A Labour government is highly likely to be formed after the next general election, current political polling suggests.
Sir Keir Starmer's party holds an average lead of 20-points over Rishi Sunak's Conservatives, with some commentators suggesting a 1997-style landslide victory could be on the cards. Polling guru Sir John Curtice - not normally one to hyperbolise - has even given them a 99% chance of victory.
While we don't know when the next general election will take place, we are beginning to get an understanding of how Labour's manifesto will shape up. The party has started to outline how it would reform financial services, and approach public spending.
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Shadow chancellor Rachel Reeves has said a Labour government’s first priority would be to provide a “secure policy platform for growth” that backs innovation, entrepreneurship and long-term investment, and which supports all UK citizens to strengthen their financial security.
So, here is what we know so far about how a Labour government could affect your tax, savings and investments. We have also outlined what the Conservative Party's manifesto could mean for your finances in a separate article.
What a Labour government could mean for ISAs
Savers and investors have plenty of options to earn returns tax-free in an ISA.
But the choices can be confusing, especially when I comes to knowing whether a Cash ISA, Stocks and Shares ISA or Lifetime ISA is best.
There are plans, announced in chancellor Jeremy Hunt’s Autumn Statement, to make ISAs more flexible and from April, the Treasury will allow multiple ISA subscriptions of the same type and partial rather than full transfers between providers from April 2024.
Labour hasn’t provided much detail but says that if elected, it will look to” simplify the ISA landscape” to make it as easy as possible for people to feel the benefits of saving and investing their money, including through increased utilisation of stocks and shares ISAs.
"This is a hugely encouraging move and something that AJ Bell has campaigned for consistently over a number of years,” says Tom Selby, director of public policy for AJ Bell.
“No sensible person designing a savings system from scratch would propose the plethora of different ISAs we have on offer today."
Selby says many people find the array of choice on offer confusing, and a ‘back to basics’ approach would help build on the core feature of ISAs, which is their simplicity.
"A full review of ISAs should be seen as an opportunity to prevent them being suffocated by incremental complexity, which could eventually see ISAs turned into a political football in the same way as pensions taxation," he adds.
“Research we’ve conducted shows that the ISA ‘brand’ is widely recognised by the UK public. But once people are asked to identify the various different types of ISA available, knowledge levels plummet.”
Pension reviews
Pensions are another political issue.
Over the past 13 years of Tory rule, savers have since the introduction of auto-enrolment, pension freedom rules as well as changes to the annual and lifetime allowance.
If in government, Labour says it will review the current state of the pensions and retirement savings landscape.
This will include working with industry and consumer groups to ensure savers are getting the best possible returns and to identify and tackle the barriers to pension schemes investing more into UK productive assets – including cultural and regulation-induced risk aversion.
Its document also suggests a scheme for defined contribution pension schemes to invest a proportion of their assets into UK growth assets – split between venture capital, small cap growth equity, and infrastructure investment. This would be modelled on the French Tibi scheme.
Becky O’Connor, director of public affairs at PensionBee, says a pensions review has the potential to “give impetus to new initiatives too”, such as the lifetime provider model currently proposed by the Treasury.
Lily Megson, policy director at My Pension Expert, says there are major issues that need to be addressed about helping people save for their retirement..
"From improving financial education and access to independent advice, through to making it easier for people to locate, track and transfer their pensions, close collaboration is required between government and the financial services sector to improve outcomes for consumers,” she says.
“So, it is only right that Labour is therefore taking a broad view on the matter to see where policy and practices can be bettered. But ultimately, this is something that must be implemented as soon as possible, and irrespective of the election result.”
Triple lock
There is plenty of debate around the future of the triple lock, used to calculate state pension increases.
The state pension is set to rise by 8.5% in April but there are concerns about how expensive it is becoming for the Treasury and that it may be unfair to younger generations who aren't seeing equivalent wage increases.
The Labour Party is reported to be planning to include a commitment to keeping the triple lock in its general election manifesto, according to the i newspaper.
Selby says any shift away from the pledge, however sensible, would have risked being the centre of an attack campaign by his political opponents.
"Given the importance of securing support from older voters, sticking with the triple-lock is likely viewed as the easiest option politically," he says.
“That does not mean the decision represents good policy, however. Any politician that advocates maintaining the triple-lock is effectively admitting the state pension is too low."
Selby says the triple lock approach has "proven extremely volatile in recent years" as inflation and earnings have spiked, meaning the cost to taxpayers has become unpredictable.
“The triple-lock has become a totem for ‘doing right by older people’, but as it increases the cost of the state pension, there is a risk planned rises in the state pension age will need to be accelerated to balance the books, embedding intergenerational unfairness into the system," he adds.
O'Connor adds that while there is a strong case for a review of the triple lock, "people depend on the state pension for a significant chunk of their retirement income" and the guarantee helps to preserve confidence for today’s pensioners as well as those hoping to benefit from the payments in the future.
The Conservative Party has committed to retain the triple lock.
Lifetime allowance
The lifetime allowance on pension contributions is set to be scrapped in full by the current Tory government from the new tax year in April.
But if elected, there are now reports that Labour could bring it back.
There were rumours that the political party would bring the allowance back but protect some public sector workers such as doctors from being taxed if they breach the limit.
But The Sun has reported that Labour now plans to fully reintroduce the lifetime allowance at a level that reflects pressures facing public sector workers.
“While it is good news Labour has ditched plans for this public sector carve-out, the party’s apparent insistence on bringing back the lifetime allowance if elected is concerning," adds Selby.
"Pursuing this policy would create huge, unwelcome complexity in the pension system and send a worrying message to savers and would-be savers."
Tell Sid campaign
Hunt has promised a ‘Tell Sid’ style retail offer of NatWest shares this year but Labour has proposed going further and once to boost retail ownership of British businesses more widely.
Labour’s document says it will look to deliver a modern ‘Tell Sid’ campaign for retail ownership to “highlight the value of British people supporting British businesses.”
The document also says a Labour government will evaluate the progress made in adopting recommendations of several reviews about boosting participation in capital markets.
Free childcare
One major point of divergence between the Conservative and Labour manifestos could be around the current government's free childcare policy.
In the 2023 Spring Budget, Jeremy Hunt announced free childcare would be extended to two-year-olds from April 2024, with other age groups covered over the following 18-months. With childcare costs rocketing, the government is hoping its plan will get more people back into the workforce.
The policy's future had been thrown into doubt in March, when shadow Education Secretary Bridget Phillipson refused to commit to the £4bn expanded scheme. But the party has since said it would keep it in place if it wins the next election.
While the current government claims free childcare will alleviate the cost of living crisis for parents, there have been doubts over how many parents will actually be able to access it. For example, some childcare providers have warned they do not have adequate staffing levels to deliver it.
More money for HMRC to crackdown on tax dodgers
When Hunt announced he would abolish non-dom tax status in his Spring Budget, it presented Labour with a problem. It was one of the party's flagship policies, which it was also banking on to raise funds for public spending.
On 8 April, the shadow Chancellor Rachel Reeves unveiled what commentators think will be the original policy's replacement. She vowed to "take on the tax dodgers" by upping HMRC's budget and to raise more tax by closing loopholes in Hunt's non-dom legislation.
Reeves' plan would see HMRC get an extra £555 million a year. This money would go towards hiring 5,000 more tax investigators, who would seek to cut what Labour claimed was a £36 billion gap between the amount of tax owed and the amount of tax raised. The party claims its plan would raise more than £5bn a year by the end of the decade, which it would use to fund the NHS and school breakfast clubs.
The money would also be spent on improving HMRC's customer service. The public body recently came under fire for a plan to scrap its self-assessment helpline for half the year - an idea it quickly u-turned on after public outcry.
As well as bolstering HMRC, Reeves pledged to raise £2.6 billion by the end of the next Parliament by tightening the Chancellor's non-dom plans. Jeremy Hunt said in his March Budget that the Conservatives would begin to remove the special tax status from April 2025, taking transitional steps before its full abolition.
But Reeves said Labour would crack down on non-doms faster - for example, by removing a 50% discount that would currently be available to them in the 2025/26 tax year.
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