Business doesn’t want a ‘partnership’ with the state
Threatening to cap supermarket prices shows this Labour government views business as a mark, not a partner, says Elliot Keck
Former US President Ronald Reagan once said: “The nine most terrifying words in the English language are: ‘I’m from the government, and I’m here to help'”. The modern equivalent is surely “we want to build a new partnership between business and government.”
Let’s look at the document titled ‘A New Partnership‘ produced for Labour while they were in opposition, produced by former Conservative adviser Iain Anderson. It called for such a partnership to be based on “clarity, consistency, courtesy, collaboration, capability, confidence.” Because who needs a serious strategy for economic growth when you have such alliterative flair?
What has this partnership with business looked like in reality? Let’s look at the most unambiguous example of the success of the free market within the United Kingdom: the supermarket industry. The wealth of options available, the intensity of the competition, means Brits have one of the lowest spends in the western world of household income on groceries. A look at data from the USDA Economic Research Service shows that in 2023 Brits spent 8.7 per cent of their incomes on groceries, compared to almost 10 per cent for Canadians and Australians, around 12 per cent for the Belgians, Finns, Norwegians and Danes and around 16 per cent for the Japanese. All countries, bearing in mind, with higher GDP per capita than us. It’s pretty much the last affordable thing about this country.
And how is Rachel Reeves choosing to partner with this unparalleled success story? Threatening supermarkets with price caps. Really. Now in return the government has offered to ease regulations. An exquisite example of the nature of government.
Government is a protection racket
Because the actual relationship between government and business, and something Andy Burnham needs to learn pronto, is more akin to a racket. If the government has identified regulations it is happy to cut, why does it have to be in exchange for something? Just cut the damn regulations and give business a break.
And this threat to take away the price setting power of supermarkets follows the taking away of the ability of supermarkets, and other businesses, to set their own pay structure. This week is that Tesco lost its Court of Appeal bid over its equal pay case, whereby companies like Tesco are being forced to equalise pay between, for example, between warehouse workers and customer assistants.
These equal pay claims, run by law firms like KP Law and Leigh Day, are a burgeoning part of the UK’s booming consumer-facing class action market. Law firms offer all manner of claims the man on the street can sign up to, whether that be equal pay, data breaches or competition abuses.
But these cases aren’t just bad for the businesses being pursued. And they’re not even just a classic example of the unproductive part of the economy squeezing the productive part ever more.
They’re driving terrible real life outcomes as businesses spend money on defending claims rather than hiring people or creating the products and services people want to buy. And that’s not even mentioning the chaos it is causing in local government.
This is what partnering with government has looked like for decades. More and more regulation, combined with higher taxes, soaring energy costs, increasing costs of employment and now crippling waves of legal action. It ends up with the government threatening to take away not just the pay but even the pricing policies of companies as seen this week. The only groups benefitting are class action law firms and of course, as always, the public sector.
Yet an analysis in The Guardian this week described one facet of Manchesterism, Andy Burnham’s economic vision, as “a closer partnership between the state and business to spread the proceeds of wealth.” If Andy Burnham is to be the next Prime Minister, he needs to recognise that business doesn’t need a new partnership, it needs a liberator.
Elliot Keck is a Westminster city councillor and political commentator