Straining every sinew

Over the course of the recent downturn, it has become fashionable for politicians of all stripes to call on businesses to ‘be more long-termist’ in their thinking and their outlook.

Yet, thanks to our political system, Britain's politicians, not its businesses, are the ultimate short-termists. When soundbites, public school point-scoring and the latest opinion polls dominate in Westminster, there's something deeply wrong with our political system. And unfortunately, those flaws translate directly into an impact on business confidence and thence on to the state of the economy.

The long-term deal that business people want to strike with government is actually quite simple. In return for facing up to increased variability and risk in the global economy, businesses want stability, clarity and positive policies from government at home. We'll take risks with our capital in an uncertain world, they tell us, if ministers take bold, positive and long-lasting decisions that enable us to invest with confidence. Unfortunately, those long-sighted policy moves are currently in short supply.

Let's give credit where credit is due. Ministers' determination to begin the process of deficit reduction is crucial; if businesses have to balance their books, the reasoning goes, the government should too. Ministers' desire to cut back unnecessary regulation is clear, even if the results have been less than overwhelming to date, thanks, in part, to stubbornness in individual departments and the cautiousness of the civil service machine. Reforms to the employment tribunal system are welcome. And the recent drive to use central government procurement more strategically to support businesses of all sizes is starting to yield results.

All of these measures, however, are seen by businesses as tactical rather than strategic. There are no grand, radical, lengthy shifts heralded here. Instead, most of the measures announced with great fanfare help only at the margins.

The government needs to recognise that it is a major customer, a maker of markets and the guardian of Britain's infrastructure and skills policies. Unless it acts boldly to discharge those responsibilities, rather than tinkering on the periphery, UK business won't be able to deliver up to its full potential.

If you want business investment that delivers higher productivity and more jobs, you don't make swingeing cuts to capital allowances, allow inflation-busting rises in business rates, or give inward investors the signal that Britain's doors are closed to skilled people from around the globe. Instead, you think big – with incentives for capital investment and a major infrastructure development programme.

If you want companies to get the finance they need to grow, you think big again, starting with the possibility of a British business bank to provide financing to new and growing SMEs with real growth potential. You can pursue repair of the relationships and trust between SMEs and high-street banks at the same time, as our major banks will continue to play a huge role in providing credit for businesses regardless.

If you want companies to invest in people, again, think big, because you have to signal a major increase in the flexibility of the UK labour market. At a time when we have around one million young people unemployed, you don't bring in complex new regulation on shared parental leave, extend flexible working or abolish the employer's ability to have a discussion with older workers about retirement. You make it easier for employers to hire and fire, and then stop tinkering with employment law year-in, year-out. You take decisions about training funding away from providers and learners, and challenge employers to direct the spending so that vacancies are filled by home-grown talent ready for the job.

Businesses want a long-lasting deal with government. The deal isn't as complex as one might think, but it is tough to deliver in a country where grand political bargains aren't the norm. Government should deal with the ‘enablers’, freeing up the labour market, pump-priming infrastructure, encouraging business investment, and helping to improve access to finance. Business, in return, will have to accept the fact that we live in a destabilised world, and learn to factor in fluctuation and variability. And we’re not talking about a deal with a three-year time horizon here; this has to be a national consensus over a decade or more, to boost our competitiveness and deliver a real spur to growth.

Such a deal would see both sides working harder to deliver growth, businesses through investment born of renewed confidence, and government through greater policy consistency and responsiveness. This is the way to get both sides “straining every sinew”, to borrow a phrase from a politician. Anything less is just playing around the edges.