Labour pledges ‘economic rewrite’ with radical election manifesto
Labour has put forward a raft of changes in its election manifesto with the aim of ‘rewriting the rules of the economy’. Philip Fisher examines what the party is proposing through an accountancy lens.
The Labour Party manifesto tops 100 pages and has separate supplements addressing corporation tax reliefs and funding. The projected cost is £83bn a year, rather than £1.2tn as estimated by the Chancellor of the Exchequer.
The headlines include measures to:
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- Rewrite the rules of the economy, so that it works for everyone.
- Rebuild public services by taxing those at the top.
- Launch the largest-scale investment programme in modern times.
- Kick-start a Green Industrial Revolution.
- Bring in a real living wage of at least £10 per hour for workers aged 16 or more with equal rights at work from day one.
- End zero-hours contracts.
- Replace universal credit.
- Amend the Companies Act, requiring companies to prioritise long-term growth while strengthening protections for stakeholders.
- Require one-third of company boards to be reserved for elected worker-directors and give them more control over executive pay.
- Separate audit and accounting activities in major firms and impose more robust rules on auditors.
- Introduce a new Workers’ Protection Agency working with HMRC to govern equal pay.
Measures include plans to:
- Create a national investment bank backed by regional development banks, with the intention of levelling up investment across the country.
- Nationalise energy and water companies.
- Improve the apprenticeship levy and introduce a new climate apprenticeship programme.
Labour’s stated objective is to create “a fairer taxation system, asking for a little more from those with the broadest shoulders, and making sure that everyone pays what they owe.”
Key points are:
- Reverse cuts to corporation tax while keeping rates below those of 2010 (see below).
- Increase income tax “a little” for those earning more than £80,000 a year.
- Freeze national insurance and income tax rates for everyone else. Although the wording is vague, it appears that national insurance will be frozen for all.
- Ensure that income from wealth is no longer taxed at lower rates than income from work.
- Guarantee no increases in VAT.
- Where government procures services from the private sector, companies will be assessed against best practice public service criteria, including provisions for collective bargaining, fair wage clauses, adherence to environmental standards, effective equalities policies, full tax compliance and application of pay ratios. In the public sector, maximum pay ratios of 20:1 will be enforced.
- A Labour government will “review the tax and pension changes implemented by the Tory government to ensure that the [NHS] workforce is fairly rewarded and that services are not adversely affected”.
- No quarterly reporting for businesses below the VAT threshold. This appears to be a promise not to go ahead with MTD quarterly reporting for income tax.
- Prescription charges in England will be abolished.
- The sugar tax will be extended to milk drinks.
- Launch the “biggest ever crackdown on tax evasion and avoidance”
- Treat corporate groups under common ownership as unitary enterprises, so that profits are declared where economic activity occurs and where value is created.
- Introduce a windfall tax on oil companies.
- Second homes which are used as holiday homes will be subject to an annual tax equivalent to 200% of the current council tax levy.
- Scrap the so-called “bedroom tax”. This is a 14% cut in benefits for each “spare bedroom” which social housing tenants enjoy.
- Abolish the IHT main residence nil rate band.
- Charge VAT on private school fees.
Corporation tax rates
Labour would reintroduce a small profits rate for firms with a turnover (not profits!) of under £300,000 a year
Labour would raise the main rate of corporation tax to 21% in April 2020, 24% in April 2021 and 26% in April 2022. It would keep the small profits rate at 19% in April 2020, rising to 20% in April 2021 and 21% in April 2021.
Review of corporate tax reliefs
In a separate document, Labour proposes a review of corporate tax reliefs conducted by the Treasury, to be completed within seven months of taking office. The target will be to achieve efficiencies of 1% of total relief expenditure i.e. £4.3 billion a year.
The review will examine existing corporate tax reliefs in relation to the following questions:
- Does the relief meet its stated policy objectives, and in a cost-effective way in comparison with alternative means of achieving these objectives?
- Is this objective already achieved by another policy or relief?
- Who does the relief target and what impact does it have on them, both individually and cumulatively in interaction with other reliefs?
- Does the relief simplify the tax system e.g. by avoiding double taxation?
- Is there evidence of misuse of the relief, including for the purpose of tax avoidance?
Maternity and childcare
The Labour Party will extend paid maternity leave to 12 months.
Within five years, all 2 to 4-year olds will be entitled to 30 hours of free pre-school education per week and access to additional hours at affordable, subsidised rates based on the parent’s income.
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There is a proposal to abolish tuition fees and bring back maintenance grants.
Broadband and TV licences
Labour promises to deliver free full-fibre broadband to all by 2030. In addition, free TV licences for those aged over 75 will be protected.
A new gambling levy will be introduced with the specific aim of funding support for problem gamblers and systems for consumer compensation.
There are undefined plans to tackle late payments to small businesses and the self-employed. Late payers could be banned from public procurement.
Workers will be given a share of dividends generated by the companies they work for. Large companies will be obliged to set up Inclusive Ownership Funds (IOFs). Up to 10% of the company’s shares will be held by this new type of employee trust with dividend payments of up to £500 a year distributed equally to the employees.
The party is additionally proposing a pilot of a Universal Basic Income scheme.
Self-employed workers will get new rights including collective income protection insurance schemes, annual income assessments for those on Universal Credit and better access to mortgages and pension schemes.
A new Ministry for Employment Rights will also be set up, which will develop plans to:
• Give everyone full rights from day one.
• Strengthen protections for whistle-blowers and rights against unfair dismissal.
• End bogus self-employment and creating a single status of ‘worker’ for everyone apart from those genuinely self-employed in business on their own account.
• Ban overseas-only recruitment practices.
• Ban zero-hour contracts and give those who work regular hours for more than 12 weeks a right to a regular contract, reflecting those hours.
Work-life balance and equality
The Labour Party proposes:
• Increasing wages through sectoral collective bargaining.
• Requiring breaks during shifts to be paid.
• Requiring cancelled shifts to be paid and proper notice for changes in hours.
• Giving all workers the right to flexible working.
• Extending statutory maternity pay from nine to 12 months.
• Doubling paternity leave from two weeks to four and increasing statutory paternity pay.
• Introducing statutory bereavement leave. Statutory support for bereaved parents is due to start in April 2020.
• Introducing four new bank holidays celebrating our four patron saints’ days.
• Reviewing family-friendly employment rights, including rights to respond to family emergencies.
Promote equality at work by:
• Requiring employers to devise and implement plans to eradicate gender/race/disability pay gaps with fines for failure.
• Increasing redundancy protection.
• Banning unpaid internships.
It will also develop collective income protection insurance schemes for the self-employed.
There is an ambition to reduce full-time weekly working hours to 32 within a decade.
- Review the retirement age and possibly reduce this for those in stressful occupations e.g. shift workers.
- Maintain the ‘triple lock’ and guarantee the winter fuel payment, free TV licences and free bus passes as universal benefits.
- Implement a single, comprehensive and publicly run transparent pensions dashboard, including information about costs and charges.
- Ensure that the state pensions of UK citizens living overseas rise in line with state pensions in Britain.
*22 November: An amended version of the article was uploaded to clarity points such as the criteria for small profits rate and the manifesto costings.