Policy Update: The Manifestos

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What's are entrepreneurs being offered this election?

Welcome to our latest Policy Update. In these updates, The Entrepreneurs Network focuses on a recent policy development and set out (nearly) everything an entrepreneur needs to know about the topic. If you’re joining us for the first time, you can read our past updates here. We want to make sure this is as relevant as possible for entrepreneurs, so we’re happy to take suggestions for future topics (send them here).

Over the past week, each major party has launched its election manifesto. We’ve read through each and in this month’s policy update we’ll let you know what each party is offering entrepreneurs.

Some people might be sceptical of manifestos and believe they’re not worth the paper they’re printed on. While it’s true that major announcements are not always mentioned in manifestos, e.g. when Osborne brought in the National Living Wage, and sometimes pledges are broken, e.g. tuition fees, the academic evidence suggests manifestos are good guides to government policy. (Though it depends on whether we have a minority or majority government).

We’ve waited till the dust has settled on all three manifestos for two reasons. First, often the full details don’t come out till days after a policy has been announced. Second, we’ve been busy working on our own manifesto. (It’s been backed by 250+ entrepreneurs and you can read it here).

The aim of this update isn’t to tell you how to vote, indeed we’re not covering many of the most important issues the country faces from climate change to the NHS. But we want to give you an idea of what’s likely to happen post-election and how it might affect your business and/or future entrepreneurial efforts.

We’re going to focus on the key areas that affect entrepreneurs from Brexit and immigration to tax and regulation. We’ll look at the parties we think have a chance of being part of the next government: Conservatives, Labour, Liberal Democrats and the SNP. Looking at the polls and betting markets, the three most likely election outcomes are Conservative Majority, Conservative Minority, and Labour minority.

The Manifestos

On Brexit

If elected, the Conservatives promise to ‘get Brexit done’. This will mean passing the Withdrawal Agreement negotiated by Boris Johnson. They will then have until 31 December 2020 to agree a free trade agreement. They have ruled out taking the option of extending the negotiating period by 2 years. This creates the possibility of a cliff edge and a no deal Brexit.

Labour, on the other hand, have a policy of renegotiating the Withdrawal Agreement within 3 months and holding a confirmatory referendum (Labour’s deal vs Remain) within 6 months, where the Prime Minister would remain neutral. Labour seeks a deal that would:

Have a permanent and comprehensive UK-wide customs union.
Closely align with the Single Market.
Follow current and future EU law on workers’ rights, consumer rights and environmental protections.

Under Labour, EU citizens would be granted an automatic ‘right to remain’ and wouldn’t have to use the EU Settlement Scheme. They are unclear on whether free movement will be maintained, but elsewhere have suggested that “there will be a great deal of movement”.

Liberal Democrats also favour a second referendum, but would revoke Article 50 if they managed to get a majority (an outcome bookmakers put at 800/1). The SNP also support a second vote on Brexit.

On Immigration

Labour haven’t confirmed whether or not they’ll keep free movement if Britain votes leave in a second referendum. On non-EU immigration, Labour will end the minimum income requirements for spousal visas. Their manifesto has little to say about changes to the rules around skilled non-EU migration, focusing instead on the hostile environment.

The Liberal Democrats would replace Tier 2 work visas with a more flexible merit-based system, create a new two-year visa for students to work after graduation and introduce a ‘Training up Britain’ programme to make the most of migrants’ skills. They would also give asylum seekers the right to work after living in the UK for 3 months (a reform that’s been backed by leading business figures. We even backed it in a letter to the FT.)

The SNP call for a devolved migration system for Scotland. They want to cut the cost for employers of recruiting from overseas, and to simplify the visa and citizenship process. In particular, they would scrap the immigration skills charge and oppose the £30k minimum income threshold. Both the SNP and the Liberal Democrats support Free Movement.

The Conservatives propose to end Free Movement and replace it with an Australian-style points based system. It’s not entirely clear what the system will look like, as Jonathan Portes argues. Unlike Australia’s system, they suggest “most people coming into the country will need a clear job offer”. They pledge to “treat EU and non-EU citizens equally.” They also state: “There will be fewer lower-skilled migrants and overall numbers will come down.” They plan to raise the NHS surcharge for the NHS.

On Taxes

The Conservatives will increase the Employment Allowance from £3,000 to £4,000. They also pledge to strengthen the Small Business Commissioner. Companies investing in new buildings and structures will benefit from an increase in the Structures and Buildings Allowance from 2% to 3%. They have promised to continue SEIS and EIS, but Entrepreneurs’ Relief will be reviewed and reformed, though the details are vague. They have cancelled the planned cut in Corporation Tax from 19% to 17%.

Labour’s manifesto promises £82bn in tax increases levied on high earners and businesses. This includes raising corporation tax to 26%, with a small profits rate of 21%; taxing dividends as normal income; reviewing corporate tax reliefs (raising £4bn); abolishing Entrepreneurs’ Relief; a new 45p rate of Income Tax for incomes over £80,000 with incomes over £125,000 paying 50p; and raising Capital Gains Tax to the same level as Income Tax, while also creating a rate of return allowance to exempt the risk free rate of saving.

The Liberal Democrats will return Corporation Tax to 20% and abolish the separate capital gains allowance. They will also raise the basic rate of Income Tax by 1p.

The SNP would review the tax rules around intermediaries – known as the IR35 tax rule – and look at problems with implementation of the Loan Charge. They would reduce VAT on energy efficiency improvements, and support a freeze in further insurance premium tax hikes. The SNP would also double the employment allowance from £3,000 to £6,000.

On R&D

The Conservatives propose raising the R&D Tax Credit rate from 12% to 13% and reviewing the scope of the policy – potentially allowing companies to claim the credit for purchasing datasets or cloud computing. They will also double public funding of R&D.

The Liberal Democrats plan to allow companies to claim R&D tax credits against the cost of purchasing datasets and cloud computing without a review. Labour’s plans are a little vaguer. While they want to increase R&D as a proportion of GDP to 3%, by “increasing direct support for R&D and reforming the innovation ecosystem to better ‘crowd in’ private investment”, according to their Funding Real Change costings document they will phase out R&D tax credits for large corporations and the Patent Box over this Parliament (while keeping the R&D tax relief SME scheme).

On Skills

Labour will allow employers to spend Apprenticeship levy funds on a wider range of accredited training. The Liberal Democrats are proposing a Skills Wallet, giving every adult £10,000 to spend on training and education throughout their life with £4,000 added at age 25, £3,000 at age 40 and £3,000 at age 55.

The Conservatives will look at improving the Apprenticeship Levy and are proposing a £3bn National Skills Fund. The fund will provide matching funding for individuals and SMEs purchasing high-quality education and training.

On High Streets and Business Rates

Labour and the Conservatives are both committed to review the system of business rates. While the Liberal Democrats have pledged to replace business rates with a levy on commercial landowners, potentially cutting admin for businesses and increasing the incentive to invest in property improvements. The Conservatives’ review will look at reducing the overall burden of rates and they’ve already committed to cutting rates for smaller retailers. Labour will exempt new capital investment from rateable values. The Liberal Democrats will also scrap the Conservatives’ reform which allows developers to convert offices and shops into residential properties without planning permission.

On Labour Market Regulation

Labour will ban zero-hours contracts and create a new Ministry of Employment Rights. They will also roll out sectoral pay bargaining. The Liberal Democrats will require a 20% higher minimum wage to be paid to workers on zero-hours contracts and propose extending paid parental leave to the self-employed. The Conservatives will launch a review on how best to help the self-employed.

On Entrepreneurship

The Liberal Democrats will create a new start-up allowance to help entrepreneurs with living costs when starting out. They will require all government agencies and businesses employing 250+ people to sign up to the prompt payment code and make it legally enforceable. They will also expand the activities of the British Business Bank to increase equity investment in SMEs.

Labour will create a network of Post Office banks. A business development agency will be based in the Post bank “providing free support and advice on how to launch, manage and grow a business.” They will also tackle late payments by banning late payers from public procurement contracts.

The Conservatives will expand the Start-Up Loan scheme and through their Red Tape Challenge will work to ensure regulation is sensible and proportionate, with the needs of SMEs prioritised.

If you want to find out more about the manifestos, you can read the full manifestos below:

We’ll make sure to keep you up to date on any other policy changes we spot in upcoming newsletters. To receive these, make sure to sign up here.

Sam Dumitriu,
Research Director,
The Entrepreneurs Network.

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