Looking for real stability and a new Sir Humphrey.
At the turn of 2023-24, there was a huge level of frustration with the ineffectiveness, incompetence and, not far short of open corruption (e.g., Covid deals), of several years of terrible Conservative rule of the UK. On the horizon, however, in what was going to be the year that the world voted, welcome back Donald Trump, was the chance to rid the country of the feckless Tories.
And so it came to pass in July 2024 that the Conservatives were rather thinly, in terms of turnout and depth of vote, kicked out, the whole country said, ‘thank the Lord’; a sense of relief emerged albeit not a sense of elation. On the latter mood, the country was correct. Labour came in promising to prioritise economic growth and to bring stability, a per-condition for the former. Indeed, the new Government somewhat naively, it has to be said, pledged to make the UK the fastest growing economy, in GDP terms one senses, in the G7.
How the mood music has changed in less than six months, with GDP in minor decline through autumn 2024. Ineffectiveness and incompetence, if not corruption, but no shortage of naivety, ideology and stupidity, have followed the Tories. British business confidence has been severely jolted whilst that of consumers has also notably stepped back. At nearly every turn Labour has not delivered policy for economic growth, starting with the doom mongering mid-summer, the made up £22bn ‘black hole’, a car crash of a runway into the Budget and then the pillaging of people-based firms. incredibly, Labour has found itself speaking in terms that Rachel Reeves is no Liz Truss.
The rather unholy trinity of 6.7% increase in the National Living Wage, at the very top end of my expectations, the major and surprising changes to employers’ National Insurance Contributions, with a costly Employment Bill (c£5bn from the UK Government’s own impact assessment, which has been severely criticised under parliamentary process), is a major challenge for the British food system, which employs c4.3m people. And then there is the bomb that has been planted in the family farm system, where change in inheritance taxation may be due in many respects, but the Whitehall inspired farce is something that The Thick of It could not even have thought up.
The outcome of these policy moves is, unsurprisingly, a fundamental reappraisal of labour processes, hiring policies, capital deployment, and in time wage awards by business. Naive is not the term that comes to mind here, a Labour government is going to do more in time to put good working people out of a job than any other process. In these respects, Coriolis is a valuable tool, helping firms to optimise operating processes in manufacturing and business services, to improve not just labour productivity, but overall efficiency; there is no point cutting people costs, for example, if technology cannot provide a similar service or better at a lower cost.
What really grinds with many business folks, however, is the misleading manner in which Labour engaged with industrialists’ pre-election and pre-Budget, and the fact that so little has been said of the systemic and structural inefficiency of the British state from local council to Whitehall. The incompetence, mismanagement, and self-perpetuation is a national scandal, just listen to the Post Office enquiry if you want the thin end of the wedge, with Sir Alan Bates calling out the poisonous Civil Service.
Dominic Cummings, for all his bad sighted driving, was correct to speak to the cancer at the centre of the British state and its ill-capability to competently deliver for the British people. The absence of clear messages around the need for a fundamental improvement of public services is a source of great anger for businesses that understand the need for effective work on crime, defence, education, and health. Firms are prepared to pay their way but react angrily to deteriorating services that cost more.
As 2024 ends, the mood music, in truth is little if any better than a year gone by. It remains the case that Britain and its food system are better without the Tories, but are we so with Labour? We have to hope that the loud chorus of disapproval from business is being heard by the Cabinet, if not the feckless Civil Service, especially The Treasury, and that over the Christmas time some important reflection takes place.
The State cannot replace the innovation and delivery of business, business though cannot be allowed to operate in an unfettered free market. The Twain need to meet, and it is vital that Government and business now engage, regroup, and rebalance the relationships. There is still time to consult and reflect to improve policy, whilst supply-side reform, which to be fair to Labour is time consuming, needs to progress, especially around skills. Reforming the planning system, in this respect, holds positive promise, but the country needs a whole lot more in this respect, starting with a more capable and service orientated Civil Service.
So, not the note I was hoping to be writing in December 2023. If the Government continues in its present vain, we will be looking at higher inflation, more joblessness, a mushrooming welfare bill, and higher for longer British interest rates. Such stagflation is a million miles from being the fastest growing G7 state, especially as the USA prepares for one Donald Trump. Let us hope that Christmas 2024 is a time where on the naively ideological Starmer lunch table smelling salts are also available and that in 2025 the Government brings supply side reform and stability that allows business to do what only business can do best.
If you wish to speak to Coriolis and the constructive services that it can offer, do please give Mark Dudley et al a call.
In the meantime, I do wish everyone reading this a very Merry Christmas and a healthy and happy 2025 and beyond.
Dr Clive Black
Senior Advisor
Coriolis
December 2024
