Stumbling and Mumbling: Labour: the party of business

Stumbling and Mumbling: Labour: the party of business

“Fuck business”. These words of Boris Johnson should be as great a propaganda coup for Labour as Liam Byrne’s equally stupid “I’m afraid there’s no money” note was for the Tories.

This is because it is the final nail in the coffin of the idea that the Tories are the party of business. Which poses the question: how might Labour exploit this?

Of course, politicians should not be in hock to cronyist big monopolies. But the overwhelming majority of businesspeople are not grasping plutocrats but rather people who are struggling to get by, much like ordinary workers. Of the 5.7 million businesses (pdf) in the UK, 4.3 million have no employees and only 41,000 have more than 50.

And the interests of these small businesses are often opposed to those of bigger ones. Smaller firms face high rents (and often upward-only rent reviews) from landlords; banks that deny them finance and sometimes actively try to destroy them; rip-off and unreliable utility providers; the huge buying power of oligopsonistic supermarkets; competition from big firms that can hold costs down by dodging tax; and massive losses if one of their big clients (such as Carillion) goes belly-up. If you want to hear anti-capitalist attitudes, forget Momentum and just ask a small business owner what he thinks of bankers. 

It would be very easy for Labour to position itself as the party of business by championing smaller firms’ interests. For example, more infrastructure spending, not least on broadband. The IoD’s call for more and better infrastructure spending could pretty much be cut and pasted into a Labour manifesto. Also, a national investment bank (pdf) would provide the finance for small firms that banks sometimes deny them, and have the extra virtue of relaxing the grasp of banks over their clients simply by providing competition. And a switch from business rates to a genuine land value tax might help shift the balance of power between firms and landlords; if empty properties were taxed as much as occupied ones, landlords would be incentivized to cut rents.

You might object here that John McDonnell’s talk of the need for “new forms of ownership” and control are anti-business. I’m not so sure. For one thing, it’s possible that some changes to what Diane Coyle calls our “ridiculous IP laws” would help start-ups at the expense of monopolies. And for another, the main problem with ownership is not that of smaller firms but of bigger ones. Kathleen Kahle and Rene Stulz have shown that the number of stock market-listed firms has shrunk in recent year and that those that are listed invest less than they used to. This might be because dispersed outside shareholders do a lousy job of monitoring management; it’s insufficiently appreciated that the financial crisis was due at least in part to a failure of ownership. Looking for alternatives to stock market-type ownership is therefore perhaps compatible with – and even conducive to – the thriving of many other types of business.

You might also object that Labour’s plans for higher taxes are anti-business. Only up to a point. For many small businesspeople, the chance to pay more tax would be a fine one: Labour’s last manifesto promised higher taxes on incomes over £80,000 which is a fortune for many small business owners. Insofar as Labour offers more sensible ideas on fiscal policy and Brexit, it will increase profits. Sure, the state will take a bigger chunk of these, but net some businesses might well benefit.

In principle, therefore, even (especially) a quite radical Labour party could – with only the smallest of effort – present itself as a party of business. I suspect that what is stopping it doing so – and what’s stopping such a presentation from being very plausible – is tribalism and history rather than current actual policies.

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