The MT Interview: Richard Lambert of the CBI

The former FT editor, who now runs the CBI, offers some sage advice to the incoming Government...

by Chris Blackhurst
Last Updated: 09 Oct 2013

Richard Lambert can't help himself. He's the director-general of the CBI and not directly affected by the outcome of the general election. But the journalist in him - he was editor of the Financial Times for 10 years - means he is obsessed about the result.

He admits to having consulted spread-betting sites before we meet to see their latest election predictions. He's excited - not so much because of what it means for the employers' organisation and its members but because an election is a newspaper editor's dream, a huge story, full of drama and tension, with endless scope for analysis and comment.

It's also the time when an editor can announce which party his paper will support and play a part in influencing the result. In 1992, Lambert's FT came out for Labour. It was a historic moment - the business paper telling its readers to turn away from their traditional allies, the Tories.

As a step in Labour's modernisation - the flat-cap party pulling away from trade union ties - it had symbolic significance. Typically, Lambert played down its importance. 'I did not think it was a great leader,' he said. Labour, of course, went on to lose. But the FT's surprise recommendation attracted much debate.

The editorial showed a fiercely independent spirit. Those who assumed it meant he was a leftie were mistaken. 'I've never been a member of any political party. I've voted for all kinds of people. I do not have any political baggage.'

Lambert is, indeed, not easily categorised. Tall, bespectacled, genial and mild-mannered, he looks and speaks more like an academic than chief representative of the profit-seeking class. At the FT, his nickname was 'Mop' in deference to his full head of hair.

He grew up in the north of England, in the affluent Manchester suburbs. But the family also spent time in London, where his father worked for Lowndes Lambert, the insurance broker (the Lambert in the firm's name is pure coincidence, he likes to point out).

His school was Fettes, the Edinburgh boarder and alma mater of Tony Blair. He played rugby as a rangy second-row forward, but is no public school rugger-bugger: as FT editor, he needed to be persuaded of the importance of sport.

Fettes was followed by Oxford and Balliol - he was the first of his family to go to university. Today, despite his relative affluence, he still lives in the Georgian town house in 'south Islington', as he calls it, that he and his wife Harriet have occupied for 30 years (they have two grown-up children). He has a chauffeur-driven limousine at the CBI but is just as happy riding to work on a bike (he declares as one of his hobbies 'walking around London').

He joined the FT as a trainee in 1966 (during his interview with the editor, someone popped in to say gas had been found in the North Sea) and stayed 35 years, the last 10 as editor. His reign was characterised by a rigorous, objective approach to news and a dramatic internationalisation of the paper. He took the challenge directly to the Wall Street Journal, launching the FT in the US.

He had little truck with the blinkered British reader. 'I think of them as a wartime convoy. In the front of the convoy is the managing director of Morgan Stanley and all the other people who want the international coverage. And at the far end, trailing a long way behind, is an independent financial adviser in a seaside town who hates the FT because it is pro-Europe and does not have sport - but he or she has to buy it.'

Nor did he have much time for the excesses of the British media. It's 'a great rich pudding, with some lovely bits and some horrid bits. Overall, it is quite amazing. We have some of the best journalism in the world and some of the worst.'

It's those core FT readers, of course, who now make up a large portion of the membership at the CBI. He has brought to it the same emphasis on globalisation, competitiveness, climate change, social inclusion and other issues outside the usual dyed-in-the-wool capitalist remit.

Too often in the recent past, the CBI has been thought of as the Fat Cats' dining and talking club, out of touch and irrelevant. It was dominated by businessmen (nearly always men) who were no longer in the front rank or, to the delight of the body's critics, whose fortunes took a hammering when they appeared on the CBI stage. The 'curse of the CBI' was usually linked to a plunging share price or sudden resignation.

One of the shoddiest episodes came in 2006, soon after Lambert took over, when Farepak, the Christmas hampers firm chaired by former CBI head Sir Clive Thompson, collapsed, leaving its low-income savers high and dry. Lambert put distance between the CBI and Thompson, calling it 'a depressing and sad story'.

Lambert's formative years were during the 1970s as a reporter on the FT. The events then - the secondary banking crisis, industrial strife, employers agreeing wage restraints - and their effect on Britain's morale and the ability of its businesses to compete have marked him.

He's keen on the bigger picture. Which is why he pulls a face when I mention the row about National Insurance that overshadowed the early part of the election battle. Lambert wishes business chiefs and politicians would focus their energies on more vital matters. Don't get him wrong, he says, 'National Insurance is an important issue - it's now a bigger burden on business than Corporation Tax. North of ú50bn a year is the employers' contribution, so a proposed increase of a percentage point in the spring of next year, just when the economy is beginning to turn, is not welcome.'

Elaborates Lambert: 'When Labour first announced an increase in 2008, we opposed it and we've opposed it ever since. It's serious and important and so we supported the Tory proposal to scrap the increase. But, in political terms, it's surprising the way it was allowed to dominate the beginning of the election in the way it did.'

The rise in the employers' contribution, he says, amounts to ú2.5bn. The total tax take, including the employees' part, is ú6bn. 'It's a mere enchilada when set against a chicken of a public account deficit of ú170bn. There are other, far more significant things that need to be talked about.' And, he says, they are being discussed - but not by politicians. 'Put it this way: they're not talking about National Insurance in the Dog and Duck in Pudsey.'

What people are more concerned about is the state of the public finances. 'The voting population needs to be told about the fiscal challenges that lie ahead. It's disappointing that at the start of one of the most hotly contested elections in modern times, none of the main parties is prepared to go into detail about those challenges.'

The differences between the parties boil down to the balance they strike between cutting current spending and making tax increases. 'Both main parties have ring-fenced areas they won't cut - but what are the implications for those areas that are not ring-fenced?

'From an economic perspective, what is needed is economic stability - which means having a fiscal policy that allows interest rates to stay ahead. We're a heavily borrowed nation. If interest rates start to climb - which they will if we don't get a grip on the fiscal side - you will see real pain for families and for small businesses.'

One of the aspects of the recession is that 'the number of corporate liquidations is a lot better than the recession of the early '90s. But smaller employers, those with under 10 staff, are in trouble now. And it will get worse when they need capital and interest rates have gone up.'

The next government, he says, must 'set out a credible pathway for the economy, to get to the point where families have financial stability and small businesses can grow'. If we can achieve stability and growth, then tax receipts will revive. 'To get there, the overriding priority is to have a sound banking system.'

The CBI boss is not sympathetic towards the bankers. 'We've been through a sensational period of financial shock. There have been serious failures of judgement across banking in the UK. For their part, the public feel disillusioned about the markets and the business process.'

The politicians, too, harp on about the banks as if they're to blame for everything. 'It's not surprising that the most popular thing the Labour government did before the election was the bankers' bonus tax. All the responses to the banking failure have focused on the banks.'

That has been true to an extent in the election as well, with the consequence that the debate has been too narrow. 'One of the things I feel strongly about in the election is that the main parties are not giving us their big vision of what kind of society and economy they want us to have.'

But it's not all doom and gloom. 'There are very tough times ahead, but we need to remember the competitive edge of our big businesses. We keep hearing that the UK is no longer such a great place to invest and we profess not to care if a few business leaders hop on a plane to Zurich. But the big driver has to be growth and trade. We've been through a period of government spending as the driver, now it's the economy and trade. If we say we will treat big companies harshly and we're hopeless, then this will not be a place where businesses will want to come and where their employees will want to work.'

Of key significance, he says, is that the private sector begins to grow again and our competitiveness improves. To that end, there needs to be more concentration, says Lambert, on strengthening the science base. 'We have fewer poorly performing schools but it is still too many. More kids from deprived backgrounds are getting six or more GCSEs, but it's still only a quarter of those who receive free school meals.'

The CBI welcomed the report prepared for the Conservatives by Sir James Dyson on boosting high-tech exports but felt it didn't go far enough. 'Dyson was interesting and good about high-value exports,' says Lambert. But while he argued for R&D tax credits for small, high-tech firms, Lambert would like to see them extended across the entire private sector - regardless of a company's size or the industry it's in. That would encourage all firms to grow through investment and innovation. 'Our economy is much bigger and broader than high-value exports. The risk in the Dyson approach is that we miss out the importance of businesses that employ a lot of people and make a valuable contribution.'

We're meeting against a backdrop of growing public hostility to big business. The gap between rich and poor has grown even larger; bankers are blamed for bringing down the economy; corporations have lost the trust of the people. One of the main factors in that has been executive pay - some bosses, not just those in the City, have been on the receiving end of huge remuneration deals and have been criticised as a result.

On this, Lambert is sanguine. He doesn't believe chiefs have suddenly become greedy. What has happened, he says, is that business is more exposed to globalisation than ever. That has caused a breakdown in the traditional relationship with employees. We've witnessed more foreign takeovers than before and, increasingly, the emphasis is on creating shareholder value. And executive compensation is tied directly to a company's share price. 'There has been a major change in the way business works and it has been accelerated by the credit bubble. Firms were able to borrow money at no cost, and the more they borrowed, the richer their executives got.'

But while attention has been paid to the banks and to the very top of business, Lambert says he is convinced that 'the average British manager is untouched. They do think about business and profit in a different way.'

There has been a shift occurring since the late '70s. 'It's about what are profits for? In the past they were used to support new products and services, now they're used to get the bosses rich.' He laughs. 'Now, this is something (as opposed to National Insurance) to be talked about.'

What would be in Lambert's manifesto if the CBI were a political movement? Top of his list, he replies instantly, would be energy security. 'This country is at a fragile point. We must have secure, diverse, low-carbon sources of energy and we must act now. We're at 10 minutes to midnight in terms of the big decisions we must take, about nuclear, offshore wind, carbon capture and storage.' It's this urgency that makes him fear a hung Parliament. There's not much to separate the parties fiscally, but on energy they are further apart. 'And if no decisions are taken within 12 months, we're in trouble.'

Second is banks. 'We've got to get them off the books of the taxpayer and lending to business. That's not easy. It means getting a framework in which you arrive at a balance-sheet structure that is sustainable and gives enough space to lending.'

Third on his wish-list is 'sound public finances to be achieved during the lifetime of the Parliament'. That entails cutting public spending and 'the public services should be more open to private sector delivery, price and quality'.

Again, time is of the essence. 'If we don't get the public finances under control, interest rates will go up, which will damage everybody and we will lose our credit rating. The country is in for a few tough years.'

For him, these three items need to be sorted out now. Beyond them, he has other wants: competitive taxes, less red tape, improved transport infrastructure and better education and skills. These, though, are 'constant needs of business. They remain great challenges, but the urgency is the public finances, banking and energy.'

In addition, 'we need to remind ourselves and the international audience that the UK is a great place for business.' We can do it, he says. He has just paid a visit to the Olympics site in Stratford. 'It's fantastic, ahead of schedule and on budget' - an example of British industry at its best.

Yes, but while Lambert and his colleagues concern themselves with affairs of state from their eyrie at Centre Point in central London, what do their members say? The suspicion is that they are more down-to-earth. He nods. 'They're most worried about the lack of policy consistency and accompanying uncertainty. And the lack of a clear view as to what the economy means for them. Firms are doing better, but there's a high degree of uncertainty, and that is going to exist for at least another 18 months.'

And, he says, 'They care about skills.' One of the facets of the slump is that businesses slashed capital spending and de-stocked - but they clung on to their skilled workers. 'That's why,' says Lambert, 'output was down 6% but employment down only 2%.'

Lambert does not share the view that too many students are going to university when they could be learning work-related crafts and skills. 'Yesterday, I saw the vice-chancellor of Cambridge in the morning, the vice-chancellor of Cranfield in the afternoon and the vice-chancellor of Hertford in the evening. All three are different universities - Cambridge is world-class, Cranfield is a centre of excellence for precision engineering and Hertford gets local kids into work - and all three do a good job.'

'Look,' says Lambert, 'when I was at school, less than 10% of the kids went to university, which was bizarre, particularly when compared with Europe and the US.' Some courses are regularly criticised, such as media studies, 'but the graduates get jobs - perhaps not in newspapers or television but in business, which values that they've been trained to communicate.'

The 'constant cry' of CBI members is the lack of science, technology and maths graduates. 'It's a real problem, the shortage of supply and the poor standards in the state school system. Plus, we need to encourage more science teaching and to invest in our university science departments.' It is, he adds, a 'recurring theme that I didn't expect when I arrived at this job'.

He left the FT in 2001 and was a member of the Bank of England's Monetary Policy Committee from 2003 to 2006, before taking charge of the CBI. Does he miss his old job? 'No, I've been very lucky - I had a lovely time at the FT.'

His predecessor at the CBI was Digby (now Lord) Jones. 'Digby used to say to me: "Everything will be fine." Now, when I say look at the economy, he says: "It was all right when I left!"'

He has as his president Helen Alexander, the CBI's first female incumbent and a former boss of the Economist group. It's the first time that two media professionals have headed the organisation. It's quite a coincidence, he acknowledges. But there should be no doubting Alexander's prowess. 'Helen is a great speaker, she's got loads of energy and she knows loads of people.'

Lambert was hired for a five-year term. Four years are up. Will he carry on? He's embarrassed and flustered. 'I don't want to say.' In truth, it's not up to him but the CBI, and he does not want to speak out of turn.

He gives the impression, though of loving it. He's a different type of leader from Jones. The previous DG was voluble and, in the eyes of some of his members, too matey by half with senior Labour ministers, often referring to them by their first names (he later, of course, went off to work for them in Gordon Brown's 'big tent'

or 'government of all the talents'). Lambert is cerebral, not given to grandstanding, and is altogether more reserved and studious.

So if he was running the country, what would he do? Again, he doesn't hesitate. 'I'd manage public sector reform. I'd manage substantial savings and I'd protect front-line delivery.'

Too much emphasis is placed by Whitehall on 'inputs, not outputs'. He cites the example of the police, where the pressure is to get more bobbies on the beat and little attention is paid to what they actually do and whether it could be done more efficiently. 'You can multiply that approach across the whole of the public service.'

Lambert is unlikely to get his chance - the suspicion has to be that even if he did, he would find the cynicism and obsession with spin in modern politics hard to stomach. That does not mean he can't enjoy the intensity of the election and its aftermath. He's loving every minute - witness his scrutiny of the spread-betting sites. He may be head of the CBI but he can't erase 35 years of being a journalist.

FOUR CHALLENGES FACING LAMBERT

1. To persuade politicians to tackle the future of Britain's energy supply with the urgency that business seeks

2. To make British business more competitive and to prevent further erosion of its base by the Government

3. To do more to increase the supply of recruits with science, technology and maths expertise

4. To give a more thoughtful, inclusive, modern edge to the CBI and to stop it reverting to being a narrow, out-of-touch dinosaur

LAMBERT IN A MINUTE

1944: Born 23 September north Bucks, educated local grammar school, Manchester; Fettes College, Edinburgh; Balliol, Oxford

1966: Trainee reporter, Financial Times. Edited the FT's Lex Column in the 1970s

1979: FT's financial editor, then New York correspondent

1991: Editor, FT. Sets up a US edition

2001: Retires as editor

2003: Member of the Bank of England MPC

2006: Appointed director-general of the CBI. Author of a government report on BBC News 24 and led the Lambert Review on the relationship between universities and business.

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