It is certain that there will be a general election on or before 3 June. This is the first in a series of election articles that should help to make the main party policies on business matters much clearer.
The 2010 campaign looks set to be particularly bitterly fought and, while the Conservatives are currently ahead in the polls, there is the very real possibility of a hung Parliament.
Public confidence in politicians is at an all-time low, battered as it has been by economic woes and the expenses scandal, and there is concern that this could result in a very low turnout. But the outcome of the general election will determine the leadership of the country as it finds itself at a crucial juncture. As the UK begins its economic recovery, the judgment of the party that leads the next Parliament will be crucial if businesses and the public at large are to maximise opportunities for growth and success.
All three major parties claim that their policies would be good for business. But how do their pledges match up, and which would provide the best deal for small and medium sized businesses (SMEs)?
The Labour campaign will likely be based on their track record in government. The UK has had a Labour leadership for over a decade, but for many people the 2010 general election will be a referendum on Gordon Brown.
Labour are keen to stress the support they have already provided to businesses during the recession. The government has, for example, initiated the VAT reduction – much derided upon its announcement, but subsequently seen to have had a positive and significant effect on sales.
It has also developed the Time To Pay scheme, offering businesses more time to settle their tax bills if they are facing financial difficulty. Extensions to the apprentice scheme have provided trainees for businesses in need of affordable workers, and an expanded loan guarantee programme has provided finance for a number of SMEs.
The Labour Party has pledged to continue supporting businesses “so they come through the downturn stronger.” This may include a further extension of the loan guarantee schemes, including the establishment of a National Investment Corporation. This much-delayed fund would provide finance to UK businesses, and would be paid for by the banks.
Many business owners recoiled at the news of a 50 per cent top rate of tax, but there is now an almost complete consensus around the idea that tax rises are necessary in order to combat the country’s financial deficit. It is presumed that the Conservatives would also raise taxes, despite their initial reticence to admit this publicly.
It is hard to present a précis of Conservative Party policy, as they are yet to offer many specific proposals. It has thus far been enough for them to criticise the government’s handling of the economic crisis, without providing many concrete policies of their own.
However, the Conservative Party has made a small number of promises regarding the help it will provide to businesses. These include:
- Tax breaks for firms hiring new employees in their first two years of business.
- A reduction in both the main and Small Companies rates of Corporation Tax.
- Increasing government procurement from SMEs.
The Conservatives have also made a number of significantly more vague commitments that are yet to be fleshed out or quantified. For example, they have promised to “reduce the regulatory burden” faced by businesses but have provided no details of how they will achieve this, or of which regulatory elements will be targeted.
They have also pledged to make it easier to hire people, but have not explained how. Finally, David Cameron’s party has cited as a priority its desire to “get the credit markets moving,” but it has not made any concrete proposals regarding how this will occur.
The Liberal Democrats have the potential to play a particularly important role in the event of a hung Parliament. While there is no conceivable chance of an outright Liberal Democrat majority, Nick Clegg’s party would be likely to enjoy significant responsibility in any coalition government.
Many of the Lib Dems’ pledges on business are broadly similar to those of the other two main parties. They would, for example, cut Corporation Tax and reduce the barriers to the public procurement process. However, in a recent Policy Briefing they also made the following pledges:
- To cut business rates for small businesses, and to value properties based on the value of the site rather than the total rental value. The Lib Dems say this would reduce rates for firms that invest in their premises.
- To give small business the option to be taxed on cash flow. This would effectively provide a tax break for businesses that reinvest for growth, rather than retain profits.
- To establish Local Enterprise Funds that would provide a point of contact between entrepreneurs and potential local ‘business angels’.
The differences between the three main parties are likely to be fleshed out in the coming months, as full pre-election manifestos are published. Business policies are also sure to be explored in the planned televised debates – the first of their kind ever to be conducted in the UK.
Regardless of the outcome of the election, the coming Parliament looks set to be characterised by an intense focus on business prospects and economic recovery. SME owners will be particularly acutely affected by the country’s decision, and it is therefore important to understand the differences between the three main parties – and, of course, to vote.