The shadow business secretary is ready and willing to intervene in industrial policy – and believes a cross party fault line is developing over whether or not to let 'market forces rip'
For Chuka Umunna, the shadow business secretary, last week's City pay revolts should, as well as shaking up UK plc, send a powerful message to Downing Street.
"It just shows how out of step David Cameron and George Osborne are, with the language and attitude they have taken," says Umunna, who is in a jubilant mood after staying up half the night to watch the local election results.
Despite proposals from Vince Cable, his opposite number in the coalition, for shareholders to have a binding vote on corporate pay policy, Umunna says that on shareholder rights, as on other areas of business policy, Cable doesn't have the full support of the prime minister. Cameron made a speech about "moral capitalism" in January, but appeared to backtrack a month later, calling for an end to "business-bashing".
"Cable's problem is that it's impossible to deliver industrial policy unless you have the right culture across Whitehall and buy-in from the Treasury and No 10," Umunna says. "The sadness of this moment is that the business department has kind of become a backwater."
Cable has expressed his frustration with the government's business policy, warning in a leaked letter to Cameron that much of it is "piecemeal". But Umunna says he should have fought harder: "It's all very well people like Vince Cable saying they don't agree with the reduction of the 50p rate of income tax, but he was in a position to stop that happening and he didn't."
He believes that helps to explain Labour's gains at the expense of the Liberal Democrats in last Thursday's elections. "The public aren't mugs: they know that ultimately this government exists with Liberal Democrat support."
The Streatham MP is widely viewed as one of the most ambitious of the 2010 intake of Labour MPs, together with other rising stars such as Rachel Reeves and Stella Creasy. What they may lack in government experience (Umunna is just 33) they make up for in campaigning zeal.
While Ed Balls makes broad-brush arguments about the risks of fiscal austerity, it's Umunna's job to detail how Labour would rebuild Britain's shattered economy.
He says the coalition is sticking to the laissez-faire approach that has characterised all recent Tory business policy. "It's your classic supply-side, deregulation-is-the-answer-to-everything approach as adopted by Margaret Thatcher and her business secretaries: Nicholas Ridley, Keith Joseph. They think the best thing government can do is step aside and let market forces rip."
Umunna says Labour would create a state-backed investment bank to bypass the crippled financial sector and channel funds to struggling firms; boost on-the-job training; and increase the powers of the local enterprise partnerships set up by the coalition to replace regional development agencies.
He also reels off a list of policy projects he is involved in with his fellow shadow cabinet ministers – Stephen Twigg on skills, Caroline Flint on energy and so on. "We're very much working across shadow teams. If we're not doing that in opposition, it's going to be far harder to do that in government when you're siloed in different departments."
The business brief seems an unglamorous one for the smooth-talking former employment lawyer. But Umunna argues that business policy will be one of the great dividing lines of contemporary politics, because the "traditional totems for the centre-left" – progressive taxation, redistribution – are harder to maintain in straitened times, and anyway will not tackle deeper problems such as poverty wages or an industrial sector unable to compete with its overseas rivals.
"If we had a more progressive tax system, that would not necessarily address the living standards crisis that millions of people are facing," he says. He's in favour of "more effective pre-distribution" – an economy structured to tackle inequality by creating a better mix of jobs.
He says that will require the kind of positive approach that is anathema to the Tories: "What we're seeing now is a fault line between those who think government should step out of the way, and those who think government must do everything it can to support business with an active industrial policy."
He says this division cuts across party lines – he cites Lord Heseltine and universities minister David Willetts as backers of a more interventionist approach than Osborne or David Cameron would support.
Labour itself was resolutely hands-off for a decade after 1997. Patricia Hewitt and Stephen Byers favoured deregulation and supply-side reforms, such as changes to competition policy, rather than direct intervention – though both got involved in the thwarted rescue of carmaker MG Rover. Only belatedly, when Brown drafted Lord Mandelson back into cabinet for a second shot at the business portfolio, emboldened by what he had learned from other governments as EU trade commissioner, did Labour start to take a more activist stance.
"We certainly don't want to return to a situation where the government is picking winners, and you end up with the losers picking the government," he says. "But I don't have a problem with picking sectors". For example, the rapid rise of the global middle class should open up opportunities for some British exporters, he argues. "The important thing is that it is done in an objective manner."
He cites the Automotive Council, set up by Labour and now championed by Cable, as an example of how government can help particular sectors by giving direction and, sometimes, funding. The council, co-chaired by Cable and ex-Ford engineer Richard Parry-Jones, with representatives from all the major carmakers, offers recommendations on how to boost skills and improve technology in the sector. "It does what the market, left to its own devices, doesn't do," Umunna says. "The market is not able to provide strategic direction."
With his well-tailored suits, urbane manner and undisguised ambition, Umunna seems an unlikely champion of Britain's neglected industrial heartlands, but it's clear he has worked hard to master his brief. The real test will be whether he can win back the confidence of business leaders, confidence painstakingly built up during John Smith's "prawn cocktail offensive" in the early 1990s, and flattened by the credit crisis.
For now, he ruefully admits: "In the 2010 general election, clearly we had lost a lot of the trust that we had worked so hard to build up in the business community."