Eliot Wilson has a useful Critic piece on the inability of Labour to move beyond its traditional comfort zones and economic fantasies. Some voters think political progress in the UK requires one of the major parties to crash and burn at the next general election. Labour is unlikely to be that party, an obvious dilemma for those who think the two party circus has had its day.
Where does Labour think that wealth comes from?
Keir Starmer has to face the reality of wealth creation
It was Peter Mandelson, the Thomas Cromwell of New Labour, who used a cheeky, half-joking sentence that was in fact one of the most significant underpinnings of Blairism. In 1998, three months into his first big public-facing post as trade and industry secretary, he travelled to California. He wanted to sniff the brash, entrepreneurial air of Silicon Valley, at that time the epicentre of the dot-com boom, so he gave a speech to a group of senior executives at IT giant Hewlett-Packard.
Explaining the temper of the new government, he reassured his audience, “We are intensely relaxed about people getting filthy rich.” Those nine words signalled New Labour like almost no other utterance.
The whole piece is well worth reading as a reminder that Starmer has changed nothing apart from putting the Corbyn debacle behind him. He has put nothing else behind him. A Labour government under Starmer is almost certain to be nationally embarrassing.
The way Labour talks about economic policy is deeply revealing. Almost every pronouncement is steeped in an assumption that the state is the best and most virtuous expression of economic activity, such as the creation of a National Wealth Fund, whilst private enterprise is the home of “excess profits” and non-domiciled tax status, two major targets for the shadow chancellor, Rachel Reeves.
The repeated references to a windfall tax are indicative. Reeves announced at the Labour Party annual conference in October that there would be a “proper” windfall tax on energy suppliers, presumably in addition to the Energy Profits Levy and the Electricity Generator Levy. The party has also talked about taxing carried interest earned by private equity fund managers. This suggests that there is a morally or societally “correct” amount of profit to be made on any commercial activity.
Keir Starmer has to face the reality of wealth creation
It was Peter Mandelson, the Thomas Cromwell of New Labour, who used a cheeky, half-joking sentence that was in fact one of the most significant underpinnings of Blairism. In 1998, three months into his first big public-facing post as trade and industry secretary, he travelled to California. He wanted to sniff the brash, entrepreneurial air of Silicon Valley, at that time the epicentre of the dot-com boom, so he gave a speech to a group of senior executives at IT giant Hewlett-Packard.
Explaining the temper of the new government, he reassured his audience, “We are intensely relaxed about people getting filthy rich.” Those nine words signalled New Labour like almost no other utterance.
The whole piece is well worth reading as a reminder that Starmer has changed nothing apart from putting the Corbyn debacle behind him. He has put nothing else behind him. A Labour government under Starmer is almost certain to be nationally embarrassing.
The way Labour talks about economic policy is deeply revealing. Almost every pronouncement is steeped in an assumption that the state is the best and most virtuous expression of economic activity, such as the creation of a National Wealth Fund, whilst private enterprise is the home of “excess profits” and non-domiciled tax status, two major targets for the shadow chancellor, Rachel Reeves.
The repeated references to a windfall tax are indicative. Reeves announced at the Labour Party annual conference in October that there would be a “proper” windfall tax on energy suppliers, presumably in addition to the Energy Profits Levy and the Electricity Generator Levy. The party has also talked about taxing carried interest earned by private equity fund managers. This suggests that there is a morally or societally “correct” amount of profit to be made on any commercial activity.
7 comments:
The biggest problem I see with windfall taxes is that they increase the argument for windfall lifebelts when things go wrong.
If a business makes windfall profits that extra money is paid out into shareholders dividends, workers wages, invested in capital plant, or used to restrain price rises later. The money circulates. Unless the government takes the windfall tax and then who knows what it is spent on.
DJ - windfall taxes are too close to theft for my liking. As you say, who know what the money is spent on if governments help themselves to it?
"The party has also talked about taxing carried interest earned by private equity fund managers."
My eldest son works in private equity. A few years ago his company had a meeting with some front-bench Labour hopeful, so they could exchange ideas and be aware of Labour's plans in readiness for a Labour government. (In fact, Labour lost...).
The Labour hopeful was woefully ignorant about private equity. He sounded, apparently, like a student politician trained to think that profit is bad and capitalism is inherently exploitative, but had no grasp of how finance actually works.
I guess we have to multiply that across every department, so the next five or six years are not going to be comfortable.
And what happened to the company known as Hewlett Packard? The Broon effect at one remove. I hesitate to say it was buggered.
And why do windfall taxes not apply to covid "vaccine" alchemists? Gotta make a billion or few.
And to renewable energy subsidy grabbers.
Windfall taxes seem to just apply to companies that do us good. So declare your profit in some overseas haven while your UK subsidiary makes a loss.
Forced to buy some very expensive US LPG cos we sanctioning Russia and burning our own gas is baad? Oh dear, what a shame. Never mind. Offgen will let you pass the cost on.
Sam - interesting but not surprising. If anyone with expertise were to hold talks with a front-bench Labour hopeful, the display ignorance would probably be embarrassing. The problem seems to be a willingness to substitute political mantras for technical understanding. Labour voters seem to do it too, and journalists.
Doonhamer - I'm not sure if Hewlett Packard makes anything now, but they used to make some good quality, innovative kit. Windfall taxes just seem to be raids on any company with money and sufficiently weak political connections. More banditry than responsible tax-gathering.
“Some voters think political progress in the UK requires one of the major parties to crash and burn at the next general election. Labour is unlikely to be that party, an obvious dilemma for those who think the two party circus has had its day.”
Yes.
James - it's good cop / bad cop which keeps the show on the road. Has to be broken.
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