‘Quick fix’ Labour plans a cause for concern

A Labour government would introduce “quick fixes” and interventionist policies, hindering job growth and sending a signal that Britain was no longer open for business, reports The BBC.

Business groups gave a lukewarm reception to Ed Miliband’s unveiling of the Labour manifesto. The Labour leader’s commitment to tackle the deficit, set up an independent infrastructure commission and incentivise businesses to promote training were broadly welcomed. But analysts said this was undermined by pledges to freeze energy prices and rail fares, as well as increase employment regulation.

John Cridland, director general of the Confederation of British Industry (CBI), said Labour’s plans could undo the Coalition’s work to make the UK more competitive.

“Labour’s manifesto includes a number of proposals that are positive for business,” he said. “But market interventions in labour and other specific sectors, together with signals on corporation tax, are a cause for concern.”

The head of Britain’s biggest business lobby group welcomed a move to freeze business rates for 1.5m small businesses, but said this should be achieved through fundamental reform, and not cancelling the reduction in corporation tax to 20 per cent, from 21 per cent.

“Business rates reform is long overdue, but quick fixes funded through a rise in the corporation tax rate would undermine progress to make the whole tax system more competitive and send the wrong signal to firms of all sectors and sizes,” he said.

Adam Marshall, executive director of the British Chambers of Commerce (BCC), also welcomed Labour’s pledge to “take some of the politics out of key infrastructure projects”. However, he said there were several areas of concern. “There are number of areas where interventions are being proposed. For example in energy and rail fares, where a freeze is also being proposed by the Tories. What’s the point of having a regulator and a regulated market if there’s simply going to be political intervention? Is it not the job of the regulator to tackle these sorts of issues?”

Mr Marshall said Labour would also “push the dial in the wrong direction” if it abolished the Government’s employment tribunal fee system. “Tribunal fees lead to a drop in vexatious claims. We must not return to a time where claims were being lodged all over the place.”

Experts also attacked Mr Miliband for not being tough enough on borrowing. “With an annual deficit still running at a staggering £90bn, vague pledges to merely reduce it each year are simply not good enough,” said Mark Littlewood, director general of the Institute of Economic Affairs.

John Wyn-Evans, head of investment strategy at Investec Wealth and Investment, said banks, utilities and bus and rail companies stood to “bear the brunt of Labour’s populist agenda”.

It came as George Osborne, the Chancellor, warned that Labour’s plans, which could see them borrowing around £30bn in 2019-20 to finance investment spending, suggested that they would “run a deficit forever”, while Nick Clegg said Labour’s track record showed the party was addicted to borrowing.

Paul Johnson, director of the Institute for Fiscal Studies, said the speed and scale of Labour’s deficit reduction plans remained unclear, while Mr Cridland said it was important that the party spelled out the details of its spending squeeze.

“As healthy public finances are a prerequisite for a successful economy, the Labour Party’s focus on fiscal responsibility and deficit reduction are welcome – and business will want to see clear timescales for achieving this,” said Mr Cridland.