26 November 2019

The party manifestos offer massively different solutions on whether the state or the market economy are best placed to deliver for society and the economy, argues Giles Wilkes. 

Party manifestos provide a wealth of subtle and not-so-subtle clues as to the different ways in which our would-be rulers see the world. When it comes to business policy, the emphasis should be on the not-so-subtle, as a little light word search can reveal.

Take the word “profit”: raised nine times in Labour’s document, and never once in a positive way. Roughly the same can be said for “market” – mentioned usually with good connotations by the Conservatives (except when it comes to housing, or the EU), nearly always negative with Labour. It is the same with “private” – a term of damnation for Labour, particularly when it comes to the privatisation of state services. 

The Liberal Democrats appear less ideological all round, but, alongside the Conservatives, more comfortable seeing business as a force for good (and not just “small business”, a phrase no politician is ever so foolhardy as to utter without praise). They are as happy to extol entrepreneurs as the Conservative party – mentioning them 13 times – while Labour does not even use the term.

The parties are more split on the merits of the market economy than any time since the 1970s

Does this textual analysis amount to much more than a policy-wonk’s parlour game? I maintain that it does. As we have argued before, it is not difficult to find agreement between the parties in terms of their broad objectives. All want to tackle the climate emergency, rebalance the economy towards ‘left-behind’ regions, invest more in infrastructure, and push the country to the scientific cutting-edge. The real differences lie in how they mean to get there, which in turn reveals how they see the world and how it works.

To a greater degree than at any time since the 1970s, the parties are split upon the question of whether the state or the market economy are best placed to deliver what society needs. As I have argued, Labour’s analysis stems from more than just that aversion to the word "profit", but a reasoned argument that some industries are objectively unsuitable to private ownership. 

But Labour’s scepticism towards the market now goes much further, and is shown up by its matching confidence in new institutions and organisations to deliver its policy aims. As diligently enumerated in this article, Labour wishes to create over 40 new commissions, boards and agencies, ranging from a £250 billion National Investment Bank, through a new Business Commission to "tackle regulatory capture and streamline regulation" and a Foundation Industries Sector Council for guiding the future of struggling heavy industry.

Both the Conservatives and Labour want to help the high street – but with very different approaches  

For an example of how the parties see the same problem differently, consider the problem of the failing high street. For the Conservatives, there is a big Stronger Towns Fund (£3bn or so for around 100 struggling towns); a smattering of tax cuts (costed at around £10m a year); and a couple of other catchy-sounding pots of money like the Community Ownership Fund and Cultural Investment Fund. Ultimately, the hope is that a little government-led regeneration can kickstart private sector and community investment.

Labour, on the other hand, takes solid aim at the private sector. Its manifesto points the finger at business failure accelerated by public austerity: unfair ATM charges, unnecessarily empty shops; pubs, post offices and bank branches closing; and the loss of youth centres and libraries. The state is expected to lead the charge back into these empty streets, with a publicly owned Royal Mail providing the backbone to a Post Bank, which will itself host a Business Development Agency. Local authorities will somehow take over empty shops, and bank branches will be prevented from closing. In short, the natural tendencies of the private sector can be overcome. The state is more than a catalyst, instead playing a permanent role.

What applies to the high streets issue can be extrapolated into the rest of business policy and, in particular, radical areas like how to tackle climate change. Labour thinks a revolution in the mindset is needed; the Conservatives prefer a little more of what has been recently tried. The Liberal Democrats do not abandon the market like Labour, but are willing to put a lot more money (raised through taxes) behind the state’s catalysing role. 

Voters will get the chance to vote for – or reject – a radical shift in business policy

The Labour manifesto is one the most ambitious attempts at state building since the Attlee government. It may work, but a Labour government would inevitably face serious questions about prioritisation – not least if new statutes are required. The party's manifesto implies a sweeping disdain for market forces as the solution to anything. Under pressure to choose, Labour needs to work out where its case is strongest. Policies have to be shown to work not just as one-offs, but as persistent features of our economy and society. Compared to the Conservative approach, this implies a much higher bar against which to judge success. 

The complaint that the Conservatives must refute is the opposite. Brexit notwithstanding, nothing in their approach smacks of excessive ambition – the question is whether their approach is really enough to solve the problem. There have been plenty of challenge funds for addressing unbalanced growth (such as the Regional Growth Fund, or the EU funds designed for this purpose), and little evidence that this catalysing effect really triggers permanent change. After nine years of tough spending settlements, any extra cash funnelled towards local authorities may simply undo a year or two of austerity.  

The Liberal Democrats hold an interesting middle ground: closer to the Conservatives in their scepticism towards big state institution building, but with an overall fiscal strategy that allows much more resources to be put towards an objective, in particular eschewing such hand-tying techniques as the Conservatives’ tax lock

The Brexit vote is interpreted by some as a cry for radical change. In business policy, we may get to see whether that thesis is right.