The Tory manifesto has the appearance of a personal memo from the Prime Minister herself, vowing to make Britain “a great meritocracy” in which a strong economy can support world-class public services.
To achieve these objectives, Theresa May wants to strike a balance between low taxes, better regulation and continuity in international trade.
The Brexit effect
But above everything else, the Prime Minister has to convince voters she can negotiate an effective exit from the European Union. The manifesto confirms that the UK will no longer be part of the single market or customs union. The Tory negotiators will seek a “comprehensive free trade and customs agreement”, but their stance signals some serious re-engineering of tax and trade mechanisms on the horizon.
On the legal front, a great repeal bill will convert European legislation into UK law, so businesses and individuals can proceed as they are used to doing rather than being confronted with overnight changes to the country’s legal framework. The Human Rights Act will remain in place while the negotiations are conducted, but will be reviewed once the UK has left the EU.
Billions of pounds of new investments are promised in road, rail, air and broadband infrastructure “that businesses need”, along with commitments to support R&D and productivity. Turning to public services, an extra £8bn has been earmarked for the NHS and £4bn for education. With these sums going out of the Exchequer, the Tories still plan to make the UK tax regime more competitive, for example by cutting corporation tax to 17%.
The Conservatives will always be the party that keeps tax as low as possible and spends the proceeds responsibly.”
Spending commitments need to be paid for and the party’s social care proposals present one avenue for savings. The £100,000 asset threshold above which the elderly will have to pay for their care is arousing some controversy, but will also demand reforms to inheritance tax to make the mechanics work.
This summary takes an accountants’ eye view of the Conservative manifesto, highlighting the issues that are likely to have the most impact on the profession if the party wins a majority on 8 June.
The 2017 business policy proposals exhibit further tension between the Conservatives’ tradition of light-touch free-market economics (dismissed as “rigid dogma and ideology” in the manifesto’s introduction) and a more active approach to business regulation.
The proposals range from new rules on takeovers, pay and workers’ rights to corporate governance and takeovers:
- Companies will have to publish more details about their pay policies, particularly complex incentive schemes, and listed companies will have to publish the ratio of executive pay to broader UK workforce pay
- Executive pay packages subject to strict annual votes by shareholders
- A review of share buybacks to ensure they are not used artificially to hit performance targets and inflate executive pay
- Listed companies will need to bolster employee representation by nominating a non-executive board director from the workforce or create a formal employee advisory council
- Employees will get a right to request information relating to the future direction of the company
- Increase the National Living Wage to 60% of median earnings by 2020
- Beefed up takeover regulations to deter acquistions driven by “aggressive asset-stripping or tax avoidance”. The government will have the power to pause transactions and put promises made by takeover bidders on a legal footing
- Power, technology and other infrastructure companies will be subject to controls to ensure that foreign ownership not undermine British security or essential services
- 33% of central government purchasing will come from SMEs by the end of the Parliament
- Increase the amount levied on firms employing migrant workers as part of a crackdown designed to reduce net immigration to 100,000 a year
- More efficient regulation and £9bn in savings achieved through the Red Tape Challenge and the One-In-Two-Out Rule
- Implement the recommendations of the Taylor report on the gig economy to ensure that the interests of conventional employees, the self-employed and those people working in the ‘gig’ economy protected equally
- Extend auto enrolment by making such schemes available to the self-employed
- New aggregate investment funds open to public investors to increase the amounts invested in and by universities
- Support for shale oil exploration by relaxing planning laws to treat “non-fracking drilling” as permitted development. A new Shale Enviornmental Reglator will oversee the industry and a “national planning regime” will decide major planning decisions
- Increase the personal allowance for income tax to £12,500 and the higher threshold to £50,000 by 2020
- Stick with the planned cut in corporation tax to 17% by 2020
- Freeze on VAT rate, but significantly no mention of either income tax or national insurance in this context
- One-year national insurance holiday will be extended to businesses employing former wards of the care system, people with disabilities or chronic mental health problems, and rehabilitated convicts
- Manifesto promises to simplify the tax system, but not further detail is given
- Residents will be able to veto high increases in council tax via local referenda
Continuing a line that has been in play since 2010, the manifesto talks of “vigorous action against tax avoidance and evasion” in closing the tax gap and promises to go further with “tougher regulation of tax advisory firms” and a more proactive approach to transparency and misuse of trusts. Other proposals mentioned, but without further detail include:
- Tougher regulation of tax advisory firms
- Reduce online VAT fraud