Softly, softly: Business policy from the Liberal Democrats

Wednesday, 17 March 2010

Ben Reid

Category: Policy Reactions

In an interesting and engaging discussion at The Work Foundation today John (Lord) Thurso, Liberal Democrat Shadow of State for Business outlined the ‘direction of travel’ of Liberal Democrat policy in this area – and the economy more generally – for the forthcoming general election.

He opened his speech by noting that he wasn’t going to be apologising if his ideas and responses ‘were more common sense than party dogma’, and this measured tone was evident throughout his wide-ranging opening talk.

Key areas of discussion included (but were not limited to…): 

• Wealth creation and social cohesion in a civil society: Thurso felt that anyone earning salaries of ‘£2m a year’ could not be worth it, declaring ‘wealth creation is good, but not an absolute good’. He felt the role of the executive remuneration committee had got out of hand in setting pay. He noted the risk and capital had become detached – too many City bankers were trading without a personal stake ‘risked’ in the outcome. He favoured ‘narrow banking’ to help protect individual investors and small-businesses needing loans.
• Financial localism: Thurso gave strong support to more local decision-making – for local bank managers to have more discretion in lending decisions to small businesses (the chancellor must tell state-owned banks to ease current lending criteria, he noted), and to other forms of local financing, praising at least the concept behind a ‘local’ stock exchange developed in Birmingham as a method of distributing equity to small businesses and entrepreneurs, and reducing business’ reliance of debt funding. Although broadly a free-market solution, a Liberal Democrat government would have a role to play in seed-funding small organisations until a successful and sustainable local equity market was in place.
• Putting the financial house in order:  Thurso suggested that UK banking needed to shift to take up a more ‘socially useful’ role in the economy, with ‘banks supporting business, rather than the other way around’. This needed to be accompanied by a similar shift in skills and resource-use from high-finance to the ‘real’ economy, particularly in science and technology, including low-carbon energy. The mechanism of change would be funding shifts and encouragement, rather than legislation – more ‘an application of the brakes than a U–turn’. A more active industrial policy supporting particular industries from a Lib Dem government would include bursaries for all higher education students in STEM subjects, designed lure them away from City roles, and science festivals locally to enthuse much younger children towards STEM subjects and businesses.
• Deficit reduction: Cuts in public expenditure had to happen, Thurso noted – but ‘a handbrake turn is not a good way to turn round a vehicle’, it must be done ‘when the time is right’, according to a number of key tests including growth, unemployment, credit conditions and the cost of borrowing. Clarity of policy, and indicating what steps would be taken well in advance, Thurso suggested, would be more important than when to cut.

Post-speech questions to John Thurso from the audience were measured and responses considered – but then perhaps this was because (unlike Lib Dem MP Lynne Featherstone, at the Women’s Question Time event in Westminster last night) Lord Thurso stuck, as he promised he would, to ‘common sense’ business policy, and therefore (also unlike Lynne Featherstone) didn’t face repeated questions about an entrepreneur and pornographic actress standing as a Lib Dem candidate at the election…