Keir Starmer, leader of the Labour Party, delivers a keynote speech at Lansing Parish Hall in West Sussex whilst on the general election campaign trail.
Keir Starmer_flickr

Labour promises to keep taxes ‘as low as possible’

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The Labour Party has committed to its plans to abolish the non-dom regime and remove the VAT exemption for private school fees in its manifesto, where it also promised to not increase national insurance, income tax or VAT. 

13th Jun 2024
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Unless the pollsters and the pundits have got their calculations wrong to an embarrassing degree, this was always going to be the only manifesto that really counted.

Throughout the last year, the Labour Party’s approach has been cautious and this is mirrored in a document that contains little that has not been signalled in advance.

The key word is “change”, pasted in red on the opening page of this 136-page document next to a casually dressed but serious-looking party leader, with “chaos” a close second.

An introduction headed “My Plan for Change” already feels repetitive as it commences “This election is about change. A chance to stop the endless Conservative chaos that has directly harmed the finances of every family in Britain.” 

From there, readers will expect and get constant repetitions of the word change along with numerous photos of Sir Keir Starmer.

When it comes to Labour’s first steps for change, number one is to “Deliver economic stability with tough spending rules, so we can grow our economy and keep taxes, inflation and mortgage is as low as possible.” 

All of this should provoke cheers from members of the accountancy profession, as long as a) Labour wins the general election and b) Sir Keir and Rachel Reeves can deliver on their promises, especially that amorphous promise to grow the economy. 

As with previous analyses, those wishing to discover the full story might enjoy reading the manifesto, which includes quotes from the likes of Sir Patrick Vallance, Imelda Staunton and Richard Walker of Iceland.

Economic stability

Having identified economic stability as its number one goal, anyone reading the manifesto might be mildly surprised to discover that the first two sections cover national security and secure borders.

Once we get to the economy, there is yet another very familiar phrase, “Every commitment a Labour government makes will be based on sound money and economic stability.” 

This is amplified by two fiscal rules. First, that the current budget moves into balance, so that day-to-day costs are met by revenues. Secondly, debt must be falling as a share of the economy by the fifth year of the forecast.

There is also a commitment to strengthen the role of the Office for Budget Responsibility, allowing it financial oversight of every fiscal event or significant change to taxation or spending.

Readers might offer a wry smile to another promise, ending the link between access to ministers and an inside track for public contracts. Going a step further, the party plans to appoint a fixed-term Covid Corruption Commissioner to recoup public money lost to fraud or waste.

Fiscal plan

Right at the end of the manifesto, Labour sets out the funding for all of its policies. This largely derives from changes to a number of taxing measures.

As previously announced, Labour will replace non-dom status with “a modern scheme for people genuinely in the country for a short period. As part of this process, the use of offshore trusts to avoid IHT will end.

An attack will also be launched on “loophole” through which CGT treatment currently applies to performance-related pay received by those in the private equity sector.

Tax avoidance also comes under the spotlight. “We will modernise HMRC and change the law to tackle tax avoidance. We will increase registration and reporting requirements, strengthen HMRC’s powers, invest in new technology and build capacity within HMRC. This, combined with a renewed focus on tax avoidance by large businesses and the wealthy, will begin to close the tax gap and ensure everyone pays their fair share.”

The resulting figures used are for 2028-29 and include:

  • £5.23bn derived from closing further non-dom tax loopholes and investing in reducing tax avoidance 
  • £1.510bn from applying VAT and business rates to private schools
  • £565m from closing the carried interest tax loophole
  • £40m a 1% increase in stamp duty on purchases of residential property by non-UK residents
  • £1.2bn windfall tax on oil and gas giants

Footnotes provide additional clarification. In particular, there will be an additional £855m annual investment in HMRC, while the non-dom loophole figure does not include £600m revenue from removing the non-dom discount in 2025-26. 

Those interested in such matters might recall that the original plans for revising the non-dom tax system fell foul of the early election and were not enacted.

Business taxation

Much to the delight of the editorial team at AccountingWEB and, one would wager almost every accountant, Labour guarantees that there will only be one major fiscal event each year.

Like the Conservatives, Labour will maintain the main corporation tax rate at 25%, though you don’t need a long memory to recall that this represents a massive hike from the rates in recent years.

It will also retain a permanent full expensing system for capital investment and the annual investment allowance for small business, as well as clarifying what qualifies for allowances. This last clause might hide some significant changes but no details are provided.

Business rates are to be replaced by a new, fairer system, “level[ling] the playing field between the high street and online giants”.

Small businesses and the self-employed

If the party comes into office, it will take action on late payments to small businesses, which will be welcome if the plans prove effective.

Additionally, it has committed to improve guidance and remove barriers for exporting by small businesses, which may be difficult unless much closer relations are established with the European Union.

Labour also intends to facilitate access to capital by small and medium-sized enterprises, while also giving them greater access to government contracts.

Taxation commitments

Having been cornered by Jeremy Hunt, the document asserts that “We will ensure taxes on working people are kept as low as possible. Labour will not increase taxes on working people, which is why we will not increase national insurance, the basic, higher, or additional rates of income tax, or VAT.”

As critics have pointed out, this theoretically leaves scope to tinker with capital gains tax and council tax. Cynics may also wonder whether this area of the manifesto might eventually give way to financial necessity before the end of the next parliament?

Making work pay

Clearly this is a significant priority, given that legislation will be introduced within 100 days of an election.

As well as measures to support people into work, the new legislation will include provisions that ban exploitative zero hours contracts, as well as fire and rehire and introduce a raft of basic rights from day one of employment including parental leave, sick leave and protection from unfair dismissal.

Going further, the remit of the independent Low Pay Commission will be changed so that it takes account of the cost of living and removes age bands, meaning that all adults would be entitled to the same minimum wage.

Helpful support

While some other proposed measures may not strictly be relevant for accountants, the introduction of free breakfast clubs in every primary school, along with 3,000 new primary school-based nurseries may make our lives and those of working colleagues easier.

Similarly, a desire to cut NHS waiting times with 40,000 more appointments every week could enable some staff members to work more efficiently.

Other manifestos

Replies (34)

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By Open all hours
13th Jun 2024 15:26

It sounds like driving off road. ‘As slow as possible but as fast as necessary’.
I think we’ll find out it’s ‘necessary’ for them to tax our cars, houses, pensions, capital and most of all our patience.

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Replying to Open all hours:
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By DavidWinter
14th Jun 2024 09:50

Or, you know, they could start reversing the corporation tax cut that big companies got all the the way through austerity.

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Replying to Open all hours:
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By FactChecker
14th Jun 2024 18:11

“.. as low as possible”

This has the same ring of vacuous intent as those who spout 'lessons have been learned' (without saying which ones or what will therefore be done differently).

Mind you that's not surprising ... the politicians, big 4 partners, banking and utility bosses all rise through the same self-serving medium of mediocrity.
You don't get to be DPP by being brave or innovative you know!

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By ireallyshouldknowthisbut
13th Jun 2024 17:01

it seems they are going to find half of their 10Bn from "tax avoidance".

Whislt they could do a heck of a lot better than the current shower simply by training up some decent CA's to turn gamekeeper rather than low grade staff they currently use and abuse, I doubt they will make a fraction of £5bn. Its fantasy stuff.

One thing they dont mention is the railway to nowhere.

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Replying to ireallyshouldknowthisbut:
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By FactChecker
14th Jun 2024 18:19

I doubt it makes much difference whether or not they find those 'missing billions' ... since, based on past performance (of both parties), spending the billions will NOT translate into the headline figures that Philip is so keen to believe:
- 3,000 new primary school-based nurseries?
- 40,000 more medical appointments every week?
- new housing etc etc.

Throwing money at the problem is all that politicians understand (especially if rather conveniently some it sticks to friends & families) - but effecting any real change (which may take a generation to bear fruit) hurts their tiny brains.

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By Paul Crowley
13th Jun 2024 18:08

As low as possible, but not for the evil whatsits that send their kids to public schools.
But it is easy, just close the tax gap and make tax avoidance illegal.

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Replying to Paul Crowley:
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By johnjenkins
14th Jun 2024 09:03

So claiming 40% on pension payments would be illegal, or is it selective tax avoidance schemes you mean?

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Replying to johnjenkins:
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By Paul Crowley
14th Jun 2024 11:05

The word avoidance is so misused by politicians.
What they really mean is artificial tax avoidance schemes.
Dead easy to control by jumping on them as soon as the DOTAS number is issued. And enquiring into the users once the number appears on a tax return.

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Replying to Paul Crowley:
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By johnjenkins
14th Jun 2024 11:29

HMRC was asked years ago about these schemes. Their reply was that they couldn't give an answer either way. So they could have nipped it in the bud. Oops no fines then.

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By richards1
14th Jun 2024 09:05

I hear all this talk about "working people" , what is the definition of a working person?

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Replying to richards1:
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By graydjames
14th Jun 2024 09:10

Someone who is in work. It's quite simple.

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Replying to graydjames:
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By AS44NG
14th Jun 2024 12:47

That rules out a sizeable proportion of Labour voters then.

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By AndrewV12
14th Jun 2024 09:11

I know exactly where Sir Kier aims to get growth, re-negotiate Brexit, ....... mind you thinking about it have we finally negotiated Brexit in the first place.

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By jon watkin
14th Jun 2024 09:37

"Readers might offer a wry smile to another promise, ending the link between access to ministers and an inside track for public contracts."

A wry smile? As I shall never forget working throughout covid trying to operate the furlough scheme and keeping my employer's finances in order remotely, sticking to the self-isolation rules, and all the while the then incumbents partied on and diverted highly dubious contracts to their mates, I cannot see any amusement in this at all. I complained to my MP at the time and the useless article that his is, he chose to sit on the fence every time and said nothing. Like so many others, he is choosing to retire this time rather than face the music. I shall be glad if this policy is applied, some collars felt and miscreants finally stripped of their ill-gotten assets as well as their liberty.
Otherwise, this is an excellent and well-written precis of the manifesto, thank you.

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By Ruddles
14th Jun 2024 10:08

"Tinker" with capital gains tax? I predict radical changes.

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By Retrocanary
14th Jun 2024 10:19

Are any of the parties pledging to do anything about the disgraceful state of HMRC?

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Replying to Retrocanary:
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By johnjenkins
14th Jun 2024 10:21

Yer, both Labour and Tory have said they will give as much as they need to sp..k up the wall.

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Replying to Retrocanary:
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By 356B
14th Jun 2024 16:31

Yes. labour are giving HMRC an additional £855m, to counter "tax avoidance".
It won't change a thing. HMRC will still be useless.

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By Ian McTernan CTA
14th Jun 2024 10:32

I've yet to see how they will 'deliver more growth'. Or they planning on using the Blair tactic of massive increases in public spending leading to a massive deficit for someone else to sort out like last time?

Lots of promises making Britain even less competitive internationally and making it more expensive to try and run a business in the UK, but somehow lots more money for things...

And I remember when the Tories floated the idea of evening and weekend working in the NHS to cut the waiting lists whcih was swifty killed off by a flat refusal of the unions to even contemplate it: have NHS staff suddenly decided they will work night shifts and doctors suddenly going to do more surgeries whilst Labour bring back the pension cap discouraging them from doing any more work?

I'm looking forward to seeing how all this plays out. From Spain.

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Replying to Ian McTernan CTA:
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By johnjenkins
14th Jun 2024 11:26

Playa de Masspending?

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Replying to Ian McTernan CTA:
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By justsotax
17th Jun 2024 17:10

14 long years.....irony that you are heading to europe.....

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By moneymanager
14th Jun 2024 10:35

Or, as GW said 'Watch my lips, no new taxes', lying bar stewards.

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By Marlinman
14th Jun 2024 10:52

Historically Labour have always bankrupted the country and the worrying thing is there's enough losers and failures to vote them in. Reform UK is our only hope as I can't see ex Tory voters going for Labour.

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Replying to Marlinman:
By Nick Graves
14th Jun 2024 11:31

Marlinman wrote:

Historically Labour have always bankrupted the country and the worrying thing is there's enough losers and failures to vote them in. Reform UK is our only hope as I can't see ex Tory voters going for Labour.

True, as the blue side of the Uniparty are also a bunch of money-printing spendthrifts these days, too.

The eventual Venezualisation is already baked-in and they will attempt to hide the collapse under another world war. Again...

The one thing we learn from history is that we never learn from history.

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Replying to Marlinman:
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By Retrocanary
14th Jun 2024 13:14

Their immigrant worker tax policy would see many businesses collapse. Let's hope they never see power. Their pet project of leaving the EU got enacted by the tories already and that's been a disaster.

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Replying to Marlinman:
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By moneymanager
14th Jun 2024 20:47

True but unfortunately, the 'great swallowing' of climate fear and self imolating 'Net Zero' policies is coming down the pike, the West repeatedly promised Russia 'No eastward extension of NATO', while the CIA undermined a democratically elected, but Russia leaning, government and installed a puppet as DARPA funded thirty four bio weapons labs in the country, it's hardly surprising that zPutin responds, and old strategy repeated. We can change the colour of the party but it makes not one jot of difference.

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By AndyC555
14th Jun 2024 11:48

"£5.23bn derived from closing further non-dom tax loopholes

£565m from closing the carried interest tax loophole"

"Loophole" has been redefined. It now means "tax law operating the way it was intended but which we don't like"

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Replying to AndyC555:
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By moneymanager
14th Jun 2024 20:31

But they'll spaff billions on fakedemics, faked up wars, and real wars we should have nothing to do with.

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Replying to moneymanager:
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By justsotax
17th Jun 2024 17:13

could be worse....we currently have more beach landings than on d day and apparently we have control of our borders......

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By AS44NG
14th Jun 2024 12:52

As with all election "promises" they are to be taken with a pinch of salt.

Don't promise me stuff, say that you will resign if it isn't implemented within the first year. That has more meaning.

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By Husbandofstinky
14th Jun 2024 16:29

Well I hate to say it, but whoever is there on July 5th, we all know the country is pretty much smashed. I would not want the job.

National debt back in 2010 was 70% of GDP and £1 trillion. For many years, the Tories slaughtered Labour for that inherited state of affairs.

Since 2010, throughout the years of austerity, the tax burden is now at the highest level since the 2nd world war yet National debt rose to £2 trillion before Covid (doubled) and post Covid £2.6 trillion. National debt now at 100% of GDP.

Can anyone see a way out of this??

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Replying to Husbandofstinky:
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By moneymanager
15th Jun 2024 11:54

What to do, I suppose we could withdraw completely from the debt based fiat currency system as Germany did in the 1920s, issuance of the Rentenmark being based on actual productivity, removing the ability to be fiscally incontinent would constrain politicians and thus their ability tonreward their friends and masters. That would of course go down like a lead balloon and attract the wrath of Hades.

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By anthonystorey
14th Jun 2024 19:52

"say that you will resign if it isn't implemented within the first year"
That would have got rid of Sunak. The only pledge that was met was the reduction to inflation, but that was wholly the remit of the Bank of England and had nothing whatsoever to do with Sunak. The election can't come soon enough.

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By KIKISROSSIDES
15th Jun 2024 11:27

I have lived and worked in the UK for 50 years, from 1969 to 2019. I cannot remember one single labour government that has done well in power! If memory serves me well they would always leave a mess for subsequent Tory governments trying to correct their mistakes. I am not saying the Tories are better but between the two evils I always voted for Tories.

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