Theresa May just promised radical economic reform - this is how she'll probably do it and who her Chancellor could be

The new Prime Minister’s economic plans appeared to have been plucked from the former Labour leader’s pitch at the 2015 general election

Ben Chu
Tuesday 12 July 2016 15:42 BST
May plans to build more houses and curb executive pay
May plans to build more houses and curb executive pay (Reuters)

Taking Theresa May’s Birmingham speech on the economy at face value, the person she ought to appoint as her first chancellor is a politician called Ed Miliband.

Anger over spiralling executive pay, frustration over multinational tax avoidance, antipathy to tax-driven cross-border takeovers, concern about the unequal distribution of the fruits of economic growth, fears over oligopolies, an urge to overhaul the prevailing culture of business in Britain: large tracts of our new Prime Minister’s speech appeared to have been plucked from the former Labour leader’s pitch at the 2015 general election, like ripe apples scrumped from a neighbouring orchard.

And the rhetoric was indistinguishable.

“We need to get tough on irresponsible behaviour in big business.”

“Tax is the price we pay for living in a civilised society.”

“Don’t let anyone tell you that this is the anti-business choice.”

“It is not anti-business to suggest that big business needs to change.”

”Our country only works for the privileged few today, not for most people.”

“We must make Britain a country that works not for a privileged few but for every single one of us”.

If you can identify from whose mouth each of those quotes emanated (whether from Theresa or Ed) you deserve a seat on the Cabinet yourself.

Theresa May: How her leadership speech differed from her voting record

The chances of May delivering this radical agenda will indeed depend to a large degree on the person she chooses as her chancellor, unquestionably the most powerful government job outside that of prime minister.

Given Miliband is unlikely to be summoned across the Parliamentary floor to enact the programme he offered (unsuccessfully) to the nation in 2015 who will it be? It’s hard to think of anyone on the Conservative benches who is particularly sympathetic to May’s surprise agenda, given the unreconstructed Thatcherite inclinations of most of them.

Perhaps the best choice would be someone like Jesse Norman, who has written thoughtfully and unfashionably (in Conservative circles at least) about the damage done by “crony capitalism”. Or perhaps a genuine old school, one nation Conservative such as Ken Clarke might be able to have a stab at it.

Yet even if the Chancellor and other ministers in major economic portfolios were fully signed up to May’s vision, the political challenges of implementing these kinds of reforms are colossal.

May wants to “get more houses built”. But the hard reality is that achieving this will require a massive liberation of the planning system and the green belt. And this will mean taking on the “nimby” tendencies in the country and a formidable coalition of opposition to development that includes the Campaign to Protect Rural England and The Daily Telegraph.

Governments with sizeable majorities, led by prime ministers with personal mandates from the electorate and united parties behind them, have been unable to secure progress on this front. It’s difficult to see May, who lacks any of these things, succeeding where they failed.

On curbing obscene pay for executives, the pitch has been helpfully rolled by the former Lib Dem Business Secretary Vince Cable, with his requirement that large listed firms publish a “single figure” of remuneration for bosses and also hold a binding shareholder vote every three years. It ought to be relatively straightforward for May to apply further pressure on pay by tightening this regime further. Yet securing genuine reform on runaway UK boardroom pay will always be an uphill battle while their peers in US firms fail to show a jot of moderation.

National oligopolies? The competition authorities are wrapping up major inquiries into the retail banking and household energy sectors and have essentially concluded there is no justification for a break-up of the big players. If May is serious about wanting to open this up again she will need to give those competition authorities new marching orders – and possibly even change the law. Not impossible, but certainly a big ask. The banks and the energy companies will not sit back quietly either while their interests are threatened.

And all these sensitive structural and cultural reforms, of course, would need to be enacted alongside what promise to be agonisingly detailed and fraught negotiations with the rest of Europe over Brexit and our future trade relations with the Continent – negotiations that are bound to dominate most of May’s attention.

Such reforms would also need to be pushed in the context of (reasonable) doubts from major corporations about whether it is sensible to expand operations in the UK. Lobbyists can be relied upon to depict every proposed nudge to corporate life as an act of gross self-harm on the grounds that it damages business “confidence”. That message will be reliably trumped by the many friends of corporate vested interests who work in the right-wing press. And this unprecedented reform drive, to boot, would need to take place at a time of sluggish growth and, quite possibly, a return to recession.

May has audaciously scrumped her apples from the Miliband tree. If she manages to squeeze anything from them at all in the coming years of Brexit-dominated economic trauma she will go down as one of the most impressive prime ministers in modern history. The odds, alas, must be that she will not.

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