The coalition is still failing business

The government's enterprise bill provides no evidence of a clear strategic direction.

Today the Enterprise and Regulatory Reform Bill receives its second reading in the House of Commons.  It was trailed in the days before the Queen’s Speech as the centrepiece of a legislative programme by the government built on “growth, justice and constitutional reform”.  In reality, it is anything but.

The bill is a good illustration of the weaknesses and divisions at the heart of the government. The most pressing issue facing Britain is the fact that the economy has gone into reverse. The Prime Minister and Chancellor may wish to hide behind the fact that there is a eurozone crisis, or that we had too many days off because of the Queen’s diamond jubilee, or that the weather is slightly too cold or too hot, or – at the moment – too much rain. But everyone else seems to realise, with the exception of the occupants of 10 and 11 Downing Street, that their insistence on cutting spending and raising taxes too far and too fast, and thereby choking off demand in the domestic economy, has plunged this country back into a recession made in Downing Street. What we need is a proper plan for jobs and growth to get the economy going again – like Labour’s five-point plan.

Only in the last few days, President Obama has implicitly criticised the government’s stance, noting that it is a lot harder to rein in deficits and debt if your economy is not growing.  Tellingly, he singled out Angela Merkel and François Hollande for “working to put in place a growth agenda alongside responsible fiscal plans”. No such praise for David Cameron or George Osborne.

There is no magic piece of legislation that would conjure up growth. But the case for a British Investment Bank needs to be examined, as Labour is doing.  Reforms to allow firms to better plan for the long-term, invest in new plant and skills and ensuring that there are more, better paid jobs so the economy works for more people, more of the time would also improve Britain’s competitiveness and allow us to get back into growth much more quickly.

In the longer-term, the bill provides no evidence of a clear strategic direction.  Business is crying out for a stable policy environment to allow them to invest and plan for the long-term; a proper industrial strategy, based on the long-term to encourage sustainable growth, but this bill has failed to provide this.

We have in the bill the establishment of the Green Investment Bank, a welcome initiative that Labour announced back in 2010, but it won’t have powers to lever in private money to boost green investment until 2016. 

There are reforms designed to make executive pay more accountable and transparent, but ministers are refusing to implement all of the sensible recommendations from the High Pay Commission such as putting an employee representative on remuneration committees – and now it appears that Vince Cable is seeking to water down provisions for annual shareholder votes on executive pay.

The bill includes reforms to employment legislation. There are some changes on tribunals which are worth exploring but, in a nod and a wink to the Tory right, the government is hinting that it could bring forward amendments during the bill’s passage to put Beecroft’s fire at will manifesto on the statute book, alongside other proposals within the bill to water down the rights we enjoy at work.

Cable lamented in his leaked letter to the Prime Minister that the government has lacked a compelling vision on where it wants to take the country’s economy by 2020.  With this bill had an opportunity to rectify this and provide the strategic vision which British business is crying out for, leaving a lasting legacy that would boost economic recovery and secure Britain’s competitiveness in the next decade. Faced with the roadblocks to reform in Downing Street, it is a great shame this opportunity has been missed.

The Chancellor continues to "hide behind the fact that there is a eurozone crisis". Photograph: Getty Images.

Iain Wright is the shadow minister for competitiveness and enterprise.

Getty Images.
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Hopes of an anti-Brexit party are illusory, but Remainers have a new plan to stay in the EU

Stopping Brexit may prove an impossible task. Remainers are looking to the "Article 49 strategy": reapplying for EU membership. 

The Remain campaign lost in the country, but it won by a landslide in parliament. On 23 June 2016, more than two-thirds of MPs voted for EU membership. Ever since the referendum, the possibility that parliament could thwart withdrawal, or at least soften it, has loomed.

Theresa May called an early general election in the hope of securing a majority large enough to neutralise revanchist Remainers. When she was denied a mandate, many proclaimed that “hard Brexit” had been defeated. Yet two months after the Conservatives’ electoral humbling, it appears, as May once remarked, that “nothing has changed”. The government remains committed not merely to leaving the EU but to leaving the single market and the customs union. Even a promise to mimic the arrangements of the customs union during a transition period is consistent with May’s pre-election Lancaster House speech.

EU supporters once drew consolation from the disunity of their opponents. While Leavers have united around several defining aims, however, the Remainers are split. Those who campaigned reluctantly for EU membership, such as May and Jeremy Corbyn, have become de facto Brexiteers. Others are demanding a “soft Brexit” – defined as continued single market membership – or at least a soft transition.

Still more propose a second referendum, perhaps championed by a new centrist party (“the Democrats” is the name suggested by James Chapman, an energetic former aide to George Osborne and the Brexit Secretary, David Davis). Others predict that an economic cataclysm will force the government to rethink.

Faced with this increasingly bewildering menu of options, the average voter still chooses Brexit as their main course. Though Leave’s referendum victory was narrow (52-48), its support base has since widened. Polling has consistently shown that around two-thirds of voters believe that the UK has a duty to leave the EU, regardless of their original preference.

A majority of Remain supporters, as a recent London School of Economics study confirmed, favour greater controls over EU immigration. The opposition of a significant number of Labour and Tory MPs to “soft Brexit” largely rests on this.

Remainers usually retort – as the Chancellor, Philip Hammond, put it – “No one voted to become poorer.” Polls show that, as well as immigration control, voters want to retain the economic benefits of EU membership. The problem is not merely that some politicians wish to have their cake and eat it, but that most of the public does, too.

For Remainers, the imperative now is to avoid an economic catastrophe. This begins by preventing a “cliff-edge” Brexit, under which the UK crashes out on 29 March 2019 without a deal. Though the Leave vote did not trigger a swift recession, a reversion to World Trade Organisation trading terms almost certainly would. Although David Davis publicly maintains that a new EU trade deal could swiftly be agreed, he is said to have privately forecast a time span of five years (the 2016 EU-Canada agreement took seven). A transition period of three years – concluded in time for the 2022 general election – would leave the UK with two further years in the wilderness without a deal.

A coalition of Labour MPs who dislike free movement and those who dislike free markets has prevented the party endorsing “soft Brexit”. Yet the Remainers in the party, backed by 80 per cent of grass-roots members, are encouraged by a recent shift in the leadership’s position. Although Corbyn, a Bennite Eurosceptic, vowed that the UK would leave the single market, the shadow Brexit secretary, Keir Starmer, and the shadow chancellor, John McDonnell, have refused to rule out continued membership.

A group of Remainers from all parties met in the Labour MP Chuka Umunna’s office before recess, and they are hopeful that parliament will force the government to commit to a meaningful transition period, including single market membership. But they have no intention of dissolving tribal loyalties and uniting under one banner. A year after George Osborne first pitched the idea of a new party to Labour MPs, it has gained little traction. “All it would do is weaken Labour,” the former cabinet minister Andrew Adonis, a past Social Democratic Party member, told me. “The only way we can defeat hard Brexit is to have a strong Labour Party.”

In this febrile era, few Remainers dismiss the possibility of a second referendum. Yet most are wary of running ahead of public opinion. “It would simply be too risky,” a senior Labour MP told me, citing one definition of insanity: doing the same thing and expecting a different result.

Thoughtful Remainers, however, are discussing an alternative strategy. Rather than staging a premature referendum in 2018-19, they advocate waiting until the UK has concluded a trade deal with the EU. At this point, voters would be offered a choice between the new agreement and re-entry under Article 49 of the Lisbon Treaty. By the mid-2020s, Remainers calculate, the risks of Brexit will be clearer and the original referendum will be history. The proviso is that the EU would have to allow the UK re-entry on its existing membership terms, rather than the standard ones (ending its opt-outs from the euro and the border-free Schengen Area). Some MPs suggest agreeing a ten-year “grace period” in which Britain can achieve this deal – a formidable challenge, but not an impossible one.

First, though, the Remainers must secure a soft transition. If the UK rips itself from the EU’s institutions in 2019, there will be no life raft back to safe territory. The initial aim is one of damage limitation. But like the Leavers before them, the wise Remainers are playing a long game.

George Eaton is political editor of the New Statesman.

This article first appeared in the 17 August 2017 issue of the New Statesman, Trump goes nuclear