Business leaders and investors expressed alarm at the Labour party’s manifesto, voicing concerns over policies that would lead to higher corporate and wealth taxes, forced nationalisation and mandatory employee ownership.
Party leader Jeremy Corbyn on Thursday renewed his attack “on the tax dodgers, the bad bosses and the big polluters”, as he promised a new levy on multinationals to raise up to £6.3bn every year and an increase in corporation tax from 19 per cent to 26 per cent at a cost to industry of £23.7bn.
At an individual level, Labour said it would tax capital gains at income tax rates, reverse cuts to inheritance tax, impose VAT on private school fees and introduce a second homes tax.
These taxes, the party said, were aimed at “the super-rich, companies who have benefited from tax cuts since 2010, the City, multinationals who hide their profits in tax havens, and those who have benefited from the forest of tax reliefs that have sprouted up with barely any scrutiny”.
But experts warned that the policies might deter investment, and push higher earners abroad. “There are some pretty radical policies in there that would scare investors. As an investor, I would be very nervous [of a Labour government]. Foreign investors would be concerned about whether Britain would be a good place to do business,” a UK-based global asset manager said.
Adam Marshall, director-general of the British Chambers of Commerce, said businesses would welcome proposals to reform skills funding, upgrade infrastructure and review business rates but rejected Labour’s approach. “Command and control isn’t the way,” he added. “Excessive intervention in business governance and sweeping tax rises would suppress innovation and smother growth.”
Taxation of multinationals, including large US tech groups, would cover the £6.9bn it would cost to operate a fibre network over 30 years, Labour claimed, as it confirmed it planned to nationalise parts of BT in a drive to link every house and business in the country to ultra-high speed broadband by 2030. It would also look to nationalise Royal Mail, and bring other sectors — rail, water and energy — back into public ownership “to end the great privatisation rip-off”.
One telecoms executive, who did not want to be named, said the raid on BT “would be a bulldozer through a broadband market that is already ripe with competition and billions of pounds worth of private investment”. He added: “A state-run Corbyn monopoly would suffocate the choice people have today and the service they receive.”
Another executive at a large UK-based group said the “extreme Labour leadership” has sent “a cloud of fear over investment in the UK”.
Labour said that it would impose a requirement that a third of seats on boards are reserved for elected worker-directors, to give employees more control over executive pay.
Large companies would have to ensure up to 10 per cent of their share capital is in the hands of employees. Holders of the shares would have dividend payments capped at £500 a year with any excess paid into a climate apprenticeship fund.
“Taking a 10 per cent ownership in all big businesses would have quite a profound impact on the market,” said one UK fund manager.
The Investment Association said: “While these proposals may sound inclusive, there is a risk that they lead to the dilution of current investors’ shareholdings. Ordinary savers and investors could face being short-changed.”
Hamish Sandison, chair of Labour Business, a membership group affiliated to the party, said a Labour government would pay a “fair price” under its nationalisation programme, and added that the employee ownership scheme was at a “broad brush proposals” stage.
But the Pensions and Lifetime Savings Association, which represents workplace pension schemes in the UK, said it was seeking urgent clarification from the party over its nationalisation plans and was looking for assurances that if in government it “would pay the full value for any companies it seeks to nationalise and not jeopardise people’s pension savings”.
Senior executives in the City also raised concerns over the impact of a new financial transactions tax that Labour estimates would raise £8.8bn, with plans to extend stamp duty across currency and derivates trading.
“A tax on financial transactions would be bad for business, bad for investors, bad for savers, and bad for the economy,” said Miles Celic, chief executive of TheCityUK, a lobby group for the financial services sector.
Edwin Morgan, director of policy at the Institute of Directors, said there was too much “stick” and not enough “carrot” in the manifesto. He noted there were “clear potential downsides” to some of the headline policies in the manifesto, such as employee ownership.
