General Election 2019: Which party is best for small businesses?

Conservative Party: Brexit approach, manifesto overview, and small business policies

Brexit

Under Boris Johnson, the Conservative Party is promising to “get Brexit done”. What this actually means is to rush Boris’s Brexit deal through parliament, and then leave the EU in January. The plan then is to negotiate a trade agreement with the other EU countries in 2020, with a deadline of the end of 2020 for that agreement. This still makes a no-deal Brexit a very real possibility under a Conservative government.

Overview

The manifesto is rather big on promises, but rather light on detail. Indeed, the politically independent Institute for Fiscal Studies noted that “as a blueprint for five years in government, the [manifesto’s] lack of significant policy action is remarkable”, suggesting that – aside from minor tinkering – it’s going to be broadly business as usual in key policy areas. A promise to not raise income tax, VAT, or national insurance accompanies the Conservatives’ rather modest spending plans, as does a commitment to raise the national insurance threshold to £9,500 from 2020.

Small business policies

• As with most of the manifesto, a lack of detail makes it hard to work out how the operating environment for small businesses might change following a Conservative election victory. One flagship policy, for example, is an “Australian-style points based immigration system” – but, beyond vague promises to prioritise law-abiding, educated people with good English skills for entry into the UK, there’s very little information on how this would actually work. Similarly, the manifesto states that most people coming into the country will need a clear job offer, but it’s not clear how many “most” is – or even what constitutes a clear job offer. It’s therefore very difficult to gauge the potential impact this policy may have on the ease of hiring new staff from outside the UK, or hiring people who have only recently arrived in the country.

• There’s also concern about the Conservative approach to Brexit. Responding to the manifesto, British Chambers of Commerce Director General Dr Adam Marshall noted that “there’s a big difference between ‘getting Brexit done’ and doing it right.” He added that “categorically rejecting the possibility of a longer transition period is a real concern, because it means businesses could face yet another damaging cliff-edge at the end of 2020.”

• On a more micro level, the picture brightens. One area that is covered in detail in the manifesto is potholes, with £2bn promised to tackle the issue over the next four years. This was greeted enthusiastically by Mike Cherry, National Chairman of the Federation of Small Businesses (FSB), who argued that: “FSB has consistently called for greater investment in fixing potholes and improving local road networks, and so this commitment from the Conservatives is very welcome. Damage to business vehicles costs money and time, leaving firms unable to get around or transport goods while a vehicle is off the road.”

• Mr Cherry also cheered a rather vague pledge to “reduce business rates […] via a fundamental review of the system” and a more concrete proposal to increase the employment allowance from £3,000 to £4,000, stating these are “strong, pro-small business measures.”

• There were also promises to increase child care funding, tackle the late payments scandal (a huge problem for many small businesses), and launch a review to improve support for the self-employed. More eye-catching was the announcement of a new £3bn National Skills Fund, to “provide matching funding for individuals and SMEs for high-quality education and training.” As with so much of the manifesto, it’s unclear how this would actually work, but the proposal received an approving response from the business community. Josh Hardie, the Deputy Director-General for the Confederation of British Industry, stated that: “The National Skills Fund could make an important contribution to the significant upskilling efforts needed in the coming years. It needs to be delivered in partnership with business, and come hand-in-hand with a detailed new immigration system that gives access to the full range of skills and labour the economy needs.”

• As many political commentators have noted, this feels like an election manifesto designed not to lose an election rather than win one. The message that resonates throughout is ‘get Brexit done’, and the Conservatives clearly feel that it’s enough to primarily fight the election on this issue. Indeed, it’s an approach that’s found favour with some small business owners. Chris Vincent, for example, the Managing Director of V4 Wood Flooring, argues that: “Boris Johnson’s mantra of ‘get Brexit done’ is exactly what I have been saying for a long time now, and the one thing that I believe will kickstart the economy and business investment. The Conservative manifesto was conservative in content, with no big, eye-catching announcements that need to be paid for one way or another; that gives me confidence in a Conservative government that will understand business, entrepreneurship, innovation and self-employment, and its importance to the country and our economy.”

Labour Party: Brexit approach, manifesto overview, and small business policies

Brexit

If elected, Labour have promised to negotiate a new deal with the EU within three months –  one that prioritises a UK-wide customs union, close alignment with the single market, and protection of workers’ rights. They would then put that deal to a second referendum to decide, once and for all, whether the UK wants to leave or remain in the EU.

Overview

The popular view of Labour’s manifesto is clear – nationalisation, nationalisation, nationalisation. Labour’s plans to take the Royal Mail, rail-operating companies, energy supply networks, and water and sewerage companies into public ownership is undoubtedly its most eye-catching policy, alongside a bold pledge to provide free broadband across the whole of the UK by part-nationalising BT. By UK standards, almost all of Labour’s policies are radical – the party is setting out a bold new vision for the country that includes scrapping tuition fees, introducing collective bargaining, creating one million green jobs, and massively increasing state spending, to leave a country that’s much more in line with central European powerhouses like Germany and France.

The really controversial bit, though, is how to pay for it all. Labour’s claim that 95% of the population would not see an increase in their tax bill has been dismissed as “not credible” by the politically independent Institute for Fiscal Studies, while Labour has already stated it will increase taxes on businesses and bring capital gains tax in line with income tax.

Small business policies

• There was a mixed response to the Labour manifesto from both the business community in general and small business owners in particular. Many praised the goals that Labour were trying to achieve, but questioned how it was trying to achieve them. Reflecting the overall mood, Edwin Morgan, Director of Policy at the Institute of Directors stated: “While new investment in infrastructure and the green economy is welcome, taken as a whole, Labour’s measures on business risk being too much stick and not enough carrot.” He also added that “many directors will have reservations that Labour’s state-first plans for the economy could crowd out, rather than crowd in private enterprise.”

• Understandably, small business owners will be worried about Labour’s taxation plans. Corporation tax would be increased from 19% to 21% by April 2020, with further rises taking it to 26% by 2023. For small businesses – which Labour have defined as those with a turnover below £300,000 – the current 19% corporation tax rate would be retained initially, rising to 21% by 2023. Labour’s approach to corporation tax was described as “disappointing, but not surprising” by Genevieve Morris, Corporate Tax Partner at tax, accounting, and business advisory firm Blick Rothenberg. She added: “[Labour] don’t seem to appreciate how beneficial the attractive corporation tax rate has been to encourage inward investment into the UK, which then creates jobs and contributes through employers national insurance”. Finally, she suggested that “the only winner will be Ireland,” reflecting a widespread feeling that some of Labour’s policies will only encourage companies to leave the UK altogether rather than pay more tax by staying in the country.

• Another flagship policy is to “rapidly introduce a Real Living Wage of at least £10 per hour for all workers aged 16 or over” – a huge increase from current levels, especially for younger workers. While Labour has said it will use “savings to public finances to help small businesses manage the extra cost,” there is no information on how this would work in practice. Other Labour tax policies likely to impact small business owners include abolishing entrepreneurs’ relief (which currently charges capital gains tax at 10% on up to £10m raised from selling a business), and increasing capital gains and dividend tax rates to match the income tax rate. This raft of policies has unsurprisingly prompted a hostile response from some small business owners, with Stacey MacNaught, Director of marketing agency Macnaught Digital, arguing that: “Coupling a higher corporation tax rate with an increased tax on dividends doesn’t just hit big corporates. It hits small owner-managed businesses and the people who own them really hard.” She adds that Labour’s mentality “seems very anti-business,” and that “Labour is the worst party for small business.”

• However, some Labour measures received a much more positive response. Chief among these was a firm promise to tackle the “late payments that leave small businesses and the self-employed waiting months to be paid, including banning late payers from public procurement.” In response, Federation of Small Businesses National Chairman Mike Cherry, said: “The cast-iron commitments to end the late payment crisis and ban late payers from public procurement are critical, but light on detail.” Mr Cherry was also enthused by Labour’s promise to “seek to develop tailored support and protections for the self-employed, including: collective income protection insurance schemes, annual income assessments for those on Universal Credit, and better access to mortgages and pension schemes.” He described these as “good proposals to help our 4.9 million-strong self-employed community.” Similarly, Phil Hall, Head of Public Affairs & Public Policy at the Association of Accounting Technicians, said Labour’s commitment to reviewing the current system of corporate tax reliefs “makes absolute sense.”

• Labour also plans to reform the apprenticeship levy by “increasing the amount that can be transferred to non-levy-paying employers to 50%” – another initiative given the thumbs up by Mike Cherry. A plan to review replacing business rates with a commercial land value tax, however, has proven more controversial. The theory is that this would encourage more productive use of land, but Mr Cherry says the FSB “have serious doubts about a commercial land value tax as a suitable replacement.”

• Overall though, it’s hard to shake the feeling that Labour’s economic policy has businesses in the crosshairs, with the party’s argument presumably being that, under the current system, companies have had it too easy for too long. Whether that’s true depends on your personal circumstances and economic philosophy, but what is certain is that Labour’s approach would significantly change the operating environment for UK small businesses. Perhaps it’s not surprising, then, that many small business owners aren’t convinced that Labour’s policies are realistic. Nick Acaster for example, Managing Director at Rugs Direct, says Labour’s economic policies are “pie in the sky, like the classroom election where you can promise the rest of the children in the class free sweets if you vote for us,” adding that “they just seem to risk the country going into huge debt.” Dennie Smith, who runs alternative online dating website Old Style Dating, was even more strident, simply stating “I couldn’t imagine life under Labour – the more I hear, the more I cringe at them obviously just throwing numbers out of a hat to get votes.” Meanwhile, Paul McFadyen, Managing Director at metals4u, offers the sober commentary that “if Labour’s proposed review of Corporate Tax Relief increases our tax liabilities, our implementation of future investment in local employment may have to be reduced.” Clearly, Labour will have to tread carefully to avoid alienating small business owners in its new vision for the UK.

Liberal Democrats: Brexit approach, manifesto overview, and small business policies

Brexit

It’s fair to say that the Lib Dems are not exactly subtle about their Brexit policy – ‘Stop Brexit’ is emblazoned on the front cover of their manifesto, and echoed on almost every page.

For the avoidance of doubt, if elected, the party would revoke Article 50 and the UK would then stay in the EU. Their argument is that winning a majority in a general election would give them the mandate to do this, but it would still be a hugely controversial move. In other circumstances – if the Lib Dems held the balance of power in a hung parliament, for example – they would support a second Brexit referendum.

Overview

Beyond their Brexit stance, the Lib Dems position themselves in the middle ground between Conservative pragmatism and Labour radicalism. The same goes for spending – with the aid of a £50bn ‘remain bonus’, the plan is to spend much more than the Tories, but a little less than Labour. That £50bn has been given cautious approval by the politically independent Institute for Fiscal Studies, who said that, over five years, the figure was “within the range of plausible estimates for the extent of that additional revenue.” On top of this, a Liberal Democrat government would raise income tax by 1p, and increase corporation and capital gains tax to invest in infrastructure and public services.

The most eye-catching policy is arguably to provide universal free childcare for all children aged 2-4. This would equate to 35 free hours a week for each child, 48 weeks a year, and would quadruple current spending levels in this area. Other highlights include generating 80% of electricity from renewables by 2030, recruiting 20,000 new teachers, and legalising cannabis. Ultimately, what is being presented is a left-wing interpretation of free market capitalism; one with higher social spending, but one that believes that – with the right regulation – British society does not require a fundamental rethink.

Small business policies

• While it may be controversial, there’s no doubt that the Lib Dem Brexit policy is very attractive to many small business owners, who would not only see an end to Brexit anxiety, but also be able to operate under the same terms as they are used to. Ed Hollands, Managing Director of truck advertising company Driven Media, sums up this feeling when he describes revoking Article 50 as the “ideal solution” to the Brexit problem – one that’s “radical, but effective.”

• Aside from this, the Lib Dems have seized the opportunity to present themselves as “the party of business”. As business and innovation expert Erica Wolfe-Murray notes, they have the experience to back this up: “During the coalition, Vince Cable headed up the Department of Business, Innovation and Skills, and introduced Growth Accelerator, a 4-year programme which identified fast-growth SMEs and helped them to build their businesses. This contributed massively to the economy and employment.” She also approvingly cites the Lib Dems’ R&D programme, support for flexible IP rules, and regional creative enterprise zones as evidence for the party’s commitment to small business.

• Experts have also cheered plans to force all large businesses (those with more than 250 employees) to sign up to the Prompt Payment Code, with Phil Hall, Head of Public Affairs & Public Policy at the Association of Accounting Technicians, stating: “Late payments have an incredibly negative impact on British business – especially the SME community – and so after years of minor tweaks, voluntarism and ineffective tinkering, it’s encouraging to see the Liberal Democrats recognise the need for legislative reform.”

• However, other proposals have proven more controversial, including one to “replace business rates in England with a Commercial Landowner Levy based solely on the land value of commercial sites, rather than their entire capital value.”. Federation of Small Businesses National Chairman Mike Cherry was sceptical, arguing: “The commercial land value tax is a cause for concern – business rates are a disgrace, but it is important not to replace one badly thought out system with another. You could easily end up with a situation where landlords continually insist on big rent increases, citing this new tax as the reason. There must be protections put in place for small businesses – nobody wants business rates times ten.”

• There was also disagreement over a Lib Dem pledge to “expand the apprenticeship levy into a wider ‘skills and training levy’”, not helped by the lack of detail on what this would actually involve. Therefore, while Edwin Morgan, Director of Policy at the Institute of Directors, suggested that the “sustained focus on skills will be welcomed by directors,” Mr Cherry argued that “expanding the apprenticeship levy – without proper review and reform – could cause all kinds of issues for firms up and down supply chains.” In short, without more information, it’s hard to know how this proposed change would affect small businesses.

• For the most part though, the Lib Dems back up their claim to be the party of business with a raft of policies targeted at SMEs. In addition to the ideas discussed above, Mr Cherry also praised commitments to increase parental pay for the self-employed and expand the remit of the British Business Bank, while a pledge to create a new ‘start-up allowance’ to help out with living costs in the first few weeks of a new business is further evidence of a real focus on encouraging entrepreneurship. This, coupled with the party’s Brexit stance, make it easy to see why the Lib Dems are the favoured choice for many small business owners.

Brexit Party: Brexit approach, manifesto overview, and small business policies

Brexit

Shockingly, the Brexit Party is rather keen on Brexit, specifically the immediate no-deal variety (which it calls a “clean-break Brexit”). They argue this would produce a £13bn a year “Brexit dividend” for investment across the UK, but the politically independent Office for Budget Responsibility believes a no-deal Brexit would plunge the UK into recession.

Overview

Arguing that manifesto is “one of the least trusted words in the English language,” the Brexit Party instead published a ‘contract’ that can be signed online. What it contains is a curious mix of right-wing policies – like tax cuts, cracking down on illegal immigration, increasing police numbers. and focussing on violent crime, robbery and burglary – and left-wing promises to axe all interest on student loans and plant millions of trees to attempt to counter climate change.

Small business policies

• Apart from Brexit, the most notable policy is to introduce zero-rate corporation tax for the first £10,000 of pre-tax profits. According to the party, 66% of companies – over a million firms – would therefore pay less than £10,000. Another pledge is to “overhaul financial services regulation, cut red tape, increase competition, and boost lending to Small and Medium Enterprises,” although no further information is given on what this would actually entail. The Brexit Party also plans to introduce a new apprenticeship scheme, “replace business rates with a simpler system”, and offer “free base level domestic broadband in deprived regions.” However, the lack of detail in these policies, coupled with the hardline stance on Brexit, means it’s hard to see the Brexit Party appealing to many small business owners outside of those who already support its ideological stance.

Green Party: Brexit approach, manifesto overview, and small business policies

Brexit

Like the Labour Party, the Green Party has committed to a second referendum on Brexit, with the party unequivocally campaigning to remain in the EU. It also wants to extend voting rights to 16- and 17-year-olds, which could have a significant impact on the result of such a referendum.

Overview

Unsurprisingly, protecting the environment looms large in the Green Party’s election manifesto. The flagship policy is to borrow £100bn a year to invest in eco-friendly infrastructure, in order to cut net carbon emissions to zero by 2030. By the same year, the Greens want to insulate every home in the UK, and ban the sale of new petrol or diesel cars. Another ambitious target is to plant 700m trees to capture CO2 and counter climate change. Other policies firmly situate the party on the left of the political spectrum, including decriminalising drug use, abolishing tuition fees (and writing off student debt), increasing overseas aid, scrapping the Trident nuclear deterrent programme, ending the sale of council houses, and abandoning minimum income rules for visas to encourage immigration.

Small business policies

• For small businesses, the Green Party offers an even-handed approach. On one hand, a key policy is to increase the rate of corporation tax to 24%, with no detail given on whether this rise would be implemented across the board or lowered for small businesses a la Labour. However, there is also a clear desire to help small businesses. To ensure funding at affordable rates, a Green Party government would help to establish a network of regional mutual banks, and require the traditional banks to increase their lending to small businesses. Similarly, 15% of government contracts would be awarded to small and micro businesses, and the current government contract application would be revised to remove the barriers to entry for small businesses.

• The current business rates system would be replaced with a land value tax, mirroring the policies of both Labour and the Liberal Democrats, and which has already proved controversial in small business circles.

• Late payments would be tackled by requiring businesses to publish and report the difference between agreed payment days and actual payment days, with fines levied on large companies that fail to pay small businesses on time. VAT would be reduced on food and drink served in pubs, bars, restaurants, and other leisure/cultural businesses in order to stimulate that sector, while the Employment Allowance would be increased from £3,000 per year to £10,000. According to the manifesto, this translates to a cut in National Insurance that “will benefit hundreds of thousands of small businesses.”

• Therefore, while the increase in corporation tax would, if introduced universally, negatively impact many small businesses, the Green Party has sought to cater to small business owners with a range of policies designed to help alleviate their day-to-day concerns. For some, this may be enough to make voting Green a viable proposition, especially if they share their environmental concern or run sustainable/eco-friendly businesses.