I know that most of us are getting fed up with the amount of stuff on TV and in the papers. There’s all the spin and bickering that goes on with it too.
It all gets a bit boring after a while.
Having said that I wanted to share my thoughts on the effect the election will have on UK business.
There is no doubt that the Conservatives have always been the business owners friend. They tend to opt for lower taxes and better tax breaks for businesses…on the whole.
Tax reductions for small business
For example, during their last term they reduced Corporation Tax rates for both smaller businesses and for larger businesses. This for me along with most business owners was a welcome reduction and good for business.
As another example, they have also given very generous Annual Investment Allowance for businesses too.
Vat rate increase!
However, if you look back to the beginning of their time in office, they did increase VAT from 17.5% to 20%.
This increase was justified, because at the time, the outgoing Labour Government had nearly bankrupted the country. So alongside the cuts, this increased tax was expected and whichever party had got in this change would have happened.
If we look at Labour though, they see things from a different perspective and are ‘Worker Centric’ rather than the Conservatives ‘Business’s Centric’. I’m not saying that looking after workers is a bad thing, but what I would say is, if you look after businesses, this in turn will help the workers.
This is a chicken and egg scenario, as one cannot work without the other. So who is more important, is it the business and the business owner or is it the employees within the business that are more important? I would say both and both need protection, but without business there would be no jobs.
Setting up business involves risk and hard work
Without taking the risk in the first place, plus the long days and hard work to set up a business from the outset, there would be no jobs.
This is not to say that employees are less important, but instead highlights the importance of rewarding businesses owners for taking that risk. That way they create jobs, as without this there would be none.
Also, by having better business tax breaks does create the opportunity for even more employment.
The anti-employment tax in my opinion is Employers National Insurance.. In Labour’s and Alistair Darling’s last Budget he increased National Insurance by 1% to 13.8%, which came into into effect in April 2011.
This of course makes it that much more expensive to employ people, which is why I was disappointed in the Conservatives for not reversing the change before it came in.
What if Labour Win the 2015 election?
However, if Labour win this time, there is a huge risk for business that National Insurance rates will increase yet again.
There is talk within their party of this very thing being called for by Labour members. Interestingly, the Conservatives have confirmed that they will bring in a law to say, there will be no increase in income tax rates, VAT or National Insurance in the next parliament.
The other alarming policy, which has only just been announced, is Labours policy on rent controls and land grabbing.
This feels like communism to me and not something that should be seen in a modern democratic society. I, like many business owners, have a property portfolio and to have the government start setting controls on this really goes against the grain. The market should set the rents, both good or bad, it didn’t work when they tried this in the 70’s, so don’t do it again.
Funnily enough, as I am writing this blog, Ed Milliband has just been on TV. He was being ask a question by a voter about the amount of borrowing the previous Labour Government did and was he sorry.
I was amazed at his answer, when he defended it by saying what they had spent it on. Usually, people learn from their mistakes, whereas in this case if they don’t see it as a mistake, there is no learning and they will likely do it again!
On balance, I think it is obvious that the Conservatives are the right vote for business, but also for the country and everyone else concerned.
A new conservative government that does not feel conservative
I have decided to review this post based upon some of the actions by the Conservative Party more recently. The first draconian change and one that they will ultimately have to reverse is the ‘Tenant Tax’. This tax is bonkers and they’ve got it totally wrong.
Renting property is a business and the tax treatment of interest should be treated as such. To only be allowed 20% tax deduction for interest will not work in the long run for landlords.
This policy was tried in Australia and Ireland and both had to reverse the policy, as it had a direct effect on rents. The same will happenin the UK, as the only way that landlords will be able to make this work is to increase rents. In which case tenants will lose out…hence the name ‘Tenant tax.’
As I write this, I think the effect is already happening and rents are rising already.
The other tax change that seemed against the norm for a Conservative Government, as the changes they made to dividends. This is against business, when they should be encouraging business.