Ukip has finally showed its hand on its 2015 election manifesto. Photo: Getty
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Why Ukip's new manifesto ideas are worrying

How many of their new, worrying ideas make it through to the final manifesto will be key in setting the tone of an undoubtedly aggressive campaign by Ukip.

After months of skirting around the question, we’ve been given a good glimpse of what Ukip’s 2015 general election manifesto will look like.

In an interview with Prospect magazine, Tim Aker, Ukip MEP for the Eastern Counties and head of the party's Policy Unit, has shown a hand that, though not unexpected, should be of genuine concern to liberal-minded voters.

First, the good news. Following a line reminiscent of the Liberal Democrat pledges at the time of the last general election, Aker says that his party “want to take low earners out of income tax altogether" with "no tax on the minimum wage”.

So far so liberal from the man charged with writing Ukip's manifesto. However, under the guise of wanting “flatter, simpler and lower taxes”, Akers goes on to say that Ukip will promise to increase the level at which the 40p income tax rate begins to £45,000, and no higher rate will exist – ie. the current top rate of income tax will be abolished completely.

We can debate whether or not this move is regressive all we like, but it doesn't change the fact that if you want to tackle inequality through tax reform Ukip would do much better to focus on evidently regressive taxes such as VAT and council tax, of which there is no mention in Aker’s interview.

More worryingly – and this is something that does seem to fall at a more obvious point on the left/right spectrum – is that “foreign aid is an obvious target” for cuts that Ukip are looking to make to reduce the deficit.

With a target spend of only 0.7 per cent of GDP for 2013-14, this shows a clear misconception of how big an impact cutting official development assistance could have on the nation’s finances, not to mention the good it does overseas.  As of 2010, nearly half the world's population were surviving on less than $2 a day. Less than one penny in every pound of government money is a small price to pay for alleviating this suffering plus, after National Audit Office and House of Lords Committee reviews over recent years, there is now more scrutiny to ensure our aid is spent more effectively.

Further plans to shrink parts of the Department of Energy and Climate Change and Business Innovation and Skills will apparently be independently reviewed, but “not by the OBR [Office for Budget Responsibility]”.

But it is welfare reform where the Ukip plans really put them further to the right of a lot of Conservatives. (Bar a commitment to scrap the relatively unpopular ‘Bedroom Tax’, which might be driven by popular sentiment than anything else.

Under a Ukip government, the benefit cap would stay and child benefit would be limited to two children. Not so radical, until you read about Ukip's plans for immigrant benefit claimants. Aker says the 2015 manifesto will include commitments to the effect that “new migrants to this country will not be eligible for any welfare benefits until they have been paying tax and national insurance for five years.”

A lot can happen in five years. Perfectly skilled, hard-working migrants could find themselves out of a job through no fault of their own. Over such a long period, its not unlikely that this will happen at some stage, but UKIP plans to deny them access to the same safety net they would provide for British born workers.

As well as a plan to increase the strength of the border force, Aker says that to come to the UK “you must show that you have been working in that profession for 12 of the last 24 months, that you can speak English and that you won’t need tax credits.”

You can almost hear foreign companies crying out to invest in UK business under such conditions, while their most talented new employees wouldn't have a hope of relocating either.

Aker’s policy hints do at least suggest that Ukip is looking to draw bolder distinctions between itself and the main three parties. This is particularly stark in his criticism of the Data Retention and Investigatory Powers Act, which Aker says was “rushed through” parliament after receiving support from the Tories, Labour and Liberal Democrats alike. The Ukip pledge of a “complete review of it and the rebalancing of what level of intervention the security services can have in our lives” is an open challenge to them on that front.

“We’re beyond left-right” insists Aker. Even if that’s so, it doesn't make the manifesto he’s drawing up wise, and how many of these ideas actually make it through to the final manifesto will be key in setting the tone of what will undoubtedly be an aggressive campaign by Ukip.

Justin Cash is a reporter at LegalWeek and tweets @Justin_Cash_1

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Let's turn RBS into a bank for the public interest

A tarnished symbol of global finance could be remade as a network of local banks. 

The Royal Bank of Scotland has now been losing money for nine consecutive years. Today’s announcement of a further £7bn yearly loss at the publicly-owned bank is just the latest evidence that RBS is essentially unsellable. The difference this time is that the Government seems finally to have accepted that fact.

Up until now, the government had been reluctant to intervene in the running of the business, instead insisting that it will be sold back to the private sector when the time is right. But these losses come just a week after the government announced that it is abandoning plans to sell Williams & Glynn – an RBS subsidiary which has over 300 branches and £22bn of customer deposits.

After a series of expensive delays and a lack of buyer interest, the government now plans to retain Williams & Glynn within the RBS group and instead attempt to boost competition in the business lending market by granting smaller "challenger banks" access to RBS’s branch infrastructure. It also plans to provide funding to encourage small businesses to switch their accounts away from RBS.

As a major public asset, RBS should be used to help achieve wider objectives. Improving how the banking sector serves small businesses should be the top priority, and it is good to see the government start to move in this direction. But to make the most of RBS, they should be going much further.

The public stake in RBS gives us a unique opportunity to create new banking institutions that will genuinely put the interests of the UK’s small businesses first. The New Economics Foundation has proposed turning RBS into a network of local banks with a public interest mandate to serve their local area, lend to small businesses and provide universal access to banking services. If the government is serious about rebalancing the economy and meeting the needs of those who feel left behind, this is the path they should take with RBS.

Small and medium sized enterprises are the lifeblood of the UK economy, and they depend on banking services to fund investment and provide a safe place to store money. For centuries a healthy relationship between businesses and banks has been a cornerstone of UK prosperity.

However, in recent decades this relationship has broken down. Small businesses have repeatedly fallen victim to exploitative practice by the big banks, including the the mis-selling of loans and instances of deliberate asset stripping. Affected business owners have not only lost their livelihoods due to the stress of their treatment at the hands of these banks, but have also experienced family break-ups and deteriorating physical and mental health. Others have been made homeless or bankrupt.

Meanwhile, many businesses struggle to get access to the finance they need to grow and expand. Small firms have always had trouble accessing finance, but in recent decades this problem has intensified as the UK banking sector has come to be dominated by a handful of large, universal, shareholder-owned banks.

Without a focus on specific geographical areas or social objectives, these banks choose to lend to the most profitable activities, and lending to local businesses tends to be less profitable than other activities such as mortgage lending and lending to other financial institutions.

The result is that since the mid-1980s the share of lending going to non-financial businesses has been falling rapidly. Today, lending to small and medium sized businesses accounts for just 4 per cent of bank lending.

Of the relatively small amount of business lending that does occur in the UK, most is heavily concentrated in London and surrounding areas. The UK’s homogenous and highly concentrated banking sector is therefore hampering economic development, starving communities of investment and making regional imbalances worse.

The government’s plans to encourage business customers to switch away from RBS to another bank will not do much to solve this problem. With the market dominated by a small number of large shareholder-owned banks who all behave in similar ways (and who have been hit by repeated scandals), businesses do not have any real choice.

If the government were to go further and turn RBS into a network of local banks, it would be a vital first step in regenerating disenfranchised communities, rebalancing the UK’s economy and staving off any economic downturn that may be on the horizon. Evidence shows that geographically limited stakeholder banks direct a much greater proportion of their capital towards lending in the real economy. By only investing in their local area, these banks help create and retain wealth regionally rather than making existing geographic imbalances worce.

Big, deep challenges require big, deep solutions. It’s time for the government to make banking work for small businesses once again.

Laurie Macfarlane is an economist at the New Economics Foundation