Economy & Business

 
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Build an economy that works for you.


Britain needs an economy that creates jobs and opportunities. The Conservative’s actions risk our future, relying on debt to prop up growth. We will build an economy that works for the long term: prosperous, green, and fair.

We will invest in innovation, people and infrastructure - building homes, modernising schools and hospitals, and developing hyperfast broadband and transport networks. We will support entrepreneurs and researchers to thrive in a vibrant knowledge-based economy.

OUR PLAN FOR THE ECONOMY

Boost the economy with a major programme of capital investment aimed at stimulating growth across the UK.

Control the national debt by eliminating the day-to-day deficit and then only borrowing to invest.

Double innovation and research spending across the economy in the long term.

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Liberal Democrats reject the Conservative Government’s damaging and irrational commitment to run budget surpluses on both capital and revenue, which imposes completely unnecessary deep cuts in spending and limits the scope for much-needed capital investment. But we have no intention of just throwing away our hard-fought efforts to control the deficit during the Coalition years. Liberal Democrats will therefore commit to eliminating the deficit in day-to-day spending by 2020. This means we will be able to keep debt as a share of national wealth falling through the Parliament, unless there is a recession. Once we have brought current expenditure into balance we will ensure that overall public spending grows roughly in line with the economy. This means that we can improve key public services and provide them with the investment they need.

A long-term stable economy requires more than just discipline over spending. It requires us to invest in people, innovation and infrastructure in order to give our economy the opportunity to remain competitive for the future. The Conservatives have failed to take advantage of historically low interest rates to borrow for the investment that would create jobs now and prepare us and our economy for the future.

Liberal Democrats will therefore commit to a responsible and realistic £100 billion package of additional infrastructure investment. This will prioritise:

  • New direct spending on house-building to help build 300,000 homes a year by 2022.
  • A programme of installing hyper-fast, fibre optic broadband across the UK.
  • Capital investment in schools and hospitals to support capacity increases and modernisation.
  • Significant investment in road and rail infrastructure, including a continued commitment to HS2, Crossrail 2 and rail electrification.
  • Additional funding to bring more private investment into renewable energy.
  • £5 billion of initial capital for a new British Housing and Infrastructure Development Bank, using public money to attract private investment for these priorities.

We will ensure that the National Infrastructure Commission takes fully into account the environmental implications of all national infrastructure decisions. We will also devolve significant infrastructure spending to local areas.

Our investment in new infrastructure is matched by our commitment to protecting vital public services, including the NHS and Education. We will make the difficult decisions needed to ensure our NHS is protected for the long term and that children are given the opportunities they need to succeed. We will therefore commit to:

  • Increasing spending on the NHS and social care, using the proceeds of a 1p rise in Income Tax. This will be paid by taxpayers in England, Wales, and Northern Ireland, and the revenue will be ringfenced for spending on NHS and social care services in England, with the appropriate share also being transferred to Wales and Northern Ireland. This taxation will be neither levied nor spent in Scotland. There will be a commensurate 1p increase in dividend taxation which is a UK-wide tax. The receipts of this will be similarly earmarked, with Scotland also receiving its share.
  • Protecting the education budget in real terms per pupil from early years to age 19.
  • End the 1% cap on pay rises in the public sector, and uprating wages in line with inflation.

The Conservative pursuit of Hard Brexit will have serious impacts on the UK’s national finances – impacts which current government plans may not fully take into account. Liberal Democrats would choose to pursue a very different European policy, and therefore would expect a better financial situation.

We will initiate a Spending Review after the General Election focusing on delivering efficiency, funding proven spend-to-save initiatives, pursuing local and community integration to drive efficiency, and investing in technology to get public services and frontline staff online.

Traditional indicators of economic activity such as GDP are poor guides to genuine prosperity and wellbeing. We will therefore introduce a National Wellbeing Strategy covering all aspects of government policy, including health, housing and environment.

In order to balance the books and build a sustainable economy for the future we must ensure that everyone pays their fair share. Liberal Democrats have a longstanding commitment to fairer taxation, and in government we raised the personal allowance for Income Tax. It remains our ambition to make taxes fairer and simpler, to help those on low and middle incomes, and to ensure that those on the highest incomes, and large international companies, make a fair contribution. We will:

  • Aim in the long-term, and as resources allow, to raise the employee National Insurance threshold to the Income Tax threshold, while protecting low earners’ ability to accrue pension and benefit entitlements.
  • Ensure those with the highest incomes and wealth are making a fair contribution. We have identified a series of distortions, loopholes and excessive reliefs that should be removed. These include reforms to Capital Gains Tax and Dividend Tax relief, and refocusing Entrepreneurs’ Relief. We would reverse a number of the Conservatives’ unfair and unjustified tax cuts, including:
    - The cutting of Corporation Tax from 20% to 17% - Capital Gains Tax Cuts - Capital Gains Tax Extended Relief - The Marriage Allowance - The raising of the Inheritance Tax Threshold
  • Take tough action against corporate tax evasion and avoidance, including by:
    - Introducing a General Anti-Avoidance Rule, setting a target for HM Revenue and Customs to reduce the tax gap and continuing to invest in staff to enable them to meet it. - Reforming Corporation Tax to develop a system that benefits the smallest companies while ensuring the biggest multinationals cannot avoid paying sums comparable to nationally-based competitors. We will consult on shifting away from a profits-based tax to one that takes account of a wider range of economic activity indicators, such as sales and turnover. - Reviewing the Business Rates system, prioritising reforms that recognise the development of the digital economy, lessen the burden on smaller businesses, and ensure high streets remain competitive. We will also consider the implementation of Land Value Taxation.
  • Conduct a full-scale review into the burden of taxation and spending between generations to ensure that government policy promotes fairness between generations.

As well as the need for public infrastructure investment, the role of entrepreneurs and small businesses in delivering a thriving economy is fundamental. Liberal Democrats believe there is a vital need for access to finance for new businesses, and those wishing to scale up. Creating true competition means allowing new businesses to rise and challenge established companies. There are also many well-established small businesses and traders which form the backbone of local economies. Our priority in supporting entrepreneurs and small businesses is to ensure that they have access to the funding they need, and in particular long-term (and patient) capital. We will:

  • Expand the activities of the state-owned British Business Bank, enabling it to perform a more central role in the economy by tackling the shortage of equity capital for growing firms and providing long-term capital for medium-sized businesses.
  • Create a new ‘start up allowance’ to help those starting a new business with their living costs in the crucial first weeks of their business
  • Support fast growing businesses seeking to scale up, through the provision of mentoring support.
  • Review business rates to reduce burdens on small firms, and make them the priority for any future business tax cuts.
  • Reform the Regulatory Policy Committee to remove unnecessary regulation, reduce regulatory uncertainty, and support new markets and investment, particularly in low-carbon and resource-efficient innovation.

In the knowledge-based economy of the future, scientific research, innovation and skills will be crucial to prosperity. The advent of robotics and increasing artificial intelligence will also change the nature of work for many people. The government needs to act now to ensure this technological march can benefit everyone and that no areas are left in technology’s wake. We will:

  • Protect the science budget, including the recent £2 billion increase, by continuing to raise it at least in line with inflation. Our long-term goal is to double innovation and research spending across the economy. We would guarantee to underwrite funding for British partners in EU-funded projects like Horizon 2020 who would suffer from cancellation of income on Brexit.
  • Build on the Coalition’s industrial strategy, working with sectors which are critical to Britain’s ability to trade internationally, creating more ‘Catapult’ innovation and technology centres and backing private investment in particular in green innovation.
  • Develop the skilled workforce needed to support this growth with a major expansion of high-quality apprenticeships including Advanced Apprenticeships, backed up with new sector-led National Colleges. We will develop a national skills strategy for key sectors, including low-carbon technologies, to help match skills and people.
  • Invest to ensure that broadband connections and services to be provided before 2020 have a speed of 2 Gbps or more, with fibre to the premises (FTTP) as standard and an unlimited usage cap by 2020 across the whole of the UK. SMEs should be prioritised in the rollout of hyperfast broadband.
  • Aim to double the number of SMEs participating in the digital economy by supporting ICT capital expenditure by businesses in non-digital sectors.
  • Build on the success of Tech City, Tech North and the Cambridge tech cluster with a network across the UK acting as incubators for technology companies.
  • Create a new retail and business strategy to look at the impact of new technology on jobs in key sectors.
  • Commit to build digital skills in the UK and retain coding on the National Curriculum in England.
  • Support growth in the creative industries, including video gaming, by continuing to support the Creative Industries Council and tailored industry-specific tax support, promoting creative skills, supporting modern and flexible patent, copyright and licensing rules, and addressing the barriers to finance faced by small creative businesses.
  • Invest in the future – supporting innovative technologies including the space industry.

Most businesses recognise the long-term value in treating their employers decently and developing their skills. However, there are still too many examples of unscrupulous employers who perpetuate bad practice, which not only exploits workers but can also undermine the competitive position of good employers. This has to change if we are to give everyone a decent chance of earning a living and move towards a more productive economy. We will:

  • Encourage the creation and widespread adoption of a ‘good employer’ kitemark covering areas such as paying a living wage, avoiding unpaid internships and using name-blind recruitment to make it easier for customers and investors to exercise choice and influence.
  • Establish an independent review to consult on how to set a genuine Living Wage across all sectors. We will pay this Living Wage in all central government departments and their agencies, and encourage other public sector employers to do likewise.
  • Extend transparency requirements on larger employers to include publishing the number of people paid less than the Living Wage and the ratio between top and median pay.
  • Modernise employment rights to make them fit for the age of the ‘gig’ economy, looking to build on the forthcoming Taylor Report
  • Stamp out abuse of Zero Hours Contracts. We will create a formal right to request a fixed contract and consult on introducing a right to make regular patterns of work contractual after a period of time.
  • Strengthen enforcement of employment rights, including by bringing together relevant enforcement agencies and scrapping employment tribunal fees.

Too many people justifiably feel left behind. Liberal Democrats believe that it is vital that everyone is given a stake in our economy, that we can only be united and competitive as a country if the rewards are reaped by all.

A well-functioning economy which works for everyone cannot be based solely on companies owned by and operated on behalf of a small groups of shareholders. It should seek to foster a diversity of types of business, including encouraging alternative models such as mutuals, social enterprises or community interest companies.

In all cases, it is vital to ensure the engagement and involvement of employees; successful businesses work for all stakeholders. That is why we will:

  • Encourage employers to promote employee ownership by giving staff in listed companies with over 250 employees a right to request shares, to be held in trust for the benefit of employees.
  • Strengthen worker participation in decision-making, including staff representation on remuneration committees, and the right for employees of a listed company to be represented on the board. We will change company law to permit a German-style two-tier board structure to include employees.
  • Reform fiduciary duty and company purpose rules to ensure that other considerations, such as employee welfare, environmental standards, community benefit and ethical practice can be fully included in decisions made by directors and fund managers.
  • Reduce the reporting requirement for disclosure of shareholdings to 1% in order to increase transparency over who owns stakes in the biggest companies.
  • Require binding and public votes of board members on executive pay policies.

It is a scandal that in Britain today there are 1.7 million people without a bank account, 8 million experiencing problem debt and 40% of the working-age population who have less than £100 in savings. To tackle the problem of financial exclusion Liberal Democrats will:

  • Take forward the recommendations of the House of Lords Select Committee on Financial Exclusion, in particular by expanding the Financial Conduct Authority’s remit to include a statutory duty to promote financial inclusion as one of its key objectives.

Prosperity is very unevenly spread across the nations and regions of the UK. The prospect of Brexit, including the loss of £8.9 billion of European Structural and Investment Funds, is only likely to make the problems faced by disadvantaged areas worse. Local autonomy with real financial muscle is the only sustainable answer to the regional divide. We will:

  • Continue to champion the Northern Powerhouse and Midlands Engine and invest significant capital resources in infrastructure projects across the North of England and the Midlands.
  • Devolve further revenue-raising powers away from Westminster, to regions from Cornwall to the North East. We will ensure that any powers devolved are matched by the funding to deliver on the needs of local people.
  • Devolve more decision-making power over key levers of economic development including transport, housing and skills.
  • Provide assistance to areas heavily dependent on fossil fuel industries, such as the North East of Scotland, to diversify away from these industries.
  • Give the immediate go-ahead to Swansea Bay tidal lagoon project
  • Encourage Local Authorities and Local Enterprise Partnerships (LEPs) to work in partnership with existing business, Universities and other business hubs to develop plans for building on already established success in a particular area, including the ability to raise money to incentivise clustering by businesses with particular specialisations.
  • Use central government public procurement policy as tool of local growth and community development, for example by purchasing from diverse sources and using local, labour, goods and services, and encouraging local government to do the same.
  • Require the major banks to fund the creation of a local banking sector dedicated to meeting the needs of local SMEs.
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