What Would a Labour Government do to Taxes and Finance?

“Against
this
backdrop,
and
absent
major
surprises,
we
don’t
expect
the
UK
election
to
be
a
market
moving
event,”
says
Royal
London
Asset
Management’s
head
of
multi-asset
Trevor
Greetham.

But
changes
of
government
are
hugely
significant
for
the
economy
and
financial
markets,
which
is
not
to
mention
the
savers,
investors
and
pensioners
who
depend
on
the
clarity
(or
lack
thereof)
produced
in
Whitehall.

As
such,
each
party’s
manifesto
will
be
pored
over
by
policy
experts,
lobbyists,
and
savers
in
a
search
for
signs
of
major
updates
to
fiscal
and
monetary
policy.
Until
we
see
the
documents,
it’s
hard
to
make
judgements
about
which
party
would
be
“better”
for
the
UK
economy,
which
has
been
in
a
low-growth,
high-
inflation
funk
since
the
pandemic,
and
is
still
dealing
with
the
legac
of
Brexit.

What’s
more,
a
long-standing
obsession
over
taxpayer
value
and
the
impact
of
Liz
Truss’s
so-called mini-Budget
now
mean
manifesto
“costings”
are
a
firm
part
of
the
UK’s
political
dialogue.
There’s
every
sense
such
documents
are
as
much
a
stick
to
beat
parties
with
as
they
are
a
call
to
action
or
a
vision
for
change.

Labour
Says
‘We’ve
Changed’.
Will
it
Change
Anything?

When
Rishi
Sunak,
who
was
previously
in
charge
of
the
UK
economy
as
chancellor,
spoke
on
Wednesday,
he
immediately
cited
his
track
record
during
the
pandemic,
and
argued
that
his
Labour
counterparts
had
“no
plan”
for
growth.

Handily,
this
came
amid
some
improved
economic
conditions:
the
UK
has
exited
recession,
inflation
is
at
2.3%
rather
than
11.1%,
the
jobs
market
is
by-and-large
robust,
and

the
stock
market
is
at
record
levels.
Even
the
International
Monetary
Fund
is
expecting
a
rebound
in
growth
in
2025.

Still,
there
are
big
political
problems.
Sunak
is
under
pressure
over
the
UK’s
tax
burden,
which
is
at
its
highest
since
World
War
Two.
British
public
services
are
under
great
strain.
Mortgage
rates
are
also
at
levels
last
seen
during
the
financial
crisis
of
2008.

Labour
has
been
working
on
its
response
to
this
for
a
long
time.
Much
of
its
approach
has
been
informed
by
the
perceived
legacy
of
Jeremy
Corbyn,
but
there
is
more
to
it
than
that.
Long
before
Corbyn
was
leader,
the
Party
occasionally
struggled
to
present
itself
as
“pro-business”.
Little
wonder
it
has
already
published
a
blueprint
for
the
City
of
London,
itself
a
key
“constituency”
that
has
traditionally
been
seen
as
pro-Tory.

The
woman
at
the
centre
of
this
effort
is
shadow
chancellor
Rachel
Reeves,
whose
only
major
gaffe
so
far
appears
to
have
been
an
incident
involving

allegations
she
plagiarised
sections
of
a
book
she
wrote
on
women
economists.

A
former
Bank
of
England
economist,
Reeves
has
suggested
corporation
tax
would
be
capped
at
its
current
rate
of
25%,
end
the
ability
of
chancellors
to
scrap
fiscal
rules,
and
pledged
not
to
re-impose
a
cap
on
bankers’
bonuses,
itself
a
controversial
measure.

Introduced
by
the
last
Labour
government
as
a
populist
measure
after
the
global
financial
crisis,
banks
circumvented
the
bonus
cap
by
raising
basic
pay.
Dealing
with
Labour’s
own
legacy
here
has
been
tricky,
but
in
the
end
it’s
as
much
about
the
optics
as
it
is
whether
the
party
is
actually
uncomfortable
with
people
making
vast
sums
in
Canary
Wharf.

And
then
there’s
the
boadroom.
Still
male-dominated.
Still
looking
for
ways
to
contribute
to
UK
economic
growth.
And
still
under
a
huge
amount
of
regulatory
pressure.

At
the
2019
election
executives
took
a
dim
view
of
talk
of
wealth
taxes
and
renationalisation.
And
yet,
in
the
time
that
has
elapsed
since,
popular
discourse
has
viewed
such
ideas
somewhat
more
kindly.
Right-wing
media
outlets
were
always
keen
to
portray
Jeremy
Corbyn
and
his
shadow
chancellor
John
McDonnell
as
Marxist
disruptors.
Naturally
the
finance
sector
did
not
warm
to
their
ideas.

In
2024,
however,
we’ve

already
heard
talk
of
renationalising
Thames
Water,
and
disquiet
(to
say
the
least)
over
dividend
payments
to
irresponsible
bosses
is
a
growing
avenue
of
discussion.
Labour
may
have
more
wiggle
room
here
than
it
assumes.

Would
a
Labour
Government
Cut
Taxes?

But
none
of
that
is
exactly
comprehensive.
Indeed,
you
could
go
as
far
as
saying
Labour
is
still
being
deliberately
vague.
One
of
its
few
solid
commitments
has
been
putting
VAT
on
private
school
fees.
You
can’t
build
a
government
on
that
lone.

It’s
already
had
a
PR
backlash
for
diluting
plans
to
spend
£28
billion
a
year
on
the
green
industry,
but
it
is
sticking
with
the
idea
of
setting
up
Great
British
Energy,
a
state-run
renewable
power
firm.
Oil
and
gas
companies
are
footing
the
bill
and,
like
all
European
governments,
Labour
will
have
to
get
to
grips
with
the
climate
change
transition.

Enter
Ed
Miliband,
himself
no
stranger
to
losing
elections,
who
has
reprised
his
former
role
as
secretary
of
state
for
energy
and
climate
change
(2008-2010)
in
the
shadow
cabinet.
His
current
job
title
is
different,
as
shadow
secretary
of
state
for
energy
security
and
net
zero,
but
the
brief
is
home
turf
for
a
man
whose
“Ed-Stone”
was
the
dying
gasp
of
Labour’s
failed
attempt
at
re-election
in
2015.

Over
in
the
personal
finance
space,
while
we
may
not
see

the
“British
ISA”
promised
by
current
chancellor
Jeremy
Hunt this
year
(or
ever),
Labour
will
be
keen

not
to
dismantle
too
much
of
the
current
savings
and
investing
regime
too
quickly.
Still,
Rachel
Reeves’
intray
with
proposed
policy
for
pensions
taxation,
savings
products,
and
financial
advice,
all
of
which
are
in
need
of
simplification.

The
affordability
of
the
current
state
pension
is
an
issue
governments
are
keen
to
avoid
talking
about,
but
the
nettle
will
have
to
be
grasped.
And
the
Tories
know
this.
Jeremy
Hunt
has
already
said
a
fresh
Tory
government
would

stick
with
the
triple
lock
after
the
election,
but
there
is
every
sense
that
is
just
a
political
grenade
being
thrown
at
any
potential
incoming
government
of
a
different
colour.

And
then
there
is
the
tax
burden.

High
government
debt
levels
mean
the
next
government
will
have
very
little
wiggle
room
to
cut
taxes.
As
the
party
of
the
NHS,
Labour
will
likely
find
itself
in
a
real
bind
over
health
service
funding,
which
is still
seen
as
a
bread
and
butter
issue
in
the
opinion
polls.

On
this,
readers
with
long
memories
will
recall
all
the
wrangling
over
Gordon
Brown’s
2002
decision
to
put
1%
on
National
Insurance
contributions
to
fund
a £6
billion
uplift
in
NHS
spending.
Today
the
NHS
costs
the
state
£180
billion,
ambulances
don’t
arrive
on
time,
and
GP
appointments
have
to
be
fought
over
at
the
8am
phone
call
queue. After

gilt
yields
spiked
and
the
pound
fell
dramatically
during
the

“Trussonomics”
mini-Budget
debacle,
markets
are
now
seen
to
always
be
watching
how
tax
rises
are
funded.

Pray
for
Growth

With
this
peculiar
and
difficult
set
of
circumstances,
it’s
little
wonder
Reeves
is
pitching
her
case
for
a
Labour
government
with
economic
growth
centre
stage.

Without
better
economic
growth,
she
said
at
a
recent
lecture,
a
Labour
government
would
have
to
make
“impossible”
tax
and
spending
decisions.
This
perhaps
makes
sense,
but
it
may
have
wrankled
the
economists
who
wanted
the
shadow
chancellor
to
make
a
stronger
argument
for
stimulating
the
economy
with
government
money.

All
this
means
Reeves
and
Starmer
may
well
move
cautiously
at
first,
but
that
assumes
there
is
a
programme
for
radical
change
coming
later.
An
alternative
theory
is
a
Labour
government
will
not
change
much
at
all.
After
all,
the
British
voter
is
now
used
to
high
taxes
and,
following
the
pandemic
era
of
furlough
and
“helicopter
money”,
a
fair
amount
of
government
intervention.
More
of
the
same
may
not
be
particularly
controversial.
Both
parties
have
been
stealing
eachother’s
ideas
for
years
anyway.

That
aside,
decent
economic
growth
won’t
hurt.
But
if
it
wants
to
do
anything
with
the
results,
Labour
has
to
put
in
a
good
showing
first.
It’s
time
to
see
if
Keir
Starmer’s
determination
to
put
“power
before
protest”
will
pay
off
at
the
polls.

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