Why business must work with politics for the good of society - ACCA Comment

You wouldn’t build a bridge without advice from the experts, and the same applies to the tax system
The relationship can be dysfunctional, but collaboration works to the benefit of all.
On the day that Scotland votes on the most tightly contested constitutional issue the United Kingdom has ever faced, questions have been raised about the relationship between business and politics.
The two are undeniably intertwined; arguably business and politics are the two main driving forces and influences on society. But the Scottish referendum has only reignited arguments about this important question: does business care about politics? Of course it does. The relationship, however, much like a marriage, rests on compromise and mutual respect.
Despite the relationship being slightly strained, perhaps the real concern rests in a lack of trust among the general public. The Confederation of British Industry’s The Great Business Campaign found that only 53 per cent of people think business makes a positive contribution to society.
In the wake of the referendum and the run-up to the general election, what should the three main parties focus on? Are politicians listening to what business wants? And how can business and politics work together in the interests of society?


The strain of this relationship is perhaps most clear when it comes to tax. In this sphere, politics has a huge impact on business, and politicians (whether they like it or not) have to bear responsibility for the current state of our tax system.
We need honest and brave politicians to admit that they cannot be expected to understand the implications of every word in every Finance Act, and allow independent experts and interested parties more input in the law-making process. Tax impact assessments should be more, not less, rigorously scrutinised than for other legislation, and should reflect what will actually happen if the policy is enacted, not just what politicians wish would happen.
Building tax law, like building bridges, is too important and too complicated to be left entirely to unqualified enthusiasts. Politicians may be best-placed to decide where a bridge should lead. But disregarding the counsel of experts on where exactly to place it, and how it will interact with the other roads or railways that lead to it, would clearly be folly. We need the same transparency and accountability on tax. Politicians should not be placed in the position of admitting, years after voting for a measure, that they didn’t understand what its effects would be. Fixing business taxes won’t be easy, but it’s too important not to try.


But tax, like so many other issues, is becoming global. In the wake of the worst financial crisis the world has ever known, big questions are being asked of politicians and of business, and problems can often not be solved by individual states alone. Everyone must compromise in what is an ever more globalised world.
Nowhere is this issue more apparent than in the City of London, where its future as a global financial centre has been a topic of fierce debate for some time.
Both business and the mayor of London have been eager to protect the capital’s status as an epicentre for global activity. And central to that debate is the issue of skilled migrants coming to London to help maintain the City’s status as the finance capital of the world. Business wants the best talent, be that home grown or not.


And contrary to some assumptions, it appears that the public agrees. In a recent report, 59 per cent of the public and 66 per cent of Conservative voters said the government should not cut international student numbers. General public concerns around immigration do not hold true when discussing students, skills and talent. But the business case seems to be falling on deaf ears.
The government must recognise that the immigration debate is far more nuanced, and should take students out of the net migration cap. An anti-immigration message risks preventing universities and businesses from drawing bright minds to the UK.
The higher education sector brings in £8bn annually from overseas students, and the Department for Business, Innovation and Skills hopes to increase that number. The success of British universities remains impressive: on Tuesday, it was announced that 2014’s QS World University ranking rated Cambridge, Imperial, Oxford and UCL among the best six globally, and KCL, Edinburgh, Bristol and Manchester all made the top 30. The rankings judged on numerous metrics, one being internationalisation. If these universities are to remain world leaders, then surely it’s clear there is no place for students in the net migration cap?


The relationship between business and politics is not completely dysfunctional, however. The collaboration between business and government across the skills agenda is impressive and indeed vital to filling the skills gap.
Government has the resources and capacity to create the appropriate infrastructure, for example through the creation of Local Enterprise Partnerships and through the roll-out of faster broadband. But business involvement is also integral. The nature of work is changing rapidly, and employers must assist in setting the agenda of what skills young people need to be “work ready”.
Getting the skills system right is vital for the future wellbeing of the economy, and you’ll find no disagreements between business and politicians here. The next step that needs to be taken is to end unpaid internships. Business and politicians recognise that, for the UK to perform to its full potential, we must improve social mobility. Wasted talent is a wasted opportunity, and we need to seize the moment by recognising this. Internships are increasingly becoming a requirement of getting a job. Politicians of every party should commit to ensuring every one of them receives payment.


Politics involves trade-offs and risks, much like business. But it’s important that it’s calculated risk, based on clear evidence and taking a long-term view. YouGov recently looked at 16 proposals that major politicians have advanced in recent months; a referendum on Europe did not lead on the voter priorities. In fact, even Ukip’s own supporters preferred a welfare clampdown over an early referendum on UK membership of the European Union, by almost two to one.
Business recognises that, while change is required, jumping the gun isn’t necessarily the right way to go. Government should be looking to use our relationship with Europe. Small businesses, in particular, have benefited from numerous schemes designed to improve access to finance, decrease administrative burden and enter emerging markers. Businesses want politicians to focus on economic growth and prosperity, and most importantly stability, so that they can make long-term investment decisions. We should be looking to create change from within Europe, and offer business the benefits that come with being part of the European Union, not just shouting from the outside.
Politics is at its best when it recognises that it doesn’t have all the answers and that it shouldn’t try to. Instead, as with any good relationship, success comes through hard work, collaboration and concession on both sides. If Scotland has shown us anything, it’s that politicians and business must work together to regain the trust of the public.
ACCA will be hosting fringes on “Does business care about politics?” at the Labour, Conservative and Liberal Democrat party conferences.

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

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