Politicans are remarkable people. They tell you how interesting your question was, and then answer a completely different one.
So it is perhaps not surprising that finding out exactly what their manifestos offer to the business world is quite a difficult task. Even more difficult in some cases is finding out what the practical reality is likely to be behind the impressive slogans being used.
LABOUR
The main general economic issue of this election is public spending. Here, there seems to be relatively little difference between Labour and the Conservatives on a broad brush approach.
Labour will cut waste in the public sector while increasing spending on selected areas such as education and the NHS.
Gordon Brown’s ‘golden rule’ to borrow only for investment purposes, not for current spending, should stay in force.
On tax, it is obviously personal income tax that grabs the headlines. Labour, while not so far committing to hold tax rates at their current levels, has indicated that it will retain the current tax band structure. That rules out the creation of a higher tax band for wealthy individuals.
However business owners will probably be more interested in what’s proposed for business taxation, particularly given the problems surrounding IR35 (service companies), Section 660A (taxation of husband-and-wife companies) and tax treatment of small company dividends.
And there is no news there from the Labour party (though both the Conservatives and the Lib Dems have decided views, if not manifesto commitments).
However, Labour has reduced tax rates for business - particularly for smaller businesses - and is committed to keeping these rates competitive.
So far, the promotion of business has not been much of a Labour theme. There are mentions of spending on scientific research and development, and the creation of high value, high quality technology businesses which can compete in an outsourced and off-shored global economy, but there’s little detail on how this will be achieved. The DTI, in fact, will be drastically trimmed to about half its current size, which suggests the Labour party intends to be more ‘hands off’ in its business policy.
Like the other parties, Labour intends to cut regulation. It will reduce over 30 regulatory bodies to fewer than ten, and will also create annual targets for paperwork reduction.
In the field of employment, Labour is likely to give employees further rights. It also promises action on corporate manslaughter, though this is an area that has been stalled since the last election and some commentators have criticised its lack of commitment. It also seems likely that the New Deal will be extended.
As far as Britain’s role in Europe is concerned, Labour advocates joining the Euro once the right economic conditions have been achieved, and is committed to a referendum on this point.
CONSERVATIVE
The Conservatives’ plans for public spending appear to take Labour’s estimates as a basis, but then cut £35bn of waste from the total. After ploughing the majority of that back into frontline spending, some £12bn total savings will be made which can be applied to tax cuts (or, if you are cynical, which will allow the budget to be balanced if the tax take falls as the economy weakens). These plans are disputed by Labour, which asserts that the Conservatives have double counted some of Labour’s own cutbacks identified in the Gershon report.
As you would expect, the Conservatives propose a ‘lower tax economy’. However their proposals for tax breaks for the lower paid and for pensioners make them look more like the Labour party than the Labour party itself. Like Labour, though, they are wary of committing themselves to specific tax cuts.
While business taxation doesn’t appear as a topic in the portions of the manifesto already published, separate policy documents show that the Conservatives have been doing some interesting thinking around the subject. For instance, capital gains tax might be reduced to 10 per cent on all assets (thus getting rid of the distinction between business and non-business assets for taper relief). The party also promises to simplify taxation for small business. That might come in several ways, for instance by merging PAYE and NI, which would relieve businesses of month-end headaches.
The Conservatives plan to slice and dice the DTI. The Small Business Service will be abolished; instead, small firms are likely to receive subsidies to access advice from commercial firms. It is rather disappointing that those portions of the Conservative manifesto already published don’t contain much on promoting business growth - or on promoting small business - apart from the promise of deregulation.
The Conservatives’ plans for deregulation are more radical than Labour’s. They would introduce a Deregulation Bill, which would, among other things, scrap the Best Value regime for local government. They would provide exemption from many regulations for small businesses, as well as looking at the impact cost of new regulations and introducing a sunset clause, so that regulations would lapse unless renewed by Parliament.
While in some areas the traditional left/right policy divide is no longer effective, it is easy to recognise employment policy as one area where it still works out well. The Conservatives will, in particular, look to buy out of the Social Chapter, including the working hours directive, making it easier for businesses to fire staff and putting the burden of proof firmly on to employees in tribunal cases. However, the Conservatives are now committed to keeping the minimum wage and implementing the latest increase should they be elected.
Unlike the other two parties, the Conservatives are opposed to Britain joining the euro. That’s not surprising in what reads as a fairly anti-EU manifesto, though it doesn’t go as far as advocating withdrawal from the EU.
LIBERAL DEMOCRAT
On public spending, the Lib Dems stand out as being the relatively high spending party, with commitments in particular to reform pensions completely and end student fees.
Unlike the other parties, the Liberal Democrats have been very upfront with their tax plans, including a higher rate of tax, at 50 per cent, for those earning over £100,000. They also make a firm promise that this will always be the highest marginal rate - including local income tax (which will not take account of income in excess of £100,000).
And for businesses, they point out that they don’t believe in windfall taxes - a comment obviously meant to damage the Labour party which is widely seen as likely to introduce such a tax.
The Lib Dems intend to simplify business taxation, particularly for small businesses. They have continually opposed IR35, which they see as a constraint on the competitiveness of the IT sector, so a repeal is on the cards. There is also a manifesto promise to reduce business rates for small businesses. For businesses whose properties have a rateable value of less than £25,000, that could add up to a £600 a year tax break.
In a very radical move, the Lib Dems propose to abolish the DTI entirely. They will have a Minister for Consumer Affairs and a separate Minister for Business within the Treasury. They will also scrap the Small Business Service, delivering business support through the Regional Development Agencies instead.
Deregulation is a strong theme, with proposals for a sunset clause on all regulation, and for independent assessment of the cost and impact of all new regulations.
The Liberal Democrats appear to promise few changes to the current state of employment rights. But they do offer an interesting new maternity support package aimed at low paid women, and though its exact funding status is unclear, it appears that the government rather than the employer will pick up the tab. If that’s right it could be a godsend for small businesses.
Like the Labour Party, the Liberal Democrats are pro-Euro, but promise a referendum.
SUMMARY
From looking at the parties’ manifestos and web sites, as well as the media, it’s apparent that the economy is being given less emphasis in this election than personal issues, and business is being given even less emphasis. The election so far is being fought on issues such as the NHS, education, crime and immigration, not on business issues. In fact the Tory ‘Action on the economy’ focuses mainly on pensions and value for money in public spending - it has very little to say about the commercial and industrial heart of the economy.
Perhaps that is a backhanded compliment to Labour’s management of the economy - it’s only when things are going relatively well that voters can ignore the economy in their assessment of the parties’ manifestos. It also reflects the fact that all three major parties accept a free market economy as the basis for their plans - which wasn’t the case, say, twenty years ago.
But it is a problem for business that it has such a low profile this time round. Look at the ‘stakeholder manifestos’ on epolitix.com and it’s obvious that the level of detail proposed by, for instance, the Institute of Chartered Accountants or Federation of Small Businesses is just not present in the manifestos. In particular, a number of stakeholders pick out the difficulty of finding finance for small businesses as a major issue - not one of the political parties really seems to get the point here. Perhaps individual business owners need to start taking these issues up with their MPs and other parliamentary candidates.
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