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Pick’n'mix policies: Chocolate Orange men seek ‘responsible capitalism’

PM joins other party leaders in seeking to blend markets with conscience – but they keep stealing from the same jars of ideas

In a WH Smith not far from Westminster, there are no Terry’s Chocolate Oranges on sale at the till but there’s every other calorie and additive on offer. This stroll to the newsagent counts for political research because if you listened to David Cameron six years ago, flogging cheap chocolate to captive targets was an exemplar of immoral capitalism run amok.

“As Britain faces an obesity crisis, why does WH Smith promote half-price Chocolate Oranges at its checkouts instead of real oranges?” Cameron protested. Through the bully’s pulpit of office and opprobrium, he sought to change it.

A few years before that, the man who became Cameron’s chief adviser, Steve Hilton, made his name arguing for business to behave more responsibly; he wrote a book about it, and even set up companies to show how it could be done. Business understood it better than the Tories, in fact, said Hilton.

“On the very same afternoon that prime minister John Major was defending Shell’s right to dump the Brent Spar oil platform in the North Sea, the company itself announced that it would reverse its decision due to pressure from Greenpeace and German consumers,” Hilton wrote in A Blue Tomorrow. “The Conservative response was a kneejerk laissez-fairism while Shell understood that the world had changed.”

The agenda was central to Cameron as far into the economic crisis as 2009, when he went to the World Economic Summit in Davos and gave two speeches leaning heavily on Hilton’s ideas, and the ideas of the “Red Tory”, Phillip Blond. Cameron talked about the “recapitalising of the poor” and “moral markets”. In one section, he spoke of “a third reason why capitalism has become unpopular: the incredible inequality of the modern world. Too often, the winners have taken it all. Today, the poorest half of the world’s population own less than 1% of the world’s wealth. We’ve got a lot of capital but not many capitalists and people rightly think that isn’t fair.”

Last year, when Ed Miliband, another youthful new leader full of fresh ideas while his party sat in opposition, used his Labour conference speech to sketch out how capitalism has gone wrong, it jolted Cameron and his closest advisers, watching on TV. This was an agenda the Cameroons cherished, but had neglected. They had made concrete steps – George Osborne was the first to move, to clamp down on “non-doms” in 2009 – but they had not managed to turn Chocolate Oranges into a larger policy pledge.

Those watching Miliband arguing that the state could differentiate between good and bad companies remember having themselves spent valuable opposition time trying to do the same. It was little surprise to them when Miliband struggled in subsequent interviews to say how he would categorise every type of business. “It can’t be done,” said one Tory. “We really wanted to do it.”

On Thursday, Cameron is expected to deliver a long-awaited speech on responsible capitalism. By the end of this week, we will have had a speech from each of the main party leaders on this theme. “Another week, another speech about the evils of capitalism,” Nick Clegg joked.

The immediate matter in hand is not highly tempting chocolate, but executive pay. All the leaders are scrambling to show they will stop the inexorable rise of the UK’s top executives (FTSE companies had risen by more than 4,000% on average in the last 30 years). Polling shows people resentful of what they see as unearned runaway wealth of all kinds. All party leaders must show that they represent a “something for something” society, and the Miliband distinction between producer and predatory companies polls well, too.

Next week, the business secretary, Vince Cable, who was talking about such things a full year before Miliband’s conference speech, will announce the government’s plan. As things stand, the most likely action revolves around shrinking the amount of notice period executives must be allowed. If it can be boiled down to a year then the payout of failed bosses can be limited.

Discussions are continuing about whether or not to make shareholder votes on executive pay mandatory. The coalition partners are attempting to sort out policy wrinkles: how to make the vote binding on pay packages which have already been paid out. Do shareholders sue a chief executive who doesn’t perform to recoup the already paid wages?

But one idea of Cable’s, which the shadow business secretary, Chuka Umunna, says Labour would introduce, is now likely to be put on the back burner by the government: the idea of having employees on remuneration committees. Instead, expect many Cameroonian transparency measures – if all involved can see more clearly the size of the payouts, these packages will come down. There may also be the same kind of zeitgeist populism: one senior aide did not discount the Tory MP Matthew Hancock’s suggestion that the bankers of the five GDP-critical banks could be charged if they ran their company into the ground.

Action on executive pay is just the litmus test, albeit a critical one. The parties are each having a go at tinkering with the whole chemistry set. Although many Tories agree with Miliband in diagnosis, they viscerally part company on everything else. One adviser quotes Peter Mandelson’s infamous quote as being particularly revealing of Labour’s mindset: “I am intensely relaxed about people getting filthy rich, as long as they pay their taxes.” That last bit is what actually sticks in Tory craws. Pay their taxes, not help their neighbour, Tories point out, or try to save the environment or build a great company.

They also disagree on specifics with Miliband’s policy announced last week, that where big energy companies did not voluntarily move their over 75-year-old customers – some of society’s most vulnerable people – on to their lowest tariff, he would legislate to make them. Tories splutter and insist a drive for transparency could do the job.

In a good system, they say, government should have ensured the lowest tariff is for everyone not just old people. Transparency, stipulated by government, would force companies to give people more information so they themselves can switch tariffs. More entrants to the market might also bring down tariffs.

“The key thing,” says one source, “is what DC [Cameron] will always remind you – he is free market but not neoliberal. Neither neo-laissez faire, nor neo-Fabian. But his weakness is that he’s never quite said what he actually is.” Previous generations of Tories have sought to “make markets work better”: Tories took on the East India Company in the 18th century; in the 19th century they made companies limited liability. Hancock, who has done detailed policy work on this – points out it was a Tory PM (Robert Peel) who repealed the Corn Laws, dismantling the barrier that protected British landowners but made food beyond affordable for the less well-off). Hancock quotes Milton Friedman saying the social responsibility of business is to “make as much money as possible, while conforming to the basic rules of society, both those embodied in law and those embodied in ethical custom”.

Both parties in the coalition subscribe to the ideas of Joseph Schumpeter: that the dynamic of capitalism is driven by firms investing or innovating in order to gain monopolies, and the government has to step in to save capitalism from its purest version of itself. There is also support for ending City short-termism, whereby companies are always under pressure to maximise quarterly profits rather than long-term sustainability. Another shared area is a belief that more employee ownership will help bend markets to people’s will – if there is greater employee ownership, businesses will to a greater extent reflect the will of the people. There is appetite to encourage co-operatives.

But there are differences within the coalition. At a time when encouraging business and a growth agenda is critical, some Tories would prefer Cable not to be fronting up the business department and the PM not to be making speeches like the one he is to make on Thursday. Beggars can’t be choosers, they think.

If Tories were really serious about recapitalising the poor, others say, they would be pushing to set up regional banks to bring capital much closer to the people. They also point out that recent Tory attempts to drive down the cost of labour – the recent push to implement the Adrian Beecroft report with its limits on employment rights – are hardly the behaviour of “moral markets”. Still, three leaders and three speeches providing different takes on responsible capitalism. At least the market in political ideas appears to be working. © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds