For all their warm words for business, Starmer and Reeves share a bone deep belief that is the state the creates wealth and grows the economy, says Eliot Wilson
When the result of a general election seems as certain as the outcome of this one, it is understandable that the private sector proceeds cautiously but builds strong relationships with the likely incoming government. In January, Sir Keir Starmer’s chosen mouthpiece, veteran PR talking head Iain Anderson, published a bland document on Labour’s business relations called A New Partnership.
I wrote at the time that it was “the epitome of tedium”, but in a way it has summed up the relationship between Starmer and business. The private sector knows he is likely to be the next prime minister, with a substantial majority, but there is also a suspicion that he neither understands nor especially likes how the British economy, away from the public sector, actually works. So it has decided to smother Labour in affection, embracing every commission, committee and working group set up. Keep your friends close…
There are still occasional flashes of alarm. Last week a rumour circulated that the next government, having pledged not to raise income tax, National Insurance or VAT, might look to hike capital gains tax as a way of generating extra income. Brent Hoberman, executive chair of the Founders Forum Group, shuddered on everyone’s behalf and told The Financial Times that an increase in CGT would be a “populist trap”. He explained, “If we have policies that are globally uncompetitive, it will cost us more and the country will have to find other ways to pay for the NHS etc”.
This was a rare outcry, however. It is easy enough to understand the bone-deep caution of the private sector: the first Labour government for 14 years will take control of the economic levers of power with minimal experience of Whitehall. We are reminded relentlessly that Rachel Reeves, the shadow chancellor, was formerly a “Bank of England economist”, but she left Threadneedle Street when she was 27, nearly two decades ago. The business community wants to present itself as a friendly face and a helping hand.
I am less sanguine about the safe predictability of a Starmer-led Labour government. I said last month that Labour remains “a dirigiste party, believing that the state must play a substantial and active role in the management of the economy”. Sir Keir Starmer said at Labour’s manifesto launch that wealth creation is his “number-one priority”, but it is clear that he sees it as something that government does. It was revealing that he said at one point, “If we could grow the economy at anything like the level the last Labour government did, that’s an extra £70bn worth of investment for our public services”.
“We”. Starmer and Reeves both believe that the state creates wealth and grows the economy. Their industrial strategy published last year said that “the Labour Party’s central mission is to deliver growth”.
Where are the champions of free enterprise? Where are the businessmen, investors, entrepreneurs and innovators for whom a free market and the opportunities it offers make their pulses beat faster? Where are the would-be successors to Richard Branson and James Dyson and Anne Boden and Martha Lane-Fox who want to beat the drum for a vibrant, free, capitalist economy?
The only way we will make a substantial difference to public spending and to what UK plc can afford is by getting the economy to grow, and grow substantially. Starmer at least acknowledges this. But it was Enoch Powell, when he was still the prophet of monetarism, who told Britain what it should have known instinctively: “you don’t tax a loss, you only tax a profit… We all live on the profits of British industry”.
I am not sure the Labour Party believes that. I am certain that it doesn’t like the logic. It is impossible to imagine Starmer or Reeves proclaiming, as Peter Mandelson did in 1998, “We are intensely relaxed about people getting filthy rich”. Yet they, and we, should be. They, and we, must be.
Free enterprise is the secret weapon of liberal democracies. It drives innovation, economic growth, efficiency and individual freedom. It has worked in the past. But it is driven by individuals and companies, not the government. It is sorely in need of a powerful advocate now.
Eliot Wilson is co-founder of Pivot Point Group