Businessmen: New Labour's unlikely heroes

The Government knows it has a great big hole in its own expertise, so it goes out and gets the best people it can find to help fill it

When government tries to run businesses it fails. The results of nationalisation have been so catastrophic that the model has been abandoned all over the globe. Now we have the reverse proposition: businessmen pulled in to help run the government.

First there was Sir David Simon, chairman of BP, joining the government in the Lords to help on policy towards Europe. Then Martin Taylor, chief executive of Barclays Bank, is to head a team which will advise on the reform of social services. And yesterday Howard Davies, deputy governor of the Bank of England (but whose original background was as a management consultant) was appointed to that most politically sensitive role, supervising what is objectively Britain's largest export industry, financial services.

And now there will be the business-led task forces announced by Gordon Brown last night. If Labour goes on in this vein it will be bringing top business talent into the core of policy-making, something that the Conservative governments never did.

Sure, the Tories used to call in high-profile businessmen from time to time to help with specific projects: Lord Rayner, head of Marks & Sparks, to cut out waste in Whitehall, or Richard Branson to clear up London's litter. There were lots of "friends" from the business world, and one or two people with a commercial background, such as Lord Young, were elevated to the Cabinet. But the Tories did not seek to get their ideas from people who ran giant corporations such as BP or Barclays. This is new.

It is easy to see why it is happening. Labour MPs have very little first- hand knowledge of what business people do: hardly any have ever worked as managers in the private sector, or even been non-executive directors of big quoted companies. So there is, for Labour, a mystic quality about business - it is a strange and different world from that of the teachers, lawyers and trade union people who make up the Labour parliamentary party. But business people are also an important group, for as anyone involved in government is aware, commercial disciplines are increasingly being imposed on the public sector. So bringing "business expertise" into the core of government has become one of Labour's priorities. And because the New Labour team is orderly and focused, it has gone not to its handful of business cronies, but to the very best in the land. Make no mistake about this: David Simon, Martin Taylor and Howard Davies are all top of the range.

In one sense this is terrific. The Labour leadership knows it has a great big hole in its own expertise, so it goes out and gets the best people it can find to help fill it. The principle that one should go out and get good people to bring in the skills you lack may be novel in politics but in the rest of the world it is exactly the way any well-run organisation operates. What the government cannot know, and the rest of us cannot really know either, is whether the skills are really transferable: if politicians are lousy at business, and we know they are, why should we expect business people to be any good at politics?

The precedents are less than encouraging. Lord Rayner may have saved money in Whitehall, but some people believe that cuts in the quality of statistics inspired by his economies led to policy errors in economic management. And Richard Branson's brief foray into rubbish did not have any noticeable impact on the problem. He exited pretty quickly: rather unkindly, a newspaper went round the back of his Virgin Megastore in Oxford Street and photographed mountains of the stuff piled against the railings!

Those may seem rather frivolous examples, but they serve as a useful warning. If you are going to bring in people from the outside world to do political jobs, you must make sure that their skills are appropriate. Lord Rayner knew a lot about retailing, but streamlining public administration is different from running shops; Richard Branson is a world-class marketing genius, but has no reason to know anything about sweeping streets.

Unlike politics and public administration, business is not a generalist skill. Take a minister from one cabinet post and put him or her in another, and the good minister will succeed and the bad one make another mess; transfer a top civil servant from one department to another and things will go on pretty much as before. But in business you need to know what you are doing. Take someone out of one industry and put them in another and it may work. But more often it does not. Not only do different industries need different sorts of people; different companies even within the same industry do. Think of all those enormous pay-offs when business executives are brought in and then sacked a few months later. The commercial world tries very hard to get its top appointments right but it frequently fails: industry is littered with bodies as a result.

So when governments want to bring in business expertise, as they increasingly will need to do, they must realise that they are not buying a simple commodity. What they need to do is to identify precisely what sort of commercial skill they want, and then see who might be able to provide it. Apply this test to these very different appointments and what do you get?

Will someone whose lifetime career was in the oil industry be any good at guiding British commercial policy towards Europe? Will someone who moved from financial journalism to industry to heading a bank be good at helping reformulate the welfare state? Will a management consultant who headed the Audit Commission, the CBI and then went to the Bank of England be the right person to regulate the financial services industry?

You know, I have no idea. These are very high quality people but they may be absolutely wrong for these jobs. Even if the people are right, the jobs may be wrongly defined. Maybe commercial policy should not be focused towards Europe, but rather towards the faster-growing markets of the rest of the world. Maybe we should not be thinking of a single radial blueprint for reforming the welfare state, but rather have a series of limited, incremental changes. Maybe we would be better to keep the present structure of City regulation, making small course-corrections where necessary, instead of having a single supremo who may come into conflict with the Bank of England.

We certainly need more business skills in government. But introducing these is a difficult, complex task needing sensitivity and care if it is to work. This knee-jerk "hire a top guy to sort 'em out" approach is just the sort of trap into which businesses themselves often fall. Great strategy; dodgy execution. It may turn out fine, but keep your fingers crossed.