Labour
Key policies
Pension Triple Lock
Labour will maintain the pension triple lock. They have not committed to ensure that the personal tax free allowance for those of state pension age always exceeds the amount of the annual state pension, but have committed to freezing the personal tax allowance until 2028. The unavoidable implication of maintaining the pension triple lock while freezing the personal allowance for persons of state pension age is that even if the state pension only rises by 2.5% each year, by 2027/28 the annual value of the state pension will exceed the frozen personal tax allowance of £12,570 and pensioners whose only income is the state pension will have to pay income tax on a very small amount of their state pension.
Taxation of pension contributions and withdrawals
The Labour Party has said that it will not introduce further taxes beyond those new taxes it has already introduced. Shadow Chancellor Rachel Reeves has said that she no longer advocates the reduction of tax relief on pension contributions made by higher and additional rate taxpayers.
Pension lifetime allowance (LTA)
Despite previously promising to reinstate the LTA, Labour dropped this commitment shortly before publishing their manifesto. This decision may have been influenced by the complexity of reinstating the LTA (it took 2 years and 100’s of legislative provisions to abolish it) and lobbying by the British Medical Association against reimposing it on doctors to avoid early retirements.
Inheritance Tax (IHT)
Labour has no plans to change IHT in their manifesto.
Edinburgh and Mansion House Reforms
Labour will complete the outstanding Edinburgh Reforms. While they do not mention the Mansion House reforms specifically, it is implicit in their commitment to complete all in-flight regulatory reforms that they will. “In-flight” regulatory reforms, include the LTAF, financial promotion, regulation of cryptoassets, SDR and OFR, but in practice those regulatory reforms not yet fully developed may well be subject to change of emphasis and detail if implemented under a Labour government.
ISAs
Labour announced a policy of promoting greater investment in UK securities through stocks and shares ISAs prior to the Conservatives announcing the British ISA. The British ISA policy is consistent with that aim and accordingly Labour have adopted it. However, with the legislation not yet drafted, it is likely that the emphasis will change to reflect Labour’s concerns. Labour’s Tibi scheme policy (see below) includes an investment selection mechanism which could easily be repurposed to include selection of approved investments for the British ISA.
Pension fund consolidation
Labour will continue the current policy aim of pension fund consolidation.
Regulating financial services to encourage climate-friendly investments
The Labour Party will require UK-regulated financial institutions – including banks, asset managers, pension funds, and insurers – and FTSE 100 companies to develop and implement credible transition plans that align with the 1.5°C goal of the Paris agreement. This would appear to be substantially the same as existing government policy.
Getting pension schemes to invest into the UK shares and assets
Labour plans to create a voluntary scheme under which DC pension funds allocate a proportion of their capital to investing in funds that have been approved by the Government and invest in UK based venture capital, small cap growth equity, and infrastructure investment. This is known as a Tibi scheme after a French policy of that name which encourages pension scheme investment into French assets. Under the French scheme that inspired this policy, the equivalent of DC funds are asked to set aside 5% of their capital, although Labour have not yet set a figure. While Labour’s Tibi scheme has substantially the same aim as existing government policy, the regulatory framework by which is seeks to achieve this aim is more involved and complex.
Allocation of funds freed up by Solvency II reforms
Labour wants the funds freed up by Solvency II reforms to be invested in the UK’s energy distribution infrastructure. This is such a specific aim that it seems likely that there will need to be some form of regulatory compulsion to do so. Labour’s plan for financial services is explicit that participation in the Tibi scheme is voluntary. There is no equivalent statement that insurers’ participation in financing energy distribution infrastructure will be voluntary, so the implication is that it will be compulsory.
Directing private capital into infrastructure
Labour have spoken about getting private capital to finance their infrastructure plans. It is unclear how they will do this, but as with their plans to have insurers fund investment in energy distribution infrastructure, there is a question as to whether this may require regulatory compulsion.
Local government pension schemes
Labour plans to “set out best practice for adopting similar, cost-effective in-house fund management capabilities within pools to deliver better returns for savers and create new jobs in regions and nations.” With the exception of the additional objective of creating new jobs in the regions and nations, that appears to be substantially the same as existing government policy.
Disposal of remaining taxpayer stake in NatWest
Labour does not favour offering NatWest shares to the public.
Financial services regulators
The Labour Party promises to ensure a pro-innovation regulatory framework for financial services. The Labour Party wants to review the remits of the various financial services regulators to ensure that there are no gaps or overlaps. They have promised a streamlining review of the FCA Handbook in light of the advent of the Consumer Duty, which they think means some rules can be removed or simplified. Labour want to introduce metrics to measure how the FCA and PRA are meeting their secondary competitiveness objective.
Sovereign wealth fund
Labour plans a national wealth fund to be capitalised with £7.3bn, however, it is unclear where that funding will come from. Typically sovereign wealth funds are funded from taxes on fossil fuel industries, however, the UK oil and gas industry is already heavily taxed with permanent windfall taxes and Labour is committed to issuing no further oil and gas licences. The fund will have a target of attracting three pounds of private capital for every one pound of taxpayer funds committed. The national wealth fund will invest in ports, car factories, steel production, carbon capture and green hydrogen projects.
Taxation of carried interest
Labour plan to tax carried interest as income, which is currently taxed at 45% for additional rate taxpayers. “Private equity is the only industry where performance-related pay is treated as capital gains. Labour will close this loophole.” Labour believes that this policy will raise an additional £565m in tax revenue. Labour have matched the Conservative promises not to increase the rates of capital gains tax or income tax.
Corporation Tax
Labour have promised to keep corporation tax at 25% for the length of the next Parliament.
Personal Tax
Labour have also promised not to increase income tax, national insurance, capital gains tax or VAT on working people. The qualification that taxes will not be raised on working people has led commentators to speculate as to whether Labour will raise taxes on the income of pensioners and on “unearned income”, eg income from investments or property. Labour says that it has no plans to do so.
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