible alternative which Margaret Thatcher would champion in the Conservative Party after 1975; but more eloquent, perhaps, was simply the readiness to listen to other diagnoses and potential cures. Thatcher would carry forward the gonfalon in government from May 1979, but it was the Labour government of 1974-79, and its intellectual thug of a chancellor, Denis Healey, which had begun to implement parts of a monetarist programme such as focusing on the money supply to control inflation.
In 1965, the big-bloc approach to economic policy was welcoming to, perhaps even required, something like the CBI: government, unions, business. But 60 years on, the case is much less persuasive. The idea that one organisation can plausibly, authentically and accurately speak for 190,000 businesses, from long-standing major retailers to the young, agile, tech start-ups, is a hard one to swallow, and there must be a danger that, in the absence of a meaningful way of communicating its members’ views, there emerges a groupthink with its own internal momentum. The more we rely on a notional “industry” view, and the less we are able to analyse and translate what businesses across the economy are doing and what they need. While the private sector is not benefited by fragmentation into single-industry pressure groups, and a platform for showing connections and interdependence between sectors has value, a monolithic platform labelled simply “business”, while its weight may give it influence, becomes more and more detached from the real world and the day-to-day concerns of many of its members, especially where those may be contradictory.
The CBI’s current travails may, then, in fact be timely: shocking on an individual level, but in broader terms perhaps prompting the business community to think again about the way it promotes and projects itself. Where do we go from here? If reform is unlikely and undesirable, Freddie Hayward’s remaining choices are a government-organised forum or a “right-wing lobby group”. I dispute the underlying assumption of the second offering: the idea that business is an issue of “the right” is now a hopelessly simplistic one, quite apart from relying on an imagination of politics on a simple left-right spectrum, which I think is falling away as its contradictions become more apparent.
Private enterprise wholly embraced Tony Blair’s Labour government after 1997 and saw rational, open interlocutors; it saw much virtue in Gordon Brown, especially for his role in mitigating the financial crisis; and it was spooked by the Conservative Party’s Brexit tendency, endorsing Remain and feeling irked by Boris Johnson’s throwaway comment of “Fuck business”. What is striking at the moment, and must concern even a prime minister with an MBA and a track record in international finance, is the impression business currently gives of being agnostic on the result of the next general election. Private enterprise is no longer solely the preserve of red-faced, pinstriped plutocrats with deep pockets for political allies; a hundred different motivations are at play, and I suspect most successful businessmen would no longer waste their money on trying to bribe or otherwise induce politicians. It is certainly a long time since Michael Heseltine was able to make the shadow chancellor, John Smith, squirm by detailing the extent to which the Labour Treasury team was courting the City of London in what was dubbed the “Prawn Cocktail Offensive”. For Smith’s eventual successor, the current shadow chancellor Rachel Reeves (a former economist at the Bank of England, remember), such networking is simple good sense.
This seems to leave us with Hayward’s option three, a government-convened forum. I sound an early note of caution: governments are quick to announce and plan these sorts of organisations, attracted by the power of association with successful business leaders, and they have proliferated: David Cameron set up a business advisory group in 2010, which Theresa May then abolished in 2016; a year later May reconstituted a network of five business councils; in 2021 Boris Johnson rebranded the business council as the Build Back Better Council, explicitly focused on post-Brexit growth and prosperity; later that year it had to be saved by Downing Street officials after Johnson’s bizarre and poorly received speech to the CBI; at the beginning of 2022 it was given a new hue as it switched its emphasis to the “green industrial revolution”; and now there are fears it may be scrapped again and accusations that the prime minister is fixated with the tech sector at the expense of wider business and industry.
The truth is that, despite convening power being one of its most powerful weapons, government is just not very good at this. It’s not just Downing Street: the Digital Economy Council, which is supposed to advice government in general and the relevant department (formerly DCMS, now DSIT) in particular, has been criticised for some years for meeting infrequently and proving somewhat lacklustre when it has met. It is easy to speak the language of engagement and advice, but ministers and officials often lose some of their enthusiasm if the messages they are receiving do not conform to what they already believe and are implementing. In short, if the CBI is pining for the fjords, the business community should be wary of relying on this, or any, government for proactivity on the issue.
We are, by most reliable estimates, around 18 months from a general election, and this is a critical time for the policy brains in both major parties, as well as for the business community. The Conservatives, for whom victory seems a major challenge, of one which is becoming slightly less implausible, are showing the inevitable wear and tear of four prime ministers over 13 years. The party is trying to package Rishi Sunak, who only became premier in October 2022, as a fresh start, an opportunity to recalibrate the Conservative offering and—they must fervently hope—put the most egregious misdeeds of previous régimes behind them. But these are not easy tasks. There is fatigue sunk deep into the bones of Whitehall now, unforced errors are creeping into the government’s game, the atmosphere crackles with tired irritation, and the relationship between ministers and civil servants is under uncomfortable strain. When a party has been in power for more than a decade, there is a substantial track record which has to be defended, and any new proposals risk the response of “Why did you wait till now?” So the government needs both friends and ideas when it comes to business, and this is the worst possible time for the CBI to be locked out.
If we strip everything right back to the stark probabilities, Labour are likely to win next year’s general election, Sir Keir Starmer is likely to become prime minister and a Labour MP will take over the Department for Business and Trade (the current shadow is the amiable Mackem lawyer Jonathan Reynolds, regarded as a safe pair of hands). The opposition is beginning to move to an election footing, and in February Sir Keir Starmer set out Labour’s five “missions” for government to form a framework for his manifesto. They are fairly unremarkable ideas and lean heavily on the “what” rather than the “how”, so the party should be receptive to discussion and debate, ready to take advice on how these pledges can be honoured. Again, the business community should be cleaving closely to Starmer and his team.
When the prime minister made machinery of government changes in February, he merged parts of the Department for Business, Energy and Industrial Strategy with most of the Department for International Trade, creating an ostensibly new Department for Business and Trade. For all its apparent novelty, we have somehow made our way back to an approximation of the status quo of 1983, and it is hard to see major differences between DBT now and the Department of Trade and Industry which Cecil Parkinson stitched together after Thatcher’s second election victory.
To lead the new department, Sunak chose Kemi Badenoch, the 43-year-old Member for Saffron Walden who has dazzled elements of the party’s base with her plain-spoken views on gender, sexual orientation and race. The prime minister seems not to know whether Badenoch is a serious threat to his leadership or a potential resource of considerable ability as the hurly-burly of an election nears. Born to middle-class Yoruba parents and growing up partly in Nigeria, Badenoch trained in IT systems then law, and only received her first ministerial post four years ago, but she is fearless in combat and has a sturdy, if not dainty, intellect. It would be understandable if she were already thinking of the repercussions of a Conservative election defeat and where that might place her in terms of the leadership, but I hope that doesn’t occupy too much of her mental and emotional bandwidth: because there is an opportunity here, for her and the prime minister, if they have the energy and imagination to take it.
Rishi Sunak has been prime minister for nearly six months now, so even the most charitable observer must admit that the window of novelty has all but closed. However, I think in this particular regard it can be extended because of the unexpected existential spasms going through the CBI, which the government could hardly have been expected to predict. It is said, perfectly plausibly, that the business community has warmed mildly to Sunak after his predecessors’ tenures, hardly surprising given the prime minister’s background in finance and his corporate training. Last month’s budget was cautiously well received: the anticipated fall in inflation will keep prices more manageable, the extension of the energy price guarantee gives more certainty, and the chancellor’s intention to tackle the participation gap should eventually bear fruit.
But it is nowhere near enough for the private sector to find the prime minister broadly tolerable: he and his party must have a compelling offer which fits into a wider policy framework and does not privilege business at the cost of the rest of the economy. At the moment the feeling is that businesses are “agnostic”, to use one reporter’s words, as to who would win the next election, and will be calculating the advantages and disadvantages by their own standards of one party or another winning. But if the Conservatives want to win the next election, and be able to use that mandate to achieve things, large parts of business need to be won back over more emphatically.
First, the script. Economic policy has endured a bumpy ride since the onset of the Covid-19 pandemic, or Brexit, or austerity, or the global financial crisis. (Some will no doubt trace the uncertainties back earlier to the South Sea Bubble or the Great Debasement.) Whether the state has handled these developments well or badly is not the point here: what matters is that crisis after crisis has forced the government to act quickly and decisively, and policy may at times have been unproven or hypothetical. In turn, this has made it more difficult for either major party, even though they have been undergoing significant changes, to develop a coherent and internally consistent economic policy in tune with their more foundational principles of belief. This has been particularly obvious in the Conservative Party, where the generally free-market legacy of Thatcher has been confused by populist protectionism, industrial chauvinism and state intervention. The Covid-19 pandemic, for example, saw Rishi Sunak, then chancellor of the Exchequer, introduce the Coronavirus Job Retention Scheme, commonly known as “furlough”, to allow companies to continue paying their workforce while unable to operate; Sunak was widely praised for his determination and timely intervention, but the final bill will be far north of £40 billion.
The government should take this opportunity to set out its economic philosophy in clear, unmistakeable terms, and to show how the Conservatives are distinguished from their opposition. A paean to the free market by the business and trade secretary would come naturally: Badenoch is a strong supporter of limiting the scope of the state, abolishing barriers to international trade and systematically and coherently reducing the tax burden. It would also be a heartening sign for realists like me if she could also make the argument that private sector economic activity is the fount of all our prosperity as a nation, and should be celebrated as a virtue. If we get economic policy right, it generates wealth for individuals and revenue for the government, and it is that revenue which allows the government to provide public benefits like education, healthcare and welfare. That intimate, inevitable connection between hard-nosed profit and the generosity of the state can be conveniently forgotten and should be hammered home.
This would lead on neatly, were my hand guiding the drafting, to an acknowledgement that the economic landscape is changing at a fearsome rate which often catches out all but the wariest; this could be a nod to the impending doom of the CBI and one of the accusations levelled at it, that it tried to encompass the representation of too broad a coalition of interests, but there might also be room for a veiled mea culpa that the government has not always got every decision right in dealing with an evolving economy. The secretary of state might therefore invite business to engage with government to discuss how the country moves forward and aims to achieve the five priorities the prime minister set out in January, especially in terms of “growing the economy” (I can’t explain why but I really dislike that phrase: something about the use of “growing”, perhaps?).
Part of that engagement could involve trying to design a new representative body for industry, if that is what stakeholders want. Even if different sectors will often, perhaps mostly, prefer representation on a specialised basis, there are surely times when it will benefit the private sector to seek strength in numbers and explore common interests, just as it will be advantageous for the government to have a single interlocutor. The outcome may well be a more flexible series of interlocking groups, where an individual enterprise might belong to two or three different lobby groups and engages with them as the situation demands. This will present some challenges, but it ought not to be an impossible task for a 21st-century political system.
The bottom line is that I think the CBI is in genuine existential danger. It has taken a lot of fire—though one must admit that most of the serious damage has been done internally by the crew itself—and the immediately obvious harm may in itself be fatal; or it may uncover pre-existing but fatal weakness. It certainly seems implausible that anything recognisable as today’s CBI will be in place by the end of the summer. I suppose what I am encouraging the government and the private sector to do is make the choice which almost always mitigates damage in a crisis, but can sometime seem beyond possibility: seize the initiative. Take stock of where we are and think about how one would ideally move forward from here, rather than continuing to observe the shells fall until the cannonade is silent.
The president of the CBI is a forthright, frippery-free Scotsman, Brian McBride, who comes from a large Catholic family in the East End of Glasgow. He had a very eminent career in technology, including as CEO of Amazon UK, and, while some of the aggression may have worn off after nearly half a century, he retains the logical, calculating, intellectually robust manner of the Glasgow University Union (of which he was president). Perhaps a conversation between McBride and the equally forthright Badenoch would not be a bad starting point for this agenda.
It is said, proverbially, that oppositions don’t win elections, governments lose them. It would make a good contribution to a Conservative loss next year to sit back and watch the government’s institutional representative links with private enterprise implode and wait with mild curiosity to see what arises from the ashes. I suspect it would be less impressive than the phoenix of the classical world. There is precious little time to spare, but I keep emphasising that, without being madly overoptimistic, and while acknowledging the scale of the challenge and the slender odds of a victory, nothing is decided. So the government should continue to get on the front foot, make sure it is setting the agenda and choosing the field of battle, it should engage enthusiastically and innovatively, and it should take risks. Because there really is little to lose. It might seem a long shot, but, to borrow from Sherif Ali in David Lean’s epic Lawrence of Arabia, truly, for some men, nothing is written unless they write it. That should be pinned above the prime minister’s desk until polling day.