The Daily Telegraph

Fraser Nelson

Corporate cronyism from the Cabinet undermines British enterprise and could spell disaster at an election

- Fraser nelson

Almost 250 years ago, Adam Smith observed that businessme­n “seldom meet together, even for merriment and diversion, but the conversati­on ends in a conspiracy against the public”. Capitalist­s, in other words, tend to collude. We saw as much this week when bosses from Amazon, BP, Siemens and Tesco all held a conference call with Philip Hammond, the Chancellor. The topic: how to subvert the Government’s Brexit strategy. A recording was leaked to this newspaper, and the transcript is fascinatin­g.

Their problem is a simple one. Theresa May has always said that if the European Union does not offer acceptable terms, Britain will leave on March 29 without a deal. The open secret is that Mr Hammond, an ardent Remainer, has sought to sabotage no-deal planning from the offset to make sure it is not an option. But he needs help. Greg Clark, the Business Secretary, is onside. When Mrs May lost her vote on Tuesday, a no-deal outcome looked more likely. So the two held a panicked conference call with leaders of the largest British businesses to talk tactics.

Mr Clark thanked them for their support and said his “purpose” was essentiall­y “to reflect all the things you have told us”. The business leaders didn’t much like Brexit and certainly didn’t like the sound of no deal. Don’t worry, said Mr Hammond, there’s a backbench amendment that will torpedo this option. The chairman of Tesco demanded an “undertakin­g” that Mr Hammond will do nothing to frustrate this plan. The head of Amazon UK said his “global board” need the “comfort” of knowing that this sabotage mission will succeed. The CBI underlined to Mr Hammond that a no-deal exit must be taken “off the table”.

The transcript reads, in places, like a bad Bond script: a capitalist cabal issuing instructio­ns to politician­s who seem to be at their beck and call. And a reminder of why, if there is a general election, the Conservati­ves could be in some trouble.

I regard myself as passionate­ly pro-business and wish companies would do more to join the national debate. But preferably out in the open, not in backroom deals. When government listens to “business” it tends to listen to the largest, multinatio­nal businesses, the ones who have done very well from globalisat­ion and the EU. The vast majority of businesses in Britain have fewer than 10 employees – so who speaks for them? They would not stand much chance of being invited to such conference calls.

In the referendum, small businesses were five times more likely to support Brexit compared to big businesses. It’s fairly easy to understand why. Companies with high costs and overheads tend to like regulation being erected by the EU, creating barriers to entry for new companies. The multinatio­nals can afford lobbyists to make sure rules in Brussels work for them. It’s part of a trend that has seen big firms concentrat­e power – and their sway over government­s. The Hammond conference call can be seen as a discussion on how to keep the best parts of the old regime in place.

One of the chief executives on that call once told me that, when he needs extra staff for warehouses, he recruits direct from Poland. His logic is depressing­ly clear: it’s a pain to look for Brits, to train the long-term unemployed and cope with the higher dropout rates. Over the years, British business has come to rely on imported labour rather than investing in machinery and skills. They ought not to be blamed for this: they are just responding to the system. Brexit was a vote to change the system.

Jeremy Corbyn seems to understand this. His recent election videos are slick, saying that a good country has been betrayed by people who did well from the crash and who act hand-ing-love with their Tory friends. And now, he might as well add, Tories who are so cosy with big business that they hold conference calls after losing votes in the Commons so they can console each other and compare notes.

This is cruel exaggerati­on but, this week, the cap seems to fit. For years, the Tories have been drifting into crony capitalism, handing contracts to companies whose bosses then do favours for the government. Mr Clark has sought to make a virtue of this corporatis­m by calling it an “industrial strategy”. Now and again, he announces “sector deals”, where major players in car-making, constructi­on etc are invited to cut a sweetheart deal with the Government. It looks like outright cronyism, doing nothing to solve the general problem of large companies having too much power.

The mission of a Conservati­ve government ought to be simple: keep taxes low and regulation­s light. Be on the side of the small guy – always.

By all means listen to business voices, but remember that – as Adam Smith pointed out – they’ll have a vested interest in keeping prices high or competitor­s at bay. So don’t get too close. Colluding with corporates about how to best frustrate a referendum result is not a good look.

There’s a very good story to tell about British business. Years of steadily lower corporatio­n tax has helped employers take on record numbers of people, keeping investment flooding in. Start-up companies are sprouting all over, the hotspots being Bradford, Birmingham, Leeds and Liverpool. As for fairness, the best-paid one per cent are earning 12 per cent of all salaries but paying 28 per cent of all income tax: a higher rate than under any Labour government, even in the Seventies. Under the Tories, Britain is now redistribu­ting more wealth than Sweden.

These are the facts. But if they’re not articulate­d, then they won’t compete with the Ken Loach-style horror stories that Labour has ready.

Mr Corbyn may soon have a chance to test his narrative. More Cabinet members think we are heading for a general election, which might come after Mrs May declares she can find no consensus for a deal. In her desperatio­n, she may well try such a gamble – and find that, while her party has spoken about nothing other than Brexit for two years, Labour is ready with a more interestin­g story, about crony capitalism.

And Mr Corbyn’s greatest weapon will be a Conservati­ve Party that has been playing straight into his hands.

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