You know election campaigns are heating up when we get to manifesto launch week. And this one kicks off with Labour’s “For the many, not the few.”
The 128 page document, together with the annex setting out the costings of the proposals will be poured over, with judgements offered up on the fiscal credibility of the package, the ideology that underpins it and, of course, the vision for a post-Brexit economy.
In this blog I’ll give you our headline views on these questions, but also dig into the policy detail setting out five policy winners and five ideas that we’d need to talk about should Labour form the next government.
And in the interests of balance, I’ll adopt the same approach with the other party manifestos as they materialise this week.
On balance, we’ve got some overall worries about the shape and tone of the ideas being proposed. Our CEO, Terry Scuoler, summed it up
“This is a comprehensive and detailed plan which contains some sensible individual measures which are worthy of further debate as part of an industrial strategy, as well as ongoing support for key elements of social care. These have to be seen, however, in the context of whether the overall economic plans will be positive for growth, job creation and investment, both UK generated and from overseas.
“Here, it falls down badly with policies that are from a bygone age and an overly interventionist approach. Given the potential impact of Brexit, sending out signals to business promising significant tax hikes and increasing red tape is hardly likely to generate the investment and economic growth we vitally need. Overall we have to ask, do the proposals have credibility in terms of cost and are they practical to implement. The answer is clearly no.”
Tax pick n’ mix
One of the chief worries from business reviewing the package is likely to be the impact of the policies on the cost of doing business in the UK. One of the first things we’d need to talk about (especially if an emergency Budget was to quickly follow) would be Labour’s business tax proposals (things we need to talk about #1).
A significant increase in the corporation tax rate would send a negative signal to companies considering where to make their next investment. Not only that, but a review of business tax reliefs – which is estimated to yield close to another £4bn, could result in higher tax rates and a broader base. Not where most of the developed world is heading.
Yes to additional investment in public services and yes to fiscal credibility, but uncompetitive and complicated business taxes are not the way to deliver on it. Indeed, it’s not businesses that pay tax ultimately, it’s people in the form of lower wages, returns on investment (pensions) or higher prices.
In the pick n’ mix of tax options, there are some more positive options – the commitment to removing plant and machinery from business rates and “a review into reforming council tax and business rates and consider new options such as a land value tax, to ensure local government has sustainable funding for the long term.” (Things we like #1).
Infrastructure ups and downs
We are unequivocally positive about the commitment to retain the National Infrastructure Commission and focus it on how to build world classs digital infrastructure (things we like #2). But in contrast there is a risk of drift back to will ‘we, won’t we’ on big projects, namely airport capacity.
At an early opportunity we’d need to talk about how we move from welcoming the work done by the Airports Commission to a commitment to oversee the implementation of its recommendations in the next parliament re a third runway at Heathrow (things we need to talk about #2).
Then we get to the National Investment Bank and the National Transformation Fund - £250bn (or £500bn if they are two separate funds – I’m not clear) in lending power that will support everything from upgrading infrastructure to patient capital and SME lending. We’ve questioned the role of one single state-backed institution that can solve a myriad of financing needs from day one. So, we’d need to talk about (#3) joining up a worthy solution with more clearly definable financing problems in the UK.
There is something in the concept of a network of regional banks. We’ve long championed the need to increase competition in the provision of finance for SMEs, this is still an idea worth pursuing (things we like #3).
While we obviously like commitments to industrial strategy, including using the government’s purchasing power to build capacity in key industrial sectors and would welcome the fact that a Labour government would have trade policy and export support closely integrated with the strategy (all things we like #4), we don’t see the evidence for Sector Councils for all (things we need to talk about #4). There are some notable successes in bringing industry and government together, but we don’t believe ironing out sectoral barriers to growth is best done with a one-size-fits-all ambitions model.
However, a key cross-cutting strand of industrial strategy is the development of skills across the economy – something the manifesto has both a strong focus and fiscal commitment to – the link to industrial strategy could be more explicit. Anyway, I’ll let that go for now. Some of the detail is good - particularly ideas such as “teacher sabbaticals and placements with industry to encourage interaction between education and industry and introduce broad experiences into the classroom” and improving careers advice (things we like #5).
For sure any discussions with an incoming Labour government would include the apprenticeship levy, targets and the like. But we’d really need to talk about the price tag and the rationale for scrapping tuition fees (things we need to talk about #5).
You can find EEF's manifesto for manufacturing here.
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