President Eisenhower once remarked, ‘Farming looks mighty easy when your plough is a pencil, and you’re a thousand miles from the cornfield’.
As someone whose first job was on a farm, I concur with Mr Eisenhower.
This quote also encapsulates Labour’s evolving relationship with business, particularly courting investment; it looks and feels very easy when 1000 miles away in opposition, and you can blame the country’s woes on the government of the day and tell corporate leaders what they want to hear. Once you’re in the cornfield, the reality is different – as Labour will continue to discover, despite big and shiny announcements arising from yesterday’s investment summit.
Most serious Labour people realise that if they are to put their plans into practice, they need business – and, more importantly, investment. This investment, for the most part, must come from global investors, given that, unlike some of our counterparts, we make it exceptionally difficult to invest our own capital in UK assets. But there are two problems.
Firstly, the Labour leadership is being reminded that the aims of trade union leaders are not completely aligned with those of business leaders. That is not to say these two groups are completely incompatible. In Germany, for example, more pragmatic trade unions often work in partnership with businesses or at least try, recognising that they need business as much as business needs workers. The trouble is that in the UK we don’t really do sensible union leaders, with most of those paid vast sums to ‘lead’ our largest trade unions viewing their role as little more than student politicians who have spent too much time reading ‘Das Kapital’.
Unfortunately, this matters because even though only a little over 20% of eligible UK workers are trade union members, such voices wield disproportionate influence within the Labour Party. Since Starmer became leader, Labour have received £17 million from unions. But this doesn’t include donations from unions to individual MPs and those who feel personally indebted, having received union support going back to their selections as candidates. No doubt this will prompt the usual tripe about ‘the cleanest money in politics’, but be in no doubt: this absolutely creates a series of perverse incentives and vested interests. And in my view, the fact the UK’s union movement effectively buys its influence is precisely why we don’t do sensible unions. Why waste time making friends and influencing people when you already have a level of political access that businesses could only dream of? As long as this murky relationship between Labour and unions persists, the party will always find itself playing both sides.
But this is an age-old problem that even Blair, at the peak of his powers, faced. The other, arguably bigger but less insurmountable challenge is that the current Labour leadership simply doesn’t ‘get’ business. Take the current cabinet, for example; not one has ever worked in the private sector – despite the fact that this is how 80% of us earn a living. Their advisers? Same story for the most part. And there’s no point asking the civil servants.
In this context, it’s hardly surprising Labour haven’t grasped one of the most basic rules governing investment: the ‘surround sound’ really matters. If all businesses hear is Britain being talked down by its own government, it hardly inspires confidence. For global investors, who can literally take their money anywhere, this could be enough to make them think twice. This is even more important when it comes to smaller investors, such as mid-market private equity and asset managers, whose pockets aren’t as deep and who need to be even more targeted in their investments.
But it’s the mixed messages that are especially dangerous. Negativity is one thing, but negativity and uncertainty are a toxic cocktail. Not only does this severely undermine confidence, but Labour spent many croissant and canapé-filled hours telling business leaders of a land of milk and honey should they come to power. So far, it has been a land of water and corn syrup. In just three months, this ‘pro-growth’ government has cancelled several major infrastructure projects and persisted with a series of workers’ rights reforms, uniting almost the entire business community in concern. All of this while claiming there’s a £22bn black hole in the public finances while borrowing the same figure and handing out inflation-busting public sector pay rises. Surely not those unions again? Not to mention the arrogance of a member of the Cabinet publicly calling for a boycott of a tax-paying business operating within the law while asking it to invest £1bn in Britain. Brass neck doesn’t come close.
For all the soundbites and platitudes at yesterday’s summit, the mood music was the same. The spectacle of a self-professed pro-growth government hosting international investors while being forced to deny that capital gains tax, arguably the biggest single driver of private investment – while almost certain to rise – was unlikely to double, was absurd. This was on the same day Starmer and Reeves as good as confirmed employer NI contributions would indeed go up – despite a promise that National Insurance would not rise.
When it comes to business sentiment, which drives investment, Labour are discovering the story you tell matters. Ideally, it should be one that doesn’t involve telling everyone how bad the economy is. But at least let it be consistent.
In truth, I don’t see Labour trading their pencil for a plough anytime soon. But appointing ministers and advisers with some business experience would be a start.
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