The Labour Party - A Warning From History

By : Forum Member
Published 3rd April 2015

Dear All,

Firstly, I am not a Tory, UKIP, Green, SNP, Plaid Cymru and am not even sure I'm a Lib Dem (although the orange poster in my garden would like me to think otherwise). 

What I am is a business man, an accountant and someone with a couple of employees and a lot of small employer clients. As a result, I find the Labour manifesto challenging, demonising and completely anti business! Yet, it remains unchallenged by the main political parties because, it will win (and lose) votes!

So, my clients are small businesses. They are not "fat cat" entrepreneurs who class £1M as mere small change. They do however employ people which in turn; reduces unemployment, increases tax revenues and in turn leads to more people living above the poverty threshold. Many are in service industries and other labour-intensive occupations. Only a handful have more than 50 employees and the vast majority employ less than 10 staff. Most however have a satisfied workforce, high staff moral and high retention rates.

Cue Ed (should have been David) Milliband - Enter from the Left Wings

The Labour manifesto for the election promises:
1. Abolition of Zero Hours Contracts
2. Increase of Minimum Wage by £1.50 to £8.00 (23%)
3. Increase in Apprenticeship Wage Rates

So, who will this hit? Who has to stump up the money to pay for these changes? Is it the government, the tax payer or Europe? No! It will be the small employers! But have we heard/ experienced this before?

Cue Gordon Brown - 

Whilst in government (as chancellor and PM), Labour introduced the following:
1. An increase to Employer's NI of 3.8%
2. An increase to statutory holiday entitlement of 40%
3. The introduction and nigh-on tripling of the national minimum wage
4. The introduction and abolition of the £10K starting rate of Corporation Tax
5. The legislation to introduce the statutory workplace pension (1% to 3%)
6. The abolition of casual labour and replacement with "zero hour" contracts

And that's without all of the additional legislative introductions which have cost business considerably (in particular small business) in time, money and resources (Health & Safety, new Companies Act, RTI... I could go on... and on... and on!).

So, back to the here and now...

It's time to penalise the small business who, having survived the recession, are just finding their feet. They pay their employees a minimum wage - because that is truthfully, all they can afford. They welcome the flexibility (as do their workers) of zero hour contracts, only employing staff when needs must. They take on apprentices which increases the skill base of the UK. Most take a menial wage to keep the status quo of their business. Their profits (and tax revenues) are starting to increase... marginally. And... many are now, after many years of a Labour government, starting to feel happy about being in business as opposed to employment.

With an effective 26% increase in wages forecast for the next few years (including pensions - and yes, including every other member of staff who will need their wages increased accordingly), business owners will have a stark choice to make. Some will absorb the cost and live below the poverty line themselves. Some will reduce their workforce and implement draconian efficiency savings which are far and beyond any expectations for reducing public service spending. Others will simply decide that, after many years of recession, they do not wish continue in business and close shop. What will this mean?
1. Absorbs the cost : unprofitable businesses = no income/ Corporation Tax
2. Efficiency savings : increased unemployment, increased benefit claims, reduced income tax
3. Closed business : increased unemployment, increased benefit claims, reduced income tax and Corporation Tax
Clearly, there will be a fourth option - others who will go underground, pay their workers cash, work for cash themselves, declare no profits (or substantially reduced profits) and their workers (who have no income) will claim benefits. It's not right but, it will happen.

What is more, by increasing the rate for an apprentice considerably, less companies will be likely to take them on. I have worked with clients who appoint apprentices, train them up, give them day-release for college and pay the going rate. However, they are not fully trained staff and hence, by increasing their minimum rate to that of a fully qualified member of staff, the employers will simply not employ them.

To top everything off... the current Labour party (as opposed to the "New" Labour party) wish to increase borrowing again! If I had ever proposed to a client to borrow when they have no way of paying it back, I would likely be deemed to be negligent!

Finally, I do not honestly care who gets in to Number 10 in May. It makes no odds in my mind whether its David Cameron, Angela Merkel or Vladimir Putin. However, a party with such disregard for small businesses; the real tax payers, the real apprentice trainers and the real service providers, as has Ed Milliband's Labour Party, really should not be governing our country! Indeed, if elected and all of the "promises" are fulfilled, the Labour Party would be best renaming themselves "The Unemployment Party"

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