This government’s objective is to build a Britain of opportunity for all. A vibrant, enterprising economy is fundamental to that mission. And the financial services industry, one of Britain’s most competitive sectors, is essential to our future prosperity.
The most important contribution government can make to business is to provide macroeconomic stability. When we came to power in 1997, inflationary pressures were mounting and the UK economy was on the verge of returning to the old boom and bust. Since then our challenge has been both to lock in that stability and promote reforms to foster growth.
Our Competition Act has introduced one of the most pro-competition policies in the world. For banking and financial services, the Financial Services Authority is now, for the first time, required to facilitate competition – with a new scrutiny role for the competition authorities. A higher degree of enterprise calls for higher levels of investment and entrepreneurship. That requires the right tax environment. Corporation tax has been cut from 33p to 30p for large companies, and from 23p to 20p for medium-sized firms. To encourage and reward new business investment, we have cut the long-term rate of capital gains tax from 40p to 10p.
The government has been particularly active in fostering the venture capital industry – the largest in Europe. British venture-backed growth companies are proven job-creators. To help institutional investors invest in early-stage VC, we are taking forward a UK high-technology fund and nine regional venture capital funds to invest in early-stage high growth businesses which have historically found it difficult to raise finance.
The government’s positive engagement in Europe has made sure London remains its finance capital. Our approach to the single currency is based on Britain’s national economic interest, not dogma. And by pressing for economic reforms in Europe we have ensured Britain is at the heart of the growing financial services market in Europe.
The choice at this election is clear: between a government committed to fostering enterprise, investment and stable growth and a Tory party whose irresponsible approach to the public finances would send us right back to the bad old days of boom and bust.
- Stephen Timms, financial secretary to the Treasury
This election campaign is in danger of becoming a contest between competing public expenditure plans. But the only money that governments have is what they extract in taxes from businesses and employees.
The lesson that Labour has still not learnt is that a world class economy requires a low burden of tax and red tape.
Instead the government is trying to ‘converge’ in the European Union model of high business taxation and regulation. It is no coincidence that during the past four years Britain has slipped down the international competitiveness league table, from 4th to 9th place.
These figures do not include the effect of the £1bn climate change levy, which is complex and anti-competitive.
Meanwhile the tax system gets more and more complicated – which is good news for accountants such as myself I suppose, but bad news for businesses trying to cope with a bewildering array of reliefs, penalties, tapers and credits. The working family tax credit makes every business a social security office and a tax collection office. This needs action, and soon.
We will have a business-led, independent Deregulation Commission with the power to block proposals and refer them back to parliament for separate debate and vote.
Regulatory costs will be independently calculated. Each government department will have to reduce its regulatory burden year by year. The climate change levy will go. So will IR35, which could only have come from a government with no business experience.
The DTI, which has grown by 53% since 1997, will be pruned back hard to pay for cuts in business taxes. These will include a £200m a year cut in small business rates. Our 6p per litre reduction in petrol and diesel tax will start to reverse Labour’s crazy policy of making our fuel the most expensive in Europe.
And we will keep control over economic policy. That means keeping the pound, which will also save businesses the £36bn cost of converting to the euro.
- David Heathcoat-Amory, shadow secretary of state for Trade & Industry
Liberal DemocratsLiberal Democrats in Finance Bill and economy debates throughout the last Parliament led the argument for reducing such complexity.
While our most well-known tax policies at this election are for some modest tax increases to fund spending, we are also campaigning for major reform to undo the damaging legacy of Gordon Brown’s tinkering.
Britain’s economy is in many ways at its most robust in decades. Independence for the Bank of England – long advocated by the Liberal Democrats alone – has been a major contributor to greater macro-economic stability. Inflation and growth have now been reasonably steady for several years and unemployment continues to fall.
Yet excessive complexity of tax is a serious microeconomic error. The Lib Dems’ key proposal is to change the whole process of passing new tax laws. The present system prevents sensible consultation and scrutiny.
Lib Dems would radically reduce the size of the annual Finance Bill, limiting its contents to the major tax policy changes. All other tax changes would be made through a new legislative process, subject to a long and open consultation process and proposed as infrequently as possible.
Principles of the Tax Law Rewrite Project would be imbedded from the start. The key aim would be to take party politics out of debates about technical matters.To relieve burdens on business elsewhere Lib Dems have identified 25 areas of legislation that require reform or abolition. We would also replace the working families tax credit with an equivalent payment by DSS so that employers did not have to administer it – saving them around £100m a year.
We would abolish IR35 and allow ‘one person companies’ to function and develop. We would stop abuse by closing the ‘Friday night to Monday morning’ loophole (where people leave work as an employee on Friday and return to do the same job on Monday as a one-person company) by targeted legislation along the lines suggested by the Professional Contractors Group.
Finally we would replace the climate change levy with a carbon tax – on a revenue neutral basis – which would reduce regulatory burdens on employers.
- Edward Davey, Liberal Democrat Treasury spokesman
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