The party conferences showed that small business is on the agenda again for both parties and is big news. Make no mistake, it will be on the agenda all the way through this parliament. The Tories will try to paint themselves as the friend of enterprise and Labour as in hock to unions and the public sector.
We cannot allow this to happen. Last year Ed Miliband declared that he wanted Labour to be the party of small business and that is the course that we need to continue to follow, clearly, boldly and courageously. But we need to be clear that we are the party both of small business and those that work in them too, as well as those who freelance and are self-employed. We need to show that we ‘get it’ and talk to people directly in the language that they understand. The current debate is about growth, the path to sustainable growth and prosperity will be through small business. That is why Germany is so strong: its economy is built on a wrought-iron grid of lots of small firms, not the splintering wood of a few banks and large corporations.
George Osborne’s policies may have sounded a little confusing; the Federation of Small Business suggested to the FT that his package of measures was ‘timid and incoherent’. Prior to the conference they had said that ‘Government policies are out of touch with reality’. That is obvious. To my mind the ‘credit easing scheme’ sounds interesting. What is clear that they desperately need to do something to get loans out to small firms since the banks, despite getting cheap credit themselves, aren’t passing it on.
Earlier in the year David Cameron identified various ‘enemies of enterprise’. We were unsure of who they were but it turns out that the main culprits seem to be people bullied and discriminated against at work who then faced unfair dismissal. It seems they are to be brought to justice. The qualification period for taking a claim of unfair dismissal is to rise from one year to two and there will be a charge for employment tribunals to deter ‘vexatious claims’.
Outside of the public sector and manufacturing there isn’t a great deal of union representation and I speak as someone who has worked in the private sector for over 20 years. My experience is that people’s employment rights are their best guarantors of good management and fair treatment. If there are consequences for bullying, discrimination and arbitrary dismissal then it tends not to happen. If firms need to get rid of people then they will need to do it properly. It is part of the covenant between employer and employee.
The OECD draws similar conclusions in its 2004 report into ‘Employment Protection Regulation and Labour Market Performance’. It states ‘that in the absence of employment protection, workers would underinvest in firm-specific human capital because they could be fired on the spot, even after having made an effort to upgrade their skills and borne the corresponding cost.’ It goes on to say that ‘employment protection legislation may foster long-term employment relationships, thus promoting workers’ effort, cooperation and willingness to be trained, which are positive for aggregate employment and economic efficiency.’
If it is about creating a dynamic flexible workforce, then it doesn’t work either. In the current climate it is risky changing job, even risker when changing jobs only to find that your new boss does like you. A successful economy does see the positive movement of staff and skills. It can be through the engagement of consultants, freelancers, supply by small firms or by recruitment of new staff. My personal experience is that it is a good thing to have a dynamic flexible workforce. The Tory policies will not do that; they will add simply insecurity to stale growth. They will introduce fear and insecurity at one of the market and reduce dynamism at the other end. If the OECD is right it will reduce the willingness of both employee and employer to invest in skills and training. It is a time for pragmatism about what gets the economy moving and growing again, but these measures won’t do that at all. For Labour it is opportunity to declare clearly without contradiction that is the party of small business and those who work in small businesses too.
Philip Ross is chair of the Labour Small Business Forum and writes for Progress small business in the Labour & Small Business column
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