It’s good that Ed Miliband is developing his ideas on responsible capitalism, which is set to be a central political issue for years to come. And his essay for Juncture touches on many of the right themes – the role of industrial policy, short-termism, finance for small enterprises, and so on. But to judge by this article, Labour still has quite a way to go to develop the kind of crunchy programme that a centre-left party in opposition might be expected to be working on at this stage of the political and economic cycle.
Some of the most difficult issues are ignored altogether – environmental sustainability and climate change being an obvious example. Labour has to think hard about the sticks and carrots that will be required to persuade companies that it makes no sense to maximise profits today at an environmental cost that will be carried one way or another by generations to come.
Other themes are addressed with aspirations – ‘I want to see a British Investment Bank supporting Britain’s enterprising small businesses’ – but with very little detail. And some ideas are decidedly woolly, such as those in the section on skills policy, which must be absolutely central to the development of a more successful and responsible form of capitalism in the UK over the long term.
Mr Miliband writes here about the last Labour government’s success in raising standards of literacy and numeracy in schools, and in vastly increasing the number of apprenticeships during its term in office. But this skates over the UK’s continuing shortcomings when it comes to the development of basic and intermediate skills, evident in the fact that many firms are still reporting skills shortages even at a time of high unemployment.
As for apprenticeships, Mr Miliband – like the Coalition government– seems to be much more interested in numbers than in quality. That’s a mistake, because the result is that the notion of what an apprenticeship should involve has been seriously devalued in this country. In continental Europe, apprenticeships are tickets to real job opportunities: they are usually available only to young people and take several years to complete. By contrast, many apprenticeships in this country have very limited labour market value, and amount to little more than subsidised training over relatively brief periods of time for people of all ages. A Labour party in opposition should be kicking the tyres of such a system very hard indeed.
Then there’s the really challenging question of whether companies should be required one way or another to take some kind of responsibility for the training of their employees. Mr Miliband writes vaguely about the need to ‘do more to support labour market progression through active labour market policies’, whatever that might mean. But shouldn’t a centre-left party have more precise views about how to tackle the UK’s relatively low and declining labour training rates?
Employers strongly resist the notion of compulsory training programmes, and with reason. But there is still an important debate to be had about how best to encourage more company-led training, and a recent IPPR publication No train, no gain: Beyond free-market and state-led skills policy provides a good starting point.
It argues that a lack of investment in training is rooted in insufficiently ambitious competitive strategies which do not stimulate the kind of investment that’s needed to build a well-skilled workforce. And it makes the case for sector skills councils to be reinvigorated and made more democratic, and for establishing local skills boards at the level of local enterprise partnerships. Membership of these boards would be mandatory where that made sense, but would also bring benefits – such as access to tax relief for training, and tailored business advice.
There’s plenty of room for argument about ideas like this – and that kind of debate is exactly what’s needed right now. The last Labour government showed that pouring large subsidies into training on a top-down basis did not produce value for money. And we know that the market by itself is unlikely to fill the gap without some form of encouragement, not least because even the most responsible companies fear that freeriding competitors will poach their staff once they’ve been trained. Labour needs to get to grips with these issues.
Responsible capitalism starts with a company that places the needs of its customers first, delivering competitively priced products and services in a sustainable fashion. It gives due weight to the needs of other interested parties – shareholders, employees and communities. And it makes profits not for their own sake, but rather in order to meet its obligations to these different stakeholders, and to stay in business. Mr Miliband is right on the big picture when he’s discussing these broad issues. It’s time now to get down to the detail.