When the Centre for Policy Studies announced yesterday that Rachel Reeves’s mooted Budget plans could see Britain plunged down a further five places on the OECD’s ranking of tax competitiveness, I wasn’t much surprised. Nor was I taken aback to see that official analysis suggests Angela Rayner’s workers’ rights package will cost businesses up to £4.5 billion a year.
Why? Because this is what Labour do, right? This is a Cabinet with almost no private sector experience, composed of a happy mixture of politico lifers, trade union busybodies, and legal grifters. These people have no familiarity with business. They have either spent their lives profiting from the public sector or arguing for its expansion. Profits are dirty and exist to be squeezed.
Taxes go up on the productive bit of the economy to pay for higher wages for the stagnant. Unions are given greater licence to strike, call in sick, or donate to Labour, whilst capital gains tax and national insurance are hiked. The magic profit lamp is rubbed ever more vigorously, expected to continue to pay out, as the actual task of running a business is made ever more difficult.
Night follows day. Socialists penalise the private sector. So what? Well, wasn’t it supposed to be different? Labour has tried hard to woo executives Indeed, Reeves has touted Labour as the natural “ party of business”. Jeremy Corbyn’s Labour is dead, and Keir Starmer’s will work in partnership with business in pursuit of investment and growth. Entrepreneurs drank it all in, the schmucks.
The Financial Times fawned. Executives stumped up thousands to attend Labour business days, to get a shot at pressing the flesh with Jonathan Reynolds. The Guildhall was booked out; an investment conference staged. Didn’t Reeves spend two weeks at the Bank of England? Statmer says he likes wealth creation. Growth sounds good. Ignore Rayner – they’ll keep her busy, somehow.
Do they feel like chumps? Battered by Brexit and outraged by Liz Truss, they thought we couldn’t be trusted. Labour seemed so eager to please with their big talk about stability. Starmer pressed the flesh at Davos, puce cheeks glistening against the snow. Ancestral memories lingered of Peter Mandelson saying something nice about getting filthy rich. They can’t be that bad. Can they?
So it goes. An Onward report today suggests British workers are becoming “unusually risk-averse” when it comes to setting up their own business. High costs and bureaucracy see us fall behind rivals on the basic metric of entrepreneurial spirit. A London Business School survey finds 53 per cent of working-age adults say fear of failure puts them off, up from 44 per cent in 2019.
Business confidence plummets further with every gloomy splash on Reeves’s mooted Budget plans. When Louise Haigh uses her first weeks to bung a pay rise to her railway comrades and call for a boycott on a law-abiding business considering investing a cool £1 billion, it’s no wonder if executives are spooked. Talk is cheap, even at a £3,000 reception. Actions speak louder, and so on.
I’m just a blogger. My professional career has so far consisted of a few months teaching and two and a half years writing about politics. I defer to any entrepreneurial readers as to the exact labouriousness of running a business under socialism. But I do seem to be more aware than the Cabinet that making life more difficult for the private sector is unlikely to be good for growth.
Bigger businesses, those with the deepest pockets to pay for lobbyists or compliance costs, should be able to wear the next five years in just about one piece. But what about smaller businesses – expected to be disproportionately hit by Rayner’s looming changes? Suck it and see for some nebulous potential benefits. Or don’t bother setting up a new firm at all. Stagnation entails.
The last government was far from perfect. As the CPS points out, Rishi Sunak’s hike of corporation tax to 25 per cent hardly improved our international competitiveness. That mooted bonfire of EU regulations turned out to be only a few cinders (paging Kemi Badenoch). But our hearts were in the right place – with Jeremy Hunt making full expensing permanent an obvious example.
Labour’s instincts are in the opposite direction. For the next five years, backbenchers will always suggest that ministers have not taxed or regulated enough, rather than too much. The crown of Foundations lies in the gutter, waiting for the next Tory leader to pick it up. Before long, they will have businesses bashing down their doors, demanding to bankroll the party.
At least when Labour were far ahead in the polls, they had the excuse of paying for goodwill from the next government. How did that work out?
