FINANCIAL IMPACT OF LABOUR GENERAL ELECTION 2024 WIN INCLUDING PENSIONS, TAX, CHILDCARE AND MORTGAGES
Sir Keir Starmer's Labour Party has secured a decisive victory, set to form the next government following Thursday's general election.
The Labour leader remarked that the UK is experiencing the "sunlight of hope" again - and people across the nation are beginning to contemplate what this could mean for our country's economic future. While we await numerous detailed elements in the forthcoming weeks, it's clear that Labour has made commitments on several crucial topics such as pensions, taxes, mortgages and other monetary concerns.
Regarding pensions, the Labour Party vowed to maintain the pension triple lock, providing reassurance to pensioners anxious about living costs. This "triple lock" safe-guards the state pension from losing value by guaranteeing annual increases aligned with inflation, average earnings, or by 2.5% - whichever is greater.
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Pensions
Currently, the state pension stands at £11,502 annually while the personal allowance is £12,570. Nevertheless, estimations insinuate that the basic pension could exceed £13,000 yearly before the decade concludes.
Notably, the Office for Budget Responsibility (OBR) has cautioned that the state pension will surpass the personal allowance by the year 2027, reports Birmingham Live.
Labour has pledged to review the current state of workplace pensions, aiming to enhance pension savings for individuals. The party's manifesto clearly states: "We will undertake a review of the pensions landscape to consider what further steps are needed to improve pension outcomes and increase investment in UK markets."
The exact value of the state pension by 2030 is contingent on the levels of inflation and average earnings growth over the coming five years.
Tax and savings
On the topic of taxes, Labour has committed to not raising income tax, National Insurance, or VAT. Yet, independent think tanks have suggested that tax hikes may be inevitable under Labour due to the financial situation left by the Conservatives, although specific tax increases have not been disclosed.
While Labour has promised not to raise the rates of major taxes, it has confirmed that the freeze on income tax thresholds will continue until 2028. This means that as wages grow, more individuals will exceed the £50,270 threshold for higher-rate tax, subsequently paying 40pc tax on their savings interest. Additionally, Labour has not made a commitment to maintain the personal savings allowance, which could see a reduction from £1,000 to £500 for those affected.
Children
Labour has committed to a robust plan to address child poverty, which includes providing every primary school pupil with a complimentary breakfast. The party's manifesto outlines several initiatives, such as transforming spare classrooms into nursery spaces, funded by the removal of tax breaks for private schools.
Labour also proposes the creation of 3,000 new nursery classes across England to enhance childcare accessibility for families. The strategy is designed to assist approximately 750,000 parents in rejoining the workforce. Labour intends to finance free breakfast clubs at every primary school in England by closing tax loopholes and intensifying efforts against tax evasion.
Furthermore, a key feature of Labour's upcoming first Budget, likely scheduled for autumn, is the imposition of a 20% VAT on private school fees. This policy has been a prominent aspect of Labour's campaign during the general election.
While the precise effect on school fees remains uncertain and will differ from one institution to another, some schools may opt to absorb a portion of the additional cost. However, headteachers have cautioned that this could result in increased fees for families.
Housing
In the housing sector, Labour has announced its intention to make the mortgage guarantee scheme a permanent fixture.
Under Labour's "freedom to buy" initiative, first-time homebuyers would be able to use the state as a guarantor for their mortgages, solidifying a temporary Government scheme.
The Tories launched the mortgage guarantee scheme in 2021, with then-Chancellor Rishi Sunak at the helm. It was designed to support buyers who could muster a mere 5% deposit, by providing a government-backed guarantee for 95% mortgages, encouraging more lenders to offer these deals.
Non-dom status
The Conservative Party has made a move on one of Labour's key pledges by announcing changes to the non-dom status. Chancellor Jeremy Hunt declared in his Spring Budget that from April 2025, wealthy foreigners residing in the UK would lose their non-dom tax status, requiring them to pay taxes on income and capital gains after four years.
While the Labour Party generally agrees with this step, they have vowed to take it further. Rachel Reeves has previously stated that Labour would instantly eliminate an inheritance tax "loophole" that allows non-doms to dodge a 40% inheritance tax by moving assets abroad into an "excluded property trust".
Benefit cap
Despite pressure, Labour leader Sir Keir Starmer confirmed last month that the party would not abolish the two-child benefit cap if it came to power. The cap restricts claims for child tax credit or universal credit to a maximum of two children, a policy which the Resolution Foundation think-tank says is driving up child poverty rates in larger families.
During an interview on ITV News last week, Starmer said he "understands" the damage done by the policy, but would not commit to something that "on the current state of the economy, I don't think we can properly afford". Campaigners argue that scrapping the cap is the best solution to child poverty and have urged the new government to rethink its stance.
Rent
Back in June, Sir Keir Starmer appeared on Question Time and announced a new Labour initiative to prevent rental "bidding wars."
He argued that new laws are needed to stop landlords from "ripping tenants off" by forcing them to bid against each other to secure properties. However, details of how such legislation would work in practice are still scarce.
Meanwhile, a predicted reduction in the Bank Rate will likely trigger a cut in savings rates offered by banks and building societies. Wealth advisers suggest that locking in a favourable rate now before any cuts or potential changes under a Labour government is a smart move for savers, especially since returns are falling despite frozen interest rates.
Minimum wage
Labour has pledged to lower the age threshold for the minimum wage. While the Tories have already extended the full minimum wage to 21 year olds (down from 23), Labour wants to lower it again to 18.
Labour has committed to put an end to zero hours contracts, "fire and rehire" practices, and will enforce rights for parental leave, sick pay and protection from unfair dismissal from the first day of employment. This is in conjunction with the present rates where workers aged 21 and over receive a minimum wage of £11.44 per hour.
Likewise, those aged between 18 and 20 are remunerated with at least £8.60 per hour, while under-18s and apprentices have an hourly wage of £6.40.
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2024-07-05T08:28:03Z dg43tfdfdgfd