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UK General Election 2024: Will Keir Starmer's Labour government mean more tax?
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Oct 7, 2024
In this episode of Bonds & Ballots Election Week Edition, we try to tackle some of the hard-hitting questions before the UK General Election. Will a Labour government really mean more tax? Is the party set to hike capital gains tax for scores of the population? What was in the Conservatives' manifesto for business? Charlie Conchie and Chris Dorrell pick through the two parties' tax plans. Get more of City A.M. 👇 🌐 http://www.cityam.com X(formerly Twitter): http://twitter.com/CityAM Facebook: http://www.facebook.com/cityam Instagram: http://www.instagram.com/city_am LinkedIn: http://www.linkedin.com/company/cityam Produced by: Charlie Conchie, Christophe Dorrell, Joseph Curay Teneda, Joe Lee, Emmanuel Nwosu #london #generalelection #rishisunak #keirstarmer #conservativeparty #labourparty #conservative #labour #tories #politics #analysis #uknews #news #trendingnews #trending #business #businessnews #businessgrowth #election #manifesto #tax #taxes #conservativepartymanifesto #polls #electionresults #seat #election2024
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0:00
We are now deep into the election campaign
0:04
Dust has just settled on a fairly hectic week of manifesto launches
0:08
We've had the Tories, we've had Labour, we've had Lib Dem, we've got a sense now of some of the detail, some of the policy that those parties are proposing
0:17
Economy has obviously been at the heart of that. Businesses and wonks across the city have been pouring over those plans to get a sense of what they actually might mean
0:24
And I'm very pleased to now be joined by our very own in-house economics wonk, Chris Doyle
0:30
So, Chris, from a business perspective, what was your initial take on what was proposed last week
0:35
particularly from the Tory and Labour manifested? I think it's interesting that both parties were very much positioning themselves as the party for business
0:43
The Conservatives had a line that they'll always be the party for business
0:48
And Labor have obviously been on a charm offensive for years now, really
0:52
And they're really hammering home the line. They're the pro-business party. They're pro-business and pro-worker
0:57
but always when they say that pro-business comes first. So they're both, yeah, really pitching for that position
1:05
It did very much feel rhetorically in line with what we've heard from Labour
1:09
over the past two years. It was, you know, Sequeir himself saying this is a pro-business manifesto
1:14
In terms of the actual policy in there, did it marry up with that? Do you think the city was quite warm to what was actually proposed
1:20
I think there were essentially no surprises in the manifesto, which is kind of the whole pitch in a way
1:27
Rachel Reeves has said a lot that stability is change. So if you look at what Labor are promising
1:33
they're promising not to increase corporation tax. They're promising to kind of
1:37
they have a line about ending short-term decision-making and bringing back stability, long-term stability
1:43
to allow businesses to plan how they're going to invest over the next
1:47
and they always say, again, a decade of national renewal, hint to the 20-29 election or whenever the next one may be
1:55
So what they're really saying is, look, we're going to get into power almost certainly
2:00
and we're going to have a really clear plan and work with businesses that I think a key difference in what Labor is saying
2:07
what the Conservatives are saying, Labor are always saying we're working in partnership with business
2:12
Labor will be much more involved in setting the terms, you know, how businesses should be investing
2:20
They've got plans for a new industrial strategy. They really want to get involved in what specific problems businesses are facing
2:28
So there wasn't actually a huge amount of detail on what those problems are. But they are being clear that they want to work as closely as possible with businesses
2:35
to understand what problems they're facing and then take really targeted action on those issues
2:42
One of the problems there was obviously big industrial strategy, for instance
2:46
will cost a lot of money. And they were quite sort of firm in ruling out a number of things
2:52
tax hikes, but there's not actually, there's been some criticism about, you know, whether
2:57
they're being honest about where the money's actually going to come from there. So is that, do you think one of the questions still hanging over is where's the actual revenue raises
3:04
Definitely, yeah. So they've, their language on this is quite interesting because they're
3:09
always saying we're not increasing taxes on working people. And the taxes they've specifically
3:14
ruled out raising our national insurance, VAT income tax and corporation tax, which are the four
3:22
biggest taxes And most economists think that there roughly a 20 billion pound hole in the public finances to avoid kind of deep cuts to a number of unprotected departments which have already faced deep spending cuts over the past 14 years So Labor have said
3:39
that they're not going back to austerity, and they're also staying in line with the fiscal rules
3:44
which then, like you say, raises the question, well, where's the money going to come from
3:48
There's clearly some taxes will almost certainly have to go up. On the industrial strategy
3:54
I think their pitch is, they're not going down the US line
3:59
They know they can't go down the US line of kind of huge fiscal stimulus
4:03
They don't have the space to do that. So that is slightly more of, you know, we'll take away the obstacles to growth, to investment
4:12
And there it's kind of around planning. And I guess trying to give some sense of direction to allow businesses to invest
4:20
And with that hole, I suppose that's where some of the nervousness perhaps from
4:24
business and the city is at the moment, are we going to be the, you know, the sort of source of
4:29
that revenue in a way, which will come back to in just a moment. But just to look at the Tory
4:33
pitch as well, there was, as you said, we're still the party of business within that as well
4:38
What was the kind of headline policies there for business? So that's an interesting question
4:43
I think I was just looking at the manifesto before coming on. And the first thing they mentioned
4:50
was their full expensing, making full expensing policies. permanent. That was a measure in the last autumn statements, which was pretty well received when
4:59
they... That was very well received. And there's a pledge to go further on that when the fiscal
5:03
position allows. So there's no timing, but basically that's a big tax break for businesses looking
5:09
to invest. Beyond that, the Federation of Small Businesses were actually quite happy with
5:14
Conservative Manifesto, particularly on a policy to abolish national insurance for self-employed
5:20
Both the Conservatives and the Federation for Small Businesses argue is kind of
5:24
big incentive for entrepreneurs. Some tax experts are a little more dubious, kind of suggesting
5:30
that you're encouraging people to set themselves up as self-employed when perhaps it's, you know
5:37
there's no particular reason why somebody who is self-employed shouldn't pay the same taxes as
5:41
somebody who is employed by a business. But there's a couple of other interesting areas, actually
5:47
that both the Conservatives and Labor agree on, kind of taking away the barriers to finance that small
5:53
businesses face, beefing up the British Business Bank. The Conservatives also have a specific
5:58
policy. There's debates going on in the financial regulators about the capital requirements
6:07
should be on lending to small businesses, and there's a lot of concern that those capital
6:12
requirements will go up quite significantly, which would then make it much more difficult for
6:16
small businesses to access finance. The Conservatives have specifically said they're not going to
6:21
allow that, which is an interesting feature, which I'm sure many small businesses will be happy about
6:27
Yeah. It was interesting, like you said, there were points at which it was very hard on certainly
6:32
sort of city and financial policy to actually put much gap between the two. I think one of the
6:39
things we saw in January when Labour and Acts City policy was a lot of the Retic was very similar
6:43
It was slimming down the regulatory rulebook. There's this proposal for a new regulatory office
6:48
which will sort of police the regulators, regulate the regulators as well, be right on the city front
6:54
It does feel like the rhetoric is very similar things like beefing up the British Business Bank to have more of a role in investing in actual businesses themselves channeling pension money and does feel very similar But just coming back to the questions as well that are for business towards both parties at
7:11
moment, what do you think the sort of main questions that still need to be answered
7:15
I think there's a big question about Brexit. If you look at the business manifestos, the manifestos put out by the business groups
7:23
before the parties release their own manifestos, they kind of have a few areas of
7:28
priority. All of them will mention Brexit. They want kind of closer alignment on many
7:34
regulatory issues to kind of smooth the barriers to trade. And so the Brexit deal signed in
7:41
2021 comes up for a review in 26. Businesses would really like, I think, for some ambition
7:49
on how closely Labour will or the new government, whichever centre-left party it will be
7:56
how much they're able to align with the EU. On the EU side, it seems unlikely that when it comes to 2026
8:04
so they'll be looking for a kind of really, it's not a big review for them
8:10
There's a contradiction, I guess, between how ambitious the UK would like it to be
8:16
compared to what the EU is looking for. The EU don't want to allow kind of third parties
8:21
to cherry pick access to the single market. So that's something that businesses will take
8:26
Yeah. It's interesting the difference in noise that's being made from business groups over Brexit compared to what we're actually seeing in the manifestos and from both parties
8:34
BCC saying they want closer ties, FSB, Federation of Small Businesses saying today they want to lower the cost of trade as well with the EU
8:42
So it does feel like that is a big gap there between what businesses want and what's actually being proposed
8:49
And just to come on, I think one of the interesting points from a city perspective as well from the Labour manifesto was this point on carried interest
8:56
which is unsettling deal makers. It's going to eat into private equity profits, essentially
9:02
by whacking up the rate of tax from its current rate capital gains
9:06
and it will be taxed as income, potentially at the higher rate of income tax. What was the sense you got from the city there
9:13
Do you think there is genuinely fears of an exodus? What might the impact of that actually be
9:17
Some people have been asking, what do Labor stand for, trying to get a sense of who is Girstama
9:25
and all of that kind of thing. And if you look at the tax measures that have been announced
9:30
there are four major ones. All of them are very much kind of targeting richer, wealthier people
9:37
whether it's private schools, non-doms, carried interest. So some of the people that we've, I think, both been speaking to
9:45
been saying that when you add up these things, it does have an impact on international investors
9:52
You know, these are very mobile people. and even Rachel Reeves, I think, was saying today that the UK is kind of in a global race to attract investment
10:02
So they're labour very aware of the kind of competitive nature of attracting very mobile investors
10:08
So there is a danger that these people could, you know, pack up their bags and go somewhere else
10:14
Yeah. But then, you know, that everyone was saying similar things about Brexit
10:21
The warnings will always come much more heavily. before any decision it's announced
10:26
it's a different question as to how far they follow through on those warnings Yeah I saw some survey earlier this year saying that 5 of deal makers would just quit their jobs entirely and change industry if it did come in So it does feel like there are some quite loud alarmist warnings but whether they will actually come to fruition
10:43
we'll wait and see. But just to come back to this point on capital gains tax, that again is
10:50
you know, you and I have been speaking with people over the past week. There's been some loud
10:54
warnings. Death of entrepreneurship was one warning there. Where's that coming from? What are the
10:59
the fears around this capital gains tax hike that we've heard so much about and why is it being
11:04
allowed to sort of proliferate as much as it is? So if we go back to the fiscal position that
11:09
I was talking about earlier and the fact that Labor have ruled out a return to austerity
11:14
they've ruled out raising any of the big taxes and they also need to meet their fiscal rules
11:20
they need to find some money from somewhere. And so naturally people are asking questions about
11:24
are you going to raise this tax you're going to raise. So capital gains is a question that's
11:29
put to Labour a number of times and the answer is always we've got no plans to there's nothing in
11:35
our manifesto that requires us to to raise these taxes which you could say is a not so subtle
11:42
suggestion that you know if if something doesn't go to plan and currently their plan you know
11:48
it's a reasonable plan to grow the economy growing the economy is something that happens over a number
11:53
of years and the spending review at which point they're going to have to decide whether those
11:58
unprotected departments will face those cuts or not, that comes in, you know, the first few
12:03
months of the next government. So growing the economy is not a route out of facing those difficult
12:09
choices. And so where's the money going to come from? And the cynical argument would be they get into
12:14
government. They say we had no idea how bad the books were. And then all of these things of which they said
12:19
no plans for. They then have a foot in the door. They've left it slightly open for potential hikes in that
12:25
area. So have you got any indication of whether that is likely, is that as firm as an idea
12:30
we have at the moment, it's just no plans? There's a few areas like this where there's no plans
12:37
and there was a report out quite recently, which was, you know, although these aren't, capital
12:43
gains doesn't raise anywhere near the same amount as income tax or national insurance
12:48
But if you put together capital gains with reforming the council tax bans and there were some
12:55
suggestion that Labor could change the amount of interest that banks receive on their deposits
13:02
at the Bank of England. Rachel Reeves has actually been a bit more precise about the reason she
13:06
disagrees with that, which is interesting in itself because, you know, that was another option
13:13
put forward as a way to raise, you know, up to 10 billion and..
13:17
Or 50, if you believe Nigel Farage is last. Exactly, yeah. Well, who knows. The line then also is no plans to do that
13:24
we don't need to but at the same time then there was a slightly longer these are the reasons why we don't
13:30
think this is a good idea which we haven't heard on capital gains okay so feeling like quite an
13:37
open door being left open there it does feel that way yeah well plenty more details still to come
13:42
and reforms manifesto obviously out today which will be picking over for economic policy as well as I
13:47
imagine yeah lucky us but we've been Charlie Punching Christdoll that has been our bonds and balance
13:53
round up for the week Stay tuned and you can click down here to subscribe
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