2015 General Election Manifesto. icaew.com2

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1 2015 General Election Manifesto BUSINESS icaew.com WITH CONFIDENCE icaew.com2

2 Foreword Ahead of the 2015 General Election, Britain faces a choice. We can accept short-term growth with underlying structural problems, or we can chart a different course towards long-term prosperity. To achieve this we must strengthen the public finances, simplify personal tax, support business growth, and ensure our young people are ready for work. Drawing on the insights and experiences of our 142,000 members, this manifesto identifies what we see as the biggest priorities for the next government, and sets out ideas on how to address those priorities. Michael Izza Chief Executive Officer Read more at icaew.com/manifesto2015 and join the discussion on twitter using #icaew2015. You can also read our priorities for the EU at icaew.com/euelection 2 icaew.com

3 ICAEW supports over 142,000 Chartered Accountants who are leaders in finance and business ICAEW Chartered Accountants advise over 1.5m businesses from more than 20,000 offices 83 FTSE 100 companies have at least one ICAEW Chartered Accountant on their board Professional services employ nearly 1m people with 327,000 jobs in accountancy, generating over 9bn of the UK trade surplus each year Government research shows accountants are the most used source of external advice or information for SMEs Our members are active in at least 30,000 volunteer roles Chartered accountancy firms are the biggest private sector graduate employer in the UK Established in 1880 by Queen Victoria with a Royal Charter to advise on policy in the public interest icaew.com 3

4 Business and economic growth Long-term sustainable growth Economic confidence is now firmly established, with ICAEW members forecasting 3.4% growth for However, a future government must do more to ensure long-term economic prosperity. We need the right kind of growth. This means higher business investment, better business finance, and more exports to drive productivity - all underpinned by a highly-skilled workforce. This can only be achieved by creating the right environment for all businesses in every region, to ensure the recovery is embedded throughout the country. Real GDP - Annual Growth Our members offer a business advice service (BAS) which provides an initial consultation for businesses and start-ups with an ICAEW Chartered Accountant free of charge. Discussions can range from cyber security advice to managing cash flow. Working closely with the British Business Bank and 17 partner organisations, ICAEW has produced the Business Finance Guide, a comprehensive guide to funding a business on the journey from start-up to growth. % f Year Source: Office for National Statistics, Real annual GDP growth (2007/13) forecast from ICAEW Economic Forecast, Q2, icaew.com

5 Drive balanced economic growth through smarter use of government Finance for growing businesses A new generation of businesses is still being failed by finance providers. They often struggle to secure finance at a vital stage in their growth, due to poor credit ratings or lack of security. The government should therefore guarantee 25% of a bank loan of up to 100,000, for businesses that have been trading for between two and five years. The British Business Bank has an important role to play in identifying and fixing such market failures that hold back growth. It is also important that businesses are aware of alternative finance options and are not solely dependent on bank debt. Ensure Local Enterprise Partnerships achieve maximum bang for buck LEPs are vital to achieve economic growth throughout the country. They will receive at least 2bn of public money over the next year. Investment decisions by central government should be made on the basis of LEPs potential to drive economic and employment growth. To succeed, LEPs need stability for their future, and a clear understanding of what is required of them. Then, government should step back and let LEPs pursue the strategy best suited to their local area. Adopt a segmented export strategy ICAEW research shows the government will miss its target of 1 trillion in exports by Without addressing this part of the economy, the UK is likely to experience another balance of payments problem. We cannot continue to import more than we export. We need a step change in the support provided by UKTI and UK Export Finance. For example, export guarantees are currently under-used and mainly serve a few big businesses. A future government should adopt a more segmented export strategy to reach businesses of all sizes and in all sectors. icaew.com 5

6 Tax A tax system that encourages growth Our tax system is in need of a major overhaul so that it works for entrepreneurs, businesses and individuals. We have one of the most complicated tax codes in the world, which undermines confidence in the tax system. It acts as a burden to those who are self-employed, suppresses entrepreneurial spirit and ultimately inhibits economic growth. Number of pages in that year's Finance Act(s) 1000 Increasing rate of change in tax law The ICAEW Tax Faculty is the largest body of practitioners involved in tax in the UK. Every year we work closely with the OECD, Treasury, HMRC and MPs to ensure the development of high quality tax law. In 2013 the Tax Faculty submitted major briefings on the Budget, Autumn Statement and Finance Bill to the government and to opposition parties, all available to the public. These included submissions to the Treasury Select Committee, the House of Lords Economic Committee and detailed representations on specific clauses in the Finance Bill No of pages in Act Years Source: legislation.gov.uk 6 icaew.com

7 Untangle the UK s complex tax system RELATIVE TAX RATE PEOPLE IN THE HIGHER RATE BEFORE Make tax simpler for lower paid employees Constantly varying tax rates and thresholds confuse employees and small business entrepreneurs. Where this interacts with the welfare system, tax becomes particularly complex for low-income employees and self-employed people. The next government should review and simplify tax for these tax payers as a priority. Aligning the national insurance (NI) threshold to match the income tax threshold would be a good place to start. NI was originally designed as a social fund, but has become another tax on employees. Protect HMRC funding and raise service standards HMRC is at the front line of protecting the UK s tax base. Its funding cannot go any lower without having a major effect on quality of service standards for taxpayers and businesses, and severely compromising efforts to tackle aggressive tax avoidance. Therefore, after the 2015 General Election, HMRC should be ring-fenced for the whole of the next Parliament. But at the same time there must be a revised charter to ensure HMRC commits to world-class service standards that put the needs of business and the taxpayers at the heart of what they do. AFTER Tax simplification should start with abolishing inheritance tax The work of the Office for Tax Simplification has shown just how difficult it is to have meaningful tax simplification. The UK has one of the longest and most complicated tax codes in the world. Further tinkering with tax simplification is not likely to work and more radical measures are now needed. We think a start should be made by looking at abolishing inheritance tax (IHT). The government should replace IHT with a modest duty on all assets transferred above a certain amount. This would simplify the tax system and ensure duty is collected across a broad base, while ensuring those with modest estates are not disproportionately affected. icaew.com 7

8 Public sector finance Austerity is a 10-year job Growth in the economy has undoubtedly returned, but Britain s budget problems are not yet fixed. With over half the planned spending cuts due after the General Election, the next government will be faced with the challenge of bringing the debt and deficit under control. They must do this to ensure taxpayers money is spent wisely and to maintain the confidence of international markets on which favourable borrowing costs depend. It is important to have the right financial skills and structures in place to implement these savings fairly and efficiently. UK Public Sector Debt & Deficit Public Sector Debt Public Sector Deficit The ICAEW and our public and private sector members have a wealth of relevant expertise to ensure greater value for money in public spending from practical experience and thought leadership in financial management, financial reporting, tax, audit, corporate governance and IT systems, to our track-record in delivering finance qualifications, learning and professional development. The ICAEW has recently contributed to the government proposals to reform PFI and actively supported the implementation of the whole of government accounts in the UK bn / / / / / / / / / / / /16 f 2016/17 f 2017/18 f 2018/19 f Year Source: Office for National Statistics, UK public sector debt and deficit 8 icaew.com

9 Tax payers need better managed public finances Transform HM Treasury into a modern finance ministry At the moment, the Treasury monitors what other parts of government are spending, as well as handling economic policy and consolidating the government s accounts. To transform how well taxpayers money is spent, the Treasury should do more to drive value for money throughout all departments, helping to manage spending and costs a function currently split with the Cabinet Office. A modern finance ministry shouldn t just hand money out. It should take responsibility for how well it is spent and collected. A CFO to the cabinet table Empower a Chief Financial Officer (CFO) to take overall responsibility for financial leadership across Whitehall. A CFO at the top of government should be providing strategic advice, improving balance sheet management and driving value for money across government. Spending should be done in a way that maximises jobs and growth and the effectiveness of the public services. Stronger financial oversight in Whitehall Rigorous financial management across local and national public bodies is vital, and this should be underpinned by high quality public audit. Following the abolition of the Audit Commission, the government is setting a new regulatory framework for local public audit. But it only applies to local government and the NHS in England. To ensure transparency and efficiency, the same principles and regulatory framework should apply right across the public sector, taking in bodies like the Ministry of Defence or academy schools. This must, of course, be underpinned by strong financial discipline in those bodies. icaew.com 9

10 Skills and social mobility How the UK can win the global skills race A rise in the number of jobs is a welcome sign that we are on the road to economic recovery. However there is a chance that businesses might not be able to capitalise on the upturn because of a growing skills gap. ICAEW members indicate there is already a skills shortage in construction, IT and transport. Employers, government, educational institutions, and professional bodies must work together to channel talented people of all ages, irrespective of their background, into jobs where their skills are most needed and not wait until businesses are unable to fill vacancies because of a lack of skills. We are a leading partner in the Access Accountancy initiative which is an ambitious collaboration of employers and professional bodies, dedicated to improving access to the accountancy profession. The scheme aims to create 3,750 high quality practical experiences of work by September Net % of businesses reporting availability of skills to be a greater challenge than 2013 Construction IT & Communications Transport & Storage Banking, Finance & Insurance Retail & Wholesale All Service Industries Property Manufacturing & Engineering All Production Industries Business Services Energy, Water & Mining 0% 10% 20% 30% Availability of non-management skills Availability of management skills Source: ICAEW Business Confidence Monitor, Q2, icaew.com

11 Give people the skills, opportunity and knowledge to compete SCHOOL TRAINING WORK Make work experience mandatory in schools Mandatory work experience was removed from the curriculum in It should be put back in. Work experience is the basic first exposure to work for young people and directly connects academic learning with the workplace. It can also help schools build links with local businesses, creating a foundation for more joint activities to build awareness and work readiness. Keep promoting alternative routes into professions The UK is turning a corner in the availability of apprenticeships and other non-university routes into the professions, such as schoolleaver programmes. However, more resources are needed to communicate the benefits of all career options to young people and business. For example, UK professional qualifications are some of the most admired in the world, and accountancy is promoting social mobility by providing more opportunities to talented students from disadvantaged backgrounds. Reform undergraduate funding The current loans system is unsustainable. It is creating an enormous future liability which is not reported on the government balance sheet. We need to ensure that the government provides sustainable and equitable support to young people pursuing a wide range of academic and vocational qualifications. We need to be clear on what the economy will require in terms of the future skills and qualifications employers will need, so that we can better plan the supply of graduates and apprentices. icaew.com 11

12 ICAEW is a world leading professional membership organisation that promotes, develops and supports over 142,000 chartered accountants worldwide. We provide qualifications and professional development, share our knowledge, insight and technical expertise, and protect the quality and integrity of the accountancy and finance profession. As leaders in accountancy, finance and business our members have the knowledge, skills and commitment to maintain the highest professional standards and integrity. Together we contribute to the success of individuals, organisations, communities and economies around the world. Because of us, people can do business with confidence. ICAEW is a founder member of Chartered Accountants Worldwide and the Global Accounting Alliance. ICAEW Chartered Accountants Hall Moorgate Place London EC2R 6EA UK Joel Spreadborough Public Policy Manager Joel.spreadborough@icaew.com linkedin.com find ICAEW twitter.com/icaew facebook.com/icaew ICAEW 2014 OTHPLN /14

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