Keir Starmer wants Labour to be the ‘party of business’ – should the Tories be worried?

Can Labour regain the confidence of business, which saw the high tax, high spending mantra of the Jeremy Corbyn era as beyond the pale?

Keir Starmer will look beyond the coronavirus pandemic in an important speech tomorrow about Britain’s economic future. It marks a change of gear in which he will start to answer the “what do you stand for?” question.

Outlining a “fork in the road” choice at the 3 March budget, the Labour leader will argue that a failed Conservative ideology weakened the country’s foundations through insecure work, stripped down public services and led to deep inequalities during the past decade in a political choice that was not inevitable. He believes these failures were exposed by a crisis which saw the UK have the worst death rate and worst recession of any major economy.

Starmer will say the Tories’ small state, free market ideology will see them repeat their mistakes in the post-pandemic period. He wants to reposition Labour as the “party of business”, not committed to “business as usual” in the way the Tories are. He believes Labour has in the past sometimes been agnostic or even hostile towards business but will offer it a “new partnership” that builds on the successful cooperation between the government and private sector in the past year.

Although some Tories will scoff at Labour’s efforts to woo business, their own traditional support amongst this group can no longer be taken for granted. Boris Johnson’s “f*** business” statement has not been forgotten despite his belated efforts to rebuild burnt bridges. His hard Brexit has caused serious problems since 1 January for many small business people tied up in red tape; they are often the backbone of local Tory associations.

Despite the government’s efforts to smooth “teething troubles,” Johnson is not going to revisit his EU trade deal. It did virtually nothing for services, which account for 80 per cent of the UK economy. Although Rishi Sunak’s £280bn of economic support provided a lifeline for many companies, many self-employed were among the three million who fell between the cracks and missed out. The chancellor is considering a rise in corporation tax in the budget, which would hardly be welcomed by firms as they try to bounce back.

Can Labour regain the confidence of business, which saw the high tax, high spending mantra of the Jeremy Corbyn era as beyond the pale? There is every reason to think that under Starmer, it can. It has been done before, when Tony Blair and Gordon Brown remodelled Labour in opposition. A lecture last month in which Anneliese Dodds, the shadow chancellor, pledged a “responsible economic, fiscal and monetary policy” landed well in the business world. Starmer will reinforce that message. 

Credibility among business leaders can help Labour build it in the more crucial arena of public opinion. Starmer clearly has work to do here. When YouGov asks people which party is best at handling the economy, the Tories are on 37 per cent while Labour (19 per cent) trails the don’t knows (28 per cent). 

Although the Tories have opened a narrow overall lead over Labour on the back of the vaccine rollout, YouGov finds that on most fronts, Starmer is viewed more favourably than Johnson. Starmer’s ratings are better than his party’s – interestingly, not among 2019 Labour voters, but among Liberal Democrat and Tory supporters (one in five of whom has a favourable opinion of him). Although purist left-wingers won’t like the finding that he is more popular among Lib Dem than Labour voters, it’s a good sign for Starmer that he is making inroads into enemy territory. 

Labour will never outbid the Tories on patriotism, but the more critical issue of the economy is now in play. Sunak wants to make a start in his budget on closing a deficit in the public finances likely to exceed £400bn in the current financial year. That will inevitably mean unpopular tax rises.  Starmer believes that now is not the right time, as higher taxes would put the post-pandemic recovery at risk – also the view of Tory right-wingers. 

Both main parties are already staking out their ground ahead of the next general election. Sunak privately warns Tory backbenchers their party must not become a Labour-lite high spender, saying the Tories would sacrifice their reputation for fiscal prudence at their peril. In return for Tory MPs swallowing the nasty tax rise medicine now, the chancellor dangles the carrot of pre-election tax cuts and “clear blue water” between their party and Labour.

Similarly, Starmer’s speech will start to draw his own dividing lines. It will be a difficult balancing act: opposing Tory austerity while having a responsible fiscal policy. With government spending likely to remain high until the next election, Labour cannot take the soft option of merely pledging to outspend the Tories. Starmer’s pitch will have to be “time for change” after 14 years of Tory rule. In time, he will need a few big ideas that voters notice, showing how Labour would spend differently and more fairly.

Starmer believes Labour is the natural party to deliver the active state that will be needed after the pandemic. However, the Tories might become a moving target; some ministers believe Johnson will stick to the interventionist approach of the past year rather than revert to the traditional Tory vision of a small state. Starmer would then have to go back to the drawing board.