U.K. opposition Labour lock horns with business over economic reform

Business groups urge caution, minimum wage plans attacked

LIVERPOOL, England (Reuters) - Britain's opposition Labour Party clashed with business groups on Monday after setting out a left-wing economic agenda aimed at boosting their chances of winning power by re-engaging with working class voters who backed leaving the European Union.

Finance spokesman John McDonnell, a veteran socialist, said Labour would raise the minimum wage, change company law to prevent firms taking on excessive debts to benefit shareholders, and redouble efforts to eradicate tax avoidance.

The agenda, which also included pledges to borrow more, reintroduce collective bargaining on a sector-by-sector basis and promote more employee-ownership, met with a chilly reception from business lobbying groups.

Labour re-elected leader Jeremy Corbyn on Saturday following a failed attempt to oust him after the EU referendum. Having won an increased mandate, he is set on shifting the party further to the left, away from the pro-business centre ground that delivered it its last spell in power between 1997 and 2010.

"We will rewrite the rules to the benefit of working people on taxes, on investment, and how our economic institutions work," McDonnell told the party's annual conference in the northern English city of Liverpool.

Predicting a snap election next year, Labour is using the conference to outline plans to win back the voters who abandoned the party at a 2015 election and spurned the political establishment by backing Brexit.

Business groups reacted with caution. The British Chamber of Commerce said Labour "must remember that the state cannot control every aspect of economic or business life and stay competitive in a global economy."

McDonnell also said Labour wanted to use low interest rates to borrow 100 billion pounds ($130 billion) and leverage it to create a 250-billion-pound fund focused on reviving manufacturing.

He has previously said Britain needs 500 billion pounds of infrastructure investment over the next 10 years, pledging to increase direct government spending by 250 billion pounds.

Britain's EEF manufacturing trade body took aim at the promise to legislate for a higher minimum pay level of around 10 pounds per hour.

"This proposal would be extremely damaging. Entry level jobs would be wiped out at a stroke," said Tim Thomas, Head of Employment & Skills Policy at EEF.

 

FALLING SUPPORT

Backed by trade unions and historically the party of Britain's working classes, Labour's support in former industrial regions in northern and central England has fallen, undermining their hopes of winning parliamentary elections.

Britain, now governed by the centre-right Conservatives, is not scheduled to hold a national election until 2020, but Labour says the Brexit vote will push Prime Minister Theresa May to call one sooner. May has said she has no need to do so.

McDonnell said a Labour government would take a much more active role in protecting and developing industries such as steel production, which is under threat from high energy costs and Chinese oversupply.

He said the approach would see the government working "hand-in-hand" with businesses to guide research and development spending and help nurture new technologies.

But a slow shift left, which accelerated a year ago when Corbyn first took power, has eroded the business community's backing - a key component of its electoral success under former leader Tony Blair, who won three consecutive elections.

Some Labour lawmakers said far fewer businesses have turned up to their conference.

"It's a massive problem because we are further and further away from the people who create wealth in the country to fund public services," said centrist Labour lawmaker Tristram Hunt. 

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