The Chamberlain News

Boardrooms should focus on the social line as well as bottom line

Earlier today, Greater Birmingham Chambers of Commerce released its latest Economic Review which underlined the skills issues faced by the region, whilst official figures this morning show national economic growth increased by 0.4%, compared with 0.3% in each of 2017’s first two quarters. Here, Waheed Saleem sets out his thoughts on the UK’s economic model. 

The political party conferences are over, amidst the P45’s, coughs and cult ‘sing along’, one significant policy difference that has emerged but has had very little coverage is the economic model for the UK.

The Prime Minister was quick to make a major defence of the free market economy, to respond to the ‘interventionist’ policy announcements from Jeremy Corbyn and John McDonnell. The political consensus of economic liberalism post 1980’s, championed by both Conservative and Labour Governments, has been challenged by the election of Mr Corbyn as Labour leader, who has very clearly redefined the economic policy of the Labour Party and rejected the ‘New Labour’ project  embracing economic liberalism as part of the modernisation of the party and reintroducing the collective organising principles, without reinstating ‘clause 4.’

The socialist principles of nationalisation – or shall I say re-nationalisation – of key industries has become a popular notion amongst the electorate. The YouGov poll in May 2017 asked the public if certain industries should be run by the public or private sector. The poll provided very interesting reading, with the majority of electorate wanting the following industries nationalised: Royal Mail (65%), rail companies (60%), water companies (59%), energy companies (53%).

Although nationalisation is stronger amongst Labour voters there is a shift in traditional Conservative voters, with 40% in favour.

The public are increasingly frustrated with the ‘fat cat’ profits that are made by businesses in monopoly markets, whilst providing deteriorating services and price increases, hitting people from all social classes. The privatisation programme has not worked in the industries that provide key services in what, in effect, are monopoly markets. The rail, water and energy regulators have not manged to provide robust regulation that puts customers first and enables a better balance between making profit to reinvest in the company and profits for owners who are often foreign companies and sovereign funds who in some cases avoid paying taxes in the UK.

The House of Commons Public Accounts Committee, under the chairmanship of the formidable Margaret Hodge, bought to light the unacceptable position of large multinational corporations who, despite making significant profits from customers in the UK, have avoided multibillion pounds of taxes.  Google paid £6m in tax on a turnover of £395m, an effective tax rate of 0.02%, with Amazon paying no corporation tax on sales of £3.3bn! Although this is legal, morally this questionable and exposes the lax powers of HMRC to take big businesses to task on their ability to manipulate the complicated tax rules of the UK.

This inequity of big business being able to ‘get away’ with playing the system, whilst ordinary people are unable to ‘make ends meet’ and feel the brunt of the continuous economic austerity of low wages, higher prices and uncertainty of employment may explain why people are starting to question the ‘laissez faire’ economic approach as the dominate economic theorem of western democracy. A new approach to economic policy based on an inclusive growth agenda, where the benefit of economic growth is shared more equably and those who can need to contribute more for the well-being of the wider society is required.

Although I have been on record as a ‘remainer’, as a democrat I accept the referendum result and therefore the refining of the economic policy will need to be in the context of what’s best in the interests of the UK. The Government will have significant control of setting the economic policy outside the EU. However, it is important that the Government does not go down the route of extreme version of ‘laissez faire’, removing the hard-fought social and worker rights, but a more inclusive economic policy that involves wealth distributed on the principles of equality for all.

This starts with the refining the tax system to ensure multi-national companies cannot play the tax system for their advantage, Governments taking an active interventionist approach to distributing wealth and the creation of wealth, through planned interventionist economic policy including nationalising key industries, utilising the levers of the state to ensure ethical wealth creation and devolving real powers and responsibilities to regions.

There is always a role for the private sector in a mixed economy, however, it must work towards inclusive outcomes and for the good of society. The rules must be fair and companies must not find complex ways and means to circumvent the rules. The question in boardrooms must not only be about the bottom line but about the ‘social line’. Every company must consider what social outcomes they will provide as well as how to increase shareholder value. The value of society will in the long-term benefit us all. Every investment decision should have social and moral outcome measures; boardrooms should be asking themselves what legacy we wish to leave behind.

It is unfortunate that we must go back 100 years or so to find truly moral businesses, the likes of Cadbury and Rowntree. Not only were they profitable businesses but also played significant part in the local community and helped their workers and invested in the local infrastructure. Their legacy is still lauded even today. The question for us is who are today’s Cadburys?

Waheed Saleem sits on several public and charitable boards in the West Midlands, including the West Midlands Police and Crime Commissioner’s Strategic Policing and Crime Board. 

Pic: George Cadbury