Home News Election 2017: Would Labour hurt business?

Election 2017: Would Labour hurt business?

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Labour Party

The Labour manifesto marks a radical break with the party’s recent past, advocating a major expansion of the public sector.

A Labour government would renationalise the railways, water companies, the National Grid and Royal Mail, and set up publicly-owned energy companies.

And it would fund extra spending on health and education – including the abolition of university tuition fees – with tax rises on those earning more than £80,000 a year and higher corporate taxes.

While the Conservatives want to cut corporation tax from 19%  to 17%, Labour would raise it to 26% by 2020-21, with a lower rate of 21% for smaller firms.

Rob Johnston, Chief Executive of Cumbria Chamber of Commerce, argues that higher corporate taxes deter business investment.

He said: “The Chamber is politically neutral. However, we will speak out on issues that affect businesses.

“Raising corporation tax sends out the wrong message to overseas investors as we are about to leave the EU.

“The corporation tax rate is one of the factors that international companies consider when they are weighing up where to invest. A low rate sends out a signal that we are business-friendly and want them to come here.

It would be a mistake to raise our tax rate when European competitors are cutting theirs.

“The new French president, Emmanuel Macron, says he wants to cut the French corporation tax rate from 33.3 to 25 per cent. It would be a mistake to raise our tax rate when European competitors are cutting theirs.”

Rob has concerns too that Labour’s employment proposals will deter businesses from employing staff by making the labour market less flexible.

Policies include banning zero-hours contracts, giving workers full employment rights from day one, and requiring employers to treat contractors as employees unless the employer can prove they are genuinely self-employed.

Rob sees no benefit in adding to the public debt to fund nationalisation, but does approve of Labour’s plan for a National Transformation Fund to invest £250bn in infrastructure over 10 years.

Proposals include extending HS2 to Scotland, potentially through Cumbria, and rollout of universal superfast broadband by 2022.

Rob said: “We need investment in roads, railways, broadband and new power stations to allow the UK economy to thrive.

We need investment in roads, railways, broadband and new power stations to allow the UK economy to thrive.

“The key one for us in Cumbria is nuclear power, where problems at Toshiba threaten to undermine the plan for a power station at Moorside, Sellafield.

“Government must step up to the plate and invest directly in Moorside.”

The manifesto contains a commitment to nuclear power, tidal lagoons of the sort proposed for the Solway, and to renewing the Trident nuclear deterrent thereby guaranteeing work for the BAE Systems shipyard in Barrow.

There is also a pledge to reform business rates, something the Chamber believes should be a priority for the next government.

Labour would remove plant and machinery from business rates calculations, switch from RPI to CPI for annual increases, and speed up the appeals process as a prelude to wholesale reform.

Rob said: “These are common sense reforms to a broken system. It’s absurd that, at present, businesses investing in plant and machinery are penalised by paying higher rates. It’s effectively a tax on investment.”

And he welcomed Labour’s proposals to exempt small firms with turnover below £85,000 from Making Tax Digital, which require them to submit data quarterly online to HM Revenue Customs.

He said: “We’ve had major concerns about Making Tax Digital, because it will be a headache for businesses that aren’t using accounting software or apps – and we know that many small businesses and sole traders don’t.”

Rob also welcomed Labour’s plan for regional investment banks to lend to SMEs, support for further education including mixing more on-the-job training with studying, a pledge to give tourism a higher priority, and greater flexibility for employers on how they use the apprenticeship levy.

But he said that proposed restrictions on firms bidding for government contracts, including a maximum 20:1 pay gap between the highest and lowest paid employees, would hinder competition.

On Brexit, Labour promises to guarantee the rights of EU citizens living in the UK, and to secure the benefits of the EU single market and customs union while ending free movement of people.

Rob said: “It remains to be seen how realistic that is – freedom of movement is an integral part of the single market. But we welcome the pledge to guarantee the status of EU workers already here. The hospitality and food industries in Cumbria are dependent to a large degree on migrant labour.”

He added: “Overall, this is a curate’s egg of a manifesto – good in parts.

Overall, this is a curate’s egg of a manifesto – good in parts.

“We have concerns as to how Labour’s spending commitments will be funded, and we think their tax and employment proposals would be damaging.

“But some of their ideas, on business rates for example, are well thought out and sensible, and echo what we called for in our Manifesto for Business. It’s good to know that politicians are listening, at least some of the time.”

Meanwhile, the Liberal Democrats are promising a second EU referendum, saying it would “give the final say to the British people”. The vote would include an option to remain in the EU.

Their tax plans include 1p on income tax, increasing corporation tax to 20% and raising £1bn from legalising and taxing cannabis.

They have pledged to spend £100bn on infrastructure, “review” business rates, expand the activities of the British Business Bank, introduce a “start-up allowance” for those launching a business, and a “good employer kitemark” covering areas such as paying the living wage and avoiding unpaid internships.

Rob said: “Again, there are is a mixture of good and bad, but in both the Labour and Liberal Democrat manifestos there are references to ‘unscrupulous employers’ which smacks of a damaging anti-business rhetoric.”

  • Voters in Carlisle can put questions to candidates from all parties at a hustings on Wednesday at the University of Cumbria’s Fusehill Street campus, starting at 7pm. Julian Whittle, business engagement manager at Cumbria Chamber of Commerce, will chair the session organised by Churches Together, Sustainable Carlisle and Carlisle One World Centre.

© Cumbria Chamber of Commerce

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