Hammond’s Budget was anti-business and anti-opportunity

  • An untrammelled free market left to its own devices does not automatically lead to an environment in which such productive, innovative and progressive businesses can thrive.

  • Chuka Umunna MP

Over the summer I had dinner with a group of incredibly successful entrepreneurs and businesspeople, each worth in excess of tens of millions of pounds, having founded well-known brand names.

These were not “red in tooth and claw” capitalists of the Philip Green variety but progressively minded figures. Most came from very humble backgrounds. All have sought not only to become commercially and personally successful but have a broader view of value creation serving the interests of all major stakeholders in their businesses – employees, suppliers, customers, creditors, the communities where their firms are located, the environment. They all recognised that business and society are mutually dependent: business needs society to buy its products, staff its workplaces and provide a supportive environment, infrastructure and so on; society needs business to provide the jobs, wealth and opportunity for its citizens.

I have seen that their business models reflect their beliefs because I visited one of their factories during my time as shadow business secretary in the 2010-2015 parliament.

These are the kinds of enterprises that can provide more of the decent, secure jobs we need in our economy now and in the future, and whose success is necessary to provide the tax receipts to fund the public services and investments we want to see. If we are serious about remodelling our economy, these kinds of businesses are vital.

An untrammelled free market left to its own devices does not automatically lead to an environment in which such productive, innovative and progressive businesses can thrive. Proper investment in public services and an active government is essential, which is why I have consistently voted against every Tory Budget and the austerity they have sought to impose on my constituents.

Nevertheless, it’s important to bear in mind that simply borrowing and spending ad infinitum and without limit is not the way to remodel our economy either. The Office for Budget Responsibility has just published its forecasts alongside the Chancellor’s Budget. setting out how the public sector net debt is still forecast to be 82.8 per cent of GDP in the next financial year, resulting in the government spending £43bn to service our debts rather than putting those monies into our schools, the NHS and affordable housing.

It’s all a question of the right balance and the Tories are still getting it wrong.

One of the dinner guests I mentioned earlier said to me: “There is so much opportunity out there” – and that was the overwhelming message during the evening. The optimism of those present was infectious and their stories of working up from nothing to employing hundreds of people are the stuff of films.

During my time in charge of business policy for the opposition, I loved meeting these people, hearing their stories and visiting their firms. Many on the left are instinctively suspicious of people like them; they question their motives and see them as the enemy. I always distinguished between those with the right values and business models, and who recognise their businesses haven’t grown in isolation from the supportive environment society has provided, and those who take without feeling the need to give anything back. My instinct is to see the former as partners in remodelling the economy; I always thought those like the latter would come unstuck. Yet the opportunities these entrepreneurs see are a pipe dream for too many. The Budget delivered by Chancellor Philip Hammond today has done nothing to change that.

In spite of the fact that we live in the fifth largest economy in the world – Hammond described it as “an economy that works for everyone” – homelessness and child poverty are all rising, our social services are threadbare, and the use of payday lenders and food banks is soaring.

Our NHS is lurching from crisis to crisis. Inequality in Britain is still higher than in other European economies. The British economy is too unproductive: the average worker here takes five days to produce what his or her German or French counterpart takes four days to produce.

Our regional cities drastically underperform their continental counterparts and our least successful regions are among the poorest in Western Europe. Above all, across the country, real wages are 7 per cent lower than they were at the time of the financial crisis and aren’t forecast to reach pre-crash levels until 2025.

For any chancellor to describe all of this as an “economy that works for everyone” is therefore the height of absurdity.

Hammond declared today that Tory austerity “is coming to an end”. Much of the debate will now centre on the extent to which the Tories keep to this promise, originally made by the prime minister in her Tory Party Conference speech earlier this month.

Hammond did confirm that the NHS will get an extra £20bn in real terms by 2023-24, but the NHS has predicted it will need over £30bn more by 2020-21 than it gets currently simply to maintain current standards of care and meet the rising demand.

He said there will be more cash to ease the financial hardship the government is imposing on millions of people transitioning to Universal Credit, but so many of the services they rely on are being withdrawn.

The investment in broadband to address digital exclusion is welcome – but people not having the skills to exploit the opportunities created by new technology is the other part of the story and the Association of Colleges says that from 2009 to 2019, college funding will have fallen by about 30 per cent.

As ever, the devil will be in the detail. What we can say now, though, is that it is all rather piecemeal and looks like tinkering. It was ever going to be thus given the government does not have a big majority, and a proper majority in parliament is needed to make big-bang, controversial reforms to embed a new economic model that fosters the kinds of businesses those I was dining with have created.

It is long-termism which the British economy needs but short-termism plagues the economy. For example, promising firms are too easily bought up and asset-stripped, and there are too many incentives which encourage behaviours tending towards making a fast buck instead of long term, sustainable value creation. Britain’s industrial structure and traditions don’t lend themselves as naturally to long-termism as their counterparts in northern European economies like Germany.

And that brings me to Europe. If there was one takeaway from the Budget today, it was that Brexit – if it happens – casts a long shadow over our economic prospects. All of the data and forecasts today are completely dependent on an optimistic reading of the outcome of the Brexit process. As those who run businesses tell me, uncertainty is the enemy of business, growth and jobs. There is no greater uncertainty than Brexit.