A Hague government - what would it mean for business?

Just weeks ago when the opposition Conservative Party announced its latest tax plans, nobody listened. Since last week's petrol crisis and a slump in the Labour government's popularity, business attention has shifted back to Tory leader William Hague.

When Michael Portillo, the Tories' chief treasury spokesman, announced a ten-point tax plan less than a month ago, he could hardly have attracted less attention.

Today's ICM opinion poll in The Guardian newspaper - coming hard on the heels of two others at the weekend - has changed all that. According to ICM, over the course of a week of petrol shortages, the Tories have reversed a 13-point lag and are now four points ahead of the government at 38%. Labour, now languishing at 34%, is at its lowest ICM level since January 1992.

Prime Minister Tony Blair's personal rating has collapsed from plus two in July to minus 34 - the lowest reading for a Labour Party leader since the unpopular Neil Kinnock in 1989.

With the premier looking so unpopular, businesses have started to think the previously unimaginable: that Tory leader William Hague may be prime minister this time next year. What would that mean?

The first and most obvious impact would be that the UK would certainly not join the eurozone in 2002; the stated aim of pro-euro campaign Britain in Europe, which is close to Blair. Hague's policy is to rule ou membership for at least his first term in government, which would be due to end in 2006-07.

A survey of manufacturing exporters' opinion published this week by the Centre for Economic and Business Research found that 27% favoured joining the eurozone while 25% felt their competitiveness problems would be more easily solved by the Bank of England cutting interest rates.

Portillo, the man who would become finance minister under Hague, recently set out fairly detailed tax plans although these focused more on wha the Tories would scrap rather than what they would put in place.

Top of the scrap heap would be the Labour government's climate change levy, a new tax on business energy consumption. Portillo argues that this levy could cost up to 150,000 jobs in manufacturing industry over the next ten years and would not even help meet the goals agreed to at the 1997 Kyoto summit on climate change. Instead, the Tories would introduce legislation to allow companies to trade pollution permits.

As for hated excise duties and value-added tax on petrol - the reason for last week's 'taxpayers' revolt' - Hague this week carefully avoided any promises. In a keynote speech to Welsh industrialists, he said: "An assessmen must be made of the best place to start cutting taxes. Clearly petrol will be a strong candidate, but other taxes which have led to anger and desperation mus be considered too."

The Tories are being similarly cagey over the notorious IR35 measure that prevents consultants (often information technology or web design specialists) who work for one company claiming the tax privileges accorded to genuinely freelance self-employed operators. IT professionals argue that this measure will damage the 'new economy'.

Portillo has been clearer regarding new proposals contained in a consultative government paper published today to allow municipal councils to add an extra 5% to the national business rate. The British Chambers of Commerce has said this could cost businesses up to 2.75 billion pounds in the next five years and 1 billion pounds a year after that. Businesses would also be given six weeks each quarter to submit tax returns.

Small business leaders have long complained about the imposition of new regulations and welfare administration under the Labour government. To address this problem, Hague has promised a red-tape bonfire.

"Regulation has been piled on regulation," he told the Welsh CBI this week. "Companies are being turned into surrogate benefit offices. Cutting tax is just one part of a Conservative agenda for business. First, we need to cu regulations on business and not just talk about it."

For a start, Portillo will re-convert the working families tax credi to a benefit would spare business the estimated 100 million pounds in administration costs.

Moreover, the Tories would kick off an 'independent audit' into the total cost of regulation to the economy and then set declining regulatory budgets for each government department. This programme would aim to bring down the cost of regulation year on year.

Business will have to await the next set of polls to judge whether the post-crisis surveys were one-offs or whether Hague really will get a chance to carry out this radical agenda.