Labour’s long march against British prosperity continues. Indeed, the last week has seen a deluge of statistics that read like the worst school report imaginable.
Figures published in the last few days had Labour trailing behind Reform UK in almost every poll. The proportion of the public with a positive view of Keir Starmer has almost halved since last July, putting him below Nigel Farage.
There were the headlines that 50,000 small boat migrants have crossed the Channel since the election – that’s 124 every day. According to Jacqui Smith, Labour’s minister for women and equalities, this isn’t the Government’s fault. Yet those plucky people smugglers are clearly unconvinced by the Prime Minister’s promise to smash them, with migrant crossings up by 50% since the signing of the ‘one in, one out’ deal with the French.
Yet the most damning verdict on the Government’s handiwork came yesterday, in the form of grim news from the labour market. The Office for National Statistics reports that 164,000 jobs have been lost since the Government came to power. While earnings rose for those in work, the fact that the Bank of England cut interest rates last week by a quarter percentage point suggests that it doesn’t expect this trend to last.
For a Chancellor who once claimed that she is ‘not one of those politicians who thinks the private sector is a dirty word’, Rachel Reeves has a funny way of showing her appreciation for Britain’s businesses. You’ll remember that at the Autumn Budget, Reeves announced a raft of measures punishing entrepreneurs and business owners. Employer’s National Insurance was hiked by 1.5% at the same time as the earnings threshold for contributions was lowered from £9,200 a year to £5,000.
The NI rise came into effect in April and, as many anticipated, the businesses suffering the brunt of these policies simply cannot afford to hire new people. In addition to the ONS figures, a survey published by KPMG and the Recruitment & Employment Confederation showed a continuing slump in recruitment activity. The report’s index for permanent placements was at 40 in July, barely up from the previous month’s two-year low of 39.1. Any result below 50 shows that recruiters are expecting to see activity drop rather than grow.
In fairness, the NI hike is only partly responsible for this stagnation – because the Employment Rights Bill is set to make matters worse. Under its current provisions, all workers will have unfair dismissal protection from day one, employers will be liable for any third-party harassment against employees, and Tory legislation on minimum service levels during periods of industrial action will be repealed. Meanwhile, the minimum wage has already risen to £12.21 per hour from £11.44 – which is nice for those on it, but again makes hiring staff more expensive.
Think about what this all means for a small business owner. If you hire a poor worker and they aren’t performing during their probationary period, it will become considerably harder to get rid of them and take on someone more appropriate. If you own a pub and a drunken punter leers at one of your barmaids while your back is turned, you could be left liable for legal action. The NI rise plus the minimum wage increase means – as the Centre for Policy Studies warned – that it is now £2,367 more expensive to hire a worker on the minimum wage than it was in 2024. And if your unionised labour force decides that all of these new allowances aren’t enough and decide to down tools, you’re left with the cost of keeping the lights on with potentially zero productivity.
The Government’s own impact assessment estimates that its reforms could cost businesses up to £5 billion annually, although that is likely an underestimate – in fact, even as Keir Starmer was promising to cut the burden of regulation on business, the Regulatory Policy Committee was pointing out that the impact estimates for the Employment Rights Bill were fag-packet maths at best.
We’re not just talking about large firms and fat cats here. According to the Resolution Foundation (whose former chief executive was, until January, Parliamentary Secretary for the Treasury), it is the low-paying hospitality sector that has shed jobs at the fastest rate since the October Budget. This chimes with the CPS research mentioned above, in which Daniel Herring calculated that the tax wedge when employing those at the bottom of the income scale will be the highest on record, at 21%.
Consider the impact on one of Britain’s sorry students or recent graduates trying to enter the labour market. A few years ago, you or I might have relied on some low-paid pub work to make ends meet. Fat chance these days. Saddled with extra costs and increased liabilities for taking on new people, the chances are you’ll be traipsing around with your CV for weeks until someone takes the risk of hiring you.
Just graduated? Not only are you entering a job market that is increasingly attracted to AI over your three years of studying sociology, but one where companies great and small are being told by the Government that any new hire can essentially hold the business to ransom if they dare try to sack them.
From welfare policy to employment rights, Labour’s starting point is that the state is the best mechanism for protecting the vulnerable. Yet by stepping in with reams of costly regulations, the Government ends up restricting the options available for an individual’s livelihood or a business’ employment model.
The Tories got a lot wrong during their last stint in office, but they had a better grasp of the economics of the labour market. Between 2010-2015, the Coalition reduced the tax wedge on minimum wage employment from 18% to 11%, by increasing the income tax personal allowance (an idea first championed by the Centre for Policy Studies in 2001). In the 2023 Autumn Budget, Jeremy Hunt made full expensing permanent for businesses investing in IT equipment, plant and machinery – freeing up billions in pent up investment.
Policies that allow businesses to thrive are those that allow businesses to hire. No amount of virtue signalling in the labour market can make up for that. Until Reeves realises this, I’ll meet you for a fag outside the job centre.
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