Written by Jon Dean on Friday 2 June 2017
This article first appeared in Professional Adviser June 2017
Theresa May’s call for a snap general election appears to have caught everyone napping – including her own party. Despite announcing the poll on April 18th, the Conservative Party manifesto was not published until a whole month later, two weeks after the start of the campaign. With 16 days until polling day, the SNP manifesto launch was further delayed following tragic circumstances in Manchester, with UKIP yet to publish a 2017 manifesto.
At 2015’s closely fought election there was a good deal of overlap between the election promises of the main parties. The contest for votes and fears over a second coalition government led to an escalation of promises that ultimately could not all be kept, and arguably locked us into a Brexit referendum. With a new “hard left” Labour Party, we’ll look below at the whether this overlap still exists between party policies.
At the start of the current campaign, external commentators were near-unanimous in asking not who would win, but by how much would the Conservatives would increase their Commons majority. At the time of writing, the Tory-Labour gap in opinion polls has closed by seven points. Whilst still a huge 13 point difference, the so-called “dementia tax” has reversed the upward trend in Conservative support and accelerated that for Labour. Meanwhile, the UKIP vote has roughly halved.
There is clear blue water between all the parties on personal taxation policy. Labour has set out plans to reduce the threshold for additional rate tax and introduce a 50% rate above £123,000. Liberal Democrats pledge an extra penny across all income and dividend tax bands, while the SNP will freeze the higher rate threshold in Scotland indefinitely. The Greens want to abolish the upper earnings threshold for National Insurance and introduce a wealth tax for the UK’s richest 1%.
Labour and the LibDems both plan to reverse the latest reduction in capital gains tax and remove the inheritance tax residence nil rate band. Labour would add VAT to private school fees, IPT on medical insurance premiums and stamp duty on derivatives trading.
Only the Conservatives, mindful of having been constrained by the 2015 manifesto, have made no promises on the rates of income tax or National Insurance. They pledge only to continue with their existing plans for basic and higher rate thresholds at £12,500 and £50,000, committing only to leave VAT alone.
On corporation tax, again there is wide variation between Conservative plans for 17% (fifth lowest in the 35 OECD countries), to Labour targeting 26% (which would place us 22nd). In addition, Labour would introduce an Excessive Pay Levy on employers paying salaries over £333,000, while Conservatives and Liberal Democrats favour giving shareholders more disclosure and powers over executive pay.
Pensions and welfare policies
On welfare, it’s very much Conservatives versus the rest. There is universal dislike of the so-called “bedroom tax”, with all other parties planning to abolish it. The State Pension Triple-Lock is safe with everyone except the Tories who propose a Double Lock after 2020. Meanwhile the pensioners’ winter fuel allowance is to be means-tested under the Conservatives and LibDems.
Labour plan to cease all SPA increases beyond age 66, with several parties pledging redress for women affected by the accelerated SPA increases. Liberal Democrats plan to review pension tax relief with a view to setting a single rate, higher than the current 20%.
The major parties have also committed to more robust protections for workers in DB pension schemes, who may otherwise face losing benefits through excessive dividend payments or mergers & acquisitions.
Elderly care policy has proved the campaign’s most controversial issue. Whereas Labour plans to consult on and establish a National Care Service, Theresa May has had to back-track on her plan to recoup the costs of elderly care from the recipient’s estate, with a capital floor of £100,000. This will now be replaced with an absolute cap on costs, yet to be agreed on.
Other finance-related policy
There is considerable commitment to improving the pay and conditions for lower earners, ranging from the Tories’ plan for minimum wage to be 60% of median hourly pay to the Green Party’s universal basic income. Labour would ban zero-hours contracts and seek to reduce the gap between top and bottom by setting a maximum “multiplier” for public sector employers and suppliers to the public sector.
All parties promise to increase the number of affordable homes with Labour and SNP particularly focused on social housing for rent.
Conservatives and Labour both appear set on a “Hard” Brexit route, outside the Single Market and Customs Union. Meanwhile the Liberal Democrats and Greens favour a referendum on the terms of the Brexit deal, with an option to remain in the EU as an alternative. SNP are clear in their determination to remain in the single market but also retain free trading links with the rest of the UK, saying they will hold a second Scottish independence referendum if this is the only way to achieve this.
A Conservative majority government still appears the most likely outcome, but as recent political events have proved, pollsters can get it very wrong and unexpected events can quickly turn an election. A swing towards a left-wing coalition could well point us towards a soft Brexit.
Should the socialist agenda win the day, we can expect the Government to be much tougher on business, with the financial sector once again bearing a greater share than others. Higher corporate taxes, redistribution of business rates towards larger firms and online businesses, and higher rates of duty on financial transactions are all more likely in this scenario.
The omission from the Conservative manifesto of any clear promise on income tax and NIC rates suggests they are keeping their options open for a tax rise in the next parliament. Indeed, no party is promising a reduction in personal taxes. For taxes on Joe Public, it looks likely the direction of travel is up, whichever way the country votes.
This article first appeared in Professional Adviser June 2017