It is the end of the love affair between business and Labour

'Without realising it, this government may have done a lot of damage to labour relations'
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The Independent Online

The love affair between Labour and the business community is over. So says Bob Ayling, and I think he is right.

One of the great achievements of New Labour was to overcome the suspicion of businesspeople. The ghosts of the IMF loan of 1976, of the "winter of discontent" of 1978/9, of the 83 per cent income-tax rate and of the sheer incompetence of the previous Labour government were finally laid. New Labour was stylish, competent and listened to business.

The Prime Minister took care to flatter prominent businesspeople by getting them to sit on task forces or by asking their advice. Meanwhile the Chancellor's masterstroke of giving the Bank of England the independence to set interest rates, plus his fiscal prudence, gave Britain greater macro-economic stability than under successive Tory governments.

But now the full-beam headlights of Blair charm seem a little less dazzling, while the stolid Brown prudence seems a little less, well, prudent.

Last Monday Mr Ayling, writing in the Financial Times, argued the case for the prosecution. That combination is interesting for a start. Mr Ayling was a prominent New Labour businessman and he was writing in a paper that, perhaps more than any other, has been a cheerleader for this government. Now, Mr Ayling had a tough time at both British Airways and the Dome but is a thoughtful and intelligent man. The FT is having a tough time, particularly with its internet operation, but has great strength and intelligence in its staff. If these two former Labour lovers are starting to criticise the Government something big is happening.

Mr Ayling argued that the Government is falling down on three counts. The first was the management of the economy. He feared there would be a return to uncontrolled rises in public spending without delivery of competent services, while the rolling back of some of the Thatcher union reforms was already leading to a rise in strikes.

Secondly, the Government was mismanaging issues that had direct impact on business: not noting foot-and-mouth's effect on tourism, nor the way Railtrack was put into administration. And thirdly, it was not managing competently the areas over which it had direct control. There were no clear output measures by which, for example, the Department of Transport or the Department of the Environment could be judged.

Interesting, revealing certainly, but is it fair? After all there should be a certain distance between government and business. They have different roles in society. I would not argue that there should be antagonism – that is silly and destructive – but there should be tension.

As a rule of thumb, be suspicious when a business executive joins a government inquiry. Most people are not aware that, in some cases, one of the specific tasks of the company public relations department is to get the boss a title. Getting him (nearly always a him) on a government body is a less slushy way of doing it than giving the ruling party a fat donation.

It does not, by the way, work. One prominent business leader (and Labour donor) thought that being made a lord would be regarded as the pinnacle of his commercial career. Then he found his friends teased him by whipping out their chequebooks and asking him how much it cost.

The issue, then, is not whether the usual healthy tension is starting to return – that would be fine – but rather whether business thinks the Government is doing things that will undermine its performance. The alarming thing for government is that this may be happening at a time when the UK is doing remarkably well by world standards, having passed France in the size of the economy and probably growing faster this year than any other large developed country.

My own take on this would be that the Government should not be too worried about grumbles from the people who run big businesses. It is their nature to complain when things are tough, just as it is their nature to praise their own acumen when things are going well.

Instead, it should worry about the concerns of small- and medium-sized enterprises, a very few of which will become the big employers of the future. In particular, it should look at what businesspeople do, not what they say. If lots of people are founding new companies, that is great. If more people are being sucked into employment, that is great, too. But if business formation rates start to fall, then it should start to worry.

Among the measures it should look at are strikes. Labour unrest is profoundly destructive of wealth-creation not just because, for example, train strikes stop people getting to work. It is destructive because it diverts management time from pushing businesses forward into fixing what ought to be one-off problems. Probably without realising it, this government may have done a lot of damage to labour relations. If Mr Ayling thinks so, I would trust his judgement.

On the macro-economic side, for the moment the Government's reputation for competence remains intact. One test will be the next Budget. If there is a significant rise in taxation, at a time when the tax levels of most EU countries are falling, then the business community will wonder whether it is getting value for money. Another test will be whether the UK continues to outperform the large Continental economies – though if we do, business may increasingly attribute this to its own hard work rather than the competence of its political masters.

On the micro-economic level, there is a problem. I think that it is not so much what the Government says or thinks intellectually but rather its lack of an intuitive feel for what it is like to run a business. If you are worrying about how to sell a new service, or more prosaically how to meet the wage bill on the 23rd of next month, you don't want "initiatives" and "task forces" and you certainly don't want to be preached at or patronised. You just want to get on with it. You try to be as competent as you can and you expect competence from government in return.

Love affairs end in all sorts of ways, from blistering rows to a gradual realisation that the beloved partner was not quite so wonderful after all. This one seems to be finishing at the low-key end of the scale. That is fine: much better than 1970s-style fireworks. Besides, the other potential partner does not look that great yet. But the romance is gone.