There was a time when political parties, going into an election, used to promise tax cuts, not increases, and then not deliver them.
The late John Smith has gone down in history as the British shadow chancellor, or finance minister, who wiped out the Labour Party’s comfortable lead in 1992 by threatening to increase the top rate of income tax from 40 per cent to 50 per cent and let John Major, then the Conservative leader, take power.
Labour’s Denis Healey’s promise to squeeze the rich “until the pips squeak” was followed by 10 years of leadership by the Conservative prime minister Margaret Thatcher who promised to cut taxes – and did.
Three weeks from the UK election on June 8, there is not a promise of a tax cut in sight – quite the opposite. Both major parties are almost competing to see which of them can be the least business friendly. The Labour leader today, Jeremy Corbyn, proposes to increase the rate of corporation tax, which the former Conservative chancellor George Osborne had cut to 18 per cent, to 26 per cent or even more.
He is also promising a “fat cat” tax on banks, businesses (and football clubs) who pay their executives more than £300,000 (Dh1.4 million) a year, and a levy of 5 per cent for anything over £500,000.
For the record, the bosses of Britain’s FTSE 100 companies are paid an average of £5.5m each a year.
Mr Corbyn also says he will bring another million “rich” middle-class people into the top rate of tax by cutting the starting figure for the 45 per cent top rate to £80,000 a year (from £150,000) and put the money raised into the National Health Service.
He can of course threaten – or promise – what he likes. He is running so far behind in the polls that the only question is how big the Conservative Tory landslide will be.
On the other hand, the current prime minister, Theresa May, is running so far ahead that she doesn’t much care what she promises either. On Monday, she astonished the business community by proposing the “greatest extension of rights and protections for employees by any Conservative government in history”.
Her manifesto, which will be published over the next few days, will commit to more rights for “gig economy” workers (those not on fixed hours), and promise employees up to a year off to care for a family member or in cases of child bereavement.
"The Conservative Party has always been the true party of those workers," she wrote in the Financial Times, causing old Thatcherites such as the former Tory chancellor Nigel Lawson to gasp in astonishment. There was a time when the Tories were the voice of business. Now, says Mrs May, they are "the unashamed voice of ordinary working people once again". Economic historians are still ploughing through the records to discover when the last time was: a professor at the University of London, Tim Bale, reckoned it might have been the second administration of Benjamin Disraeli in the 1870s.
Mr Lawson, who cut the top rate of tax from over 70 per cent under the Wilson and Callaghan governments to 40 per cent, welcomed Brexit as “the chance to finish the job that Margaret Thatcher started”. Mrs May doesn’t see it like that. She proposes to guarantee all the protections that workers currently enjoy under EU rules. The manifesto will also include a pledge that the minimum wage, which many businesses hate, will increase in line with inflation and require worker representation on company boards.
Senior company executives this week complained bitterly about her “business-bashing” attitude, including her implicit accusation that employers are to blame for what she calls the “injustice of racial pay disparities”. The manifesto is expected to include a pledge to broaden disclosure rules on the gender pay gap to include information on ethnicity – yet another pointless regulation.
No matter. Big business may not like her, but the markets do.
The FTSE 100 index hit a new all-time high this week, keeping pace with international markets that are shrugging off cyber-attacks, North Korean missile launches, scepticism over the US Trump government’s fiscal policy and an ominous slowdown in Chinese economic growth.
“The continued success of British business in dependent on a strong economy,” says Mrs May, “which the strong and stable leadership of a Conservative government can provide.”
It is also dependent on companies being allowed to incentivise their top managers, control their costs and enjoy more, not less, freedom from red tape and unnecessary regulations.
“Mayism” is proving very different to “Thatcherism”.
Ivan Fallon is a former business editor of The Sunday Times and the author of Black Horse Ride: The Inside Story of Lloyds and the Financial Crisis.
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