Companies don’t vote – people do. Were it the other way round, Britain‘s election on Thursday would be even more difficult to call. Both the ruling Conservatives and the opposition Labour party offer businesses bad choices. On balance, capitalists may prefer the incumbent party – if only because it probably lacks the conviction to carry out many of its promises.
Labour wants to impose direct costs on companies, while the Conservatives favour indirect ones. A Labour government would bring higher corporation tax, a levy on executives who earn more than 330,000 pounds a year, and a much higher wage bill. The Conservatives would keep their existing promise to cut corporation tax but impose extra red tape including intervention on corporate takeovers and share buybacks, a bigger role for workers in board decisions and more disclosure on the gender pay gap.
Economically, there’s less in it. Labour will tax more but also spend more, including a 250 billion pound infrastructure programme that ought to add to growth and benefit companies selling diggers, concrete and construction services. Unless, that is, companies turn tail because of the extra tax and wage burden. Labour’s plan is also weakened by its leadership’s lack of experience in managing the economy.
Both manifestos contain poison pills. Labour proposes a financial transaction tax that would crush London’s ability to survive as a financial trading centre. Plans to nationalise energy, rail and mail services smack more of Venezuela than western Europe. The Conservatives will once again try to reduce immigration to below 100,000 a year, while also cutting spending on schools in real terms per pupil, according to an analysis by the Institute for Fiscal Studies – a recipe for worsening Britain’s talent shortage and its weak productivity. And neither party has given a clear sense of what would happen after Britain leaves the European Union.
There’s some good. Both parties are proposing that companies be forced to consider stakeholders – such as employees and suppliers – as well as shareholders. The Liberal Democrats, who have almost no chance of winning, have some of the best ideas. They have proposed taxing corporate revenue rather than profit – an intriguing way to stop companies shifting their accounting profit to low-tax jurisdictions – and introducing a land value tax that would offset some of the undeserved and unequal gains of property ownership.
As in other recent elections, free markets will be the losers. That’s no surprise. Pressure from shareholders hasn’t resolved issues over excessive pay, the lack of women in boardrooms, or the hardship and uncertainty faced by workers on zero-hours contracts. Assuming more intervention is unavoidable, businesses may prefer a Conservative victory – if only because the proposed meddling is so out of character and much of it will never see the light of day.
Commentary by John Foley, European editor at Breakingviews. Follow him on Twitter at @johnsfoley.
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