New Chancellor John Healey risks being seen as nothing more than Rachel Reeves with a packet of pork scratchings unless he prevents Andy Burnham's Government landing another hammer blow on businesses.
His mantra is that he wants to see “growth in every postcode”. But the growth of just 0.4% seen between April and June will not liberate households from the cost of living crisis or give employers the confidence to take on staff.
Ms Reeves torched trust and horrified the nation's small business owners when she hiked the National Insurance paid for each employee. In a country facing a youth unemployment crisis, she made it more expensive to give someone a job.
Zero hours reforms cost billions
Labour looks on the verge of delivering a second blow to businesses. The Government's own assessment of the impact of plans to reform the use of zero hours contracts says this could cost businesses £2.9billion a year.
Of course Labour wants to strengthen workers' rights – that is its founding mission. But if it ends up destroying jobs, or stopping a young person getting work in the first place, it can hardly call itself the party of labour.
The grim fact is that if growth continues to flatline then jobs across the country will be at risk because companies – under pressure to make cost savings – will find ways of using new technology to make efficiencies. Job security depends on a growing economy.
Cost pressures on firms
Labour needs to wake up to the reality that while Government can do a lot to help businesses, sole-traders and entrepreneurs, it can also do much to hurt them. And right now, Labour needs to stop stamping on the men and women who are doing their best to keep the economy alive.
Stuart Morrison of the British Chambers of Commerce (BCC) warned of a “cocktail of cost pressures choking long-term business growth”. The BCC points to extra costs from the minimum wage, employer National Insurance, business rates, employment rights, the apprenticeship levy, climate levies, IR35 changes, VAT thresholds and packaging taxes. It has calculated that a typical mid-sized firm with 50 staff and a £5million turnover “now pays around £1.98million a year in domestic policy-driven costs, up from £1.16m in 2016”.
At a time when the acid rain of inflation has destroyed families' disposable income, it does not make sense to pile onto businesses yet more costs that will have to be passed onto consumers. Britain needs its businesses in the strongest possible state to survive the potential storms ahead.
Economic risks ahead
Research handed to Mr Burnham and Mr Healey warns that if disruption continues in the Strait of Hormuz until the end of the year, then growth could be just 0.3% next year – far below the 1.6% forecast by the Office for Budget Responsibility; inflation could climb from 2.6% to 4.3%.
If this happens, Mr Burnham will have to do much more than release another video of him rating his favourite bar snacks with the Chancellor to secure the confidence of the country. Millions of Britons will have decided that while they may not particularly like the alternative parties, they simply cannot let Labour continue to run the UK into the ground.
It is time for Mr Burnham to stop flirting with the Left. The new Chancellor needs to sit down with his boss – with or without a packet of pork scratchings – and deliver this message: Labour must stop hurting the country it serves.
