Daily Coronavirus Webinar: In Discussion with the Shadow Chancellor of the Exchequer

Overview:

Today's webinar took the form of a conversation between the CBI’s Director-General, Carolyn Fairbairn, and the Shadow Chancellor, Anneliese Dodds. The CBI has been speaking regularly, behind the scenes, to Labour’s new economic and business teams. We are grateful that Anneliese was able to join us today in this rather more public setting!

Among the issues we discussed were:

• Labour’s attitude towards business
• A different settlement
• Improving access to finance…
• …and the Job Retention Scheme (JRS)
• Planning for the restart.

Labour’s attitude towards business

Does a new Labour leadership represent a new relationship with business? Anneliese explained that her own relationship with business was formed while growing up: “My dad was a small businessman. He set up a load of businesses – most of them failed. Thankfully, the second-to-last one didn’t fail. He worked six-day weeks for 30 years. I know how hard businesses work.”

She added that the current crisis has, in fact, helped many people to recognise the hard and decent work that businesses do. “We are reliant on retail and logistics; it’s getting us to think about what’s needed for a fair, just and equitable society.”

Anneliese’s approach to business as Shadow Chancellor will, she said, be “very much about having an open door”. She spoke enthusiastically about the business engagement groups that already exist within the Labour party and explained that she is “trying to intensify” this engagement. Indeed, she even invited businesses participating in the webinar to “get in touch with me” – with her parliamentary office probably being the easiest route of contact.

A different settlement

When it comes to businesses that are not acting in good faith, Anneliese suggested that now is not the time for an “ideological approach” that would “deny people the support they need”.

But she did add that, once the immediate crisis has passed, there will need to be a “different settlement” around various issues, such as “creative tax mechanisms” and “environmental performance”. She emphasised that this is not an anti-business position, but rather a matter of fairness: “There is an upside for businesses around [this] – particularly for those that are striving, as so many are, to achieve the right outcomes in those areas.”

Carolyn welcomed the prospect of this discussion – and said that the majority of businesses would welcome it, too. “This is something that every business I speak to wants to be involved in… accelerating the conversation about business with purpose… making sure that energy is used to build a more sustainable, fairer and more prosperous future after this crisis.”

Improving access to finance…

What does Anneliese make of the government’s economic rescue package? On the whole, she was complimentary of what has been done and the speed at which it has happened. But she did point out that “where there are areas of concern, we haven’t shied away from putting those on record”.

“If I try to identify what feels like the weakest element,” Anneliese said, “it is around CBILS [the main Coronavirus Business Interruption Loan Scheme] and particularly around smaller businesses.” She went on to describe some of the measures that Labour is suggesting to improve the flow of money to small businesses, including some form of “100% guarantee,” and “transparency” around the staffing levels and general workforce capacity at the banks.

Of course, the CBI has also been calling for action around the smaller end of the CBILS process. We formalised these calls yesterday, Carolyn explained, with a list of measures that the government could adopt – including a 100% guarantee and a speedier process for loans up to £25,000; and a 100% guarantee “within the CBILS system” for loans up to £500,000.

Carolyn also dwelt on the possibility of expanding the grants available to businesses. At the moment, grants are provided through local authorities to businesses in the retail, hospitality and leisure sectors. “This should be extended to manufacturing,” said Carolyn, who also revealed that the CBI’s latest Industrial Trends Survey contains “one of the weakest outcomes for manufacturing that we’ve seen in the last 50 years”.

Anneliese agreed that thinking about grants, as well as loans, could be beneficial – particularly as “it’s possible that many companies could find it difficult to pay back those loans”.

…and the JRS

Anneliese’s message on the JRS was similar. She said that “there’s no question” that the scheme has prevented a “worse situation”, but she also highlighted one or two areas of concern.

Among these areas is partial furloughing – which is to say, the possibility of having staff work part time while on furlough. The JRS doesn’t currently allow this. It is, as Anneliese said, “all or nothing”. She added: “I really do think that [ministers] need to be working hard to try and develop a more flexible system as we come out of this.” This is something that the CBI has been calling for, too.

Anneliese also cited the example of Germany, which has had a “short-time” work scheme in place for years – a scheme that could very easily be adapted for the current crisis. “There are incentives in that system for businesses to aid their workforce with retraining.”

But the Shadow Chancellor also emphasised that “we shouldn’t be thinking about the scheme on its own”. “A critical factor is what alternative provision and support there might be. If we did have a fall-off in support – without the recognition of different challenges in different sectors and in different regions – we will see an increase in unemployment.”

Planning for the restart

As we turn towards restarting the economy and reopening businesses, “we’ve got to fix it together,” said Carolyn.

There appears to be, she added, two philosophies on the restart: one that is “top-down”, with politicians telling businesses when they can and can’t open; and another that is far more collaborative, developing guidance so that businesses can reopen having gained the public’s trust.

The CBI, which is having conversations with trade unions and healthcare professionals today, is trying to collaborate. “We will be taking our ideas to the government next week,” revealed Carolyn.

Anneliese also urged collaboration: “What this crisis has demonstrated [is that] when you get the experts in a room, and you require them to work together, that can have very positive results.”

She suggested that a particular area of focus should be what has worked and what hasn’t worked during the lockdown: “If you look at procurement issues, we’ve had a very centralised system that hasn’t necessarily worked very well. A number of local organisations stepped up to the place to improve the situation…. We’ve got to ask what went well there and empower those organisations.”

That’s in the spirit of the CBI’s continuing search for personal protective equipment (PPE). “Businesses that can’t easily socially distance do need their own supplies of PPE,” said Carolyn. “Many businesses don’t want to take supply away from NHS. We do need a parallel track. Some of that can happen without government.”

If there’s any way you can help, please contact businessheroes@cbi.org.uk.

Key questions we answered:

1. To Anneliese, what is your perspective on how the government can and should respond to this pandemic?

• Thank you to the CBI who are doing an incredible job in ensuring that businesses concerns are being heard.
• Our main concern has been to work constructively with government. Where there are areas where we think they should do more, we have not shied away from putting that on the record.
• We are concerned about the access to finance for small businesses, as an example. However, when we raise these concerns, we are keen to do it in a constructive way to ensure we do not turn this into a partisan knockabout.
• Regarding the future, we need to be thinking about what the recovery will look like and how the current support packages will lead into that.
• This could involve issues such as re-training and access to a skilled workforce. Time for fresh thinking and learning from other nations on this – as the CBI have done.

2. Where do you think the weaknesses with the government’s approach lie?

• I do think there are issues with CBILS, and in particular, small business access to the funding.
• The take up of CBILS is, compared to other nations, very low in the UK.
• We set out 5 different ways we thought it could be sorted, including the 100% government guarantee.
• Banks are forced to use the same commercial decision-making process as they would do with loans previously.
• There are severe cashflow issues with 15% of businesses only having enough cashflow for one more month. That money has to get to them as an urgent priority.
• The UK appears to be taking more of a focus on loan financing rather than grants, which are practised in other nations. I can understand this approach but there are concerns for the longer term around debt. It is possible that it could become very difficult for businesses to pay back those loans down the line.
• So, we are saying to government that we need to start having these conversations now.

3. What are your key steps to improve CBILS?

• Ed Miliband set out these proposals, set out last week. most of the key aspects of what we are asking for are exactly the same as what the CBI are asking:
  • We think there does need to be a 100% government guarantee
  • Need to be a change in the government’s stipulation on how banks are delivering the scheme.
  • Needs to be a focus on boosting the capacity of banks.

4. On the furloughing scheme, have the government got the operational side of it right?

• We would say the scheme is broadly working well. We were very relieved with its rollout.
• I pay tribute too all the HMRC staff who worked so hard on it.

5. On the issue of transparency, are the CBI getting enough clear information in from government and business to inform your recommendations on what needs to be done next?

• Regarding CBILS we know this is difficult as the banks collate data in different ways, so UK Finance have produced a standardised format on how to collate the data.
• On the JRS, we want to know what size and kind of businesses are applying so we can understand how well it is working.

6. Under Keir Starmer’s leadership, how will you be changing how you engage with businesses?

• Business has to be at the centre of our economic future. Without them, you don’t have a viable economy.
• This will be based on having a close relationship with the business community.
• We want to have an open-door policy to businesses so they may receive a hearing if they have any concerns about our policies.
• In the past, we have had difficulties on policy-making with elections that were declared quite late, now it looks like we could have four years until the next election so we can have more detailed debate with businesses to form our policies.
• We also have a business engagement team within the Labour Party, which we work with very closely now.

7. On part time work within the furlough scheme, there are companies saying they cannot afford to keep someone on full time. An employee may only need to do a day per week, but the scheme has no capacity to accommodate that. What discussions are you having with the Treasury to address this?

• The Chancellor has so far said that you are either completely furloughed or you aren’t.
• I think they need to develop a more flexible system out of this.
• Germany has incentives within their system for employers to aid their workforce with re-training programmes.
• I accept there are enormous technical challenges with implement this, but I do think we need to start learning from best practice taking place in other countries.

8. On the JRS, would Labour be minded to continue extending the scheme or will you adopt the position being that the sooner we re-open the economy, and end the scheme, the better?

• The critical factor is what alternative vision and support there may be to that system.
• If we do not address that and end the scheme, leading to mass unemployment, that is a conclusion nobody wants.
• The long-term impact of making people unemployed will be enormously expensive, just as the JRS is.

9. How would you be setting out the plan for the re-emergence of the economy after the lockdown?

• Government with trade unions and business working together led to the successful rollout of the JRS.
• We need to adopt this tri-partite approach to address this issue. This will help us properly addressing what safe-working looks like, so we do not compromise people’s safety when re-opening the economy.
• I also would like to see this mechanism continuing as we address longer term economic questions.

10. What are your instincts politically towards capitalism and business?

• My father was a small business owner and had to work for 6 days for approximately 30 years, so I appreciate just how hard people within the private sector work.
• This crisis has shown businesses demonstrating that they are doing the right thing.
• I hope that this will lead us to a better recognition of quite how critical many aspects of business are.
• As we exit the crisis, we will need a different settlement on issues such as the environment and the recovery.
• The burden of recovery will need to be distributed fairly as we will be reaching debt levels that are worse than what we saw after the global financial crisis.