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May sets out grand bargain with business

Theresa May has set out the terms of a new grand bargain with business, where the government invests to boost productivity and cuts corporation tax, in exchange for help tackling the worst excesses of capitalism.

Setting out her business strategy, the UK prime minister proposes in the Financial Times a pact with corporate Britain to work together to defend capitalism, free markets and free trade from populist attacks.

She promises to back business with a new industrial strategy that will include an extra £2bn a year by 2020 to support research and development.

Mrs May, who on Monday will address the annual conference of the CBI, Britain’s biggest business lobby, says she wants the UK to become the world’s “go-to place for scientists, innovators and tech investors”.

Philip Hammond, the chancellor, will present his first Autumn Statement mini-budget this week and will announce more investment in road improvements, while Mrs May will tell the CBI that the government will support innovation through the tax system and deliver the “lowest corporation rate in the G20”.

Corporation tax is already due to come down to 17 per cent in 2020 — the lowest rate in the G20 — but Mrs May’s allies said Britain could drop the rate to 15 per cent if Donald Trump fulfilled his promise to cut US business tax to that level.

Mrs May is also planning to dilute one of her most contentious business proposals, that workers should be represented on company boards.

Theresa May and Philip Hammond tour the Jaguar Land Rover factory earlier this year. The prime minister says she wants to make Britain the ‘go-to place for scientists, innovators and tech investors’ © AFP

The prime minister is looking at alternative models, rather than having an ordinary worker at board meetings. This could include a director instructed to reflect shop floor or consumer opinion.

However, she is determined to press ahead with a proposal to give shareholders a binding vote on executive pay.

Greg Clark, business secretary, told the BBC Today programme on Monday that he “wouldn’t demur” from the idea that many people were “outraged” at high levels of executive pay.

Referring to a proposed new bargain between government and business, he said: “Part of this agreement we need to have is a much more rigorous approach to executive pay”.

The government is proposing binding shareholder votes on executive pay but Mr Clark effectively confirmed that he would not press ahead with plans to put workers on company boards.

“We will put forward a series of ways in which those voices can be represented on boards,” he said. Asked if he was watering down Theresa May’s original plan, he said: “There will be different options.”

Mrs May’s offering to business has strings attached: she says business must work with her to create “the best corporate governance of any major economy” to stave off attacks on capitalism.

“When a small minority of businesses and business figures appear to game the system and work to a different set of rules, the social contract between businesses and society fails.”

Paul Drechsler, president of the CBI, will acknowledge that business must work with the government on this and that companies had to deal with “unacceptable transgressions”.

“Many people still see business as something they are not part of, run by a privileged few who don’t look or sound like them and who seem to play by a different set of rules,” he will say.

“Firms should explain in public what steps they’ve taken on employee engagement and representation. And we need to send out a strong message that rewarding failure is not an option: exceptional pay can only be justified by exceptional performance.”

Mrs May writes that the Autumn Statement will also contain “targeted help for ordinary working families who are struggling to get by”, although Mr Hammond’s main focus is on raising productivity.

The chancellor promised on Sunday to make Britain “match fit” ahead of Brexit, combining modest infrastructure spending with efforts to drive down the country’s “eye-wateringly large debt”.

Meanwhile, Labour leader Jeremy Corbyn will say in a speech to the CBI that his party will “be on the side of the innovators, entrepreneurs and investors that our economy and our workforce need”.

He will argue that state intervention is required to “unleash the creativity and potential of entrepreneurial Britain”, funnelled through a National Investment Bank and a network of publicly accountable regional banks.

Labour is proposing a “fiscal credibility rule” that would allow the government to borrow “to invest for the long term in order to [expand] the economy”.

Via FT