General Election 2019: Labour

Anthony Murphy

Posted on: 27th November 2019

Blog three in our General Election series see us look into the Labour Party’s manifesto and how it could impact the personal Financial Services space should we have a Labour government on December 13th.

Personal Taxation

It is not unreasonable to say that Labour’s manifesto plans to spend and they propose to pay for this through ‘by creating a fairer taxation system, asking for a little more from those with the broadest shoulders, and making sure that everyone pays what they owe’.

The headline is that those who earn over £80,000 per annum pay ‘a little more’ income tax whilst freezing NI and Income Tax rates for everyone else.

A new tax rate will be introduced for those on £125,000 or more. The IFS states that this will see the tax bills of over 1.5 million people rise, however, Tom Selby at AJ Bell comments that this may have some benefit to higher earners with the tax relief on pension contributions potentially increasing as the individual’s marginal rate increases.

Aimed at resolving the issues surrounding the Tapered Annual Allowance, Annual Allowance and subsequent tax charges for NHS doctors, Labour is promising a review of the tax and pension changes implemented by the Conservative government to ensure ‘that the workforce is fairly rewarded and that services are not adversely affected.’

Similar but also going further than the Lib Dems, Labour is proposing to tax capital gains, dividends and income tax under a single allowance which could potentially raise £14bn a year for the Government, however, it could have unintended consequences on small business owners who are flexible with how they take their earnings from their businesses.

State Pension

Labour has announced a number of policies surrounding the State Pension;

Primarily, ensuring that the 1950s women affected by the changes in State Pension age are compensated for their losses and the insecurity suffered and going further to legislating to prevent accrued rights to the State Pension being changed.

Secondly, the State Pension age (SPA) increases will cease and be frozen at 66 and a review into the SPA for ‘physically arduous and stressful occupations, including shift workers, in the public and private sectors.’ However, it is not immediately clear how much these policies will cost.

In line with freezing the SPA, the triple lock is also guaranteed alongside the Winter Fuel Payment, free TV licence and free bus pass which are guaranteed as universal benefits.

Mentioned for the first time in the three parties we have reviewed so far is the Pensions Dashboard – Labour will create a single, publicly run dashboard that is transparent including cost information.

Author’s thoughts

As Steven Cameron, pensions director at Aegon mentioned to the FT, the changes would come at a heavy cost to taxpayers – “Labour is currently leading the charge in terms of the generosity of state pension commitments.”

We mentioned at the start that Labour plans to spend and the IFS seems to agree with an £80bn increase in spending by 2023-2024. However, their plans to amend the income tax bands for those over £80,000 only affects the top 3% of earners. You can read more of the IFS’s analysis of all the manifestos here.

Their policies may effect positive change for NHS pensions and help ensure a smoother retirement for all, however, we stand ready to assist anyone who wishes to secure their financial future into 2020 and beyond no matter the result on December 13th.

Get in touch with Haven IFA for Pensions and Investment Advice.