Labour supporters think the Tories are more pro-business than their own party; it's time for Milband to change the emphasis
The Fabian Society’s report In It Together, launched next Monday in association with the Portman Group, is a welcome contribution to the key debate as to how Labour should position itself vis-à-vis the private sector.
As its authors Robert Tinker and Ed Wallis note, since 2010 Labour has learned – or at least articulated – that the state cannot do everything, and nor should it.
But if central planning is undesirable for the electorate and out and out Blairism unpalatable for the party base, what should fill the void?
To over-simplify an interesting analysis, Tinker and Wallis alight on three factors – co-production, localisation and long termism – which should mark the Labour offer to business small and large.
Co-production involves, in essence, shaping the future of our economy through a partnership between public and private interest. Critics may yell ‘PFI’ here and that recent experience may be salutary, but there is good cause to maintain a healthy dialogue.
For one, partnership working is delivering in other areas such as public health and reducing alcohol consumption. Equally, in terms of the brass tacks, tax receipts will always depend on the willingness of businesses to honestly report, and national output is reliant on keeping high performing firms in the UK. The ‘global race’ should neither be fetishised nor ignored.
That is not, to be clear, a call for some laffer curve logic on tax rates. Given the margin between the UK’s present 20 per cent corporation tax rate and its closest G7 competitor – the Canadian rate of 26-27 per cent – one imagines Labour’s talk of ‘maintaining the lowest rate of leading economies’ will equate to a slight rise over the parliament. With a deficit to clear, fine.
Indeed, they may wish to extend this pledge at zero real cost by making clear they will maintain a lower rate than the last Labour government (28 per cent at the upper band by 2010). Ed Miliband pledging to tax big business at a lower rate than Blair and Brown would be nicely counter-intuitive, and he has basically already done this.
But Labour do need to bring business more into the conversation generally. The British economy is not just Mike Ashley and Fred Goodwin. For every Sports Direct Labour should be highlighting a more positive example. Since Labour loves a good ambient temperature pasty, why not Greggs? The point is that there are two and a quarter million VAT registered businesses in the UK. ‘Business’ as such cannot simply be tarred as some unthinking and unfeeling monolith.
To do so this may involve structural adjustment. National Economic Development Councils were set up by Harold Macmillan in 1962 to help plan the economy over the long term, and mediate public and private interest. Margaret Thatcher’s sidelining of such apparatus was a mistake, and symptomatic of the general trend of the early 1980s.
But could the general concept be resurrected? The Fabians rightly point to the Automotive Council as a sector specific example of positive dialogue at the national level, but is there room to further embed collaborative capitalism locally?
On localisation Labour has already, rightly, prioritised a greater role for Local Enterprise Partnerships – comprised by boards made up of both public and private representation. They need to spell out what the proposed £30bn of devolution to LEPs and city regions actually means with regard to skills, transport and trade and investment functions, but the broad step is a good one. The think tank Localis will be exploring such questions in detail in a forthcoming report.
But they can be doing more. For one, Labour haven’t talked enough about local authority trading companies. Council owned concerns competing with the private sector can help generate returns for the authority and drive down prices for end users. Labour councils like Leeds are already leading the way here, and housing companies have been around for decades.
Responsible capitalism can involve competing with the private sector as well as regulating it.
And if Labour want to deliver the type of long term agenda they espouse, they will need to be canny with the tax system. They should indeed make explicitly clear, as the Fabians note, that where companies can demonstrate a long term plan in the national interest that they will back them with tax breaks and subsidies.
Some of Labour’s headline pledges – increased employment via a jobs guarantee, rebalancing the British economy away from London and the south east, and incentivising the living wage – are already somewhat operating in this space already. But somehow this needs to be joined up into a more overtly positive, tabloid friendly, ‘Balls backs business’ line.
At present the general perception is that whilst the Conservatives may be in league with some ‘predatory’ capitalists, they better represent the responsible ones. According to a YouGov poll last summer 63 per cent of Labour supporters think the Tories are pro-business compared to 57 per cent who make the same claim of their own party. 66 per cent versus 27 per cent is the even starker national picture.
A 50p top rate of income tax, a mansion tax, capping energy bills, taxes on bankers’ bonuses and their employers’ balance sheets may all have individual merit. With a quibble here or there as to the method, most of the British public would back each of these measures. But collectively they do suggest a party that isn’t doing enough to challenge perceptions as to what Labour is.
Miliband has done a pretty textbook impression of what a decent, middle-class left leaning reformer would do in his position, but it’s been so on message that the counter intuitive stuff Labour have on occasion put out there has been drowned out.
With the party now barely bobbing over the 2010 General Election figure of 29 per cent in the polls, some new thinking may be needed. It may be too late for policy, but it isn’t for emphasis.
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