There’s no doubting the mood among Britain’s business leaders. It’s sulphurous.
Last week, I chaired a panel of hugely successful small and medium-sized enterprise (SME) bosses and to a person they were angry. Many felt betrayed and let down.
For many months, Sir Keir Starmer and Rachel Reeves embarked upon a charm offensive, designed to woo Britain’s boardrooms. They’d got the support of the workers, now the Labour hierarchy wished to win over the industrial chiefs.
But given the build-up to Wednesday’s Budget, they fear it might have been a con – designed to secure support for the idea that Labour could be trusted with other people’s money and the national purse. Despite repeated entreaties from Starmer and Reeves that their version of the Labour Party was capitalism’s friend, they are starting to believe the words were empty.
If speculation is correct, Reeves is going to dish out a clobbering to the private sector and those who run it. If this chatter turns out to be wrong, anger could dissipate. But in which case, why risk losing the confidence of the business community in the first place? No, the signs are that reforms to capital gains tax, inheritance tax and employer’s national insurance will be in her sights – among measures aimed at hitting those Labour was busy trying to impress before the election.
Then, of course, Labour won by a landslide. Perhaps the size of that victory has convinced Starmer and his colleagues they can shake off the need to embrace business.
Perhaps the scale of the margin gave Starmer certainty. He’s in power for five years, no ifs or buts, and may be there for a second, or possibly a third, term.
Businesses not only fear they will be hurt by the Budget but that measures are to be accompanied by new legislation protecting workers’ rights. A common refrain from the panel was, “Why now, why do it all at one go?” Starmer has plenty of time, there is no imperative to rush – but no, he’s hitting business with twin hammer blows.
The irony, too, is that Labour’s overwhelming majority did provide the sort of stability investors crave. For four years, Britain lurched from one prime minister to another; one of them, Liz Truss, imperilled the entire economy and made Britain a global laughing stock.
That was because Truss tried to do too much too soon; committed to a growth agenda and wishing to honour pledges made to the Tory activists who voted for her, she launched a headlong charge. Seemingly unconcerned by what the markets thought, Truss and her chancellor, Kwasi Kwarteng, took Britain down a dangerous path.
Things may have turned out differently had they been patient and bided their time. It’s as if Starmer and Reeves want to repeat the same mistake. In their case, it’s the left they’re reaching out to, showing that – despite the romancing of the City – they remain reds at heart.
How else to explain the imposition of VAT on private schools? It will contribute little to the Exchequer while storing up problems for hard-pressed state schools as pupils, many of them special needs, make the switch. But ideologically, it’s symbolic, it matters. Which is precisely the same view that explains Starmer’s desire for an anti-business Budget followed by an anti-business, pro-worker statute. While some of the proposals in the bill for the latter are causing irritation, it’s the form-filling and regulation they ultimately engender that also provoke annoyance.
This was one of the themes propounded by Starmer at his recent investment summit. He took delight in telling the audience of multinational titans how he was going out of his way to make doing business in Britain easier. Not all regulation is bad, Starmer said, but he wants to sweep away the kind that requires energy companies to complete 4,000 documents before starting to build infrastructure.
Music to the ears of those in front of him, yet his remarks came just a week after his government introduced a bill setting out the biggest increase in employment regulation in a generation.
Still, Labour hailed that gathering a success, claiming total investment commitments of £63bn versus the £39bn raised by Rishi Sunak at last year’s summit. Inevitably, there is an opaque, heavily-spun aspect to these tallies; Tories were quick to claim not all of the Labour figure was new. It’s also the case that a portion would have been in the pipeline regardless of who occupied No 10. Equally, once the small print kicks in, some may not match the headline announcement.
Nevertheless, it was a vote of confidence in Starmer’s administration from several international business stars. That’s how Labour saw it. Others said it was more a declaration of optimism in the underlying strength of the British economy, the world’s sixth largest and one that is performing stronger than its European peers.
Whether that continues is the major question. If the economy grows, then Labour’s early drive against commerce, against entrepreneurship and enterprise, may be forgotten. Businesses will revel in improved turnover, profits and returns. All will be well.
Unfortunately, there is precious little sign of Labour having a concrete plan for growth. There is plenty of talk, lots of platitudes, but the detail is lacking and so is the cash. An injection of capital into large-scale infrastructure projects could transform the economic outlook but Reeves says her hands are tied, she has no money. Similarly, the cupboard is bare for the NHS, social care, education and the other areas that Labour would like to boost.
Reeves will alter the public borrowing rules to give her some leeway for investment but that is unlikely to let business off the hook. The chancellor did an excellent job in her charm offensive with the business world before the election – but it will be bad news for her if they are left feeling betrayed by the time she sits down on Wednesday.
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