Rachel Reeves was probably expecting to be cheered for restoring ‘stability’, for rebooting ‘growth’ and crafting a British version of Bidenomics to create ‘the industries of the future’. Instead, the Chancellor’s ‘fireside chat’ at the Confederation of British Industry (CBI) conference today is likely to be rather uncomfortable. There probably won’t be any heckling, walk-outs, boos and cat-calls. Yet the business world has made it all-too-clear that Reeves’s Budget will hit both jobs and growth hard. Reeves is going to get a rough ride this afternoon – and deservedly so.
Labour’s relationship with business is now broken beyond repair
The CBI made it clear this morning what it thinks of Reeves’s Budget. “Across the board, in so many sectors, margins are being squeezed and profits are being hit by a tough trading environment that just got tougher,” its chief executive Rain Newton-Smith told delegates. She argued that “profits…aren’t just extra money for companies to stuff in a pillowcase” but that, “when you hit profits, you hit competitiveness, you hit investment, you hit growth”.
A survey of its members found that 62 per cent will slash hiring plans following the Budget, while 42 per cent will delay pay rises. In response, Reeves is expected to give her well-known impression of a Dalek with a bad cold, droning on about ‘black holes’ and ‘fixing the NHS.”
Whatever Reeves has to say, there won’t be much of a meeting of minds, nor are any of the delegates likely to come away fired up with enthusiasm for building a new warehouse or investing in research and development facilities. Most have probably already started looking again at moving to the United States, Dubai or anywhere where businesses aren’t constantly being punished, as they are in Britain.
The CBI’s hostility to Labour matters. It wouldn’t be any great surprise if the Federation of Small Business was criticising Reeves. Or, indeed, if the more free market Institute of Directors was taking a pop. But the CBI would normally be sympathetic to Reeves’s version of statist corporatism. It would probably be anticipating under a Labour government lots of grants and subsidies, co-operating with growth strategies, and occasionally even investing some real money.
The trouble is that Reeves has made such a mess of her first few months in office that she appears to have lost even the CBI’s support. The Budget hammered companies with steep rises in employment taxes, with bills running into tens of millions a year for any company with lots of workers; the lower paid they are the harder they are hit. Employment rights have been extended, making it even harder to fire someone who turns out to be no good.
Perhaps most significantly, there has been absolutely no sign of anything to compensate for this business bashing by making it easier to invest in the UK. Even proper reform of the planning system, which many companies thought would be a big win from this government, has failed to materialise. Instead, all that appears to be on Labour’s agenda is an endless series of increases in corporate taxes to pay for an insatiable NHS, and an out-of-control welfare system. The government’s relationship with business is now broken beyond repair. Reeves fully deserves the rough ride she will get this afternoon.
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