Westminster Watch: What the manifestos mean for the technology sector

With the UK General Election just over two weeks away, all major political parties have now released their manifestos which propose a broad array of policies.

With current polls and political commentators predicting a change of government on the 4 July, it is in the interests of all businesses to understand the impact of each party’s manifesto commitments on their industry.

The Financial Times’ aggregation of national voting polls suggests the Labour Party maintains a 20 percentage point lead on the Conservatives (FT, 14 June 2024). No incumbent party has ever bounced back to close such a significant polling gap so far into the campaign season. As such, it seems likely that the Labour Party will achieve an electoral majority on 4 July (although how significant this majority will be, is difficult to predict). While there is always a possibility that unexpected developments may change the trajectory of the campaign, as of today, we advise clients to carefully consider the policy commitments that are being proposed by the Labour Party in their manifesto.

This is the first of our series of Westminster Watch client alerts, analysing the impact of the party manifestos on key sectors across the UK economy. We will be focusing on the two major political parties, with additional insight into the manifestos of the Liberal Democrats and Reform UK. Together, these manifestos provide a representative indication of the political and legislative intentions of the next cohort of MPs in Westminster.

In this article, our UK Government Affairs and Technology teams offer an overview of the manifesto commitments affecting the technology sector in the UK.

THE LABOUR PARTY MANIFESTO

The Labour Party’s manifesto outlines a strong commitment to fostering innovation and supporting the growth of the AI sector (The Labour Party, 13 June 2024). Key initiatives include:

• A new Regulatory Innovation Office, merging the Better Regulation Executive and the secretariat of the Regulatory Horizons Council. It would set targets for tech regulators, monitoring the speed of their decision-making (e.g. on regulatory approvals for innovative products and services) against international benchmarks. It would also be empowered to ‘steer’ regulators to carry out their work according to the priorities outlined in the Labour Party’s industrial strategy (The Labour Party, October 2023)
• Removing planning barriers to new data centres. This could be by designating data centres as Nationally Significant Infrastructure Projects, or NSIPs (Telegraph, 9 June 2024). NSIPs were introduced under the Planning Act 2008 to streamline the approval process for major energy, transport, water, wastewater and waste infrastructure projects. Over 100 NSIPs have already been built. Expanding the definition of NSIPs to include data centres recognises their position of foundational importance to the growth of AI in the UK (‘The meteoric rise of the data centre,’ DLA Piper, June 2022)
• A National Data Library to consolidate data from existing research programs and enhance data-driven public services. This may be an evolution of the Tony Blair Institute’s proposal for a ‘National Data Trust’, to streamline access to ‘the UK’s valuable health-data assets … while maintaining public ownership and protection of the data’ (TBI, 21 May 2024)

The Labour Party would also ‘scrap short funding cycles for key R&D institutions in favour of ten-year budgets that allow meaningful partnerships with industry’ and simplify procurement processes to ‘reduce micromanagement’. While these reforms could lead to fewer opportunities to apply for UK government funding, once secured, R&D partnerships between business and the public sector would provide substantial advantages, with a long-term focus. Overall, the manifesto recognises the importance of a stable and supportive environment for technological advancements.

The Labour Party's policies appear conducive to making the UK a hub for AI development. The focus on creating a regulatory framework that can keep pace with technological advancements, coupled with support for data centres and long-term R&D funding, positions the UK as a competitive environment for AI research and innovation.

Their commitment to ensuring ethical AI development reflects a concern for the societal impacts of technology. The Labour Party have pledged to introduce ‘binding regulation on the handful of companies developing the most powerful AI models’ as part of an ambition to build the ‘world’s most competent regulatory environment for AI’ (The Labour Party, September 2023). While this represents a risk of over-regulation for the companies concerned, it may on the other hand lead to enhanced public trust and acceptance of AI technologies. The many businesses adopting AI via third parties or a hybrid approach will welcome the Labour Party’s aims to introduce competent and comprehensive AI regulation (‘AI governance’, DLA Piper, September 2023).

In the first months of a new Labour administration, it is likely the Department for Science, Innovation and Technology (DSIT) will be open to approaches from businesses looking to engage constructively in the development of this framework.

Overall, the Labour Party manifesto presents a comprehensive plan that could significantly benefit the technology sector in the UK.  We admire the manifesto’s ambitions to create a stable and innovative environment conducive to the development of emerging technologies, including AI. However, the success of these policies will depend on effective implementation and collaboration with industry stakeholders to ensure that the UK remains at the forefront of technological innovation.

THE CONSERVATIVE MANIFESTO

Should the Labour Party win the general election, Prime Minister Rishi Sunak’s AI Safety Summit, held at Bletchley Park last November, may become a central part of his political legacy. The subsequent bilateral agreement between the UK and US agreed to pool government resources and know-how on the regulation of emerging AI technologies (FT, April 2024).

Accordingly, the Conservative manifesto looks to ‘spearhead [the AI] transformation’, recognising the importance of significant R&D investment and ensuring a conducive regulatory environment for innovation (Conservatives, 11 June 2024). The Conservatives re-affirmed their commitment to:

• Existing R&D tax reliefs, while increasing overall R&D spend by GBP2 billion to GBP22 billion a year
• Investing over GBP1.5 billion in large-scale computer clusters and AI research facilities
• The Catapults innovation funding vehicle, which will distribute GBP1.6 billion across the country by 2028. The Digital Catapult has over seventy active projects in the UK, and has supported 259 start-ups to raise over GBP577 million so far

These substantial investments in research and development (R&D) could accelerate developments in AI and other cutting-edge technologies, making the UK a more attractive location for tech companies and researchers.

Additionally, the focus on digital infrastructure improvements, including the expansion of gigabit broadband and 5G coverage, supports the tech sector by providing the necessary backbone for digital enterprises to thrive. The manifesto's aim to make the UK the leading market for FinTech and maintain the highest standards of consumer protection and prudential regulation also highlights a balanced approach to fostering innovation while ensuring stability and trust in the sector.

Moreover, in the context of manifesto commitments to cut-back the size of the civil service, the manifesto proposes doubling the number of civil servants with digital and AI expertise. This suggests a governmental recognition of the importance of digital technologies in future public service delivery and policymaking, integrating AI more comprehensively into the fabric of government operations and public life.

It should be noted that many of the Conservative manifesto’s policies lean towards a continuation of the status quo, re-committing to existing government announcements – such as the Advanced Manufacturing Plan, delivering GBP4.5 billion to strategic manufacturing sectors (Department for Business and Trade, November 2023). The manifesto commitments that do represent additional spending have been described as paid for by ‘uncertain’ and ‘unspecific’ savings, according to Paul Johnson, Director of the Institute for Fiscal Studies (IFS, June 2024).

THE LIBERAL DEMOCRAT MANIFESTO

While the Liberal Democrat party are unlikely to win an outright majority, their policies represent an alternative model for regulation of the UK technology sector.

Of particular interest is their commitment to negotiating for the UK to join the Trade and Technology Council with the US and the EU. This would be a proactive, internationalist stance on the UK’s participation in global AI regulation, which could align UK standards with international benchmarks, enhancing the sector's global competitiveness. Should the next UK government decide to seek increased regulatory alignment with international standards, they may well adopt this plan.

Another area in which the Liberal Democrats offer a unique approach to the sector can be seen in approach to digital literacy and consumer protection. By setting a UK-wide target for digital literacy and ensuring clear terms and conditions for tech products, the Liberal Democrats aim to empower consumers and ensure equitable access to technology. This focus on inclusivity and user protection would foster public trust in new technologies, which is essential for their widespread adoption and success.

THE REFORM UK MANIFESTO

Reform UK is averaging 14% in the polls, aiming to establish a small cohort of MPs in the next parliament (FT, 17 June 2024). They are unlikely to have a significant voice in the House of Commons, as consistent levels of minority support across many constituencies are not conducive to electing MPs under Britain’s First-past-the-post voting system. However, polls suggest their policies have been gaining traction with disillusioned Conservative voters, a trend that may well continue over the next five years and beyond.

Reform UK’s manifesto pledges GBP88 billion in tax cuts (Reform UK, 17 June 2024). The threshold at which businesses would have to register for VAT would increase from GBP90,000 to GBP150,000, with a policy to exempt the first GBP100,000 of profits from corporation tax. This pro-business orientation would make the UK a more supportive ecosystem for entrepreneurs and smaller firms in technology industry. On the other hand, strict controls on immigration – including raising the National Insurance rate to 20% for foreign workers – may limit access to international talent, which is crucial for innovation in the technology sector.

The manifesto does not present a coherent technology strategy and makes no mention of research and development. Much of the tax reductions promised would be paid for by slashing government subsidies, including for Net Zero and related technologies.

NEXT STEPS: 4 JULY AND BEYOND

Polling day is set for the 4 July. On the 9 July, Parliament returns for the election of the Speaker. The State Opening of Parliament is set for the 17 July, when the King’s Speech will set out the new government’s proposed legislation for the coming session. Before the election was called, the House of Commons was scheduled to break for summer recess on July 23. However, should the Labour Party win the general election, they may extend the sitting of parliament until early August so as to keep momentum up to implement their legislative priorities (FT, 12 June 2024).

The first hundred days of a new government is a critical period of time. Whichever party wins the election, new Secretaries of State and their Special Advisors will be entering government departments with the ambition and momentum of a recently elected administration.

With campaigning behind them, ministers will have to get up to speed with the regulatory and legislative complexities of government. Both of the major political parties have signalled their openness to working with the private sector to broaden their understanding of the issues concerned. Businesses have an important contribution to make to the development and implementation of effective policy, targeted at specific outcomes and minimising any unintended consequences that could unduly affect their commercial interests.

HOW WE CAN HELP

DLA Piper’s UK Government Affairs team supports companies to take a pro-active approach to addressing the risks and opportunities arising from political change. Unlike government affairs agencies, we combine political, legal and regulatory expertise with an in-depth understanding of the workings of Westminster and Whitehall. As regulated Consultant Lobbyists, we are experienced in supporting you in executing sophisticated engagement and advocacy strategies.

Our clients also benefit from the insights and understanding of our Strategic Consultants, Lord David Blunkett, Lord Edward Garnier, Lord Gavin Barwell and Lord Andrew Tyrie.

Please contact Paul Hardy for further information on how we can support you to navigate the opportunities arising from a new government in the UK.