The British economy has plenty of problems and economic growth has been painfully weak over the last decade.
And yet it has a few major strengths as well. We have a bedrock of well-managed, family-owned businesses that have often endured for generations. We have a flexible labour market that generates lots of jobs. And we have a tradition of embracing cutting-edge innovation.
But the new Labour government seems to be about to crush each of these strengths in turn – until all that will be left is a stagnant collection of corporate mediocrities.
A few platitudes about growth aside, Prime Minister Sir Keir Starmer and Chancellor Rachel Reeves have kept remarkably quiet about their plans for the economy during the election campaign. A couple of weeks into the new administration however, and their real intentions are starting to become clear. This will be the most anti-enterprise government the UK has experienced in 50 years.
Let’s just take a few examples. There is plenty of speculation that a shake-up of inheritance tax may well remove the exemption for unlisted, family-owned companies. This relief means that a company can be passed down without having to pay tax on its value. Over the next few months we will no doubt hear lots about how that is a “tax break” for the “few” that we can no longer afford, although in reality the Treasury only forgoes about £1.4 billion in tax that might otherwise be collected.
And yet that misses the point entirely. If tax is levied at 40pc when a business is passed on from one generation to the next, in effect the heirs could be left with no choice but to sell it simply to meet the bill due from HMRC. We also have countless studies to show that family-owned businesses are often the most stable part of the economy, with high rates of investment and excellent employment records. Take a look at JCB, one of the UK’s largest exporters, or indeed the business run by the family of the new prisons minister, James Timpson, for evidence of that.
We should be helping them do even better. Instead, Labour could be about to vindictively force them to be sold off, often to private equity firms that will bleed them of cash and then flog off the assets. Huge numbers of private businesses could be destroyed.
This week’s King’s Speech is expected to include legislation dramatically increasing employment rights. The trade unions are already celebrating a clampdown on “c-----” employers. And who are they exactly? The pub chain JD Wetherspoon or the online retailer Amazon apparently.
It is extraordinary that the Labour movement can be so dismissive of what, in reality, are excellent companies. Spoons has created a chain of value for money pubs that serve decent drinks and food at fantastic prices, has made many historic buildings viable again, and breathed new life into ailing high streets. On what possible planet is that a “c-----” company?
Likewise, Amazon has made next day delivery of just about anything you can think of completely standard, creating vast wealth in the process. It might be worth pausing to consider what the entrepreneurs behind those successes had got right, but instead Labour’s allies just want to destroy them.
Finally, while we may not always commercialise it as well as we should, the UK has always been very good at nurturing new technologies. It looks like we won’t have to worry about that happening with artificial intelligence (AI), however. The Government is planning an AI bill that appears likely to mimic the heavy-handed regulations recently implemented in the European Union.
In fact, there is little need to regulate AI separately, since most of what it might do is already covered by existing laws (if a chatbot finds an insurance policy for you, for example, that is already covered by financial regulators). All it will do is smother a new industry in red tape, preventing entrepreneurial firms from emerging, and ensure that the winners in the industries that intelligent software will open up are all in the United States or China.
Like our neighbours across the Channel, heavy-handed regulation will turn our economy into nothing more than an open-air museum, while the real wealth is created elsewhere. It might keep Sir Keir’s old legal colleagues busy but the rest of the country will end up far poorer.
That is just a small sample. The King’s Speech is also expected to see legislation put in place to create GB Energy, a confused attempt to set up a nationalised energy company. Oddly it will neither generate power, nor sell it, but instead appears designed to pass on to the taxpayer projects that the private sector has already decided are not viable.
More broadly, with 35 bills unveiled for the new parliamentary session, the Speech will set the tone for a hyper-regulating government determined to increase red tape. An economy that is already creaking under the weight of all the rules and obligations that have been loaded on to business will be confronted with a government busily adding even more.
Sure, stability counts for something and with a big majority the Starmer administration will at least be able to govern without the constant threat of internal rebellions and revolts. But this will be the stability of the graveyard.
The UK economy had a certain resilience and, for all its weaknesses, retained a few residual strengths. It had some great family businesses, the labour market was flexible and innovation was, if not exactly encouraged, at least tolerated. This Labour government is, piece by piece, about to crush all that – and we will all be worse off as a result.