The Labour manifesto has been published today, with advisers, wealth managers and those working right across the financial services spectrum will be looking at the detail. That’s especially the case given the party’s considerable lead in the polls ahead of the general election on 4th July.
Experts from across financial services and legal professions have already been sharing their reactions to the detail of the manifesto, which largely contains the policy statements already revealed, following Sir Keir Starmer’s speech to launch the manifesto, as follows:
Rachael Griffin, tax and financial planning expert at Quilter said: “The conspicuous lack of confirmation from the Labour manifesto that it would not raise Capital Gains Tax (CGT) will spark significant concern among entrepreneurs and investors in the UK. Both Shadow Chancellor, Rachel Reeves, and Sir Keir Starmer have in recent interviews doubled down on the fact they have “no plans” to increase CGT rates without completely ruling it out. However, in its manifesto Labour has explicitly ruled out increases to income tax, National Insurance, VAT and corporation tax, but make no mention of CGT.
“Those who face CGT in the UK – primarily higher rate taxpayers and entrepreneurs who realise gains from the sale of residential property, investments, and other chargeable assets – have already seen their annual exempt allowance slashed by the current Conservative government to just £3,000 a year. If Labour is to win the general election and then increase rates, it would serve as a double whammy with higher rates and lower exempt allowances considerably increasing the capital gains tax take.
“Under the current system, higher rate taxpayers face a 24% CGT on residential property gains and 20% on other chargeable assets. The potential alignment of CGT rates with income tax rates, if that is what ends up being enacted, could see these figures rise dramatically, impacting not just the wealthy but also a substantial number of small business owners and investors who play a crucial role in driving the economy in the UK.
“For those looking to mitigate the impact of CGT there are several strategies you can employ. Transferring assets to a spouse can be an effective way to maximise the use of both partners’ CGT allowance. Additionally, utilising tax-sheltered accounts such as ISAs can shield gains from CGT altogether. It has therefore never been more important to maximise your £20,000 ISA allowance. Other more complex options include deferring gains by investing in Enterprise Investment Schemes (EIS) however these carry significant risk and it’s important to get professional financial help when looking at these types of options.“
David Brooks, Head of Policy at Broadstone has shared his thoughtson the party’s pledges, commitments and comments on the pensions sector with productive finance, the State Pension and a wide-ranging review into the market all mentioned.
David Brooks said: “Labour’s manifesto contained no notable big-ticket ideas for the pensions’ sector, confirming plans to progress with the productive finance agenda and encourage further consolidation in the workplace pension market.
“The Party has pledged a wide-ranging “pensions review” to improve outcomes, but the devil will be in the detail as to what that covers before we can anticipate any potential outcomes.
“Labour has also, as expected, committed to the State Pension triple-lock and there now seems to be political consensus that this is untouchable. The encouragement for green-focused investments also appears to have achieved cross-party consensus.
“The push for productive finance comes with a caution warning as there may be a disappointing uptake from defined benefit schemes but an ongoing review into VFM may allow more schemes to allocate long-term illiquid assets to this space. Whatever government we have in 3 weeks, we would counsel caution in this space as these assets are not a one way bet and the long-term interests of pension savers will need to be carefully balanced with the short-term needs of the country.
“Given the Conservatives’ plans are similarly light on new policy ideas it suggests the pensions sector can prepare for welcome continuity over the next five years. This is pleasing given the huge number of policies that are already progressing through regulatory and legislative processes.
“Labour’s manifesto also contained no mention of its previous plan to reverse the abolition of the Lifetime Allowance in a suggested U-turn on its previous rhetoric. Again, this continuity is to be welcomed – especially given the industry has already expended significant effort in preparing for this change – but this may be a policy area that Labour revisits should it gain power.”
Commenting on Labour’s ‘raid’ on non doms, Sophie Dworetzsky, Partner at Charles Russell Speechlys said: “Plans to modify the tax treatment of non doms even further in Labour’s Manifesto are disappointing. Specifically, the ability to settle trusts and protect assets from IHT is in their sights, as is a transitional measure to allow offshore income to be taxed more favourably for a two-year period.
“These measures feel like trying to squeeze out every last drop until there’s nothing left. The UK operates in an environment of tax competition, and if the UK makes itself yet more unattractive from a tax point of view, we could lose out to other countries, such as Italy, which have more favourable tax regimes. One can but hope this is realised before any legislation is implemented.”
Sarah Jane Boon, a Partner in the Family team at Charles Russell Speechlys, has shared her views about Labour’s plans to charge 20 per cent VAT on independent school fees saying:
“Labour’s manifesto pledge to add VAT to private school fees could make private schooling unaffordable for some families and bring about concerns about how easily (and when) a good state alternative could be found.
Parents of children at independent schools will be used to regularly assessing the affordability of school fees against their finances – school fees have increased ahead of inflation for the past 25 years – but families could now be hit with significantly increased fees as soon as the next academic year.
This possibility may be especially worrying for separated or divorced parents, who are committed to a court-imposed obligation to discharge school fees until their children reach the end of their secondary education. If Labour do form the next government, there may be increasing numbers of parents who seek to vary their court obligations on the grounds of affordability.
Separated couples often struggle with funding two households on divorce. The decision as to where children are educated falls to both parents to be agreed under their parental responsibility, so disagreements over such issues can lead to litigation – with the court making the ultimate decision.”
Nathan Emerson, CEO at Propertymark said: “Pledges to reform the planning system, commit to a brownfield-first approach, making the private rental sector more energy efficient, and a commitment to build 1.5 million new homes over the next parliamentary term are more than welcome. The planning process can be a huge obstacle in keeping pace with demand and change is desperately needed in order to serve an ever-growing population. Many buyers have had a tough time since the 2008 recession, and it is vital any future strategy includes a sustainable mix of affordable housing options for both buyers and renters.
“Propertymark would like to see more details from Labour about how they plan to meet their housing goals and ensure this is there is a firm and fair set of policies in place to serve all demographics.
“Any aspiration to reintroduce the Renters (Reform) Bill must come with full disclosure and a realistic timeline regarding the required court reform before the removal of Section 21 evictions should ever become a reality.”
Commenting on planning reform, Lizzy Galbraith, Political Economist, abrdn, says:
“Nevertheless, housing targets like that are very ambitious – even with planning reform – so it will be interesting to see if such a target will be made mandatory.
“The notable shift in Labour’s strategy is an enhanced role of the private sector in the financing and delivery of infrastructure projects compared with their plans a few years ago. Now, Labour has shifted to a vision in which the state aims to direct investments towards high-value projects and restore investor confidence through a combination of clearer planning documents, fewer fiscal events and in some cases, joint financing. Labour believes they can rectify the current challenges of fluctuating government policies and inconsistency, which have previously undermined private investor trust.”
Also commenting on planning reform proposals, James Dunne, head of operational real estate for abrdn, says:
“As a long-term investor and provider of professionally managed, affordable rental homes across Europe, abrdn welcomes all initiatives to unlock the blockages in the delivery of UK housing. The planning system needs reform and investment to allow appropriate and sustainable development which addresses the critical need for new housing across all tenures and geographies whilst enhancing local communities and respecting our environment.
“It is encouraging to see the issue at the heart of political parties’ policy priorities for the next parliament and we hope this translates into swift, tangible reform and funding not only in the short term but with a long term vision and stability that is desperately needed to address these ongoing deep rooted issues.”
On the fiscal rules, Lizzy Galbraith, Political Economist, abrdn, says:
“Until now, Labour’s approach to fiscal policy has rhetorically at least, been tacking fairly close to the Conservatives – and this manifesto is no different. Nevertheless, there are legitimate questions over how sustainable an approach this is for a party who, after all, will want to do and act differently than their predecessors.
“Labour will be looking to generate some fairly substantial economic growth over the short term (leaving taxes to one side). So, it is likely that the fiscal rules will shift at some over the next Parliament. Rachel Reeves has previously spoken about how fiscal rules could better enable long-term public sector investment.
“For example, using a metric such as public sector net worth rather than the current public sector net debt to measure performance may enable a little bit more fiscal wiggle room. Labour would argue that it’s better to consider the long-term value of things like infrastructure and capital expenditure, which would be a better reflection of the long-term value of government spending, rather than just considering it in terms of the amount of debt that spending generates.
“Whether something like this could be implemented in practice is yet to be seen. It would likely involve an assessment by the Office for Budget Responsibility (OBR).
And commenting on the green industrial strategy, Galbraith said: “Labour’s view is that a green industrial strategy is not just a route to decarbonization and environmental benefits but a major economic opportunity. This approach is particularly aimed at appealing to constituencies in former industrial areas, the so-called “red wall” seats, which Labour needs to win back to secure a return to Number 10.
“Labour has emphasised its commitment to renewable energy, decarbonising homes, and upgrading the national grid. However, the strategy now leans more on leveraging private sector funding, with public investment playing a reduced role. The party still plans to establish a £7.3 billion national wealth fund to support these initiatives from the public side, aiming to attract three pounds of private investment for every pound of public funding. GB Energy will also support these efforts though the distribution of grant funding and financing smaller renewable energy projects. The manifesto also makes it clear Labour sees a greater role for pension funds as a source of private investment capital. It has identified the potential for fund consolidation and regulatory reform to enable funds to invest in UK assets.
“This approach positions Labour as taking on a supportive, yet significant, role in critical national infrastructure projects.”
