Chuka Umunna 2013-05-23T20:46:33-04:00 Chuka Umunna http://www.huffingtonpost.co.uk/author/index.php?author=chuka-umunna Copyright 2008, HuffingtonPost.com, Inc. HuffingtonPost Blogger Feed for Chuka Umunna Good old fashioned elbow grease. Ed's Google Speech and What It Means for Responsible Capitalism tag:www.huffingtonpost.com,2013:/theblog//3.3320561 2013-05-22T19:00:00-04:00 2013-05-23T04:44:58-04:00 Chuka Umunna http://www.huffingtonpost.com/chuka-umunna/
These are all prominent examples of a more general conundrum: the struggles for national governments framing tax rules for global companies.

For Google, the irony could not be more acute. Its founders - bright eyed and fiercely intelligent maths PhDs - were inspired by the force for good their algorithm could become. And so it has. Perhaps more than any other company, Google has changed the way that that humanity engages with information. To the curious, Google is the ultimate phone-a-friend. To businesses large and small, it is the gateway to the great wide world. Like Hoover before it, it has become part of the lexicon of modern life.

With the surpluses their algorithm has generated, Google has turned its attentions to more and more of life's problems: from the mundane like email on the move; to the magic of driverless cars; to attempts at the miraculous - those intractable problems, or 'moon shots', that require focus and imagination, dedication and daring to push back at the very frontiers of possibility. Never mind the company motto, "don't be evil," Google has sought to be on the side of right.

But with great power has come responsibility and all the challenges - on tax, access to information and markets - of navigating a global economy.

Eric Schmidt saying that he will obey the law is not enough. His company has a responsibility that goes beyond that. Clearly, it is not living up to its founding principles when it goes to such extraordinary lengths to avoid paying taxes in this country.

Google is not the only company finding itself in the spotlight as it struggles with these kinds of dilemmas. For too long, a focus on shareholder value has narrowed the sense of broader obligation that business owes to society, to its workforce, to its supply chains, to the environment and to the communities in which it operates.

There is a growing movement of business leaders who sense that this must change. Not only for the good of the community, the workforce, or the environment - although it will surely do this kind of good - but for the good of business itself. Rather than seeing these kinds of obligations only as things that add cost, many are discovering that if they are built into the business model: they save costs.

Executives from a host of blue chip firms - from BT to Babcock to GKN - are part of the Engage for Success Taskforce, working together to understand how better employee engagement can improve company performance and productivity, while making work more fulfilling.

There is plenty that governments can do to set the rules so that the most socially valuable and sustainable business strategies are the most profitable too. And it should. But this is also a business-led conversation about the practices, models and behaviours that can help to build and sustain market leading companies.

It is what Harvard Professors Michael Porter and Mark Kramer have described as 'shared value': "creating economic value in a way that also creates value to society by addressing its needs and challenges". With examples drawn for some of capitalism's most hard-nosed exponents - from GE to Unilever to Walmart, and including Google - they view it as the next thing in business strategy: "reinvent[ing] capitalism [to] unleash a wave of innovation and growth".

Google's story shows us the power of business to transform our world. But is also shows us the challenges that success brings, to global companies like Google as well as to national governments. Governments have a duty to do better in setting the rules of corporate citizenship, working together across national boundaries. But it is encouraging to see others in business beginning to demonstrate that the pursuit of profit need not just be about the avoidance of evil, but can contribute positively to advancing the common good.

Chuka Umunna is Shadow Secretary of State for Business, Innovation and Skills and MP for Streatham]]> We Must Do All We Can to Encourage the Restless tag:www.huffingtonpost.com,2013:/theblog//3.2629925 2013-02-06T19:00:00-05:00 2013-04-08T05:12:01-04:00 Chuka Umunna http://www.huffingtonpost.com/chuka-umunna/
Together we must do all we can to encourage the restless who are constantly hunting for new ways of doing business, selling goods and services. It is why our schools, our colleges and our universities must nurture the ambitions of future entrepreneurs, every bit as much as they nurture ambitions for professional and skilled employment.

It is why we must do all that we can to ensure that those with good ideas can find the advice they need to generate viable business models, and access the finance that they need to grow. It is why we must do more to encourage learning from business failure - not condemnation - as well as the celebration of success.

I feel fortunate that I was exposed to entrepreneurship from a young age. My father, who grew up in Nigeria and who arrived in Britain in the 1960s with nothing but the suitcase he carried, set up a successful import export business. He was only able to realise his dream after doing whatever jobs he could find to make his way; washing cars, and pots and pans. And when he was able to save a little, the same spirit that had compelled him to leave his home now caused him to strike out on his own. From him I got an understanding of what motivates those who start their own businesses and become their own boss.

Just as the spirit of one entrepreneur shaped my life, so the spirit of the next generation of entrepreneurs will shape our nation's future. It is to the next generation of entrepreneurs that we will look for the businesses that will help our nation thrive in a fast changing world, the innovation that will improve our lives, and the good jobs that will strengthen our communities.

I am delighted that the Huffington Post UK is launching its new Young Talent page. I am sure it will become essential reading for young entrepreneurs, the restless spirits looking for sage advice. I know it will be valuable for me to get a window on your world, and the challenges you face. And I hope it will become a place that celebrates success, encourages learning and a builds a more supportive culture.

HuffPost UK's Young Talent section is now live! Want to be on it? Email: ukstudenteds@huffingtonpost.com
]]> We Need Justice for Firms Hit by Banks' Mis-selling tag:www.huffingtonpost.com,2013:/theblog//3.2579463 2013-01-30T03:41:19-05:00 2013-03-31T05:12:01-04:00 Chuka Umunna http://www.huffingtonpost.com/chuka-umunna/ Clippy's who make jam, conserve and jelly that you can buy in the major supermarkets, to the medium sized companies like dotDigital Group plc, which has grown to become a global leader in the provision of intuitive software technology and tools for digital marketing.

Notwithstanding the rich diversity of these businesses, what these entrepreneurs and wealth creators have in common is that that they work hard and take risks, provide jobs and growth; they innovate and challenge established market players. This not only brings rigour and competition to the market, securing a better deal for the consumer, but it also helps the UK pay its way in the world.

So their importance to our economy cannot be underestimated and, yes, it has become somewhat of a cliché to say it but collectively they are the "lifeblood" of our economy - they provide almost two thirds of private sector jobs and half of private sector turnover.

That is why the mis-selling of interest rate swap products to SMEs is so distasteful and such a scandal. Neither of the companies I mention above were victims of this but many SMEs have been, which highlights, yet again, why a culture change is needed in the way our banks serve the real economy.

Over the last decade or so, mainly between 2005 and 2008, thousands of small business customers were mis-sold complex hedging products by their banks which they thought would protect them against the risk of interest rate movements on loans they took out. This turned out to be the start of a nightmare for them when, having thought they were purchasing protection against rate rises, they found they ended up paying more when interest rates fell. What's more, when the businesses sought to cancel the hedging product they took out, they were often told they would have to pay hundreds of thousands of pounds for the privilege. Businesses have been forced under as a result - dreams shattered, lives ruined.

Following an investigation last year, the FSA found the banks had engaged in some thoroughly shabby practices when it came to the sale of these hedging products, including: poor disclosure of exit costs; failure to ascertain the customers' understanding of the risk; "non advised" sales straying into advice; "over-hedging" (with the amounts and/or duration of the hedge not matching the underlying loan); and rewards and incentives for bank employees being a driver of the sale of these products.

Consequently in June and July last year 11 banks signed up to a scheme to provide redress for and review the sale of these products - in an effort to speed up the compensation of businesses that were victims without the need to resort to litigation which, in any event, many of the businesses lacked the funds to pursue. Under the agreement, the banks assessment of whether redress in the form of compensation should be made to a customer will be scrutinised and determined by an independent reviewer. A pilot exercise has been carried out with a selected number of customers from each bank signed up to the agreement to assess their approach and ensure it is delivering the right outcomes for customers. Now that exercise is complete, the FSA will announce its findings on the operation of the scheme and what changes are necessary shortly.

At the end of last year, Ed Miliband, the leader of the Labour Party, myself, shadow small business minister Toby Perkins and shadow financial secretary Chris Leslie met with the FSA to give voice to the concerns that have been expressed to us by those who have fallen victim to this scandal. As the pursuit of justice for those businesses who were victim to this mis-selling continues, we want to see the FSA resolve these issues:

First, the scheme must command the confidence of the business community and it is far from clear that is currently the case. For example, if businesses do not feel the "independent reviewers" are "independent", it undermines the entire process. And if the process is not genuinely a speedy one, it will be of little assistance to those forced under before they receive any redress.

Secondly, the scheme should operate as far as possible to put SMEs into the position they would have been in had they not bought the mis-sold product concerned. The banks should not be able to rely on the need to protect their share price or any other reason to justify the erosion of this principle.

Thirdly, under the agreement, if misselling is found to have occurred, the bank concerned is to provide "fair and reasonable redress" to affected customers but it is not clear what this means. This needs clarification so the system for redress is open, transparent and applied in a consistent manner.

Fourthly, the scope of the scheme is limited to what are described as "non-sophisticated" business customers. A sophisticated customer is described as one with either having a turnover of more than £6.5million, a balance sheet of more than £3.26million or more than 50 employees. This is too restrictive a definition and must be broadened. As the organisation, Bully Banks, which has done excellent work on behalf of victims has pointed out, the current narrow definition would mean farmers who employ large seasonal workforces and own agricultural land with large capital values would be excluded from the remit of the scheme when they don't think of themselves as "sophisticated."

Finally, we have persisted in our calls for a moratorium to apply to payments made by those businesses who have clearly been mis-sold products. There is a real danger that as the process of seeking redress continues, ongoing charges relating to missold products could push more businesses under.

We need to see the FSA come forward with a fair solution for the wealth creators in our country who have lost out as a result of swap misselling. This is crucial not only to provide redress for the small and medium sized firms themselves, not only as a part of the process of restoring public trust in the banks, but for all of us at a time when we need to see them driving growth and spurring recovery.]]> Why it Is Time for an Active Defence Industrial Strategy tag:www.huffingtonpost.com,2012:/theblog//3.1957114 2012-10-11T06:55:45-04:00 2012-12-11T05:12:01-05:00 Chuka Umunna http://www.huffingtonpost.com/chuka-umunna/
The UK Government has done the right thing in sticking to red lines, but ministers now have a challenge to deliver the active defence industrial strategy which is needed more than ever before. Business as usual for BAE and the Government is not an available course of action.

Declining domestic defence budgets in the UK, US and across Europe provide a huge challenge for all defence manufacturers. The United States is deciding how to make $487billion of defence cuts, and perhaps a further $500bn in the case of 'sequestration'. As a result of the financial crisis real defence spending in NATO European states fell by an average of 7.4% per country between 2008 and 2010. In 2011 BAE sales were down 14% and profits down 9%.

The future health of the UK defence industry will depend on companies diversifying, broadening portfolios to engage with emerging sectors such as cyber security, electronic systems or unmanned technologies, as well as reaching growing international defence markets such as Australia and India. However, this is not a challenge that either companies - or their large and highly skilled workforces - should face alone.

There has been more than a little irony in Conservative MPs urging the government to take action to protect the UK national interest in defence when it is this government which said in its recent White Paper that "the MOD does not consider wider employment, industrial, or economic factors in its value-for money assessments." This is the same government which has consistently asserted that in defence procurement their "default position is to use open competition in the global market, to buy off-the-shelf where we can". That is an explicit statement that the UK is currently committed to importing rather than manufacturing. We hope that those warning against the involvement of French and German governments in defence will now get behind our demand for a more active industrial strategy from the British government.

Thousands of job losses at BAE Systems and the uncertainty now surrounding that company's long-term UK footprint, combined with the defence industry's trade body's assessment that 30,000 industry jobs in total could be under threat, underline the need for a government rethink.

We must use the power of defence procurement strategically - to strengthen standards; to increase certainty so that business can plan ahead; develop capabilities and nurture supply chains; to take account of the impact on employment when awarding contracts; to professionalise procurement staff; and to work closer with international allies.

The UK government must help UK defence companies such as BAE acclimatise to the future, investing in skills and capabilities as well as supporting exports and using Special Security Agreements to ensure the UK national interest is protected where we cooperate with our allies.


There are specific measures that could be taken to support our defence manufacturers. UK-based industry, for example, deserves greater certainty around areas where strategic investment is warranted against long-term opportunities. The government should be clearer about its 'make-buy' choice: the capabilities which will be purchased off-the-shelf overseas and those which will be developed domestically. This will allow industry to make strategic investment decisions and should guide R&T funding.

Furthermore, recent conflicts have shown us that strategic kit must be capable of undergoing major urgent operational requirement upgrades to be optimal in theatre. Therefore we may not wish to buy equipment from overseas if it cannot be upgraded here in the UK. This could be known as a "UK control test" and would protect jobs and intellectual property, and prevent against our upgrades being "put to the back of the queue" by overseas governments with competing urgencies or ambivalence about our actions.

These changes could put Government on a clearer path to helping the UK-based defence industry play its part in modernising both our industrial base and equipment programme. A strong UK defence industry can be both responsive to the changing threats we face, providing the advanced weaponry we need, as well as part of a vibrant, advanced and high skilled private sector, stimulating jobs and growth.

It is estimated that the UK defence industry employs over 300,000 people and generates over £35billion per year to the UK economy. The defence industry makes up 10% of our high-tech manufacturing. Both we and the Government seek an export-driven, private sector-led economic recovery, but for Labour this requires a partnership between productive business and active government.]]> Cameron Insists on Business as Usual, but Business Itself is Calling for Leadership tag:www.huffingtonpost.com,2011:/theblog//3.1086576 2011-11-10T13:41:08-05:00 2012-01-10T05:12:01-05:00 Chuka Umunna http://www.huffingtonpost.com/chuka-umunna/ Observer: "'big firms have allowed themselves to be seen as detached from society."

In September, Ed Miliband put this agenda at the heart of his party conference speech, saying that sustainable growth has to be built on productive, not predatory, business behaviour. He talked of "responsibility, commitment for the long term" being "an essential part of the new bargain." In so doing, Ed put this agenda front and centre of the national debate about our country's future.

Speaking on the Today programme shortly after, David Cameron dismissed the speech out of hand for daring to broach this subject, describing it as "completely impractical... off the rails".

But the prime minister's reaction, whilst predictable, demonstrates how out of touch he is. Since Ed's speech, there have been a number of hugely significant interventions from key figures in the business world making many of the same arguments that featured in the speech.

So this month Ken Costa, who served as chairman of investment bank Lazard International, spoke of the need to reconnect morality and capitalism, particularly in the context of the City of London.

Former CBI Director General Richard Lambert, writing in the Financial Times, outlined bold and radical proposals on executive pay, highlighting the dangers of "insider capitalism, in which the rewards are concentrated in a small number of hands, and nearly everyone else is a loser".

Bob Diamond has talked of the need for bankers to be "good citizens". And just this week, a group of 25 leading business academics wrote to the Times saying: "As educators working with leading businesses across the world, we believe that the culture of business must evolve for business to gain public trust once again."

The key question though, is how we respond to this agenda, and what action policy makers can take to promote responsible business. As Labour has argued, the government sets the rules of the game, which can either favour or discourage certain behaviour. We are clear - government should use the range of tools at its disposal including procurement, competition policy and taxation to nurture and reward the best of British business practice.

How is the Tory-led government responding? There are steps it could take now, but instead ministers choose to sit on their hands. For example, on executive and City pay - just this week, David Cameron said he finds the prospect of RBS paying £500m unacceptable. Yet, though he could act immediately by implementing the Walker Review proposals, already on the statute book (meaning that bankers' remuneration above £1 million would be disclosed within pay bands), he has refused to do so. In addition, we have said companies should publish the ratio of the pay of their top earner compared to their average employee and that every remuneration committee should have an employee on its board - this has been met with silence from the government.

This should come as no surprise. This government is out of touch with what is really going on in our economy. With growth flatlining and business confidence plummeting they refuse to back Labour's five point plan for growth and jobs which includes a repeat the bank bonus tax, the proceeds of which could be used to build houses, provide youth jobs and invest in regional business to get the economy moving and get people into work, the best way to get the deficit down.

And what of the Business Secretary, Vince Cable? He has at times struck a different tone to David Cameron and George Osborne. However, he so often plays second fiddle to the treasury, it makes no difference - people know where the real power lies in the current administration.

With this government, it's business as usual when business itself is saying loud and clear - now is the time for change and reform.]]> The Lifeblood of the Economy tag:www.huffingtonpost.com,2011:/theblog//3.893949 2011-07-10T20:00:03-04:00 2011-09-09T05:12:02-04:00 Chuka Umunna http://www.huffingtonpost.com/chuka-umunna/
The reality was somewhat different. Two weeks after Cable's claims the Office for National Statistics told us GDP had decreased by 0.5% in the last quarter of 2010; in April they told us GDP had increased by just 0.5% in the first quarter of 2011. So the economy flatlined under Cable's watch.

Second quarter figures for 2011 are due on 26 July. The highly respected NIESR expects GDP growth of just 0.1% for this period. If correct, that would mean GDP growth of 0.1% in 9 months suggesting that Cable is living on a different planet.

The Opposition and the Tory led Government disagree profoundly on the pace and scale of deficit reduction. Reducing the deficit is essential but, as former US President Clinton pointed out this week, because of the policies pursued by the Tory led government "there's a good chance economic activity will go down so much that tax revenues will be reduced even more than spending is cut and [the] deficit will increase". Where there is agreement is on the need for the private sector to spearhead growth in the future. Small and medium sized businesses are crucial to this because they are the backbone of the British economy, responsible for six out of ten private sector jobs and over £1.5 trillion of private sector turnover.

However SMEs face many obstacles - one that is raised time and time again is access to finance. SMEs cannot look to capital markets for finance in the way big business does so they rely on our banks. I visited one such business last week - a family run private nursery employing over 50 people in my local area; I met another in Leeds this week, a young entrepreneur running a digital media outfit. Both successful established businesses run by people who work hard, play by the rules and are passionate about the service they provide and the communities they provide them in. Both bank with one of the major retail banks and were told in the last 18 months - out of the blue - that their lending terms and conditions would be changed despite the health of their businesses, creating great uncertainty and stress.

The Government negotiated the Project Merlin agreement with the banks in February, promising it would lead to an increase in lending to SMEs by £10 billion (from £66 billion in 2010 to £76 billion in 2011), yet the banks collectively missed the quarterly target by £2.2 billion for the first quarter of this year. This is supported by the Bank of England's agents out in the country - they say small firms "generally perceived credit conditions to be very tight" and "were reluctant to approach banks in case it led to an increase in the cost of existing borrowings, or reductions in overdraft limits". Consequently many are resorting to using personal credit cards and other means to help with cash flow. We cannot go on like this.

What's the alternative? First, we were told bank CEO pay would be linked to satisfaction of those SME lending targets but the Government failed to check how this would work in practice and is now - by Cable's own admission - having to revisit the issue. Labour would have given Merlin real teeth, insisting the banks evidence how CEO pay would be linked to lending targets before finalising the agreement.

Secondly, the government has established the Regional Growth Fund under which it will allocate £1.4bn over three years to support businesses (two thirds less than allocated under the previous government through Regional Development Agencies). We would add an extra £200m to the RGF through a repeat of the bankers' bonus tax and re-examine the eligibility criteria for it too - currently many SMEs are excluded given the minimum threshold for bids is £1m.

Thirdly, in his last budget before the election Alistair Darling announced the establishment of a business growth fund for small businesses paid for by the banks. This was taken forward by the banks who announced the establishment of the Business Growth Fund in October 2010. This is welcome but, again, the £10 million threshold for bids excludes many SMEs from being able to apply. We would tell the banks to look again at the criteria in order to provide greater access to SMEs.

So the government has failed to deliver for SMEs when what they deserve is an active, intelligent government doing all it can to help businesses prosper, grow and create wealth for the country. Without this, the risk of an economy continuing to flat line will persist. Let's hope the Tory led Government gets its act together because if it doesn't, the consequences for people up and down the country will be disastrous]]>