Can Labour, again, become the natural partner for UK business?

This New Year the UK is entering into an unfamiliar, post-Brexit, hopefully post-pandemic, world, and is facing many challenges. To succeed we need a flourishing economy, and a business sector working closely with the government to strengthen the domestic economy, and international trade. The current Conservative government, however, is disunited and unclear about its recovery plans, making business planning difficult, and prospects of success uncertain.

This was not how it was meant to turn out, when, in 2010, the Conservative party, led by David Cameron, a smooth public affairs executive, won the general election. Replacing a tired Labour administration, which unwisely joked on departure, ‘There is no money left’, he promised a competent, business-friendly hand on the tiller of the UK economy. Constant repetition that the Labour administration had maxed out the national credit card and caused financial ruin denied the undoubted financial caution of Prime Minister Gordon Brown, and the skill he and Chancellor Alistair Darling showed in navigating the 2008 world-wide banking crisis. The verdict was harsh. It was based on an untruth. The message, however, stuck: That Labour could not be trusted with the economy, and the Conservative party was the natural party of business.

Since 2010, three different Conservative-led administrations have pursued various policies. These have, however, consistently supported Treasury policies over those of the Business department and avoided long-term economic planning and investment. Their guiding principles have been tight expenditure control, reducing the size of the public sector, market-led solutions, and deregulation. To a remarkable degree, these administrations have regarded the public sector as a tax burden on the private sector, rather than an alternative, and – in the case off the NHS – very popular, way of providing universally necessary services. This style of economic management has practiced widely since the Reagan/ Thatcher era; after eleven years its current success in the UK can be judged by its results.

These are the outcomes: The total Government debt level has more than doubled, and was increasing even before the pandemic struck in 2020. Real wages and productivity have stagnated; the IMF now predicts that the UK will emerge from the pandemic at the bottom of the G7 class for economic performance. The flagship UK car industry has shrunk, and the steel industry has also contracted. Cuts to the public sector have left it weak on forward planning and procurement. This is demonstrated by the problems with PPE supplies during the pandemic, and, quite separately, by problems with armed forces procurement, that have left aircraft carriers short of planes and the army short of new vehicles. Small businesses have had no effective help with long term problems of credit availability and late customer payments. Meanwhile, policies from previous like-minded Conservative administrations have come to fruition: Since the sell-off of council houses, the country has never managed to build enough houses; it now has a chronic housing shortage. Privatisation of rail transport has failed, and has led to renewal of state control. Water privatisation has led to water shortages and low investment in waste water management with consequent environmental damage. Energy privatisation has led to rapid price increases and multiple energy company failures. The policies pursued have, therefore, failed to produce results that are good for the overall economy, for workers, or for many businesses, and the associated economic problems have further fractured society.

The dominant policy issue of the last six years has been Brexit, a divisive political project with profound economic consequences. The key points, now, are that Brexit is far from done, and although the adverse economic outcome has been masked by the pandemic, many economists believe it will amount to a permanently lower UK GDP of up to 4%. Businesses operating in the UK were largely, if not very vocally, against Brexit, but, accepted the 2016 referendum result. The cavalier attitude to truth, facts, commitments, and consequences that characterised the winning leave campaign, and is unchanged in the Johnson administration, is likely, however, to leave long memories and a trust deficit with businesses and trade partners.

What individual businesses and business sectors want is not necessarily what is good for the overall economy, or what meets the wishes of the electorate. Without a thriving business sector supporting the economy, however, it is difficult to address social and economic problems, and invest in the solutions needed to fix them. No government ever manages to balance these factors perfectly, but the success of their approach determines the harmony and efficiency of society and the economy. By this measure, the Conservative party has failed to deliver on its economic promises and undermined its claim to be the natural party of business. If it loses the next general election, perhaps the leaving note will say ‘There is no trust left’?

Would Labour do any better? In the four most recent elections won by the Conservatives, the Labour party has offered four different propositions, none of which sufficiently appealed to voters. Each, however, recognised the complex nature of the UK’s economic and equality problems, and the need to address social needs and commit to long-term planning, investment, and innovation. Putting such plans into practice will never be easy. It will need to go well beyond consumerism and maximising shareholder value. Instead, it will require a joined-up, collaborative approach to connecting economic and business aims with social and environmental needs. The top priorities will be:

  1. A comprehensive and inclusive industrial strategy to provide good jobs and grow the economy sustainably.
  2. Economic policies that provide long-term investment in infrastructure and skills.
  3. A realistic trade strategy that restores friendly relations with the EU and builds new trade opportunities that accord with UK human rights and environmental values.
  4. A restoration of trust in government, corporate governance, and standards in public life, generally.
  5. Renewing the Civil Service, the NHS, and all our public sector for the 21st century.

In 1997 the Labour party won a landslide general election victory and enjoyed wide business support. The party had worked hard to be seen as financially credible. Crucially, in office, its promises proved sincere. It worked closely with business and other stakeholders to build an economy that could provide social benefits, restore infrastructure, and invest for the future. Now, in 2022, the country faces the major challenges of levelling up, climate change, disease control, and an increasingly turbulent world order. With a new and energetic shadow team led by an eminent lawyer, Sir Keir Starmer, Labour, again, has the opportunity to put itself forward as the competent, sincere, and business-like partner needed to restore trust and tackle these challenges. If it does this it will, again, deserve the support of UK business.

About the GPI

The Global Policy Institute is a research institute on international affairs. It is based in the City of London, and draws on both a rich pool of international thinkers, academics as well as policy and business professionals. The Institute gives non-partisan guidance to policymakers and decision takers in business, government, and NGOs.