Is High Pay Commission really tuned into business growth?

I blogged a few weeks back about the High Pay Commission, and it was in the news again over the past couple of days.
If you don’t want to track back through the link, here’s the resume: the High Pay Commission isn’t a Commission in the normal sense of a heavyweight, government-sanctioned probe into a matter of major concern. It’s a one-year project funded by a left-leaning think tank which wants to influence government policy. So the name’s a bit of a fib.
And though it is clearly all about what goes on in the upper reaches of stock market businesses, it doesn’t involve any business people. This Commission’s members are academics and a couple of well-connected London journalists.
The Commission’s mission is written all over its name: a belief that senior executives get paid way more than most, and probably don’t deserve it.
It’s in the news again this week because it has published its final report. It finds that executives right at the top of big stock market firms enjoyed pay rises which disappeared into space, compares that to the less-than-stellar performance of their businesses, and wants other people to have a say in executive pay in future. So no surprises really.
I’d be amazed if anything happened, though, for three reasons.
One is that a government grappling with no growth probably has neither the time nor the inclination to launch into an issue which risks being portrayed as dis-incentivising businesses at the cutting edge of the economy (indeed, Business Secretary Vince Cable has already kicked the Commission’s proposals into the long grass by saying government will look at some proposals next year).
Secondly, some of them sound like Utopia-meets-the-boardroom. The idea that any business would want employees sitting on a committee voting on a proposal about how much the boss gets paid is unrealistic. Why not stop there: we could have selected employees also voting on the sales strategy, couldn’t we? No, actually – it would be stupid.
Finally, while reining in top pay might make ordinary people feel good it will do nothing to make them wealthier. The answer to that is enabling economic growth, not disabling executive pay.
And this is the beef with the High Pay Commission. It’s an entirely London-centric concept: backed by a London think tank, run by people based in London and focusing on a small part of the business universe which is centred on London.
It seems to think silly salary packages doled out by global enterprises should be a big issue for the UK government. But is this really where the action's at?
As I said in the earlier blog, many ordinary business people have no more time for the PLC world than the High Pay Commission does. They think it’s too short-term, and have little respect for stock market chief executives or their jackpot pay packets.
But they don’t lose sleep over it. The big issue for them is the continuing inability of government to act like it gets SMEs – the real bedrock of the economy – on any level.
If it did, there would be fewer rules and regulations, cleverly-targeted tax incentives, better access to finance, and a serious effort to solve the continuing problem of school and college leavers who don’t understand what it takes to hack it at work.
The High Pay Commission’s proposals simply do not register on the radar of key business concerns.
But perhaps they weren’t meant to. Protests not so very far away from the Stock Exchange (and mirrored in Nottingham’s own Market Square) have been making a lot of noise about inequality and unfairness. The Occupy movement is anchored in a belief that capitalism, having landed us all in the soup, is just carrying on like it’s someone else’s problem.
Against that background, PLC bosses paying themselves fortunes according to obscure formulae which seem to come up trumps whatever the weather hardly seems like the stuff of civil society.
So the High Pay Commission is not divorced from reality. It makes some powerful points about the relationship between attainment and reward and public companies’ obligation to fairness.
But the anti-big business rhetoric we see so much of these days is in danger of obscuring a greater truth: that the vast majority of businesses simply aren’t like that, and that it is these businesses that our economic recovery hinges on.
I said in another blog that we were in an era where business has to work a whole lot harder to win public respect, and might start by pointing out the huge contribution it makes to the wealth and wider wellbeing of the communities we live in (don’t forget that 80% of jobs are in the private sector).
If it did, then may be London think tanks would think beyond PLC pay packets when they ponder the best way for business to bring wealth to a wider audience.

RGF: A growing controversy?

There’s a palpable sense of disappointment about the failure to secure anything other than a few crumbs for Nottinghamshire and Derbyshire businesses from the Government’s Regional Growth Fund.
This £1.4bn pot was set up by the government in the wake of its decision to get rid of regional development agencies like Emda.
While emda at one stage had an annual budget north of £150m, the amount of money Nottinghamshire and Derbyshire have managed to squeeze out of the RGF is a pitiful £1.6m. Out of 38 bids made for projects in the two counties, only one was successful.
The successful bid relates to the planned expansion of Molecular Profiles in Nottingham. Levering £8.4m of its own, the pharmaceutical research company plans to open a new building at Nottingham Science Park and create up to 65 new jobs.
This is a significant vote of confidence in an important sector for Nottingham, and Molecular Profiles CEO Nikin Patel is to be congratulated.
But what about everyone else? There are rumblings and machinations about why the 37 other local bids failed, but I suspect ours is not the only region where this soul-searching and teeth-gnashing is taking place.
Today’s announcement covers only the first of three rounds of funding bids, and has accounted for £450m of the £1.4bn available. So there is still £950m to bid for. It is the second round, which is underway now and closes shortly, which will see the lion’s share of the cash allocated.
We don’t know yet whether any of the unsuccessful bids from the first round will be considered again, but the word from Derbyshire & Nottinghamshire Chamber is that they had expected four of the 38 bids to be successful in round one – which suggests to me they will be looked at again.
I suspect the issue is that the Government's preference will be for projects which create wuick jobs, rather than trophy projects like physical infrastructure, which may only work in the long-term. It wants quick wins.
Just to complicate matters, the second round of RGF bidding coincides with the start of bidding for £19m of European Regional Development Fund cash available to the East Midlands. This is being administered by emda, though the word is that bids for this can be 'aligned' with bids for RGF money. Baffled? You're not alone...
There is a degree of paranoia in the East Midlands about its weak identity, and Business Secretary Vince Cable found himself having to reassure the region this morning that the decision was not a personal slight. That’s one to ponder – I’m not aware he has visited Nottinghamshire or Derbyshire since taking office.
There are some fairly blunt questions the government has to answer, though. It is almost certain that some of the bids will have failed precisely because the guidance from Whitehall about what they were looking for was far from clear.
That, in itself, is symptomatic of the government’s tendency to make policy on the hoof: having decided long ago that it did not want to put money into regional development agencies, it had no clear plan for what might fill the administrative void these organisations were bound to leave behind.
I blogged last week about the decision to maintain some parts of the Government Office for the East Midlands operation, and the concerns that – when put together with emda’s demise – it left the region voiceless in Whitehall.
For business, the most important part of the Government operation is the new regional representative for Mr Cable’s department, Rowena Limb. A robust conversation with her about Nottinghamshire and Derbyshire’s expectations for the next round of RGF money will be important.
So will an invitation to the Business Secretary, so that he can come and inspect for himself this unexplored corner of the Midlands. You know what we need to say when he finally does battle his way through the undergowth and find us: Dr Cable, we presume...

What a week for Nottingham

What a week for Nottingham. £500m and 5,000 jobs from the massive expansion of Broadmarsh, £240m and 2,000 jobs from the extension of the Victoria Centre, final sign-off from government for the construction of lines two and three of the tram…and now an Enterprise Zone at Lenton which could create anywhere between 5,000 and 10,000 jobs.
Normally, you’d be lucky if you got one scheme a year of this magnitude. To have four in the space of one week is well into all our Christmases coming at the same time.
These are only plans, of course. In this kind of economic climate – one clearly exposed to the impact of global economic events we cannot control – they could change, stall, perhaps be pushed on to the back-burner.
The likelihood is that at least three of them will go-ahead. Together, they could have a significant impact on the Nottingham economy for years to come, adding economic multipliers to local business and the local economy during and after construction.
It’s been obvious for a while that the unused parts of the sprawling Boots site were in pole position to become an Enterprise Zone – especially after the Treasury contacted Nottingham City Council and asked them to put more work into a draft proposal for it.
It was finally confirmed this morning by that well-known political double-act, David Cameron and Nick Clegg (who, incidentally, took over an announcement which was originally scheduled to be delivered by Vince Cable).
Alongside Boots and just across the road from QMC and the university hospital, and the international research giant that is University of Nottingham, it ticks all the boxes the government is looking for with the new generation Enterprise Zones.
The hope is that it could attract national and international businesses of size or standing, probably in technology or knowledge-related industries – while also being a great opportunity to nurture promising spin-outs from university research.
We’re told there is the potential for around 200,000 square metres of commercial business space for all sorts of industry sectors. So together with the 7,000-odd people who work at Boots, that could put up to 17,000 people working at the campus in the coming years.
Which begs one final question. While the expansion of the tram will assist with transport, this surely puts further pressure on government to make the dualling of the A453 a priority.
May be I’m expecting too much…

Business enterprise: set phasers to stun

I blogged last week about a major speech given by Sir Richard Lambert in which the departing CBI leader gave a penetrating insight into where the economy is now and what government must do to move it along.
It looks like there’s a groundswell building behind this, with Derbyshire & Nottinghamshire Chamber of Commerce launching their own wish-list of things the government should do to help the private sector build the economic recovery which it says it wants to see.
To be fair to the Chamber, it is not jumping on a bandwagon here. At the end of December last year, its chief executive, George Cowcher, called on government to make 2011 a year for growth.
The Chamber – the third biggest in the country, remember, and a fairly big player round here – has now put some flesh on the bones of that wish-list.
So far, it is less specific than the measures set out by Sir Richard, but what is interesting is that it sings to that age-old business torch song, less is more.
In other words, one of the biggest contributions government might make to the economy is to stop thinking it can solve every problem under the sun by passing a new law.
A fair few business people are of the view that the ‘initiativitis’ which afflicted the last government meant it did rather too much of that, almost to the point where it was trying to codify common sense.
John Dowson, the Chamber’s imposing policy director, told me yesterday that while there are some signs that the coalition is trying to strip out some of the nonsenses, others are still slipping through.
So the biggest difference government could make is to adopt what he called an ‘enterprise state-of-mind’ – understanding the entrepreneur in everything it does and perhaps designing regulations with an approach based on the principle of ‘how easy will this rule be to comply with’.
That’s a tough ask – not least because there are those in government who genuinely believe they already do this…
Nevertheless, the detail of what the Chamber is asking for does contain some interesting suggestions.
It wants a simpler planning regime for what are obviously business or industrial sites so that they can expand more easily. So provided a change to a building falls within clear guidelines it just gets nodded through rather than going through the often long-winded planning cycle.
It wants government and agencies like UK Trade & Investment to put a whole lot more effort into making it easier for small firms to export. One of the big issues here is Export Credit Guarantees, which have been criticised for focusing too much on big businesses.
This mirrors Sir Richard Lambert’s concern that government policy for business and industry has an unfortunate habit of locking on to the activities of sectors and businesses which are already doing well – of picking winners rather than identifying entrepreneurial growth potential.
My understanding is that government – led by Vince Cable – is hard at work on some kind of business growth initiative which will be unveiled in March. You don’t need to be a political analyst to work out that the main theme in the Budget will be that now the cutbacks have been identified, Government will now take steps to assist growth.
It has some catching up to do on two fronts. While it’s said the right things about a business-led recovery, those measures which do affect firms have been cack-handed – think LEPs and the immigration cap. That betrays a disjointed approach.
Secondly, if the March growth strategy is to work it should take an enterprising approach which recognises that government is best assisting, not doing, and that it is small to medium entrepreneurial Britain that holds the key to long-term growth, not the usual corporate titans.
To borrow from the Starship Enterprise, if it isn’t going to lose the economic argument then it needs to set those policy phasers to stun.