The Party of Business
Fifty years ago on 28 February 1974, there was a general election. The Labour Party’s election manifesto included a pledge to:
‘Bring about a fundamental and irreversible shift in the balance of power and wealth in favour of working people and their families’.
During the election campaign, Denis Healey made his famous promise to squeeze (some of) the rich until the pips squeaked. It was only to be property speculators not all the rich but he did say that a future Labour government would increase income tax on those with the highest incomes.
Labour won that election and a second one in October the same year.
Alongside nationalisation, the redistribution of wealth from the rich to the working class was the Labour Party’s claimed path to a more equal society. That was how reformism was going to gradually bring about ‘socialism’.
The Labour Party was originally set up as the parliamentary wing of the trade union movement. Hence its name. It was supposed to be the party of labour, the party that was to press for legislation to improve the conditions of workers. In 1918 it did adopt a constitution which proclaimed full-scale nationalisation, which it called socialism (but was actually state capitalism) as its long-term aim, but in practice it sought working- class support on the basis of promising to improve things for workers within the capitalist system.
When in office the Labour Party has always had to govern in the interest of business. That capitalism is an economic system that runs on profits made by businesses is an economic reality which all governments have to recognise on pain of causing an economic slowdown or even downturn. Whatever they might have promised so as to get elected or might have wanted, all Labour governments ended up recognising this and accepting the need for profits to be allowed to be made. Labour MP Harold (later Lord) Lever put it very clearly shortly after Labour won the 1966 General Election in terms as relevant today as they were then:
‘Labour’s economic plans are not in any way geared to nationalisation; they are directed towards increased production on the basis of the continued existence of a large private sector. Within the terms of a profit system it is not possible, in the long run, to achieve sustained increases in output without an adequate flow of profit to promote and finance them. The Labour leadership knows as well as any businessman that an engine which runs on profit cannot be made to move faster without extra fuel. So, though profits may be squeezed temporarily by taxation and Government price policy, they must and will, over a longer period, increase significantly even if not proportionately to increased production’ (Observer, 3 April 1966).
Labour openly embraces capitalism
In 1995 Tony Blair got the party, in opposition since 1979, to drop Clause 4 of its constitution with its socialist-sounding wording. In 1998, Peter Mandelson, a cabinet minister in the Labour government that had come into office the previous year, famously stated the government was ‘intensely relaxed about people getting filthy rich as long as they pay their taxes’.
This was the ‘New Labour’ that replaced Old Reformist Labour. Starmer is in the same tradition, only he has gone further by declaring Labour to be ‘the Party of Business’. Not only that, he accepts that this involves pursuing, when in office, a policy of ‘fiscal conservatism’ (tinyurl.com/58xynpda):
‘It was “a big mistake” for the left to equate spending money with radicalism as he insisted that fiscal discipline was fundamental to winning power’ (Times, 19 July).
He told last year’s Labour Conference that a Labour government would not be ‘a cheque-book state’ and in a speech last December declared that ‘anyone who expects an incoming Labour government to quickly turn on the spending taps is going to be disappointed’ (tinyurl.com/bddbhuxu ).
Starmer and his would-be Chancellor Rachel Reeves began 2024, the year they both hope to move into Downing Street, by stepping up their appeal to business leaders. Reeves went to Davos to meet the world’s political and business elite at their annual jamboree in Switzerland. She said she was going there to try to convince them that Labour not the Tories ‘are now the pro-business party’ (Times, 18 January).
A couple of weeks later the Labour Party organised its own meeting for business leaders, sponsored by HSBC. The headlines in the business press reporting what went on tell it all:
‘Labour Is The Party Of Business,’ UK’s Starmer Tells Corporate Bigwigs (Barrons, the American business weekly).
Labour is now ‘pro-business’, vows Rachel Reeves (Financial Times).
Reeves unambiguously committed the Labour Party to supporting capitalism:
‘This Labour Party sees profit not as something to be disdained but as a mark of business succeeding’.
‘Be in no doubt, we will campaign as a pro-business party — and we will govern as a pro-business party’ (tinyurl.com/bdubeuak).
So, what has the New Business Party been offering Business?
‘We will cap the headline rate of corporation tax at its current rate of 25 per cent for the next parliament.’
‘The shadow chancellor has told the BBC Labour would not reinstate a bankers’ bonus cap that was scrapped last year by the Conservative government’ (tinyurl.com/dsymw2zn).
‘Labour rules out wealth tax if party wins next election. Ms Reeves confirmed Labour would not target expensive houses, increase capital gains tax or put up the top rate of income tax’ (tinyurl.com/eyftrjdu).
‘Party amends plan to bolster protections for gig economy as it boasts of ‘pro-business’ credentials’ (tinyurl.com/ypxfaz48).
In her speech to the business leaders, Reeves declared that, whatever happens, ‘I will not waiver from iron-clad fiscal rules’. Labour is banking on being able to conjure up growth, but what if this doesn’t happen, as it might well not as governments don’t have the power to bring about growth?
No or slow growth would mean less tax revenue. Under its ‘iron-clad’ rules and given its promise not to increase corporation or other taxes on business, the Labour government would have to cut back on its spending and impose austerity, putting the defence of profits and profit-making first, before social spending and before public sector wages. It would, as Reeves put it, ‘govern as a pro-business party’. All governments always end up having to do this anyway but never has a party announced so clearly in advance that this is what they will do.
ADAM BUICK