Hamish McRae: Ten ways government should help businesses

The Business World: 'Running a theme park in Docklands is different to winning elections'
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The Independent Online

Businesses don't vote ­ and governments are dreadful at running businesses. These two lessons have to be re-learned periodically. Thus, successful business people often assume they will be equally good at politics, not realising that the standards by which they were judged at business were different to the test of the ballot box. And politicians often assume that if they cannot make a success of a business venture "we're not much of a government", not realising that running a theme park in London's Docklands is different to winning an election.

Businesses don't vote ­ and governments are dreadful at running businesses. These two lessons have to be re-learned periodically. Thus, successful business people often assume they will be equally good at politics, not realising that the standards by which they were judged at business were different to the test of the ballot box. And politicians often assume that if they cannot make a success of a business venture "we're not much of a government", not realising that running a theme park in London's Docklands is different to winning an election.

But each need each other. Businesses need government to create the stable macro-economic environment in which they can plan and prosper; governments need a business community successful at generating economic growth. What ought business people to be asking of the next government? Here are 10 ideas.

First and most important, business needs monetary stability. To its great credit, the Labour Government sub-contracted monetary policy to the Bank of England. This has created a structure that puts an enormous amount of thought and expertise into interest-rate changes: the Bank committee may not always get it right but if it is wrong, it will at least be wrong for sound reasons.

But the reasonable demand that business might make is that the next government does not consider the euro unless it is confident that the European Central Bank is as likely to deliver as appropriate a monetary policy for the UK as has the Bank of England.

Next, business needs fiscal competence. This too has been achieved over the past four years. But these have been exceptionally favourable circumstances: established UK domestic growth, reinforced by a long American boom and a continental European recovery. The demand that business should now be putting on the next government is that competence will continue in more testing times, when revenues are in danger of being compressed by falling growth rates and there will be heavy demand for improved services.

Three, business needs competence in the detail of taxation. The result of the Government's efforts to fine-tune business taxation has been increased complexity, which is fine for large companies able to exploit the incentives the Government has created but less so for smaller companies that lack the skilled (and expensive) tax experts. Business should plead for simplicity as well as equity in taxation.

Four, regulation. All business people complain about regulation because conforming with regulation takes time that could be devoted elsewhere. A reasonable requirement that the business community should make of government is that it devotes resources to examining the appropriateness of regulation and makes a start in abolishing regulations that have outlived their usefulness.

The fifth area is planning controls, where regulation has inhibited business with often perverse effects. One example: regulations on size of city-centre shopping and associated parking controls, designed to protect the diversity of the city environment, encouraged out-of-town developments. Regulations on out-of-town development have encouraged concentration because only the giants have the resources to push through the planning procedures. The result is high streets populated by charity shops, and mono-cultural out-of-town shopping, not at all what the planners intended.

Demand number six is competence in applying the new technologies to its own business. Government is poor at applying technology, particularly IT. Central government should at least be no worse than large private sector companies, and we'll draw a veil over the competence of local government.

Seven, business needs acceptable infrastructure that it cannot, of itself, deliver. Even within the cash and time constraints on any government, it is hard to defend the record of the past four years which seem to have been driven by ideology rather than practice. Several high-profile schemes have been delayed, from a new terminal at Heathrow to upgrading service on the London Underground. But business needs competent management of small projects as much as eliminating bureaucratic obstacles to large ones. So here is another area for governments to lift their game.

Eight, subsidiarity. This is Euro-speak for pushing government decisions down to the lowest level at which they can competently be taken. But it can be applied at a domestic level too, for so many decisions have to go up to Whitehall. With devolution, the Government has shown itself sensitive to the problem in a UK context but it might also consider looking at this in an English context. This is not a call for a separate English Parliament, but for a look at local government to see what it can do in areas usually handled by London.

Nine, reinforcing success, and dealing with the consequences of failure. This is one of the core principles of management but it seems rarely to be applied to government. Successful businesses get little government attention, and less successful ones get a great deal. Business might ask for a change in focus so that government tries to help the successful, as well.

Finally attitude: the rhetoric of the Labour Government has been remarkably pro-business and it deserves credit for that. But recently this tone has been muted, and the relationship with business seems to have deteriorated.

Will the next four years see a reasonably pro-business attitude in Westminster? Remember, each needs the other if each is to succeed.

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