With the Conservative Government’s ‘mini-budget’ setting off market turmoil and dissent within the Tory party, this week’s Labour conference was the most business-like and business-focused iteration since the Blair-Brown years.
Throughout the Corbyn years, Labour Conference used to be the yearly grand final of the unending internecine warfare that gripped the party. Plots and counterplots would be launched as party rules were changed and delegates were ousted, leaving precious little time for the participants to even look at the country around them.
The overwhelming mood of this conference was one of calm confidence with the sense the party is making real plans for Government. With No.10 perhaps rounding into view, the party has become increasingly willing to engage with businesses about the best routes to driving economic growth in the UK. There may not have been agreement on every point but the atmosphere of polite debate between business leaders and the Labour leadership would have been unimaginable just a few years ago.
The question for Labour now is complacency, the results of the 2019 election leave the party with a mountain to climb electorally, and it will need to remain focussed on translating polling into real gains. Can it stay on track and show its fiscal responsibility? Can it offer a compelling vision for the future of the economy and society that captures a landslide of public opinion?
Below are the big takeaways for businesses from Labour conference.
Return to centre
Practically every speech from the Shadow Cabinet at conference made gleeful mention of declining business and public confidence under the new Government. In Rachel Reeves’ speech she described an ‘economy in danger’ from unsustainable borrowing and moribund growth. Sensing an opportunity in the Government’s shift to the right, Labour sought to present its plans as a centrist alternative built around a responsible approach to the public finances.
Labour figures were further emboldened when, in the hours after Reeves’ speech, the results of a YouGov poll were published, giving the party a seventeen-point lead over the Conservatives. Many senior figures used to privately believe it would take at least an electoral cycle to rebuild the party’s credibility in the eyes of public. Now these figures are starting to make plans for Government.
This hopefulness has given rise to a new pragmatism as the party now looks to build a policy platform capable of fixing the economy and crumbling public services. The party’s leadership know this means building a productive working relationship with business and the conference was notable for the sheer number of events where both elements appeared to be singing from the same hymn sheet.
Perhaps the most striking sign of this new attitude in the party was the relative lack of presence from the major unions. Trade Unionists, particularly Sharon Graham from Unite, have made their displeasure with the party’s new direction clear but the conference was notable for the lack of any real attempt at rapprochement from the Labour leadership. The thinking from the Starmer team is clearly that after the tumult of the last few years, the next election will be won from the centre.
A red rose with a green stem
Labour’s aim is to build a ‘pro-business, pro-worker’ economy capable of funding: thousands of new staff for the NHS; better access to housing; an increased minimum wage; more police officers; and better social care. For Labour, the only way to tackle this without sacrificing the public finances is with the state taking a significant role in building viable green industries in the UK.
Labour’s Green Prosperity Plan calls for the UK to generate all of its energy from clean sources by 2030, creating thousands of new jobs in renewables. As part of these efforts a Labour Government would create Great British Energy, a new publicly owned company to exploit clean energy opportunities and compete with existing providers.
Green industries are essential for Labour’s vision of ‘middle out and bottom-up growth’ built around increasingly the supply of high-quality jobs and raising the wages of the poorest. Support for this approach was evident at conference but Government is a tough place to be. Any wavering on green growth from a future Labour Government could spell trouble with the party backbenches or the membership.
The Everyday Economy
Labour may be more willing to work with business now but not all industries are equal in the eyes of the leadership. Across conference, members of the Shadow Cabinet were happy to stand shoulder to shoulder with business leaders from the pharmaceutical industry, manufacturing and the big high street banks and lenders.
However, there were some conspicuous absences and eye-catching rhetoric which could spell trouble for tech giants and investment bankers. Summing up the party’s view on Monday, Rachel Reeves made clear its support is for the ‘everyday economy’ of blue-collar workers and small businesses.
It was the stories of these everyday workers that the Shadow Cabinet turned to when they made the moral case for electing a Labour Government. This was reflected in the policy agenda too with the party planning reform of business rates (conspicuous in their absence from the Conservative ‘mini-budget’) with the intention of making smaller high street businesses more competitive with e-commerce giants like Amazon. Even the reintroduction of the Banker’s Bonus cap was explained in these terms.
Moving forward businesses will have to be prepared to explain their contribution to the ‘everyday economy’ if they want to get the best out of a Labour Government.
Labour’s ambitious policy pledges and commitment to sound public finances are the two key planks of its appeal to voters but nothing adds up without increased taxation. They have committed to keeping the basic income tax rate cut but bringing back the 45p rate. While some tax rises were celebrated publicly at the conference, most notably the windfall tax on energy companies, large parts of Labour’s tax regime were kept very quiet.
Paying for headline proposals like the Green Prosperity Plan or thousands of new nurses will require significant spending. Labour’s fiscal rules leave it the latitude to borrow so long as it’s in the national interest but it seems unlikely they’d give up their hard won economic credibility early on. This creates the need for at least some re-emphasis of spending or additional taxation in the early days of a Labour Government to fund its manifesto commitments.
The all-round positive atmosphere may have been a change at Labour conference, but businesses should remember that the party has not finished making hard choices yet. The party will need to make choices on tax and they’re likely to be some its toughest.
Making Brexit work
The Labour membership may remain Europhile at heart but there’s no sign that the Keir Starmer wants to refight any old battles on Brexit. Labour’s focus now is on arguing that any flaws with Brexit are the fault of the current government rather than the fundamentals of the enterprise.
This will mean pursuing a conciliatory settlement on the Northern Ireland protocol while also ensuring broad regulatory similarity between the UK and EU. The hope being that with these measures in place, barriers to trade with the EU can be significantly reduced.
Montfort will continue to provide analysis of the ongoing political developments throughout conference season. If you would like to find out more or talk to the team on a specific matter, please contact email@example.com