Labour is demolishing Britain’s competitiveness
Sir Keir Starmer’s Government is adrift in troubled waters. New regulation, delayed decisions and an impending Budget replete with tax hikes have put paid to any lingering hope that Labour would enter office and immediately arrest Britain’s economic decline. Instead, we are seeing our competitiveness demolished.
The shambolic nature of Monday’s investment summit illustrates the problem well. The centrepiece of the event is set to be DP World, the owner of P&O ferries, announcing a £1 billion investment in London Gateway port. Yet, days before, this was put at risk when Transport Secretary Louise Haigh labelled P&O a “rogue operator”, resulting in DP World almost pulling out of the summit.
Whatever is said on Monday, it appears Ms Haigh’s comments are more likely to set the tone: a hostility towards business and wealth written through the Government’s policies, and considerable uncertainty over its plans combining to drive investment away from this country.
This starts with the tax system. The upcoming Budget is set to see a punishment beating for investors. Policies being floated include extending the inheritance tax liability of non-doms for a full decade after they’ve left the UK, and, of course, increases in capital gains taxation. While the Treasury has dismissed speculation that the rate could rise to as high as 39 per cent, there are still suggestions that the new rate could be substantially above 30 per cent.
Even at the lower end of the scale, this would be a huge rise from its current level, and would leave Britain with the seventh-highest rate in Europe. If Chancellor Rachel Reeves and Sir Keir are keen to end policy uncertainty dissuading investors, leaving a void for months of speculation over their precise plans for tax hikes is hardly the way to go about it. Indeed, many are taking action rather than waiting to see precisely what Labour has in store. Directors of UK-listed companies have doubled their disposal of shares, the asset manager Liontrust has seen £1.1 billion withdrawn from its funds in the past three months, and the UK is set to see the largest exodus of millionaires in the world.
This direct raid on assets sits particularly poorly alongside the other elements of Labour’s agenda. Changes to employment law are set to make Britain’s labour market less flexible, and the relentless focus on decarbonising the grid is unlikely to help companies already facing the highest electricity prices in the developed world.
Perhaps least helpful of all, however, is the Government’s approach to planning. While Sir Keir and company entered office making positive noises about planning reform, their record since has been underwhelming: higher housebuilding targets for Northern areas where demand is relatively low, and lower targets in cities where it is high.
While some good decisions have been taken, what credit the Government has earned in this field has been rapidly spent. Calling in a rejected application for a £750 million film studio in Buckinghamshire was the right choice. Delaying a final decision on the £9 billion Lower Thames Crossing project was decidedly not.
It is an inescapable fact that Britain’s growth record over the past decade and counting has been dire. It is also true that in a global market, capital naturally flows to places that offer higher returns, and that too often investing in Britain is an unappealing prospect.
Nothing Labour has set out to do in its first 100 days has corrected this impression. Sir Keir and his comrades should change course, and soon.