Labour Party Manifesto 2010 Building the high-growth economy of the future
The challenge for Britain
To secure the recovery and learn the right lessons from the global economic crisis, laying the foundations for sustained growth: reforming banks, modernising infrastructure, and as we pay down the deficit, providing the right support to the private sector to build a diverse, high-tech industrial economy. The Tories would threaten recovery with cuts this year, and fail to invest in our economic future.
The next stage of national renewal
• Secure the recovery by supporting the economy now, and more than halve the deficit by 2014 through economic growth, fair taxes and cuts to lower priority spending.
• Realise our stakes in publicly controlled banks to secure the best deal for the taxpayer, introduce a new global levy, and reform the rules for banking to ensure no repeat of past irresponsibility.
• Create UK Finance for Growth, bringing £4 billion together to provide capital for growing businesses, investing in the growth sectors of the future.
* Build a high-tech economy, supporting business and industry to create one million more skilled jobs and modernising our infrastructure with High Speed Rail, a Green Investment Bank and broadband access for all.
* Encourage a culture of long-term commitment to sustainable company growth, requiring a super-majority of two-thirds of shareholders in corporate takeovers.
As the economy steadily creating infrastructure and recovers, there will be no return enterprise, accompanied by the to business as usual: financial diversification of our industrial institutions cannot continue the base, Britain will not emerge practices of the past. Radical from the recession ready for a change is needed. Without stronger, fairer future. long-term investment in wealth-The engine of growth is private enterprise: we will give business our full support in creating wealth and jobs. Strong and sustained growth is fundamental to a credible strategy for keeping the public finances on a stable long-term footing.
To be successful, business needs stability, but to achieve stability after the seismic shock of the global banking crisis, the governance of our economic and financial institutions must be radically reformed.
And to support business in securing prosperity for future generations, an activist industrial strategy is needed: learning the lessons from those nations that have succeeded in developing advanced manufacturing and leading-edge service industries. In these countries the role of government is not to stand aside, but to nurture private-sector dynamism, properly supporting infrastructure and the sectors of the future.
Securing the Recovery
We have taken the tough decisions to get Britain through the downturn. We have done so with fairness in mind: we have not allowed the recession created by the financial crisis to become a depression, or stood aside and allowed grave damage to be inflicted on our society as it was in the 1930s and 1980s. The Tories argue that public spending should be cut immediately, but this position is out of step with every other G20 government, right or left. If governments do not provide support when families and businesses most need help, growth is set back, jobs are lost, and the country builds up more debts – paying a higher price in the future. To cut now would push the economy back into recession, not reducing the deficit but increasing it.
We will continue to support the economy while growth is still fragile, sticking with our targeted increase in public spending over the next year to sustain the recovery. Our focus for the stimulus is strategic investment, putting in place the new digital, transport and energy infrastructures that will support the return to sustainable growth.
Deficit reduction and fiscal sustainability
Once the recovery is secure, we will rapidly reduce the budget deficit. We have set out a clear, balanced and fair plan to more than halve the deficit over the next four years and we will stick to it. We will achieve this through a combination of: fair tax increases; a firm grip on public spending including cuts in lower-priority areas; and strategies for growth that increase tax revenues and reduce spending on benefits.
Over the next Parliament the structural deficit will be cut by more than two-thirds.
The huge global recession and our efforts to counter it have required us to make tough choices, including on tax. We have made our choice in ways that put the greatest burden on those with the broadest shoulders. Bankers have faced a bonus tax, tax relief on pensions for the best off will be reduced, and we have introduced a new 50p tax rate on earnings over £150,000. As part of our plan to ensure we protect frontline services while halving the deficit over four years, we have announced that National Insurance will rise by one penny. This will not happen until next year, once growth is firmly established. This is the fairest way to protect key frontline services. Our National Insurance changes will mean that no-one earning under £20,000, or any pensioners, will pay more. It is fairer than alternative options like VAT – which we have not increased since 1997. Our commitments allow us credibly to deliver our deficit reduction plan and to sustain the services that matter most to families.
We will not raise the basic, higher and new top rates of tax in the next Parliament and we renew our pledge not to extend VAT to food, children’s clothes, books, newspapers and public transport fares. We will maintain tax credits, not cut them. And we have made our choice to protect frontline investment in childcare and schools, the NHS and policing.
On public spending, we will be relentless in making sure that the public gets value for money for every pound spent. We will overhaul how government works: cutting back-office and property running costs; abolishing unnecessary arms-length-bodies; sharply reducing spending on consultancy and marketing; and cutting lower-priority spend. We have already shown in Budget 2010 how these steps will help us to achieve savings of £20 billion a year by 2012-13, on top of the £15 billion savings that are being delivered this year.
We will take a tough stance on public-sector pay, saving over £3 billion by capping public-sector pay rises at one per cent in 2011-12 and 2012-13. We have agreed tough reforms to public-sector pensions, which will make significant savings and ensure that pensions for the public-sector workforce are secure and sustainable in the long term. Any government-controlled appointment involving a salary over £150,000 will require ministerial sign-off. Savings from our tougher approach will help realise a fair rate of pay for all those working for central government.
As we prepare for the upturn, fiscal responsibility and monetary stability will be the foundations on which we build.
We have made the new fiscal responsibility framework legally binding, and we will maintain our inflation target of two per cent so that mortgage rates can be kept as low as possible.
Rebuilding our banking system
The international banking system played a key role in fuelling the most severe global recession since the Second World War. We are determined to support our financial sector and for it to be a major employer and wealth creator, but there will be no return to the excesses of the past – banks will face tighter regulation. The banking system must support domestic businesses, including start-ups and entrepreneurs, as well as mortgages. We have agreed lending targets with those banks in which we have a stake, and there will be consequences for executive remuneration if targets are not met.
Learning the lessons of the crisis means ensuring that far greater responsibility is taken for risk in the boardroom. We will compel banks to keep more capital and create ‘living wills’ so that should they fail there will be no danger of that failure spreading. Because the banking crisis demonstrated the global nature of financial instability, we will continue to work with our international partners to require all banks to hold more and better-quality capital, to ensure counter-cyclical protection, and to introduce a global levy on financial services so that banks across the world contribute fairly to the society in which they are based.
In the UK the new Council for Financial Stability will monitor and help address asset bubbles and financial imbalances. We will give the FSA additional powers if necessary to constrain and quash executive remuneration where it is a source of risk and instability.
If there is evidence of bonus rules being evaded, we will act.
We will ensure greater competition in the banking sector, breaking up those banks in which the Government currently has a controlling stake.
The proposed Office of Fair Trading review into how City markets operate is welcome. We value the role of building societies owned by their customers and the strength and diversity that a healthy mutual sector brings to our financial services, and we will consult on measures to help strengthen the sector. As one option for the disposal of Northern Rock, we will encourage a mutual solution, while ensuring that the sale generates maximum value for money for the taxpayer.
Rebuilding our industrial base: new industries, new jobs, new knowledge
Britain is the sixth largest manufacturing economy in the world. Because of substantial investment since 1997, the UK has an excellent research base and is already strong in some world-leading sectors. But if we make the right decisions as a country in the coming years – through a new industrial policy, stronger infrastructure and a renewed partnership between business and government – we can be leaders in the emerging industries of the future.
After the financial crisis, we will ensure that growing companies can access the investment they need to expand. Finance must be at the service of industry, as new public channels are built to deliver private funds to innovative and fast-growing companies. The new UK Finance for Growth Fund will bring together a total of £4 billion of public funds and combine it with private money to channel equity to businesses looking to develop and grow. Within this, the Growth Capital Fund will focus on SMEs which need capital injections of between £2 and £10 million, while the Innovation Investment Fund will focus on the needs of high-tech firms.
Business investment in physical capital will play a key role in a balanced and sustainable recovery. The Strategic Investment Fund is supporting important new investment in the nuclear and renewables industries. We will provide incentives for companies to invest through R&D tax credits, and protect and increase the size of capital allowances that help to grow key sectors such as manufacturing. We will ensure a competitive regime through the development of the patent-box – a lower rate of corporation tax to encourage UK-based innovation – supporting the UK’s strengths in new industries and sectors.
Investing in science and research
Britain is among the best places in the world to do science, having massively increased investment in research and development as a proportion of national income. We are committed to a ring-fenced science budget in the next spending review. To help us do better in turning research outputs into innovation, we will provide focused investment for Technology and Innovation Centres, developing technologies where the UK has world-leading expertise.
We will also support university research through the Higher Education Innovation Fund, and through the development of a new University Enterprise Capital Fund. The proceeds of success will flow back into the higher education sector.
As we create a more diverse economy, we will strengthen support for exporters to help us increase our market share with our traditional markets in Europe and the United States, while breaking further into the emerging markets of China, India and Brazil.
We must seize the opportunity to develop education, in particular higher education, as a great export business. Universities will be encouraged to develop international links and research partnerships, and we want the Open University and learndirect to reach the global market in distance learning. We will develop a new gateway for the export of NHS intellectual property and cutting-edge services.
Restoring full employment
We expect our growing economic and sectoral strengths to create at least one million skilled jobs by 2015. These jobs of the future will increasingly come from the new growth sectors in which we are investing – low-carbon, digital and creative industries, life sciences – and professional services in business, healthcare and education.
There will be greater prosperity for every region of the UK economy. A regional growth fund will be established by the Regional Development Agencies with regional ministers given an enhanced role, and we will help our core cities and city regions to become powerhouses of innovation and growth, with a major devolution of power to shape local transport and skills.
Championing an enterprise economy
At the heart of our approach to building a strong and fair Britain is a commitment to support enterprise. We will back those who want to get on, work their way up, and generate wealth. We will keep business taxation competitive at the same time as we increase capital allowances to encourage investment.
There is no substitute for the drive and ambition that entrepreneurs bring. We will support small businesses and help with their cash flow by continuing our Time to Pay scheme that has already – through tax and NICs deferral – helped thousands of firms; offering a one-year holiday on business rates for small businesses; widening support for training and apprenticeships; and in recognising the special contribution of entrepreneurs we are doubling the Entrepreneurs Relief lifetime limit to £2 million.
We will also create a new Small Business Credit Adjudicator with statutory powers ensuring that SMEs are not turned down unfairly when applying to banks for finance.
We will help to create a new generation of entrepreneurs, ensuring that those studying for vocational skills are offered the opportunity to learn how to start and run a business, while the Flying Start programme will do the same for final-year university students.
We will continue to simplify regulation and avoid unnecessary red tape. If it is used correctly, regulation can help drive innovation, as well as protect workers and consumers. We will seek to reduce the costs of regulation by more than £6 billion by 2015.
21st Century infrastructure
The key to creating the industries of the future is renewing the national infrastructure on which firms rely. To ensure Britain’s infrastructure needs are properly resourced, we will work in partnership with the private sector, reforming the regulation of energy to improve incentives for the private sector to invest. We will establish a Green Investment Bank to invest in low-carbon infrastructure, with the Government’s stake funded by the sale of infrastructure assets. The Government will seek to match its contribution with at least £1 billion of private-sector investment.
The newly formed Infrastructure Planning Commission will – within a democratically determined framework – help streamline and speed up decision-making on major projects. We now propose to extend the public interest test so that it is applied to potential takeovers of infrastructure and utility companies.
Britain must be a world leader in the development of broadband. We are investing in the most ambitious plan of any industrialised country to ensure a digital Britain for all, extending access to every home and business. We will reach the long-term vision of superfast broadband for all through a public-private partnership in three stages: first, giving virtually every household in the country a broadband service of at least two megabytes per second by 2012; second, making possible superfast broadband for the vast majority of Britain in partnership with private operators, with Government investing over £1 billion in the next seven years; and lastly reaching the final ten per cent using satellites and mobile broadband.
Because we are determined that every family and business, not just some, should benefit, we will raise revenue to pay for this from a modest levy on fixed telephone lines. And we will continue to work with business, the BBC and other broadcasting providers to increase take-up of broadband and to ensure Britain becomes a leading digital economy.
Rebuilding our transport infrastructure
Britain needs to invest in modern, high-capacity and low-carbon transport infrastructure. At the heart of our growth plan is the commitment to a new high-speed rail line, linking North and South. Built in stages, the initial line will link London to Birmingham, Manchester, the East Midlands, Sheffield and Leeds, and then to the North and Scotland. By running through-trains from day one, cities including Glasgow, Edinburgh, Newcastle and Liverpool will also be part of the initial network. Journey times will be slashed – those from the West Midlands to London will be as little as 31 minutes. We will consult fully on legislation to take forward our high-speed rail plans within the next Parliament.
High-speed rail is not just about faster journey times. It will free up capacity on existing intercity rail lines, enabling more rail freight, commuter and local services We will press ahead with a major investment programme in existing rail services, hugely improving commuter services into and through London, and electrifying new rail-lines including the Great Western Main Line from London to South Wales. We will complete the new east-west Crossrail line in London adding ten per cent to London transport capacity.
Rail passenger numbers have increased by 40 per cent in the last ten years and punctuality and quality of service are improving steadily. We will encourage more people to switch to rail with an enforceable right to the cheapest fare, while trebling the number of secure cycle-storage spaces at rail stations. We will welcome rail franchise bids from not-for-profit, mutual or co-operative franchise enterprises and will look to remove unfair barriers that prevent such bids benefiting passengers and taxpayers.
Tackling road congestion is a key Labour priority. We will extend hard-shoulder running on motorways, alongside targeted motorway widening including on the M25. Too much disruption is caused by local road works: we will increase tenfold the penalties on utilities who allow work to overrun. We rule out the introduction of national road pricing in the next Parliament.
Heathrow is Britain’s international hub airport, already operating at full capacity, and supporting millions of jobs, businesses and citizens who depend upon it. We support a third runway at Heathrow, subject to strict conditions on environmental impact and flight numbers, but we will not allow additional runways to proceed at any other airport in the next Parliament.
Through our investment, Labour has put Britain at the forefront of electric and low-carbon vehicle manufacturing. To promote the rapid take-up of electric and low-carbon cars, we will ensure there are 100,000 electric vehicle charging points by the end of the next Parliament.
Corporate governance reform
To build strong businesses we need skilled managers, accountable boards, and committed shareholders – all with a culture of long-term commitment. We will strengthen the 2006 Companies Act where necessary better to reflect these principles.
The UK’s Stewardship Code for institutional shareholders should be strengthened and we will require institutional shareholders to declare how they vote and for banks to put their remuneration policies to shareholders for explicit approval.
Too many takeovers turn out to be neither good for the acquiring company or the firm being bought. The system needs reform. Companies should be more transparent about their long-term plans for the business they want to acquire. There needs to be more disclosure of who owns shares, a requirement for bidders to set out how they will finance their bids and greater transparency on advisers’ fees.
There should be a higher threshold of support – two-thirds of shareholders – for securing a change of ownership and the case for limiting votes to those on the register before the bid should be examined.
Creating a shareholding society
We want Britain’s workers to have a stake in their company by widening share ownership and creating more employee-owned and trust-owned businesses. We want to see a step change in the role of employee-owned companies in the economy, recognising that many entrepreneurs would like to see their companies in the hands of their employees when they retire. We will review any outstanding barriers to the formation of more employee-companies like the John Lewis Partnership.