Business needs to wake up to the age of insecurity
3 min read
Rachel Reeves is right to prioritise tackling insecurity in the Budget. But for this new vision of growth to work, people must feel the difference sooner rather than the later.
Today marked a historic moment for the UK. Growing businesses over the last decade, I’ve watched countless Tory Budgets to see what they might mean for my work. But this is the first time in my career when a Budget has been delivered by a Labour government. I know some in business feel that the government has turned its back on them. But what they don’t understand is that the government is pursuing a new vision for growth, one which solves the main crisis of today: insecurity.
Everywhere you look, insecurity is rife. For ten years, we’ve had huge returns on capital alongside stagnant wages and deteriorating public services. So when the government talks about growing the economy, it doesn’t need to be about yanking the chains off capitalism. Slashing taxes isn’t the only way to unleash businesses. They can be given the incentive to invest in their workforce and increase productivity.
I would take it as an opportunity to invest in making each worker more efficient to justify the extra cost
The government has set out to find the money to solve the insecurity crisis without spooking the markets, and the public is largely onboard with their approach. The Good Growth Foundation’s polling pre-Budget found that 50 per cent believe the government must make “difficult decisions” to control public spending and just under half think that the government should borrow more to invest in infrastructure. But as we saw in 2022 during the Liz Truss premiership, the government cannot simply borrow more. It must back this up by balancing the books.
There is much for business to be happy about here. They have been crying out for stability and a credible Treasury.
The increase in employer’s National Insurance Contributions (NICs) will certainly bite. Businesses could respond defensively by looking for ways to claw back the extra costs stemming from the Budget and the Employment Rights Bill. If the view that the government is no longer prioritising economic growth takes hold, it may reflect in business decisions and present a new drag on the economy.
But we shouldn’t pick policies and declare them pro- or anti-growth. By looking at the Budget within the wider context of enhanced employment rights, investment in growth and skills, and industrial strategy, it’s possible to see a shift towards a more Northern European model for the economy. If I were faced with this Budget as an entrepreneur, I would take it as an opportunity to invest in making each worker more efficient to justify the extra cost and boost productivity. The challenge for the government is whether British business is ready for a form of Scandinavian shock therapy to kick them into gear.
One question remains: is the public prepared to wait the years necessary for these measures to make a return? I suspect not. Reeves and her team will need to match today’s plans with tangible results quickly, or risk losing momentum. Increasing the minimum wage is a good start. But the link between economic growth and higher living standards must be re-established — and viscerally felt — for Labour to have any hope of success.
Praful Nargund is director of the Good Growth Foundation.
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