Analysis: ‘Labour believes in profit’

But the historical significance of Labour’s claim to be the friend of profit should not be missed. A party founded in 1900 in order to ‘secure for the workers the full fruits of their labours’ has turned itself, more or less convincingly, into a technocratic party for managing the private enterprise system that is now as competent, if not more so, than the original party of business, the Tories.

Business groups have their niggles and complaints about New Labour, especially over tax and regulation.

But it is remarkable how few differences of fundamental principle there now are between the government and, say, the CBI or chambers of commerce. Perhaps the reluctance of trade secretary Stephen Byers to proceed with thoroughgoing reform of company law together with the government’s failure to confront such issues as board room remuneration and stakeholder audit shows the Labour-business relationship to be too cosy.

A core belief of the Blairites is that the way to raise the long run rate of economic growth and secure the spread of prosperity among the disadvantaged is by improving human capital; hence their mantra ‘education, education, education’, which will continue to be heard during a second term. The jury is out on whether Gordon Brown at the Treasury, David Blunkett at education and employment and Stephen Byers at the Department for Trade and Industry have together done enough to improve the economy’s human capacity. UK productivity has not risen under Labour and remains lower than France and Germany let alone the United States, where the average working hour is 38% more productive than in the UK (according to the National Institute for Economic and Social Research).

But British business and its mixed record on investment bear some responsibility for that.

Business could not wish for stauncher friends than Department of Trade ministers, at least as measured by their rhetoric.

Labour’s change
Labour says it believes passionately in profit. Marginal taxes on income and wealth are now among the lowest in the European Union. Labour’s acceptance of market forces is shown by its abandonment of most ‘industrial policy’, meaning the planned effort to shape the structure of product markets.

Witness the handwringing response by Byers to Longbridge and, more recently, the government’s impotent reaction to Motorola’s decision to close its Bathgate plant in Scotland.

And then there is Europe. It would be hard to convict the government of anything more than moderation in its approach to membership of the single currency, which is understandable since the stated interests of the City and manufacturing, let alone small service companies, are not the same.

Labour’s main theme over the past four years has been competitiveness. That has meant (Gordon Brown will say this ad infinitum during the campaign) establishing a stable basis for companies to operate on in terms of price inflation.

But this is still a Labour government. The unions still pay for a lot of it. A good number of cabinet ministers have seats in areas vulnerable to factory closures. So Labour also carried out its manifesto promise to give trade unions a statutory right to be recognised, for the first time.

A minimum wage
Keir Hardie’s century old ambition of a minimum wage has been delivered, too, along with new rights to paid maternity leave and protection against unfair dismissal. The north east is teetering on the brink of recession so it is no wonder the 2001 manifesto promises new regional assemblies to complement the regional development agencies inaugurated in 1999; their political purpose is to remind workers on Tyneside and Merseyside that Labour still believes government agencies can stimulate jobs and investment.

Labour is trying to fight the 2001 election primarily on the economy, which is not surprising given the fall in unemployment and rise in real incomes since 1997.

Whether Brown has been lucky as a steward of the UK is debatable but he takes political credit for giving the Bank of England operational independence and his tight control of the public finances and repayment of debt.

He has also shown himself an incessant fiddler with the tax system. ‘Corporate tax rates have been cut to the lowest among all the major industrialised countries,’ says Labour’s propaganda. But the total corporate tax bill increased as a proportion of GDP, thanks to the way Brown abolished tax credits on dividends payable to pension schemes.

Labour says the UK now scores high in surveys of entrepreneurial friendliness and has been busy dreaming up tax incentives for small and medium-sized firms to invest. Together Gordon Brown and Stephen Byers have presided over a jungle of incentive schemes for investment and job creation. Their impact is hard to measure precisely, but Labour claims that Tory plans to cut the Department of Trade and Industry’s budget by Pounds 300m would cost hundreds of millions of pounds in lost exports and thousands of jobs.

Online credentials
The government has ‘jawboned’ the new economy. DTI minister Patricia Hewitt has been a tireless exponent of the beauties of trading online.

But financial support has been slim and big money projects such as providing the UK with a network of broad band connections have moved forward only falteringly.

‘Labour understands that regulation tends to impact more on small than large firms, since they do not have the same resources to cope as larger firms. We are determined to ease the regulatory burden”, says deregulation supremo Chris Haskins. But business might say that so far his better regulation task force has put a lot of effort in but not accomplished much.

Labour is also keen on the work-life balance. It has brought in a package of maternity and related rights that the chambers of commerce say are going to cost hundreds of millions to implement. It claims to have simplified the rules but note the fine living Cherie Booth continues to make from employment tribunal cases.

After the election, Stephen Byers will move on. But given the overall dominance of the Treasury (assuming Gordon Brown stays put, and where else could he go except Number Ten?) it is unlikely the DTI will become a powerhouse department.

This could be good news for the accountancy profession, which will be left alone in self-regulatory splendour. Byers welcomed the Office of Fair Trading report identifying abuses of competition law in the conduct of legal and other professions, but has shown no sign of wishing to put the audit function under scrutiny.

There are, next term, to be new disclosure requirements for companies but company law reform is not going to be a priority if, as the polls keep predicting, Tony Blair proves the success of his revamping of Labour by winning convincingly.

  • David Walker is the author, with Polly Toynbee, of Did Things Get Better, an audit of Labour’s successes and failures, published by Penguin.

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