It’s past time the Tories reclaimed their self-appointed title as the Party of Business. Their website may proudly declare they want Britain to be the best country in the world to start and grow a company but their actions indicate a shift away from the conditions that allow businesses to thrive, from low taxes, from Conservatism.
Policymaking on the hoof, madcap rules and stringent controls have made it near impossible for businesses to plan ahead during the pandemic. Thousands have gone to the wall. And poorly-targeted, costly schemes kept some unviable firms afloat, thereby preventing resources from being diverted towards more productive uses.
In isolation, this is troubling enough. But it has been combined with ongoing uncertainty over our post-Brexit regulatory landscape and a manifesto-busting tax raid. We are just months shy of a planned increase in National Insurance Contributions for workers and companies (which Labour opposed) and higher taxation of dividends. What will happen to deductions when corporation tax increases in 2023? Radical reform of our distortionary and overly-complex tax system is long overdue. The UK’s tax code now sits at more than 22,000 pages, or 12 times the size of the King James Bible.
Ministers have voiced their intention to reduce the tax burden, yet the total tax take as a proportion of national income is at a 71-year high, on par with Clement Attlee’s post-war socialist government. We should be clear about the impact this could have on business – and the risk it will dispirit those entrepreneurs who drive improvements in productivity, create jobs, and expand consumer choice.
After “getting Brexit done,” the stage was set for incinerating anti-business EU bureaucracy. But rather than ignite a bonfire of red tape, policymakers are finding new and creative ways to hamstring businesses with pettifogging regulations, like banning ads on yoghurts or jam. Employing anyone in the UK now brings a bewildering array of costs and obligations. There are over 250,000 employees shown in the Annual Survey of Hours and Earnings as having personnel, industrial relations, training or human resources in their job title. Such is the Government’s appetite for labour market regulation that even mandating menopause champions in every workplace, as was suggested last week by the former head of the British Menopause Society, doesn’t seem beyond the realm of plausibility.
But it is our approach to decarbonisation that represents the most costly and damaging element of post-Brexit planned regulation. Arbitrary targets, achieved via state restriction, will crush market innovation. The UK can either be net zero or have secure and affordable energy. With the available technology it cannot have both, and the current mess demonstrates the harm wreaked by the stubborn insistence it can.
In an emergency – war, famine, epidemics – some expansion of the state is necessary. But it’s hard to see how policymakers could blame nationalising railways, bailing out defence contractors or signing us up to a global minimum corporation tax on the Covid crisis. Last summer, polling revealed two-thirds of under-40s want a socialist economic system. The political realignment that has been underway since 2010 has left the Tories dependent on working class voters in Wales, the Midlands and the North – meaning their change in economic orientation and philosophy may not be a temporary, Covid-driven blip. For those who believe the best prospects for recovery lie in unshackling entrepreneurs, this is a grim prospect.
Either way, Government cannot forever hide behind the pandemic. It’s 2022, and Omicron infections may peak later this month. Soon, the mask will have to come off. Then we’ll know if the Tories have fallen out of love with free-market economics, or were just a little slow in ending their dalliance with social democracy. The latter is forgivable. The former would signal that the Conservative Party doesn’t understand wealth creation, enterprise or business, and certainly isn’t the one to represent it.
