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Published 10 July 2024
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7 minutes

Now Labour is in Government, What Does it Have Planned for Your Finances?

As the dust settles after the general election, we examine what a Labour government could mean for your money.

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Labour is in government for the first time since 2010. Chancellor Rachel Reeves now has the task of making good on the pledges that Labour set out in its election manifesto when it comes to your money.

Labour has promised to keep the state pension triple lock, cut your energy bills and not hike personal taxes. We consider these pledges – and more – below.

What does Labour say about personal taxes?

Labour has said it won’t hike income tax, National Insurance or VAT. Instead, it wants to pay for its plans by making the tax system “fairer” by clamping down on wealthy non-domiciles and introducing a windfall tax on energy companies’ profits.

It also wants to put a “fiscal lock” in place, meaning governments cannot skip an Office for Budgetary Responsibility assessment of their spending and tax plans. The idea is to stop unchecked announcements, such as the mini-Budget in September 2022, from causing significant financial instability.

Labour has said it will keep the outgoing government’s freeze on income tax thresholds, due to end in 2028, which will drag even more people into paying higher tax rates on their earnings.

Myron Jobson, senior personal finance analyst at investment platform interactive investor, has said that arguably “the most significant news from the Labour manifesto involved what the party didn’t say – such as the treatment of capital gains tax”.

By making no promises on regimes such as capital gains tax and inheritance tax, the possibility of Labour hiking them to increase revenue remains open. 

What does Labour say about reducing energy costs?

Labour hopes to reduce household energy bills by up to £1,400 a year by making Britain a “clean energy superpower”. 

A big part of this plan involves setting up a publicly owned energy company called Great British Energy.

And through a Warm Homes Plan, Labour also wants to cut energy bills by offering grants and low interest loans to “upgrade five million homes”. This would involve insulation, solar panels, batteries and low-carbon heating. Labour has promised that no one will be forced to get rid of their gas boiler as part of its plans.

Labour has also said it will work with the energy regulator, Ofgem, to cut bills by reducing standing charges.

What does Labour say about housing?

First-time buyers

Labour wants to introduce a permanent mortgage guarantee scheme which it’s calling ‘Freedom to Buy’. A similar scheme introduced by the Conservatives was set to end in July 2025. 

Mortgage schemes like this allow lenders to offer mortgages to people who have smaller deposits – usually 5%. If the homeowner falls behind on their payments, then the government covers some of the lender’s losses. 

Labour wants to give first-time buyers the first opportunity to buy new homes, claiming that international investors often leapfrog those who want to get on the property ladder. It also wants to reform planning rules to enable the construction of 1.5 million new homes and develop a generation of ‘new towns’.

However, Labour has also said that the temporarily higher stamp duty threshold for first-time buyers will fall back to £300,000 from £425,000 in April 2025, ramping up the costs involved in buying a home.

Homeowners

Labour has said that it will keep mortgage rates as low as possible. But there aren’t specific details about how it will do this in its manifesto, beyond implementing and sticking to its “strong fiscal rules”.

However, after inflation hit the Bank of England’s 2% target in May 2024 many experts expect the Bank to reduce the base rate of interest in August and mortgage rates are likely to fall as a result. 

Tenants

The Conservatives had pledged to introduce a series of rental reforms, including a ban on Section 21 ‘no-fault’ evictions

However, the legislation failed to pass through Parliament before the election was called. The National Residential Landlords Association wrote on its website that it means the new government “will need to start from scratch when it comes to developing new legislation around private rented housing”.

Labour’s plans include:

What does Labour say about wages?

Labour wants to increase the hourly minimum wage by:

The minimum wage applies to under 21s and is currently £8.60. The national living wage applies to over 21s and is currently £11.44.

The Living Wage Foundation, which campaigns for a fairer living wage, commissioned the think tank, the Resolution Foundation, to calculate a ‘real living wage’ based on the cost of living. This wage for 2023-24 was £13.15 for London and £12 for the rest of the UK.

If Labour implements a genuine living wage using these figures, over 21s outside London on a minimum wage would be better off by 56p an hour. Those in London would be better off by £1.71 an hour.

And if Labour removes age bands and puts this higher living wage in place, under 21s outside London would have their minimum wage rise by £3.40 an hour. In London, it rises by £4.55 an hour.

But Tom Waters, an associate director at the Institute for Fiscal Studies (IFS), wrote on the think tank’s website that its research suggests “the risks of job loss from raising young people’s minimum wages are greater than for older workers, so there is a case for making this adjustment gradually to allow for its effects to be carefully monitored”.

What does Labour say about pensions?

Labour has committed to:

Gary Smith, a partner in financial planning at wealth management firm Evelyn Partners, believes that pension savers shouldn’t hold their breath on workplace pension reforms, pointing to past ideas that have failed to get off the ground.

He said in a press release: “We’ve had “pot follows member” versus “default consolidator”, and most recently “pot for life”. It’s probably wise for savers not to wait around for that or the pensions dashboard or whatever the new government announces before they get a grip on their pensions.”

What does Labour say about childcare?

Childcare is expensive and Labour has made several promises when it comes to supporting parents. It wants to:

In a response to Labour’s childcare and early years review, childcare charity Pregnant Then Screwed said that breakfast clubs are an important first step towards modernising childcare. However, it thinks that much more reform and investment is needed to develop an affordable childcare system.

In particular, the charity would like to see Labour prioritise supply-side reform, ensuring childcare staff are paid well and have good working conditions and progression opportunities.

Look out for the King’s Speech next

The new government will lay out its priorities for the coming months in the King’s Speech on 17 July. It will be one of the first chances to see how Labour plans on turning its manifesto pledges into concrete action.

Image source: Getty Images

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