GENERAL ELECTION: Battle of the ballot box well under way

Mar 1 2010 Alasdair Northrop, Business Insider

In just a few weeks time we will find out who will be running the UK Government at one of the most critical times in our history. There are a number of possible scenarios facing us when the voting is over

In just a few weeks time we will find out who will be running the UK Government at one of the most critical times in our history.

There are a number of possible scenarios facing us when the voting is over. The Conservatives could be in power for the first time since 1997 with David Cameron as Prime Minister. Alternatively, current PM Gordon Brown may have - against heavy odds - kept Labour in power. Or we could have a hung parliament with no single party having a majority but much probably relying on the Liberal Democrats who may have to choose who to form an alliance with. It could even mean the popular Liberal Democrat shadow chancellor Vince Cable getting his chance to run the Treasury. A hung parliament could also put the SNP in a remarkably strong position.

In January the Office for National Statistics claimed the economy had grown by just 0.1 per cent in the last quarter of 2009, marking the possible end of the recession after 18 months. However, the growth figure was so slight many feared the next stats for the first quarter of 2010 which are due to be published in April - just days before the much mooted election date of May 6 - could show us slipping back into recession. With UK public sector net debt at £870bn whoever holds the reins will be under pressure to take rapid action to reduce borrowings.

In Scotland the general election battle involves 59 seats with 39 currently held by Labour, 12 by the Liberal Democrats, seven by the SNP and one by the Conservatives. According to the Total Politics Guide to the 2010 General Election it is hard to see the Conservatives winning more than half a dozen seats. It says there remains the possibility of a raft of SNP gains as it takes advantage of Labour's weakness in the polls and the impact of the expenses scandal. It speculates that the Liberal Democrats will strongly target four Labour seats in Edinburgh South, Aberdeen South, Edinburgh North and Leith, and Glasgow North.

Whatever happens CBI Scotland director Iain McMillan says it will be a significant election for Scottish businesses. "Having said that, all elections are significant in terms of the democratic mandate they provide for an existing government or a new government coming in," he says. "That is important. It is a fresh mandate with a number of years ahead. Where a Government feels it needs to take unpopular decisions in the short term it can do so without having to worry too much over the next few years about the electoral consequences.

"It is important in a number of respects. First of all we believe we have got to get the right economy for the UK including Scotland. So, for example, we believe the next government does need to set out a sustainable path for public finances. The chancellor in the pre-budget report flagged up some steps that are bound to be taken principally from 2011 onwards. But the new government coming in needs to give much more detail about how they are going to consolidate the public finances going forward - the issue of reducing a huge, increasing UK national debt needs to be addressed. Our very first call on the new government is to set out a credible plan to achieve that."

Like many other organisations the CBI has been lobbying the political parties with their wish lists. It is also not taking sides. "I have said many times that we do not call for the election or defeat of any political party; we work with whoever wins the election and it is in our members' interests to do that," says McMillan. "We have no idea of what our members political affiliations are."

David Watt, who is Scottish director of the Institute of Directors, says his organisation is also apolitical. "We are looking for whatever party is in government to help people to develop their businesses and so help the economy to develop," he says.

One of Watt's big gripes is the lack of communications with Westminster MPs and he hopes things will change after the next election. "We have virtually no communication with current MPs," he says. "We have more contact in the Highlands and Islands with people like Charles Kennedy and Danny Alexander. John Thurso used to be quite a strong member of the IoD and is still a supporter of the IoD; I find him very positive. In the central belt I think there has been a bit of a fading. Obviously we meet Jim Murphy on a regular basis and he has been much more active. But I would struggle to tell you the name of most MPs. Most of our members would be the same because most of the day to day stuffcomes from Holyrood.

"Macroeconomics is controlled from Westminster and yet the engagement with Westminster MPs is limited, surpassed only by the nonengagement of MEPs. We must have an active group of Scottish MPs fighting the case for Scotland and Scottish business and taking a real interest in that macroeconomic agenda. I have a slight concern they haven't been doing that as well as they should have been. I hope the new generation will become involved in Scotland and working with the Scottish Parliament."

Watt also thinks there is a real disconnect between the Scottish and UK Governments. "We want them working together to the benefit of the Scottish economy. They shouldn't always be fighting each other as they seem to be."

Colin Borland of the Federation of Small Businesses is concerned that any wrong moves by the next Government could be extremely damaging. "I think we are genuinely at a crossroads. We are seeing some positive signs coming from business. At the same time there are questions about the public finances that have to be addressed. Has the right balance been struck? Are we going to nurture those green shoots or just trample over them with a size 12? It is a very difficult situation. It is fragile."

John Thurso, who is currently Liberal Democrat MP for Caithness, Sutherland and Easter Ross, thinks more needs to be done to build relationships between MPs and Scottish businesses but feels the responsibility is on both sides. "I broadly regard myself as a business person who has become a politician. I have sat on plc boards, I have chaired a remuneration committee, I have my own businesses - very small businesses but they are mine. So I am very alive to the challenges faced by both big businesses and small businesses because they are challenges the people who are managing my businesses for me are facing themselves.

"I sometimes think the two communities exist on separate planets. It is like a Venus and Mars thing. The dialogue is sometimes politicians saying 'right, business, you have got to do this'. And business, on a completely different sort of planet, is saying 'politics, you have got to do this'. There is, in my view, a need for a much better dialogue. It is starting to happen. Many business organisations are much more aware of how politics works and who you need to speak to."

Conservative MSP Gavin Brown, who is helping with the party's general election campaign north of the border, says his party wants to see a different relationship between the Westminster government and Holyrood government. "Relations have been pretty sour for the last couple of years," he says. "We found out Alex Salmond and Gordon Brown hadn't met for over a year. This is during the worst financial crisis in a generation. We find that utterly bizarre. David Cameron has said he will meet Alex Salmond within the first week and that he wants a far more constructive relationship between the parliaments and governments."

There are not many high profile business people who put their head above the parapet in their declaration of support for the Conservatives in Scotland. However, Brown says that understandably they prefer to run their businesses and know they have to deal with whoever is in Government and opposition. "I get a sense that the majority of business leaders are still pro-Conservative in many instances but I don't think any of it is automatic. We have to go out and convince and persuade for every vote. You certainly always get a very warm reception."

SNP MP Stewart Hosie says his party has set itself the challenge and target of winning 20 seats. "We need to be a party that will champion Scotland, especially the business community who have been under the cosh for the last 18 months." Hosie says if there was a hung parliament he would hope the SNP could have a huge influence, though the independence agenda will be driven through the Scottish Parliament. "I hope we can use that leverage to ensure no incoming government does anything precipitative which would weaken the recovery," he says.

On the relationship between the Scottish and UK Governments he says a lot of the relationships function perfectly well at departmental level."But at the highest level things aren't great which is why the First Minister proposed the proper use of the joint ministerial meetings in order to have a proper structured forum for debate and discussion between the governments. The last thing the SNP wanted was disharmony. There is enough serious work to be getting on with without that kind of thing. I would say, given Gordon Brown's attitude to the SNP, I think the fault lies in one place and one place only."

Jim Murphy, the Secretary of State for Scotland, argues that Labour has a strong offer for businesses and really pretty strong support. "The Labour party went through a big change in the 90s," he explains. "I think there was a period in our history in the 80s where we basically said it was something grubby to be successful. But that has changed. We had that unprecedented period of economic growth and even in the midst of this recession there are quarter of a million more people in work today than there were when we came to power. I think it is important that politicians and business don't just talk in the run up to elections. Actually, a conversation just after the election is probably more important."

Murphy says he has been in two meetings with Salmond and Brown in the past year but is not sure how many times they have phsyically met. But he admits the relationship isn't good enough. "It is too littered with grievance. My frustration is sometimes the SNP Edinburgh Government sees London as the source of all its problems and that is not a credible argument. But it takes two to make it happen and for my part I will keep trying."

National insurance

What the business organisations want: Federation of Small Businesses: "Freeze employers' national insurance contributions and do not go ahead with the planned increases to NICSW in 2011. Introduce a national insurance rebate for new jobs in small businesses."

Institute of Directors: "Reverse increases in national insurance planned for 2011."

Scottish Chambers of Commerce: "Cancel the increase in employers' national insurance contributions planned for 2011."

What the parties are offering: Conservatives - Gavin Brown MSP: "Obviously we have a very strong desire to prevent the national insurance rise which was announced in the pre-budget report from happening. We feel very strongly that we don't want any tax raises but we put that above the others. As you are climbing out of recession what you don't want is a tax on jobs.

"We will work tooth and nail to try and make sure that doesn't happen without obviously being able to guarantee it."

Labour - Jim Murphy MP: "I personally don't like putting people's taxes up or business taxes up but how do you balance the books and cut the deficit within four years? As far as I can work out, while the other political parties sing and shout about it no one has committed to repealing it.

"This isn't where you would start but if you look at the books - the income and outgoings - and after an awful lot of thought, it becomes unavoidable."

Liberal Democrats - John Thurso MP: "We oppose the rise in national insurance contributions. In office we would seek to reduce the contributions as soon as is practically possible. However, no responsible party is able to give an absolute commitment on this without identifying how the £4bn which will be raised by increased NICS will be replaced in the budget."

SNP - Stewart Hosie MP: "The NIC increase will impact private and public sector employers - taking money out of Scotland at a time when we need stimulus. That is why we'll go ahead with the £220m tax cut to take place across Scotland in April as to match the English poundage for business rates - that's a sign of our approach which is about reducing burdens on our wealth creators. That will protect many Scottish businesses from the impact of the NI increase."

Corporation tax

What the business organisations want: CBI -Iain McMillan: "Set a strategic objective to drive the headline rate of corporation tax down to 18 per cent. The UK's corporation tax regime and rates are not giving businesses in the UK a competitive advantage." Institute of Directors: "Reduce corporation tax to 15 per cent for small companies and 21 per cent as the main rate over a ten year period." Scottish Chambers of Commerce: "Cancel the last phased rise in the small business rate of corporation tax which, in the longer term, should be reduced to match the basic rate of income tax."

What the parties are offering: Conservatives -Gavin Brown MSP: "We would like to move the main corporation tax down to 25p from 28p for companies generally. For SMEs who are currently paying 22p we could like to see that being cut to 20p. One of the issues we see is the whole tax system in the UK is overtly complicated. The cut would be paid for by removing quite a few of the current entitlements and exceptions so you have got cleaner and flatter system."

Labour -Jim Murphy MP: "Supporting business is a priority. That's why we have already cut corporation tax to 28p - currently the lowest level in the G7 group of major economies. We oppose the sharp tax rise on business investment proposed by the Tories and the fantasy figures from the SNP. We will continue the Time to Pay scheme that allows companies to spread their corporation and other tax payments, helping over 160,000 businesses over the last two years."

Liberal Democrats -John Thurso MP: "The principle is to achieve a lower rate but far fewer allowances. For example, I think the average paid by FTSE 250 companies is 21 per cent. So the effective corporation tax rate is nearer 20 than the current 28 per cent rate. But I think anybody who goes into the election saying that they make a promise over a specific taxation commitment simply is setting out a hostage to fortune."

SNP-Stewart Hosie MP: "Scotland should have a lower rate of corporation tax - 20p - as that would allow us to compete more effectively and create jobs. Evidence shows it generates growth and revenues, boosts competitiveness and creates employment. The £220m business rate saving and the Small Business Bonus Scheme is evidence of our desire to deliver a more competitive tax regime and encourage business growth and job creation."

New regulations

What the business organisations want: Federation of Small Businesses: "Call a halt to all changes in business regulation for the period of the economic downturn and recovery."

British Chambers of Commerce: "The next government must focus on simplifying regulation and reducing its costs to businesses - leaving companies free to grow and create jobs. Introduce a moratorium on new UK employment laws for the lifetime of the next Parliament and campaign for an EU-wide freeze."

What the parties are offering: Conservatives -Gavin Brown MSP: "In order to achieve economic growth we will focus on having the right kind of regulation. We will reduce the burden of red tape on business with a 'one in, one out' rule for new regulations, mandatory sunset clauses and regulatory budgets for departments to reduce the burden of regulation. We will cut the number of forms needed to register a new business - moving towards a 'one click' registration model."

Labour -Jim Murphy MP: "It is important we don't introduce unnecessary regulations during the recession but the problem is we are committed to health and safety at work and I don't think businesses would argue we shouldn't do that. There is a really strong argument for common commencement dates - two dates a year for UK Government, Scottish Government, European Commission and local authority regulations so everyone knows when they are coming."

Liberal Democrats - John Thurso MP: "Have a much more robust analysis of what a regulator is meant to do and what its commercial impact would be before you actually bring the regulation in. Back that up with an audit independently done afterwards. All regulations should be on a sunset clause - in other words they should have to come before parliament whether it is one year or two years or three years or whatever but there should be a proper review by parliament."

SNP-Stewart Hosie MP: "For too long regulation has pitched government, regulators and businesses against each other. At a time of economic fragility it's crucial we all work together to deliver the kind of competitive environment in which businesses can flourish. That's why we believe changes to regulation should be carefully roadtested to determine exactly how they impact on business, to make sure the regulation works equally for business and government."