The UK election on May 6 looks set to be the closest run contest for a generation. The uncertain outcome – betting currently favours no outright winner – has created concern that any new government will lack the ability and will to tackle the ballooning budget deficit.
But it seems just as probable that a so-called hung Parliament would enable the political parties to fudge through the necessary cuts with any coalition blaming the other party or parties involved for its savagery.
The two main political parties, the incumbent Labour, and the main opposition Conservatives, are both relatively business friendly. Ironically, for bankers, the less aggressive party in terms of banking reforms is the left-leaning Labour.
Overall, however, it is no surprise to see the Conservatives presenting the most business friendly manifesto. For the hospitality industry it is encouraging that, despite some rhetoric to the contrary, the Conservatives talk of a balanced economy without condemning services and applauding manufacturing.
Rather the balance is in terms of higher exports, business investment and saving as a share of economic output (it has to be assumed that saving here is what makes investment possible, of itself it is not part of GDP).
Another key policy difference with Labour is the Conservative intention to scrap the proposed increase in National Insurance, a payroll tax that hits both employee and employer.
Less beneficial to some hospitality companies is the Conservative proposals on immigration. This would restrict the number of non-EU migrants to a fixed, if unspecified at this point, cap. And there would be immigration controls for people from any new states joining the EU.
Labour too is focused on controlling immigration but its manifesto does not propose fixed caps on the number of migrants admitted but talks instead of a "gradual tightening".
The Conservatives are also less friendly towards the travel industry. They would axe not only the third runway at Heathrow, but also any prospect of second runways at Gatwick and Stansted.
The most pro-business noise from the Conservatives is from tax policy. Here the manifesto promises to simplify business taxes, particularly for multinationals. Corporation tax would be cut to 25% (20% for smaller companies) but this would also entail the ending of a number of reliefs. The pledge is to have the most competitive tax system in the G20 within five years.
It is on tax where the third party, the Liberal Democrats, have some of the least friendly policies towards the hospitality industry. This is particularly the case for property owners. The Lib Dem manifesto promises to tax capital gains at the same rate as the taxes on income (which would be extraordinary if capital gains taxes rose to 50% to match the highest rate income tax).
In addition, the Lib Dems are the most aggressive in their language on tackling tax avoidance stating that they would prevent the avoidance of stamp duty by putting properties into an offshore trust.
The tax status of non-domiciled individuals would also be reformed, forcing them to be taxed on all offshore income after seven years.
The Labour manifesto also promises measures that are likely to deter inward investment. It proposes a so-called Cadbury law to restrict takeovers of UK companies.
HA Perspective: It would be a brave reader to take political advice from your correspondent given my history as a teenage Trotskyist. But overall, there appears little to fear from either of the main political parties in the current contest.
The Conservatives have the most business friendly policies, particularly on taxes, but the difference – at least on the surface – is relatively small.
Much more important is what is not said in the manifestos. Only the Liberal Democrats make any attempt to cost out their proposals and even then the effort falls woefully short.
What matters is how assertive any new government will be in addressing the budget deficit. A strict and believable framework for reducing the deficit in the medium term is essential for the UK to avoid a Greek-style sovereign debt crisis.
And it is here that the Conservatives have the strongest cards. Analysts at Citigroup suggest that a large (30+ seats) Conservative majority would enable tight fiscal tightening but anything less is unlikely to see any sustained reduction.
If there is this cause and effect – which in my view is not necessarily the case – then interest rates will only remain low if there is a large Conservative majority, according to the macro economics team at Citigroup. Vulture funds should thus be voting against the Conservatives and any existing holders of distressed assets should be making large donations to the Conservative cause.
A hung parliament is likely to weaken Sterling, reckons Citigroup. If so, then this would also suit operators in the UK. Longer term, however, the damage to the economy from higher government borrowing costs would hurt domestic demand.
The reality is that even in the event of a hung parliament, politicians of all hues will attempt to reduce the deficit. The socialist government in Spain, for example, has made significant cuts to government spending and the Prime Minister Jose Luis Rodriguez Zapetero is increasingly bellicose promising this month to cut the deficit "whatever the cost".
The main UK parties have refused to rule out raising VAT (sales tax) and a 20% rate seems a shoe-in after the election. There appears little appetite, however, for further direct tax rises. The fiscal tightening will mostly be via spending cuts.
The election should be centred around who is the most able and willing to do this fiscal tightening effectively. Sadly, the debate is failing to reflect this. Rather, in the words of the former Labour deputy leader John Prescott, spoken this month during a debate with his opponents, it is all just "yak, yak, yak".