What the political parties are promising

Election 2010With the election looming, the main political parties have outlined what they intend to do on business support and tax.

With economic recovery an urgent priority, all the parties have made tax, business regulation and strategies on public expenditure central to their offerings to the electorate.

What follows is a brief summary of each party’s principle policies that may be of interest to businesses.

Labour

With a new top rate of income tax at 50p for those earning more than £150,000 already in place, Labour, if it is returned to office, will also be raising national insurance contributions by 1 per cent in April 2011.

However, the party has promised not to raise income tax further or to extend VAT charges to food, children’s clothes, books or public transport.

The capital investment allowance of £100,000 would stay in place and, in future, be linked to inflation.

A £4 billion growth fund will be established to provide firms with investments, the money coming from both the government and the private sector. Business support programmes, such as the Enterprise Finance Guarantee Scheme, would continue, along with sustained backing for the Regional Development Agencies.

The national minimum wage would rise, at its basic, in line with increases in average earnings up to 2015.

There would be a guarantee of employment or training for those young people who have been out of work for six months or more, and a guaranteed job placement for those unemployed for more than two years.

The threshold of support for company takeovers would be increased to two-thirds of shareholders.

Public spending would continue to rise during the first year of the next Parliament before a series of cuts would be introduced, the aim being to reduce the deficit by at least half by 2014 and to reduce the structural deficit by at least two-thirds over the same period.

A 1 per cent ceiling would be imposed on public sector pay rises for 2011-12 and 2012-13.

Conservatives

The Conservatives have pledged to drop the government’s planned 1 per cent rise in national insurance contributions for those earning less than £35,000 annually.

For the first two years of the next government, new businesses would be exempt from paying national insurance on the first ten employees they hire during their first year.

Large company corporation tax would be cut to 25 per cent and that for small companies to 20 per cent, a move to be funded by the withdrawal of R&D tax credits for larger companies.

Under a Conservative government, the inheritance tax threshold would climb to £1 million, and stamp duty would be removed from sales of properties worth less than £250,000.

The government’s present portfolio of employment programmes would be dovetailed into just one scheme, with much greater private sector involvement in service provision.

Public spending cuts would begin immediately, with £6 billion to be made in 2010.

The Conservatives have said they would aim to remove most of the UK’s structural budget deficit within five years.

In 2011, public sector pay would be frozen for one year for all but the million lowest paid employees, and civil service costs would be reduced by a third over the course of the next Parliament.

An independent Office for Budget Responsibility would monitor the state of public finances.

Liberal Democrats

A Liberal Democrat government would increase the personal allowance threshold for income tax to £10,000.

Capital gains tax would see a rise to align it with income tax.

A ‘mansion tax’ would apply to properties worth £2 million or more.

Taxpayers would only be permitted to claim non-domiciled tax status for a shortened period of seven years.

Over £3 billion would be directed to a one-year green stimulus package, the aim of which would be to boost low carbon industries and to create 100,000 new jobs.

The young person’s minimum wage would be increased by 20 per cent.

Regulators would be obliged to take the public interest into account when evaluating large take-over bids.

The Liberal Democrats have promised to make public spending cuts of £15 billion a year, focusing on low priority areas, and to reduce the structural deficit at least by two-thirds by 2015.

A £400 cap would be introduced for public sector pay rises for a limited time.

Other issues

All the parties have pledged to extend the right to request flexible working to more employees.

It seems possible also that the next government, whatever its colour, will drop the default retirement age of 65.

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