What is the Confederation of British Industry for? Indeed, who is it for? The soi-disant voice of British business held its conference this week. As one might expect, the organisation’s chief executive, Rain Newton-Smith, lamented the tax increases levied on employers in the Budget.
She issued a plea to the Chancellor for the CBI to be more closely involved in the design of fiscal events in the future. She was joined by the organisation’s chair in chiding Labour for treating the private sector as a cash cow. But these criticisms were pianissimo compared with the chorus of praise the group has been orchestrating for Labour.
The CBI welcomed the Labour manifesto during the general election for its mission to deliver sustainable growth. The organisation praised the Chancellor for her speech at the Labour party conference, which ‘hit all the right notes’. Even this week, alongside the gentle regret she expressed at tax increases, the CBI’s chief executive praised the Prime Minister and Chancellor for their ‘strength and determination’, thanked Rachel Reeves for her ‘brave decision’ to change the government’s fiscal rules and lauded Labour for putting the country in ‘a strong position by drawing the curtain on a near-decade of instability at home’.
The CBI has become a corporatist ally rather than an independent champion for the private sector
If the CBI truly believes that such treacly public support helps shield the private sector from the most anti-business government for four decades, one must question not just its judgment but its whole raison d’être. There is worse to come for business in the months ahead in the form of the government’s Employment Rights Bill, which threatens to re-arm trade unions at the same time as making it more difficult to fire underperforming staff. Perhaps the CBI fondly imagined that a Starmer administration would be a rerun of the Blair government. If so, one has to ask what justified such childish optimism. There were all too many indications, from the rhetoric of Angela Rayner on workers’ rights to Reeves’s own proposals for state intervention, that Labour would pursue a far more collectivist economic policy than Tony Blair ever did.
The whole point of the CBI is to say the things which individual businesses might fight shy of saying themselves; to be energetic on behalf of enterprise overall and challenge government with vigour.
Instead, the CBI has consistently sought to become Labour’s little helper, a corporatist ally rather than an independent champion for the private sector. Newton-Smith’s request this week that the CBI could help ‘co-design’ the government’s economic policy in future is both naive and strangely entitled. A Labour government is as likely to accept such an invitation as a Conservative one would invite trade unions to help draw up its strike laws.
The CBI behaves as it does because, although it claims to represent all businesses, large and small, it is really the voice of big business. Its income comes disproportionately from those major incumbents who squat in individual sectors jealous of their own market share rather than ardent to see markets made freer. For the establishment executives who dominate the CBI’s thinking, deregulation is the last thing they need. Much more congenial is the maintenance of barriers to entry for any competitor who, if allowed to grow, would eat their lunch.
So, in that sense, the big businesses who dominate the CBI have less to lose from a statist Labour government than smaller businesses which are struggling with tighter margins, let alone those who are contemplating a new start-up or incubating ideas which will disrupt existing cartels. And for Labour, the honeyed words of the CBI’s chief executive can be used to counter any criticism from others in the private sector. If the principal voice of British business is offering such praise, Labour can argue, clearly the critics are motivated by self-interest and not the wider economic interest.
It may suit the corporate bureaucrats of the CBI and the state bureaucrats of Labour to maintain such a cosy relationship. But this sort of crony capitalism does not work for the rest of us. It is a recipe for stagnation. If the CBI’s contributions to government policy are simply the mildest of critiques and polite requests for more input to Treasury seminars then they fail in their duty to stand up for the real wealth creators in our society.
What business really needs are organisations and individuals who will work hard to identify the regulations choking growth and who will campaign determinedly for their repeal. Organisations which will make the case for lower taxation, more flexible labour markets, energy abundance and more rigorous vocational education. That the CBI has failed to rise to this challenge should prompt business leaders to do what they would in any other area: cash out from a losing position, close down a failing concern and find a proper enterprise worth investing in.
