Johnson Takes Aim at Business and Hints at Minimum-Wage Hike
(Bloomberg) -- Boris Johnson is colliding with business as he tries to deliver on his promise to remake the U.K. after Brexit and the costs of his “leveling up” strategy start to become clear.
As the prime minister prepares to take center stage at the Conservative conference in Manchester, he’s been hinting that a boost for the lowest earners could eventually be part of the package. While Wednesday’s speech is set to focus more on vision than policy specifics, the low-pay commission is looking at a 5.7% increase in the minimum wage and Johnson said Tuesday he’ll accept whatever it recommends.
Johnson has promised that his plans to refashion the British economy will raise incomes, especially for the worst off. But that has brought him into conflict with the business community at a time when he is already under pressure over a supply chain crisis and fuel shortages that have triggered panic-buying.
The coronavirus outbreak redefined his premiership, and the party known for austerity and low taxes instead had to go big on spending and now has to find ways to pay for it. In all this, Johnson -- who famously criticized businesses over their anti-Brexit stance -- has put the onus on companies to fix the mess.
“We are embarking now on the change of direction that has been long overdue in the U.K. economy,” Johnson will say, according to his office. He is dealing with problems no other government “has had the guts to tackle before.”
It’s a risky political move. By calling the crisis an opportunity and shifting responsibility to business to cover the costs, he’s making an enemy out of the corporate world that the Tories are traditionally aligned with. He will turn the table on companies, and accuse them of using immigration “as an excuse for failure to invest in people, in skills and in the equipment.”
Raising the wage floor in the coming weeks would be another turn of the screw. The commission is studying an increase to 9.42 pounds ($12.81) an hour next year for workers aged 23 and over. The rate currently stands at 8.91 pounds after a 2.2% rise in April, less than the panel had recommended.
The combination of further cost increases and the prime minister’s broadsides hasn’t gone down well. “If all there is is a blame game with business, or the media, or consumers, that’s not a strategy,” said Craig Beaumont, head of external affairs at the Federation of Small Businesses.
It’s a battle of the narratives and Johnson has decided to channel the most famous of Tory leaders, Margaret Thatcher.
“There is no alternative,” Johnson said in one of many media interviews on the eve of his speech. He deliberately deployed the phrase closely associated with the “Iron Lady” to make the case that the shortages and disruption are part of a necessary transition from the low-skill, low-pay economy the U.K. endured as a member of the EU.
Johnson speaks on the day cuts to U.K. welfare payments kick in, threatening to undermine his message that his government wants to help left-behind communities. It’s a decision that has angered some Tories.
Johnson will need his party united behind him, including the traditional Tories -- mainly in southern England -- who worry that “leveling up” means diverting money from their districts and old-school Conservative interests to the poorer north. But Johnson secured a huge parliamentary majority by penetrating those old Labour heartlands, and he needs to retain them.
“Leveling up works for the whole country,” Johnson will say in his speech. “Because it helps to take the pressure off parts of the overheating southeast, while simultaneously offering hope and opportunity to those areas that have felt left behind.”
©2021 Bloomberg L.P.