Published:

14 comments

Pinning Down Miliband

“Labour leader Ed Miliband has dismissed claims that he is ‘anti-business’…” Uh-oh. It can’t be good if it’s come to that, can it? Party leaders don’t tend to dismiss things unless they feel they have to.

And, no, it’s not good. Miliband doesn’t just have to contend with aspersions about his business-friendliness from the Tory Party, but also from his own side. The former Labour minister Alan Miliburn captured to tenor of it, in April, with an article in the Financial Times headlined “The two Eds need a more pro-business tone for a Labour win”. But for sheer, cut-out-and-tweet provocativeness it’s hard to beat the words of another former Labour minister (now a cross-bench peer), Lord Digby Jones, speaking last month. Miliband, he suggested, is one of the “least business-friendly” party leaders in years.

In a way, this all goes back to the conference speech that Miliband delivered in 2011. This was the speech in which he cleaved a rhetorical divide between “predators” and “producers”. On one side, the predators: companies that are out to make, as the Labour leader put it, a “fast buck” – and don’t care whom they injure on the way. On the other, the producers: companies that, again in the Labour leader’s words, “train, invest, invent, sell” – and specialise in manufacturing rainbows and love. We want, of course, fewer of the former, and more or the latter.

For all that we rag on Miliband, at least there’s this to say: his views on business are sincerely and deeply held. They’re thought to have been informed by his reading of the essay collection Varieties of Capitalism, which dwells on the differences between liberal market economies such as ours and more coordinated economies such as Germany’s. But, beyond the bookshelves, they’re also present in his abiding emphasis on the cost of living. In Miliband’s schema, predators such as banks and energy companies don’t just prey on people’s wallets, they also prey on producers’ profit margins. To prevent that sort of extortion, the markets need controlling a little (or a lot) more.

Yet the intellectual consistency of Miliband’s position doesn’t stop it being muddy. The crucial question is one that emerged immediately after his 2011 conference speech: who are the predators? And who, for that matter, are the producers? If this, er, One Nation leader is going to split the nation into two halves, it would help to know where the boundaries lie. On what side is a mega-corporation that plants a million trees a year? What about a self-employed, work-from-home sort who fiddles his taxes?

Sometimes Miliband’s intentions are clear: such as a plan to raise taxes on payday lenders, and transfer the cash to credit unions. But, generally, confusion abounds. Take another of his other tax policies: apparently, the first act of a new Labour Government would be to cut business rates for small businesses, all paid for by scrapping the one percentage-point cut in the main rate of corporation tax – from 21 per cent to 20 per cent – that the Coalition has scheduled for 2015. I’m all for helping small businesses and cutting business rates, but this policy has barbs attached. In selling Labour as “the party of small business”, Miliband seems to be equating big with bad. The smaller businesses can gain, but the bigger ones face punitive tax increases.

Besides, another question, further down the rabbit hole: what is small? It’s worth noting that the main rate of corporation tax affects every incorporated business with profits above £300,000. Were he to keep it at 21 per cent, Miliband wouldn’t just be hammering the pinstriped predators.

This confusion of big-bad-small-good often leaves Labour looking confused. Remember when the shadow local government minister Andy Sawford berated Waitrose for giving out free coffee and newspapers to its customers, on the grounds that this hurt local coffee shops and newsagents? Turned out, this wasn’t official Labour policy, but Miliband didn’t distance himself from it as unambiguously as he might have. And thus we get the impression of a party that’s against both higher living costs and free coffee. Which is to say, a party that doesn’t know where it stands.

Actually, that’s unfair. Under Miliband, Labour does seem to know where it stands on the rich: make ‘em pay. One of their most frequently quoted policies is to raise the top rate of income tax from 45p back to 50p. Although I’m keen not to get bogged down in all the stuff about taxable income elasticity, it’s worth making two points about this policy. First, Labour are selling it as a way of helping deal with the “debt”, which is laughable. Even if – underline and italicise if – the hike were to raise any money for the Exchequer, it wouldn’t stack up to much beside a deficit of roughly £100 billion.

Second, there are the wider consequences. Even though it may not force our wealthy business-folk out of the country, a 50p rate could, as the Economist has suggested, dissuade other business-folk from coming in. The shadow business secretary likes to talk about “working in partnership with other countries”. What he and his boss don’t appear to appreciate is that we’re in competition with some of them, too.

Whether it’s this 50p tax rate or his dubious cap on energy prices – discussed elsewhere in our Pinning Down Miliband series – the Labour leader is generally too quick to impose a rigid moral framework on the economy. You are either naughty or you are nice. You will either be punished or subsidised. But the trouble with economies is that they’re more complicated than that. The big companies depend on the small companies who depend on the big companies who depend on the… oh, you get the point.

But Miliband doesn’t. Even his more attractive-sounding business policies, such as a network of regional banks for smaller businesses, are about imposing something on a structure that may not support it. These banks may have worked okay in Germany – although that’s debatable – but the fact remains that we’re not Germany. We don’t have the same federal system that puts money closer to the regions. Hence why Labour’s small business task force had to limply admit that “the challenge is to bring the key principles to life in a British context.”

None of this is to say that there aren’t problems with Britain’s business economy that need fixing. The banks still haven’t been properly reformed, for instance. The Government itself still relies too heavily on big business. But when it’s Miliband offering to take control, we’d probably do better to take our chances.

14 comments for: Pinning Down Miliband: Business policy

Leave a Reply

You must be logged in to post a comment.