Technically, as a Chartered Accountant rather than a Turf Accountant, I may not be qualified to ask the following questions, but let’s run with it anyway!
Who is your money on for the next Chancellor? Will it be Ed Miliband (Evens); Wes Streeting (3/1); Rachel, continuing (50/1)? Or will there be a third party, running up the rails over the next few weeks - a “horse” at good odds, a Yvette Cooper or a Shabana Mahmood?
It’s a fine parlour game, and I’ve enjoyed a flutter on it myself. Andy Burnham, the Prime Minister-elect, is said to be weighing all of them. The bond markets are watching the paddock nervously. And a summer clear-out at No 11 now looks all but guaranteed.
But here is the uncomfortable thought I keep coming back to. Whoever gets led into the winner’s enclosure, the course they have to run does not change.
I read Simon French of Panmure Liberum on this last week, and it stopped me. The idea that our economic malaise might be cured by a change of personnel is a comforting one. It is also, as he puts it plainly, naive and wholly wrong.
Rachel Reeves will not lose her job because she failed to understand the economy. In my view she grasps it as well as any of her predecessors. She will lose it because her party, like the Conservatives before them, will not face up to the difficult trade-offs. And no smooth media voice, and no Treasury CV, alters the facts sitting on the next Chancellor’s desk.
What are those facts? French lists four, and they are sobering.
The tax burden is heading for an 80-year high by the end of the decade - and falling on a shrinking group of people and companies, many of whom can choose where to live and where to book their profits. Public debt is at a 65-year high, and the pension funds that once soaked it up are no longer dependable buyers, which is why we now pay the highest interest on our debt in the G7. Inflation has averaged 3% since 2010, held up by a cost of employment, energy and construction that makes Britain an international outlier. And we spend roughly four times as much on social security as on defence — hardly “match fit” for a dangerous world, or for the frontier technology that will decide who prospers next.
That is the track. It does not care who is riding.
Now, I could stop there and simply be gloomy. Plenty do. But that is not what I take from it, and it is not what I say to the business owners I work with.
Because there is a version of this that plays out in businesses every single week.
A founder convinces themselves that their problem is a person. The wrong sales director. A weak finance lead. If only we swapped them out, the numbers would come right. So they change the jockey - and eighteen months later the business has drifted to exactly the same place. Because the problem was never the jockey. It was that no one had honestly mapped the course.
Changing the Chancellor without changing the mindset is the national version of that same mistake.
French argues the markets will be looking for a Chancellor with four virtues rather than four excuses: one who pursues abundant, competitive energy and capital; who takes fiscal devolution seriously rather than hiding behind the “Treasury view”; who reforms our barnacle-covered tax system rather than simply raising it; and who is honest about the fiscal rules rather than quietly gaming them. A tax-reforming Chancellor, he notes, will earn a better growth dividend than a tax-raising one. I’d put all four the way I put it in a boardroom: face the trade-offs, or the trade-offs will face you.
And here is where I worry for the smaller business owner. When the tax rate climbs, when employer’s National Insurance jumps £25 billion in a year - as it did last April - it is not the FTSE 100 that feels it first. It is the firm with fourteen employees, a tight margin, and a hiring decision to make on Monday. Those are the businesses I spend my days with.
You cannot control who wins at No 11. You can control whether your own business is planned to withstand whatever they do. That means knowing your real margins, stress-testing your numbers against higher costs, sorting your structure and your succession before you’re forced to, and having the honest, properly worked-out conversation about where you are actually heading - not the away-day version.
So my two questions to you are the ones I would genuinely like answered. Who would be your choice for Chancellor? And, more to the point, what do you actually want them to do once they have the job?
Answer that second question well, and you’ll notice something. You have also started answering it for your own business.
If the four facts above give you pause - and they should give any business owner pause -that is exactly the conversation we are here to have.
Adrian Barker FCA | Managing Director | CBSL Accountants
