Event: Grant Thornton Election 2015 Business Debate

14 April 2015

Speaking at Grant Thornton’s Election 2015 Business Debate were:

  • Conservative Skills and Equalities Minister Nick Boles
  • Shadow Business Secretary Chuka Umunna
  • Liberal Democrat Business Secretary Vince Cable
  • UKIP Immigration and Financial Affairs Spokesperson Steven Woolfe

The event, which was hosted by Grant Thornton LLP, was chaired by Bloomberg TV News Anchor Anna Edwards.

Summary

Introductory remarks

Opening proceedings, Mr Boles stressed that his party wished to continue to build on the economic successes seen in the last Parliament. He stressed the need to invest in infrastructure like HS2, Crossrail and London airports. 

He also said that the Conservatives would introduce 3m new apprenticeships, lower Corporation Tax and support research and universities.

Following, Dr Cable also pointed to the success of the economy in the past few years, and cited the industrial strategy as evidence of the Coalition’s long-term focus on skills and innovation.

In addition, Dr Cable noted the restructuring of investment banks as an example of the work done to increase economic stability, and also made reference to the British Business Bank and consumer-to-consumer lending.

He stressed the need to increase productivity and thus wages, and called for an improvement in the quality of apprenticeships.

His party would build on the Catapult programme, he said, and emphasised the need for Britain to be open to the world and to remain part of the EU.

Mr Umunna stressed that Labour was about jobs, and said that business would create jobs rather than the state.

The party’s manifesto, he said, focused on ensuring public finances were brought to a state of balance and debt cut. He emphasised the need to reduce debt repayments, and stressed that all Labour’s manifesto commitments were properly costed and would ensure that the deficit fell each year.

Secondly, he said, Labour would keep the country in the EU to ensure the current account balance remained strong, though the party recognised a reform role. He also pointed to the benefits the EU provided in international trade negotiations.

He stressed the need to improve vocational qualifications and reform the financial services sector.

More action was also needed when it came to infrastructure, he said.

However, he also emphasised the value of continuity and building consensus, and added that, were he to be in Government following the election, he would maintain stability.

Following, Mr Woolfe highlighted his experience in finance in a pre-recorded message, and suggested European regulation was damaging to the UK.

He argued that it was best for Britain to be out of the EU, which would allow for greater freedom and more trade. The UK had no impact in the EU, he said, and argued that the cost of the EU was similar in spirit to tariffs.

He stressed that help was needed at the top and the bottom of society, with a 35 per cent tax rate between £42,000 and £55,000 and the scrapping of Inheritance Tax.

Borrowing and the budget

Following, Ms Edwards cited research by Bloomberg Intelligence suggesting that Labour’s plans could lead to £100bn more borrowing and questioned Mr Umunna about his party’s commitment. 

Responding, Mr Umunna rejected this statistic, but stressed the need to tackle the number of people in low paid work.

He noted that the stagnation of wages had impacted tax revenues, and businesses needed to be encouraged to pay more.

Those earning the most would also need to pay more in tax, he added.
    
No commitments made in the Labour Manifesto, including those concerning capital expenditure, would require more borrowing, he said, and everything in the party’s manifesto was fully costed. He cited analysis from the Institute for Fiscal Studies (IFS) to this effect.

Ms Edwards then questioned Mr Boles on his party’s extension of the Right to Buy, and how this policy would be funded. He replied that this would be achieved through the sale of the most valuable council housing holdings. 

Mr Umunna, however, suggested that around £20bn of spending commitments made by the Conservatives were not funded.

Following, Dr Cable said that the cuts to spending in his department had demonstrated the potential for savings. However, he also argued that certain areas, such as adult skills, had been cut too much.

He noted that the Coalition had pointed to the structural deficit as something to control. Some degree of increased taxation or cuts would be needed, he said.

However, he argued that borrowing for capital investment was not necessarily bad, and suggested that considering borrowing in the aggregate was unhelpful.

He pointed to the cheap cost of Government borrowing and thus suggested it could play a particularly useful role.

Mr Boles defended his party’s record, noting the investment it had protected. However, he claimed that for the sake of intergenerational justice it was wrong to increase debt too greatly.

Mr Umunna said the deficit from the last Government had been the result of the recession.

He noted that former Labour Chancellor Alistair Darling had matched the Conservatives’ actual achievements, and said that if Mr Osborne made the cuts he had suggested, the impact on public services could be damaging.

Tax avoidance

Turning to the issue of tax, Lombard Risk Management CEO John Whisby asked about the distinction between tax evasion and tax avoidance and noted a “blurring” in the rhetoric of many politicians. He called for greater clarity.

Responding, Mr Umunna acknowledged the difference between avoidance and evasion, and criticised “egregious” avoidance.

He argued that the deficit in trust in UK business meant that firms needed to pay more and do their duty as members of the community.

Constituents were often angered by such issues due to a perceived inconsistency, he said, and more trust was needed.

Expressing agreement, Mr Boles said it was important for large companies to pay their way as ordinary individuals did.

He recognised the distinction between evasion and avoidance, but queried “aggressive” tax avoidance. The Coalition Government had clamped down on big global corporations, he said.

However, Ms Edwards suggested the distinction had blurred.

Dr Cable said this was inherent, and the behaviour of those who perverted the aims of tax rules to avoid tax was wrong and needed to be tackled. He too critiqued “abusive” avoidance.

He noted the scandal concerning the revelations surrounding HSBC.

Further, he stated that it would now be possible for HMRC to crack down on people avoiding tax aggressively.

He also pointed to the desire among small businesses to have a better system that fairly taxed larger companies.

Mr Umunna said the distinction between avoidance and evasion could be unclear to the layperson, but was clear to advisers.

Combining National Insurance and Income Tax

Following, Jas Bowman Finance Director Sean Fox suggested that combining National Insurance and Income Tax would be effective.

However, Dr Cable said that National Insurance linked to the amount paid for provision such as pensions, and thus the two levies could not be neatly integrated.

Further, taking such different structures and combining them often led to odd results, he added.

He noted the success of raising the threshold for Income Tax, but also warned of the expensive involved in simultaneously tackling National Insurance.

Mr Boles said that this suggestion was unlikely to be a Conservative Party policy. He suggested that, while superficially attractive, the idea was expensive and hard to implement. 

He suggested that the benefits would not be sufficient at a time when the overarching policy aim was to bring down borrowing and spending.

Mr Umunna also agreed with these sentiments. 

Hung Parliaments and party interests

Following on, a member of the audience asked how the parties would prioritise the economy over party interests in a hung Parliament.

Dr Cable said that his party had already demonstrated its ability to do this, and that role of the Liberal Democrats involved moderation of the two major parties.

This could come through coalition, backbench support or constructive coalition, he added.

Mr Umunna contended that a majority was better than a coalition. He suggested that his party’s decision to remain part of the EU had been evidence of its ability to prioritise economic priorities over the hay to be made on the issue of immigration.

He dismissed the idea that Britain was constantly overruled in Europe, and said that the record of the country had tended to be much stronger. He suggested the Northern European countries were looking to Britain for more leadership.

Mr Boles noted the constructive work done as part of the Coalition, but also said that such governments were not popular. He suggested his party had a strong edge due to the losses  Labour would make in Scotland, meaning it would only be able to form a Government with the SNP.

A Conservative majority was thus the only option, he said.

Dr Cable said that the greater concern was a minority Government, and argued that one-party politics would decline.

Asked about “red lines” for potential coalitions, Mr Boles said his party would continue to maintain low Corporation Tax, reduce regulatory burdens and help businesses, but refused to outline specific limits for a Coalition.

Dr Cable also said he had no red lines, but emphasised the significance of the Industrial Strategy and noted concerns over cuts to adult skills and the consideration of withdrawing from the European Union.

Following, Mr Umunna also dismissed talk of red lines and said that an EU referendum would create more instability.

Labour would keep the country in the EU, he said.

Entrepreneurship

Following, Protocol Education’s Stephen Lawrence asked what the panellists would do to stimulate entrepreneurialism. 

Mr Boles said that he had set up two businesses and a charity, and noted the lack of understanding in Government of the difficulties companies faced in tackling complex systems.

The Conservatives would continue to cut regulation and do what was necessary, he said.

This had contributed to the growth of businesses out of the recession, he added.

Mr Umunna cited the “British dream” and called for more respect for small businesses. He said that a shift was needed when it came to cultural attitudes to business failure.

He also argued that more work was needed to ensure banks supported small businesses. He welcomed increased competition, and said that more must be done but sources of alternative finance were needed.

He also said that small businesses should have their tax burden reduced. On the regulation side, he agreed with Mr Boles, but said it was not simply the quantity but the quality of regulations that was the issue. He also called for greater clarity.

Dr Cable called for big investors, a start-up culture and support during the middle stages of growth. He stressed the need to increase access to equity and capital.

Questioned about the importance of this funding, Ms Edwards noted research by Grant Thornton suggesting funding was now less of a concern for middle-sized companies.

However, Dr Cable noted that the lack of venture capital in the country was an issue for these firms.

Ms Edwards then asked about investment in infrastructure in areas such as transport and broadband.

Mr Boles noted Britain’s high rural broadband coverage due to the Coalition’s investment programme.

He acknowledged that the Government had needed to rely on BT for this, but noted the wider coverage and suggested this could help contribute to growth nationally.

Skills gap and migration

A member of the audience who worked for a software company asked about how to increase technology skills standards, and emphasised the conversion of skills into practical skills, as well as raising the issue of hiring from non-EU markets.

Dr Cable argued that the skills gap would be the greatest constraint to growth, and stressed the value of senior apprenticeships and the Digital College.

The UK faced a shortage of software engineers, but graduates who studied software engineering also had high levels of unemployment due to poor teaching in universities relative to employees’ needs.

He said that the system for non-EU migrants needed to be made more flexible.

Mr Umunna pointed to a general lack of digital skills, and said the needs of employers would be met through technical degrees. He noted the work done by Jaguar Land Rover and the University of Warwick in this area.

He also called for greater improvements in basic numeracy and literacy. 

Accusing Theresa May of being the most anti-business Home Secretary in years due to her anti-immigration rhetoric and the decline in Higher Education, he called for a more “sane” and “rational” immigration approach. 

Legitimate students should not fall within the migration cap, he said, and it would make sense to allow these students to take up jobs in the UK when they were needed.

However, Mr Boles noted the high number of people still coming to the UK as foreign students.

He added that the root problem was young children not acquiring the skills they needed. The Government had now introduced coding at the primary level, he said, alongside the English Baccalaureate to ensure that young people had English, Maths and Science. There had been an increase in the number taking physics, he said.

However, he rejected the need to abolish A-levels, though it was important to ensure people were aware of the choices they made.

Taxation of wealth

Another question came from the audience suggesting that the taxation of wealth needed to receive more attention, rather than the taxation of income.

Dr Cable agreed with the general proposition, and welcomed the taxation of assets. He cited the example of Capital Gains Tax on property value appreciation.

He also said that, where high-value properties were undertaxed in Council Tax, more needed to be paid. Some progress had been made, he said.

Mr Umunna, however, said this would be difficult due to the new round of valuations needed. He stressed that he did not want to increase the tax burden, but payments needed to be made.

Mr Boles said some interventions had been made to tackle this. However, he suggested there were myths around property tax. He said that the UK had one of the highest rates of property taxation through Stamp Duty.

He rejected the need to increase tax on assets, and stressed the need to cut overall tax payments through an efficient tax system.

Ms Edwards then suggested that the proposed Mansion Tax represented a tax on the South of England.

However, Mr Umunna said that even in his constituency the number of people affected would be small.

Those who did not fall into the 40p tax rate would only pay a levy when the assets were exchanged, he said.

Mr Boles noted that Scottish Labour Leader Jim Murphy had suggested it would be used to fund the NHS in Scotland.

He suggested that the Liberal Democrats had withdrawn from this policy due to the cash bill the Mansion Tax would impose.

Dr Cable noted the tax would affect a small number of properties. However, Mr Boles said that changing the tax boundaries would suck more people in.

Mr Umunna said the threshold would be raised in line with average increases in house prices.

Productivity

Turning to the issue of productivity, Ms Edwards asked Dr Cable what could be done to encourage the business community to invest more.

Mr Umunna pointed to the Industrial Strategy as a basis for investment and stability.

Labour’s proposed Energy Security Board would allow long-term direction for renewables, Mr Umunna suggested.

He stressed the need for a productivity boost in the UK.

Mr Boles suggested that the higher productivity seen in the UK compared to France was due to higher unemployment in the latter nation.

Further, he argued that the decline in productivity in oil and gas and financial services was responsible for the UK’s figures.  This was the big challenge, he said.

However, Dr Cable said that some parts of the UK economy performed well in terms of productivity.

Part of the problem, he said, was that SMEs did not export enough. He called for British business to be more outward-looking.

Madhav Bakshi, Political Analyst
Madhav Bakshi
Political Analyst

Madhav Bakshi is a Political Analyst within DeHavilland’s Editorial Team and leads on Energy policy. He is a graduate of King’s College London, where he studied International Politics.