Theresa May has told the world’s biggest companies they need to start paying their taxes and treat their workers more fairly in order to address the concerns of those who feel left behind by globalisation.
In a keynote speech to the World Economic Forum, the prime minister said governments could not rely on international market forces to deliver prosperity for everyone and action was needed to address the “deeply felt sense of economic inequality that has emerged in recent years”.
May’s warning that businesses needed to address the issue of executive pay and that market forces alone would not ensure the spread of prosperity to all ensured her first appearance in Davos was met with only lukewarm applause from her well-heeled audience.
The prime minister said that “across Europe, parties of the far left and the far right” were seeking to exploit the sense among people on modest incomes that globalisation was not working for them.
“I want to set out a manifesto for change that responds to these concerns and shows that the politics of the mainstream can deliver the change people need,” May said.
“Because talk of greater globalisation can make people fearful. For many, it means their jobs being outsourced and wages undercut. It means having to sit back as they watch their communities change around them.”
Following the Brexit vote and Donald Trump’s victory in the US presidential election, responding to growing populist pressures has been a feature of this year’s Davos. May said both governments and business had to do more to address the concerns of those who felt that “those who prosper seem to play by a different set of rules”.
May said: “If you’re just getting by, you don’t want a government that gets out of the way, you want one that will help you.”
Business had to do more to spread the benefits of free trade and globalisation to more people. “It means playing by the same rules as everyone else when it comes to tax and behaviour,” she said, “because in the UK trust in business runs at just 35% among those in the lowest income brackets. And it means putting aside short-term considerations and investing in people and communities for the long term.
“It means businesses paying their fair share of tax, recognising their obligations and duties to their employees and supply chains, and trading in the right way; companies genuinely investing in – and becoming part of – the communities and nations in which they operate, and abiding by the responsibilities that implies; and all of us taking steps towards addressing executive pay and accountability to shareholders.”
May said she rejected the prevailing orthodoxy that the best thing government could do was to get out of the way. Problems would not just solve themselves if business was left to get on with the job.
Outlining the government’s rationale for a more interventionist approach, she said: “Our strategy is not about propping up failing industries or picking winners, but creating the conditions where winners can emerge and grow. It is about backing those winners all the way to encourage them to invest in the long-term future of Britain.”
May said her aim was to deliver jobs and economic growth to every community and corner of the country. “We can’t leave all this to international market forces alone, or just rely on an increase in overall prosperity.
“Instead, we have to be practical and proactive – in other words, we have to step up and take control – to ensure free trade and globalisation work for everyone.”
Two days after outlining her approach to Brexit, the prime minister adopted an emollient tone towards Britain’s EU partners, saying that it was “overwhelmingly and compellingly” in Britain’s interests for Europe to succeed.
She said Britain had voted with “determination and quiet resolve” to leave the EU. “Let us not underestimate the magnitude of that decision,” she said. “Britain must face up to a period of momentous change. It means we must go through a tough negotiation and forge a new role for ourselves in the world. It means accepting that the road ahead will be uncertain at times, but believing that it leads towards a brighter future for our country’s children, and grandchildren too.
“We are going to be a confident country that is in control of its destiny once again.”
She said Britain was a racially diverse nation, welcomed inward investment and played a leading role in the UN and other global institutions.
“By instinct we are a great trading nation,” May said. “We seek the freedom to strike trade deals with old friends and new allies around the world.” The prime minister said talks had already started with Australia, New Zealand and India.
But Sir Angus Deaton, the Scottish-born Nobel prize winner, said he was surprised that May didn’t talk about the customs union, in which EU member states currently impose the same import duties, with no tariffs between them.
“That’s a big deal. Free trade and custom unions are not the same thing, and I think that will hurt Britain,” Deaton said.
“So I haven’t changed my expectation that in the long run Britain would be a lot better off in the EU than out.”
The London mayor, Sadiq Khan, said the UK must ensure “privileged access” to the single market after it leaves the EU.
“There’s got to be a recognition that so-called hard Brexit benefits no one, in relation to London, the UK, or Europe,” said Khan, who has been meeting business leaders and politicians in Davos.
“Businesses that leave London aren’t going to Paris, Brussels, Madrid, or Frankfurt, they’re going to New York, Singapore, and Hong Kong.”
Dr Paul Sheard, chief global economist at Standard & Poor’s, says May was making a pitch for Britain to be the ‘lead supporting voice for globalisation’.
“A lot of people have seen Brexit as anti-globalisation, a return to nationalism. She’s pivoting to saying ‘no, this is about Britain being very global’,” Sheard said.
