Why small businesses must be at the centre of Labour's economic strategy

By promoting balanced growth and increasing employment, small businesses exemplify the investment economy Labour wishes to build.

At the recent Progress conference, Ed Miliband gave a speech in which he talked about the need to establish a new political and ideological consensus, different to that of the post-Thatcherite settlement we live in now. But it was in the subsequent Q&A that one of the most interesting points was raised. "Small businesses," Miliband said, "should be a natural constituency for Labour". It is an area of policy and a section of society largely ignored by the party’s dialogue, but it shouldn’t be.

Small businesses represent many of Labour’s economic philosophies: connection with communities, accountability and high-quality work. For a "One Nation" party, with all of its Blue Labour flavourings, the idea of a connection between community and business is has obvious attractions. By employing locals and contributing to regional growth, small businesses exemplify the investment economy Labour aspires to build. 

Those who wish to demonise the British left have long depicted Labour as anti-capitalist, anti-business and narrowly pro-union. As always, the words of Tony Crosland are a great help here. Crosland argued that post-war capitalism is not the impossible framework for pursuing equality that Marxism believes it to be – the Labour Party is fundamentally a parliamentary socialist party, not a revolutionary one. If the 20th century Labour governments taught us nothing else, it is that Labour wants to harness capitalism to achieve greater equality; the minimum wage from New Labour, the technological investment of the Wilson years and the Attlee government's welfare state, are all examples of how the party has sought to curb the destructive tendencies of the modern western economy. If nothing else, this is the pursuit of 2012’s political buzzword, 'responsible capitalism', a progressive agenda within the contemporary socio-economic framework.

Politically and economically, Labour is an anti-monopolistic party. It makes perfect sense for it to support small businesses in the face of large nameless multinational corporations. One of the guiding principles is that of accountability, for which Tony Benn’s five questions of power are always relevant: what power have you got? Where did you get it from? In whose interests do you use it? To whom are you accountable? How do we get rid of you? These questions are far more easily answered when asked to a small business than a large multinational; an issue never more relevant than at the moment with the tax-dodging antics of Google and Amazon.

Labour has made its objective clear; to get people into good work and to get the economy moving, both of which are staples of the German business model much feted by the left. This attitude has been personified by the reinstatement of the Small Business taskforce and its resultant policy review report, putting businesses back at the centre of the push for growth and greater economic diverity. The 2008 crash and subsequent recession demonstrated the overdependence of the UK on the City and its lack of economic variation. Businesses, both small and medium-sized, will go some way to addressing this and toward meeting the challenges of regional struggles during austerity, injecting growth back into deeply affected areas such as the north east. The Labour Party is a progressive political force and small businesses should be, and are, a key part of its programme for a better economy. 

Dan Holden is deputy editor of Shifting Grounds

Shadow business secretary Chuka Umunna speaks at last year's Labour conference in Manchester. Photograph: Getty Images.

Dan Holden is deputy editor of Shifting Grounds

Photo: Getty
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After Richmond Park, Labour MPs are haunted by a familiar ghost

Labour MPs in big cities fear the Liberal Democrats, while in the north, they fear Ukip. 

The Liberal Democrats’ victory in Richmond Park has Conservatives nervous, and rightly so. Not only did Sarah Olney take the votes of soft Conservatives who backed a Remain vote on 23 June, she also benefited from tactical voting from Labour voters.

Although Richmond Park is the fifth most pro-Remain constituency won by a Conservative at the 2015 election, the more significant number – for the Liberal Democrats at least – is 15: that’s the number of Tory-held seats they could win if they reduced the Labour vote by the same amount they managed in Richmond Park.

The Tories have two Brexit headaches, electorally speaking. The first is the direct loss of voters who backed David Cameron in 2015 and a Remain vote in 2016 to the Liberal Democrats. The second is that Brexit appears to have made Liberal Democrat candidates palatable to Labour voters who backed the party as the anti-Conservative option in seats where Labour is generally weak from 1992 to 2010, but stayed at home or voted Labour in 2015.

Although local council by-elections are not as dramatic as parliamentary ones, they offer clues as to how national elections may play out, and it’s worth noting that Richmond Park wasn’t the only place where the Liberal Democrats saw a dramatic surge in the party’s fortunes. They also made a dramatic gain in Chichester, which voted to leave.

(That’s the other factor to remember in the “Leave/Remain” divide. In Liberal-Conservative battlegrounds where the majority of voters opted to leave, the third-placed Labour and Green vote tends to be heavily pro-Remain.)

But it’s not just Conservatives with the Liberal Democrats in second who have cause to be nervous.  Labour MPs outside of England's big cities have long been nervous that Ukip will do to them what the SNP did to their Scottish colleagues in 2015. That Ukip is now in second place in many seats that Labour once considered safe only adds to the sense of unease.

In a lot of seats, the closeness of Ukip is overstated. As one MP, who has the Conservatives in second place observed, “All that’s happened is you used to have five or six no-hopers, and all of that vote has gone to Ukip, so colleagues are nervous”. That’s true, to an extent. But it’s worth noting that the same thing could be said for the Liberal Democrats in Conservative seats in 1992. All they had done was to coagulate most of the “anyone but the Conservative” vote under their banner. In 1997, they took Conservative votes – and with it, picked up 28 formerly Tory seats.

Also nervous are the party’s London MPs, albeit for different reasons. They fear that Remain voters will desert them for the Liberal Democrats. (It’s worth noting that Catherine West, who sits for the most pro-Remain seat in the country, has already told constituents that she will vote against Article 50, as has David Lammy, another North London MP.)

A particular cause for alarm is that most of the party’s high command – Jeremy Corbyn, Emily Thornberry, Diane Abbott, and Keir Starmer – all sit for seats that were heavily pro-Remain. Thornberry, in particular, has the particularly dangerous combination of a seat that voted Remain in June but has flirted with the Liberal Democrats in the past, with the shadow foreign secretary finishing just 484 votes ahead of Bridget Fox, the Liberal Democrat candidate, in 2005.

Are they right to be worried? That the referendum allowed the Liberal Democrats to reconfigure the politics of Richmond Park adds credence to a YouGov poll that showed a pro-Brexit Labour party finishing third behind a pro-second referendum Liberal Democrat party, should Labour go into the next election backing Brexit and the Liberal Democrats opt to oppose it.

The difficulty for Labour is the calculation for the Liberal Democrats is easy. They are an unabashedly pro-European party, from their activists to their MPs, and the 22 per cent of voters who back a referendum re-run are a significantly larger group than the eight per cent of the vote that Nick Clegg’s Liberal Democrats got in 2015.

The calculus is more fraught for Labour. In terms of the straight Conservative battle, their best hope is to put the referendum question to bed and focus on issues which don’t divide their coalition in two, as immigration does. But for separate reasons, neither Ukip nor the Liberal Democrats will be keen to let them.

At every point, the referendum question poses difficulties for Labour. Even when neither Ukip nor the Liberal Democrats take seats from them directly, they can hurt them badly, allowing the Conservatives to come through the middle.

The big problem is that the stance that makes sense in terms of maintaining party unity is to try to run on a ticket of moving past the referendum and focussing on the party’s core issues of social justice, better public services and redistribution.

But the trouble with that approach is that it’s alarmingly similar to the one favoured by Kezia Dugdale and Scottish Labour in 2016, who tried to make the election about public services, not the constitution. They came third, behind a Conservative party that ran on an explicitly pro-Union platform. The possibility of an English sequel should not be ruled out.  

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.