Employee ownership, child bonds, start-up help: Ideas for a Labour economy

This month, Labour became the biggest party in local government for the first time in more than 20 years. The local elections resulted in an additional 22 councils now being Labour led, meaning their residents will benefit from the party’s consistent, effective policies born out of its philosophy to build a better Britain.  

In contrast, the core philosophy underpinning the Tory government’s economic policy has shifted, dramatically, at least three times since last summer. Johnson’s boosterism and ‘cakism’, gave way to Trussenomics, which was then jettisoned for Sunak’s austerity 2.0. Meanwhile, some ministers have remained in the cabinet throughout, flim-flaming to curry favour with their ever-changing bosses. Some, indeed, are the very ministers who in 2010 set loose austerity 1.0. They’ve managed to go full circle, while Britain‘s opportunities have stalled. 

Since 2010, for the first-time ever, life expectancy has stopped extending. Indeed, it has declined for some groups. Inequality has increased, with the gap between the richest and the rest of the population widening. 

Trickle-down economics has failed and continues to fail, and our economy has stopped growing. We are the only G7 nation to still have an economy smaller than it was pre-pandemic. And the International Monetary Foundation recently forecast that the UK will be among the worst performing economies in the G20 in 2023. 

So what can Labour propose in order to avoid another decade of low growth and lots of inequality? Well, the economic and business growth policy ideas already proposed by Keir Starmer, Rachel Reeves and Jonathan Reynolds do look to the future and a better British economy.

From their proposed £8bn national sovereign wealth fund to their £28bn-a-year commitment to the green prosperity plan, they have set out how ‘good’ growth can be delivered and how investing to deliver societal, environmental and financial returns can create an economy that is better for Britain. From commitments born from the recent review by Lord Blunkett on skills policy to those that have emerged from Lord O’Neill’s report into entrepreneurship, they have serious plans for the future, which embrace change and economic opportunity, whilst backing each with economic and political competency. 

In order to deepen the impact of such transformational policy thinking, I think there is one more ingredient to make the recipe complete: the icing to make this perfectly baked cake irresistible, if you like. It is to wholeheartedly embrace an entrepreneurial mindset as a core driver to deliver policy and reset our economic system. An entrepreneurial mindset places value in curiosity and innovation, constantly iterating for building growth and cultivating meaningful relationships, partnerships and collaborations.  

To entrepreneurs, change brings possibilities. As influential fashion designer Marc Jacobs once remarked: “How can things move forward if you never question them or challenge them? Change is a great and horrible thing… Without change, however, you just don’t move.”

I understand this because, for more than a decade, I have been a profiled proponent of entrepreneurial principles. In business, my start-up, Ella’s Kitchen, grew to become Britain’s biggest baby food company, and on the economy, I’ve helped introduce the B Corporations model, while advocating for a Better Business Act and the value of public benefit companies. This is because I believe that the changing world offers us a golden opportunity to reset the economic system so that it works in the long term, for more people.

To future-proof our economy with entrepreneurial vigour at its core, the next Labour government has an opportunity to rebuild the three core, but crumbling, pillars of the economy’s structure. 

First, it could explore changing incentives and motivations that currently drive too many company boards to focus on short-term results, at the expense of long-term benefits. And change them.

Next, it could re-emphasise that if capitalism is to work well, more people have to own capital. There are many untapped possibilities here: from different corporate structures to more employee ownership; from the already proposed national wealth fund to children’s bonds. 

Finally, it could encourage both business and wider society to return to striving for a people-centred measure of value. Healthy profits, healthy communities and a healthy planet are invariably interconnected. At both the macroeconomic level and at individual business level, success could be measured in terms of increased health and education and decreased poverty and incarceration, rather than the blunt and misleading measure of GDP or EBITDA. After all, isn’t the purpose of a successful economy to create prosperity and do something with it for the society that created it?

Each pillar could be strengthened by policies to harness entrepreneurial talent and ideas so that small-and-medium-sized businesses (SMEs) get a fair chance to compete and create prosperity for our society.

Those fair chances are key. For example, a policy could require the Competition and Markets Authority to remove barriers to entry for young companies that the dominance of monopoly power has created, such as by regulating or taxing the unfairly advantageous transfer pricing cash flows that multi-nationals enact when they ‘offshore’ IP to shell group companies in foreign tax havens. Another example would be expanding opportunities to, and sources of, secure, patient investment by widening the pool of capital available, like the French government has done in creating their Tibi initiative, which raises additional finance for tech scale-ups.

Finally, a policy could deepen fiscal incentives to encourage SME growth in those industries in which the UK has competitive advantages and demand is growing. The creative, health and green industries are obvious starting points. Here, the British government could further its existing seed-funding and enterprise investment schemes.

The current government is out of ideas to pilot, iterate and adapt (or reject) to help stimulate a better British economy. Labour’s leadership is not. This brings a golden opportunity to create a Labour Party entrepreneurial mindset.

Meanwhile, the ‘Fair Competition for Fair Growth’ project – a collaboration between Labour-supporting Renaissance and Progressive Britain – is currently looking at how government can support SMEs to drive green growth.

It is time to truly unleash the potential of our entrepreneurs and SME businesses to build a sustainable, stable, fairer and growing economy. It’s time for embracing entrepreneurial principles in broader economic policy. It’s also time to change the government. Let’s get to work.