The third article in our series looking at the key tax pledges from the various parties at the time of writing.
Following the terror attack in Manchester on 22 May, political campaigning was suspended and the major parties paused making policy announcements. This week’s article focuses on key pensions’ related issues arising from previous announcements as well as detailing out some new tax policy pledges from the Green Party manifesto, issued before campaigning was halted and the UKIP manifesto which came out on 25 May.
The Green Party launched their manifesto with the introduction of a universal basic income and the phasing in of a four day working week being their headline pledges. On tax policy, the Greens have pledged to ensure that everyone pays their “fair share” of tax as well as the introduction of a wealth tax and the reinstatement of higher levels of corporation tax for large businesses. In other tax raising measures the manifesto promises the implementation of a ‘Robin Hood’ tax on high value transactions in the financial sector, much like the Labour Party, as well as the abolition of the cap on employees’ national insurance.
UKIP’s manifesto claims that their spending proposals do not involve any tax raising measures, instead they propose to increase the personal allowance to £13,500, cut tax for middle earners by increasing the 40 percent threshold to £55,000 and cut VAT on domestic fuel and hot takeaway food. UKIP also plan to raise the inheritance tax threshold to £500,000 per individual and in long term plans, aim to abolish inheritance tax altogether and restore the personal allowance for those earning over £100,000. UKIP also state that they will “close the loophole allowing businesses to pay tax in whichever EU or associated country they choose”.
The three main parties’ manifestos set out a limited range of pensions proposals. The only issue addressed in common is the basis for increasing the state pension. Labour and the Liberal Democrats would maintain the existing ‘triple lock’ (the higher of price inflation, earnings inflation and 2.5 percent) throughout the next Parliament. The Conservatives would maintain it only until 2020, with a ‘double lock’ (the higher of earnings and price inflation) applying thereafter. Labour have also rejected further increases in the state pension age beyond the increase to 66 (effective from 2020) but commit to review the state pension age with a view to allowing flexible retirement.
On private pensions, each party has its own distinct concerns. The Conservatives focus on new powers and penalties (including scrutiny of some corporate transactions) to prevent defined benefit schemes from being left under-resourced. The Conservatives also propose extending automatic enrolment to the self-employed and encouraging pension funds to join new sovereign wealth (‘Future Britain’) funds.
Labour similarly proposes to protect pensions in corporate transactions, through amendment of the takeover regime. Otherwise, Labour’s priorities are to end ‘rip-off’ hidden fees and charges, and to encourage large, efficient pension funds (presumably through consolidation into mastertrusts).
The Liberal Democrats’ only private pensions policy measure is to review the basis of pensions tax relief, with a view to introducing flat-rate tax relief (set more generously than the current 20 percent basic rate relief) – an option that was widely discussed at the time of the 2015 pensions tax green paper.
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