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2010 election guide
According to Benjamin Franklin, 6th President of the United States, “In this world nothing can be said to be certain, except death and taxes.”
However, there is another certainty – that by 3 June 2010 we will have had a General Election, and quite possibly, a change of Government.
Each of the main parties has much to say in terms of their policies, but what are they each offering business?
The Conservatives have plenty of ideas. They would rein in Government spending and would create an Office for Budget Responsibility. Its job would be to report to Parliament to ensure that government plans are balanced and longterm in vision.
To prevent ‘boom and bust’ the Conservatives propose a number of measures to control ‘irresponsible behaviour’. They would give the Bank of England a greater role in market oversight via a new Debt Responsibility Mechanism. The Bank would effectively have a direct hand in the management of debt within the financial system, reporting to the Financial Services Authority who could then tackle individual banks. Financial institutions that offered ‘massive bonuses’ to encourage short term risks would have to hold higher cash reserves.
The Conservatives plan to reform the ‘uncompetitive’ tax system to reduce the tax burdens on families and businesses, however, they wish to increase the revenue collected by green taxes, introduce a new Carbon Levy to encourage low carbon energy use (replacing the Climate Change Levy) and a ‘Fair Fuel Stabiliser’ to make the UK less exposed to international oil market instability. ‘Stealth’ taxes such as Air Passenger Duty and the Vehicle Excise Duty rises on older cars would be removed.
Other proposals include an Office of Tax Simplification with a simpler tax code; a reduction in the headline rate of Corporation Tax to 25 per cent; the small companies rate of Corporation Tax would drop from 22 to 20 per cent – both funded by a reduction in allowances. Struggling firms would be able to defer VAT for six months; the inheritance tax threshold would be raised to £1 million; Stamp Duty on homes under £250,000 abolished.
They would increase investment to develop the transport, infrastructure and skills sectors and strengthen UK Trade and Investment to help UK businesses overseas; Regional Development Agencies would be reformed and businesses would receive help via a £50 billion National Loans Guarantee Scheme, open to all.
For employment, the Conservatives would take the UK out of the Social Chapter and extend the right to request flexible working to all with children under 18. They want employment law simplified to make hiring easier and would help businesses to hire new staff with £2500 tax breaks for new jobs. State provided skills training, (cost £775 million), would provide ‘useful skills and real apprenticeships with actual employers’. Recently unemployed people could retrain and still claim Jobseekers Allowance.
Transport policy plans include new cross country high speed rail links, cancelling the third runway at Heathrow and tackling congestion by building new roads or improving present capacity. Councils could seek funding for green travel initiatives.
The Lib Dems would begin by reducing the regulatory and administrative burdens on businesses. Government would carry out an impact assessment of regulations before implementation. The Bank of England would be more independent of Government. It would have sole responsibility for setting inflation targets. The biggest (nationalised) banks would be split up. The National Audit Office would scrutinise government spending, money markets would be more tightly controlled through changes to disclosure regimes, hedge fund regulation and stricter use of competition law for banks.
Lib Dems would abolish the Department for Business, Innovation and Skills, making the Chief Secretary to the Treasury responsible for Business. £1 billion a year savings from this will be ploughed into education and training. Failing industries wouldn’t be supported.
They want electricity production to have zero carbon emissions by 2050 and businesses would receive incentives for carbon reduction and energy efficiency. Air Passenger Duty will be scrapped but each plane will be taxed on its emissions.
The LibDems plan to cut business rates for small businesses by reforming the valuation system to base rates on site values rather than rental values. Firms with a rateable value under £25,000 could claim an allowance. Corporation Tax would be simplified by removing reliefs, funded by lowering the tax rate by one per cent. Small businesses could choose to pay Corporation Tax based on net operating cashflow rather than accounting profits. R&D tax credits would be reviewed so that innovation is ‘properly targeted’. Individuals would get a £10,000 tax allowance – those on incomes under £100,000 a year would be £700 a year better off.
A General Anti Avoidance Rule would replace the maze of other rules aimed at stopping tax avoidance. Businesses would get a quick response to a tax question for certainty and the LibDems would seek standardised tax rules (but not rates) across Europe to keep all businesses equal.
They would create an independent financial advice network, removing the ability of lenders to increase credit limited or overdrafts without prior consent.
They support the protection of employment rights brought by the EU Social Chapter to cover parental leave, European works councils, part-time work, burden of proof in sex-discrimination cases, fixed term employees, consultation with employees and equal treatment. Job growth would be stimulated by selling assets and taxing the utility companies.
They don’t support differentiation in the National Minimum Wage, so would equalise the rates. They would tackle the gender pay gap with changes to women’s rights and give flexible working rights to all, not just parents.
In transport, they would re-open rail lines, add stations and capacity, paid for by a per mile charge on lorries and rail franchisees. Vehicle Excise Duty would be abolished and fuel duty reduced but replaced by road pricing. Motorway widening would be stopped.
The Government has been forced by circumstance to make changes to the way the financial markets are run. Labour, via HM Treasury say they have strengthened the UK’s regulatory framework and increased oversight on firms considered ‘too big to fail’. Through the Banking Act 2009, the Government gave the Bank of England, the FSA and the Treasury more power over banking.
The Government via HMRC created the Business Payment Support Service, a service for those who owe taxes to HMRC to spread payments over a period of time. There is ongoing financial support via Business Link and the ‘Real help with finance now’ scheme that includes the Trade Credit Insurance scheme which insures a company’s sales with credit insurance; Government lending through the Enterprise Finance Guarantee which helps businesses with a turnover up to £25 million with loans up to £1 million and the Working Capital Scheme which supports business lending.
£500 billion was put aside to recapitalise the banks, create a Credit Guarantee Scheme to fund the banks and allow to them to swap illiquid assets for Treasury Bills. The car industry got the scrappage scheme. UK manufacturers may tap into a £151m fund for emerging technologies.
Labour wants to enhance Britain’s green credentials. Changes to Vehicle Excise Duty and emissions-based car tax calculations altered our buying habits. The Government claims to have helped five million households to get better insulation and it aims to reduce CO2 emissions by 20 per cent by 2020 as it triples production of renewable energy. Air Passenger Duty aimed to cut pollution by making air travel more expensive; still to come is the renewable Transport Fuel Obligation – five per cent of road fuels will come from biofuels and a broadband tax of 50p per month for anyone with a fixed line telephone will fund better infrastructure.
Government action in the labour market started in 1997 when they signed the UK up to the Social Chapter. They introduced the National Minimum Wage in 1999 and changed to the law on disability and age discrimination. More recently, the Government has guaranteed work training for unemployed 18-24 year olds and offered businesses up to £2500 to take on the unemployed. Redundancy pay was increased to £380 a week and they claim to have revitalised the apprenticeship programme and invested £90 million.
The Government announced in December 2008 £1bn extra to increase rail capacity. The desire is to double the number of passengers and the volume of railfreight over the next 30 years. Also, Labour will kickstart building with £925m for housing projects that have stalled.