Moving on from “tax and spend”

At conference, Ed Balls illustrated his plan for growth. In order to generate revenue for the much-needed economic stimulus he advocated repeating the bank bonus tax, increasing discretionary spending and tax breaks for home improvements. In addition, the temporary reduction in VAT and national insurance contrasts with Osborne’s minimalistic plan for growth. Whilst the shadow chancellor illustrated promising plans, it is time that we moved on from the Keynesian premise of “tax and spend” and reasserted vocations, virtues and values within Labour’s economic policy for the future.

It is the reality of business that profit cannot occur without labour and wages cannot be paid without profit. The relationship between the holders of capital and labour is symbiotic. However, recent rhetoric surrounding economic governance emphasises the competitive, rather than collaborative, relationship between workers and “management”. In principle, Labour must seek to foster a “culture of collaboration” rather than competition between unions and management. Costly strikes undermine productivity and wider economic growth.

However, it is paramount that worker’s rights are defended. At the corporate level, Labour must advocate and legislate for greater employee representation in boardrooms. Miliband’s move towards worker representation is an important first step, however, this must be built upon further. A two-tier system, common in Germany, gives employees considerable veto power and powerful voice within corporate governance. In practice, the culture of co-determination ensures worker flexibility and reduces outsourcing to foreign subsidiaries.  The closer, harmonious working relationship via co-determination ensures corporate behaviour is closely correlated towards the national interest and of workers.

In the UK, developers are given tax credits for efforts in research and development into technological advancements, but not games production itself. While welcome, the research tax credits are considered by many to be overly complicated, with 70% of developers saying more “liberal” tax credits would be helpful. In these cases, Labour needs to be seen as streamlining regulation and helping to grow the knowledge economy of the future. In the economic game between firms, business owners are not incentivised to train apprentices and graduates. Why train when you can poach? In fact, the money saved on training can be used to pay higher wages during the poaching process. This disincentive to train erodes employment. Labour must take a stand against this practice and must legislate to protect firms willing to train new workers.

Furthermore, Labour must seek to foster stronger ties between universities and businesses in order to partner innovators with business brains. Our innovation within value-added knowledge based sectors will drive growth and employment in the future – every effort should be made to secure this. In the long-term, we must provide internationally benchmarked qualifications against the top performers within educational attainment. In order to foster a world-leading knowledge based economy, the skills of workforce must remain internationally competitive. In any case, it must be recognised that universities are not for everyone. It is vital that apprenticeships and technical colleges are in place to ensure that practical skills are transferred into careers and opportunities for the future.

Alongside the educational measures, Labour must seek a responsible approach towards business regulation and the relative costs and benefits of current legislative measures. The Tories speak of the growth-retarding “red tape” merely as an excuse to attack the rights of workers – Labour must rally against any attempts to dilute the rights of workers and the erosion of wages and working conditions.  By aligning the interests of workers and management we can assuage the feelings social disconnection embodied in the ‘Occupy London’ protest and recent riots.

Labour must seek to foster a better kind of capitalism. This begins with focusing our efforts on companies with turnover between 10m and £100m. These represent 1% of businesses but created 22% of jobs. Labour must illustrate how its plans would provide a broader range of finance to medium-sized firms, struggling to secure lending from the frugal banking sector.  Drawing on the results gathered by the CBI, by opening UK bond markets to medium-sized businesses, encouraging use of venture capital, and making it easier for large companies to invest in medium ones we can foster growth. By igniting the flame of small-scale finance, we can create sustainable employment for the future.

More specifically, Labour must suggest the re-introduction of the Corporate Venturing Scheme (CVS) in order to combine the power of the corporation with the energy and dynamism of entrepreneurial start-ups. In order to guarantee the expansion of jobs and growth, these tax deductions must rest on the expansion of employment within firms receiving investment. Together, these measures would destroy the assertion that Labour was not the party of industry whilst protecting the interests of the average worker. There is no chance of equity without efficiency and no point of efficiency without equity.

We must seek to build a web of understanding between business, employees and government. The continuing battle between the owners of capital and labour cannot continue. In order to build a new economic model for Britain, we must work together. Instead of competition without competitors, let us collaborate and drive ethics back into our businesses.