Labour must not be Public Enemy No. 1 for business

He’s not backing down. The “cost of living crisis” remains at the heart of Ed Miliband’s pitch to the voters. In spite of increased optimism about economic growth, and the suggestion from some – notably the SMF think tank – that not all of the squeezed middle is being squeezed quite as badly as all that, the Labour leader continues his attack. Our economy simply doesn’t work well enough, he maintains. Not enough good jobs that pay well are being created. Osborne’s “full employment” is at best a disingenuous con, at worst a pessimistic embrace of ever decreasing standards for most people at work.

Miliband’s basic critique is sound. The so-called “productivity riddle” is not all that puzzling when you look at the sort of jobs people are being asked to do. GDP per capita remains flat. We have a large working population but also massive under-employment and, yes, high (sometimes hidden) unemployment too. Our economy is not healthy. And most people will continue to feel worse off, even if wage rises finally creep above the CPI measure of inflation (if not above the RPI measure, which reflects the world most of us actually live in).

But there is a missing link in Labour’s argument. And it has to do with the party’s relationship with business. With the public sector facing severe and continuing retrenchment, the better jobs we all want are largely going to have to emerge in the private sector. In other words, the “predistribution” Labour seeks depends to a great extent on the success, competence, and goodwill of private sector employers.

The “predator/producer” analysis still stands. But in the same way that employees tend to remember all the gripes in a performance appraisal and forget the praise, so businesses never really heard the nice bits about being benevolent producers. Some business leaders, even the good ones, felt “got at”. You can still read their anonymous mutterings in the newspapers from time to time. Only on one issue, the EU and Labour’s decision not to offer a referendum on continued membership except in unlikely circumstances, has Labour’s leadership won approval from Britain’s boardrooms. According to our captains of industry, that is the one really sensible thing Ed Miliband has done so far.

Labour should not pander to business. In the years running up to the financial crisis the party leadership was rather dazzled by the apparent genius of the bankers. They were not alone in that. But it should be clear that hero-worship is unwise and is not needed.

What is needed, though, is a constructive partnership with business, a pro-growth agenda that encourages business leaders to invest and create more good jobs. For all of the Conservatives’ alleged pro-business outlook it is not obvious that companies feel inspired by the current government to raise their game. Business investment is still weak. Pay is not rising much, even if some hiring is going on. Britain remains stuck on a low skills, low wage path – the opposite of a path to prosperity.

At a breakfast meeting last week I heard the former science minister David [Lord] Sainsbury talk a little about the themes in his book “Progressive capitalism” (reviewed by Andrew [Lord] Adonis in the New Statesman here). He said that Labour needed to recapture some of the excitement that Harold Wilson had created in 1963 with his “white heat of technology” speech (I wrote about this speech on its 50^th anniversary here).Labour is effectively pro-market and pro-consumer when it says that the energy companies or the rail companies are ripping customers off and failing to provide a good service. It is not anti-business to make these criticisms. In his attack on vested interests Miliband is explicitly saying that businesses deserve fair regulation and a healthy trading environment. It is not pandering to business to make these pro-business arguments.

The best businesses, and the best business leaders, are creative forces for good. They employ people, give them careers, and contribute to their general sense of well-being. There is (or should be) dignity in labour, and the best employers recognise that. But for some business people the impression has been created either that Labour is out to “get” business, or that it sees business as an obstacle to progress rather than a partner in achieving it. This is a damaging misconception. It must be tackled. Ed Miliband and colleagues need to make a few new friends in business, and soon.