Cameron Insists on Business as Usual, but Business Itself is Calling for Leadership

With this government, it's business as usual when business itself is saying loud and clear - now is the time for change and reform.

There has been an ongoing debate within business about values, responsibility and long-term value creation. In their seminal Harvard Business Review article in January, Harvard academics Michael Porter and Mark Kramer said: "Companies must take the lead in bringing business and society back together. The recognition is there among sophisticated business and thought leaders, and promising elements of a new model are emerging". GlaxoSmithKline CEO Andrew Witty echoed this in March, telling the 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.

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