Overview: How the main political parties plan to kick-start growth

They’ve worked their socks off keeping businesses afloat and money moving round. Now finance directors could rightly expect to see some sort of reward (or relief) from the government. But what do the leading political parties say they’ll proffer up in three key areas ­ regulation, stimulating growth and dealing with a hung parliament ­ if they win the election?

To find out, Financial Director spoke with Labour’s financial secretary to the Treasury Stephen Timms MP, Conservative shadow Treasury minister David Gauke MP and the Liberal Democrat’s shadow chancellor, Vince Cable MP.

Public spending
Wafer-thin growth of just 0.1% in the final quarter of 2009 underlines the danger of deep public spending cuts now, argues Stephen Timms. He wants to continue “targeted support until the recovery is secure”. Labour’s target is to halve the deficit in four years. The fiscal responsibility bill sets out obligations to do it “fairly and at a sensible pace ­ so we can protect the economy, support key services and invest in new industries,” says Timms.

Gung-ho for deep cuts? Or not? Confusing messages have emerged from David Cameron and shadow chancellor George Osborne in recent weeks. Osborne says a key objective is to preserve Britain’s AAA credit rating by cutting a large part of the structural deficit over the course of a parliament ­ usually four to five years. But that begs the question of whether cuts will come sooner or later.

Gauke told Financial Director, “We will make a start in 2010 and crucially set out a credible plan to remove a large part of the deficit over the parliament. The pace of cuts will be decided in co-ordination with the Bank of England.”

Vince Cable talks tough on cuts. “What is absolutely clear is that the incoming chancellor must have a clear plan to eliminate the structural deficit. The current government estimate of the structural deficit at 5.5% of GDP is a guess ­ it could be worse. The plan to reduce this deficit by half over four years may also prove to be too laid back for the markets. It is, however, a starting point.”

Kickstarting growth
Labour’s Timms says the actions the party took to cut VAT temporarily, the car scrappage scheme and interest rate reductions prevented the recession being worse than it could have been.

“Emerging from the recession, our active industrial strategy will be key, rolling out high-speed broadband, investing in new technologies and protecting and raising investment in science and research.”

Timms adds that the party will reduce business regulation by 25% by May 2010. “And between 2010 and 2015, to help offset costs of new regulation, we will make further new reductions of £1.5bn in burdens.”

Tory man Gauke believes it’s important to stimulate enterprise. “Any new business started within the first two years of a Conservative government will pay no employer national insurance on the first 10 employees it hires during its first year. We will also build a network of business mentors and provide loans to would-be entrepreneurs, supporting self-employment and franchising as a route back into work.”

Cable also sees a more entrepreneurial climate emerging as key to creating the conditions for sustained recovery. These include moderate taxes, cutting red tape, securing intellectual property rights and ensuring a flow of credit on competitive terms.

Bank reform
Labour’s Timms says that plans to break up rescued banks will create three new banking outfits “in the biggest market shake-up for a generation”. And he argues that measures in Labour’s financial services bill will create a new body to monitor and manage system-wide risks and will give the Financial Services Authority new powers ­ on the G20 model ­ on banking remuneration.

Timms is keen to remind us that his party “commissioned and welcomed Sir David Walker’s recommendations on financial sector corporate governance,” Timms says, “including strengthening bank boards, boosting non-executives’ roles in risk assessment and remuneration, improving the structure and disclosure of pay, and encouraging institutional shareholders to be more active.”

Gauke reiterates the party’s well-known view on the abolition of the tripartite system of regulation and restore the Bank of England’s responsibility for prudential supervision, monitoring the overall growth of credit and debt in the economy.

“We will increase competition in the banking industry,” says Gauke, “starting with a competition review of the sector that will inform our strategy for selling the government stakes in state-controlled banks.”