What would the successful implementation of the ‘winning’ manifesto mean for business?
Responding to the Conservative manifesto, CBI Deputy Director-General Josh Hardie said: “Businesses will be heartened by a pro-enterprise vision” but noted caution around a “needless rush for a bare bones Brexit deal that would slow down our domestic progress for a generation.”
Conspicuous in its absence from the Conservative manifesto were any major commitments that would impact the City. On the campaign trail, Prime Minister Boris Johnson announced in a speech to the CBI that a plan to reduce corporation tax by 2% next year would be scrapped. At 19%, the UK’s corporate tax rate is already below the EU average (21.68%) and OECD average (27.63%). It was therefore a decision that was met with little protest in the City, which has not been vocally lobbying on corporation tax given the dominance of Brexit.
In his leadership bid to succeed Theresa May, Boris Johnson sought to promote his pro-business credentials. Often citing his two terms as Mayor of London in which he was a major advocate for financial and professional services, we can expect a majority Conservative government to be seen to act in the interest of business. However, it is expected to focus much more heavily on regulation and legislation that helps small and medium-sized businesses. Whilst maintaining a steady flow of Foreign Direct Investment (FDI) into the UK is imperative, the Conservatives will not want to be too friendly to the City or it will play into Labour’s attack lines about wealth and privilege.
Whereas the Conservative manifesto was seen to be cautious and muted, Labour’s election manifesto is unapologetically radical. Business and economic measures include a vast £400 billion “national transformation fund”, paid for through borrowing, in order to invest in infrastructure and low-carbon technology. Rail, mail, road and broadband would be brought under public ownership with a sale price determined by parliament. Corporation tax cuts made since 2010 would be reversed, whilst high earners in the City would be asked to contribute more heavily in the form of an increase in income tax for those earning more than £80,000.
Tax rises worth more than £80 billion a year by 2023-24 were widely attacked by business groups – CBI Director General Carolyn Fairbairn said “Significant hikes in corporation tax, threats to important investment incentives and windfall taxes on oil and gas will set alarm bells ringing for globally mobile businesses.”
Based on their record in Opposition, there is little to suggest that Labour would lend a friendly ear to business in government, which was largely reflected in their manifesto launch. Jeremy Corbyn and John McDonnell have consistently stated that they will ask big business to “do a bit more” and we can expect the City to be asked to pay a greater share to central government, in an attempt to redistribute wealth and resources around the country.
Before considering Liberal Democrat policies at face value, it is worth considering their likely impact. Since their high point in the polls at 24% on 29 May, the party has been in decline. A reduced share of the vote and a small number of MPs in parliament would limit the ability of the Lib Dems to position themselves as ‘kingmaker’ in the event of a hung parliament.
Addressing professional and financial services, the Liberal Democrats took a bold approach in a similar vein to Labour. Whilst Labour would raise Corporation Tax to 26%, the Lib Dems would increase it to 20%. Further pledges included a crackdown on tax avoidance by multinationals by reforming “place of establishment rules,” and ensuring tax bills are more closely related to the sales companies make in the UK. Those commitments are broadly in line with Labour’s approach, although less radical than a commitment to de-listing companies that fail to tackle the climate crisis from the London Stock Exchange.
In the Cameron-Clegg coalition, it was the Liberal Democrats who ran the Business, Innovation & Skills and Energy & Climate Change departments. Now both moulded into the Business, Energy & Industrial Strategy department, it is feasible that the party could demand a Lib Dem Secretary of State to lead on both business and climate change as their price for propping up a Labour government.
So where are we?
Irrespective of the outcome of the general election, a major trend that we can expect to see develop in 2020 is businesses being asked to do more for their communities and supply chains, whilst better defining their ‘purpose’.
The other aspect to highlight is climate change. Promoting a green economy, including by way of legal standards for decarbonisation, is a policy area that has cross-party support (in one form or other). Given the palpable shift in public concern over the environment, it is of little surprise that governments and political institutions around the world have been prompted to declare climate emergencies.
Overall, therefore, ethical investment and a pivot away from the extractive industries seem inevitable regardless of the political make-up of the next government. With consumer behaviour placing an increasing onus on environmentalism, politics and business will need to mirror their demands to keep pace with a changing society. The pace at which climate change mitigation measures are demanded of big business does of course depend on the outcome of the election, with Labour, for example, pledging more radical and urgent measures than the Conservatives. But whoever occupies 10 Downing Street after the result of 12 December election is announced, business and the City must prepare for another frenzied period of activity – with regard to all policy areas that touch them. From Brexit to specific business policy, there will be no shortage of issues keeping the City on its toes in 2020.