Liberal Democrats’ 2024 Election Manifesto: Business Breakdown.
We all know there is an election around the corner on 4th July. With any campaigning, the focus on financials and taxation always plays a key part. We’ve pulled together some of the key topics from the various party’s manifestos. Whilst we know the proof is in the pudding in terms of the politicians delivering what they say in their manifestos, it is important for both your business and personal finances that you can identify a direction of travel from these policies.
Our goal is to provide an objective analysis of the business-related policies proposed by each party in the 2024 UK general election. We aim to present the potential impacts on businesses without any political bias, ensuring that our readers can make informed decisions based on the factual details of each manifesto.
This is a LIVE BLOG and will continue to be updated as information is released and analysed.
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Business Impact of Addressing Housing Affordability and Community Stability
The Liberal Democrats’ 2024 manifesto includes a policy aimed at regulating second homes and short-term lets. The proposed measures give local authorities the ability to increase council tax by up to 500% on properties purchased as second homes. Additionally, a stamp duty surcharge would be imposed on overseas buyers purchasing these properties. A new planning class for second homes and short-term lets would also be introduced.
These measures are designed to address housing affordability and community stability. By significantly increasing council tax on second homes, the policy aims to discourage the purchase of properties that are not used as primary residences. The stamp duty surcharge on overseas buyers seeks to limit foreign investment in the housing market, which can drive up property prices and reduce availability for local residents.
For businesses, especially those involved in the short-term rental market, these changes could lead to higher operational costs as property owners face increased taxes. This might result in higher rental prices as owners try to offset the additional expenses. The new planning class would require property owners to comply with additional regulations, potentially increasing administrative burdens.
For individual homeowners, particularly those with second homes, the financial impact could be significant. Higher council tax bills may prompt some owners to sell their properties, potentially increasing the supply of homes and making housing more affordable for local residents. This policy reflects an effort to balance the housing market, ensuring more homes are available for local use rather than being tied up as investment properties or short-term rentals.
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Business Impact of Giving Local Authorities the Authority to Increase Council Tax by up to 500% on Second Homes
In a blow for second homeowners and short letters, the Lib Dems plan to give local authorities new powers to control second homes and short-term lets in their areas by allowing them to increase council tax by up to 500% where homes are being bought as second homes, with a stamp duty surcharge on overseas residents purchasing such properties. There will also be a new planning class for these properties.
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Business Impact of a 20% higher minimum wage for those on zero-hour contracts
“The Liberal Democrat manifesto includes a pledge to set a 20% higher minimum wage for those on zero-hour contracts at times of normal demand, to compensate for the uncertainty of fluctuating work hours.”
This policy could see revenue increases for some businesses, as employees would find themselves with higher disposable income, and productivity and employee morale may improve as employees feel financially better off and thus more incentivised to work.
However, it could also have a negative effect on the employers that will have to pay the increased wage – in order to cover the increased staffing cost, employers may have to either reduce workers’ hours or the number of workers they employ, or increase the costs of their products and services. This could have a negative impact on business growth, as customers would be unwilling/unable to afford impacted products.
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Business Impact of Establishing a New Employment Status for Zero-Hour Contract Workers
Further to Liberal Democrat plans for zero-hour contract workers, they also plan to establish a new employment status of “dependent contractor”, between employment and self-employment. This status would imbue contractors with rights normally reserved for employees, such as minimum earning levels, sick pay, and holiday entitlement. It is unclear however how this status would differ from that of full employees when put into practice.
Similarly to the policy on increased zero-hour minimum wage, this could see increased revenue and growth as contractors find themselves with more disposable income, or income during periods of sickness. Holiday entitlement could also positively affect business growth, as contractors have time away from work to spend their income. However, as with the minimum wage increase, this would come with increased costs for employers, who may find themselves faced with higher salaries to pay and the requirement to pay sick pay to contractors they previously would not have had to.
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Business Impact of changing the Statutory Sick Pay (SSP) System
Another issue affecting workers and employers will be The Liberal Democrats plan to reform the statutory sick pay (SSP) system by making it available to the more than one million workers earning less than £123 a week, most of whom are women, and aligning the rate with the national minimum wage. In addition, payments would be made available from the first day of missing work rather than the fourth. This could have the same effects upon businesses as the above reform, that employers find themselves not just paying to workers they would not have had to before, but also paying from an earlier point than before, making SSP payments last for longer.
The manifesto, however, does include a commitment to “support small employers with Statutory Sick Pay Costs”. No amount is given, which leaves open the possibility that business will still pay part of these costs even with government support, as the commitment is to support, not to pay for.
Whilst the aims of these policies in relation to businesses certainly appears to be growth and higher revenue, caused by both an increase in consumer disposable income and spending power, combined with increased employee productivity and morale through the aforementioned raised income, there are potential negative knock-on effects to the employer that have to fund these changes, who may find themselves struggling to afford this without cutting hours or increasing existing prices for consumers.
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Business Impact of Investing an extra £1 billion a year in HMRC
The Liberal Democrat’s proposal to invest an extra £1 billion a year in HMRC to improve customer support and boost compliance and anti-avoidance activities could have several effects on businesses and their activities.
For businesses, improved customer support from HMRC could make tax administration more efficient and user-friendly. This could reduce the time and resources companies spend on navigating tax issues, allowing them to focus more on their core operations and growth.
Enhanced compliance and anti-avoidance measures could lead to stricter enforcement of tax laws. While this could create a fairer business environment by ensuring all companies pay their due taxes, it might also increase the administrative burden on businesses. Companies may need to invest more in accounting and legal services to ensure full compliance with tax regulations, potentially raising operational costs.
The proposed investment aims to raise £7.23 billion by the end of a four-year parliament. If successful, this could provide additional government revenue without increasing tax rates, potentially leading to a more stable fiscal environment.
Overall, while the proposal aims to improve tax compliance and customer support, its actual impact on businesses will depend on the efficiency of the implemented measures and how effectively HMRC can balance enforcement with supportive services.
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Business Impact of Reforming Capital Gains Tax (CGT)
The proposed reform of capital gains tax (CGT) is to target the ‘super wealthy’ aims to close loopholes and raise £5.21 billion by adjusting rates and basing them solely on capital gains. The specific details suggest three new rates: 20% for gains up to £50,000, 40% for gains between £50,000 and £100,000, and 45% for gains over £100,000. This contrasts with the current rates of 10% or 18% for basic rate taxpayers and 20% or 24% for higher rate taxpayers.
For businesses, especially those owned or heavily invested in by high-net-worth individuals, these changes could result in higher tax liabilities on realised capital gains. This may discourage investment in assets subject to CGT, potentially reducing the availability of capital for business expansion and new ventures. High-net-worth individuals might seek to restructure their investments to minimise CGT exposure, possibly affecting the liquidity and valuation of certain assets.
Investment firms and financial advisers may see an increase in demand for their services as clients seek strategies to mitigate higher CGT rates. This could drive up operational costs for businesses needing sophisticated tax planning and advisory services to navigate the new tax environment.
On a broader scale, the proposed CGT reform could lead to a more equitable tax system, ensuring the super wealthy contribute a fairer share of taxes. This could help level the playing field, promoting fair competition among businesses by closing tax loopholes.
However, the actual impact will depend on the precise implementation and effectiveness of these reforms. If not managed carefully, there could be unintended consequences, such as reduced investment in certain sectors or increased tax avoidance strategies, which might undermine the intended revenue goals.
Business Impact of Replacing Business Rates with a New “Commercial Landowner Levy”
Replacing business rates with a new “commercial landowner levy” could have significant effects on businesses and their activities, though the lack of specific details makes it difficult to predict exact outcomes.
For High Street businesses, this change could potentially reduce their tax burden, as the levy would be focused on landowners rather than occupiers. This might lead to lower operational costs for retailers and other businesses occupying rented commercial spaces, potentially boosting profitability and encouraging growth.
For commercial landowners, the new levy could increase their tax liabilities, particularly if the levy is higher than the current business rates. This might lead to increased costs for landowners, which could be passed on to tenants through higher rents. The overall impact on High Street businesses would then depend on how much of the cost landowners transfer to their tenants.
The effectiveness of this policy will depend on its implementation. If designed well, it could support High Street businesses by reducing their direct tax burdens. However, if landowners pass on increased costs to tenants, the benefits for High Street businesses might be limited.
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Impact of Introducing a National Food Strategy
Introducing a National Food Strategy to tackle rising food costs could affect businesses in various ways, though specific details are lacking.
For food producers and suppliers, the strategy might include subsidies, tax incentives, or efficiency improvements, potentially lowering production costs and increasing profitability. Retailers and food businesses could benefit from more stable food prices, helping manage costs and boost sales.
However, the actual impact will depend on the specific measures and their implementation. Effective support could mitigate rising costs, but significant regulatory changes might increase administrative burdens and costs.
Overall, the strategy’s success and impact will depend on its details and industry response.
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Impact of Double statutory maternity and shared parental pay, and introduce an extra month’s leave for fathers and partners paid at 90% of earnings
Doubling statutory maternity and shared parental pay, along with introducing an extra month’s leave for fathers and partners paid at 90% of earnings, could have several effects on businesses and their activities.
For businesses, these changes could increase the costs associated with employee leave. Companies might need to budget for higher payouts during maternity and parental leave periods, potentially impacting their financial planning and profitability. Additionally, providing an extra month of leave for fathers and partners could result in extended absences, requiring businesses to find temporary replacements or redistribute workloads, which could affect productivity.
However, these measures could also have positive effects. Enhanced parental leave benefits might improve employee morale and job satisfaction, potentially leading to higher retention rates and reducing recruitment costs. Offering more generous leave could make businesses more attractive to prospective employees, enhancing talent acquisition.
The actual impact will depend on the specific implementation details and how businesses adapt to these changes. While increased costs and administrative adjustments are likely, the long-term benefits of improved employee satisfaction and retention could offset these challenges.
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