James Frayne: Big tax rises would make Tory campaigning impossible – in Red Wall seats as well as traditionally blue ones

1 Sep

James Frayne is Director of Public First and author of Meet the People, a guide to moving public opinion.

In my last column, I suggested that the best hope for the Conservatives in building an effective campaign infrastructure in newly-won Northern and Midlands seats was by developing a new business-led coalition in these places.

Many of these towns and small cities have no activist networks of any description, and new voters come from families that openly despised the Tories a generation ago. Practically the only truly culturally Conservative people here – in the North East, the far North West and South Yorkshire – are businesspeople. Businesspeople are relatively large in number and are trusted by their local communities; they would be a perfect launchpad for a new Conservative Party.

It’s early days, of course, and details are yet to emerge, but news of a major assault on British businesses via higher taxes would make such a campaign totally impossible to run. It would be a massive set back to Conservative plans to become a regional party.

If reports are to be believed, amongst other things, the Treasury is considering significantly raising Corporation Tax, as well as Capital Gains Tax (CGT) and taxes on pension payments.

“Corporation Tax” is badly named; it’s a tax on pretty much any significant business, not on “corporations” – but, while larger businesses have both the resources and the endless budget lines to be able to minimise profit and keep corporation tax bills down, SMEs just have to lump it.

And increases in CGT and pension payments will put fear into small businesses, because they ultimately allow business owners to take a lower income now in the hope and expectation of being able to enjoy pay-offs in the future – with their currently lower income supporting their ability to employ others.

All of this would be a bad idea politically at the best of times. But doing it now, just when businesses have been struggling very badly, would be unbelievably risky. It’s not just high street retailers that have bit badly hit; vast numbers of firms have been hit either directly by the logistical difficulties of running a business while social distancing is required, or by a collapse in the confidence of their customers, or both.

New, higher taxes would make it harder for businesses to earn a living, and they would also make redundancies more likely and the scrapping of recruitment plans much more likely. Many businesses will be looking to develop a decent financial cushion over the next year or two – with at least six months’ operating costs in the bank – having been scarred by how close they came during lockdown to oblivion.

They would not be able to generate such a cushion with higher taxes on their profits. (Some businesses are also complaining that this comes on top of Brexit – something else that they would sooner not manage).

Aren’t these businesspeople effectively locked-in to the Conservative Party? Where would businesses go to vote? It’s true to say there are many, many businesspeople across the Midlands and North that would be very unlikely to vote Labour – on the basis the Conservatives would pretty much always be better for them.

But we’re not talking about simply securing their votes for future elections; we’re talking about trying to energise businesses so that they became local recruiters, fundraisers and campaigners for the Party in places where there are no activists. They simply won’t do this if the Conservatives turn them over. Again, if the businesspeople of Rotherham, Doncaster, Barrow, Workington, Bishop Auckland and so on aren’t going to create a new Conservative campaign network, who on earth is going to do it?

While major tax rises on business would make the growth of new regional Conservative Party much more difficult, I strongly doubt it would retain any medium-term popularity with the public either. Public opinion polls always lag behind business polls – and these are showing extreme concern about the state of the economy.

The public would catch up when reality bit and growth slowed and redundancies rose; at that point, the public would see that raising taxes on employers doesn’t help anyone. So where should the Treasury look? There are already suggestions they are being strongly encouraged to look at spending cuts first; only when they have exhausted what’s reasonable morally, economically and politically should they turn towards tax rises.

Alexander Stafford: Renewables – not just providers of green energy, but enablers of levelling up

15 Jul

Alexander Stafford is MP for Rother Valley.

In every conversation around the clean recovery there is, rightfully, a tendency of NGOs and commentators to look at how we can take the steps needed to achieve our net zero ambition. Job-rich initiatives such as energy efficiency and EV charging development are particularly alluring. The development of green hydrogen is promoted as strongly for its regional growth benefits as much as its importance for decarbonising heat.

The potential role of renewables in the green recovery is celebrated, but often overlooked. But it is these that are already driving jobs in the North of England and would help with this Government’s “levelling-up agenda”, as well as being the most publicly popular.

The Government has an ambitious target of 40GW of offshore wind by 2030, which will bring over £50 billion of investment into the UK over the next decade. The industry is already transforming ports across the country such as Grimsby, Great Yarmouth and Tyneside, employing thousands in high-wage high-value jobs and supporting our levelling up ambitions.

What’s more, as the cheapest large-scale new power source, the offshore wind that the UK will be building in the coming years, and indeed the onshore wind and solar, will be helping the British economy stay competitive.

Our competitive market framework of Contract of Difference auctions has ensured consumers get the lowest cost renewables, whilst supporting the development of a world-leading supply chain. New companies like Tekmar in Sedgefield have emerged as world-leaders in cables. Traditional oil and gas companies such as James Fisher, headquartered in Barrow-in-Furness, have found new contracts servicing offshore wind farms. However, we could be doing much more to support the development of the UK’s supply chain.

The Prime Minister is looking for infrastructure investment which will unlock future regional growth. The next generation of offshore wind turbines will be almost as tall as the Shard, so it is essential that we re-develop our ports so that they’re able to handle these incredible machines and their component parts.

Similarly, our manifesto rightly saw the opportunity of floating offshore wind, and the Government is looking at the CfD reform needed to develop it. We are well placed to become world leaders, with an established wind industry supply chain, expertise, and great wind resources. There’s the potential to power millions of homes by developing floating offshore wind in the Celtic Sea and deep in the North Sea, but we need to invest in ports like Milford Haven and Nigg to do so – vitally, to maximise the development of the UK supply chain in the process.

We know proactive industrial strategy works in renewables. It was a mixture of market opportunity and Government support that unlocked £310 milliom of private investment in the Siemens Gamesa blade factory in Hull, which now employs over a thousand people, 96 per cent of whom live within a 30 mile radius of the factory.

We need to reignite bilateral conversations with major supply chain companies, and set up a policy environment that better supports the vast number of UK SMEs. Test facilities like the ORE Catapult in Blyth are fantastic in allowing UK innovators to trial new products on wind turbines but, once they’re proven, we will need to ensure the grants, tax relief or financial de-risking schemes are in place which help these innovators to scale-up their businesses.

Increasing our research and development funding to the levels of competitor countries like Germany, Denmark, the Netherlands and Japan will ultimately ensure UK’s companies are at the forefront of innovation and remain competitive in the global market.

When the global market in offshore wind is set to increase to at least £30 billion a year by 2030, we should be increasing our export ambitions and the support that government gives companies in entering these global markets.

Just as Denmark has an ecosystem of multiple agencies working to boost renewable exports, we too should work across Government. We’re rightly levering our role as COP President and world leadership in offshore wind to encourage countries such as Brazil, Mexico and India to take advantage of their vast wind and seabed resources too. We do so for the future of the world’s climate. But we should also acknowledge that, in doing so, we’re developing markets for our supply chain companies, and departments should act accordingly.

Finally, and most importantly,  the Government shouldn’t lose sight of the importance of also ensuring that people are re-skilled so they can take advantage of the jobs we create through the nurture of our renewables sector. We need to manage the transition.