Labour and the Conservatives are jockeying for position as the party that can be most trusted with the economy. Both have pledged to adhere to strict rules on debt and borrowing to avoid the investor jitters and economic meltdown triggered by Liz Truss’s mini-budget of tax cuts and increased spending.
Both will have to grapple with a major funding hangover from the triple shocks of Brexit, Covid and the war in Ukraine and many say neither has been totally upfront about the scale of the task ahead, which could seriously suffocate any chances of imminent economic recovery and hoped for interest rate cuts.
Both have promised major house-building programmes which would be a welcome boost for the construction industry after years of slow development made worse by high mortgage rates – but can they be achieved?
The biggest potential economic game changer between Labour and the Conservatives came with tax cuts or tax freezes.
The Tories have promised £17bn tax cuts over the life of the next Parliament to put more money in the pockets of working people, which they say will stimulate the economy. Their proposed scrapping of NI for most self-employed people means they will carry 15% less of the tax burden than salaried workers – 20% compared to 35% on average – making it more attractive for employers to use consultants and freelancers. For directors and partners, this could potentially offer a considerable wage boost.
However, the Conservatives also tabled a raft of expensive new measures including National Service for all 18-year-olds and heavy investment in infrastructure, defence and childcare. Rishi Sunak says the funding will come from cutting the welfare bill, non-doms and slashing the civil service and non-protected public services. Critics say such income streams are far from guaranteed and his sums don’t add up. His promised tax cuts plus extra spending could therefore bring more uncertainty and instability. But is he just setting a political trap for the incoming government, making tax the electoral focus and forcing Labour’s hand?
Arguably, we could have advanced The Reform Party as the most viable future opposition here after they polled one percent higher than the Conservatives for the first time days before releasing their own manifesto. However, Nigel Farage’s party is unlikely to translate vote share to seats. The right wing vote will be split fairly equally if current polling is reflected on the day. Either way, the Conservatives have realistically shifted from fighting for the right to rule, to battling for the Shadow bench, which means they can offer a menu of extravagant economic pledges without potentially ever having to honour them.
Labour leader Sir Keir Starmer, currently seen as PM-in-waiting, introduced what some have called a “straightjacket” or “safety first” manifesto. There were no rabbits, no hats, no surprises. Land is in sight, all he has to do is keep the ship steady and hope for the weather to remain clement.
Starmer stressed his number one priority would be wealth creation via a National Wealth Fund, using £8bn within “allowed” borrowing and broad reform to regulation and planning to kickstart the economy and bring in private investment as the first of his five core missions. He pledged to create 650,000 new “good” jobs, most in a world-beating green economy, and drive the highest growth in the G7 – a difficult one to pull off with so many variables beyond his control, mainly the performance of the other six members.
Optimists believe that with a “super-majority” in the Commons and his growth mindset, there is a chance he could push through a bold programme of change and hope to ride a global uplift to pull off this trick, which seems to represent his riskiest promise.
Critics say he has not given any clear indication of how his party plans to achieve this turnaround, especially with the fiscal mess and spending pressures he will inherit.
His clean green Great British Energy company and Great British Railways would bring these core sectors back into national or partial national ownership, the former, he says, helping to bring down energy prices and profit the nation. For the renewables industry and the manufacturing and logistics businesses supporting it, a Labour term in office should see heavy investment towards the latter part including improving the national grid. Other sectors can hope for energy security going forward, lower fuel prices, lower inflation and more interest rate cuts plus more intense investment in innovation and business creation in the regions and nations, should all go to plan!
No tax cuts for now but he pledged not to raise corporate taxes, VAT or taxes on working people and promised wholesale reform of the business rates system to make it fairer on SMEs, all welcomed by business leaders. He did not rule out council tax and capital gains tax increases.
Instead, extra money for the NHS, infrastructure and education would come from raiding private schools, non-doms and economic growth, he said. In interviews, Shadow Chancellor Rachel Reeves indicated she would like to lower taxes for working people but only if fiscal stability was first achieved.
Labour has ruled out reversing Brexit but said it would seek a more favourable trade deal with the EU. The CBI approved Labour plans for further devolution to “unlock the power of the UK’s regions” and attract national and international investment.
Improved workers’ rights and minimum wages tied to cost of living with an end to age bands could see wage bills rising for most British businesses.
While Starmer’s policies were broadly welcomed, he only set out clear funding plans for the fifth of the five years and for a selection of policies. 0Critics said his plans were uncosted and largely unachievable in the current economic climate.
Neither party has been clear about how they will reduce crippling national debt payments while repairing crumbling healthcare and other public services, transport links and increasing defence spending without tax rises.
Aside from the central planks of the Labour manifesto, offering hope to the regions, renewables, manufacturing around infrastructure and housebuilding, senior leadership and executives have little to go on from the manifestos in terms of strategic planning and may have to wait many months for a clear idea of new opportunities in and risks to the domestic economy and global trade.
That means continuously striving for innovation, efficiency and optimising new and disruptive technologies to ensure professional and organisational strategic growth and success in this ongoing, unpredictable and ever-changing business environment.
Conservative Party:
Rain Newton-Smith, CBI CEO: “Moves to reduce tax on workers and increase the number of apprenticeships are in isolation welcome – but both are areas where a more holistic approach could unlock the business investment needed to deliver the shared goal of a high productivity, high growth economy. ”
Paul Johnson, IFS Director: “The Conservatives have promised some £17bn per year of tax cuts, and a big hike in defence spending….Those are definite giveaways paid for by uncertain, unspecific and apparently victimless savings. Forgive a degree of scepticism.”
Justin Young, CEO at Royal Institute of Chartered Surveyors: “1.6 million homes over the next five years … is over 300,000 new homes a year – which hasn’t been achieved since the sixties.”
Accountancy Age: “The focus on reducing administrative burdens and enhancing access to finance for SMEs is poised to support smaller businesses in navigating economic challenges and capitalising on growth opportunities.”
Helen Dickinson, Chief Executive of the British Retail Consortium: “After 14 years in government, the Conservative Party are aware of the major issues facing the retail industry. Unfortunately, this manifesto fails to take the bull by the horns. Despite previous promises to reform the broken business rates system, we continue to see empty shops around the country that have fallen prey to sky-high rates.”
Labour Party:
Paul Johnson: “This is a manifesto that promises a dizzying number of reviews and strategies to tackle some of the challenges facing the country….Labour’s manifesto offers no indication that there is a plan for where the money would come from to finance this.”
Rain Newton-Smith: “Reassurances that Labour will not increase corporation tax and will look at wholesale reform of the business rates system are especially welcome…Turning these proposals into legislation would require continued collaboration with business to understand the fine detail on how their implementation can avoid unintended consequences.”
Helen Dickinson: “The Labour manifesto includes many of the right policies to help retail invest for the future, upskill its workforce, and play its part in growing the UK economy.
“From replacing the broken business rates system, to reforming the rigid Apprenticeship Levy, Labour are promising to make changes that will have a meaningful impact to retailers and their customers.”
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