It’s no surprise that policies intended to facilitate economic recovery have become the big guns of the main parties’ election manifestos, or that in each case the promised measures have had their supporters and their critics – but with the election almost upon us, which outcomes are emerging as the most likely, and what does this mean for SMEs?
Of course, deciding which political party will be best for business is never as simple as comparing the different manifestos like for like – it’s not exactly in the parties’ interests for them to state their pledges in unequivocal terms. Since these key documents are rarely even presented in the same format, let alone with matching points addressed clearly, it’s as much as we can do to gain a general impression of the support each party will offer SMEs by considering the areas that they do focus upon.
Labour
If the current government remains in power, its new top rate of income tax – at 50p for those earning more than £150,000 – will be joined by a raise of 1% in national insurance contributions. However, Labour has indicated that it will not raise income tax, or levy VAT on such purchases as food, children’s clothes or books. The current annual investment allowance of £100,000 for capital items will remain, although it would be linked to inflation in future, while the £4 billion UK Finance for Growth Fund will provide firms with investment opportunities. The HMRC’s ‘Time to Pay’ scheme will be maintained, while small firms will be offered a one-year holiday from business rates. Schemes such as the Enterprise Finance Guarantee will continue, as will support for the Regional Development Agencies – all intended to help facilitate the party’s pledge that a million skilled jobs will be created in the next five years within the life sciences, education and healthcare, as well as the low-carbon, digital and creative industries.
Conservatives
If the Conservatives win the vote on 6th May, the party plans to reverse Labour’s planned National Insurance rise for those earning less that £35,000 – and for the first two years of the new government, start-up companies will be exempt from paying national insurance on the first ten employees taken on during their first year of trading. The process of pitching for government contracts will be simplified, and ‘business-led enterprise partnerships’ run by local authorities and businesses will replace Regional Development Agencies. Corporation tax is set to be reduced to 20% for small companies.
The party also pledges to cut the number of forms needed to register a business, implement a ‘one in, one out’ rule for red tape, and a review of the controversial IR35 legislation. The party’s manifesto underlines the fact that a Cameron-led government would focus on boosting science and engineering, in a bid to turn Britain into a leading exporter of hi-tech goods.
Liberal Democrats
It’s commonly believed that a Liberal Democrat win is unlikely – if not impossible – but, given the current poll results, it does seem entirely possible that we could end up with a hung parliament. If this happens, it could mean that the party’s ideas could prevail, in some form or other, through a coalition agreement. This could mean that measures such as the increase of the young person’s minimum wage, the reformation of business rates so they are linked to site rather than rental value, and a £3 billion year-long green business stimulus package, could have an influence on the new government’s policy making.
However, policies aside, many businesses are concerned that such an outcome could lead to a lack of decisive action, and therefore constitute a threat to Britain’s economic recovery. But let’s take a step back here. This is a presidential-style election the likes of which have not been seen before in the UK, with media speculation and inconclusive polls left, right and centre. Until we hear the results of the vote, we simply can’t know what will happen – but what we do know is that whatever happens, CBHC will be there to help you navigate through the changes and keep your business on track for success.
