Adam Bernstein looks at what a Labour government could have in store for business over the next parliament.

THE fact we now have a Labour government after 14 years of Conservative leadership is already ancient history. And regardless of an individual’s given political persuasion, the net effect is that we just have to get on with whatever Labour decides to enact. Given that the party has a particularly large majority and produced a very busy King’s Speech with some 40 bills announced, change could be extensive.

So, what is coming the way of business? What will it mean?
Taxation and economic matters
Pre-election, Labour committed itself to not increasing VAT, income tax or national insurance and said the same for corporation tax. However, that doesn’t mean that individuals won’t pay more tax through fiscal drag as pay rises take them into higher tax bands.

Labour also said that it would remove the preferential tax status that non-domiciled taxpayers (taxpayers who claim to have a permanent home outside of the UK) benefit from. But could this affect inward investment from wealthy individuals?

Tax specialist Saffery noted ‘Labour made no promises on capital gains tax (CGT) in its manifesto’ apart from guaranteeing that those selling their main home would not pay CGT. However, Labour’s refusal to rule out raising CGT makes it easy to speculate that CGT would be increased.

Inheritance tax (IHT) is another potential target for a cash-hungry government.

Labour has gone on record as saying it would stop the use of offshore trusts to avoid IHT. But that’s niche and only applies to the seriously wealthy. Of greater concern is the risk of significant reform with changes to agricultural property relief and business property relief that make them less generous to those passing on a business.

Indeed, Family Business UK thinks that over 3,000 family-run enterprises would face significantly higher inheritance tax bills each year if business relief were removed.

Those involved in energy won’t be happy that Labour plans to extend the Energy Profits Levy until the end of the parliament, will increase it by three percentage points, and will remove oil and gas company investment allowances.

While that won’t directly affect other sectors, it’s likely to reduce investment by such firms, make the UK more reliant on other sources of energy, and could possibly see costs pushed through the system in the form of price rises – especially where oil products are the basis of an industrial process.

Labour wants reduced tax avoidance. As a result, taxpayers – individuals and businesses – can expect more HMRC compliance activities via an extra 5000 staff, more technology and transformation of the tax system, and legal changes to ensure more deterrents to tax evasion.

On business rates, the party’s election manifesto says little other than ‘Labour will replace business rates with a new system of business property taxation which rebalances the burden and levels the playing field between our high streets and online giants’.

It’s worth remembering Labour is expected to publish a roadmap for business taxes that sets out key policy details for the expected five years until the next election with the proposed aim of helping ‘businesses to plan investments with confidence’.

And with regard to late payments, Labour’s manifesto notes ‘plans to ensure small businesses and the self-employed are paid on time’.

There will also be improved guidance and fewer barriers to exporting for small businesses. The new government says that it’ll reform the British Business Bank, including ‘a stronger mandate to support growth in the regions and nations, [which] will make it easier for small and medium-sized enterprises to access capital’.

Beyond that will be further – there was change recently under the Conservatives – reform of the procurement rules to give SMEs greater access to government contracts.

And of interest to those caught out by corporate failures, there’s an audit reform and corporate governance bill to pave the way for a new accounting regulator. The idea is to have more robust and rigorous scrutiny of large companies by auditors in a move that will look to prevent the repeat of disastrous corporate failures, such as the demise of construction giant Carillion, which left 30,000 subcontractors unpaid.

Employment rights
It shouldn’t surprise anyone that Labour will reform employment law with a greater focus on workers’ rights. Employers may see higher costs and greater use of the law by employees.

The King’s Speech outlined, for example, an Employment Rights Bill with key features, according to law firm Walker Morris, being ‘the banning of zero-hour contracts and fire and re-hire/fire and replace practices; making parental leave, sick pay and protection from unfair dismissal available from ‘day one’ for all workers; and strengthening statutory sick pay by removing the lower earnings limit to make it available to all workers’.

Elsewhere Labour aims to enhance flexibility, work-life balance and family-friendly policies and rights, ensuring equal pay for ethnic minorities and disabled workers, update trade union legislation, and will establish Skills England to ‘bring together businesses, providers, unions, Mayoral Combined Authorities and government to ensure a highly trained workforce’.

The apprenticeship levy is also going to be reformed.

Law firm Burges Salmon sees other areas as ripe for reform including redundancy and TUPE. It specifically highlights a technical change to redundancy rights with potentially a large impact on employers – the right to collective consultation being determined by reference to the number of people impacted across the business as a whole rather than, currently, one workplace.

And on TUPE, when a division or firm is sold, Labour refers to ‘workers’, not ‘employees’ – a bigger pool of individuals who would be involved in the process.

Europe
The subject of Europe is a big deal for some whether a leaver or remainer. But the Guardian reported that a diplomat commented that the UK relationship ‘isn’t taking up as much of our mental space as it was a few years ago’.

While Labour said it ‘will work to improve the UK’s trade and investment relationship with the EU, by tearing down unnecessary barriers to trade’ the paper reckons the EU won’t make it easy. Rather, ‘officials see potential for a better relationship with the UK under a Starmer government but say any agreements… would require the UK to accept ‘rules and responsibilities’.

Industry
On energy, Labour is advancing a plan to establish a state-owned energy company, Great British Energy, supported by £8.3bn of taxpayer funds. The idea, the new government says, is it to ‘help us take back control of the country’s energy, achieve energy independence, create new jobs… and tackle climate change’.

The goal is a net zero electricity system by 2030. While consultants PwC acknowledge more public intervention in the energy market, Law firm Ashfords’ energy specialist reckons that ‘at best it could offer a useful partner for risky schemes. At worst it could be unnecessary competition’.

As for an industrial strategy, there is little detail from Labour. As The Manufacturer wrote, ‘on manufacturing specifically, there is relatively little clear guidance as to what we can expect and certainly no indications of a radical change of approach. Although the manifesto recognises ‘advanced manufacturing’ as an area of strength and outlines funding for automotive and steel sectors, manufacturing itself is mentioned a mere four times in the document’.

But in one area, Labour is clear – it will establish a national wealth fund with £7.3bn of funding. Under it there’s a plan to spend £1.8bn upgrading ports, £1.5b on automotive gigafactories, £1bn on carbon capture and £500m on green hydrogen manufacturing.

Infrastructure
On transport, there are to be – assuming this comes to fruition – investments to enhance rail links in northern England as part of a programme to improve east-west connectivity following the cancellation of HS2 beyond Birmingham; by definition, Labour isn’t reversing the cancellation.

Allied to this, Labour plans to bring train operators under state control as their contracts expire while also establishing Great British Railways (GBR) to integrate nationalised train operators with Network Rail’s track maintenance functions.

Planning should become somewhat easier through a Planning and Infrastructure Bill that seeks to bring in changes to the planning system to streamline the process for roads, railways, reservoirs, and other nationally significant infrastructure.

No doubt that will rub off on other parts of the economy – especially housing which the government wants ramped up to 300,000 new properties a year with the concomitant impact for those that supply the housebuilding and homes sector.

Summary
Of course, with 40 bills announced, this is but a light touch overview of what is likely coming the way of business. The best advice is to tune into forums and government and to take advice on how to prepare.
Adam Bernstein is an independent columnist