Like it or not, we're now in election mode. From now until 7 May we can look forward to politicians throwing bricks at each other. Should business people join the debate? Undoubtedly. The future of the UK economy depends on the success of British businesses and that success in turn depends on our Government creating the right environment. It would be daft for business people to keep quiet. But I can't help thinking some of the contributions so far have been weak, ranging from the use of ad hominem hyperbole to complaints about Labour's mansion tax. I'm sorry but business has much greater concerns than a modest (even if misguided) imposition on houses worth £2m or more or whether Ed Miliband can eat a bacon sandwich. The fact is we're still running a very substantial public sector deficit and an increasing trade deficit. While the economy is growing and unemployment is falling the Prime Minister himself has noted "red lights are flashing on the dashboard" not least from the Eurozone where nearly half of our exports go. People can make their own minds up about this Government's record but given that there was "no money left" when the Coalition came to power the question is can business trust Labour on the economy again?
It's true that only 8% of Labour MPs have worked in business. That lack of business experience definitely gives them a credibility gap. As backgrounds go, I'd prefer that of a grocer's daughter to the son of a Marxist academic any day of the week. But I'm confident Ed Miliband, Ed Balls and Chuka Umunna are smart enough to know that a successful business community would be key to their success if they win in May and that Bill Somebody is, in fact, a real person not an economic policy! So I don't believe they are anti-business per se. The real question is whether their policies will help or hinder us.
To be fair, Ed Miliband has put his finger on some valid themes. He's not wrong to criticise the antics of aggressive tax avoiders - the Government should do more to ensure multinationals pay their taxes like British SME companies do. Nor was it wrong to challenge the energy companies - although The Spectator claims policies introduced when Miliband was Energy Secretary have added £78 to the average energy bill. The Labour MP Stella Creasy did more than most to highlight the malpractice of payday lenders leading to welcome Government change. The proposal to freeze business rates for small businesses is certainly a crowd pleaser.
So what exactly are businesses worried about? Well, I for one am concerned Labour have to be dragged along kicking and screaming when it comes to deficit reduction. In theory they're signed up to George Osborne's next round of "fiscal consolidation" but given they've opposed virtually every cut that's ever been proposed I'm worried they won't have the mettle or even the desire to make tough choices if they get back into power. That matters because without a viable deficit reduction plan our borrowing costs will rise only causing further consolidation to be made later on. My fear is their reflex reaction will be to levy extra taxes on wealth creators killing the goose that lays the golden egg. France tried that and it did not end well. Labour have already proposed an increase in corporation tax and national insurance - moves in the wrong direction from a business point of view.
I'm also worried Ed Miliband is a restless interventionist. Mistrustful of the market, his natural response, learned at his father's knee no doubt, is to introduce rent controls, freeze energy prices and nationalize things as he seeks to re-shape the world around him. These socialist panaceas have been tried before. All the evidence is they damage economies cutting investment and supply. That's one reason why all previous Labour Governments have left office with a higher rate of unemployment than they inherited despite every effort to the contrary. To be fair, Tony Blair's New Labour moved a long way towards learning that lesson. But I fear a Miliband Government would only move us back.
And that brings me to my central point. We should only trust Labour with our economy again if they can demonstrate they've learnt the lessons of the past. The core of these lessons can be summarised as follows:
- Governments shouldn't borrow to fund current expenditure over the term of the economic cycle. This "Golden Rule" was introduced by Gordon Brown but subsequently abandoned by him. It's true the Coalition aren't meeting this rule either but for me both the Conservatives and Liberal Democrats have a more convincing plan to do so in the next Parliament;
- whilst there is a need to regulate certain aspects of business this should be kept to the minimum necessary not extended to the maximum possible. It's much better to work with business to agree codes of conduct than to impose rules on us;
- price fixing really does not work. Investment requires return. Cut the return and those who've studied economics at Oxford University should know what happens next. If you want to cut prices provide a subsidy (not that I'm very keen on subsidies) or tax incentive;
- the state doesn't know best, people do. Government should trust people and thus businesses to meet the challenges our country faces. The Government's role is to create the right climate for businesses to succeed in not to micro-manage everything we do.
- Lower simpler taxes work better (ie raise more tax and incentivise success) than higher more complex ones.
It's true that economic policy is not the only reason any of us supports a particular party but it is significant. I'm also very clear that we do need to pursue social justice and a society that works for all as well as a strong economy that can pay our bills. I've not a scintilla of doubt that Ed Miliband wants both of these things just as much as I do. While often making a valuable contribution on the former he's got his work cut out to convince business people that he knows how to deliver the latter between now and 7 May.