Why employee fraud matters | Money Week

It didn’t take long for the new government to descend into slanderous accusations. Prime Minister Keir Starmer accepted tens of thousands of pounds of free gifts, including free glasses, suits, Arsenal match boxes, Taylor Swift tickets and, perhaps most unusually, free clothes for his wife. Most double-earning couples in the highest tax bracket can easily afford their own glasses, but it seems not Starmers.

Chancellor Rachel Reeves, despite preaching austerity for all, accepted free clothes, which her official statements strangely referred to as “office expenses”. Education Secretary Bridget Phillipson accepted a £14,000 donation from Labor MP Waheed Alli to pay for, among other things, a birthday party. The list goes on.

Since the start of this year, the Labor cabinet has accepted a total of over £800,000 in donations and free gifts. It would be easy to dismiss all this as mere politics. After all, Boris Johnson was constantly attacked as Prime Minister for accepting gifts, and the history of the last Tory government was not spotless. But the Labor fraud is much worse than the Tory fraud. Here’s why.

Subscribe Money Week

Subscribe to MoneyWeek today and receive the first six issues of the magazine absolutely FREE

Get 6 issues for free

Sign up for Money Morning

Don’t miss the latest investing and personal finance news, market analysis and money-saving tips with our free, twice-daily newsletter

Why the Labor scam is worse than the Tory scam

First, the party is much more devout than the Conservatives have ever been. In opposition, Starmer and his team continually made allegations that the Tories were breaking the rules. They demanded inquiries and inquiries into every possible violation and painted a picture of a government that was completely corrupt. The amount of money Johnson spent on renovating his flat at Number 10 became a huge political issue. Now it turns out that different rules apply to labor ministers. Starmer and his team don’t mind accepting gifts for reasons that are never fully explained. It is difficult to avoid the accusation of hypocrisy.

Secondly, and much more importantly, it matters because Labor clearly says it wants to, as the new chancellor put it, “rule the economy”. The party plans to distribute multi-billion subsidies and grants. Great British Energy will have a budget of £8.3 billion to invest in wind, solar and green technologies. The new National Wealth Fund will have public funds worth £7.3 billion at its disposal for investments in “green technologies and infrastructure” and will increase these funds several times also using borrowed money.

In her 2024 Labor Party conference speech, Reeves promised a full industrial strategy, which will be published alongside the Budget and which is likely to include a whole new round of grants. This is not the end. The party promises a much more active role for government, intervening in the economy, creating partnerships with business and unions, and shaping industries through regulation. In this context, it is not a big surprise that business wants as much access to and influence over ministers as possible.

Hundreds of millions are at stake. Companies with appropriate connections will be able to obtain cash directly from GB Energy, i.e. the National Property Fund. For a select few, money from the industrial strategy will be available. If you know who to talk to, you may be able to get them to agree to a deal because you’re in a “strategic industry,” and for someone with the right connections, a lucrative “partnership” with government and trade unions will suddenly appear.

We can all argue whether intervening in the economy to the extent that Labor plans is a good or bad thing, and whether bureaucrats and politicians really can pick winners. However, if this happens, you should be careful. He must approach business with suspicion, knowing that he will seek special favors.

Instead, it falls into the worst kind of Latin American-style crony capitalism. A select group of mega-donors and a small handful of fixers dominate the economy, creating lucrative markets for themselves and their friends and paying ministers with gifts and freebies and the promise of lucrative jobs once they leave office. This will be a disaster for the economy – and for the taxpayer who ultimately foots the bill.

This article was first published in MoneyWeek magazine. Enjoy exclusive, early access to news, views and analysis from our team of financial experts with MoneyWeek subscription.