It’s been evident for the last 6 months or so that the economy is going to dominate the forthcoming election debate. With the private sector providing 80% of UK employment and a widespread belief that GDP is indistinguishable from national wellbeing, it is a point of serious public interest. Shots have already been fired in Labour’s direction regarding their economic credentials from the Tory Camp: the Conservatives are usually regarded as the party providing for businesses’ best interests, a reputation that they have looked to capitalize on by highlighting Ed Miliband’s dubious economic record and pushing their ‘Long Term Economic Plan’ forward as their main selling point. However, over such fiercely contested territory as the economy, Labour have not backed down, even carving their economic policies into stone.
There are a number of key points to look out for if your main electoral concern is establishing which party might be most conducive to business prosperity. Firstly, general economic policies are the major concern. Which party can deliver growth, create favorable tax environments and provide stable exchange and inflation rates? Who will create the most jobs? The relationship between economics and politics, or political economy, is well known, and, as a result, political risk is a major consideration for multi-national corporations when hedging their exposure for long-term investment decisions.
Research investment, infrastructure development and industry incentives are also things to look out for in parties’ manifestos. How much money is going to be put into supporting university and industrial research projects? Are some industries going to be subsidized? Infrastructure, especially in the UK, is also a major sticking point. Our airports are oversubscribed, our rail networks infamously outdated and unreliable, and London’s broadband bandwidth is so bad in places that it is quicker to send files by courier than by email.
Thirdly, immigration and our membership of the EU are major factors in deciding the competitiveness of UK businesses and are issues that UKIP have ensured are going to be definitive on May 7th. In my opinion, maintaining our membership of the EU is vital to ensuring that our businesses are competitive. The EU’s free movement policies ensure that companies have the best access to global talent. It also provides a single European market and freer competition, which fosters better consumer value, greater inter-business communication and joint innovation and also removes trade barriers, cuts transaction costs and provides cheaper financing opportunities.
It is estimated that Britain’s membership of the EU is worth up to 5% of GDP, and its perceived value is shown by the existence of Business for New Europe. BNE is a coalition of business leaders (including members from BAE, Goldman Sachs, ASA, The London Stock Exchange, JP Morgan, Shell, BT, Citigroup, Amazon (etc.) that is committed to Britain’s continued membership of the EU. Indeed, if the Brexit were to take place, US-owned Bank of America, Citigroup and Morgan Stanley would apparently leave London as their European headquarters.
How, then, do the three main parties match up?
The Tories are probably the most obvious choice. Their manifesto has a clear focus on the economy and boasts many achievements: growth in 2014 was the fastest of all major advanced economies and 1000 jobs were created per day. Their ‘long term economic plan’ looks to build on this stable foundation, continuing many of the policies which have been credited with success thus far: they will continue to implement austerity measures and cut government debt, which should to help to equalize out current balance of payments deficit. Furthermore, Cameron’s anti-state ideology should mean that corporation taxes are almost guaranteed not to increase, making the UK a more attractive option for investment and allowing businesses to plough more of their bottom line back into R&D.
There are also many incentives for growing businesses and funds have been put aside to help get entrepreneurs off the ground. Small Business Rate Relief will be extended and David Cameron has pledged to support 27 thousand business mentors, who will extend business advisory services to those who usually mightn’t be able to afford them. A further £6.9 billion will be pumped into the UK’s research infrastructure by 2021, £2.9 billion of which will support research facilities of national interest.
Economic and logistical infrastructure is another element of their manifesto that has attracted a lot of thought. It is the first content section of the manifesto, and the scale of planned investment is indeed impressive. £38 billion is to be invested in rail networks and £15 billion in roads and highways over next 5 years. The improvements to infrastructure will be vital in the next, especially as the UK’s very existence is threatened by Scottish and Northern separatism.
As if in a nod to this, George Osborne has promised greater investment in a ‘Northern Powerhouse’, with greater budget devolution allowing city administrations to spend money where they see best. HS2 and HS3 should also help integrate Northern cities into London’s economic miracle, though the question remains whether cities such as Manchester, Leeds and Sheffield, built on industrial solidarity, are culturally assimilable with neoliberal do-or-die individualism? Superfast broadband has also been promised to 95% of the country.
So far it all looks good. The only sticking point is the EU and immigration. Cameron has promised an EU referendum and it is no secret that a large proportion of his party wish to leave.
Ed Miliband has not been so forthcoming about the benefits Labour would bring to businesses. Whilst the Conservative manifesto lays out a clear plan, Ed, it has to be said, does not.
One of the main worries for businesses is that Labour will borrow more, increasing the budget deficit, and therefore, our balance of payments account. However, Labour have done their best to dispel this charge and their manifesto comes with a budget responsibility lock, a commitment that every policy is funded and that no more borrowing is needed. Commitments to implement austerity and maintain the current level of corporation tax are also included. Could this really be a Labour manifesto?
Business rates will also be freezed and Ed Miliband would set up an independent National Infrastructure Commission, support HS2 and advocate further investment in the North of England.
But beyond this, everything is just a bit descriptive. Labour seemingly make many of the same commitments of the Conservatives, but these are not quantified in the same way or in the same level of detail, which raises the question of how much is going where? You really get the feeling that if you are a small business, the Tories are a safer bet. Labour, by tying themselves into the same austerity discourse, have really failed to offer a differentiating economic alternative to that supplied by David Cameron. If you’re focusing mostly on these sorts of policies, Labour’s manifesto is unlikely to win you over for this reason, especially as the Tories have proved time and time again that they are heavily private sector orientated, even if this is at the expense traditional public sectors.
However, where Labour does differ is Europe. They are committed to our continued membership of the EU, which, as has been argued, is a major factor in their favor. Could American bankers be hoping for a Labour victory?
The Lib Dems
What’s this? More austerity measures, reducing the deficit etc. etc.? If the Lib Dems hoped to become even more of a vanilla party, they have succeeded with their manifesto. Using a rhetoric of deficit cuts where unscrupulous Cameron reigns supreme, Nick Clegg is only going to get squashed. But the Lib Dems assure us that they will do this fairly. So the poor, disabled and sick aren’t going to loose even more benefits then? Hmmm.
However, what the Lib Dems to possess is an emphasis on sustainability and civil liberties. They talk of a new type of economy, a green one, different from the economist capitalism of the past. They would build on the newly established Green Investment Bank, which backs ‘green’ initiatives around the country with good value loans. They would also incentivize sustainable business practices through green taxes, invest in low carbon technologies and set up a Natural Capital Committee. These policies might be expensive in the short-term, but foster long-term innovation and reduces private-sector reliance on non-renewable resources. This can provide sources of competitive advantage, making UK business resilient to a changing global resource base and cutting outgoings in an environment where utility costs are only going to rise.
Well, from my perspective, it’s clear that the Conservatives seem to provide the best option on an economic level. Their policies are mostly pro-private sector and it is clear that a lot of time and effort has gone into policy formulation. However, the Lib Dems do offer something different if sustainable innovation is your thing, and it increasingly seems that businesses need to wake up to this if they want to remain competitive in the long term.
The losers arguably are Labour. You can’t try to beat Cameron at his own game and come out on top. A clearer economic alternative might have been the answer. Who will win, we will have to wait a few days to find out!
Story by Matthew Rusk
This story does not represent the views of Fresh Start UK, purely the view of the author. Editorial note Matthew is not affiliated to the Conservative Party, and indeed is a Labour voter – this article was written from an as objective viewpoint as possible focusing purely on the parities economic policies. Got a different opinion? Let us know!