By Stefan Boscia
The City is getting more comfortable with the idea of a Labour government as it reverts to a New Labour-like policy direction, according to former Tory minister Lord Jim O’Neill.
O’Neill, a crossbench peer who is heading a review of start-up funding for Labour, told City A.M. that the party under Sir Keir Starmer has produced “a significant shift” on economic policy and that “hopefully it is a very good sign of something a bit more like the days of Blair and Brown”.
O’Neill is a former Goldman Sachs executive and was brought into the Treasury by George Osborne in 2015 to head the Northern Powerhouse project, but resigned the Conservative whip in 2016.
His review for Labour will look into the best ways to increase funding opportunities for British start-ups, particularly those that operate outside London.
He said it will also look at why the London Stock Exchange (LSE) is becoming a less attractive destination for Initial Public Offerings (IPOs) and the volume of venture capital funding being invested into British start-ups.
“We have so little long-term British capital going into this space. You have the importance of the City of London in global finance, including British institutions, and yet the paucity of investment capital going into early stage VC funding is dreadful,” he said.
“In an era where we have government talking about levelling up … why doesn’t the government of the day – whoever it is, it doesn’t bother me if it’s Conservative or Labour – encourage its independent British Business Bank or infrastructure bank to have clearer guidelines in backing things that are going to be creating businesses here in the UK in the areas where they originate.”
The review is a part of Labour’s efforts to woo the City in the lead-up to the next election in what has been called the “salmon and scrambled eggs offensive” in a mirror of New Labour’s prawn cocktail offensive in the 1990s.
A senior Labour source said Starmer, shadow chancellor Rachel Reeves and shadow business secretary Jonathan Reynolds had met “hundreds of business leaders over the past year” and had made their pro-business instincts clear.
Starmer also made a keynote economic speech in Liverpool last week in which he said there would be “no magic money tree economics” under a Labour government, while also ditching Jeremy Corbyn-era policies to nationalise water and energy firms.
O’Neill said the start-up review suggests Labour is becoming genuinely business-friendly, but warned Starmer against implementing wealth taxes if he wins power.
“Keir Starmer sometimes hints that under a Labour government they’d raise wealth taxes of some sort and there would not be much point doing all of this interesting work and absorbing the recommendations if it were accompanied by plans to raise capital gains tax and on forms of income on people taking these huge risks,” he said.
“At the speech in Liverpool he mentioned I was doing this review, so I would think it would be a bit odd if they keep dining out on the short-term political benefit of saying things like that and not listening to the ideas.”
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