2017 General Election Manifesto Highlights for SMEs - 2/3: Labour

In the second part of our manifesto roundup series, we’re looking at what the Labour Party
manifesto means for employers. While not as radically socialist as many people were expecting, Labour’s manifesto nevertheless represents the Party’s contemporary brand of social democracy and as such contains arguably more to benefit employees than employers. 

Much has been made in the press over the last few weeks of Labour’s pledge to increase
Corporation Tax to 26% by 2020. As the UK prepares for its post-Brexit economy, this is
understandable as it stands in direct opposition to the Conservative plan to reduce it to 17%. 
Labour would, however, also re-introduce the lower small profits rate of corporation tax (at 21%). 
Small businesses with a turnover of less than £85,000 will also benefit from the scrapping of
quarterly reporting. 

The Ministry of Labour would be re-established, and given resources to enforce many of the
pledges made in the manifesto. These include the repeal of the Trade Union Act, the scrapping of
the 2014 TUPE changes and the abolition of tribunal fees. 

Two of the policies most likely to impact small businesses are the increase of the minimum wage to £10 an hour, and the banning of unpaid internships. Maternity pay would also be extended, four
new public holidays introduced, and zero-hours contracts banned outright. 

Temporary employees will automatically receive equality of rights with permanent employees, and the ‘burden of proof’ will be shifted so that “the law assumes a worker is an employee unless the employer can prove otherwise.”

Private companies bidding for public-sector contracts will be subject to a maximum pay ratio - the highest-paid employee in the company will be limited to earning 20 times as much as the lowest-paid. 

The threshold for the Additional Tax Rate of 45% will be reduced to £80,000, and a 50% top rate
introduced on earnings over £123,000. Both of these policies could cause challenges for
businesses recruiting higher earners, particularly those on starting salaries close to either of the
new thresholds. 

The projected tax revenues from the increases outlined above will be used, among other things, to invest in those who will form the workforce of the future. Inspired by the NHS, Labour will establish a National Education Service. Its goal will be to provide “cradle-to-grave learning that is free at the point of use”. 

There’s a real opportunity here for employers to benefit from an up skilled workforce who have
ongoing opportunities to expand their knowledge throughout their careers. Labour would also
reintroduce the Education Maintenance Allowance, providing a payment to 16 to 18-year-olds from lower and middle-income backgrounds who stay in post-16 education. 

A mixed bag, then. Employers and employees will both feel the impact of a Labour government on their wallets, but employees will benefit from significantly enhanced rights. And employers may well find that Labour’s redistributive programme provides them with better-trained, better educated staff in the future. 

If you missed it, yesterday we posted the highlights from the Conservative manifesto.  Tomorrow will be our final instalment, where we will take a look at the Liberal Democrats.