The major political parties made their pledges to the nation this week, but did they contain anything radical?
- Labour promised no increases in rates of income tax, NI, VAT or corporation tax, but left capital gains tax on the table
- The Conservatives promises NI cuts, and an extension to the expensive pension triple lock
- The smaller parties were bolder on tax and spending promises
This was manifesto week, when the major parties outlined their action plans for government. There was little to set the pulse racing on personal finance, but it is nevertheless worth contemplating what could be coming down the line.
The Labour manifesto was the most closely-watched, but also contained the least detail. While the party said it would not reintroduce the lifetime allowance, it also said it was planning a root and branch review of the UK pension system, “with the aim of improving outcomes and encouraging greater levels of investment in UK markets”, so in theory, all allowances and tax reliefs could be on the table.
The opposition parties have focused on what was unsaid. Labour promised no increases in income tax, NI, VAT or corporation tax, so its rivals have assumed that capital gains tax, inheritance tax and council tax could be put under review. In reality, whoever is in power faces tough choices. The IFS has said: “Whichever of the main parties forms the next government, it will need to cut spending or raise taxes or it will miss its own fiscal targets.”
The Conservative party went one step further, promising a further cut to national insurance for employees and to abolish them for the self-employed. However, the measures would only come in for April 2027. It has also extended the triple lock – already a ruinously expensive pledge – to a ‘triple lock plus’, which prevents pensioners paying tax on their state pensions.
The Conservatives promised to leave pensions alone, not introducing any new taxes and to keep the 25% limit on tax-free lump sums. It will also extend the stamp duty holiday, meaning first time buyers will pay no stamp duty on purchases up to £425,000. There was no pledge to abolish inheritance tax, despite many Conservative MPs, including the Chancellor Jeremy Hunt, believing it is “against Tory values”.
Elsewhere, the other parties were bolder on tax, either raising it – in the case of the Lib Dems, Plaid Cymru or the Greens – or radically cutting it, in the case of Reform. There were a few interesting ideas in the mix: the Lib Dems ‘dependent contractor’ employment status and Reform’s proposal to stop the Bank of England from paying interest to commercial banks who hold quantitative easing reserves. Both could be picked up by other parties.
Radical, horse-frightening change looks unlikely. The likely incoming Chancellor Rachel Reeves has made a virtue of stability and lacks the fiscal flexibility to make bold moves. However, in the longer-term, financial realities may force more radical action.
