Cooking the Books 1 – More pro-business than thou

Chancellor-in-waiting Rachel Reeves’s commitment to private capitalist business knows no bounds. ‘We will be the most pro-business government ever, vows Reeves’ was the headline of an interview with her in the Times (25 April). For the record — to remember when someone asks you to vote Labour in the coming general election — her exact words were:

‘If I become chancellor, the next Labour government is going to be most pro-business the country has ever seen’.

That’s quite an ambition. To be more pro-capitalist than Gladstone’s Liberals in the 19th century, the Tory governments of the 1920s, and the Thatcher government of the 1980s!

But why is she saying this? It can’t be to catch votes since big business hasn’t a particularly good reputation amongst the general public. It can’t really be, either, to convince business that Labour is fit to govern in their interest as business has been convinced of that since the first Labour government a hundred year ago. It is more likely to assure ‘the markets’ so they don’t do to her what they did to Truss.

After all, like Truss, she has a plan to try to artificially stimulate ‘growth’. She put it this way:

‘I genuinely believe the way to improve living standards and to achieve our potential is by unlocking private business investment’.

Truss wouldn’t disagree. The difference is that Truss planned to do this by reducing direct taxes on profits while Reeves plans to do so by bribing capitalist firms with contracts and subsidies. Both hoping that the resulting growth would avoid the government having to cut spending (too much).

Reeves explained that under her plan:

‘the government would provide state support to give business the confidence to invest in expensive and risky technologies … To get people to invest to produce green hydrogen they need to know that at the end they can sell it … So the role of government in the sector might be to say, “You produce it and we will guarantee that it is purchased. We will be the backstop to that”’.

The government is going to do this by offering to put up a quarter of the cost (of in this case providing places where motor vehicles can fill up with hydrogen), by borrowing it from ‘the markets’, as long as private capitalist business invests the remaining three-quarters. There are two uncertainties here. First, private capitalist business won’t put up the money unless they expect to get the going ‘rate of return’ on their investment and, second, will the rate of interest that the speculators who lend the government money charge for their loan be less than the rate of return the government expects to get from investing in the project?

Neither is guaranteed. Nor can be. In other words, whether or not Reeves’s plan works depends entirely on decisions taken by profit-seeking private enterprises and international speculators. No wonder she is insisting the next Labour government will be so pro-business. Mind you, there is a certain perverse logic to her position. If you accept capitalism more or less as it is (as she and Labour do) you accept that the economy is driven by business investment for profit, therefore you must encourage this and kowtow to business. But she doesn’t need to be quite so obsequious.

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