Gove declares war on ‘crony capitalists’
Environment Secretary strays from brief to unveil manifesto for tax reforms that favour ‘the rest of us’
MICHAEL GOVE has declared war on “crony capitalists” as he suggested changing the tax system to encourage investment rather than “short-term” profiteering.
The Environment Secretary said capitalism was “failing” because a privileged few had “rigged the system” in their favour.
In a speech that was interpreted by some as a pitch to succeed Theresa May as prime minister, Mr Gove laid out his own manifesto for fixing capitalism so that the poor were not “shut out”.
His speech – which was approved in advance by Downing Street – strayed far beyond his environment brief, and followed a speech last month in which he urged the Tories to move on from Thatcherism to win over younger voters. He said the Government must meet the challenge of “the failure of our current model of capitalism to deliver the progress we all aspire to” and compared today’s poor growth to economic crises “when we needed to reform capitalism to save it”.
He added: “Economic power has been concentrated in the hands of a few and crony capitalists have rigged the system in their favour and against the rest of us …
“It’s not just that members of the cognitive elite … have the networks and mobility to insulate themselves from economic shocks, it’s also the case that deliberate policy decisions have rewarded those who’re already asset-rich.”
Calling for government intervention, Mr Gove said it was right to step in to “repair” free markets.
He blamed irresponsible levels of borrowing; excessive bonuses for bosses; dividends and share buy-back schemes that “enrich” managers at the expense of long-term investment, and mergers that close down competition.
He also took a swipe at companies that employ lobbyists to “control the rules of the game” by persuading governments to “shape regulation in their favour”. In order to fix the system and “restore incentives to innovation, creativity and growth”, Mr Gove suggested reforming the “rules” that govern how investors are incentivised in order to promote innovation rather than “taking low-risk, short-term options”.
He also said that after Brexit, the UK could “look at how the tax treatment of different types of investment could change”, while corporate ownership rules could be tweaked to help entrepreneurs maintain control of their firms rather than being bought out by rivals. Finally, the Government could “place appropriate restrictions or controls on lobbying” to “prevent the powerful rigging markets in their favour”.
Without such reforms, he said, the rise of far-left and populist movements would continue as voters lost faith in the capitalist system to deliver greater wealth for all.
Mr Gove, who was speaking at the Policy Exchange think tank, said his ideas were “simply potential lines of inquiry” rather than suggested policies.
On this Thursday a year ago, Britain went to the polls in a snap general election whose outcome left Theresa May without a parliamentary majority. Although the Conservatives won 42.5 per cent of the popular vote, a higher proportion than at any time since the Eighties heyday of Margaret Thatcher, Labour polled 40 per cent, far beyond expectations.
Different lessons have been drawn from this. We argued, both during the campaign and afterwards, that the Tories should have been bolder in espousing the virtues of free markets, competition, low taxes and a smaller state. However, the Left’s malign narrative that rapacious capitalists were plundering the nation’s wealth and keeping the poor in their place was shared, to some extent, by both parties. It still is.
In a speech to the Policy Exchange think tank yesterday, Michael Gove borrowed much of the Left’s language in a lengthy critique of capitalism. Our current model had failed to deliver the progress we all aspire to, he said, though it is doubtful that any economic model could ever be so bountiful. But Conservatives have always taken the view that encouraging wealth creation will benefit everyone, even if some people get better off than others as a result. In contrast to the Left’s egalitarianism, Tories maintain there will be less wealth to spread around if those who create it are unduly penalised, making everyone poorer.
Mr Gove challenged this view. He said “economic power has been concentrated in the hands of a few and crony capitalists have rigged the system in their favour and against the rest of us”. Bosses who paid themselves excessive amounts must be “called out and held to account”, he added, though without saying exactly how. Ed Miliband could have made this speech; and, indeed, he probably did.
Mr Gove is right to address the voter discontent fuelling populist movements across Europe. They have supplanted the traditional parties by tapping into a deep well of resentment often replenished by mainstream politicians on the Right unwilling to defend their ideological corner. A variation of the capitalist model is succeeding in the East, but to keep up with those economies we need to be more productive, more competitive and less hamstrung by excessive regulation and high taxes. Is that what Mr Gove is proposing? We certainly hope so, but somehow doubt it.