The UK economy ground to a halt in the three months leading up to the end of October, official data show. The political parties competing in Thursday’s high-stakes general election are promising to fix that — but the impact of their policies is far from certain.
“It’s impossible to say, under any serious economic model, under which party’s manifesto the economy would do better,” Paul Johnson, director of the nonpartisan Institute for Fiscal Studies, recently told reporters.
This has a lot to do with the complex choice voters face. Should the Conservatives and Prime Minister Boris Johnson win a majority, the United Kingdom is expected to push ahead with a “hard” Brexit deal that could harm the economy. Johnson has also sworn to negotiate a detailed agreement on future terms of the United Kingdom’s relationship with the European Union in just one year. If he can’t get a deal in time, Britain would face significant new trade barriers with its largest export market.
The alternative is even more alarming for some businesses and investors. Jeremy Corbyn’s Labour Party has promised to raise corporate taxes, empower unions and give 10% of companies’ shares to their workers. A Corbyn government would also nationalize key utilities, including water, energy infrastructure, railways and broadband. In the eyes of the business community, those plans offset the party’s well-received pledge to give UK citizens a chance to cancel Brexit.
“If there were a Labour-led government, you get the potential positive from its Brexit policies, but you get the negatives from its very anti-business policies,” said Ruth Gregory, UK economist at Capital Economics.
Here’s where the Conservatives and Labour stand on top issues affecting business and the economy.
Boris Johnson’s Conservative Party
- Taxes: The Conservatives have pledged not to raise income tax rates. They have also vowed to cancel a corporate tax cut scheduled for 2020 that would have lowered the rate businesses pay to 17% from 19%. Under the Conservatives’ plans, taxes will rise £3 billion ($4 billion) by fiscal year 2023, according to IFS.
- Spending: The party would increase day-to-day spending on public services by £3 billion ($4 billion) above current plans by fiscal year 2023 and boost outlays for longer-term projects by £8 billion ($10.5 billion), per IFS. The Conservatives are pledging to spend more on the National Health Service, to increase funding for schools and to hire more police officers.
- Brexit: The Conservatives have committed to “get Brexit done.” That means pushing the agreement Johnson negotiated with the European Union through parliament so the country can leave by January 31. The structural changes caused by Johnson’s deal are expected to diminish the country’s economic prospects over the longer run. Johnson has also vowed not to extend a December 2020 deadline to define the terms of Britain’s new relationship with the bloc. That raises the risk that the United Kingdom could be left without an agreement to protect trade.
Jeremy Corbyn’s Labour Party
- Taxes: Labour is proposing £78 billion ($103 billion) in tax rises by fiscal year 2023, according to IFS. The party has pledged to increase income taxes for those earning more than £80,000 ($105,300) a year. It would also raise the corporate tax rate to 26% from 19%, and impose a tax on financial transactions. Additionally, Labour would raise taxes on capital gains and dividends.
- Spending: The party would increase day-to-day spending on public services by £98 billion ($129 billion) by fiscal year 2023, per IFS. That includes pay hikes for public sector workers, abolishing university tuition fees, raising funding for the National Health Service and rolling out free prescriptions. Investment in longer-term projects, such as a green infrastructure program and building new hospitals and schools, would double to £55 billion ($72 billion) per year.
- Business policies: Labour would mandate that one-third of corporate board seats be reserved for worker representatives who would have a say on executive compensation. It also would require large companies to set up “Inclusive Ownership Funds,” allowing for up to 10% of the company to be controlled by employees, who would receive dividend payments.
- Labor policies: Labour has pledged to achieve an average 32-hour workweek within a decade, and to expand collective bargaining by sector across the economy, increasing the number of Britons whose pay would be negotiated in talks between unions and management. It would also raise the minimum wage to £10 ($13) an hour.
- Brexit: Labour wants to strike a new exit deal with the European Union that would maintain a closer relationship with the bloc than proposed by the Conservatives. The party would then put that agreement up for a public vote against the alternative of stopping Brexit altogether.