INSIDE OUT

INSIDE OUT - Business and Brown are in the divorce courts because he has become a serial adulterer in ways that are bringing British business to its knees.

by Andrew Neil, publisher of The Business and Scotsman newspapers
Last Updated: 31 Aug 2010

Business and Brown are in the divorce courts because he has become a serial adulterer in ways that are bringing British business to its knees.

British business's long-running love affair with Gordon Brown is over. The chancellor has been unfaithful to business too often these past six years for it to believe his protestations of love any more. Indeed, like any cheated lover, business is now bitter about Brown.

The falling out is not the result of one major act of unfaithfulness.

Business and Brown are in the divorce courts because Brown has become a serial adulterer in small ways which, together, are bringing British business to its knees.

The parting of the ways came this spring, when the new employment act and the 1% increase in national insurance were added to the 16 earlier major pieces of employment legislation in the past six years, including the 48-hour week and pro-trade union legislation, plus an array of tax increases that have cost companies billions.

The sheer volume of new regulation Brown has imposed on business is staggering.

In addition to the 48-hour working week and the minimum wage, there has been a reduction in the qualifying period for unfair dismissal; a new public-interest disclosure act; a new right to take time off to study; a higher cap on unfair dismissal payouts; the introduction of European-style works councils; working families' tax credits paid through company payroll systems; student loan repayment regulations; enhanced trade union recognition; restrictions on the dismissal of striking staff; new part-time work regulations; the right to accompaniment at company hearings; restrictions on repeated fixed-term work contracts; and the creation of complex stakeholder pensions.

Phew! No single measure would cripple British business. But the cumulative effect has meant death by a thousand cuts. Manchester Business School reckons the total cost of regulations introduced since 1998 is now over pounds 20 billion.

That figure does not include the introduction of the national minimum wage: add another pounds 10 billion for that. Nor does it take into account the spring rise in national insurance: that will add another pounds 4 billion annually to the costs of doing business in Britain. And the burden on business does not stop there: new parental employment rights alone will add a further pounds 300 million a year.

Statutory maternity leave has been increased from 18 to 26 weeks, and maternity pay from pounds 75 to pounds 100 a week. Mothers are now allowed another 26 weeks of unpaid maternity leave; and now fathers have the right to two weeks' paid leave. On top of all that there is a new right to adoption leave, and a right to 13 weeks' unpaid parental leave.

All measures likely to be welcomed by families. But the cumulative effect for business, especially smaller businesses, could be devastating, especially since more of the same - including Brussels rules on worker consultation, employing temporary agency staff and age discrimination - beckons.

All this on top of a rising tax burden that has landed disproportionately on business (think the windfall tax, the pounds 5 billion pensions levy, the extra oil taxes, national insurance). It is hardly surprising that the business leaders so assiduously wooed by Brown in the run-up to the 1997 election and after have turned their backs on the chancellor, who now enjoys the support of only a handful of pro-Labour tycoons and plutocrats like Lord Sainsbury.

The latest polls show that disillusion with Brown's policies is greatest within the business community. 'Slowly but surely this country is becoming as sclerotic and over-governed as the rest of the European Union,' complained one medium-sized businessman from Croydon. 'We have to spend far too much time filling in forms and complying with ludicrous amounts of red tape.'

The impact is being felt across the economy. Since Brown moved into 11 Downing Street, Britain has plunged down nearly all the major league tables measuring international competitiveness, and productivity has been stagnant, despite a stream of measures from Brown designed to stimulate it. The more attention he devotes to raising productivity, the worse it gets.

But it's not just British business that has turned against the Iron Chancellor.

So has international sentiment. The pound dropped to four-year lows against the euro and the dollar in the spring and is likely to keep falling. The markets have perceived that Britain's mini-economic miracle is now over and that we are heading for continental Europe levels of lacklustre growth.

They have watched Britain's burgeoning trade deficit being joined by a soaring government deficit - and they don't like what they see. Despite the highest (real) interest rates in the developed world, they are selling sterling and we are in the midst of a sea change in market sentiment towards Britain.

Brown's boast that Britain is the strongest economy in the G8 cuts no ice beyond the Labour front bench. In British boardrooms and international dealing rooms the bloom is off the Brown economy.

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