Theme: Political Economy | Content Type: Blog

Why the Conservatives' Bond with Business is Weaker than Ever

Deborah Mabbett



| 5 mins read

Long before Boris Johnson gave his robust view of business opposition to Brexit, the Conservative Party had an ambivalent relationship to business interests. Mrs Thatcher disliked the cautious compromise-seeking of the Confederation of British Industry; the aggressive anti-union stance of the Institute of Directors was more to her liking. It is easily forgotten that Cameron and Osborne initiated the so-called  ‘high wage’ strategy with a big boost to the minimum wage in 2015, casually sidelining the Low Pay Commission in the process – one of the few bodies where employers had a clear role in national policy-making.

This is not to say that the party is unfriendly to business. It is heavily reliant on business donations, although it is always worth bearing in mind the difference between rich people and business people. As Gilens and Page pointed out in the US, the concentration of wealth has created more opportunities for maverick figures to pursue their personal obsessions, at great cost to the rest of us. The government is friendly in other ways too, particularly to those with personal links to ministers, but corruption is liable to annoy as many businesspeople as it pleases.

The Johnson government has taken its relationship with business to a new low. At this year’s party conference, the Prime Minister stuck with the strategy of restricting immigration in pursuit of a ‘high wage, high productivity’ economy. He was assailed with criticism from Thatcher’s erstwhile favourite, the Adam Smith Institute, which called the policy ‘vacuous and economically illiterate’. Business leaders convened in a Financial Times forum accused the government of lacking a credible economic plan and complained that economic policies appeared to be politically driven.

The politics of immigration

Whether this loss of influence for UK plc should worry us depends on what kind of politics takes its place. The politics of immigration policy are hard to unravel. Strikingly, commentators on the left have joined the chorus of criticism of the government’s policy. Jonathan Portes and Simon Wren-Lewis have argued that immigration controls will make ‘us’ poorer, while also denying employment to people who would benefit from being allowed to immigrate, albeit to low-waged jobs. Wren-Lewis has argued that if the immigrants left, the economy would shrink and natives would have to do some of the lower-paid jobs. Portes cites evidence that immigration expands the economy and does not harm native workers’ wages.

Obviously, this is not everyone’s experience, and we know well the political effects of failing to grapple with the consequences for those who are disadvantaged by immigration. But there’s another missing element in the story, as Alan Manning recently highlighted. Overall, there will be more low-paid work in a high-immigration economy. Both Wren-Lewis and Portes distinguish sharply between natives and immigrants and point out that natives will, on the whole, benefit from immigrants’ low-paid work. But this sharp bifurcation should make anyone who cares about equality uneasy.  Wage inequality has increased, and those at the bottom are not receiving their fair share.

The exact design of immigration policies will affect how serious a problem this is. In fairness to those on the cosmopolitan left, they advocate genuine free movement, which means that immigrants enjoy full civil rights and can move freely to better opportunities. They are less exploitable than when they enter under restrictive conditions. Requiring migrants to stay with the same employer can lead to gross abuses, as Sarah O’Connor and Judith Evans have uncovered in the seasonal workers’ scheme.

More generally, sponsor visas help employers keep wages low, enhancing their profitability. While it is true that consumers may then benefit from lower prices, and taxpayers from lower costs in health and social care, these gains are founded on a discriminatory and potentially exploitative regime.

Fight them on the beaches?

This government sees immigration policy, along with the minimum wage, as the easiest lever to pull to counter low pay and poor conditions. It has got into a game of chicken with employers, trying to keep immigration restrictions in place and face down employer pressure. It has partly succeeded, but at the cost of price increases and shortages. This would usually be enough to frighten a government into backing down, and it has capitulated in some areas, but it has also resisted by invoking a post-Brexit, ‘fight them on the beaches’ spirit. The government thinks its policies are popular with voters, and will not sacrifice those electoral benefits in the name of economic competence. Instead, its populist strategy is to build on Brexit by reaching for nationalistic excuses in the face of economic disruption, leaving its traditional allies in the business community fuming and powerless.

  • Deborah Mabbett

    Deborah Mabbett

    Deborah Mabbett is Co-Editor of the Political Quarterly journal. She is also Professor of Public Policy at Birkbeck, University of London.

    Articles by Deborah Mabbett