With the UK election in ten days’ time, the manifestos launched by the two main opposition parties, is causing concern in the financial district (known as the ‘City’) of London.
The Liberal Democrats opened the first door on the economic policy, reiterating their commitment to stop Brexit and adding measures such as reserving a role on corporate boards for workers’ representatives. There were also eyebrow-raising taxes, such as making frequent fliers pay more in order to combat climate change.
Following the Lib Dems, it was the Labour Party’s turn. Aside from the party’s radical plans to nationalise rail, mail, water and the internet, the ‘City’ looked on in fear as the party pledged it would introduce a financial transaction tax, measures to increase the amount paid for both capital gains and dividends, and a threat that corporations not meeting environmental standards could be delisted from stock exchanges.
Condemnation of the more extreme proposals, particularly Labour’s, was swift. But one question being asked was why, in the areas where business broadly seems to agree that there is need for reform such as corporate governance and green investment, do opposition parties seem to be giving them the cold shoulder? Many in financial services were happy about the general election to break the long-going deadlock in Parliament, if only to nudge the Brexit process towards some kind of resolution – which would go a long way to restoring the battered international perception of the UK as a centre for commerce.
Director of Policy at the Institute of Directors (IoD) – which represents board members and other businesspeople – Edwin Morgan, said: “People from foreign governments do say that the last few years have affected the UK’s reputation as somewhere that is stable, a good place to do business and a good place to invest.”
Even though most of the financial district expects the Conservatives to win the election and is pleased that the party leads in the polls, Morgan was diplomatic in his characterisations of both Labour and the Lib Dems’ policy proposals.
He noted that IoD members broadly support initiatives to reduce their companies’ environmental impact.
He said: “Our members support decarbonisation; 90 per cent who did our survey a couple of months ago said they saw it as part of their responsibility as a director to aid in tackling climate change. He added that the IoD’s members, “want a very clear plan”, before outlining the area of divergence with the Labour party’s proposal. “What we don’t want is, ‘These are good companies, these are bad companies – we are going to call you out’. It will inevitably be arbitration and subject to political mood.”
Morgan had some praise for the Lib Dems’ policy of requiring fund managers to show whether their portfolios are consistent with the 2016 Paris Agreement terms, which include keeping annual rises in global temperatures below two degrees Celsius above pre-industrial levels.
Head of research for neoliberal think-tank the Adam Smith Institute, Matthew Lesh, criticised the apparent unwillingness of the two opposition parties to consider financial services’ needs and abilities: “It doesn’t seem both parties are really interested in harnessing the City’s potential when it comes to investing in infrastructure or green energy.”
Reforming corporate governance is another core topic for the IoD’s membership, said Morgan. While he applauded the fact that both Labour and Lib Dems are drawing attention to the composition of corporate boards, he was wary of viewing their proposals to appoint worker representatives on board as a panacea. He cited examples of where it did not work at times.
For some, the prospect of a Labour-Lib Dem coalition is a better outcome than a majority for either party. There is an overlap in the two parties’ policies, such as increases in the amount of capital gains taxes. The concern for many in the ‘City’ is that even if they were spared the nightmare scenario Lesh warned could occur under Labour – mass liquidation of UK assets and a run on the pound – under a coalition, the two parties’ views is perhaps too different to reconcile.
Stuart Adam, senior research economist at the Institute of Fiscal Studies, pointed to the Lib Dems’ proposals such as raising income tax by 1 p for all payers and the frequent fliers tax, and said: “Things like that are fairly across the board. If you look at Labour’s policies three-quarters of their tax-raising measures are taxes on companies and shareholders.” (The author is our foreign correspondent based in the UK. He can be reached at email@example.com)