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Labour manifesto: Tax and business plans

16th May 2017
Labour
iStock_Alicia_Garcia_Labour

Labour is the first major party to reveal its general election 2017 manifesto, featuring a range of new tax and business measures.

Key ‘For The Many Not The Few’ announcements include:

  • Extra tax take in total £48.6bn

  • Income tax rate 45p on £80,000 and above

  • 50p to be reintroduced above £123,000 earnings

  • £6.4bn to be raised from income tax from the top 5%

  • A new excessive pay levy

  • Extra £19.4bn from higher corporation tax

  • £6.5bn from tax avoidance programme

According to the final manifesto (a draft was leaked last week) a Labour government would impose £48.6bn of annual tax rises on the wealthy and on business to fund an equal spike in public sector spending. The party has insisted that the income tax rise will hit just 5% of earners. Shadow chancellor John McDonnell said the policy proved Labour was “the party of low taxes for middle and low earners”.

The largest tax rise in the proposals is an increase in corporation tax to 26%, raising £19.4bn a year.

Up to 1.5m high earners would also be hit with an increase in income tax raising £6bn a year. The proposal involves lowering the threshold for the 45p additional rate to £80,000 and reintroducing the 50p rate on earnings above £123,000.

A new excessive pay levy would see a 2.5% charge on earnings above £330,000 and 5% on more than £500,000.

The party also plans to extend stamp duty reserve tax to derivatives, will carry out a review of corporate tax reliefs, reverse tax giveaways on capital gains tax, inheritance tax and the bank levy, plus impose VAT on private school fees. Labour says it would also raise £4.7bn a year through a financial transaction tax.

Party leader Jeremy Corbyn has committed to carrying out a range of re-nationalisations, including Royal Mail, taking control of the railways as existing franchises come up for tender, the water and sewerage system, and intervening in the energy markets.

Fair tax campaigner Richard Murphy said Labour was making a move in the right direction in its policy to tackle high pay, but said it will need to go further: “My obvious question is to ask why the timidity? Quite a number of years ago I wrote a policy for the TUC on this issue, which was adopted, which suggested that any payroll cost above 10 times UK median pay (now just over £28,000 a year) should be disallowed for corporation tax creating an effective 19% levy on that excess at current rates. I still think that worthwhile and fair.”

Robert Joyce, an associate director at the Institute for Fiscal Studies (IFS) also commented on the policy: “Labour is proposing to raise income taxes for the highest-income 2% of adults. Many would take action to reduce their taxable income in response: for example by increasing contributions to private pensions. Because the extent of those kinds of responses is very uncertain, the amount of extra revenue these higher tax rates would raise is also very uncertain.

“Labour’s policy could raise something like the £4.5bn per year it expects, but it could also raise nothing. What is certain is that the proposal would miss an opportunity to sort out the complex mess that recent governments have made of the tax system for those with the highest incomes,” Joyce said.

What do you make of the Labour Party manifesto?

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Replies (8)

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By memyself-eye
16th May 2017 15:19

It should be titled "How to lose an election".

Thanks (1)
By ireallyshouldknowthisbut
16th May 2017 16:03

@memyself-eye, it depends which side of the fence you are on.

Not that many people earn over £80k outside of London, and some that do may well prefer working services such as schools and hospitals.

I think its quite a smart gamble, he was never going to win based on being a bit like the Tories, the only way Labour stand of getting even close is to present a real alternative. A lot of people I speak to (outside of bean counting, I know lots of real people too from all walks of life, not just rich people who's tax returns I file) are very excited by Labour and their policies, especially uni fees. I am baulking myself at coughing up the thick end of £100k to get my two kids through uni as I think its deeply unfair to saddle them with debt of that magnitude. I came out with £500 in my pocket from holiday jobs, having been educated by the state from a council estate. Hence the illiteracy!

I for one think the rise in CT is very sensible, there is no evidence at all to suggest more CT is being raised by the fall in the headline rate from 28% to 19% (and proposed 17%). If you look at the red book the % of taxes raised from CT is falling. Big corporations still prefer to shovel income offshore and pay 1-5% tax not 10% in Ireland.

Anyhow they wont win, the papers are too rabbid Tory and huge numbers of natural Labour voters dont even vote, but it will however open up the debate on how hard right wing the Tories should be and how much of what is left of the public sector should be divvied up amongst their mates.

Thanks (3)
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By Simple Accounting
16th May 2017 18:06

Game changer:
On page 18 of the Labour manifesto come these glorious words: Scrap Quarterly reporting for businesses with a turnover of under £85,000.
Thank goodness someone is finally listening to accountants concerns about Making Tax Digital.

Thanks (7)
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By Simple Accounting
16th May 2017 18:06

Game changer:
On page 18 of the Labour manifesto come these glorious words: Scrap Quarterly reporting for businesses with a turnover of under £85,000.
Thank goodness someone is finally listening to accountants concerns about Making Tax Digital.

Thanks (0)
Replying to Simple Accounting:
Hallerud at Easter
By DJKL
16th May 2017 20:45

Looks like the influence of Richard Murphy.

JC has been the only party leader to have come out with this previously, glad to see he is sticking to his beliefs.

Now, if only someone had told him public ownership leaves a nasty taste in the mouths of older voters he would not have left himself so open to the "uncosted" jibes, less would have been more, imho.

Thanks (2)
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By Harrison88
17th May 2017 09:22

Tax doesn't have to be taxing hey? What happened to simplicity?

They have no costing on how they will fund the nationalisations either.

Thanks (0)
Replying to Harrison88:
Hallerud at Easter
By DJKL
17th May 2017 09:49

The Railways are nil as they just pick up each franchise as it expires-not sure how that works as I assumed they would have to pay for the actual Hornby engines, coaches and wagons somehow?

The Water and other bits, these are profitable so the borrowing may be ignored, well so we are told- it appears that when we are buying assets you can ignore the associated borrowing, honest, it just does not count.

Listened to Rebecca Long-Bailey on Radio 4 yesterday lunchtime, she obviously drew the short straw. She did make a decent fist of the defence but tricky to play tennis when the racquet has no strings.

(As an aside I have actually been pretty impressed by her, she seems to learn her facts, is reasonably articulate, she could go far in Labour especially given the competition- she could even do well as a Conservative as not much talent on their benches either)

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By Robert Lovell
23rd May 2017 10:44

Now all the main party manifestos are out, what's your take on the key differences tax policy-wise?

Thanks (1)