How the Labour government could affect your finances

SIR Kier Starmer will be Britain's next Prime Minister after Labour won a landslide election.

Sir Keir Starmer's Party has made a swathe of promises to voters to help put extra cash in their pockets.

But it can be difficult to know what these policies would mean for your money in reality.

Here, we delve into each of Labour's manifesto pledges and explain how they would impact your finances off the back of the party's victory.

PENSIONS

Labour has promised to keep the pensions triple lock in place, which is good news for pensioners worried about the cost of living.

The "triple lock" ensures the state pension doesn't lose value by increasing it each year in line with inflation, average earnings, or by 2.5% - whichever is higher.

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TAX

Labour has promised it will not increase income tax, National Insurance or VAT.

However, independent think tanks predict taxes will go up under Labour - but they haven’t admitted which ones yet.

The partydid not commit to ending the existing freeze on tax thresholds any earlier than April 2028 - the time frame set by the current Government.

WILL LABOUR INCREASE TAXES?

LAURA SUTER, director of personal finance atAJBell shares her view on whether or not Labour can keep its promise not to raise taxes for working Brits:

"We've heard from previous governments that they won’t raise taxes – and then we have been landed with higher tax bills by stealth or broken promises," she said.

"The Conservatives pledged not to raise taxes, but instead froze income tax bands to introduceatax raise through the back door.

"At the time, they also pledged not to raise National Insurance, before increasing the rates for the short-lived Health and Social Care levy - albeit the government eventually came full circle with the recent cuts to NI rates."

She added: "Recent history shows us that whenapolitical party pledges no tax rises it’s unlikely to stick to it 100%. While they may not explicitly raise the taxes they’ve singled out, the door is still open to tax rises elsewhere.

"One clear example already is that Labour have pledged not to increase income tax, but they haven’t laid out plans to end the threshold freeze, which means people will be paying more tax than they would have if the thresholds had increased with inflation."

CHILDCARE

Labour has pledged to revamp the UK's childcare system and tackle child poverty, including by providing free breakfast to every primary school child.

As part of its manifesto, the party promised:

Spare school classrooms will be converted into spaces for nurseries, paid for by ending the tax breaks on private schools
Three thousand new nursery classes across England to open up access to childcare hours for families
To support three quarters of a million more parents to re-enter the labour market
To provide free breakfast clubs in every primary school in England, paid for by ending tax loopholes and clamping down on tax evasion
Breakfast clubs to drive up attendance and standards and improve behaviour and attainment

Sarah Coles, head of personal finance at Hargreaves Lansdown, said: "There were clearer pledges for parents [in Labour's manifesto] – including breakfast clubs in primary schools, the right to parental leave from day one of starting work, and protections against discrimination against pregnant women.

"When added to the roll-out of freechildcareto all children over nine months, this could make a significant difference to families."

BENEFITS AND INCOME

Labour's manifesto pledged to reform welfare and tackle poverty, with the aim of reducing the number of people relying on food parcels and increasing the number of people in work.

This included a review of Universal Credit, although the party did not give much more detail on what that would entail.

Ms Coles explained: "A big part Labour's pledge is also to encourage more people into work, and make changes to the workplace to ensure fewer working people need state support.

"This includes things like ensuring the minimum wage takes account of the cost of living, and ending age bands, so all adults receive the same minimum wage."

Labour has also pledged to end zero hours contracts, end "fire and rehire" and introduce rights to parental leave, sick pay, and protection from unfair dismissal from day one, Ms Coles said.

"However, despite being a major factor in child poverty, it has not pledged to end the two-child policy – limiting benefits to the first two children in a family," she added.

HOUSING AND RENTING

One of the big cost of living burdens over the past few years has been the increased cost of housing.

Mortgage rates have risen significantly meaning homeowners have to pay far more each month, while rental costs have also risen.

Labour has promised to build 1.5million homes with the aim of getting more people on the property ladder.

The party has also said new buyers will get first dibs on properties in new developments before they are sold to overseas investors.

Ms Coles said: "Labouris focusing on building more affordablehousing, prioritising first-time buyers, and reforming planning to speed things up."

Meanwhile, Richard Donnell, executive director for research at Zoopla, said Labour's growth agenda is "positive" as long as it is delivered.

"The growth agenda is positive but needs delivering - the housing market is an extension of the economy so a growing economy and wealth creation is good for homeowners," he said.

Elsewhere, the party also plan to launch a "Freedom to Buy" scheme to help people secure a mortgage.

Donnell says this mortgage guarantee scheme may help 5% of first time buyers a year.

"However, the pressure is still on new buyers to enter the market with chunky deposits unless we really boost the supply of more affordable homes to buy and rent," he added.

For renters, the party promised to end the much-maligned leasehold system, where homeowners do not own the land their property is built on, and would tackle unaffordable ground rents.

How the Labour government could affect your finances - including childcare (2024)