Since the demise of the New Labour project, ‘business’ has been a dirty word in the Labour movement but now Labour under ‘Red’ Ed Miliband and Ed “not my fault guv” Balls have realized that business plays an important part in the UK economy.
Fresh from calling big companies ‘predators’ and demanding state intervention in the banking and energy markets, Miliband has been rocked by criticisms from within his own party that he’s losing the battle on business.
Criticisms Within Labour
Lord Myners, the former Labour City minister, noted that:
[Miliband] “doesn’t talk a language that business recognises”
Whilst up and coming Labour MP and leadership aspirant Chuka Umunna, the shadow business secretary has bluntly summed up Labour’s failed relationship with business by saying any new Labour administration would be:
“A resolutely pro-business government [as] it is a fairly academic decision how you can cut the pie more fairly if you haven’t increased the size of the pie first”
A Labour aide added:
“The cost of living crisis is not going to go away, but we need to earn our way out of it. It is not just about redistribution but also about the long-term growth agenda.”
This recognition of the critical role business will play in the electability of Labour in future elections was underpinned by comments from Simon Walker, Director General of the Institute of Directors (IoD), who noted that at present Labour was entering the general election campaign on the most anti-business footing of any modern political party.
Walker said:
“From the 50p tax rate to a list of planned market interventions, [Labour have] moved a long way from the days when Ed Balls was a respected City minister.”
“If Labour wants to be the party of employment, it must first become a party of business.”
“This doesn’t just mean reassuring the City, it means demonstrating a real understanding of the pressures facing SMEs and the obstacles preventing their investment, expansion and growth.”
Adam Marshall, Director of Policy at the British Chambers of Commerce, added that Labour had:
“Very serious and respected people but, on the other hand, [they also have] some eye-catching political initiatives which make business distinctively uncomfortable – whether on energy prices, rental markets, tax policy or any number of things [leaving] businesses a bit confused”.
Balls, allegedly after placing pressure on Miliband to address the concerns that business has for Labour’s credibility, has taken a leading role in an attempt to change perceptions of Millbank amongst the business community.
In announcing the change of mood inside the party, Balls, in his typically striding, unapologetic style and with his usual lack of self-awareness, said:
“We now face the twin challenge of dealing with the aftermath of the financial crisis while also trying to adapt to the relentless forces of globalisation, immigration, and technological change.”
“[We] will set out how we should help small business thrive, ensure innovation flourishes and empower independent and properly funded local enterprise partnerships alongside combined authorities.”
“Failure of financial regulation led to a global financial crisis, and the global recession which followed hit middle and lower income families particularly hard.”
“Global economic integration led to much greater instability in our financial and tax systems than any of us anticipated.”
“The global financial sector was taking risks that both bankers and regulators did not fully comprehend. As leverage increased and balance sheets grew, bulging corporate tax receipts gave the impression that everything was rosy.”
“Alongside this, globalisation also created much greater complexity in our tax system, leading to large multinational companies that have chosen to avoid paying their fair share of taxes.”
“If we are to maintain public support for an open market economy, we need to address public concerns, promote competition and long-term investment and make sure markets like energy and banking work better for consumers and businesses alike.”
“[Labour will offer] a new plan for Britain and business to succeed together [and will be] pro-business, but not business-as-usual”
Perhaps not the most deafening support for business but an improvement on recent outbursts from his boss, however hidden not very far beneath the surface was a stark reminder of the real driving force behind the Labour movement when Balls, rather unconvincingly, ‘reassured’ business by saying:
“Avoiding argument with the unions is not an absolute imperative”
In summing up the new position Labour intended to rake on business Balls said:
“[It must be] competitive, promote long-term investment and innovation, and be simpler, predictable and fair.”
Dismally failing once again to recognise his own culpability in the recent economic collapse Balls added:
“Business investment is slowly starting to recover, but it is still £6.1bn a year below its pre-crisis peak and is the fourth lowest in the EU as a share of national income – only above Cyprus, Greece and Ireland. UK export growth since 2010 is sixth in the G7, 16th in the G20, and 22nd in the EU.”
“Business expenditure on R&D is the lowest in the G7 as a percentage of GDP, while infrastructure investment is down 12.2% compared to 2010, and public investment is set to contract again next year. Only 8% of all employers – including less than a third of the biggest firms – offer apprenticeships to give young people a route into work.”
Labour’s response to the post recessionary economy is a list of potential policies and reviews that will be ‘considered’ over the coming months before the 2015 general election campaigning gets into full swing.
Labour’s potential policies are:
- A cut in business rates
- Reversing the Coalition decision to cut Corporation tax to 20% from the current level of 21%
- A commitment to keep corporation tax as the lowest in the G7 in order to attract long-term investment, suggesting a new rate above 21% but below 26.3% as seen in Canada
- The transfer of £30bn of pre-existing funding from Whitehall to cities, county regions and local enterprise partnerships to devolve decisions on housing and job spending.
- Handing city regions some tax-raising powers, to enable them to retain income if they are generating higher than foreseen growth.
- A review with Lord Adonis into growth to see how taxation can be used as a tool to drive growth and investment, including the return of regional ministers and stronger city-regions
- Improving competition in banking through a British investment bank within which may be established regional state banks that would have a role in providing finance to small business
- Action on boardroom pay
- Tougher corporate governance,
- A review with Sir John Armitt, former Olympics Development Authority chair into infrastructure, to identify Britain’s long-term infrastructure needs, including the draft bill to set up an infrastructure commission.
- A manufacturing review led by Mike Wright, executive director of Jaguar Land Rover for improving manufacturing supply chains.
- A decentralisation review led by Sir Richard Leese, leader of Manchester City Council, to encourage authorities to join forces to cut costs and to work together to promote certain businesses or sectors
- A housing review led by Sir Michael Lyons, one-time chair of the BBC Trust, considering local authorities being given greater borrowing powers to create more social housing and providing support for new garden cities and expansion of existing towns through “urban extensions”.
- An Allowance for Corporate Equity (ACE) to create a tax break for companies that raise money by selling shares and use it to fund takeovers & growth.
- A commitment to ensure a quarter of government contracts to go to small and medium-sized firms.
- New tax avoidance measures
The CBI reacted positively to the proposals, saying:
“[A competitive business tax system is] crucial for future growth”,
However CBI Director General John Cridland’s former comments that the business community was confused by Labour’s policy of “wage controls, price controls, land controls, tax increasing, and dividing large and small companies” was still a dominant feature of Labour’s plans with their intention to move ahead with their plan to crack down on energy companies and banks as being “ultimately good for companies as it will help restore faith in an open-market economy”.
It seems that for all the promises, Labour still have mixed messages down to a fine art.