City to pay for election manifesto promises
With just a week to go before election day, the manifestos of the main parties offer up real choice to the electorate for the first time in years
Which side does the electorate prefer? According to the latest published YouGov poll, commissioned by The Times, the Conservatives may lose 20 of their 330 seats, so we could be heading for a hung parliament. Will Theresa May pull off her gamble to call a snap election? The logic seemed sensible; strengthen Britain’s hand ahead of expected choppy Brexit negotiations ahead. However, these are nervous last days and both the EU Referendum vote and the election of Trump are an uncomfortable reminder that the unexpected happens, and has happened. Political uncertainty is the new norm.
Deep dissent, increasing disenfranchisement, accusations of ‘fake news’ and the unabated movement for deglobalisation continues. Corbyn has been surprisingly strong. While flaky on Labour’s manifesto economics, his broader societal messages and his ‘ordinary bloke of the allotment like you’ persona are resonating. The strapline “working for the many” not the few has indeed worked.
Predictably, injections into the NHS and social care, promises to curb immigration, and an expansion of house building programmes have featured prominently in all manifestos.
Apart from the Lib Dems, Brexit has been somewhat de-emphasised in the debate.
The proposed fiscal burden would fall differently, reflecting the different political stances. The Conservative Party would continue its path of financial probity, but with slightly eased plans to now eliminate the national deficit three years later, by 2025. Labour is promising a bold programme of nationalisation of the National Grid, Royal Mail, train operators and water companies, a £50bn spending spree – big on infrastructure investment commitments, but less convincing on financial soundness. How will this be funded, or borrowed? What is clear, however, is that it is intent on punishing the City.
But, what impact would the manifestos have for the square mile and beyond?
Conservatives: Traditionally the friend of the City, there is less preference this time round, with the Prime Minister playing the “Great Meritocracy” card to counter the Labour campaign. Interestingly, it is not just Labour that is attacking City workers, who will also suffer under Conservative proposals to make businesses pay more to hire foreign workers.
In addition, the now infamous, quickly dubbed the “dementia” tax, proposals that would have captured anyone with more than £100,000 of assets, including the value of their home, to contribute to their social care, were quickly modified. Furious backtracking – no ‘cap’ and undertakings to carry out wider consultation – failed to stem the instant narrowing of their poll lead. The Conservative campaign faltered, a huge miscalculation which did not chime sincerely with the ‘meritocracy’ campaign message.
Labour: There is a clear attack on “excessive pay”. Those earning more than £123,000 would face a newly introduced 50% tax rate, while those workers earning more than £80,000 would pay a 45% tax rate. However, The Institute for Fiscal Studies (IFS) has questioned whether these proposals would yield the £4.5bn Labour anticipates. A new “excessive pay levy” on firms paying staff more than £300,000 would also be imposed and corporation tax increase up to 26% in the next parliament.
Also, deeply unpopular in the City and dubbed the new Robin Hood tax in what is also being claimed is a tax on savers, are proposals to raise £4.7bn extra by changing levels of stamp duty levies on shares, though it would also damage the global competitive position of the City.
Liberal Democrats: Not only do the Lib Dems want to give Britain a second vote on Brexit but they’ve clearly thought through the logistics of withdrawal and acknowledge that the City of London is Europe’s financial capital and must retain its full rights – and equivalence and level playing field in EU financial markets.
The City is about geographical domiciles, both for people, especially the tech and ‘gig’ worker crowd, and companies and their bricks and mortar registrations. There is nothing in any manifesto to limit the damage done in recent years to erode the attractiveness of London as a place to conduct business and live and work. The fears among EU nationals – many of whom are providing the City tech wizardry, living and working in London following the Brexit vote remain. Whoever wins, the election outcome will strengthen Britain’s Brexit negotiating hand. Despite the reassuring undertakings made to this community, insecurities will persist as we enter tough EU negotiations ahead
During recent political campaigns, large companies haven’t been hesitant about voicing their concerns. Talk is easier than the reality of upping sticks. We’ve seen scare noises before about possible relocation, but the fact is London still retains its global competitive edge, albeit there is no room for complacency.
Readers will recall that RBS used this relocation tactic during the Scottish Independence vote. Of course, Scotland voted to stay in the Union at that time, but there was a sour after-taste left regarding the effect on the vote from the deployment of these ‘fear’ tactics during the electoral campaign.
Interestingly, Labour have proposals to break up RBS to create new local banks, plus a string of other proposals to ensure more inclusive banking. Perhaps, there is also a political sub-text to dilute the political influence of larger financial institutions?
Britain – a tale of two+ cities?
The City already sits at odds with mainland Britain, and even the rest of relatively affluent London, seen increasingly as an offshore tax and property investment centre. The vilification of the City, especially the bashed ‘fat cat’ bankers, is nothing new and always regarded as fair game for fiscal picking. It wasn’t so long ago that former Chancellor Gordon Brown imposed a swingeing windfall tax on banks.
However, the fact is, London still leads most global financial indexes and innovation, a record continuing with the new generation of City fintech and mobile money disruptors.
Financial and professional services employ over 7% of the UK workforce, produce nearly 12% of total economic output, contribute over £65bn in taxes and generate a trade surplus of over £70bn. Foreign companies have invested over £100bn into the UK financial series sector since 2007, more than in any other sector. Unsurprisingly, there has been radio silence on this on the campaign trail, but this contribution and wealth isn’t lost on the party faithful bean counters, given the boring task of estimating the cost of electoral promises. How else can the sums tally? Expect City coffers to be plundered.
Follow MRM for further in-depth political commentary.
Melanie Worthy, Head of Public Affairs, MRM