When Big Business got one step too close

Some of you may have seen this from the headline in The Times (which I won’t link to because they have a firewall). This story being about alleged plans for the heads of big business to be given a ‘hotline’ to ministers – which was trailed in both the Telegraph and the BBC. There are a number of reasons why I am very worried about this.

Due to watching the trials and tribulations of the global economic system in horror – if only because of the human impact of lots of people being made and staying out of work because of the lack of jobs, this story seems to have snuck in without any real scrutiny. The proposals – as reported (I’ve not seen any detailed briefing or press releases so am going on trust by what I’ve read in the mainstream press) are flawed for a number of reasons.

Pro-business vs pro-market

I’ve always been sceptical of any politician who claims to be “pro business”. Being pro-business and being pro-market are not the same thing (in my book). The role of the state in a market economy is to ensure that a legal framework is in place to ensure a level playing field for all of those who want to enter a given market. The USA and subsequently the EU have at least recognised this in parts of their legislation, if not in the application of it – e.g. the US anti-trust laws. In terms of being ‘pro-market’, the responsibility of the state is to reduce the barriers to entry to markets so as to promote competition, reduce prices, increase quality and output and generally be of benefit to the consumer. (I’m going by traditional textbook economics here). This role includes taking action against individual firms that take steps to increase illegally those barriers to entry. This might be from the well-known such as price fixing and the formation of cartels, to the less well-known such as artificially lowering prices to below cost price when a new competitor comes in for long enough to send a competitor out of business, to buying up land or inputs that might be essential for a new competitor to set up, thus preventing them from doing so. These less-well known ones are both hard to prove and some of them may well be perfectly legitimate. Favouring businesses just because they happen to be big – i.e. giving them privileged access to ministers of whom regulators are directly accountable strikes me as being irresponsible at best – especially given the current perception the general public has on politicians anyway.

What is the selection criteria?

The Telegraph reports the ‘top 50 firms’ and quotes a BIS spokesman as mentioning ‘strategically useful firms‘. BAE Systems is a ‘strategically useful firm’ in terms of our defence industry but when it comes to corruption allegations, it has form. BAE Systems was fined again by US authorities only this year. Shell has also been mentioned as one of the firms – yet it too was fined this year following a gas terminal blast at Bacton a few years ago. What sort of firms are being given very high level public access to ministers that other firms can only dream of? How do we know that the firms that are being picked are not firms on the decline? Is the Coalition picking firms today that in a few years time may wither on the vine? Who fancies sending a freedom of information request to BIS to ask them what the selection criteria were for selecting the firms?

Will this help innovation? 

By selecting big firms, what message does this send out to small firms – in particular small but successful and growing firms? One of the continual messages from NESTA (the former non-departmental public body that in 2010 cut its ties with state funding) is how small firms are one of the key engines that drive innovation. Why put so many eggs into the basket of big business? Would it not be far better for ministers to focus their efforts on levelling the playing field and rebalancing things towards small businesses rather than giving even more advantages to big business that can already afford to recruit and retain full-time lobbyists to do their bidding?

Transparency

Apart from the issue of tax avoidance and tax evasion – issues that have risen up the ladder of the public’s conscience to the extent that ministers are being forced to take action in a way the previous administration to its shame never did – transparency is a big issue here. Familiarise yourselves with Michael Cockerill’s series Inside Whitehall – and in particular the roles of private offices. Whenever I have met with ministers someone in my team (usually me) always took a note of who said what and what was agreed. The same is true of one of the minister’s assistant private secretaries. This is essential for transparency and for the public record in terms of decisions taken.

How will we know that ministers have not been unduly influenced by big business to behave in a manner that is of the benefit to big business, but not to consumers and the general taxpayer? Will these telephone calls and meetings be minuted? Will these minutes be published? How will Parliament scrutinise what happens as a result of these meetings? This is a completely different league to businesses ‘buying access’ to senior politicians at party political events – all three main political parties have sponsorship opportunities for their big conferences. The reason why this is in a different league is because the civil service – and by definition the tax payer – is footing the bill for all of this.

There is nothing wrong with ministers meeting businesses and representatives from businesses as part of their ministerial duties. In fact, I’d argue it is essential – especially where the private sector is going to play a key role in the delivery of a government policy that has been developed in a transparent manner, or where the input of the private sector is essential for reasons of public safety or the delivering of a service that later on may become universal – radio frequencies for the next generation of mobile phones or exact designs and arrangements for charging points for electronic vehicles. (Thinking off of the top of my head there). But with those sorts of developments, all interested parties are invited to take part, the consultations are public and the meetings with them are minuted. What unnerves me in particular about these proposals – and they are only proposals at this stage – is the issue of transparency.

Read the first paragraph of the ministerial code.

Will these proposals really help restore the public’s trust in politics and in politicians? These proposals must be dropped and they must be dropped now.

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11 Responses to When Big Business got one step too close

  1. jacabsolute says:

    Well spotted and well argued. Thank you.

  2. Frances Coppola says:

    Well said. Totally agree with you that government is abdicating its responsibility to ensure a level playing field and encourage small businesses and new entrants. The only thing I would add is that I suspect the new “hotline” arrangements merely formalise what was already happening anyway – so actually (heaven help us) this could be a very small improvement in transparency, couldn’t it?

  3. Enoch Root says:

    Fantastic post, well analysed. My only addition would be to query the role of professional trade bodies & institutes, as well as organisations such as the Chambers of Commerce.
    Do these bodies not have a role to represent an industry, or geographical area, or occasionally facilitate specific introductions where necessary?
    In my mind they are an opportunity to bridge the gap between allowing the gov’t to support a fair market & favouring a single business.

  4. radegund says:

    This sounds like a ridiculous idea. So ridiculous I suspect it has been thought up by a 21 year old wonk as being a good wheeze for a press release. If not and has any substance then there is a bit of a problem.

  5. alexcoley says:

    The mass shoehorning of mates into government jobs has become a national sport recently. It looks like the UK is becoming more like the US when mass incumbency is followed by mass replacement. Equally the well established priority lobbying on the Hill looks like being aped in Whitehall. Only now there’s an official tier given a private hotline.

  6. Bywater blog says:

    just more spin from David Cameron

  7. paulgriffithsuk says:

    Okay I’ll be the first to leave a controversial counter-response to this…..

    I’m all for small businesses and understand the entrepreneurship is the lifeblood of the economy. However when it comes to do doing big international business with China/Russia (e.g. weapons, oil etc), I’m afraid three blokes in an office from Bracknell simply won’t cut it. These types of deals need to be done by big international British companies with strong government backing.

    If we don’t have these national champions we simply will have a worse balance of payments problems with large parts of the developing world which will eventually manifest itself as inflation (as imported items start to rise based on an unequal trading relationship).

    Now all that said, it does need to be a two way deal. Put simply government support in winning a Russian, Saudi, Chinese deal – should have a price tag. Personally I think this should come in the form of guarantees about UK employment and tax revenues. I see nothing wrong is a symbiotic relationship between big corporations and government (so long as it is symbiotic and not parasitic)

  8. Andrew Bower says:

    I agree with bestest budy here. As the following article quite rightly says, ministerial favouritism isn’t business friendly. Basically this is a recipe for regulation that harms smaller businesses.

    http://www.cityam.com/forum/ministerial-favouritism-isn-t-business-friendly

    In response to Paul above, I would say the elephant in the room is the Bribery Act 2010 – will it prevent British businesses from doing any business in corrupt countries? I don’t know the answer but it was certainly a brave move.

  9. paulgriffithsuk says:

    Thanks Andy for your response…..

    The bribery act can be easily bypassed by having a corporate policy against bribery (effectively passing the responsibility onto highly paid middle management people who have to authorise the bribes). I’m not condoning this but that is the reality… particularly if companies want to do business in parts of the world where kickbacks are the norm.

    I agree that we don’t want large companies using political advantage to squeeze out smaller up and coming competitors (and I can see that as a risk of this policy if implemented badly). However we need to be a bit more realistic about what a culture of entrepreneurship and small companies can actually achieve. Small companies often do very well in niches (e.g. specialists cars, software, leisure events). They can grow to becomes large companies (serving a mass market), however, they typically don’t. This means that they typically stay small businesses focusing on the domestic market (and at best make small efforts to start penetrating markets such as the US/Ireland where the business culture is similar). They typically cannot reach such markets until they get brought by a larger firm (with an international footprint).

    Now I’m sure that potentially there is much we could do to improve our record in building up smaller companies to larger companies (although I suspect that in part this would require a significant change in the culture in the city – where the large private equity tend to focus their efforts on management buyout that offer quick returns rather than investing in the next Google). However in the meantime I would suggest politicians focusing some of their efforts on getting a good deal for Britain from the various large corporations domicile over here (in exchange for political backing and help reaching international markets) might be a necessary evil…..

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