Abigail Melville: We need a new relationship with business

AbigailBy Abigail Melville

Open information about public subsidies to business would help us change the conversation.

The Fabian Society today publish a report which echoes, at a national level, much of our thinking about the need to build positive relationships with business locally based on commitment to the long term success of a place and its people.  Our Policy Commission will propose a new deal with business based on shared responsibility and shared benefit.

The problems are clear. Business is disengaged from an education and skills system that is not meeting its needs. Business engagement and support services are fragmented. Some employers are competing on cost and taking advantage of state welfare to subsidise poverty pay.

Many of our councils are using Fairness Commissions and Living Wage campaigns to tackle this. Our new deal with business builds on this by seeking to develop local employment commitments backed up by clear incentives.

We are currently developing our proposals for a deal with business and consulting with business about what they value and what their constraints are. We know for example that businesses is often frustrated that the education and skills systems does not supply them with the people they need. So as part of our deal with business, we could promise to supply good applicants to business. In return we expect business to help develop and deliver a local skills strategy to support future growth.

Our evidence sessions showed that by working cooperatively in our areas we can make the systems work better. By working cooperatively with local employers we can improve our knowledge of the skills that are needed. By working cooperatively with schools and colleges we can create opportunities for young people and meet these skills needs.

We need the support of central Government to help change some of the incentives on business. Overall business is receiving millions in subsidies and tax benefits without any reciprocal commitment to collaborate, provide good quality jobs, invest in skills and work with schools.

British business is often criticised for the narrow pursuit of short term profit, but as the Fabian report points out, “rather than being a reflection of the rapacious, mean-spirited and selfish nature of business, short-termism is simply a rational response to the institutional arrangements corporate leaders are presented with”.  These perverse incentives exist in local public services as well. Consider the drive to cut costs for social care and the impact that has on wages paid by local care contractors competing for contracts on a least cost basis.

The Fabian echo our thinking that the key lies in changing relationships and incentives. For example, they propose tax incentives are used to encourage more businesses to adopt enlightened business strategies such as investment in training and committed relationships with employees. Recent reports suggest the cost of “corporate welfare” is as much as £85 billion.

To support our new deal with business we will be asking central government to publish information about the public subsidy that individual businesses receive. Imagine if the next time the Council Leader is having a discussion with a local business they are able to pull up information about the £7 million subsidy that business received last year from the public purse?  How could that change the nature of the conversation?

Abigail Melville is the RSA’s CCIN lead. 

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