Conservative conference delegates cheered Boris Johnson when he took a swing at British business. Business leaders outside the hall were furious. Chris Philp, the Tech Minister, had a little pop at UK institutional investors for not backing native nascent tech companies.
Away from these suggestive, headline-grabbing interventions, DeHavilland’s Charlie Byatt, Esme Trevelyan and Alexandra Braby saw a more nuanced picture.
As expected from the self-named “party of business”, there was much discussed on businesses, both small and large. There seemed, unsurprisingly, to be a specific focus on how to help businesses help themselves to recover from the covid-19 pandemic and to harness their successes to bolster the economy.
During his keynote speech, Prime Minister Boris Johnson mentioned “levelling up” an astonishing 12 times. This new catchphrase was uttered widely in all corners of the Conservative conference, but many agreed that without precise definition it means simultaneously everything and nothing.
Andy Street, Mayor of the West Midlands, said that levelling up cannot be delivered from Whitehall alone, and that local authorities and mayorships are key. Across the board, from panellists to MPs, everyone wanted further clarity.
In an event with the FSB, Kwasi Kwarteng MP, Secretary of State for Business, Energy and Industrial Strategy, stressed that it is his job to “protect businesses”, and vowed to do so. He said he would look into late payments and the apprenticeship levy, which he admitted could be better targeted.
Lee Rowley MP, Minister for Business and Industry, conceded that businesses want post-pandemic and post-Brexit clarity, which he said is provided in the plan for growth. He said the spending review would give further clarity.
There was a strong theme throughout the conference on increasing UK productivity, which would be intrinsically coupled with increasing the quality of jobs, pay and conditions. Mr Kwarteng said that the way forward is for the UK to have high wages and higher-skilled workers without relying on high immigration.
The HGV driver shortage was a key example. The theory goes as follows: if driving an HGV is recognised as a higher skill, it will attract higher pay and better conditions, and more people will gravitate towards the profession and do the training. Immigration, so the argument goes, simply drives down pay and conditions and involves no upskilling. It’s an interesting theory. Let’s just say that questions remain.
In a fringe event hosted by Bright Blue, the centre right thinktank, there was agreement that the pandemic had affected different sectors and regions differently within the UK, and therefore that a one-size-fits-all approach to the recovery will not suffice.
In an event hosted by the Health Foundation, there was talk of how best to help people with disabilities to flourish in their jobs, which included blended working, an increasing focus on assistive technology and helping those with disabilities to retain work – they have been disproportionally affected by the pandemic in terms of job losses.
There was a general consensus that, while the Government had done extremely well with the furlough programme, it needed to do more in the coming months. Many panellists, including Christian Wakeford MP, said that the cut to universal credit was unacceptable and diametrically opposed to the Government’s levelling-up agenda.
In a jam-packed event on Monday at the Conservative conference, a panel unanimously agreed that retail needed help. High streets, retail parks, community parades have felt the pandemic hurt most sharply. As a free-marketeer, Jake Berry MP said that he wanted the Government to “get out of the way”.
Paul Scully, the Minister for Small Business, Consumers and Labour, another free-marketeer, said that local authorities and the Government have a significant role to play in helping retail to bounce back.
There were mixed views on how best to implement a tax on online retailers to level the playing field for bricks-and-mortar businesses, or on whether to tax online retail at all. Mr Berry said he would not want to demonise online retail. Nick Lakin, from Kingfisher, gravitated heavily towards the idea of a delivery tax that he said would be a low burden for the consumer.
The UK hosts of COP26 next month, and sustainability was a key theme of financial services-related fringe events.
The Task Force on Climate-Related Financial Disclosures (TFCD) reporting requirements recently came into force, per the Pension Schemes Act 2021. TFCD has two big implications for pension stewardship: how to account for climate risk; and how to marshal trillions of pounds in pension fund money into environmentally-friendly investments.
One of the more ambitiously titled fringe events – “Can pensions save the planet?” – covered several key issues. Pensions Minister Guy Opperman, a popular figure who was commended throughout the conference by his colleagues and industry participants as driving forward the sustainable finance agenda to great effect, was keen to stress the importance of “active stewardship” rather than forced divestment from carbon-unfriendly companies.
Mr Opperman wants to use divestment as a “last resort” because access to capital will allow businesses to drive innovation in green products and solutions. The Government was keen to use the conference to state the primacy of businesses in helping solve the climate crisis. The PLSA’s Nigel Peaple highlighted the importance of Government signalling on its green policies to enable businesses to make investment decisions with clarity.
We can expect the focus on the social element of ESG investment to intensify. Gareth Davies MP, formerly of Columbia Threadneedle Investments, suggested that the “next big wave” would be in social bonds following the recent issuance of green gilts.
Socially aware business – ethical supply chains, human rights, sustainability – was passionately discussed at a fringe dedicated to investments in China. In March, the Chinese Government sanctioned a group of UK parliamentarians for their role in spreading “disinformation” about the human rights situation in Xinjiang. Sir Iain Duncan Smith, who was among that group, led the calls for a crackdown on companies dealing with China. It’s possible to detect a broader hardening of anti-China sentiment within Parliament, and the social impact of investments could play an increasing role in policy as the Government seeks post-Brexit trading opportunities.
The future of financial services
Solving the climate crisis notwithstanding, discussions about the future of the sector touched on a broad number of areas, from regulatory reform post-Brexit, to crypto-assets and digital banking.
John Glen, Economic Secretary to the Treasury – another Minister widely recognised as doing a stellar job championing the UK’s financial services sector – confirmed that legislation on the UK’s future regulatory framework will be presented to Parliament in Q2 2022. The legislation will deal with how to regulate. The presumption is that regulatory bodies – the FCA and PRA - will be left to interpret the technical details of a direction set by Parliament.
A key theme from MPs and industry representatives was that regulators need to be agile and should not get too hung up on getting regulation right the first time. The sense was that, if the UK wants to encourage high-growth, innovative businesses, the regulatory regime needs to be accommodating and to show leadership.
A few solid reform proposals came up. Changes to banking taxes and levies are the most likely to be looked at quickly, potentially as soon as the October Budget. Ministers seem keen to lower costs on the City in the context of global corporation tax increases.
On competitiveness, UK Finance warned that the FCA’s recent duty of care proposals and Department for Business, Energy and Industrial Strategy plans for corporate governance reform could have the opposite effect and increase the burden on UK businesses.
The future of financial services also threw up more specific discussion on financial inclusion. Panellists said that improvements in digital banking and an expansion of crypto-assets have helped vulnerable people to manage their financial affairs and have a place in the formal financial ecosystem.
A final point of tension is deregulation. Throughout the conference, Mr Glen stressed the importance of high standards in attracting business to the UK and continued the narrative that there wouldn’t be a bonfire of regulations post-Brexit.
Chancellor Rishi Sunak said he is “all ears” for deregulatory ideas in financial services and FinTech especially, but that deregulation was being looked at across the Government under the leadership of Lord Frost.
Industry participants seemed to indicate that there is not a strong appetite for deregulation, and that tweaking of EU rules to suit the specifics of a UK economy is a preferable approach.
Economy and financial sustainability
As expected at an event hosted by the Taxpayers Alliance and the Institute of Economic Affairs, Chancellor Rishi Sunak was grilled on taxation.
The Chancellor was keen to reiterate what he said in his keynote – that there is a need to reduce public spending. He was keen to spread the message that the Conservative party needs to restore its self-described reputation for fiscal responsibility. He went as far as confirming that taxes will not be lowered until public debt is stabilised.
Following widespread public backlash against his decision to raise national insurance contributions to fund social care, which disproportionately impacts younger people, he argued that it was the “least bad” option available to him.
Prime Minister Boris Johnson was criticised last week for placing more of a burden on businesses, including the burden of his blame, and his Chancellor didn’t attempt to reverse that narrative. He said national insurance is a revenue-raising lever that allows employers to foot more of the bill.
During his keynote speech, Prime Minister Boris Johnson stressed that he wants to make the UK “even more attractive destination for foreign direct investment”.
At a fringe event titled “Investment big bang: funding Britain’s future”, there was excitement among the panellists about post-Brexit Britain investment. Dehenna Davison MP said that the human aspect of investment would have profoundly positive effects on so-called “left behind” constituencies like hers. Anthony Browne MP looked forward to tax increment financing – the Northern line extension to Battersea power station is a key example – to help finance investment in the UK in a low-tax, low-risk way.
The Labour party conference focused heavily on business and economy, with very little attention given to financial services. As leader Sir Keir Starmer’s first in-person conference, the event was a chance to finally deliver policy ideas ahead of the upcoming local elections and the more distant general election. The party focused on orienting itself towards business and fiscal responsibility, but maintained that it is still be the party of fairness, and pledged to invest in tackling the climate crisis.
Keen to shed the party’s perception as untrustworthy and irresponsible with money, shadow Chancellor Rachel Reeves pledged fiscal responsibility and the avoidance of “making promises we cannot keep” – a thinly veiled dig at the party’s moonshot 2019 manifesto. Ms Reeves promised the creation of an Office for Value for Money to scrutinise public spending and to minimise waste, especially with reference to Conservative cronyism in covid contracts. She promised to claw back public money spent on unusable PPE and the outsourced track and trace system. Ms Reeves also promised the “biggest wave of insourcing in a generation” but would not re-commit to Labour’s previous policy of renationalisation.
Across various fringes there were calls for bold and transformative policies, coming from big voices such as Mayor of Greater Manchester Andy Burnham and shadow Business Secretary Ed Miliband. Borrowing to invest was not shied away from. One rumour doing the rounds is that the leadership is not happy with either Mr Burnham or Mr Miliband for freelancing on policy ideas such as universal basic income, common ownership and wealth taxes.
Both shadow Chancellor Rachel Reeves and shadow Business Secretary Ed Miliband stressed across the conference that Labour was a “pro-business, pro-worker party”. The shadow Chancellor pledged to scrap business rates entirely, replacing them with a new system that “incentivises investment, promotes entrepreneurship and rewards businesses that move into empty premises”.
Mr Miliband talked of the importance of “purposeful business” and suggested that Labour would want to reform the corporate governance model by reconsidering the Companies Act 2006.
Everyday economy and fairness
The shadow Chancellor focused on the “everyday economy” of working people and said that Labour would not “balance the books” on the backs of ordinary people. Ms Reeves said that Labour would ensure that the tax system is fair and that the economy works for all, applying a “laser focus” to tax loopholes and making sure that those at the top pay their fair share.
She also suggested that a digital services tax would allow room for the Government to continue to freeze business rates for longer.
Ms Reeves said she would be the first “green Chancellor” and announced Labour’s policy to invest £28 billion in green industries per year. The targets of the spending would include gigafactories, hydrogen, offshore wind turbines manufactured in Britain, and more everyday infrastructure such as cycle lanes and home insulation. The announcement came after Labour leader Sir Keir Starmer was seen to ignore young climate activists attempting to question him outside the conference.