We must give enterprise culture the space to breathe

Introducing the King’s Speech in July, Sir Keir Starmer said Labour wanted to “take the brakes off Britain”. The monarch laid out 40 bills — the most included in such an address since under the last Labour administration in 2005 — on matters ranging from housebuilding to workers’ rights. Together they formed the outlines of the new government’s ambitions. Since then, the tone from Downing Street has turned darker.
In fairness, this has partly been a response to the appalling rioting that broke out last month after the killing of three girls in Southport. But it has also been a calculated attempt by Labour to make sure that the Conservatives’ many failings in office stick — a well-worn political strategy that proved effective for David Cameron and George Osborne after 2010 — and to soften up the electorate for almost inevitable tax rises. Rachel Reeves, the chancellor, has identified a £22 billion “black hole” in the public finances, a suggestion disputed by the Tories after controversial public-sector pay settlements.
But the electorate is already only too aware of how chaotically the Conservatives governed between 2016 and this year, with five prime ministers coming and going, bouts of fiscal incontinence damaging the UK’s international standing and growth slowing to a crawl. The voters wanted the Tories out and rightly decided that carrying on as we were was simply not an option.
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But Starmer and his senior team run the risk of overdoing the negativity. Inflation is heading back towards the Bank of England’s 2 per cent target, interest rates are coming down and — according to Asda’s consumer tracker — household disposable income is back to its highest level since before the cost of living crisis. The Office for Budget Responsibility predicts growth of 0.8 per cent this year, followed by about 2 per cent a year until 2028. The economy was beginning to turn before the election — partly thanks to the stabilising presence of Rishi Sunak and Jeremy Hunt.
Labour also inherited a store of goodwill from business, which should not be frittered away. An economy, like any product, needs to be sold with a positive narrative. There are easy wins to be had in projecting a confident vision of Britain to overseas investors.
The bigger concern is over the party’s understanding of growth. Labour has talked a good game about wanting to encourage wealth creation by working hand in hand with the private sector. Now is the time to show it means it.
The ban imposed by the energy secretary, Ed Miliband, on new licences for North Sea oil and gas exploration and his plan to decarbonise the electricity grid by 2030 feel unrealistic and possibly harmful. The package of reforms to workers’ rights pledged by the deputy prime minister, Angela Rayner, which includes reversing anti-strike legislation and restricting the use of zero-hours contracts, may lumber companies with unnecessary red tape. The suspicion is that the changes, when they come, will be staggered, and ministers should continue to consult widely. Small businesses and start-ups should receive generous exemptions. Indeed, the UK’s 884,0000 job vacancies and low unemployment rate do not suggest that employers have the whip hand. A proposed ban on smoking in pub gardens is an odd priority at a time when many pubs are struggling to stay afloat.
Most people accept that Reeves’s October budget will push up taxes. The chancellor has ruled out raising the four main ones — income tax, VAT, national insurance and corporation tax. But she should tread carefully in areas such as capital gains and carried interest. Adjusting taxes on those would generate revenue but could have a disproportionate impact on the movement of wealthy people and their companies. Research suggests that millionaires are more mobile than ever before: many are expected to change their domicile this year. We should not take it for granted that cities such as London and Manchester will continue to be natural homes for entrepreneurs and investors — the people who, whatever their popularity with the public, account for an outsized share of tax revenues.
The best way for a government to foster wealth creation is generally to set an appealing and stable business environment and then step back. Labour’s bold move to loosen planning rules is an excellent example of how that environment can be improved, and more policies in that vein are to be welcomed. If we really want to speed up growth, we need to help the hard-working types who fill our How I Made It profile every week, not put obstacles in their path. At the moment Downing Street seems to be standing on the accelerator and brakes at the same time.