In a sense Labour has been hoist by its own petard: in 1997 it secured a letter signed by numerous eminent businessmen praising its policies – and thus underlining its electability.
Now, a similar letter from 23 leading company executives threatens to do the exact reverse by criticising Labour policy just weeks before the general election. Executives from industry and the City like to back winners. (And while some of these are Tory donors, most are not).
This time the executives are backing the Conservative plan to partially reverse next year’s National Insurance increase, at the cost of about £5bn (found through efficiency savings across Whitehall).
At first glance the letter does appear to be a bombshell – and has certainly been written up in this way across the media. As George Osborne said: “This is proving to be a significant day. Gordon Brown now finds himself at war with business.”
But don’t be fooled, however, by any suggestion that the letter, now backed by the CBI, Institute of Directors, and British Chamber of Commerce, is not born of self-interest.
Their argument is that the planned rise in National Insurance is a “tax on jobs”. Perhaps. Yet the Tory reversal will be paid for by further cuts to the public sector – which will surely impact on jobs of another kind.
You can argue ad infinitum about how much of the state is “bloated” or “wasteful”. But even if the £5bn of efficiency savings did prove to be low-hanging fruit, that still makes the subsequent task of cutting the deficit even harder.
Ultimately, however, the task looks more and more likely to involve large-scale redundancies across the public sector, whoever is in power (although pay cuts remain the other, so far unspoken option).
Introducing a new tax cut worth billions only increases that particular pressure, as Labour have pointed out (seems hard to believe that Brown and others barely acknowledged the deficit problem until recently*).
What does this all mean? It’s not an argument between job losses vs no job losses: it is an argument between private sector pain vs public sector pain. As such you would expect Corporate UK plc to advocate the latter.
If you thought there was no ideology left in politics, here is the proof to the contrary. In reality the figure in question – £5bn – is tiny compared to the scale of the public debt; but it is a foretaste of the big debate to come.
* There is an inside-out quality to Labour ministers’ attempts to portray the Tories as deficit-deniers given that this was until recently the main accusation against them.
Jim Pickard
Kiran Stacey