A new agenda for Britain?

Great Britain goes to the polls for a snap general election on 8 June 2017.  For all parties, campaigning takes place against the unprecedented background of Brexit and the associated negotiations, adding a new element to a number of the manifesto pledges.  Although many commentators are predicting a win for the Conservative party, there are various key themes in each of the three main parties' manifestos.  Labour's proposals, aimed at a "fairer Britain", include plans to renationalise four important industries and is seen by many as a return to Labour's traditional high tax, high spend approach.  The phrase "fairer Britain" is also echoed by the Conservatives but would be achieved through economic strength and prosperity.  The Liberal Democrats' offering is pitched as a programme for a credible opposition rather than for government itself.  

This briefing highlights the key points to be aware of in areas likely to impact anyone who does business in the UK or is likely to do so.

Digital economy

While all the parties make commitments to broadband, Wi-Fi, mobile coverage and R&D, they vary in the degree to which they emphasise innovation, with digital industry featuring more centrally in Liberal Democrat and Conservative policy.  Any business looking to benefit from digitalisation will be interested in the Conservatives' commitment to launching a new £23 billion National Productivity Investment Fund, which will include £740 million of digital infrastructure investment and £250 million in skills by the end of 2020.  Also relevant are the Conservatives' commitments to superfast broadband under the Universal Service Obligation, to which every home and business in Britain will have access by 2020; enhanced fibre infrastructure; extended mobile coverage of 95% of the UK by 2022; better Wi-Fi; more spectrum for private sector use; and roll-out of new 5G network providing cover for most of the population by 2027.  

Labour commits to delivering universal superfast broadband by 2022 and intends to instruct the National Infrastructure Commission to report on how to roll out "ultrafast" (300Mbps) across the UK within the next decade.  In a similar vein, the Liberal Democrats commit to investing to ensure that broadband connections and services have a speed of 2 Gbps or more by 2020, with fibre to the premises (FTTP) as standard and unlimited usage by 2020 across the whole of the UK and priority delivery of "hyperfast" broadband to SMEs.  In fact more help for SMEs comes by way of their intention to double the number of such enterprises participating in the digital economy by supporting ICT capital expenditure by business in non-digital sectors.

Labour also commits to improving mobile internet coverage and expanding provision of free public Wi-Fi in city centres and on public transport, improving 4G coverage and investing to ensure all urban areas, as well as major roads and railways, have uninterrupted 5G coverage.

The Liberal Democrats pledge to develop provide high-quality apprenticeships backed up with new sector-led national colleges and a national skills centre to match skills and people, with coding as part of the national curriculum in England, and promise to create a new retail and business strategy to look at the impact of new technology on jobs in key sectors.

Employment and pensions

With the Brexit negotiations one of the main issues in the election, all three parties have promised to preserve current EU-based employee protections at the point at which the UK leaves the EU. The Conservative party does, however, acknowledge the right of Parliament to repeal EU laws post-Brexit and that could extend to employment laws, although none are specifically mentioned.

Employment status can take various forms, particularly with the rise of the gig economy, and all three parties are committed to taking action to ensure workers have the proper protections. What form this will take is likely to tie in with the report of the Taylor review into modern employment practices which is due to report this summer.  There are wide-ranging promises to offer employees new rights, particularly in relation to leave. Although no detail is given at present, the Conservative party is proposing new statutory rights to carers' leave (expected to be unpaid) and child bereavement leave as well as a new right to request leave for training to all employees. The Liberal Democrats are proposing an additional month's paid paternity leave.  

Labour has pledged not to raise income tax for those earning less than £80,000 pa, the corollary of which is higher rates for those earning above that amount, with the 45% rate kicking in at a much lower level, and a new 50% rate for the highest earners. To curb what they describe as "excessive pay", Labour also proposes a levy for employers paying individuals over £330,000. The Conservatives have not ruled out income tax and NIC rises as they did in 2015, but do pledge to continue raising the personal allowance and thresholds at which the higher rates take effect.

With mental health issues a growing concern in the workplace, the Conservative party plans to amend the Equality Act protections to cover discrimination for mental health conditions that are "episodic and fluctuating". Employers will also be expected to offer greater support to employees with mental health issues.

All three parties are proposing extensions to the current regulations on pay reporting. The Conservatives and the Liberal Democrats intend to require large employers to publish information on the pay gap for employees from different ethnic backgrounds, with the Liberal Democrats also proposing an extension for LGBT+ employees. The Labour party is proposing civil enforcement measures to ensure compliance with the gender pay gap reporting requirements.  In the light of the BHS pensions debacle, both the Conservatives and Labour are unsurprisingly proposing new powers to protect pension arrangements in the event of certain corporate activities.

As a wider point, questions remain about the impact of Brexit on the UK workforce.  The Conservative party has placed emphasis on technical education and training to boost the capacity of the domestic workforce, but has not guaranteed the rights of the existing EU workforce, planning also to cut net migration to below 100,000 and proposing to increase the cost of employing workers from outside the EEA.  The Labour party has "guaranteed existing rights" for EU nationals but pledges to end freedom of movement.  The Liberal Democrats will address the risk by "fighting a hard Brexit" and, like Labour, guaranteeing the rights of EU workers in the UK.  

For more details on the proposals see here.

Energy

Both Labour and the Conservatives have expressly acknowledged the importance of the North Sea oil and gas industry, with Labour vowing to protect vital North Sea assets, while the Conservatives also promise to support the upstream industry, including the development of a "world-leading" decommissioning industry.  However, there is a stark difference in approach to shale gas.  Both Labour and the Liberal Democrats intend to ban "fracking".  The Conservatives, on the other hand, are focused on getting a shale gas industry off the ground in the UK, with a number of significant initiatives announced in their manifesto: further reforms to the planning regime; changes to the proposed shale wealth fund so that more money is paid to local communities, including individuals; and the creation of a new shale gas regulator.

As mentioned below, nationalisation of key utility infrastructure lies at the heart of Labour's election manifesto.  It is intended that in the longer-term, all electricity and gas distribution and transmission infrastructure will be brought back into State ownership.  In addition, Labour wants to create publicly-owned "locally accountable" energy companies and co-operatives to compete with private energy companies.  The rising cost of energy is cited as a key reason for these radical proposals.  As a short-term measure, Labour also intends to introduce an emergency energy price cap for consumers.  Both the Conservatives and the Liberal Democrats see increased competition in the energy market, as well as energy efficiency, as key to addressing concerns about rising energy costs, although the Conservatives have also tabled a "tariff safeguard cap" for consumers.  The Conservatives have also avowed a review of how utilities and transport infrastructure is regulated, to achieve greater cost efficiency.

All three parties pledge support for renewables, but the approach taken is very different.  Labour's manifesto contemplates a target of 60 % of energy to come from renewable or low-carbon energy sources by 2030, and this is to be achieved by support for renewables (with express reference to tidal lagoon projects), nuclear power and emerging technologies, such as carbon capture and storage.  Similarly, the Liberal Democrats intend to meet the 60 % target, as well as set new legally binding targets to reduce net greenhouse gas emissions by 80 % by 2040 and to zero by 2050.  These ambitious targets are to be attained by a plethora of green policies, including: more funding for renewables; a new British Housing and Infrastructure Development Bank; restoring incentives for solar PV and onshore wind; support for "cutting edge" technologies such as carbon capture and storage, energy storage, offshore wind and tidal (including an express reference to the Swansea Bay tidal lagoon project); and building new electricity interconnectors.  Interestingly, the Liberal Democrats also contemplate that nuclear is to be a part of the energy mix but on the basis of "no public subsidy for new build".

The Conservatives consider that cost is of paramount importance when planning the UK's future energy mix.  Their manifesto announces an independent review into the "Cost of Energy" tasked with making recommendations for minimising the UK's energy costs while ensuring a reliable supply and meeting the UK's 2050 carbon reduction objective.  It appears that the Conservatives are reserving their position on future role of specific technologies – there is no specific reference to expensive technologies such as nuclear and tidal lagoon, although there is a commitment to offshore wind and confirmation that no support will be given to onshore wind in England.

Post-Brexit, both Labour and the Liberal Democrats are committed to maintaining access to Euratom, with Labour also prioritising continued access to the internal energy market.

Infrastructure

For the first time in a generation, the visions of the main political parties as to how the UK's infrastructure should be owned and managed has become an election issue.  "New Labour" had enthusiastically embraced the concept of private ownership of public infrastructure, actively pursuing a policy of opening up the provision of public services to private entities through, for example, public private partnerships (PPPs) and outsourcing arrangements.  However, the Labour party manifesto completely changes this direction of travel. Not only does it promise to bring the railways back into public ownership as franchises expire, or by taking advantage of franchise review and break clause provisions in franchise agreements, it also commits to returning the health service to public control by repealing the Health and Social Care Act 2012, to "in-sourcing" public and local council services, and to replacing the regional private companies in the water sector with a network of regional publicly-owned companies. Other commitments include extending the Freedom of Information Act 2000 to apply to private sector companies which run public services and no further building of private prisons or privatising any prisons which are currently publicly owned. The Conservatives, on the other hand, commit to continuing with their programme of investment in strategic transport projects – including High Speed 2, Northern Powerhouse Rail and the expansion of Heathrow Airport. The Liberal Democrats pledge support to Crossrail 2, High Speed 3 and the Transport for the North strategy, but remain opposed to any expansion of Heathrow, Gatwick or Stansted airports. 

But how will all of this be paid for? There have been warnings from the Conservatives that Labour's figures do not add up, and certainly Labour's plans to renationalise the rail and water industries, and to reverse privatisation in the NHS, would require an eye-watering amount of money to be borrowed. In terms of expenditure on infrastructure investment, all three parties recognise that access to investment capital – particularly in a post-Brexit world, presumably without access to European Investment Bank lending – will be crucial. The Conservatives propose the creation of UK sovereign wealth funds, known as "Future Britain" funds, in which pension funds will be encouraged to invest.  (At the same time, the Conservative manifesto broadly confirms intentions to impose new controls on inward investment in critical UK infrastructure, including telecoms, defence and energy).  Labour's leaked draft manifesto had included a reference to setting up a "National Infrastructure Bank, financed with an injection of initial public capital which will be leveraged using additional private sector finance to give £250bn of lending power over the next decade".  However, the final version of the manifesto referred instead to a "National Transformation Fund" which would "invest £250 billion over ten years in upgrading our economy" with no mention of private sector finance.  The Liberal Democrats commit to  providing £5 billion of initial capital for a new British Housing and Infrastructure Development Bank, using public money to attract private investment for housebuilding, broadband, schools, hospitals, rail, road and renewable energy.

 
Many parts of the Conservative manifesto impact on listed companies, from plans for reducing immigration and keeping taxes "as low as possible" (including continued reductions to the corporation tax rate and a review of business rates) through to industrial strategy and proposed protections for workers.   In terms of specifics on M&A and corporate governance for listed companies, the key headline areas are increased intervention in takeovers, restraint on executive pay, and listening to employees.  While some of the proposals on mergers and takeovers are not new, others are more radical and have the potential to affect transactions – for example, giving the Pensions Regulator powers to clear with conditions or even, in extreme circumstances, stop deals that threaten the solvency of pension schemes.  Another potentially significant idea is that of "pausing" a takeover bid to allow greater government scrutiny but, as is typical of manifesto pledges, many are vague and raise more questions than answers.  On executive pay, the Conservatives will require a "strict" annual vote on pay packages but it is not clear exactly how this would compare with the current advisory vote. Listed companies will also be required to publish the ratio of executive pay to broader UK workforce pay.  Proposals for listening to employees are unchanged from the Green Paper on corporate governance issued in November 2016, with a range of options for taking account of the views of stakeholders, including employee representation at board level.  In addition there is a somewhat vague notion of a right for employees to request information relating to the future direction of the company. 

Labour's pledges likely to impact listed companies include proposals to increase corporation tax, roll out sectoral collective bargaining, reduce the gap between boardroom pay and pay for others (including the levy on "excessive pay" mentioned above) and for infrastructure investment.  Overall, its focus is on delivering shared wealth and increasing security and equality at work.  With regard to sharing wealth, Labour proposes to amend company law so that directors owe a duty to employees, customers, the environment and the wider public.  As with the Conservative Party manifesto, the commitment is vaguely worded; it is not clear, for example, how directors would balance the competing interests of these groups or indeed what is meant by the wider public.  In terms of security and equality at work, businesses identified as "systemically important" would be required to have a clear plan in place to protect workers and pensioners when a company is taken over, although details are scarce.  Labour also plans to introduce a "right to own" so that employees would be given a right of first refusal when a company is put up for sale.  This is a radical proposal and, in the event of a Labour victory, it will be interesting to see how this would operate in practice.  

For business generally, the Liberal Democrats have a number of proposals ranging from plans for capital investment, reversing the recent corporation tax rate reduction and scrapping future reductions planned by the Conservatives, through to pledges to set a genuine living wage and expand apprenticeships.  Promoting employee engagement and involvement is seen as key, with headline pledges which include giving staff in listed companies with over 250 employees a right to request shares to be held in trust for the benefit of employees, permitting German-style two-tier board structures and reforming general duties of directors to ensure that other considerations such as employee welfare can  be "fully included" in decisions made by directors.  Diversity will be encouraged, with a minimum target of 40% women on boards of FTSE 350 companies, implementing the Parker review recommendations on the ethnic diversity of boards, extending the Equality Act to companies with over 250 employees and requiring them to monitor and publish more data.  The Liberal Democrats also see transparency as important.  As well as a pledge to make larger employers publish the numbers of employees paid less than the living wage and the ratio between top and median pay, they promise to reduce the threshold for the reporting requirement for disclosure of shareholdings in the biggest companies down to 1%.  There is no explanation of what benefits beyond transparency as an end in itself that this latter change is intended to bring.  

Real estate and construction

For far too long, housing has been largely overlooked in UK national elections, placed firmly in the "too difficult" pile.  This election is different: housing is now a key topic and the manifestos contain some eye-catching proposals to increase the supply of new homes.

The section of the Conservative manifesto dedicated to housing is short, covering just under two of its 84 pages.  This is not surprising given that the government has only recently published its Housing White Paper (albeit to mixed reviews).  But what it lacks in quantity, the manifesto makes up for in its clear break with the Cameron/Osborne legacy of promoting owner-occupation "passionately" above all else, and relying exclusively on the private sector to deliver housing.  This continues the theme of the Housing White Paper, but takes the theme much further.

The manifesto repeats the Tory commitment from 2015 to deliver one million homes by the end of 2020, and adds a broadly consistent further five hundred thousand homes by the end of 2022.  It also repeats the 2015 commitment to release enough government land to build 160,000 houses (a target not currently being met).  Finally, it repeats the commitments from the 2016 Autumn Statement to a National Productivity Investment Fund, which will include funding for housing.

However, now, as well as a commitment to deliver the reforms set out in the Housing White Paper, there is an acknowledgement that supply will never match demand without the participation of "social and municipal housing providers", and encouragement is given to "ambitious, pro-development and local authorities" which will be helped to build more social housing by way of "Council Housing Deals".  

Labour has said that it will build over a million new homes by 2022, of which at least 100,000 will be for "genuinely affordable rent or sale", and has pledged a new generation of new towns.  The Liberal Democrats have set an ambitious target of 300,000 new homes per year – almost double the current level.  

As well as the question mark over funding (considered above), questions remain over where the skilled workforce to build these houses will come from.  The risk of a Brexit-triggered skills shortage is of major concern within the construction industry.   

Other sectors

All parties propose a number of measures relating to Britain's industrial and commercial landscape.  Unsurprisingly, a stronger and more prosperous nation, underpinned by a modern industrial strategy, is the aim of any future Conservative administration (as this was the central part of their strategy as set out in the recent White Paper).  Their proposed focus is on industries of strategic value (car and aero manufacturing; financial services; life sciences; the digital economy; creative industries) together with renewed support for the more traditional area  of shipbuilding.  All parties express a wish to promote trade, although how they do so – and, indeed, the extent to which they can - will depend heavily on the Brexit negotiations.  Despite their proposals for new inward investment controls (see above), the Conservatives pledge to minimise barriers to trade and investment generally and they will seek to replicate all existing EU free trade agreements and global trading arrangements too.  A Trade Bill is proposed for the next Parliament.  A new export culture, including in the agriculture sector, will be encouraged through a reinstated Board of Trade.  Clearly, the ability to deliver this is heavily dependent on the outcome of the Brexit negotiations in which tariffs and customs may well be significant issues.  Labour and the Liberal Democrats agree on the need to retain the benefits of the single market and the Customs Union while at the same time committing to preserve employment and social rights and environmental protections, in Labour's case through an EU Rights and Protections Bill.

Both Labour and the Liberal Democrats include proposals which will impact the food and drink sectors, namely pressing ahead with the "sugar tax" (the Soft Drinks Industry Levy) recently passed into law by the current government, and imposing more stringent advertising and labelling requirements in an effort to increase health and reduce obesity.  The Liberal Democrats, in particular, intend to target the tobacco and drinks industries through a tobacco levy and minimum unit pricing for alcohol.  Supply chains are mentioned specifically by Labour and the Liberal Democrats.  Both pledge to extend the remit of the Groceries Code Adjudicator, with potential implications for the food sector, and Labour would seek to increase corporate accountability for abuses generally.  The Conservatives see competition within markets as a key means of keeping prices low and driving innovation and are promising further market reforms, coupled with enhanced powers for regulators, in order to support this.  Those in the retail sector should note their proposals to bolster consumer rights, specifically when shopping online and through a general promise to make terms and conditions clearer. 

Labour has again proposed the introduction of a "Robin Hood" tax, akin to stamp duty, on transactions involving shares, bonds and derivatives which is likely to be hugely unpopular within the City. The Conservatives had withdrawn the UK from European plans (currently in abeyance) to introduce this type of financial transactions tax over fears that it would damage financial trading in the City.

Summary

One thing which the manifesto pledges have in common is that they lack detail and in many cases will require significant consultation which might result in substantive changes.  In any event there is no certainty that everything which the post-8 June government has promised will be put forward given the likelihood that Brexit and trade deals will take priority in terms of Parliamentary time.