03 Dec 2019

Manifesto analysis: the key election battlegrounds

Investec experts analyse the main parties' manifestos ahead of the 2019 UK general election and how they have addressed the challenges faced by businesses and wealth creators.

Rarely has a general election been characterised by such radically contrasting policies across the political spectrum. A potentially watershed moment for the UK, the outcome will not only determine the shape of the next parliament but also the country’s direction for decades to come. We take a look beyond the dominant issue of Brexit to examine the central policies affecting both individuals and businesses.

Individuals

For individuals, the electoral result will have profound implications on areas including investment and inheritance taxes, private education and pensions. Here is an overview of the most prominent proposals.

  • Property

    All three of the main political parties have focused their fiscal attentions in the property sector on overseas buyers acquiring UK housing. While the Conservative Party has hardened an earlier proposal for a 1% stamp duty surcharge on non-tax residents buying houses in the UK with a 3% surcharge pledge, the Liberal Democrats have indicated a similar policy – with no specific figures given – while Labour plans to charge 20%.

     

    The Labour Party has pledged to raise an annual levy on second homes used for holidays at a rate equivalent to 200% of the current council tax bill. Meanwhile, the Liberal Democrats propose allowing councils to increase council tax by up to 500% on holiday homes, impacting the more than 250,000 properties classified for this purpose.

     

    Both parties have revealed radical changes to capital gains tax treatment that will have further implications for property investors.  The Liberal Democrats will merge the capital gains and income tax allowances, while Labour will charge capital gains at income tax rates. 

     

    Key manifesto pledges

     

    Conservatives

    • A 3% stamp duty surcharge on non-tax resident buyers of UK residential property 

     

    Labour

    • A 20% stamp duty surcharge on non-tax resident buyers of UK residential property
    • Annual levy on second-holiday homes equivalent to 200% of council tax
    • Significant restrictions for buy-to-let landlords, including open-ended tenancies, compulsory registration, the abolition of Section 21, inflation-linked rent controls and the abolition of “unfair fees”
    • Capital gains to be charged at income tax rates 

     

    Liberal Democrats

    • Additional levy to be applied to non-tax resident buyers of UK residential property 
    • Councils to be allowed to charge up an increase of up to 500% on second-holiday homes 
    • Landlord restrictions, including introduction of three-year tenancies, compulsory registration and inflation-linked rent controls 
    • Capital gains and income tax allowances to be merged 

     

    Other

    • The Green Party would introduce council tax premiums for second homes 
    • The Green Party would also introduce rent controls and more secure tenancy agreements, abolishing “tax breaks” for buy-to-let investors 
    • The Green Party would add a new duty for the Bank of England to constrain house price growth
  • Pensions and investments

    The treatment of pensions and investments is a crucial differentiator between the main parties. Labour favours earned income over accumulated capital. The party has confirmed plans to bring dividend and capital gains taxes in line with income tax. It will also reduce the capital gains exemption threshold from £12,000 to £1,000. 

     

    The Liberal Democrats have committed to taxing capital gains and income through a single allowance.

     

    Labour has additionally pledged to introduce a financial transaction tax. This will involve applying stamp duty to a range of financial transactions undertaken by pension schemes and investment companies. The party estimates that this initiative will raise nearly £9bn a year. 

     

    Labour’s broader economic proposals include plans to nationalise major companies and take control of 10% of businesses with more than 250 employees in Inclusive Ownership Funds, which could potentially depress the value of stock market investments.

     

    The Conservative Party has promised to review the current restriction to pension contributions, known as the Annual Allowance Taper. In notable contrast to Labour and the Liberal Democrats, the Conservative Party has not referred to taxing wealth. 

     

    Key manifesto pledges

     

    Conservatives

    • Commitment to review the Annual Allowance Taper

     

    Labour

    • Bring dividend and capital gains tax in line with income tax
    • Reduce capital gains exemption threshold from £12,000 to £1,000
    • Introduction of a new rate-of-return allowance, set at the rate of a 10-year bond 
    • Introduction of a financial transaction tax on a range of financial transactions undertaken by pension schemes and investment firms
    • Plans for inclusive ownership funds and nationalisations have the potential to impact the value of stock market investments  

     

    Liberal Democrats      

    • Merger of separate capital gains and income tax allowances 

     

    Other

    • The Green Party’s consolidated income tax approach would increase capital gains
  • Personal tax

    The Conservatives’ headline pledge about tax is a promise not to increase income tax rates, national insurance or VAT. This contrasts starkly with Labour’s commitment to implement a new 45% rate of income tax for those earning over £80,000 and a 50% rate of income for those earning over £125,000, as it seeks to increase the tax burden on “those with the broadest shoulders.” 

     

    The Conservatives are committed to raising the national insurance threshold to £9,500 next year, intending to raise it to £12,500 in the long run. They have also promised to “review and reform” entrepreneurs’ relief, which may make it harder for some taxpayers to obtain it. 

     

    Inheritance tax is another area that hasn’t made it onto the Conservative Party manifesto. Labour, on the other hand, has pledged to reverse cuts to inheritance tax made by the Conservatives, which allowed people to pass on an amount of property tax-free, in addition to the existing £325,000 tax-free allowance that applies to all assets.

     

    The Liberal Democrats have pledged a 1 penny increase in income tax at all rates to be ringfenced for spending on the NHS and social care, but have excluded reference to inheritance tax in their manifesto, despite previously proposing its abolition and replacement with a lifetime gift. They also plan to abolish the marriage tax allowance, while proposed reforms to air passenger duty will hit frequent flyers. 

     

    All parties, meanwhile, pledge a commitment to tightening restrictions around tax avoidance.

     

    Key manifesto pledges

     

    Conservatives

    • Promise not to increase income tax rates, national insurance or VAT 
    • Commitment to raising national insurance threshold to £9,500 next year, with the aim of a further increase to £12,500 
    • Pledge to review and reform entrepreneurs’ relief  

     

    Labour

    • Implementation of a new 45% rate on income over £80,000 and 50% over £125,000 
    • Reversing inheritance tax exemption allowance for homeowners
    • Introduction of VAT on private school fees

     

    Liberal Democrats

    • A 1p increase in income tax at all levels
    • Abolition of the marriage tax allowance
    • Merger of separate capital gains and income tax allowances
    • Shake up of air passenger duty

     

    Other

    • The Brexit Party has pledged to abolish inheritance tax
  • Education

    Labour’s controversial policy of abolishing private schools may not have made it onto the manifesto, but a commitment to removing their charitable status has. In doing so, Labour will impose VAT on private school fees, increasing average termly costs for day pupils by around £1,000. At the same time, Labour has pledged that it will increase school funding by £10.5bn by 2022 and, as in 2017, it promises to scrap university tuition fees.

     

    The Liberal Democrats also have big plans for spending on schools, with the promise of another 20,000 teachers in England. The Conservatives have indicated that the current freeze on tuition fees at £9,250 will continue.

     

    Key manifesto pledges

     

    Conservatives

    • Indication that tuition fee freeze will continue

     

    Labour 

    • Abolition of private schools’ charitable status and the imposition of VAT on fees 
    • Abolition of tuition fees 
    • Increase in schools’ funding by £10.5bn

     

    Liberal Democrats

    • Increase in schools funding, including 20,000 new teachers 

     

    Other

    • The Brexit Party would stop charging interest on student loans
    • The Green Party would abolish student loans

Businesses

All three main political parties have made significant pledges to invest in the infrastructure required to drive business growth across the country, to support start-ups and to stand up for SMEs. But the divergence between their core business policies is considerable. We outline what those policies are and what they might mean.

  • Supporting start-ups and SMEs

    The Conservatives have sought to position themselves as the champions of business in their election manifesto. The creators of the British Business Bank have pledged to continue to expand start- up loans.

     

    The Liberal Democrats have also promised to expand the activities of the British Business Bank, promoting digital start-ups, for example, by reforming the bank’s support for venture funds. Also, the Liberal Democrats’ plan to launch a new start-up allowance to help with living expenses in the early days of a new venture.

     

    Labour, meanwhile, will create a Business Development Agency, which would offer free support and advice on launching, managing and growing a company. 

     

    All three main political parties have pledged their support to level the playing field between big players and SMEs in the supply chain. The Conservatives say they will strengthen the powers of the Small Business Commissioner and “clamp down on late payment more broadly.” Labour plans to ban late payers from public procurement, while the Liberal Democrats will require all government agencies, contractors and companies with more than 250 employees to sign up to an enforceable prompt payment code. The party wants to  ensure “that the company at the top of a supply chain cannot abuse its position to shore up its own cash flow at the expense of smaller suppliers.”

     

    Key manifesto pledges

     

    Conservatives

    • Expansion of start-up loans by the British Business Bank
    • Strengthen the powers of the Small Business Commissioner to clamp down on late payment
    • Support SMEs through public procurement processes

     

    Labour

    • Development of a Business Development Agency to give free advice 
    • Ban late payers from public procurement 

     

    Liberal Democrats

    • Extension of activities related to the British Business Bank and reform of investment in digital start-ups
    • New start-up allowance to help with living costs 
    • Require all government agencies, contractors and companies with more than 250 employees to sign up to a prompt payment code 

     

    Other

    • The Green Party pledges to give small businesses access to lending at affordable rates by establishing a network of regional mutual banks, as well as “requiring” traditional banks to increase lending
    • The Green Party also says that 15% of government contracts will go to small and micro businesses and that businesses will be required to publish the difference between agreed payment days and actual payment days with fines associated
    • The SNP is seeking to get a “fairer” share of British Business Bank funds by ensuring it works closely with the Scottish National Investment Bank
  • Tax and business rates

    Tax treatment is a top priority for companies of any scale, with business rates one of the most politically sensitive. The Conservatives have pledged to cut the burden of tax on business by reducing rates with a fundamental review of the system. The first step, it says, is to reduce rates for retailers and other select leisure- based companies further.

     

    Labour is committed to tackling the pressure of business rates and reviewing the option of a land value tax on commercial landlords as an alternative. Other measures intended to revive the high street include stopping bank branch closures, banning cash machine charges and “giving local government new powers to put empty shops to good use.” The Liberal Democrats have announced a similar strategy, with a plan to shift the burden of taxation from tenants to landowners and a pledge to expand the Future High Streets Fund. 

     

    The Conservatives pledge to increase the research and development tax credit rate to 13% from 12% and review the definition of R&D to support investment in technology, productivity and innovation. An increase in the employment allowance for small businesses is another priority. However, the party has cancelled plans to cut corporation tax from 19% to 17%.

     

    Labour plans to reverse previous cuts to reach a 21% small profits rate and 26% main corporation tax rate. The Liberal Democrats want to take corporation tax to 20% and then maintain it there. Meanwhile, Labour’s planned financial transactions tax will target the financial services industry. 

     

    Key manifesto pledges

     

    Conservatives

    • Pledge to cut the burden of business rates with a fundamental review of the system
    • Further reduction of business rates for retailers and other select leisure sectors
    • No increases in income tax, national insurance or VAT
    • Increase in R&D tax credit rate to 13% 
    • Cancelled plans to cut corporation tax from 19% to 17%

     

    Labour

    • Pledge to review the option of a land value tax on commercial landlords in place of business rates 
    • Plans to increase corporation tax to a 21% small profits rate and 26% main rate 
    • Financial transactions tax to impact financial services 

     

    Liberal Democrats

    • Plans to introduce a land value-based tax to shift rates burden from landlords to tenants 
    • Increase corporation tax to 20%

     

    Other

    • The Brexit Party is pledging a zero-rate corporation tax for the first £10,000 of pre-tax profits
    • The Brexit Party plans to replace business rates with a more straightforward system funded through an online sales tax
    • The Green Party plans to increase the employment allowance from £3,000 to £10,000
    • The Green Party plans to abolish business rates and council tax, replacing them with a land value tax
  • Infrastructure

    An infrastructure revolution that can support business growth across the country through major transport and communications projects, while tackling or mitigating climate change, is integral to the manifesto of all three primary parties.

     

    The Conservatives pledge to invest £100bn in projects ranging from Northern Powerhouse Rail to the Midlands Rail Hub, as well as the roll-out of gigabit-capable broadband to every premises, flood defences and an electric vehicle plug-in network.

     

    Labour’s infrastructure commitments also include the national roll- out of full-fibre broadband by 2030, by bringing parts of BT back into public ownership.

     

    Other infrastructure pledges include a long-term investment plan for delivering Crossrail for the North and completion of the full HS2 route to Scotland. Labour plans to achieve these ambitions, in part, through the creation of a National Investment Bank, backed by a network of Regional Development Banks, which will provide £250bn of lending for enterprise, infrastructure and innovation over the next 10 years.

     

    The Liberal Democrats are backing high profile transport projects including HS2 and Crossrail 2, as well as other projects designed to promote the Northern Powerhouse and the Midlands Engine. They plan to invest £2bn in providing high-speed broadband to all households and businesses as well as investing in mobile data infrastructure. Finally, they aim to boost the electric vehicle industry by reforming taxation and increasing the rate of installation of charging points. 

     

    Key manifesto pledges

     

    Conservatives

    • Pledge to invest £100bn in infrastructure projects including Northern Powerhouse Rail and Midlands Rail Hub
    • Roll-out of gigabit-capable broadband to every premises
    • Investment in electric vehicle plug-in-network
    • Deferment of verdict on HS2 until findings of review
    • No further public funding for a third runway at Heathrow

     

    Labour

    • The Creation of a National Investment Bank to provide £250bn of lending for enterprise, infrastructure and innovation over ten years
    • Roll-out of full-fibre broadband nationally by 2030
    • Roll-out to be implemented through nationalisation of BT’s broadband activities with funding from big business 
    • Investment in Crossrail for the North 
    • Completion of the HS2 project 

     

    Liberal Democrats

    • Support for transport projects including HS2 and Crossrail 2
    • £2bn of investment in high-speed broadband 
    • Support for the electric vehicle industry, including tax reforms
  • Labour market reforms

    The Labour Party focuses heavily on labour reforms, with the planned introduction of a new Ministry for Employment Rights. Among its key pledges is a reduction of the average full-time working week to 32 hours across the economy within 10 years, with no loss of pay.

     

    Labour plans to introduce a Living Wage of at least £10 per hour, using “savings to public finances to help small business manage the extra cost.” It will abolish zero-hour contracts, guarantee that those who work regular hours for more than 12 weeks will have the right to a regular contract reflecting those hours, and sector-based collective bargaining to agree minimum standards on issues including pay. 

     

    Paid maternity leave will be extended from nine to 12 months under a Labour government, with paternity leave doubled to four weeks and extended pregnancy protection. Labour would also bring in four new bank holidays. It will also make it easier for employers to spend the Apprenticeship Levy by allowing it to be used for a broader range of accredited training.

     

    The Conservatives want “sensible and proportionate” employment regulation, particularly for small businesses. While key policies include extending the allowed leave for neonatal care and unpaid carers, they are focusing on investing in skills by improving the Apprenticeship Levy and creating a new National Skills Fund worth £3bn. The Conservatives also state that once Brexit is complete, it will introduce an Australian-style points-based immigration system. 

     

    The Liberal Democrats mirror Labour’s aim to help those in insecure forms of employment, including paid parental leave for the self-employed and policy to shift the burden of proof in employment tribunals regarding employment status from the individual to the employer. They also pledge to create a new “dependent contractor” employment status in between employed and self-employed, ensuring basic rights such as minimum earnings, sick pay and holiday entitlement. 

     

    Key manifesto pledges

     

    Conservatives

    • Extended leave for neonatal care and unpaid workers
    • Improvements to the Apprenticeship Levy
    • Creation of a £3bn National Skills Fund
    • Australian-style points-based immigration system
    • Promotion of flexible working

     

    Labour

    • Introduction of a new Ministry for Employment Rights
    • Pledge to reduce the average working week to 32 hours in 10 years with no loss of pay 
    • Introduction of a Living Wage of at least £10 per hour
    • Abolition of zero-hour contracts
    • Guarantee that those who work regular hours for 12 weeks have right to a contract reflecting those hours 
    • Sector-based collective bargaining
    • Paid maternity leave increased from nine to 12 months 
    • Four new bank holidays
    • Plans to make the Apprenticeship Levy more flexible
    • No foreign-worker only recruitment processes 

     

    Liberal Democrats

    • Emphasis on expanding flexible working
    • Paid parental leave for self-employed
    • Policy to shift the burden of proof in employment tribunals regarding employment status from the individual to the employer
    • Creation of “dependent contractor” employment status  

     

    Other

    • The Brexit Party promises to scrap the Apprenticeship Levy and introduce tax incentives for employers to take on “genuine apprentices” 
    • The SNP plan to “press for the devolution of employment law” and to increase maternity leave to one year, setting maternity pay at 100% of weekly earnings for the first 12 weeks 
Boris Johnson and Jeremy Corbyn shake hands on TV debate
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Even though Brexit has dominated the election campaign, some of the main parties’ domestic policies have the potential to be equally as far-reaching in their impact on individuals and businesses.

The main parties’ manifestos will be pivotal for shaping both the near and long-term future of the UK. Even though Brexit has dominated the election campaign, some of the main parties’ domestic policies have the potential to be equally as far-reaching in their impact on individuals and businesses. With the election result still all to play for, it remains to be seen which set of proposals have any chance of being implemented and which government will have to provide the answers to the many questions these ambitions raise.

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