Now comes the hard part, Chancellor

City & Business

After the euphoria of a landslide election victory the Labour Party must now deal with the harsh and more mundane reality of government. How different Cabinet ministers will find life as they emerge from the shadows and discover that broad generalities are no longer sufficient to secure a warm reception. It is specific action, not soothing words, which are now demanded over luncheon tables and early evening cocktails.

There is a residual will on the part of the industrial and financial sectors not to offend the new masters of the universe. That will make their transition from vote-winners to policy-makers less traumatic. However, at some point the reassurances that New Labour is different will have to give way to some definition of what New Labour actually means for the business world.

There will be no shortage of opportunities to provide that definition. It will be, however, a process not without its difficulties. It is easy for a party in opposition to sign up without question to prudent management of the economy. It is more contentious for the government of the day to implement the policies which will deliver said management.

An immediate question facing Chancellor Gordon Brown is whether or not to raise interest rates. In its most recent public statements the Bank of England has been pressing for a quarter point rise. However, inflationary pressure is relatively subdued at the moment and the arguments for an automatic hike are less compelling.

Indeed manufacturing industry will argue quite vehemently that an interest rate is not only unnecessary, but that it would also be extremely damaging since it would underpin the strength of the pound which is costing exporters dearly.

However, financial markets have already factored in a quarter point rise in base rates and anticipate a further quarter point increase during the summer. Indeed the anticipation of rising interest rates is cited as a reason for international confidence in the pound and the new Labour Government.

There is a clear temptation then for the Chancellor to signal his contempt for inflation by obliging with the requisite rise. But how will that look to an electorate which has just swept his party to power? Interest rate rises are rarely seen as tools of economic management, rather as the cause of higher mortgage payments.

If he does increase rates, will Mr Brown be seen as a tough chancellor, or a push-over for a Bank which never seemed to get its way with his predecessor?

However, if he resists a rate rise then the Chancellor will be drawn down a path of tax increases to secure the necessary dampening of consumer demand. He may delicately manage the exchange rate lower and help exporters, but how will a back-door tax-raising Budget be judged by those who have been assured that direct tax rises are not on the agenda?

It is an extremely tough call made tougher by the fact that the decision will be pored over and analysed by City pundits and the media for some indication of what this means for long-term economic policies.

Right across the business spectrum there are other decisions which require immediate attention. The proposed British Airways alliance with American Airlines was put on hold during the election. It is now nearly a year since it was first announced but is no nearer to resolution. Margaret Beckett, the new President of the Board of Trade, must handle the complexities of a deal which are only compounded by the intense lobbying of rival airlines including Virgin Atlantic, headed by Prime Minister Blair's new friend Richard Branson. The deal is linked to US demands for a new open skies agreement and also faces opposition from the European Commission. It is a political minefield but it has to be dealt with.

In the next few weeks, Sir Andrew Large will step down as chairman of the Securities and Investment Board. A new appointment must be made. But will that appointee be someone to keep the seat warm or the person who will oversee a fundamental overhaul of the financial regulation structure?

There are other difficult calls, such as whether to do Henley or the men's semi-finals at Wimbledon. But no one said running the country was easy. Welcome to the real world.

Raising the stakes

IT IS no coincidence that this week sees the publication of The Stakeholder Corporation by David Wheeler and Maria Sillanpaa. Regular readers have had a flavour of this excellent book in articles penned for us by the authors over the last three weeks. Stakeholding is one of the New Labour mantras but this is a business book not a political tract. However, on the assumption that stakeholding will underpin much of the new government's policy-making in the commercial sphere, The Stakeholder Corporation's appearance is timely.

Appealingly, it adopts the tone of practical guide rather than moral lecture. Its aim is to assist businesses rather than shame them into action. Most crucially it demonstrates that there is no conflict between the stakeholder and the shareholder. Maximise the value of the former and you maximise value for the latter. The book provides compelling evidence that businesses run with the broader stakeholder in mind ultimately succeed in increasing long-term shareholder value.

But the authors do much more than float this as a tantalising proposition. Extensive case studies along with what is in effect a how-to-do- it manual make it the ideal companion for any executive interested in transforming their business.

Unfortunately there is no quick- fix solution for the lazy company. The stakeholder corporation requires energy and commitment. But by the end of the book it is difficult to question the value of making such an investment. It is well written, well structured and well worth taking the time to study.

The Stakeholder Corporation, by David Wheeler and Maria Sillanpaa, is published by Pitman at pounds 19.99.

PROMOTED VIDEO
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Sport
Laura Trott with her gold
Commonwealth Games
Arts and Entertainment
Gal Gadot as Wonder Woman
film
News
Bryan had a bracelet given to him by his late father stolen during the raid
people
Sport
France striker Loic Remy
sportThe QPR striker flew to Boston earlier in the week to complete deal
Extras
indybestSpice up your knife with our selection of delicious toppings
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Training/Learning and Development Coordinator -London

£28000 - £32000 per annum: Ashdown Group: Training/Learning and Development Co...

Training Programme Manager (Learning and Development)-London

£28000 - £32000 per annum + benefits: Ashdown Group: Training Programme Manage...

.NET Software Developer (.NET, C#, ASP.NET, front-end)

£30000 - £45000 per annum: Harrington Starr: A Global Financial Service Organi...

C# Web developer (C#,MVC,ASP.NET,SQL)

£30000 - £40000 per annum + Bonus+Benefits+Package: Harrington Starr: C# Web d...

Day In a Page

A new Russian revolution: Cracks start to appear in Putin’s Kremlin power bloc

A new Russian revolution

Cracks start to appear in Putin’s Kremlin power bloc
Eugene de Kock: Apartheid’s sadistic killer that his country cannot forgive

Apartheid’s sadistic killer that his country cannot forgive

The debate rages in South Africa over whether Eugene de Kock should ever be released from jail
Standing my ground: If sitting is bad for your health, what happens when you stay on your feet for a whole month?

Standing my ground

If sitting is bad for your health, what happens when you stay on your feet for a whole month?
Commonwealth Games 2014: Dai Greene prays for chance to rebuild after injury agony

Greene prays for chance to rebuild after injury agony

Welsh hurdler was World, European and Commonwealth champion, but then the injuries crept in
Israel-Gaza conflict: Secret report helps Israelis to hide facts

Patrick Cockburn: Secret report helps Israel to hide facts

The slickness of Israel's spokesmen is rooted in directions set down by pollster Frank Luntz
The man who dared to go on holiday

The man who dared to go on holiday

New York's mayor has taken a vacation - in a nation that has still to enforce paid leave, it caused quite a stir, reports Rupert Cornwell
Best comedians: How the professionals go about their funny business, from Sarah Millican to Marcus Brigstocke

Best comedians: How the professionals go about their funny business

For all those wanting to know how stand-ups keep standing, here are some of the best moments
The Guest List 2014: Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks

The Guest List 2014

Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks
Jokes on Hollywood: 'With comedy film audiences shrinking, it’s time to move on'

Jokes on Hollywood

With comedy film audiences shrinking, it’s time to move on
It's the best of British art... but not all is on display

It's the best of British art... but not all is on display

Voted for by the British public, the artworks on Art Everywhere posters may be the only place where they can be seen
Critic claims 'I was the inspiration for Blanche DuBois'

Critic claims 'I was the inspiration for Blanche DuBois'

Blanche Marvin reveals how Tennessee Williams used her name and an off-the-cuff remark to create an iconic character
Sometimes it's hard to be a literary novelist

Sometimes it's hard to be a literary novelist

Websites offering your ebooks for nothing is only the latest disrespect the modern writer is subjected to, says DJ Taylor
Edinburgh Fringe 2014: The comedy highlights, from Bridget Christie to Jack Dee

Edinburgh Fringe 2014

The comedy highlights, from Bridget Christie to Jack Dee
Dame Jenny Abramsky: 'We have to rethink. If not, museums and parks will close'

Dame Jenny Abramsky: 'We have to rethink. If not, museums and parks will close'

The woman stepping down as chair of the Heritage Lottery Fund is worried