The Labour Party manifesto contains policies and changes that could have a wide-ranging impact on your investments and personal finances. This also includes changes to industrial policy and new rules for hiring workers. Here’s everything you need to know.
The economy and government finances
Hermione Taylor sets out Labour’s proposals for the public purse:
Labour’s manifesto placed an emphasis on wealth creation, stressing the importance of economic growth, improving living standards and prosperity. The party reinforced its pledge not to increase income tax, VAT or national insurance should it win the general election next month.
The party revealed plans to increase NHS spending, increase childcare and launch Great British Energy, a new publicly owned clean energy company. This would be covered in part by cracking down on tax evasion, changes to tax on private schools and a windfall tax on oil and gas companies as part of a ‘fully costed and fully funded’ policy package.
Labour is leading the Conservatives by around 20 points, implying a huge majority. Analysis from consultancy Capital Economics suggests that a large majority historically leads to an increase in investment, which in turn leads to higher GDP and tax revenue. Andrew Wishart, senior UK economist, said that although a big majority “may not prevent the need for tax rises completely”, it could still deliver a very welcome boost to the UK this year.
A new fiscal lock
The party has also vowed to introduce a new ‘fiscal lock’. This will guarantee in law that any government making significant tax and spending changes will be subject to an independent forecast from the Office for Budget Responsibility (OBR). In 2022 the Truss government announced its ill-fated “mini” Budget unaccompanied by forecasts from the OBR, and Labour claim their new measures will “ensure that no future government can inflict the devastation on working families that Liz Truss and the Conservatives did”. The party has also committed to just one major fiscal event a year to give families and businesses more warning of tax and spending policies.
The party has so far refused to rule out increasing capital gains tax (CGT), which was announced as a flagship Lib Dems policy earlier this week. Economists estimate that equalising CGT and income tax rates could raise almost £17bn a year were gains not indexed for inflation.
Before the manifesto was announced, shadow chancellor Rachel Reeves also poured cold water on the idea of ‘tiering’ the interest paid on reserves that commercial banks hold at the Bank of England. Economists had calculated that the move could potentially save the public sector billions of pounds a year, depending on where the reserve requirements were fixed.
What will the election result mean for interest rates?
Both the Conservatives and Labour have been keen to stress that they are the party of low base rates. Labour released costings warning that the Conservatives' policy pledges risk increasing interest rates by 250 basis points, while Sunak insists that the Tories are the party to back for lower rates.
This fixation on interest rates is understandable: since the last general election, the average newly drawn mortgage rate has increased from around 2 per cent to closer to 5 per cent today. It’s also misleading: after all the Bank of England has been ‘operationally independent’ since 1997, meaning that its monetary policy committee alone has the power to set interest rates, free from political interference.
But while the government can't directly change interest rates, it can impact them indirectly. The first mechanism is through higher government borrowing, which usually translates to higher demand in the economy and higher inflationary pressure. The second is a Liz Truss-style crisis of confidence: after the “mini” Budget, gilt yields spiked as investors effectively demanded a higher premium to lend to the UK government. This fed through to higher mortgage rates.
Thanks to fiscal rules, neither of these look like a serious risk today. Both the Conservatives and Labour have pledged to adhere to strict limits on borrowing and debt, limiting the scope for a significant demand injection – or an adverse market reaction.
Tax rises are 'hiding in plain sight' – whoever wins
Research from the Resolution Foundation think tank suggests that while there are “material” differences between Labour and Conservative tax proposals, these will be dwarfed by the set of tax rises scheduled for the next parliament that have already been announced by the government.
Policies such as freezing income tax and national insurance thresholds and planned increases to fuel duty, stamp duty and business rates are expected to increase taxes by over £20bn a year by 2028-29 – around £800 per household. The think tank said that since both the Conservatives and Labour are “implicitly committed to these”, the tax hikes were “hiding in plain sight”. The tax-to-GDP ratio has risen sharply since 2019, from 33.1 per cent to 36.5 per cent.
How businesses will be affected
Wealth fund channelled into industrial policies
Labour pledged to “use every available lever” to boost economic investment, including the creation of a £7.3bn national wealth fund to support a new Industry Strategy Council that will oversee industrial policy. It will invest £2.5bn of this in the steel industry, £1.5bn in new gigafactories to support the automotive industry, £1.8bn in upgrading ports and supply chains, and the remaining £1.5bn in carbon capture and hydrogen.
It also pledged to “increase investment in UK markets” from pension funds and a review of the pensions landscape.
Planning barriers will be removed to quickly create new data centres to support the development of artificial intelligence. MF
Energy stocks fall on plan to halt licences
A greater focus on green power includes targets to facilitate a doubling of onshore wind power capacity and a quadrupling of offshore wind generation, as well as a tripling of solar capacity. Labour also stuck to its pledge to halt the issue of any new oil & gas exploration licences in the North Sea and said it would close a “loophole” in the windfall tax regime that allows companies to offset the value of new investments made against taxable profits.
The share prices of offshore energy companies fell accordingly, with Serica Energy (SQZ) down 7 per cent, Harbour Energy (HBR) dropping 4 per cent and Deltic Energy (DELT) falling by 11 per cent.
Deltic said last week that it would wait to hear what Labour’s policy would be before deciding on whether to give a new project the green light. MF & AH
Tapping into the ‘grey belt’
A target of building 1.5mn homes over the next parliament, equating to 300,000 homes a year if a full term is served, is similar to the pledges set by the Lib Dems and the Conservatives in their manifestos.
Labour says it will achieve this by restoring the mandatory housing targets the government has abandoned, by encouraging building on ‘grey belt’ sites – areas of low-quality green belt land on the fringes of major cities – and by re-establishing mandatory housing targets for local authorities, which were scrapped by the government in 2022. A “new generation of new towns” will also form part of a series of large-scale new communities.
Labour also plans to speed up planning by hiring new planning officers, funded through the imposition of an additional 1 per cent on stamp duty for overseas buyers of UK properties. MF
Beefed-up workers’ rights could increase costs
Labour pledged to bring forward legislation within 100 days to improve workers’ rights. Measures would include a set of basic rights from the first day of employment guaranteeing sick pay, parental leave and protection from unfair dismissal. It would ban “exploitative” zero hours contracts and end the practice of firing and rehiring workers.
It also plans to remove “discriminatory” age bands from the national minimum wage. MF
What Labour means for buy-to-let landlords
Labour is planning an overhaul of the regulations of the private rented sector, its manifesto says. The government's renters’ reform bill was not passed before Parliament was dissolved on 30 May. The bill was meant to introduce a series of tenant protections and originally intended to ban no-fault evictions, although this part of the legislation was later watered down.
Labour said it intends to ban no-fault evictions immediately, as well as “empower renters to challenge unreasonable rent increases, and take steps to decisively raise standards”.
It also plans to introduce new energy efficiency requirements for rented homes, but there are no details of what the policy might look like. “We will ensure homes in the private rented sector meet minimum energy efficiency standards by 2030, saving renters hundreds of pounds per year. Nobody will be forced to rip out their boiler as a result of our plans,” the manifesto says.
Rental properties currently must have a minimum Energy Performance Certificate (EPC) rating of E. This was originally due to move to C by 2025, but the government abandoned the plan last year. VC
What Labour will mean for your finances
Changes to personal taxes
Labour had promised a no-surprises manifesto and on that front it delivered. There are no major hikes on personal taxes or changes that had not already been announced.
The manifesto reiterates Labour’s promise not to “increase taxes on working people”, ruling out hikes to national insurance, income tax or VAT. But there is no mention of capital gains tax (CGT), and the party has recently appeared reluctant to rule out changes in this area. Rachael Griffin, tax and financial planning expert at Quilter said this absence would "spark significant concern among entrepreneurs and investors in the UK.”
“Those who face CGT in the UK… have already seen their annual exempt allowance slashed by the current Conservative government to just £3,000 a year,” she added. “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.”
The party once again committed to supporting the pensions triple lock, so that the state pension continues to rise in line with the highest of wage growth, inflation or 2.5 per cent. It also plans to encourage the consolidation of workplace pensions and to carry out a pension review, but there are no details of what it might entail – simply that it will “consider what further steps are needed to improve pension outcomes and increase investment in UK markets”. As reported earlier this week, Labour has abandoned its plans to reintroduce the lifetime allowance (LTA).
The manifesto confirms Labour’s plans to end the VAT exemption and business rates relief for private schools. This is likely to result in a steep increase in fees.
Labour will also abolish non-dom status, replacing it with “a modern scheme for people genuinely in the country for a short period”. The non-dom tax regime offers certain tax advantages to people who live in the UK but who are not settled here permanently. Earlier this year, chancellor Jeremy Hunt announced its abolition in the Spring Budget, partially appropriating what had previously been a Labour policy. The manifesto also promises to end the use of offshore trusts to avoid inheritance tax. VC
