Keir Starmer’s economic plan is already making businesses nervous | City & Business | Finance
Readers of a certain age may remember the 1940s radio comedy ITMA (It’s That Man Again). One of its characters was the lugubrious Mona Lott. Her catchphrase, “It’s being so cheerful that keeps me going,” long outlasted the show’s demise.
That was eight decades ago but it could have been written about Keir Starmer. Since taking office in July, the Prime Minister has turned gloom and misery into a programme for government – never missing an opportunity to bemoan how terrible everything is because of the “deep rot” left by the previous government.
And if you think things are bad enough now, just you wait, he tells us – things “will get worse before they get better”. Next month’s Budget, Sir Keir promises, is going to be painful – especially for those who he says can afford to take a hit.
Let’s ignore, for the sake of argument, whether he and Chancellor Rachel Reeves are right to talk about a previously undiscovered £22billion “black hole” (they’re not). And let’s ignore the arguments Ms Reeves has made about inheriting the worst economic mess since World War Two (it’s a preposterous idea – 1979 was worse by an order of magnitude).
Because even if you think they are correct about the appalling state of the economy, there are profound economic consequences from their non-stop focus on doom – namely that entrepreneurs and businesses have reacted accordingly to the continual warnings of “shortterm pain” albeit for “the longterm good”.
A report yesterday by the Recruitment and Employment Confederation and consultants KPMG warned that companies have already started holding off hiring employees. That’s hardly a surprise. Last month, for example, Treasury minister Darren Jones dropped a heavy hint that employers will have to pay more in National Insurance for their staff.
Labour has previously promised not to increase NI. Jones now speaks only of not increasing “employee National Insurance” – in other words leaving the possibility of increasing the employer part of it. That would be a straightforward tax on jobs (as well as a betrayal of an unambiguous promise) – making it more expensive to hire staff.
His seemingly precisely formulated words set a hare running. It may be that NI will not, after all, be increased. But no one knows at the moment, so it is entirely rational for businesses to hold off employing new workers until they find out in the Budget what will actually happen.
Increasing employment is, of course, a prerequisite of the economic growth that Labour says is its focus, which makes the very idea of increasing NI a truly bizarre idea. This same thought process for prospective employers applies far more widely than this one specific tax.
As the report puts it: “Recent Government warnings that the UK’s economy may weaken further before improving add to the overall sense of uncertainty, affecting recruitment plans. Firms holding back from hiring led to a sharp contraction in the number of people placed into permanent roles in August.”
If Starmer and Reeves had set out to stop businesses feeling encouraged to invest they could hardly have found a more successful method. Instead of setting out a vision of a prosperous nation building for the future, their near despondency about the state of the economy has encouraged a sense of pessimism among the very people we need to be optimistic about our prospects.
People, that is, like the wealthy investors who are moving overseas, according to another report by Henley & Partners, which shows a net loss of 4,200 millionaires in the first five months of the year. A further 5,300 are expected to leave before next year. I t’s not just increased taxes and gloomy words, though.
This week’s TUC is the first since Baroness Thatcher was PM that takes place under a government planning to roll back the employment and trades union law reforms that began in the 1980s and have been the bedrock of our labour market ever since.
Labour sees the union laws of the 1970s not as a symptom and cause of Britain’s historic economic malaise but as a model to be recreated. Of course employers are reluctant to commit to hiring new staff when the Government seems intent on saddling anyone who does so with deleterious financial and legal obligations.
Labour’s manifesto pledged to restore trust in politicians and heal “the weariness in the heart of the nation”. Instead, within a few weeks, it has deliberately turned misery into its raison d’etre.
