Financial Regulatory Forum

FACTBOX – UK parties’ policies on banks, bonuses, M&A, jobs

By Reuters Staff
April 14, 2010

LONDON, April 14 (Reuters) – Britain’s three main political parties have published their manifestos ahead of a general election on May 6.

Below are details of their business policies in areas such as banking, regulation, acquisitions, executive bonuses and job creation.

* BANKS LEVY

Conservatives: Say they will put a levy on banks and do so unilaterally if they cannot get international agreement.

Labour: Looking for a globally agreed levy on financial services.

Liberal Democrats: Aim to raise over 2 billion pounds a year from a levy, requiring banks to pay for financial support they have received.

* BANK REGULATION

Conservatives: To put the Bank of England in sole charge of bank regulation and seek an international agreement preventing retail banks from engaging in risky activities such as large-scale proprietary trading. The Consumer Protection Agency will take on the FSA’s consumer protection role. The sale of government bank stakes will be used to boost competition and offer a “people’s bank bonus”.

Labour: To make the FSA responsible for the regulation of all mortgages and work with international partners to require all banks to hold more and better quality capital. The new Council for Financial Stability will monitor and address asset bubbles and financial imbalances. To boost competition, it will break up the banks in which government has controlling stakes.

Liberal Democrats: To split up banks to insulate retail banking from investment risks and work with EU partners for stricter international regulation. They also propose maximum interest rates for credit cards and store cards and to turn Northern Rock into a mutual building society.

* MERGERS & ACQUISITIONS

Labour: Wants a “super-majority” of two-thirds of shareholders to back any takeover bid and to introduce a public-interest test for takeovers of infrastructure and utility companies. The case for limiting votes on M&A deals to those on the shareholder register prior to the bid should be examined.

Liberal Democrats: Want public interest tests on deals and proposing that they should be subject to approval by long-term shareholders.

Conservatives: No mention of M&A law in their manifesto although business spokesman Ken Clarke has told the Financial Times that Labour plans are “populist nonsense” and that his party would seek to limit government intervention in business.

* BONUSES

Conservatives: To empower the Bank of England to crack down on risky bonus arrangements

Labour: To give the Financial Services Authority (FSA) additional powers to constrain executive remuneration where it is a source of risk and instability. Will also require banks to put remuneration policies to shareholders for explicit approval.

Liberal Democrats: To ensure the bonus system can never again encourage banks to behave in a way that puts the financial system at risk or rewards failure.

* BUSINESS

Conservatives: To cut the headline rate of corporation tax to 25p and the small companies rate to 20p, funded by reducing complex reliefs and allowances. Will also improve Britain’s international rankings for tax competitiveness and business regulation.

Labour: To cut the cost of regulation by more than 6 billion pounds by 2015. Also plans a UK Finance for Growth Fund, bringing 4 billion pounds of public funds together with private equity to provide capital for growing businesses, focussing on SMEs and high-tech firms.

Liberal Democrats: To establish Local Enterprise Funds to help local investors put money into growing businesses and Regional Stock Exchanges for businesses seeking equity without the heavy regulatory requirements of a London listing. Also pledged to cut red tape and setting up an infrastructure bank to direct private finance to essential projects.

* JOBS

Conservatives: For the first two years of a Conservative government any new business will pay no Employers National Insurance on the first ten employees it hires during its first year. Also to set an annual limit on the number of non-EU economic migrants admitted into the UK to live and work.

Labour: Those out of work for six months or more will be guaranteed employment or training through a 1 billion pound Future Jobs Fund, with mandatory participation after ten months. The fund will support 200,000 jobs. All those who are long-term unemployed for two years will be guaranteed a job placement, which they will be required to take up or have benefits cut. On immigration, Labour plans a points-based system.

Liberal Democrats: Plans a one-year economic stimulus and job creation package. Has identified 3.1 billion pounds of public spending that can be used to create 100,000 jobs.

(Reporting by Paul Hoskins; Editing by Simon Cameron-Moore) ((paul.hoskins@reuters.com; +44 20 7542 5331; Reuters Messaging: paul.hoskins.reuters.com@reuters.net))

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