What the Labour authorities means to your cash

Labour has won the election, as widely predicted. So what’s next for your finances?

We could get a flurry of early announcements as Labour signals a definitive change of course for the country.

If it has anything market-sensitive planned – along the lines, for example, of Gordon Brown making the Bank of England independent in 1997 – it might come swiftly after victory.

But in terms of big decisions on the economy and personal finances, incoming Chancellor Rachel Reeves has ruled out a Budget before September and said even then there will be no surprise tax changes.

Labour has promised not to raise the rate of income tax, national insurance, VAT or corporation tax, which has led to fears that there may prove to be a raid via capital gains tax, inheritance tax, council tax or pension tax relief 

The Labour manifesto was notably light on financial detail, but now the votes are in we will finally find out what the party intends to do on regaining power after 14 years of Tory government.

Here are the proposals we know about so far and what they could mean for your finances.

Growth: GB Energy, a wealth fund and a housebuilding drive

New Prime Minister Sir Keir Starmer has pledged to prioritise economic growth.

The headline policies are launching a publicly-owned company, Great British Energy, a National Wealth Fund, and new housebuilding targets.

GB Energy will invest billions of pounds in clean, home-grown energy, in an initiative Labour hopes will also boost jobs.

It will be funded at least in part by closing ‘loopholes’ in the windfall tax on oil and gas companies.

The National Wealth Fund will pay for ports and new gigafactories, and help rebuild the steel industry.

Labour’s manifesto says: ‘We will embrace a new approach to economic management – securonomics.’

The economy grew by 0.7 per cent in the first quarter of the year, which was more than initially thought, according to the latest official figures. However, it flatlined in April.

Taxes: No rises in income tax, NI, VAT and corporation tax

Labour is adamant there will be no increase in the big four tax rates – income tax, National Insurance, VAT and corporation tax.

It plans to cap corporation tax at the current level of 25 per cent and replace the business rates system to raise revenue ‘in a fairer way,’ but has not provided details yet.

While there is a pledge not to raise tax rates on individuals, the new Government will rake in more regardless due to fiscal drag.

Labour has previously said it will go ahead with the Conservatives’ planned freeze on income tax thresholds until 2028. That  pushes people into higher bands and drags more of their earnings into tax.

Influential think-tank the Institute for Fiscal Studies estimates that it is equivalent to putting up income tax by 6p.

It is scathing about both main parties having ‘ducked’ choices on tax rises and spending cuts before the election.

Minimum wage: Age bands gone and cost of living factored in

Labour says it will ensure the minimum wage is a ‘genuine’ living wage.

It says: ‘We will change the remit of the independent Low Pay Commission so for the first time it accounts for the cost of living.’

The party also plans to remove the age bands, so all adults are entitled to the same minimum wage, which will mean a pay rise for many workers across the UK.

Pensions: Triple lock safe but a big review is pending

Labour has committed to keep the state pension triple lock.

That means pensioners should carry on getting increases every year, set by whichever is the highest of inflation, average earnings growth or 2.5 per cent, until nearly the end of the decade.

However, Labour has not promised to protect the state pension from income tax, as the Tories did with their Triple Lock Plus plan.

In reality, it will eventually have to address this too for practical reasons, to avoid the situation where the Department for Work and Pensions pays millions of people a state pension, some of which is then clawed back by the Treasury in income tax.

In its manifesto, Labour says: ‘We will also undertake a review of the pensions landscape to consider what further steps are needed to improve pension outcomes and increase investment in UK markets.’

That means it is likely to stick with the Tories’ plan for using people’s pension savings to help boost economic growth.

But a raid on pension tax relief could also be on the table, as this would be a large and tempting source of cash to spend on other priorities.

Housing: A new building target and a revamp of planning and greenbelt rules

Building more homes is at the heart of Labour’s plans and it has set a target of 1.5million over the next five years.

This means 300,000 homes will need to be built each year – an ambitious target given housing completions are forecast to fall to 160,000 a year over the next three years, according to Savills, unless there is major policy intervention.

To achieve this Labour is aiming to reform the planning system, and to change compulsory purchase compensation rules to unlock new building sites quickly and at lower cost.

Landowners will be awarded ‘fair compensation’ rather than ‘inflated prices’ based on the prospect of planning permission.

Building on brownfield sites will be prioritised, with a fast track approval system, but as this will not meet housebuilding targets alone, lower quality ‘greybelt’ land on the existing greenbelt will also be prioritised for development.

Aside from building more homes, Labour is aiming to get more of them into the hands of first-time buyers with a new and improved Help to Buy scheme – rebranded Freedom to Buy – to help them secure a mortgage.

This will be partly funded by housebuilders, but we await more details.

Labour will also introduce a permanent mortgage guarantee scheme, helping people who struggle to save for a deposit, though this might only help a small number of buyers.

It will give first dibs to local people on new developments, ending what Labour calls ‘the farce of entire developments sold off to international investors’ before buyers in the area get a look in.

Drivers: Ban on new petrol and diesel cars by 2030 and a  pledge to sort potholes

Most worrisome to drivers is the possibility that Labour will increase fuel duty.

Currently it’s frozen until March 2025, when it will rise by 5p, and then in line with retail price index (RPI) inflation after that.

If Labour does hike fuel duty, then motorists are likely to be spending at least £50 more a year on fuel because of it .

Labour will bring the ban on new petrol and diesel cars forward to the original 2030 deadline. It was pushed back to 2035 under the Conservatives.

No incentives have been promised to help private buyers afford this switch, but Labour has committed to expanding the charging network to make it cheaper and easier for drivers to go electric, and bringing in more education around EVs and battery health.

Labour’s promised to fill in an additional one million potholes each year of the next parliament. As well as fixing the poor state of UK roads, this goes hand in hand with Labour’s pledge to ‘tackle soaring insurance costs’.

The party’s said that fixing potholes should save drivers hundreds of pounds in lower repair bills and insurance premiums.

Private school fees: VAT and business rates exemptions to go

Labour has pledged to remove the VAT and business rates exemptions on private schools, meaning parents could pay up to 20 per cent more on fees.

What’s not mentioned – so far

When we looked at Labour’s manifesto, we noted the omission of anything on capital gains tax, the pension lifetime allowance and inheritance tax.

The lack of confirmation that Labour would not raise capital gains tax will cause concern among investors.

Keir Starmer and incoming Chancellor Rachel Reeves have said there are ‘no plans’ to increase CGT rates but haven’t ruled it out.

Inheritance tax is unpopular and considered ripe for an overhaul. The now abolished Office of Tax Simplification delivered a damning report on it that the Tories did not act on.

Labour is rumoured to have dropped the idea of reinstating the pension lifetime allowance after it was axed last year.

This is Money’s pension columnist Steve Webb pointed out that not putting it in the manifesto is not the same as a commitment not to bring it back.