Post-Conservative Party Conference and ahead of the Budget, Woolf Thomson Jones digs into three days in Manchester to tell us what the big takeaways are for businesses as the Government continues to navigate challenges on all fronts.
The great political shapeshift continued at Conservative Party Conference this week as the Conservatives sought to head off the series of growing crises with a new, questionable economic plan and the enduring yet unfulfilled slogans of leveling up, building back better, and getting the job done.
The conference was a deliberately policy-less affair, focussed on resetting the story post-COVID and putting the focus on Boris and his vision for the country. This was a conference of slogans made in focus groups delivering support in the new base mid-term, with no perceived electoral threat.
There was one clear message across the conference – on the main stage and fringes – that this is not the party of business. Even the Chancellor was out to get businesses for their “lack of investment” and “low wages”. This is a new reality, where Ministers whisper their support for the private sector and then beat it up on air. As businesses try to navigate this increasingly hostile and shifting landscape, the Tories are banging the drum in their new heartland and targeting the “people’s priorities”.
The question is whether any of it translates into long-term policymaking or whether the gap between reality and narrative will only widen as the crises deepen… a heady mix.
Below are the big takeaways from a strange few days for businesses.
F**K Business 3.0
Despite a last-minute, crowbarred attempt in the Prime Minister’s speech to head off a building narrative of being anti-business, it has felt – not for the first time in the rhetoric of Boris Johnson – that ‘business’ is getting the blame for much of the current issues and will be bearing the brunt of a lot the planned remedies.
Much of the conversation and narrative forming from ministers at fringes or MPs on the floor was that the reason for high prices, staff shortages, and other issues was businesses’ inability to prepare for Brexit and their addiction to ‘cheap labour’.
So too was businesses’ lack of investment in people and technology the reason given for sluggish productivity levels.
With planned rises to National Insurance, Corporation Tax, and the National Living (Minimum) wage (yet to be formally announced), much of the longer-term costs and remedies will fall at the door of business.
There has been space at the conference for businesses to engage and Ministers have been open to businesses’ role in the Government’s leveling up and net-zero agendas. It is however on their terms and, with public criticisms of business leaders such as Lord Wolfson, it feels as though big business is not being listened to and is becoming the easy punchbag for national issues and the Government agenda.
Cost of Living Crisis
The Government is grappling with a rising cost of living crisis that is threatening to swallow any relative gain made on wages.
That crisis has collided with the removal of the £20 uplift to Universal Credit, the end of furlough, and planned rises to National Insurance.
There was significant disquiet, away from the ‘boosterish’ speeches, that the Tories are running the gauntlet on this crisis, shifting blame whilst continuing with policy cuts that will impact some of the most vulnerable. Those people are not core voters, nor is it entirely unreasonable to remove a temporary uplift worth £6bn when you need to balance the books. However, it feeds a crisis the Government is at the mercy of, despite attempts to paper over with its economic narrative.
Questionable economics
In hushed tones at think tank events, there was considerable talk about whether the sudden target of a high wage, high-skilled, high productivity, full employment economy without ‘uncontrolled migration’ really makes sense or whether it is a desperate political attempt to ‘own the current crisis’.
David Smith’s excellent piece in The Times encapsulates the issue calling the new focus a “diversionary dog whistle”. The current rise in wages is not UK-wide, it is sector-specific and short-term supply-based. Once you try to explain it with a new long-term economic plan you are at promising to change something you don’t really control. As Smith points out, “it is laughable to say these shortages were part of a masterplan”.
Even more so, higher wages mean higher costs, which impacts real wage increases. As Torsten Bell of the Resolution Foundation tweeted, “wages are going up for some but prices are rising for everyone…public policy discussion has lost touch with reality”.
As time progresses and we understand the full extent and duration of shortages and price rises, so too will the Government’s plan be laid bare. The Government has set itself the difficult task of driving real wage growth countrywide in the short term, which requires long-term policymaking and thinking to improve productivity and controlling inflation. Time will tell but it feels like a slightly economically questionable plan with a misalignment of timelines and outcomes at its core.
Green Everything
Net Zero and COP26 had a strong presence in the fringe events and on the main stage with Ministers focussing on how policy across Government can support reaching Net-Zero. BEIS and Kwasi Kwarteng specifically led on the new ‘green economy’ policy and fleshed out their ideas on ‘building back greener’ with new investment in renewable energy. Boris Johnson also announced further investment in solar energy in his conference speech.
It was the only policy area that felt like there was a good working relationship and collaboration with the private sector. Clearly, as we approach COP26 there are opportunities for businesses to properly engage with Government and collaborate on meaningful policy development.
The People’s Priorities
A clear refrain from the Conservatives was the desire to focus on ‘the people’s priorities’. Whether that is migration, wages, tips going to staff, the NHS backlog, or pet theft – this Government is governing in line with polling and not with a larger view or strategy for the UK.
For businesses that means fitting into that narrative. With limited legislative space and a focus on this people-led agenda, business needs to position its policy proposals in the wider context of the conservative narrative and focus. Show why what you want or need is in line with the people’s priorities. It’s just one of the reasons the Conservatives have been so happy to dig in on migration, in spite of repeated demands from businesses… it fits the narrative and polls well.
Fighting for the ‘Fiscal Responsibility’ badge
With all the spending it is hard to associate this Government with its Conservative and coalition predecessors. The previous Governments’ concept of fiscal responsibility involved lower taxation and lower spending. This Government is spending more but still wants to keep the mantle of the party of fiscal responsibility (it does happen to poll well!)
Labour and Rachel Reeves, Shadow Chancellor, attempted to park their tanks on that lawn last week, distancing themselves from the Corbyn era and highlighting the need to balance the books – quicker than the Conservatives too.
Sunak tried, in his speech, to head this off with commitments to fiscal responsibility, acknowledging the national debt and the need to reduce it with raised taxes. The issue is when you add additional spending to an already large bill you have to raise taxes too, to the highest individual burden in 70 years.
The conservatives might be balancing the books but it remains to be seen if people can accept the tax burden alongside it. The battle for the responsible badge is tighter than it has been for years.
Lack of Policy
Amongst the warring narratives on business, migration, wages, and cost of living. There was a distinct lack of actual policy delivered. Beyond Priti Patel on crime and migration, no other Minister had a policy announcement of substance, even the Chancellor only had a £500m job support scheme announcement to cover the UC cut.
A clear tactic from the party to position this as a Boris-focussed reset for the Government and drive at the post-covid agenda. This was intended to be a chance to shape the vision for the next few years. It would have been better without the competing crises behind, but the conservatives will consider this a successful conference that culminated with all eyes on the ‘Boss’ and his vision.
For further information or any policy specific detail please contact Woolf Thomson Jones
+44 (0) 7376 392 693