Labour’s manifesto pledges & future Economic Policy

Labour’s 2024 manifesto outlines a comprehensive set of tax reforms and economic policies aimed at reshaping the UK’s financial landscape.

These proposals are designed to increase fairness in the tax system, close existing loopholes, and generate additional revenue to fund public services.

Here is  a quick analysis of the potential impact of these pledges on the Treasury’s economic policy.

 Key Tax Pledges

Maintaining Existing Tax Rates

Labour’s commitment to not increasing National Insurance, the basic, higher, or additional rates of Income Tax, or VAT, ensures stability for taxpayers. This pledge provides certainty for households and businesses, allowing them to plan their finances without fear of sudden tax hikes.

Ending VAT Exemption and Business Rates Relief for Private Schools

By removing the VAT exemption and business rates relief for private schools, Labour aims to redirect funds into state schools. This policy is expected to generate £1.51 billion in revenue, which will be reinvested in public education. The increased funding could improve educational resources and outcomes in state schools, potentially reducing educational inequality.

 Closing Loopholes in the Windfall Tax on Oil and Gas Companies

Labour plans to extend the sunset clause in the Energy Profits Levy and increase the rate of the levy by three percentage points, while removing generous investment allowances. This is expected to generate £1.2 billion in revenue. These measures ensure that oil and gas companies contribute a fairer share of their profits to the public purse, especially during periods of high profitability.

Abolishing Non-Dom Status

Replacing non-dom status with a modern scheme for short-term residents is expected to raise £5.23 billion. This change aims to ensure that all individuals who make the UK their home pay their fair share of taxes, reducing tax avoidance and increasing fairness in the tax system.

Additional Tax Pledges

Modernising HMRC and Tackling Tax Avoidance

Labour’s pledge to modernize HMRC and enhance its capabilities is crucial in reducing tax avoidance. By increasing registration and reporting requirements, strengthening HMRC’s powers, and investing in new technology, Labour aims to close the tax gap. This focus on large businesses and wealthy individuals will ensure a fairer distribution of the tax burden.

 Publishing a Roadmap for Business Taxation

Providing a clear roadmap for business taxation will allow companies to plan their investments with confidence. By capping corporation tax at 25%, Labour aims to maintain the UK’s competitive edge while ensuring businesses contribute fairly to public finances.

Reforming Business Rates

Labour intends to replace the current business rates system with one that raises the same revenue but is fairer. This new system will level the playing field between high street retailers and online giants, incentivize investment, tackle empty properties, and support entrepreneurship. Such reforms could stimulate economic activity and growth, particularly in the retail sector.

Supporting Economic Sectors

Labour’s manifesto includes measures to support various economic sectors, such as:

  • Reducing Car Insurance Costs:** This could alleviate financial pressure on drivers, potentially increasing disposable income and consumer spending.
  • Securing the Aviation Industry:** Promoting sustainable aviation fuels and supporting the industry’s long-term future will help maintain jobs and economic stability in this vital sector.
  • Supporting Start-Ups:** By ensuring start-ups have access to finance, Labour aims to foster innovation and economic growth.
  • Carbon Border Adjustment Mechanism:** Supporting this mechanism aligns with global efforts to reduce carbon emissions and promotes sustainable economic practices.

Revenue Projections

Labour’s proposed tax changes are expected to generate an additional £8.55 billion in revenue. This includes:

  • Closing non-dom tax loopholes and reducing tax avoidance: £5.23 billion
  • Applying VAT and business rates to private schools: £1.51 billion
  • Windfall tax on oil and gas giants: £1.2 billion
  • Closing carried interest tax loophole: £565 million
  • Increasing stamp duty on residential property purchases by non-UK residents: £40 million

Labour’s 2024 manifesto pledges signify a major shift in economic policy, focusing on fairness, sustainability, and long-term growth. By closing tax loopholes, modernizing tax collection, and ensuring businesses contribute appropriately, Labour aims to create a more equitable tax system. The additional revenue generated will be crucial in funding public services and supporting economic sectors, ultimately contributing to a more balanced and resilient economy.