Politics
The story of a strange romance
Published 08 November 1999
Once, business was solidly Tory; now many big corporate chiefs adore new Labour. But can it last? John Lloyd reports
One of the most remarkable paradigm shifts in British politics of the 20th century has happened at the end of it, and was celebrated, implicitly, this month. The leaders of a party brought into existence at the beginning of this century to secure for the workers by hand and brain the fruits of their labours went to the Confederation of British Industry and said: we want to be trusted by you. How do we make Britain safe for business and business feel safe in Britain?
Gordon Brown, whom the left likes to think of as its prince over the water, announced tax breaks for dynamic managers. Stephen Byers, the Trade and Industry Secretary, said "without apology" that he was pro-business. Tony Blair said there would be no monetary laxity while he was Prime Minister. A deeper genuflection before the altar of Mammon could scarcely be choreographed.
"You know," says Adair Turner, director-general of the CBI, "15 years ago or less, the Labour Party still stood for renationalisation and trade union power and worker directors and hostility to Europe. There was still a fundamental fight about capitalism versus socialism. That may even have lasted till 1992. Now it's all gone. Even the things that still have a labour versus capital aspect are settled, generally, on the basis of common sense and compromise."
This is no longer seen as very remarkable, but it still is. For most of this century, Labour has been about replacing, or very substantially transforming, capital. Even its right-wing revisionists were suspicious of capital and wanted to capture its surpluses for redistribution. Yet in 1997, Blair raised half of Labour's campaign funds from capital - a remarkable effort from virtually nothing. "We are now," says Turner, "much closer to the American model of Democrats and Republicans, pro-business parties, than the Continental socialist v capitalist model. Parties compete on how to combine dynamism with social justice - both using very much the same language."
Yet the relationship is still thin and nervous. The business friends of Labour are largely from show business, communications and new technology - a critically important sector, but not the whole of business. The most important of these - like the entrepreneurs Lord Paul and Lord Levy, the architect Lord Rogers and the film producer Lord Puttnam - have been ennobled and drawn into the new Labour family. Levy, the major fund-raiser, swung, in particular, Jewish business people who, with their strong traditions of civic and political engagement and charitable activism, were attracted to new Labour's centrist- democratic pitch.
A number of big corporates, anxious for Britain to enter the single currency, were also attracted. Two of the biggest corporate managers, Lord Simon of BP and Lord Sainsbury of the eponymous supermarket group, entered the government. However, the British cabinet system, drawn from the majority party in the Commons, does not really allow the promotion of finance capitalists or corporate lawyers to front-rank briefs as in the US; Simon and Sainsbury served in middle-ranking posts, in which their expertise and contacts were used but their writs could not run.
Turner, who leaves the CBI at the end of this year, has led in making Labour acceptable to capital: in a speech the day before the 1997 election, he said that Labour was sound on the macroeconomic level. Blair and Brown, publicly and privately, had dinned into him and other industrialists and financiers that they were determined to continue the policies of the Conservative administration, and in particular Kenneth Clarke's fiscal policies.
It was not an easy sell. Gerald Holtham, then head of the leftist Institute of Public Policy Research, now working for the Norwich Union, spent much of 1996 and 1997 hosting a Business Commission in which leading business figures (they included Sainsbury and Bob Simpson, chairman of GEC) thrashed out such issues as the minimum wage, union recognition and the European social chapter with trade union leaders and analysts. When they issued a report, Michael Heseltine accused the businessmen of being duped by new Labour flannel.
"There was a great deal of suspicion about labour law and a return to past practices," recalled Holtham. "But actually the suspicion was wholly misplaced. New Labour did not want there to be any division between it and business and went very far - too far in my view - to reassure the business people. The minimum wage is an example - I think many in No 10 would have preferred to ditch it; it was kept, but set very low."
What may have finally convinced business of Labour's good intentions was the decision, almost immediately after the election, to make the Bank of England independent. "It amazed us all," recalled Turner. He is happy not only with the minimum wage, but also with Labour's union recognition legislation. "It is not up and running yet," says Turner, "but it is low down on a list of members' concerns. We sat on a commission with the unions on this and I think we got an honourable draw."
But Turner is not the CBI. His sunny view of new Labour was fairly comprehensively negated by Sir Clive Thompson, the CBI president, who accused the government of "bashing business" and listed over 20 new regulations and laws which, he said, had driven up business costs and decreased flexibility. His accusations find an echo at the Institute of Directors, whose membership is generally drawn from smaller businesses than the CBI's.
Ruth Lea, its chief economist, says: "The trouble with Labour is not that it is ideologically opposed to business any longer, but that it wants to serve all the people all the time. Employees' rights on one hand and pro-business on the other - well, it can't do both. To invoke the Third Way to cover all this is not good enough. We like Stephen Byers and we liked Peter Mandelson. They changed the mood. They are doing a very good thing in leading business into e-commerce, where without that lead we really would be falling behind. But there's no question that the Conservative Party is more attuned to the needs of business still."
Likewise, David Burnside, a former press director at the institute who now has his own PR company, says: "The free- enterprise people in British business must find their voice again on taxation, on labour restrictions, on red tape. We have a sound economy now but, unless the laws have been suspended, it will turn down again and then Labour will go back to controls and statist solutions. And then there will be a fight again."
The governments most revered by business - at least in retrospect - were those led by Margaret Thatcher. But it is sometimes forgotten that she first saw the CBI, dominated by nationalised industry chiefs as well as by the large corporates, as part of the problem: being too cautious, too keen on state subsidies and too deferential to the unions. She rejoiced when Sir John (later Lord) King, then of the engineering company Babcock and Wilcox, later of British Airways, took his company out of the CBI, closely followed by Frank Taylor of the builders Taylor Woodrow. The Institute of Directors was then run by Sir John Hoskyns as a cross between a free-market vanguard and a free-enterprise think-tank. It was Burnside - later to serve as King's press man at British Airways - who stole the word "privatisation" from the US and injected it into British, then world, debate.
New Labour has none of that crusading zeal behind it. Centrist business people, hi-tech barons and media bosses may have disliked Thatcherism and the Major years, but not viscerally. (Many of them, after all, did very well out of those years.) Thatcher could present her policies as a crusade to save Britain; but Britain is not felt to be in the same plight now, for all that Blair seeks to inject urgency into his modernisation drive.
In truth, Europe is the defining issue. The smaller businesses represented by the Institute of Directors tend to be suspicious, but Turner reckons that about 75 per cent of his members favour early entry to the euro. They have become new Labour not as an ideological shift, but as a pragmatic recognition that it would govern competently as a broadly pro-European party, representing its traditional constituency of organised labour in the mildest possible manner and offering no threat to capital.
Indeed, British capital now faces its biggest threat not from any political party, but from its customers. "Globalisation and the Internet," says Turner, "have put enormous power in the hands of the consumer. They allow a kind of shopping around and comparison of prices on a global scale. So while the economy is in pretty good shape, and we are reasonably happy, you don't find members saying life is easy. It's hard."
So the workers by hand or by brain are after all securing the fruits of their labour, but not through the route that Labour originally expected. A flexible party now, it has gone along with the trend and become the consumers' friend (denouncing "rip-off Britain"), not the producers'. But capital, which believes that the customer is always right, can hardly grumble.
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