Sunday 10 February 2013 9:12 pm

Cynical Labour has no claim to being a party of business

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CHUKA Umunna, the shadow business secretary, suggested in last week’s City A.M. that Labour is the natural party of entrepreneurship. This is little more than a cynical attempt at gesture politics.

Like Umunna’s father, my parents came to Britain with very little and set up their own businesses. The small shops they owned created jobs in their communities and provided stability for my family. But Labour’s economic legacy has made it harder for the next generation to start and sustain a business, as our parents were once able to do.

Britain’s business community is fully aware that Umunna stood for a party that went into the last election committed to taking more tax from small and medium-sized enterprises (SMEs). Small firms shuddered at the prospect of increases to the small profits rate of corporation tax and national insurance contributions. Labour planned new taxes on phone lines.

Labour’s obsession with red tape and EU laws also established a punishing regulatory regime. During its time in office, Britain fell from fourth to eighty-ninth in the World Economic Forum’s “burden of government regulation” ranking. This legacy is costing SMEs almost £17bn a year, according to the Forum of Private Business, and acts as a barrier to private sector growth, job creation and inward investment. Just one EU directive Labour signed up to, the agency workers’ directive, is costing firms £1.5bn a year – equivalent to the government’s budget to invest in 700,000 apprentices.

But what’s more shocking is that behind Umunna’s warm words lies a dangerous set of Labour policies, which would cause more harm to firms wishing to expand and to individuals wanting to start their own companies. Labour’s blanket opposition to the deficit reduction plan risks higher interest rates on lending, while its desire to spend more money inevitably means businesses paying higher taxes. Umunna also led Labour’s opposition to the Beecroft reforms to employment law, which would give firms more flexibility to recruit, retain and rebalance their workforces while keeping costs down.

Around 60 per cent of private sector jobs come from SMEs and, despite the economic downturn, the number of enterprise births has increased by more than 10 per cent in the last two years, and by 20 per cent in London.

The government should reward these companies by cutting tax and regulation, and ministers deserve credit for the steps they have already taken. The small profits rate has been reduced to 20 per cent, and regulatory reforms have saved firms £3bn. But more action is needed to encourage and stimulate entrepreneurship. A rise in threshold of the small profits rate from £300,000 to £500,000, a simplification of the tax code, reforms to air passenger duty and the abolition of regulations from Whitehall, town halls and Brussels are among the many liberalising policies that should be vigorously pursued. The government must defend the interests of SMEs, back entrepreneurs and remove the many damaging economic barriers the private sector identifies.

Priti Patel is Conservative MP for Witham.

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