Sir Keir Starmer led Labour Party has swept to victory, had a clear majority to form the next government. Starmer speaking on the ability in the just accomplished electoral stated it as marking the arrival of the “sunlight of hope” in the UK.
However, even if the detailed policy implementations will be made in the next few weeks, Labour has made significant promises concerning quite a number of important fiscal aspects of the economy such as pensions, taxes, mortgages among others.
What Labour's Victory Means for the UK's Financial Future!
Let us examine the principal areas that the Labour Party has committed to addressing, encompassing pensions, taxes, mortgages, and various other issues.
Pensions
Labour has promised to keep the pensions 'Triple Lock', which is good news for older people worried about the cost of living going up. The triple lock makes sure that the state pension doesn't lose value by increasing it each year based on inflation, average earnings, or 2.5% - whichever is higher.
Right now, the state pension is £11,502 a year, and the personal allowance is £12,570. But it's predicted that the basic pension could be over £13,000 a year by the end of the next ten years. The Office for Budget Responsibility (OBR) has warned that the state pension will be higher than the personal allowance by 2027.
Also, Labour has even agreed and pledged to reform base employment pensions with the aim of boosting pension saving. As mentioned in their manifesto, one of the priorities is to carry out a pensions' policy to discuss what additional measure are still required to enhance the pensions and lift the investment in the UK markets further. The value of the state pensions in the predicted years will depend upon inflation and average earnings growth.
Taxes
As for taxation, Labour has promised not to rise income tax, National Insurance or the VAT. However, trade and economic organizations expect that the Labour Party will raise taxes as a result of the current state of the British’s budget situation left behind by the Conservatives.
While Labour has not clearly mentioned which taxes may increase, s/he has assured the public that the lack of movement on income tax thresholds will remain until the year 2028.
Additionally, with wages increase more employee at the higher rate threshold of £50,270 will be subjected to 40% of the tax on savings interest. This one can disappear altogether, or it could be reduced from £1,000 to £500 as Labour has not pledged to preserve it.
Childcare
Child poverty is a big issue and the Labour Party intends to address it through free breakfasts for all children in primary schools. These are their propositions: Transforming disused school classrooms into nurseries funding it through the removal of tax incentives for private schools, and creating 3000 new nursery classes all across England to work for the increase in childcare hours for families. The priority in this case is seeking to assist 750,000 parents to regain employment.
Two-Child Benefit Cap
The Labour Party intends to uphold the two-child benefit cap, which limits parents' eligibility for child tax credit or universal credit to a maximum of two children, despite recognizing the adverse impact of this policy.
Starmer has indicated that prevailing economic circumstances do not allow for the removal of the cap. Backers are calling on the government to reconsider this position in order to address child poverty more effectively.
Private School Fees
Labour plans to introduce a 20% VAT on fees for private schools, which is a prominent aspect of their campaign. The effect on school costs will differ, with some schools potentially absorbing a portion of the additional expense. School principals have cautioned that this may result in increased fees for families.
Mortgage Guarantee Scheme
Labour has proposed a “freedom to buy” pledge, making the mortgage guarantee scheme permanent. Initially introduced by the Tories in 2021, this scheme helps first-time buyers with deposits as low as 5% by using the state as a guarantor for 95% mortgages, encouraging more banks to offer these loans.
Rental Market Reforms
In June, Starmer announced that Labour would introduce legislation to end rental "bidding wars." This measure aims to prevent landlords from exploiting tenants by demanding higher rents to secure properties. However, the specifics of this legislation remain unclear.
Savings
A potential reduction in the Bank Rate is expected to lower savings rates. Wealth advisers recommend locking in favourable rates now. These actions should be taken before any cuts or potential Labour changes.
Minimum Wage and Employment
The Labour Party seeks to broaden the scope of the minimum wage to encompass younger employees, in contrast to the Conservatives, who have already extended the full minimum wage to individuals aged 21. Labour advocates for the reduction of this age threshold to include 18-year-olds. Presently, the hourly minimum wage for workers aged 21 and above stands at £11.44, while it is £8.60 for individuals aged 18 to 20.
Additionally, workers under 18 and apprentices receive £6.40 per hour. In addition to its stance on the minimum wage, Labour pledges to abolish zero-hour contracts and halt the "fire and rehire" practices. Furthermore, they intend to establish entitlements to parental leave, sick pay, and safeguards against unjustified dismissal from the first day of employment.