How do the two main parties match up on election pledges?
Monday, April 20, 2015
While a coalition government is a highly likely outcome of the 7 May election, it will be led by one or other of the two big players. So, what are they offering?
After five years dedicated to cutting the deficit, red tape and the cost of the business, it is of no surprise that all three feature prominently in the Conservative Party’s bid for another five in power.
We have known for some time that the chancellor’s original plan to eliminate the deficit in the course of this parliament was a busted flush and consequently that deficit reduction will be a top priority for whoever forms the next government.
The Tory line on this is well rehearsed and epitomised in Prime Minister David Cameron’s foreword to the manifesto, in which he asks “which party is best placed to keep the economy strong” and urges the electorate “to build on the progress we have made, not put it all at risk”.
The promise of an “in-out referendum to be held on Britain’s membership of the EU before the end of 2017” won’t exactly thrill business owners, although it has long been known that this would be the price of a new Conservative government or a second Conservative-led coalition.
The manifesto itself, which was print managed by St Ives, is a somewhat schizophrenic affair that combines Thatcherite policies, such as an extension of Right to Buy and tough new anti-strike laws, with promises to double the amount of free childcare for parents of three- and four-year-olds and establishing a tax-free minimum wage.
From a business perspective, the relevant policies can be broadly divided into the following areas:
The Conservatives plan to eliminate the remaining structural deficit by 2017/18, via an additional £30bn of fiscal consolidation, including £13bn from departmental savings, £12bn from welfare savings and raising £5bn from tackling tax evasion. This will enable the government to move into surplus in 2018/19 after which spending will grow in line with inflation.
Following the temporary doubling of the annual investment allowance to £500,000 in last year’s Budget, the Conservatives have now promised a new “significantly higher, permanent level for the Annual Investment Allowance”.
Other pledges include trebling the number of Start Up Loans to 75,000, bolstering the Prompt Payment Code and conducting a “major review into business rates” by the end of 2015.
The Office of Tax Simplification is also set to become a permanent body with an expanded role and capacity, should the Tories get re-elected.
While most business owners will welcome plans to cut a further £10bn of red tape in the next parliament, few would appreciate the Conservative policy on volunteering, which will entitle employees of companies with more than 250 staff to an additional three days paid leave a year for volunteering. The same policy will apply to all public sector employees.
Critics have pointed out that this policy flies in the face of Tory efforts to reduce the cost of doing business and will place additional pressure on the public sector and by extension the Exchequer.
Further devolution of powers over economic development, transport and social care to large cities that choose to have elected mayors is widely regarded as a positive move in terms of regional growth and job creation.
The Conservatives have promised £100bn of infrastructure spending across rail, roads and broadband, half of which will be spent on the HS2 rail link. A total of £6bn of the £15bn roads investment will be in the northern road network, while £38bn of the rail investment will be focused on the North, Midlands and South Wales. The manifesto also includes promises to press ahead with the develop of HS3 and Crossrail 2, although there is no clear promise on expanding airport capacity.
Labour leader Ed Miliband has confronted the party’s demons by putting a promise of fiscal responsibility front and centre in the party manifesto. This so- called Budget Responsibility Lock (BRL) includes a promise that every policy in the manifesto is paid for and that a Labour government would commit to reducing the current budget deficit in every year of the next parliament.
However, critics have pointed out that the BRL only covers policies mentioned in the budget, enabling the party to save any nasty surprises on spending and taxation for after 7 May, and that the commitment to reduce the deficit could be met so long as overall spending increased marginally slower than GDP.
In addition, the fact that the Labour party has not set a date on when it will eliminate the current budget deficit (unlike the Tories and Lib Dems who have both said they will balance the books by 2017/18) means that the size of any spending cuts Labour has to make could range from £18bn (to balance the books in 2017/18) to zero if it leaves it until the last year of the next parliament.
So, while the party’s BRL could be easily picked by Ed Balls once he became chancellor, for now this is what we know of Labour’s business policies:
To cut the deficit every year and to get national debt falling, and deliver a surplus on the current budget “as soon as possible in the next parliament”. This will include spending cuts outside of the protected departments of health, education and international development. All proceeds from the sale of government stakes in Lloyds and RBS will be used to start repaying the UK’s £1.5 trillion national debt.
Labour’s headline promise is to “cut and then freeze business rates for over 1.5m smaller business properties”. However, this will be paid for by cancelling the further 1% cut in corporation tax to 20% that came into effect on 1 April. In addition, Labour’s promise to maintain “the most competitive rate of corporation tax in the G7” is considerably less ambitious than the UK’s current position as the most competitive in the G20 and would give Ed Balls scope to raise corporation tax back up to 26.5%.
Labour has also promised to create a Small Business Administration, responsible for ensuring public sector contracts are accessible and regulations are designed with small firms in mind, and to create a British Investment Bank, although it is unclear how this would differ from the current British Investment Bank.
Gone are the days of New Labour-era light-touch regulation. Under Ed Miliband, Labour would have a hand in everything from energy prices to executive pay. Of particular interest to the print sector are the promises to strengthen rules on late payment and to give tax rebates to businesses that sign up to paying the Living Wage.
Labour would also ban zero-hours contracts, reverse the fee system for employment tribunal claimants and “introduce protections as necessary” to ensure competition does not undermine Royal Mail’s universal service obligation.
Aside from pledging its support to the construction of HS2, Labour’s manifesto contains fewer specifics on infrastructure investment than the Tories. The party would “set up an independent National Infrastructure Commission to assess how best to meet Britain’s infrastructure needs” and “take action to improve and expand rail links across the North to boost its regional economies”.
However, on the much-needed expansion of airport capacity, Labour was firmer in its language than the Conservatives, stating that it would “make a swift decision on expanding airport capacity in London and the South East” following the Davies Review.
Opinion: Both parties set out similar aims, but differ on methods
Charles Jarrold, chief executive, BPIF
The BPIFs ‘Priorities for Print 2015-2017’ sets out five key areas that we want to keep at the front of legislators’ minds. Party approaches differ across these areas, but the issues identified, and intended outcomes, are remarkably similar. Both parties state they will invest in improving infrastructure, reduce bureaucracy and help small businesses – all laudable aims – and both strongly advocate increased access to apprenticeships.
The approaches differ though. The Conservatives promise a major review of business rates and £100bn spend on infrastructure. This contrasts with Labour’s backing for SMEs by cutting business rates for 1.5m smaller businesses, creation of a body to look at infrastructure needs and a commitment to invest.
BPIF members often have difficulty in participating in government tenders and voice concerns about accessing funding. Labour plans to create a Small Business Administration to help, establish a British Investment Bank to oversee wealth and job creation, and increase competition between banks. The Conservatives commit to increasing SMEs’ share of central government procurement to one third, trebling start-up loans, and a “significantly higher” annual investment allowance.
Both parties highlight a commitment to apprenticeships. The Conservatives promise 3m more apprenticeships and Labour matches this.
Both parties want to increase the minimum wage to £8, and both recognise that the energy market is inefficient. The BPIF recognises the need to be environmentally responsible, but this need must be balanced with the requirement for reliable, affordable energy.
Finally, no commentary would be complete without reference to the Conservatives 2017 referendum on the EU. A decision to ‘Brexit’ has serious implications. Whether a referendum represents a chance to clear the air and finalise the debate once and for all, remains to be seen.
A manifesto for print: what industry bosses would vote for
"Make training towards a nationally recognised accreditation tax deductible. And free accounting software for start ups tied into HMRC so you are automatically compliant, don't need to become an accountant to start a business and indeed you don't even need to have an accountant. Massive."
Simon Biltcliffe, chief executive, Webmart
“Fairer taxes for all businesses – we hear so many stories of offshore tax havens for individuals and businesses, as well as loopholes for very big businesses. Basically a better, fairer chance for smaller businesses.”
Paul Hewitt, managing director, Generation Press
“Scrap HS2 – enjoy the journey and have another coffee. More investment, finance and training, with an emphasis on the new digital economy.”
Graham Congreve, director, Evolution Print
“Make it a legal requirement to pay in 30 days, with fines for companies who don’t.”
James Dark, managing director, Statex
“A completely fresh approach to SMEs with more support, less red tape and more tax breaks.”
Tony Bates, managing director, Fast Graphics
“Stop companies incentivising people to opt out of receiving paper bills.”
Patrick Headley, managing director, GI Solutions
“Apprenticeships for young people should pay at least the minimum wage and not £2.50 an hour; the government can top up the wages. More mature youngsters should be able to start training for skilled jobs at 15.”
Bill Greenwood, technical director, Pavement Production
“Abandon the plan to charge for supermarket carrier bags. It is inefficient, costly and completely misguided if they follow the Environment Agency report.”
Mike Golding, managing director, TCL Packaging
“Bring back metalwork and woodwork in schools. If nothing else it teaches the kids hand-eye co-ordination and, better, gives them a basic skill set to build upon.”
Keith Robson, managing director, Global Print Services
“Fighting climate change should be top of any government’s agenda. With current policy we are sacrificing the future of our grandchildren to have a better life for ourselves.”
Dave Broadway, managing director, CFH Docmail