The document has had a mixed reaction from the public, industry experts and organisations.
One of the most contentious policies is the rise of corporation tax to 26pc (it will be a lower 21pc for businesses with an annual turnover under £300,000). The tax would be staggered over the next three years. It’s hoped that this will raise £23.7bn within five years.
However, the evidence is that slashing corporation tax actually boosts government coffers.
The Office for Budget Responsibility (OBR) says that cutting corporation tax from 28pc to 19pc in 2017 boosted revenue from £40.1bn to £57.6bn. However, the Institute of Fiscal Studies (IFS) says that, since then, the reduction in the headline rate has cost the Treasury £13bn.
The IFS said: “Corporation tax revenue has increased since 2010 even while the headline rate has been cut. But that does not mean that rate reductions have increased revenue. Much of the rise in revenue since 2010 is simply recovering from the effects of the financial crisis and recession. We would have expected a recovery in profits even if the corporation tax rate had not been cut.”
Critics also argue that the proposed increase in capital gains tax will harm investors who want to put funding into start-ups. This in turn could hinder the growth of young companies.
What’s evident is that Labour’s plans have raised plenty of questions. Let’s review what industry experts had to say about some of their other policies relating to small businesses.
‘We will tackle late payments, including banning late payers from public procurement’
Paul Christensen, CEO at fintech Previse, said:
“Labour putting the late payments issue on its political agenda is certainly a welcome step in the right direction, but the party’s pledge to achieve this by banning late payers from public procurement is not the right approach.
“Previous punitive measures have failed to have the deterrent effect intended. More importantly, in this day and age with machine learning as advanced as it is, invoices can be paid the moment they are received – something the most progressive corporates are already doing”.
Federation of Small Businesses (FSB) National Chairman, Mike Cherry, said:
“The cast-iron commitments to end the late payment crisis and ban late payers from public procurement processes are critical, but light on detail.”
Rights for the self-employed
‘We will 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’
Mike Cherry said:
“There are good proposals here to help our 4.9 million-strong self-employed community. Specific commitments to reform the Universal Credit system so that it works for the self-employed, improve access to mortgages and pensions, as well as end late payments will all be cheered.”
Replace business rates with commercial land value tax
‘A Labour Government will review the option of a land value tax on commercial landlords’
Mike Cherry said:
“It’s right that the Labour manifesto acknowledges the pain that business rates cause, however we have serious doubts about a commercial land value tax as a suitable replacement.
Edwin Morgan, director of policy at the Institute of Directors, said:
“The vast majority of business leaders are on board with Labour’s ambitions of tackling climate change and injecting dynamism to all parts of the country. The next Government must tap this resource, not alienate it. 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.
“Labour’s plans to boost prosperity nationwide by improving local support for growing enterprises, expanding the Apprenticeship Levy and removing quarterly reporting requirements for small firms will sit well with business leaders. But many directors will have reservations that Labour’s state-first plans for the economy could crowd out rather than crowd in private enterprise.
“Labour’s approach on corporate governance is frequently insightful but almost always one-sided. It’s absolutely right for Labour to seek improvement to how British businesses are run and to look abroad for new policy ideas.
“But attempts to reform UK corporate governance must start from the recognition that our present system is an asset to the economy and is admired and imitated throughout the world. They can’t continue to ignore the clear potential downsides of headline policies such as Inclusive Ownership Funds.”
Corporate tax relief
‘We will reform the inefficient system of tax reliefs’
Phil Hall, head of public affairs & public policy at AAT said:
“The Labour Party commitment to reviewing the hundreds of corporate tax reliefs that account for over £400bn in forgone revenue every year makes absolute sense.
“Many of these reliefs work well and provide important incentives for particular types of behaviour but others don’t work well, in fact some don’t work at all and should therefore be scrapped or amended.
Entrepreneur’s Relief is a good example of the need for reform as there’s now an overwhelming body of evidence to suggest that the relief is not achieving its policy objectives, that it’s extremely expensive, misguided and ultimately ineffective.”
Full terms of the Labour Party review will be published within a month of Labour entering office and the Labour Party states it will report after six months.
‘Ending bogus self-employment and creating a single status of ‘worker’ for everyone apart from those genuinely self-employed’
Julia Kermode, chief executive of The Freelancer & Contractor Services Association (FCSA), said:
“FCSA welcomes Labour’s promise to protect the UK workforce particularly in its pledge to end bogus self-employment and create a single status of worker for everyone apart from those genuinely self-employed in business on their own account.
“Employment status is complex; all employers should treat their workforces properly so that exploitation cannot happen and it is unacceptable that some workers do not enjoy minimum rights or protections.
“Umbrella businesses are a great example of treating workers well as they provide contractors with greater job stability along with all 84 statutory employment rights, whilst also giving them the flexibility to work for numerous different end-clients.
“Unfortunately, there are increasing numbers of tax avoidance schemes which aggressively target contractors, luring them into dubious arrangements which put innocent workers at significant financial risk – these schemes must be stopped. With the gig economy on the rise it is important that policymakers act to protect the vulnerable and precarious while not unfairly penalising genuinely self-employed people who are important contributors to the UK economy.”
Introduce Real Living Wage
‘We will bring in a Real Living Wage of at least £10 per hour for all workers’
Mike Cherry said:
“And while Labour has pledged to support the many small firms that will inevitably struggle with its proposed rapid increase to the National Living Wage, it’s stopped short of saying exactly what that support would look like. It should start by increasing the £3,000 discount on national insurance bills that small employers receive through the Employment Allowance.”
‘We will further help small businesses by increasing the amount that can be transferred to non-levy-paying employers to 50pc and introducing an online matching service to help levy-paying businesses find smaller businesses to transfer their funds to’
Mike Cherry said:
“Where apprenticeships are concerned, increasing the transfer cap for non-levy paying businesses to 50pc and introducing an online matching service are good moves. The party should ensure that – through its Green New Deal initiative – it doesn’t end up being too prescriptive in this space.”
We’ll publish a run-through of general election policies once all of the party manifestos have been released