Tensions inside the cabinet are emerging and the likelihood is that they are going to spark an almighty row about the government’s attitude to business.
On one side are the free marketers and authors of Britannia Unchained: the 2012 manifesto for an economy stripped of burdensome regulations.
In the document, Dominic Raab, Priti Patel, Liz Truss and Kwasi Kwarteng – now in the cabinet as foreign secretary, home secretary, trade secretary and business secretary respectively – cast themselves as libertarian “freedom fighters” battling, as Margaret Thatcher once did, to cast the UK less as a donkey in the mould of Winnie the Pooh’s Eeyore and more in the image of a lithe cheetah.
“The British are among the worst idlers in the world,” the authors said. “We work among the lowest hours, we retire early and our productivity is poor. Whereas Indian children aspire to be doctors or businessmen, the British are more interested in football and pop music.”
At the time they were very much outsiders, hustling to be recognised. Brexit was a central plank of their agenda, not least as a way to escape the European court of justice and its supposedly suffocating verdicts on business rules and regulations.
Kwarteng, appointed to run the business department this month, has already been forced to deny that he is planning to light a bonfire under EU worker protections that Theresa May’s government transferred into UK law, such as the 48-hour maximum working week.
The Financial Times said on Friday that it understood proposals to weaken rules about breaks at work, remove overtime pay when calculating certain holiday pay entitlements, and end the 48-hour week, were all part of a package under discussion inside Kwarteng’s Department for Business, Energy and Industrial Strategy (BEIS).
“We want to protect and enhance workers’ rights going forward, not row back on them,” Kwarteng insisted.
But given his sympathies and friends inside the cabinet, few are likely to believe that he is doing anything more than playing for time.
Ed Miliband, Labour’s BEIS spokesman, has already responded with warnings of a “deregulated race to the bottom”.
Thankfully, there will probably be resistance to such moves from more pragmatic cabinet ministers such as health secretary Matt Hancock, Scottish secretary Alister Jack and possibly even Boris Johnson himself.
They won’t rely so much on contesting the claims in Britannia Unchained, such as the falsehood that UK workers clock off early when all international comparisons show they worker longer hours than any in the developed world bar the US.
More important will be the practical implications for the prime minister’s levelling-up agenda, which is already struggling to make any headway while the pandemic is killing record numbers of people.
The “red wall” MPs – those Conservatives who won seats in previously rock-solid Labour heartlands across the north – are asking Johnson to put government support at the heart of a regeneration programme for their blighted areas.
They want billions of pounds in public investment to be directed to big regional cities and towns to protect their parliamentary positions before a general election in 2024.
They need improvements in transport, housing and amenities to be on show for their constituents to give credit to the Tories. They need their dilapidated high streets to be rescued and the local health and care services to be given extra cash following the pandemic.
They do not need an ideologically driven battle over regulations that few in the business world see as a barrier to growth.
There is also the risk the EU, fearful of the UK using Brexit to undercut regulations and export cheaper goods, will quickly retaliate. British workers, forced to work longer hours and cut off from important markets, would suffer twice.
In this debate, sense must prevail. Regulations must be seen for what they are: hard-won protections for vulnerable workers, who often lack a trade union to represent their interests.
Move to ban Carillion bosses is a positive step
A comprehnsive list of organisations that failed at Carillion, the construction and contracting firm that collapsed three years ago this week, would include the auditors, the pensions regulator and the Crown Representative, supposedly looking out for taxpayers’ interests. Ultimately, though, corporate failures tend to start in the boardroom.
It is therefore right that Kwasi Kwarteng, the new business secretary, last week launched proceedings “in the public interest” to ban eight former directors of Carillion from holding senior board posts for terms of up to 15 years.
The financial details of Carillion’s failure, as set out by two select committees in 2018, were extraordinary. The collapse was “sudden and from a publicly stated position of strength”. The 2016 accounts were supposedly so healthy that £79m could be paid in dividends, plus bonuses to executives.
Yet, in July 2017, the company announced an £845m reduction in the value of its contracts, rising in September that year to a £1.04bn cut – a figure equating to the previous seven years’ profits combined. When liquidation came in January 2018, liabilities stood at nearly £7bn versus just £29m in cash. This was a company employing 43,000 people, including 19,000 in the UK.
One can feel a smidgeon of sympathy for the backbench non-executive directors who are included in the disqualification proceedings. They are, in theory at least, less culpable than the main figures at Carillion: Richard Howson, chief executive from 2012 to 2017; Richard Adam, the long-serving finance director; and Philip Green (not the retail tycoon), the chairman.
But the proceedings are essential, even if they have been launched only belatedly. Carillion was the biggest corporate failure in a decade and left chaos in its wake. Even three years on, accountability matters.
No frills, long-haul economy flights could make a comeback yet
When the magnitude of the coronavirus pandemic and its effects on travel became apparent last year, the airline industry’s prognosis was bleak: only a few hardy businesses would survive the summer. Instead, as creditors, aircraft leasing companies and governments were faced with the consequences of calling in debts, the finance was found to keep airlines afloat while barely aloft. The crisis in aviation, to adapt a phrase applied to Brexit, is proving a slow engine failure rather than a sudden crash.
Even Norwegian, whose finances were precarious long before Covid hit, has lurched on, zombie-like, through the pandemic. While its transatlantic Dreamliner fleet was grounded, the airline’s announcement last week that it would never fly long-haul again seemed another marker of change, not least for the 1,100 furloughed British staff who will now lose their jobs.
Coronavirus has put Norwegian back into the kind of local operating realm once expected for a small Scandinavian business, before it decided to wrongfoot the wider world with a wildly ambitious expansion. A combination of the internet, globalisation, changing consumer expectations and a step-change in aircraft fuel costs created the apparent possibility for a new airline to undercut established rivals and open up a new market of no-frills transatlantic flights, for better or worse.
Ironically, its full-service rival airlines’ flights are now cheaper than ever, as most potential customers are barred from travel. However, such carriers’ profits are normally sustained by business fares – the kind of travel whose future looks most likely to be ended by Zoom. If and when holidays are again allowed, fares may remain low in the short-term to attract passengers back. But more airlines may need to rethink their cabins and costs. All-economy, no-frills long-haul may yet have its day – even if Norwegian will be absent from its own feast.