Business ‘drunk on cheap labour’
Tories attack industry as Cabinet ministers blame shortages on firms’ failure to prepare for Brexit
BUSINESSES have become “drunk on cheap labour”, Cabinet ministers believe, as the Government insisted industry must shoulder the responsibility for petrol and food shortages.
A series of ministers used the Conservative Party Conference as a platform to criticise firms, with several members of the Cabinet understood to be furious at what they see as companies trying to shift the blame on to the Government.
In recent weeks, supermarkets, retailers and hauliers have complained about supply chain problems which they blame on labour issues brought on by Covid and Brexit.
Yesterday, the Army started delivering fuel, with the Government now privately believing that troops will have to help with deliveries until Christmas.
But as warnings of Christmas shortages increase, ministers decided to go on the attack, blaming businesses for failing to prepare for Brexit.
One senior source insisted it was “a failure of the free market, not the state” that was behind the fuel crisis and empty shelves.
It marked a significant departure from the Tories’ traditional stance as the champion of business, and reflects the determination of Boris Johnson to make Britain a high-wage, high-skill economy after Brexit.
One source close to a senior Cabinet minister said: “They have known for five years that we were ending freedom of movement, and we have told them repeatedly they shouldn’t pull the lever of uncontrolled immigration every time. But they are drunk on cheap labour.”
Business leaders hit back by accusing the Government of “starting to panic” in the face of potential shortages at Christmas and “getting their excuses in early”.
They said the Government had been warned months ago about the shortage of lorry drivers behind the current problems, and should have ensured that sufficient drivers could be allowed into the country from abroad to fill the gaps.
Lord Wolfson, the boss of Next, called for a “demand-led” immigration system where businesses are free to recruit overseas workers as long as they pay a visa tax.
Rishi Sunak, the Chancellor, insisted he could not “wave a magic wand” to solve the supply chain crisis, stressing that industry had to rethink the way its supply chains operated. Paul Scully, the business minister, said firms had a “collective responsibility” to find solutions, while Kwasi Kwarteng, the Business Secretary, said companies had become too reliant on too few suppliers.
Ministers also pointed out that better organised companies, such as Tesco, rarely had any gaps on their shelves.
‘They have known for five years that we were ending freedom of movement … we have told them repeatedly’
‘When you talk about some of the supply chain issues, that’s really a function of the world economy, particularly the UK economy, coming back to life after Covid’
The Daily Telegraph understands that concerns about supermarket supply chains were raised by ministers during Operation Yellowhammer, the planning exercise for a no-deal Brexit that was carried out three years ago.
While some took notice and reorganised their supply chains to withstand shocks, others “had no business plan at all” according to one source, and assumed the Government would step in to sort out any problems.
There are now concerns that industries previously reliant on cheap foreign labour, such as road haulage and pork production, are trying to unpick the immigration policy by demanding ministers make it easier for foreign workers to get visas. The Prime Minister has stood firm, making it clear firms need to pay better wages to attract more staff into sectors where there are shortages.
There is speculation that Mr Johnson could use his conference speech tomorrow to announce a rise in the minimum wage. One minister said the fact that drivers sometimes have to sleep in their vehicles because of a lack of decent quality truck stops – which is putting off potential drivers – is “a failure of the free market, not the state”.
Mr Johnson has been categorical in public that the country voted for “change” to low-skill, low-wage sectors when it backed Brexit and backed him to deliver it in the 2019 general election.
He has sought to claim recent wage growth as a victory for his “levelling-up” agenda, despite fears that soaring inflation as Covid restrictions ease is undercutting the impact of such growth.
Yesterday, Mr Johnson insisted once again that fuel shortages were down to market forces, saying: “When you talk about some of the supply chain issues, that’s really a function of the world economy, particularly the UK economy, coming back to life after Covid, sucking in gas in particular – there is a massive demand for that in Asia. There is a shortage of lorry drivers actually around the world, from Poland to the United States, and even in China they are short of lorry drivers.”
Some Cabinet ministers fear that the higher wages being demanded by the Prime Minister could drive up inflation. George Eustice, the Environment Secretary, admitted yesterday that higher wages for hauliers would lead to a “modest” rise in food prices.
Mr Johnson has already partially caved in to pressure from industry by allowing thousands of temporary visas for lorry drivers. Now pig farmers are demanding the same for foreign butchers, saying pigs will have to be slaughtered and put to waste because there are not enough butchers to process them.
It was reported last night that just 27 fuel tanker drivers from the EU have applied to come to work in Britain since the emergency visas were rolled out.
Several ministers, including Priti Patel, the Home Secretary, it is understood, have urged Mr Johnson not to give any more ground because it will turn back the clock and represent the thin end of the wedge when it comes to reversing immigration controls.
Last night, business leaders hit back at the Government’s aggressive stance, with Richard Walker, the head of Iceland supermarkets, suggesting the crisis was “self-inflicted” by ministers and that they had hit out “in a panic”.
Tony Danker, the director-general of the Confederation of British Industry, said the Government needed to convene a task force with business to solve the supply problems, rather than blaming business.
‘Iwant to cut tax,” insisted Rishi Sunak as he addressed the Conservative Party conference at a time when the tax burden is at its highest level since the Second World War.
Clearly conscious of criticism that the health and social care levy is a thoroughly un-tory policy, the Chancellor sought to reassert the case for fiscal discipline.
Coming after polling by the Taxpayers’ Alliance suggested that voters now see Labour as the low-tax party, rather than the Conservatives, the Thatcherite rhetoric couldn’t have come a moment too soon. A 70-question survey of 2,036 people found that 34 per cent of people trust Labour more than the Conservatives to keep taxes low for “people like you”, compared to 31 per cent who opted for the Tories.
Little wonder, then, that as Boris Johnson prepares to take to the stage in Manchester tomorrow, there remains unease among the party faithful about the way in which the Prime Minister has been blamed for what is very much a Treasury-led 1.25 percentage point increase in National Insurance contributions to clear the NHS backlog.
As one senior minister put it: “There is a sense that Rishi has gone native and Boris is the one who has ended up taking the flak for it.
“I don’t think the Prime Minister is comfortable with this tax rise, which has been pushed by the Treasury not No 10. The Treasury’s response to everything is always to put up taxes. Some people are a bit disappointed that Rishi is now suffering from the same sort of Stockholm syndrome as his predecessors.”
While one Johnsonian suggested the Prime Minister had “let Rishi get away with it because he is too nice”, another was more critical. “The trouble with Boris is he doesn’t really understand economics. He’s happy to delegate these decisions.”
A number of Tory grey hairs had made the case for more borrowing to pay for social care, adding another £36billion to what is already an eye watering amount of government debt.
As one grandee put it: “They should have treated it like war debt and come up with a repayment scheme, arguing that it was an unforeseen event.”
Yet as Mr Sunak made clear on the conference floor: “I know tax rises are unpopular – some will even say un-conservative … anyone who tells you that you can borrow more today, and tomorrow will simply sort itself out, just doesn’t care about the future.”
As well as being worried about rising inflation in the face of an impending cost-of-living crisis, the Chancellor and his team are said to be “petrified” that a rise in interest rates could add billions to servicing the Government’s ballooning debt.
Buoyed by polling that suggests most voters are willing to pay more in tax to pay for the NHS, and mindful of the threat of a looming economic winter of discontent, Mr Sunak has clearly resolved to tough out any criticism in the spirit of being seen as a responsible Chancellor able to make the difficult decisions.
He may also feel he has gained the public trust with the generous furlough scheme, which has helped to kill criticism of the Conservatives as the “austerity” party.
Yet there is no doubt the former investment banker, 41, remains deeply concerned about what one insider described as “the big-gesture PM’S rather profligate approach to public spending” – hence his recent joke about “taking his credit card away” to get the nation back on a sustainable financial path.
Historically, the tensions between No 10 and No 11 have been well documented. Harold Macmillan spent most of his premiership at odds with the Treasury, Edward Heath became his own chancellor because he was so unhappy with what Anthony Barber was doing while Harold Wilson and James Callaghan spent years at economic odds.
From Margaret Thatcher and Nigel Lawson to Tony Blair and Gordon Brown, relationships have generally proved stormy.
With a Prime Minister keen to splurge and a Chancellor desperate to claw back the exorbitant costs of Covid, further tensions appear as certain as death and taxes.
‘The trouble with Boris is he doesn’t really understand economics. He’s happy to delegate these decisions’