Host
- Philippa Lamb
Guests
- Alan Vallance, ICAEW CEO
- Kemi Badenoch, Leader of HM Official Opposition and Leader of the Conservative Party
- Iain Wright, Chief Policy and Communications Officer, ICAEW
Producer
- Natalie Chisholm
Transcript
Philippa Lamb: Hello. Today we’re bringing you a special episode, because last week, the Conservative leader Kemi Badenoch chose Chartered Accountants’ Hall to deliver a speech setting out her vision for the party ahead of the conference in October. Now you can listen to that speech in full online, but immediately afterwards – in conversation with ICAEW’s CEO, Alan Vallance – Miss Badenoch talked about delivering growth, the problem with UK productivity and, interestingly, given her background in tech, whether she thinks accountants are actually at risk from AI. Spoiler alert, she doesn’t. So here they are chatting after her speech; and afterwards, I’ll be asking Iain Wright, ICAEW’s Chief Officer on Policy and Communications, what he made of her comments.
Alan Vallance: Can we explore a bit more, what more do you think the government needs to do to help businesses get the confidence they need to plan, invest and grow?
Kemi Badenoch: So one of the most frustrating things about being Business Secretary was understanding the issue, but not having the levers. And the most frustrating thing that business experienced was just the lack of certainty. Things changing again and again. Today, we’re doing this; tomorrow, we’re doing that. And they couldn’t plan. Business needs certainty in order to invest, so providing an environment where they have that certainty is really critical, and that means setting out what a Conservative government’s roadmap looks like. So that’s one of the key things. But we also need to look at what business is asking for. They are overburdened by red tape. This is one of the things that is not looked at enough in government right now. You talk to a business, especially a small business, they complain about even the local council bringing in more and more regulations for them to comply with. And we may see the businesses that close – we never see the ones that never start in the first place. So it’s quite critical that we reduce the burden of regulation. That’s the work that we’re doing right now. Labour’s Employment Rights bill, with more trade union powers, more strikes, you know – day one rights, which will make life much harder for younger people and those looking for their first job – this is just yet another burden the business has to has to carry, and one of the things that I want to do is lift the burden off business. They’re the ones who will create that growth. So a deregulatory package is going to be required, and one that gives long-term certainty, not just certainty for the next year or until the next budget.
AV: OK. So in my question before I just said beyond tax, but it would be remiss of me not to ask – we’re two months out from the budget and, given your time in government, your experience and also the challenges and difficulties of delivering reform in practice, if you were setting the next budget – hypothetically – what would you prioritise and why would you do so?
KB: So I would prioritise those elements which encourage people to take risks. I think that we have turned into a country that is afraid to take risks. That’s where all this regulation is coming from. Nothing bad must happen. Let’s bring in a new law, and then when that law is there, everybody will have to follow it, and then nothing bad will happen. That’s not how life works. We’ve created a zero-risk environment, and without risk, there is no reward. So we need to stop punishing people for taking risks, and we need to stop assuming that growth will just, you know, will just be there as long as government is setting rules. But we also need to look at things that will help drive up productivity. Productivity in the private sector has been increasing over the last decade and more; it’s the public sector where the problems are really, really entrenched. So any budget, any government’s plan, also has to look at how we are ratioed between public and private sector. That’s something that’s going to be key. We need more people in private enterprise.
AV: That’s a great lead into my next question, because I wanted to talk about productivity and ask you about that. So our members are very clear, productivity is absolutely the UK’s biggest long-term challenge, and new technologies, AI, automation, could be transformative, but they also raise a lot of really serious questions. So earlier this year, in March, in fact, we all heard at the ICAEW about Jeremy Hunt’s suggestion that AI was going to replace accountants and that they should become doctors instead. And actually, a couple of days later, Bill Gates then came out and said that AI would replace doctors and teachers. So I think it’s a bit difficult at the moment to be a careers adviser, if nothing else. But joking aside, there are some really kind of challenging issues. And it’s certainly true, I think, that AI will change many roles – some positively, and some not so. But I wanted to ask you a question drawing on your experience and expertise, because you’ve got not just a bachelor’s but a master’s degree in computer engineering. You’ve worked as a software engineer. So I’m really interested in you drawing on your background as well in that experience, to talk about AI and technologies and the way that you see them improving productivity, not just in the public sector, but also in the private sector.
KB: So first of all, I don’t think accountants have anything to worry about. This is, you know – and people might disagree – but if you look at what happened with Angela Rayner, I think we all need to speak to a human being and ask what we need to do with our taxes. If AI gives you a wrong answer, you can’t take it to court. There’s no liability there. So I would rather speak to a qualified professional, ideally from the ICAEW.
AV: Thank you, we support that. We definitely support that Kemi, thank you.
KB: But you asked about my own background in engineering. One of the things that working in tech taught me is that we always overestimate the impact of technology in the short term and underestimate it in the long term. And I think that’s what’s happening with AI. I remember when I was graduating, that was when the dotcom crash occurred, and everybody wanted to work on online business and set up their website. And we all thought that that was what was going to make us, you know, millions and billions. And it did for some people, but for everyone else, it actually just turned out to be just another channel, just another medium, and you needed to focus on what you were actually producing, how you are actually generating wealth. I think that it’s too soon to say exactly what AI will do to every single industry. It will help many. It might destroy some. What we need to do is make sure that everyone is educated to a point where they can cope with that. This is where having a plan on skills that isn’t reliant on everyone going to university is going to be key. I mean, I have two degrees. I did one in engineering, I did one in law, but a lot of people don’t know I also did an apprenticeship, and actually, it’s what I did during the apprenticeship that I remember most now, age 45 and a half. I can’t remember how to do parallel integration; I can’t remember everything that I did in my law degree; but I can still build a computer, because the things you do with your hands, I think, actually stay with you.
AV: Can I then take us back? I said we’d talk a little bit about public spending. So another thing our members are really concerned about is uncertainty and tax – we talked about that. But the UK also faces a number of long-term pressures, and you’ve talked about a couple of them today: ageing population, rising health and social care costs; the need to spend more on defence. So from your perspective, what’s the right balance? How do we find the balance between keeping the tax burden competitive on the one hand, but also ensuring that public finances remain credible on the other?
KB: We have to be honest. Pretending that we can always do every single thing that we did before, without changing, is dishonest. And one of the things that I often say is that there are no perfect solutions. There are only trade-offs. If we are getting older as a society, certain things will need to change. People may need to work longer, lifestyles may need to change, and we need to look at those structural issues that are impacting society, just as you described. What causes the problem is people believing that everything can stay the same and more money will just arrive. It’s not just what’s happening to us, it’s also what other countries and economies are doing. More countries are competing aggressively with the West, with Western Europe, in a way that they never did before. And we have to be alive to that, that in an era of increased competition, we cannot be complacent. We cannot do things the way we used to. That will require compromises. It will require trade-offs. But if we have an honest debate in politics that we can’t do this anymore, let’s try something else – that will be better than what we see right now, where everybody is saying we can do everything [and] the only reason why we can’t is because of greedy fat cats or immigrants turning up, stealing jobs and so on. This is not an honest conversation. Of course, we need to make sure that we look after our borders and manage migration, but we have to be honest and realistic about what life is like in 2025 and what it’s going to be like in the next decades.
AV: I’ve talked before about the fact that we have over 200,000 members. They’re working with three million businesses across the UK, and they cover the smallest organisations through to the very largest. And they consistently tell us that certainty, clear communications on policy matters, are really essential, and you’ve reflected that, I think. But how do you see government working more closely with organisations like ICAEW and others to make sure that the voice of business is really properly reflected in policy?
KB: By listening, and I mean honestly listening. I was horrified when, you know, senior business people would come into my office as Business Secretary – and I knew quite a lot of my Shadow Cabinet had this experience –and would explain the consequences of policy which had been designed, probably years before, by people who’d never worked in business, never run a business, to meet perhaps a philosophical or ideological objective. If I think about the extended producer responsibility, deposit return scheme – a business was shedding its hair at the way these policies had been designed. So we need to get business actually involved in writing policy, in helping designing policy. There is an assumption in Whitehall that business is only looking after its own interests. I think that’s completely wrong. I think that it’s creating jobs. Creating a profit is corporate social responsibility, and by doing so, it helps make a healthier economy. And so we should listen to business. Of course, we should be alive to vested interests and those who don’t want competition, who want monopolies or oligopolies. But if we listen to business and listen to them explain what the consequences of certain policy decisions will be, we will end up in a much better place. We don’t need, you know, many more business councils, and you know, all sorts of apparatus which you find in government, which actually end up being Potemkins or ways to fob off business while doing what they were always going to do instead. I hated being in those meetings. We need to have real discussions, real conversations, and that will often mean government hearing things that it doesn’t want to hear or doesn’t like hearing, but it’ll be the truth.
PL: So there you have it. Iain, you were there. I mean, what did you make of the comments she made overall?
Iain Wright: First of all, Philippa, I was really pleased that the Leader of the Opposition, when wanting to talk about a major speech on business and the economy, decided to do it in Chartered Accountants’ Hall. That shows how we are the voice of business. And that when major policy makers, such as the leader of His Majesty’s Opposition want to talk to business, they come to Chartered Accountants’ Hall.
PL: Interestingly, she said a thing that you often say, that the biggest problem for business is uncertainty.
IW: I mean, of course, you know, if you’re an entrepreneur, if you are in business, you have to deal with volatility and uncertainty. But actually the job of government – and no one is pretending that the UK government can stop geopolitical threats or technological change or anything like that – but try and have in things like fiscal policy, in terms of the approach to regulation, as smooth a path as possible, to ensure that businesses can plan in advance and determine what needs to be done. That’s the key. That’s what business asks for.
PL: She talked a lot about too much regulation, didn’t she? It cropped up several times
IW: Yeah, you know, and we get this a lot from our members, you know, that constant drip, drip of additional regulation. And often one part of government is regulating on something and another part of government is regulating on something, and it’s often very contradictory. So not only is, you know, the volume, the wider envelope of regulation bulging, [but] businesses have to take time, resources, and ultimately money, in deciding, ‘Is that regulation consistent with that regulation?’ And that causes real concern.
PL: Yeah, because she said, didn’t she, that when she was Business Secretary, she was really horrified when business people come into her office and say, you know that legislation, that policy, that’s not working for us. Do you understand the unintended consequences we’ve got? And so in the speech she just made, she said she wanted business more involved in policy making, which I thought was also interesting.
IW: I think the last question that Alan asks is one of the most important. Alan, our CEO, asked about, you know – it’s great that the leader of the opposition, she’s at Chartered Accountants’ Hall. Let’s be honest, the Conservative Party, over the last four or five years have had a really quite torrid relationship with business. This seems to be the first step of renewing that relationship, of business engagement. But that’s the key to successful business policy – you know, engaging early and often with business so that they can say, ‘That’s not going to work. These are the, you know, unintended consequences.’ Philippa, that’s not lobbying, that’s not trying to protect vested interests. That’s saying, ‘You know what? We deal with business on a day-to-day basis. We know what will work and what won’t. You should really listen to us as you share business policy.’ I think that’s key, both for government and certainly for opposition, and that’s where we’re at the heart of it – you know, engaging with different policy makers, whether it is government, whether it’s opposition – to say that doesn’t work. Our members are advising three million businesses. Our members are in business. They’re telling us, this is what’s going on and that won’t work. That’s where we are key, as being that voice of business.
PL: Alan raised AI, of course, and the potential challenge to – well – all sorts of jobs and industries. But I thought it was interesting that she said – you know, she’s a former engineer herself – and her take was, accountants don’t have a problem when it comes to AI, because we’re always going to speak to a human being, an adult, qualified professional.
IW: Her former colleague in the cabinet, Jeremy Hunt, made – let’s be honest – what was a bit of an offhand comment about, you know, ‘I wouldn’t train to be a chartered accountant, you know, because AI is taking jobs.’ And Kemi said, you know, that’s not going to be the case at all. AI will enhance, AI will provide additional value. It will help chartered accountants do their work more effectively, much more productivity. And that’s the key. I mean, it’s very similar to, say, a spreadsheet. It’s very similar to, perhaps, an abacus. You know, it increases productivity. It will maybe help increase accuracy, but ultimately, the role of that trusted business adviser and professional will still be key for a long time to come.
PL: Yeah, she couldn’t quite resist a bit of a dig at Angela Rayner while she was talking about that.
IW: Indeed. But you know, I suppose that’s party politics.
PL: She also talked about the fact that we always overestimate the short-term impact of new tech – you know, history tells us this – and underestimate the long-term impact. That’s clearly what she’s thinking is going on with AI, that it’s being over-egged a bit at the moment, perhaps, do you think?
IW: I mean, I am far from being an AI expert, Philippa, but I do use it every day, you know, and it has made some of the tasks that I do a lot quicker. So, you know, in terms of productivity, you can see it even at a relatively early stage – it’s enhancing things. This will be, I think – this general transformative technology – a bit like electricity, you know, in terms of, we will just rely on it so much. And there will be new jobs, there will be new industries, but the job of the human at the heart of things will still be there.
PL: And she talked, didn’t she, about the need for everyone to be educated in that tech and the need for more vocational education generally.
IW: The world is changing very fast. We’ve talked about AI, you know, that transformative technological change. The notion of maybe, maybe my grandparents’ era, the notion that in the North East of England, you left school at 14 on the Friday; you went into whatever it was, shipyards or steel works, on the Monday, and you stayed there for 40 years. That’s long gone. There’s an estimate that you will change careers nine or 10 times over your working life. So you’ve got to be agile, and the skill system has to be agile to enable that to happen. And indeed, the chartered accountancy profession needs to be agile, because you could be starting off in practice. You will go into business. You might go back into practice. You might be going into, I don’t know, a government job, charitable sector. And we’ve got to make sure that our qualification, the ACA – which is world class, a really strong business qualification – can adapt and be agile, and that the continuing professional development can respond in order to demands as well. So it is really important, you know – what you do now will be very different to what you might be doing in seven to 10 year’s time, and how we adapt as a country and as an economy to deal with that.
PL: Because she was talking about the equal importance of vocational education with university education. Obviously, the emphasis has been very much on university in recent decades. I hadn’t realised she did an apprenticeship herself – she talked about it, and very fondly.
IW: She was really good on this. She said that how she’d done two degrees, and she got a law degree, but she was also a software engineer apprentice, and she said she can’t remember much of her law degree, but she takes into account a lot of her apprenticeship work. Do you know what, Philippa? This is something I feel quite strongly about. For far too long in this country, we’ve had this really awkward and artificial distinction between academic qualifications – somehow good, and vocational qualifications – somehow beneath them. The modern world’s not like that, you know. And it could be, if you’re ambitious enough in that area and you’re good enough, you should go to university and do an academic qualification. If you’re good enough and you’re ambition lies in this particular area, you should be able to have access to an apprenticeship. The great thing about our profession is we’re almost going back to the time of the articled clerks, you know. So it’s a case of, you can get a really strong world-class business qualification at the age of 18. It is, with Level Seven Apprenticeships, a great apprenticeship to do. So, as I said, the idea of how, you know, somehow you have this distinction at the age of 18 or 21, it’s not how modern work works. You know, it’s not how the modern economy should exist. We need to be breaking down those artificial barriers.
PL: Yeah, and she did seem to be alive to that, didn’t she? I mean, what she said about business and growth generally, about encouraging risk-taking, about, you know, stop punishing risk-taking. Did that work well with your own thinking at ICAEW?
IW: It works well with government thinking. I think I’ve mentioned with you before, Philippa, the current government’s green paper in October last year on the industrial strategy, talked about the long-term reasons for our poor economic growth and our poor productivity performance. There were four key areas. One is, we don’t invest enough. You know, we have very, very low investment rates. One, is we’re too regionally imbalanced. The third is that we don’t embrace new technological innovations and new management practices. That’s a big thing. But the other thing is, we don’t encourage that dynamism in our economy, we need to be more risk-taking. So that’s absolutely key to ongoing productivity improvements and ultimately economic growth and rising living standards.
PL: Was there anything you were hoping to hear from her that she didn’t say?
IW: I wouldn’t say so. At this stage in the electoral cycle, you are not going to get specific policies. It’s very much broad brush, and it’s very much the start of the process. A couple of months ago, Sir Mel Stride, the Shadow Chancellor, made a speech. I was there. I was invited by Mel on this, which is, you know, in terms of almost saying sorry on behalf of the Conservative Party for the mistakes made in government, but trying to return to a good, positive relationship with business. So what you’re getting at the moment is this broad sweep of rhetoric and ongoing business engagement, but you’re not going to get specific policies. You know, the general election could be four years out still, so I don’t think anything surprised me in what she said.
PL: I mean, I was thinking about that, because obviously, as you say, it’s a very early-stage government, this. But given the pressure from Reform and given the travails of the Labour Party and the government currently, do you think we might hear a little bit more detail from the Conservative Party, perhaps earlier than we might otherwise do? They’d be looking to differentiate themselves, I guess?
IW: Where I think you make a good point is, the current political cycle is much faster, more volatile than ever before. In that regard, you can imagine that important process of developing policies will be quicker. Having said that, you know, you’ve got a majority in the government of about 170. Never say never. But that indicates, you know, a general election in about 2028/2029. It would be unwise for any leader of the opposition to come up with specific policies at this stage, because circumstances change. And frankly, maybe the government in power will pinch them off you, you know, and take credit for them themselves. So at the moment, it’s broad brush. The other thing to mention from a political point of view, Philippa – of course, people take interest in politics. You know, there are active and engaged citizens. People watch the news, take a view. They certainly want to know, you know, that their streets are clean, their local health services working, schools are working, all of that. But they only really start paying attention towards the end. It’s why, you know, you get the best audience viewing figures for the World Cup final and Strictly’s final. You know, that’s how it works, and it will hone in. So the political trick is to engage, to get that mood music right, that broad brush approach, but then bringing in specific policies as the general election gets closer.
PL: I think that’s what she was doing there?
IW: Yes.
PL: Thanks, Iain, good to know and good to have you back on the podcast. Thank you.
IW: Nice to see you again, Philippa.