The Tory thought process can boost business

The “Big Society” tag is not only a clever dig at Labour’s record of building big – let’s face it, very big – government; it is also a pointed rebuff of Lady Thatcher’s mantra that “there is no such thing as society”. According to the former prime minister, there are only individual men and women, families, and, at a pinch, neighbours – a far cry from the “little platoons” of civil society envisaged by current Conservative policymakers, who want “every adult in the country to be an active member of an active neighbourhood group” (their italics). I hope for their sake that dream isn’t quite realised, or there will be no one left to help.

The Big Society plan sounds as if it would only affect, well, society, but I think there is an underlying shift in Tory attitudes that may change policies towards business and commerce too. The Tories’ enthusiasm for social enterprises and ideas such as the school voucher system involve a coupling of business and government which suggests a subtle repudiation of the last Conservative administration’s enthusiasm for unfettered market forces. Although New Labour has tried in some areas to engage business in the running of the state – academy schools, for example – government has generally become increasingly interventionist, centralised and bureaucratic. Yet New Labour, pre-crisis, also largely bought the Thatcherite market rhetoric.

In his new book, Red Tory: How Left and Right Have Broken Britain and How We Can Fix It, Phillip Blond, the director of the ResPublica think tank, argues that “the state and the market have advanced from both left and right” and as a result the market has been “captured by producer interests”. But his attack on New Labour’s record is barely more ferocious than his repudiation of Thatcherite “neo-liberalism” and the “clearly unconservative idea that the market was the ultimate arbiter of value”.

Mr Blond would like there to be greater diversity of business structures – a return to the mutual and the cooperative. He is also a fan of the employee-owned business, à la John Lewis. I am pretty keen on John Lewis myself, and I think that the next government – of whatever complexion – should make it easier to set up and operate such businesses. But I find it hard to believe either that such a renaissance is feasible, or that it would, on its own, have a dramatic knock-on effect on the British business environment.

Why did so many mutuals fail, or fail to thrive, and why did others not replace them? There are some obvious answers: they were lured by the spoils of selling themselves in the public market and those which resisted suffered from reduced access to capital; many were unable to expand rapidly enough to compete with publicly-listed rivals.

This in turn helps explain another worrying trend in British business. There are a lot of small businesses in this country – they are the greatest source of employment – and there are plenty of big domestic or multi-national businesses. But there isn’t much in the middle ground – there is no British word for the German concept of Mittelstand.

Furthermore, businesses are beset by rules and regulations, yet efforts to create more efficient and competitive markets through deregulation and privatisation had mixed results. Anti-trust rules have been weakened and poorly enforced in recent years.

More regulation has, in many cases, favoured Big Business: just look at the concentration of the financial services industry. More red tape increases the economies of scale available to bigger companies, which now routinely employ large in-house legal and human resources teams. Small businesses just about cope, if owners juggle a lot of balls in the air, but mid-sized businesses may be priced out of the market.

My worry is that the response to the financial crisis, so far, is to set lots of new rules, which probably won’t prevent a re-run but may further restrict competition. I’m not arguing for deregulation, but for a strong, straightforward regulatory structure, which would make Britain a safer and more desirable place to do business. Being “business-focused” too often means listening exclusively to the incumbents, when the voices of consumers, rivals and suppliers also need to be heard. Still, there are at last some signs that the terms of the debate are changing.