As confidence in Labour wanes, Starmer and Reeves must do more to help business

Labour’s decision to increase employers’ National Insurance contributions has knocked a hole in business’s confidence in the government, according to the CBI

While Rachel Reeves received the dreaded vote of confidence from her boss, with Keir Starmer insisting the Chancellor was doing a “fantastic job”, the economic figures told a different story.

The pound fell to a 14-month low against the dollar and the rate at which the government borrows money through ten-year bonds rose to its highest level since 2008, demonstrating international investors’ lack of confidence.

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In this context, it was a mistake for Starmer to twice decline to say if Reeves would remain Chancellor until the next election, undermining his official spokesperson’s later statement to that effect.

Keir Starmer and Rachel Reeves need to find ways to give businesses the confidence to invest (Picture: Oli Scarff)Keir Starmer and Rachel Reeves need to find ways to give businesses the confidence to invest (Picture: Oli Scarff)
Keir Starmer and Rachel Reeves need to find ways to give businesses the confidence to invest (Picture: Oli Scarff) | AFP via Getty Images

‘Ugly rush’ of redundancies

The Prime Minister’s hesitancy came as Rupert Soames, of the Confederation of British Industry, criticised Reeves for creating “a hole in the confidence and trust that business has in the government” by increasing employers’ National Insurance contributions.

"I think sometimes it's not understood, the extent of the impact, particularly on companies that employ lots of people,” he told BBC Radio 4. “We think the National Insurance increases are going to feed through into inflation, [and] we're going to have a lower growth rate...” He also warned of an “ugly rush” to lay people off before new employee rights legislation comes into force.

The CBI is unlikely to be wholeheartedly in favour of extra business taxes, but with growth appearing to flatline, the UK Government needs to find ways to help business. A U-turn on National Insurance is unlikely, but there are other levers the government could pull.

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Skills crisis

A new survey by Edinburgh College found 88 per cent of 57 companies in the surrounding region which employ a combined total of more than 16,000 people were struggling to fill job vacancies because of a lack of skills, knowledge or experience. If companies cannot fill job vacancies, they will eventually disappear, so the Scottish and UK governments should be working together to ensure the workforce has the necessary skills.

However, it will take more than this to restore that all-important economic factor, confidence, which Labour has done so much to talk down since taking office. Calls for Reeves to go are premature, but both she and Starmer have much work to do.

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