Fantasy economics or daring concepts? Reform and the Greens Party’s plans

Would you like a personal allowance of £20,000, higher rate tax only above £70,000, a capital gains tax overhaul, or wealth taxes on those with more than £10million?

These are some of the financial policies being put forward by Reform, the Green Party and Plaid Cymru.

And while Labour and the Conservatives have taken up most of the general election airtime, the smaller parties are the ones trying to shake up conventional economic thinking.

But are their plans ‘fantasy economics’ as some claim, or the bold ideas Britain needs? We take a look at some of them.

The Green Party, Reform and Plaid Cyrmu have laid out their plans to challenge Labour, the Conservatives and the Lib Dems

The Green Party, Reform and Plaid Cyrmu have laid out their plans to challenge Labour, the Conservatives and the Lib Dems

> What the Labour manifesto means for your finances 

> What the Conservative manifesto means for your finances

> What the Lib Dem manifesto means for your finances 

Green Party – a wealth tax and rights for renters

The Green Party wants to bring in a wealth tax on those with more than £10million in assets and hike national insurance for higher rate taxpayers.

Their housing policy has also caught the attention of some experts, as where other parties have focused on first-time buyers, the Green Party is hoping to win renters’ votes with its pledges.

The Green Party says its wealth tax would see those with assets of more than £10million pay 1 per cent per year – so starting at £100,000 annually each and rising.

Billionaires would pay more, with a 2 per cent levy above £1billion of assets. 

The other Green Party tax plans that they say can raise £50billion to £70billion annually from the wealthy and higher earners are:

  • Raising capital gains tax rates to match income tax levels
  • Raising dividend tax rates to match income tax and NI
  • Removing the upper earnings limit so national insurance at 8% is paid above the 40% tax threshold – delivering combined 48% and 53% income and NI rates
Tax the wealthy and help renters: Green Party co-leader Carla Denyer

Tax the wealthy and help renters: Green Party co-leader Carla Denyer

On housing, among its commitments are the introduction of rent controls, a new stable tenancy system and ending the right to buy system for social properties. The party says it would deliver 150,000 new social homes a year.

Generation Rent welcomed the party’s commitment to ending no-fault evictions and their impact on renters.

Dan Wilson Craw, deputy CEO of the lobbying group, said: ‘Unaffordable rents are a huge driver of poverty and homelessness. 

‘Plans to help social landlords and community housing groups purchase and refurbish poorly-insulated homes and bring them into the social sector will mean more people made homeless will find a stable home, while also cutting carbon emissions.

‘Powers for councils to control rents will be an important mechanism to slam the brakes on the wild rent rises that tenants are facing, keeping us in our homes and easing the pressure on our wallets. We hope the party will set out more details about how far councils could intervene.’

The other Green housing plans include £29billion to insulate homes, requiring local authorities to spread small developments across areas, all new developments to be accompanied by extra investment in local health, transport and other services, and all new homes meet Passivhaus or equivalent standards and include solar panels and heat pumps. 

Reform – big hikes to income tax thresholds

Tax has played a central role in this election campaign, with both major parties committing to not raising income tax, national insurance contributions or VAT rates.

But both Labour and the Conservatives plan to continue with the freeze on thresholds that mean people do pay more tax.

Reform UK unveiled its ‘contract with the people’ this week and placed emphasis on the opposite, as it looks to convince former Conservatives to vote for them.

Reform pledged to lift the tax-free personal allowance and level at which people start to pay income tax to £20,000.

It also said that it would raise the 40 per cent higher rate tax threshold to £70,000.

This could be a very popular policy given that the income tax thresholds have been frozen since 2021 and are expected to stay at the same level until 2028. 

This drags more of people’s earnings into tax and pushes more into higher tax bands. The IFS estimates that it is equivalent to putting up income tax by 6p.

Rachael Griffin, tax and financial planning expert at Quilter: ‘The pledge to increase tax thresholds would be a welcome proposition for many, signalling a potential increase in take-home pay for hardworking people.

‘However, the specifics of how that would be a funded lacks detail, leaving voters to wonder about the financial feasibility of such promises.

‘As with many tweaks to the tax system while this policy would lift lots of people out of having to pay income tax, it also means that those on higher-than-average salaries pay much less in tax too.’

Someone earning £75,000 would save nearly £5,500 per year, while those on the average salary of £35,000 would save just £1,486. This would reverse some of the effect of the Tories raising taxes for high earners but cutting them for middle earners.

Reform also pledged to abolish inheritance tax for all estates under £2million, and axe stamp duty up to £750,000 – three time the current £250,000 zero percent threshold.

The party says it would fund these pledges by raising £35billion a year from stopping the Bank of England paying interest on commercial bank deposits created via quantitative easing.

While voters might like the sound of Reform’s tax cuts, there has been criticism from experts. Sir Geoffrey Clifton-Brown, ex-deputy chairman of the public accounts committee dubbed them ‘fantasy economics’.

Taking out a contract: Nigel Farage's Reform party offers much higher tax thresholds

Taking out a contract: Nigel Farage’s Reform party offers much higher tax thresholds

Carl Emmerson, deputy director at the IFS said Reform’s £90billion package of tax cuts ‘as a whole is problematic’.

While their tax cuts would be sizeable, tax revenues would still be higher as a share of the economy than in 2019/20, according to IFS analysis.

Griffin added: ‘These kinds of tax giveaways are not easy to fund and such a radical shake-up would cost the government billions at a time when the public purse strings are stretched

‘As is often the case manifesto pledges among the smaller political parties are designed to ignite public debate rather than have a chance of being realistically implemented.’

Reform UK also wants to shake up the tax system for businesses and plans to scrap IR35 tax legislation, which could bring in more votes from the self-employed.

The legislation governs whether a person is employed or self-employed for tax purposes when providing services through a limited company. It has been criticised for limiting the flexibility of contractors, and some argue that it dissuades businesses from hiring contractors and freelancers.

Andy Chamberlain, policy director at the Association of Independent Professionals and the Self-Employed (IPSE) said: ‘IR35 is the top priority for thousands of freelancers and contractors at this election. 

‘By pledging to scrap it, Reform will take thousands of votes away from Labour and the Conservatives who have so far neglected to acknowledge the flaws in this damaging legislation.

‘Reform have gone one step further than the Liberal Democrats, who committed only to review the IR35 rules.’

The election manifestos: what they mean for you

The economy, tax and people’s finances are a cornerstone of the all the manifestos, but what are the main parties proposing and what could it mean for you? 

The This is Money podcast takes a dive into the manifestos to see what’s there. 

Press play to listen to the episode on the player above, or listen (and please subscribe and review us if you like the podcast) at Apple Podcasts,  Audioboom and Spotify or visit our This is Money Podcast page.  

Tax the rich: Plaid Cymru backs a wealth tax and a hike in capital gains tax rates

Tax the rich: Plaid Cymru backs a wealth tax and a hike in capital gains tax rates

Plaid Cymru – hike capital gains tax

The Party of Wales Plaid Cymru’s manifesto calls for higher funding for public services and investment, funded by tax increases.

Plaid Cymru is going after capital gain taxes, like the Lib Dems, with a pledge to equalise CGT rates with income tax rates.

It also wants to hike NI contributions for higher earners and would support a wealth tax.

The economists’ verdicts

Reform: While Nigel Farage and his party have committed to a huge tax giveaway, it will have to be paid for and the experts aren’t convinced that the numbers stack up.

The IFS says that its cost-saving measures would save less than set out. While there is an argument of changing the extent to which the Bank of England pays interest to commercial banks, the IFS is not convinced it would raise the £35billion Reform claims.

‘Reform also propose to reduce “wasteful” spending by £50 billion per year across all government departments, quangos and commissions. But saving this sum would require much more than a crackdown on waste; it would almost certainly require substantial cuts to the quantity or quality of public services.

‘Even with the extremely optimistic assumptions about how much economic growth would increase, the sums in this manifesto do not add up. Whilst Reform’s manifesto gives a clear sense of priority, a government could only implement parts of this package, or would need to find other ways to help pay for it, which would mean losers not specified.’

Green Party: For the Greens, the level of spending would see the size of the state increase ‘on an unprecedented scale,’ according to the IFS.

While some of their tax plans – notably an increase in NI contributions and a wealth tax – the IFS said it would affect a large number of higher earners. Its plans to raise £90billion from a carbon tax is also doubtful ‘not least because the tax is at changing behaviour, the less it would raise.’

While some of the individual tax measures look ‘sensible’ it argues that many of the measures would combine to ‘increase disincentives to work and to invest.’

Plaid Cymru: The IFS’ David Phillips says the party ‘isn’t honest about the implications [of higher spending] for public spending and taxation in Wales.’

‘Some spending pledges would require change at the UK level or further devolution. This includes increasing child benefit by £20 per week per child. This would cost around £600 to £700 million per year in Wales, which if undertaken at a devolved level, would be roughly equivalent to 2% on all rates of income tax in Wales.’


Affiliate links: If you take out a product This is Money may earn a commission. These deals are chosen by our editorial team, as we think they are worth highlighting. This does not affect our editorial independence.