Speech to Cicero Global delivered at the Law Society, London 8th March 2018 by Nicky Morgan MP
Good morning Ladies and Gentlemen.
It is great to see so many people here today. Thank you to Iain and his team at Cicero for arranging this and to the Law Society for hosting.
Today is International Women’s Day. As many of you will know the Committee which I have the immense privilege of chairing is conducting an inquiry into ‘Women in Finance’. One of the questions we are addressing is why does diversity, in any organisation, matter? As we are hearing, more diversity, in this case gender diversity, means less chance of ‘groupthink’ whereby it is too easy for everyone in an organisation – such as a company boardroom - to think the same way and there is some tacit agreement not to challenge what is really going on. It has been said that if Lehman Brothers had been Lehman Sisters it might not have suffered the fate it did.
2018 is also the centenary of the first female Member of Parliament to be elected. I am very proud to be the 321st female MP elected to Parliament over the course of that 100 years – we are now at 489.
And proud to be the first ever female Chair of the House of Commons Treasury Select Committee.
Before and after 1918 there have been women who blazed trails, who caused havoc, who argued passionately and proudly for their beliefs and who got things done. My favourite Margaret Thatcher quote is ‘If you want something said ask a man, if you want something done, ask a woman’.
So in that spirit today I want to challenge some ‘groupthink’ going on in my Party at the moment.
I want to challenge the notion that Brexit has to mean that the Conservative Party cannot begin to refresh our thinking and attitudes in a whole host of areas. I hear ‘After Brexit…” too often. We do not need to wait until 29 March 2019 before we begin to respond to the reasons why many people voted to Leave the EU and gave the establishment a good kicking on 23 June 2016.
Now also seems like a good moment given last week’s news that, after a lot of hard work, day to day spending has been brought into balance.
And while the Shadow Chancellor will, no doubt, call for the spending taps to be turned on the real opportunity we should be taking is to make the next set of plans to ensure our economy is working for everyone and assess how we use this milestone to build a better society.
Some of you may be relieved to hear this is not a speech about Brexit. As I’ve already publicly stated – the Prime Minister’s deeply pragmatic speech last week provided a very welcome dose of realism into the whole Brexit debate and laid out some of the compromises needed to leave the EU but to do so in a way which protects people’s jobs and security. But while there is no doubt that Brexit hangs over all other political and economic discussions at the moment, so it cannot be ignored, it also really cannot continue to use up all the oxygen in Whitehall and Westminster in the way that it has done since Summer 2016. And, in any event, as the PM said last week – Brexit is not an end in itself. Politics will continue to roll on after Brexit and we have to be preparing to shape that landscape now.
And I want to argue today that the department with the greatest ability to shape the Conservative Government’s approach to domestic priorities is the Treasury which can work with mainly domestic facing departments, prepare the ground for post March 2019 and push on with our one-nation policy agenda.
I recently read something very alarming – that John McDonnell is working on a new and transformative economic policy for the Labour Party. The question is what will be new about it and whose lives will it transform? I can give you the short and traditional Conservative answer – this is a Labour leadership whose economic policy takes us back to the 1970s and the only lives transformed are those of the union paymasters and those who end up out of work as they drive our economy to the brink.
But, frankly, we tried that response in 2017 and it didn’t work so that answer definitely won’t do in 2018. We have at least one if not one and a half generations for whom talking about the 1970s means nothing and many others who’d actually quite like their lives to be transformed – or, at least, to be very different from how they are now.
The IPPR, which has set up a Commission on economic justice which is working on a new vision for the British economy, believes that the 2008 financial crisis is as serious as the crises of the Great Depression of the 1930s and the oil shocks and ‘stagflation’ of the 1970s.
As the IPPR Commission puts it in their interim report “The British economy today is not generating rising prosperity for a majority of the population.”
The Conservative Party has to stand back and recognise that our capitalist free-market economy is not working for many people as it should. And even those for whom it is, on the face of it working, in the sense that they have a job and a home and can pay most bills fairly easily have an instinct something still doesn’t feel right in our society.
So, in the same way that the Thatcher governments offered people a different way in the 1980s we have to offer a new route for the 2020s.
First, for many citizens Britain’s social contract, that is the promise that the next generation will have better opportunities than their parents, is broken. The Conservative Party has to work out, soon, how to repair the contract or face the consequences. And we have to do so in the political headwind of Brexit and an economy which isn’t growing as fast as our competitors and where wages have been very slow to rise. Unaffordable housing, increased automation in the workplace, an imbalance between the regional economies of London and the south of England and the rest of the country and a belief that no-one listens to what the ‘ordinary voter’ thinks all contributed to very real frustrations.
In June 2016 those frustrations found a voice in the EU Referendum. Next time they could find a voice in voting Labour.
Second, our rules based international system is under some strain as the accepted world order changes, the leader of the free world opts for protectionist policies, electorates become less happy with their leaders and technology makes the world a smaller place and people more aware of the huge differences between them. Confidence in our key institutions to keep us safe and solve some major problems such as climate change, mass migration and ageing populations gets lower, particularly as issues get ducked by those elected to provide solutions.
Third, our workforces and employees have become commodities to be bought and sold through mergers and acquisitions, redundancies and casual contracts.
As Edward Luce says in the “The Retreat of Western Liberalism”:
“In survey after survey the biggest employee complaint is being treated with a lack of respect. Whether they work in an Amazon warehouse, serve fast food or sit in a BT customer-cubicle, they feel diminished by how they are treated. People must request permission for bathroom breaks from supervisors who are clocking every minute of their time. Yet wage theft – the systematic undercounting of overtime work – has shot through the roof.”
Fourth, whilst income inequality has fallen our country doesn’t feel any more equal and the values displayed by those who should know better seem out of balance. The President’s club, the treatment by RBS of SMEs by its Global Restructuring Group, a £110m bonus for one housing developer boss, charity bosses embroiled in sexual harassment claims and so on and so on.
Now, I’m a great believer that every individual and institution has to be explicit about their values. That’s why I wrote a book about character education and why I applaud the work of Dr Neil Hawkes of the Values Based Education Trust, Sir Antony Seldon and teachers up and down the country who work phenomenally hard every day to instil strong values and character traits in their pupils.
According to Neil “A value is a principle that guides our thinking and behaviour” and “values help to determine the formation of our character”. Thinking about values is not new, Aristotle believed that humans possessed a natural moral end – a good flourishing life – and to achieve this was a good in itself. The desire to see each of us ‘flourish’ seems to me a very Conservative thing to want. The question is how we get there and how we get people to believe we want to help them get there.
Unfortunately we don’t appear terribly certain at the moment about the values that underpin the Conservative view of the world. In fact I think as Conservatives we can be nervous talking about values rather than policies and facts where we are on more comfortable ground. That’s why people are so ready to believe the accusations hurled against us by our opponents.
An Australian campaign doctor once said to a group of MPs that it wasn’t enough to say what we were doing or had done we had to explain why so voters knew what our motives were.
I believe that being clear about our values will be a key driver in winning over younger voters. At the moment what drives us as Conservatives is, I believe, a bit of a mystery to them. And those who recruit and work with the millennial generation know that the most successful prospective employers have to have a sense of mission in what they are trying to do which their millennial employees subscribe to so they become part of that mission.
What is the Conservative Party’s mission in the early 21st century? And how are some of our key Ministers and Ministries using every tool at their disposal to demonstrate that mission?
I’d like to suggest that our mission is that the Conservative Party wants to give everyone the opportunity to fulfil their aspirations, to tackle injustices and imbalances of power and to build a better society.
Having worked in both the Treasury and now from my vantage point as Treasury Select Committee chair I can see the opportunity the Treasury has to shape and support efforts across Government to demonstrate our values, start the process of flourishing and start to address some of the problems set out above.
The drive to eliminate the deficit, led by the Treasury, was necessary because it is unfair to put the burden of paying for our spending on to the next generation and wrong to spend more on debt interest than our schools.
But the reason that I wanted the Select Committee to look at household finances was because it is too easy for politicians to talk in the language of millions and billions used in Whitehall. We need to have a much better understanding of the realities of every family’s efforts to balance their books at the end of each week and month.
For tens of thousands of households having a couple of hundred pounds in savings would make an enormous difference to their financial security. How can our economic policy help to make that a reality? This week I note that the AAT and a cross party group of MPs has made sensible calls for an ‘Everything ISA’ to keep savings simple.
What action can we take to tackle the poverty premium where the poorer you are the more people pay for essential services because they are, for example, on pre-paid meters. You can even pay more to access your own cash because pay to use ATMs are more likely to be situated in disadvantaged areas. Are we satisfied with that?
Government has the power to convene people and get them to work together. There are still too many silos. For example, we’ve been told that two of the biggest players in consumer credit – the Department for Work and Pensions which pays out money to many people who rely on credit and the Financial Conduct Authority – which regulates those who provide the credit - should work together much more closely on consumer credit issues given their mutual interests.
As a former SoS for Education you’d expect me to say that education is important. One of the issues we keep returning to in our evidence is the need for much better financial education throughout our country. The Treasury could be bringing together some key parties who could take advantage of the welcome re-introduction of PHSE in our school curriculum to create really effective and systemic financial education which includes teaching about cyber vulnerabilities too. This might also help to encourage a more diverse range of candidates to work in our financial sector and institutions too which can only be good for their future.
But education is important for another reason too – future proofing our skills base. In the November Budget the Chancellor announced the National Retraining Scheme. We’ve also seen the Government’s Industrial Strategy published. The question is how do these and other initiatives work together and how are they translated into policies which make a real difference to people’s lives, particularly those for whom their workplaces are being rapidly transformed through automation and competition from abroad. How are employers being encouraged to invest in building a resilient workforce and how are school pupils, and their parents, being excited about and prepared to encounter the industries of the future as identified in the Industrial Strategy?
I recently met the CEO of a large insurer where their actuaries are being re-trained as data scientists and now working from Hoxton. Fintech is an area the Treasury Committee will be looking at, not least because we want to generate some excitement about it. Given more people work in financial services outside the City of London and the UK leads the world in fintech it has the potential to affect workforces across the country and should be seen as something the UK can lead in, not an unwelcome challenge where people can see their work places changing and can’t see how they fit into the future.
As the party on the side of entrepreneurs and business owners the Conservative Party should be the ones to be champions and critical friends to business and the corporate world. Why does a bank think it is acceptable to treat businesses in difficulties as cash cows to be milked and then dumped? Who is deciding that we want to move to a cashless society which suits those who like using their cards or the institutions who don’t have to service as many cash machines but doesn’t suit those trying to live on a budget or who run the risk of living in ATM deserts. Why don’t we require banks who pull out of towns and villages to leave cash machines behind and ensure that their loyal customers have somewhere nearby to go to receive the same service?
Is it time to introduce an offence of ‘reckless conduct which causes an institution to fail’ – bosses getting out in time but leaving behind unpaid salaries and unfunded pensions is not right.
How do we work with businesses to ensure they invest not just in their facilities through capital schemes such as enterprise zones and business rates relief but in their people by encouraging apprenticeships at all ages, long term employment, compassionate HR and a focus on health and wellbeing at work (after all we are all going to be spending much longer working this century than people did in the last).
What can we do to work with publicly listed companies who feel they are caught up in ever shorter reporting cycles and faster returns to shareholders? Is there something the power of Government can do to take on the short sellers and those who invest with the intention of making a fast buck rather than a sustainable return? In fact, as I discussed with leading members of the asset management industry last week it is longer-term shareholders who can apply the necessary pressure to companies to change their corporate governance, re-think their pay structures and increase their diversity.
The Conservative Party is a party which is pro-business. We believe in the power of enterprise. We recognise that our SMEs are the biggest group of employers and that many of today’s young people expect to set up enterprises – whether for profit or social – at some point in their working lives. No Conservative Minister should attack business, or those who represent their views, for speaking up on their behalf.
But, as champions of business, we can also nudge them to change too – where they need to show self-awareness about corporate pay, the treatment of workers and pensioners, the need for greater diversity and having more heed for what customers actually want.
The Banking Standards Board was set up in the wake of the financial crisis when something went truly wrong with the culture and behaviours in too many of our financial services institutions.
As the BSB says in its first report,
“The BSB does not exist to encourage trust in the banking sector, but to help raise the trustworthiness of the sector; a very different proposition.”
The culture and trustworthiness of our banking sector really matters. It is set by the top of the organisations and no one who works within them should be any doubt about the culture they work in and the standards of behaviour they are expected to demonstrate.
Those who sign up to the BSB are assessed against nine characteristics through an employee survey, a board questionnaire, non executive board member interviews and executive interviews. The final assessment is not published. The BSB say that “it is the responsibility of each board and executive team to decide how to act on and share, for example with employees and regulators the contents of their assessment report.” I think though that each Board should publish their reports and, if not, explain why not.
The overall results of the first year’s report are fascinating,
“Only 65% of employees…agree that there is no conflict between their firm’s stated values and the way that the firm does business. 14% do see such a conflict, with this being more marked in systemically important institutions and the remainder neither agreeing nor disagreeing. Of those employees who perceive a conflict, almost half do not believe that senior leaders in their organisation mean what they say (compared with 19% of employees in general).”
I mentioned wellbeing at work above. In this report the BSB noted,
“Almost three in five employees across all firms say they feel under considerable pressure to perform at their work, and more than a quarter say that working in their firm has a negative impact on their health and wellbeing. A detrimental effect on personal health is most commonly reported by individuals working in investment banking and in systemically important institutions.”
Of course, this is a snapshot but it demonstrates a truth – for many people their understanding of capitalism is the world of business and here we are asking people to work for longer and more intensively which can adversely affect their health and they haven’t even seen their wages go up. The answers aren’t all for Government but the Government can certainly be up front about the problem, start the discussion and work with others to identify a solution.
If the Conservative Party wants to advance a theory of popular capitalism as opposed to the Opposition’s bleak view of capitalism then we have to think of ways to encourage people to own their own capital. For many owning a home is their main stake in society – it’s a long-term commitment.
But because we all know that owning a home has become something that takes longer to achieve these days and that will take some time to remedy then we need to think of other ways to encourage people to make longer-term commitments. Many people who don’t own a home will have a pension. Where does their money go? Who really understands or thinks about the fact that their pension fund is making long-term investments on their behalf in our infrastructure, for example? Could pension funds invest in more of our smaller companies? Could we do more to make the link more transparent – to make it clear that a pension isn’t just a preparation for old age, it’s enabling the UK to be ready for the future too.
One of the broader changes that could be made across Government is to ditch the pointless impact assessments which generate far more paperwork and hot air than light and instead find a way to measure the social consequences of policy changes. And that process has to come at the start of the development of a new policy, not the end. Simple behavioural changes such as moving the box certifying compliance to the start of a tax return rather than the end leads to more tax being paid because more is declared on the form. If departments knew that the social consequences of a policy had to be assessed and would then be measured it might help them to think through all the ramifications of a policy at the start of its development. Can the Treasury by working with the Behavioural Insights Team lead the way on this?
There are others in my party, Nick Boles’ Square Deal and George Freeman’s Festival of Ideas, who are coming up with some innovative and exciting policy proposals. It does seem at the moment that it is mainstream moderate Conservatives who are coming up with the ideas!
The challenge is how do we stitch them together to form a coherent whole which takes on the Left. But we can do this and we must do it and I believe the Treasury should be asked to drive through our domestic policy agenda as others grapple with Brexit.
The first step though is to be clear about our values and our mission and then see how each policy idea fits within that framework.
Brexit is an enormous undertaking. It has driven a coach and horses through David Cameron’s entreaty to the Conservative Party that we should stop ‘banging on about Europe’. I wrote last week that we all need to find a way to rise to its extraordinary challenges – not least we need to find a way not to lose all sense of reason and perspective as we go round and round again on the same issues.
It won’t be enough in 2022 for the Conservative Party to say that we delivered Brexit. As we saw in 2017 Brexit did not drive the election campaign even then.
But a refreshed look at how our economy is working for everyone, a concerted one-nation plan to build a better society and demonstrate that our Conservative pro enterprise, ‘Government doesn’t always know best’ approach can enable everyone to flourish and fulfil their aspirations will help us to make the case that it is the Conservative Party which has addressed the demands of the 2010s and will address the challenges of the 2020s.
And, in spite of Brexit, we have to start this process and this thinking now. And there is nowhere better to start than next week’s Spring Statement.