An Office for the Impact Economy: a new dawn for government-business partnerships?
This piece was written by Esmé Clifford, Policy Director at ReGenerate.
In his speech at Labour’s Business Conference earlier this year, Sir Keir Starmer MP outlined his vision for a renewed partnership between government and business, inviting businesses to join Labour in a “decade of national renewal”. He also celebrated the shift toward a more purposeful approach to doing business: “the caricature that British business only serves the shareholder interest is lazy and out of date. In fact, one of the things I draw great hope from is the determination I see, from the countless business leaders I’ve met, to serve the national interest”.
More detail on what such a renewed partnership could look like and how Labour might tap into this economy-wide shift toward businesses profitably doing good came this week, with senior Labour figure the Rt Hon Sir Stephen Timms MP setting out his thinking on the role of the impact economy in accelerating Labour’s five missions. He called for an Office for the Impact Economy to help leverage the resources and power of businesses, investors and philanthropists. On the role of business, Timms wrote:
“Purpose-driven businesses can play a key role in advancing our missions. Nearly three-quarters of people in Great Britain believe the next Government must work closely with UK businesses to tackle climate change and poverty. Businesses have a unique ability to innovate and scale solutions to the big challenges of our age, and their influence means that small decisions can have a big impact.”
This intervention came only days before the election and from a politician, who, as former Chief Secretary to the Treasury and Chair of the Department for Work and Pensions Select Committee, has a deep understanding of some of the UK’s most complex societal issues as well as the inner workings of government. As a charity working to unlock the power of mainstream business to tackle the big social and environmental challenges of our age, we have been thrilled to see this progression in Labour’s thinking over the last few months. Our research earlier this year showed why previous attempts to create government-business partnerships had failed to fully unlock businesses’ potential to help deliver national priorities. Our Good Business Manifesto, meanwhile, had as its key proposal the creation of an Office for the Impact Economy at the economic heart of government.
The new Labour government faces a daunting set of challenges, from worsening poverty and growing regional inequality to rising global emissions and increasingly stretched public services. Tapping into mainstream businesses’ firepower, and ensuring that they are pulling in the same direction as social enterprises and charities, will be crucial to finding long-term, sustainable solutions to the UK’s toughest challenges. This should not be conflated with the privatisation of public services; it is about acknowledging where government should lead and where other actors can help.
Unlocking the full potential of businesses profitably doing good will also be key to achieving Labour’s mission to kickstart economic growth, while driving prosperity and innovation, including boosting UK GDP by £149 billion and business R&D by £116 billion annually, increasing capital investment by £86 billion and supporting a £5.3 billion pay rise for the lowest paid.
What we are talking about here is a powerful triple win for society, businesses and the economy. For example, as cited by Timms, an alliance of major businesses in the West Midlands, which together employ over 100,000 people per year, recently joined forces through ReGenerate to help employ people from marginalised groups, including ex-offenders, care leavers and neurodivergent people, generating regional prosperity and growth through business success.
Now, with a Labour government in power, how can talk turn into action? And how might the Office for the Impact Economy actually work to align business resources and activities to government priorities? Since I joined ReGenerate last September, we have been diving deep into these very questions and have some insights to share.
What struck a number of commentators about Timms’ proposal was where such an Office should live: he suggested a joint unit spanning the Treasury and the Department for Business and Trade. The title ‘Office’ also implies a certain heft. In our Good Business Manifesto, we highlighted the challenge of limited resources within Whitehall dedicated to unlocking the power of business to profitably do good. This has been compounded by a failure to embed the wider impact economy agenda within key economic departments, despite the Treasury and the Department for Business and Trade holding responsibility for the vast majority of policy levers needed to turbocharge it. Where there are parts of government working on this agenda, they focus on specific impact areas and very targeted parts of the economy.
Having worked to deliver the Dormant Assets Act from within the Department for Culture, Media and Sport’s Inclusive Economy Unit, I can confidently say that placing this agenda at the economic heart of government is absolutely the right move. And, as ReGenerate’s research showed, so far, the machinery of government has not been set up to effectively tap into business firepower. A key reason for this is that, with policy responsibility spread across Whitehall, there is a lack of a clear focal point within government, resulting in businesses and investors who want to help achieve policy priorities often not knowing where to turn. A poll found that 80% of businesses would find it helpful to have an easy way to connect with government on addressing social and environmental challenges.
Linked to the Office’s positioning in Whitehall is the encouraging – and growing – view that a purposeful approach to business should not be, and is increasingly no longer, on the margins of how businesses and the economy as a whole operate. This reality is reflected in polling conducted by the British Academy and supported by ReGenerate, which found that business leaders are now as likely to think that their company’s purpose should be to profitably tackle the problems of people and planet as to maximise shareholder returns. And it is a view shared by investors: the Impact Investing Institute estimated that the UK’s impact investment market stood at £58 billion in 2020 and expected this figure to double to over £100 billion within five years.
This shift in business and investor attitudes and behaviours is part of a broader move toward a more purposeful, or impact, economy – one which works in service of people and the planet, and not to their detriment. A recent blog by Ben Kellard, Director of Business Strategy at the Cambridge Institute for Sustainability Leadership, does a fantastic job of joining up the considerable body of research in this area.
But, turning from theory to practice, how could the government bring all of this to life?
As we set out in our Good Business Manifesto, to support the establishment of an Office for the Impact Economy, the government could invite leading experts spanning business, investment, philanthropy and civil society to help develop a strategy for the impact economy and set up the government structures needed to enable it. It should also look for ways to support and engage with place-based partnerships to enable, replicate and scale up business-led solutions to national challenges.
