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Labour to prioritise ‘wealth creation’ as manifesto under scrutiny: reactions from across the industry

The Labour manifesto has been published today, with advisers, wealth managers and those working right across the financial services spectrum will be looking at the detail. That’s especially the case given the party’s considerable lead in the polls ahead of the general election on 4th July.

Experts from across financial services and legal professions have already been sharing their reactions to the detail of the manifesto, which largely contains the policy statements already revealed, following Sir Keir Starmer’s speech to launch the manifesto, as follows:

Rachael Griffin, tax and financial planning expert at Quilter said:The conspicuous lack of confirmation from the Labour manifesto that it would not raise Capital Gains Tax (CGT) will spark significant concern among entrepreneurs and investors in the UK. Both Shadow Chancellor, Rachel Reeves, and Sir Keir Starmer have in recent interviews doubled down on the fact they have “no plans” to increase CGT rates without completely ruling it out. However, in its manifesto Labour has explicitly ruled out increases to income tax, National Insurance, VAT and corporation tax, but make no mention of CGT.

“Those who face CGT in the UK – primarily higher rate taxpayers and entrepreneurs who realise gains from the sale of residential property, investments, and other chargeable assets – have already seen their annual exempt allowance slashed by the current Conservative government to just £3,000 a year. If Labour is to win the general election and then increase rates, it would serve as a double whammy with higher rates and lower exempt allowances considerably increasing the capital gains tax take.

 
 

Under the current system, higher rate taxpayers face a 24% CGT on residential property gains and 20% on other chargeable assets. The potential alignment of CGT rates with income tax rates, if that is what ends up being enacted, could see these figures rise dramatically, impacting not just the wealthy but also a substantial number of small business owners and investors who play a crucial role in driving the economy in the UK.

“For those looking to mitigate the impact of CGT there are several strategies you can employ. Transferring assets to a spouse can be an effective way to maximise the use of both partners’ CGT allowance. Additionally, utilising tax-sheltered accounts such as ISAs can shield gains from CGT altogether. It has therefore never been more important to maximise your £20,000 ISA allowance. Other more complex options include deferring gains by investing in Enterprise Investment Schemes (EIS) however these carry significant risk and it’s important to get professional financial help when looking at these types of options.

David Brooks, Head of Policy at Broadstone has shared his thoughtson the party’s pledges, commitments and comments on the pensions sector with productive finance, the State Pension and a wide-ranging review into the market all mentioned.

 
 

David Brooks said: “Labour’s manifesto contained no notable big-ticket ideas for the pensions’ sector, confirming plans to progress with the productive finance agenda and encourage further consolidation in the workplace pension market.

“The Party has pledged a wide-ranging “pensions review” to improve outcomes, but the devil will be in the detail as to what that covers before we can anticipate any potential outcomes.

“Labour has also, as expected, committed to the State Pension triple-lock and there now seems to be political consensus that this is untouchable. The encouragement for green-focused investments also appears to have achieved cross-party consensus.

 
 

“The push for productive finance comes with a caution warning as there may be a disappointing uptake from defined benefit schemes but an ongoing review into VFM may allow more schemes to allocate long-term illiquid assets to this space. Whatever government we have in 3 weeks, we would counsel caution in this space as these assets are not a one way bet and the long-term interests of pension savers will need to be carefully balanced with the short-term needs of the country.

 “Given the Conservatives’ plans are similarly light on new policy ideas it suggests the pensions sector can prepare for welcome continuity over the next five years. This is pleasing given the huge number of policies that are already progressing through regulatory and legislative processes.

“Labour’s manifesto also contained no mention of its previous plan to reverse the abolition of the Lifetime Allowance in a suggested U-turn on its previous rhetoric. Again, this continuity is to be welcomed – especially given the industry has already expended significant effort in preparing for this change – but this may be a policy area that Labour revisits should it gain power.”

 
 

Tom McPhail, Director of Public Affairs at the lang cat said: “The commitment to reform workplace pensions so we have fewer, bigger and better run schemes is good news.  On the other side of the election, whoever wins, demands will be placed on pension schemes and their investment strategies to adapt to meet the political agenda. The industry should prepare for some robust conversations ahead on how fiduciary duty is defined and interpreted.

“Where Labour talk about a review of the pensions landscape, it’s not yet clear how broad or independent this will be.  Though the pensions industry would welcome an independent commission along the lines of the Turner review, to address the long-term challenges involved in providing a sustainable retirement income for all savers.”

Commenting on the triple lock aspect, Jon Greer, head of retirement policy at Quilter comments: “Labour has unsurprisingly pledged to uphold the triple lock in its manifesto. While sensible in terms of winning votes the continuation of the triple lock is fraught with problems. The triple lock, which guarantees that the state pension increases annually but the highest of CPI inflation, average earnings growth, or a baseline of 2.5%, has served to safeguard against poverty for retirees. However, it presents a significant fiscal challenge that no party has been willing to fully address.

 
 

“As Labour appear poised for a potential electoral victory, its commitment to reviewing the pensions and retirement savings framework offers a critical opportunity to re-evaluate the triple lock’s long-term viability. Any plans must move beyond political posturing and seriously consider whether the triple lock remains fit for purpose. If Labour win, then during its announced review of the pensions landscape, the triple lock should be put under a microscope.

The central dilemma is finding a balance between protecting current pensioners and ensuring intergenerational fairness especially given the UK has an ageing population that will continue to make the state pension ever more expensive.

“One potential reform is linking pensions more closely to average earnings. This approach would align pension growth with national economic performance, creating a more predictable and sustainable system.

 
 

Sharing his thoughts on Labour’s plans for pensions, Steven Cameron, Pensions Director at Aegon, said:

“With older generations typically more likely to vote, policies for pensioners will always be a key focus in General Election campaigning.

“But pensions aren’t just important to ‘older people’ – government policies on pension savings, investment and economic growth also play a huge role in helping people save for their retirements.

 
 

“The Labour manifesto, published today, provides confirmation of its commitment to retain the State Pension Triple Lock for a further five years.

“This offers state pensioners a very valuable guarantee of increases equal to the highest of price inflation, earnings growth or 2.5%. With the Conservatives also committing to this, the triple lock is secure whatever the election outcome.

“Of course, this comes at a cost, but a return to typical historic levels of inflation and earnings growth may make it less costly or unpredictable in future years. One means of funding this would be to further increase the state pension age, but there has been no mention of this in either Manifesto.

 
 

“As expected, Labour is not following the Conservatives in creating a Triple Lock Plus arrangement. The ‘Plus’ is a Conservative commitment to increase state pensioners’ personal allowance in line with the state pension triple lock. Without this, the Conservatives say there is a risk that the full new state pension will rise above the personal allowance, meaning pensioners could be subject to income tax even if they have no other income in retirement.

“The tax breaks on offer to pension savers can make a big difference to how quickly they can build up pension funds and hence create wealth for their futures. While the Labour manifesto places much emphasis on wealth creation, it is silent on aspects of pensions tax. The Conservatives said they won’t change the system of pensions tax relief for the next five years, retaining a top-up based on an individual’s highest marginal rate of income tax, which is very valuable particularly to higher earners. There’s also a Conservative commitment to the 25% tax free lump sum and no new or increased pension taxes.

“Labour’s Manifesto commits to reviewing the pensions landscape to consider what further steps are needed to improve pension outcomes and increase investment in UK markets. It also talks of increased pension scheme investment in productive assets. These investment aims are similar to what the current Government has also been seeking.  

 
 

“Automatic enrolment into workplace pensions has been hugely successful in helping millions of people build up more in workplace pensions. But neither the Labour nor Conservative Manifesto makes any mention of when planned enhancements might be advanced. These would open up automatic enrolment from age 18 rather than 22 and would gradually increase the minimum contributions to 8% of earnings from the first £1, rather than only on earnings above £6,240. We very much hope whoever is in power advances this as a priority to start the journey towards more adequate pension savings.

“There are many other pension initiatives under development by the current Government, affecting people both while saving for retirement and when they take a retirement income. These include online pension dashboards to keep track of all pensions, a consistent value for money framework for assessing all pension schemes, a solution to consolidate small pension pots worth under £1,000, offering members of trust-based pensions more retirement options, extending a new form of ‘collective defined contribution’ scheme and offering individuals the choice of a pension ‘pot for life’ rather than their employer choosing their pension scheme. Aegon has been campaigning for a combined plan with sensible timescales. If we have a new party in power, we’ll repeat our calls for clarity on which are being taken forward, and in what order.”

Commenting on Labour’s ‘raid’ on non doms, Sophie Dworetzsky, Partner at Charles Russell Speechlys said: “Plans to modify the tax treatment of non doms even further in Labour’s Manifesto are disappointing. Specifically, the ability to settle trusts and protect assets from IHT is in their sights, as is a transitional measure to allow offshore income to be taxed more favourably for a two-year period.

“These measures feel like trying to squeeze out every last drop until there’s nothing left. The UK operates in an environment of tax competition, and if the UK makes itself yet more unattractive from a tax point of view, we could lose out to other countries, such as Italy, which have more favourable tax regimes. One can but hope this is realised before any legislation is implemented.”

Sarah Jane Boon, a Partner in the Family team at Charles Russell Speechlys, has shared her views about Labour’s plans to charge 20 per cent VAT on independent school fees saying:

“Labour’s manifesto pledge to add VAT to private school fees could make private schooling unaffordable for some families and bring about concerns about how easily (and when) a good state alternative could be found.

Parents of children at independent schools will be used to regularly assessing the affordability of school fees against their finances – school fees have increased ahead of inflation for the past 25 years – but families could now be hit with significantly increased fees as soon as the next academic year.

This possibility may be especially worrying for separated or divorced parents, who are committed to a court-imposed obligation to discharge school fees until their children reach the end of their secondary education. If Labour do form the next government, there may be increasing numbers of parents who seek to vary their court obligations on the grounds of affordability.

Separated couples often struggle with funding two households on divorce. The decision as to where children are educated falls to both parents to be agreed under their parental responsibility, so disagreements over such issues can lead to litigation – with the court making the ultimate decision.”

Commenting on the non doms aspect, Carol Katz, Partner in the Tax and Wealth Planning group at Mishcon de Reya, said: “Labour’s manifesto confirms their proposals to abolish non-dom status, saying that the funds raised from abolishing the existing regime will go towards reducing NHS waiting times. Unlike the Conservatives’ proposals announced by the Chancellor on 6 March, Labour have said that they will prevent existing inheritance tax (IHT) planning by non-doms using excluded property trusts and make offshore trusts created by non-doms subject to IHT. There is no detail on whether there will be a grandfathering period for existing trusts. As we have previously said, the Conservatives’ deliberate plan to retain the IHT shelter provided by excluded property trusts for such trusts created before April 2025, enables those non-doms who have been in the UK for a while (but under 15 years) to protect their non-UK assets from IHT. Without this period of planning or grandfathering it is likely that many non-doms will leave the UK, taking their spending, investment, businesses, and employment with them. This uncertainty will worry non-doms who will be unclear on the taxation of the structures that may have been in place for many years.” 

And in terms of IHT, Katz went on to say: “It was thought that the Labour manifesto might include some changes to how inheritance tax (IHT) operates. The Shadow Chancellor had said in her paper ‘The Everyday Economy’, published in 2018, that IHT needs to be changed ‘wholesale’ or ‘reset’. The manifesto gave no indication that the tax will be reviewed in the future but, should Labour win the election on 4 July, it could be a topic that comes up at some point during the next Parliament, if not at the first fiscal event of the new Government.”

On the CGT question, Katz said: “Despite media speculation, there was no pledge to align capital gains tax rates with income tax rates in the Labour manifesto; this will provide some certainty to investors.”

And finally on carried interests, a pledge which clearly has implications for private equity, Katz said: “The Labour manifesto includes the pledge to ‘close the loophole’ that enables carried interest to be taxed as income; it is currently subject to capital gains tax treatment. This position may have a significant impact on the private equity industry in the UK, especially given that many non-doms work in the industry and may feel like Labour’s pledge to abolish the non-dom regime combined with their pledge to change the tax treatment of carried interest is a step too far.”

Nathan Emerson, CEO at Propertymark said: “Pledges to reform the planning system, commit to a brownfield-first approach, making the private rental sector more energy efficient, and a commitment to build 1.5 million new homes over the next parliamentary term are more than welcome. The planning process can be a huge obstacle in keeping pace with demand and change is desperately needed in order to serve an ever-growing population. Many buyers have had a tough time since the 2008 recession, and it is vital any future strategy includes a sustainable mix of affordable housing options for both buyers and renters.

“Propertymark would like to see more details from Labour about how they plan to meet their housing goals and ensure this is there is a firm and fair set of policies in place to serve all demographics.

“Any aspiration to reintroduce the Renters (Reform) Bill must come with full disclosure and a realistic timeline regarding the required court reform before the removal of Section 21 evictions should ever become a reality.”

Commenting on planning reform, Lizzy Galbraith, Political Economist, abrdn, says:

“Planning reform is clearly a key part of Labour’s growth strategy. We’ve already heard that they intend to focus on planning reform in their first 100 days in office, with a pledge to build 1.5 million homes over the next parliament and with a potential view to redesignate greenbelt areas to facilitate such developments, as well as overruling councils deemed to be persistently blocking new developments.

“Nevertheless, housing targets like that are very ambitious – even with planning reform – so it will be interesting to see if such a target will be made mandatory.

“The notable shift in Labour’s strategy is an enhanced role of the private sector in the financing and delivery of infrastructure projects compared with their plans a few years ago. Now, Labour has shifted to a vision in which the state aims to direct investments towards high-value projects and restore investor confidence through a combination of clearer planning documents, fewer fiscal events and in some cases, joint financing. Labour believes they can rectify the current challenges of fluctuating government policies and inconsistency, which have previously undermined private investor trust.”

Also commenting on planning reform proposals, James Dunne, head of operational real estate for abrdn, says: 

“As a long-term investor and provider of professionally managed, affordable rental homes across Europe, abrdn welcomes all initiatives to unlock the blockages in the delivery of UK housing.  The planning system needs reform and investment to allow appropriate and sustainable development which addresses the critical need for new housing across all tenures and geographies whilst enhancing local communities and respecting our environment. 

“It is encouraging to see the issue at the heart of political parties’ policy priorities for the next parliament and we hope this translates into swift, tangible reform and funding not only in the short term but with a long term vision and stability that is desperately needed to address these ongoing deep rooted issues.”

On the fiscal rules, Lizzy Galbraith, Political Economist, abrdn, says:

 “Until now, Labour’s approach to fiscal policy has rhetorically at least, been tacking fairly close to the Conservatives – and this manifesto is no different. Nevertheless, there are legitimate questions over how sustainable an approach this is for a party who, after all, will want to do and act differently than their predecessors.

“Labour will be looking to generate some fairly substantial economic growth over the short term (leaving taxes to one side). So, it is likely that the fiscal rules will shift at some over the next Parliament. Rachel Reeves has previously spoken about how fiscal rules could better enable long-term public sector investment.

“For example, using a metric such as public sector net worth rather than the current public sector net debt to measure performance may enable a little bit more fiscal wiggle room. Labour would argue that it’s better to consider the long-term value of things like infrastructure and capital expenditure, which would be a better reflection of the long-term value of government spending, rather than just considering it in terms of the amount of debt that spending generates.

“Whether something like this could be implemented in practice is yet to be seen. It would likely involve an assessment by the Office for Budget Responsibility (OBR).

And commenting on the green industrial strategy, Galbraith said:  “Labour’s view is that a green industrial strategy is not just a route to decarbonization and environmental benefits but a major economic opportunity. This approach is particularly aimed at appealing to constituencies in former industrial areas, the so-called “red wall” seats, which Labour needs to win back to secure a return to Number 10.

“Labour has emphasised its commitment to renewable energy, decarbonising homes, and upgrading the national grid. However, the strategy now leans more on leveraging private sector funding, with public investment playing a reduced role. The party still plans to establish a £7.3 billion national wealth fund to support these initiatives from the public side, aiming to attract three pounds of private investment for every pound of public funding. GB Energy will also support these efforts though the distribution of grant funding and financing smaller renewable energy projects. The manifesto also makes it clear Labour sees a greater role for pension funds as a source of private investment capital. It has identified the potential for fund consolidation and regulatory reform to enable funds to invest in UK assets.

“This approach positions Labour as taking on a supportive, yet significant, role in critical national infrastructure projects.”

Ed Matthew, Campaigns Director at the independent climate and energy think tank E3G said: “UK dependence on fossil fuels has driven the cost-of-living crisis and undermined our energy security. This manifesto will kick start a mission for energy independence and economic renewal, with net zero investment at its heart. Labour has recognised that upgrading our homes will be key; and we welcome the £13.2bn investment boost, and reinstatement of higher efficiency standards in the private rented sector. This manifesto gives hope that the UK’s leadership in tackling the climate crisis will finally be restored.”

Commenting on the disability and ethnicity pay gap elements, Melissa Blissett, Pay Gap Analytics Lead at Barnett Waddingham comments:Disability and ethnicity pay gap reporting for large employers has already been proved to bring value, with organisations that are voluntarily reporting conveying a clear message of fair pay, fair progression, and reward for everyone in the workplace. Unlocking the working potential of women and ethnically diverse employees will be key to enhancing UK productivity, and the next Government would do well to prioritise it. As such, it’s positive to see the policy already taking shape in Labour’s manifesto.  “The biggest hurdle in ethnicity pay gap reporting is achieving a high enough disclosure rate from employees for meaningful analysis. This takes time and good communications to achieve. Therefore, employers should act to start collecting data now, if they aren’t already. Otherwise, their reporting figures could show them in poor light to peers, impacting future talent management and potentially investment in their organisations.

Lessons also need to be learnt from gender pay gap reporting – reporting itself is not enough to change the dial. Going beyond the reporting figures and analysing the underlying data to monitor trends, progress and potential blockers / drivers of the pay gap will be important. Employers should also seek to embed fair pay within the design of employee benefit packages. All too often we are still seeing employers offering tiered pension contribution structures – effectively further rewarding those with higher disposable incomes and widening the gender and ethnicity pension gap.”

Miles Dean, Partner and Head of International Tax at Andersen LLP, comments: “Virtually all politicians vow to tackle tax avoidance, but Starmer neglects to mention specific areas of tax the Conservatives have not dealt with during their term in office, which makes this seem a glib throwaway.

“The non-dom regime is being significantly overhauled per the Conservative Budget 2024 and we have already seen non-doms leaving the UK in droves, which was perhaps inevitable given that Labour is so far ahead in the polls.

“Labour’s plans to remove the remaining benefits of the non-dom regime left in by the Conservatives will almost certainly cause many more non-doms to leave the UK.

“It is doubtful that the changes to the non-dom regime will have the impact Labour suggest, as the number of remaining non-doms will fall dramatically as they can so easily relocate to friendlier jurisdictions.

“Starmer’s pledge to keep taxes on ‘working people’ low needs proper scrutiny – who are the working people he refers to? He pledges to end the conservative chaos, but given recent infighting within the Labour party as regards nuclear disarmament and union reaction to the VAT raid on private schools, it seems likely that they’ll deliver chaos in spades.”

Labour’s manifesto in relation to financial services lays out a pledge to support innovation and growth in Financial Services through supporting new tech and ensuring a pro-innovation regulatory framework, as well as a commitment to creating a new Regulatory Innovation Office to bring together existing functions across Government to speed up regulation, approval timelines and co-ordinate issues that span existing boundaries. In relation to this, a spokesperson at Clearpay said:

“The scale of innovation in UK FinTech has long been one of its greatest strengths, and the industry’s rapid growth is testament to this. Millions of UK consumers and businesses use FinTechs every day to manage their money. The continued success of UK FinTech will be dependent on the Government and regulators working together to support the industry’s growth – and deliver a regulatory landscape that can keep pace with innovation.”

Katie Pender, managing director of Target, said:Labour’s pledge to build 1.5m homes and prioritise brownfield sites for development are almost identical to those in the Conservative manifesto, although Labour has committed to reinstating mandatory housing targets for local authorities. But every Government in recent times has promised to build more homes and reform the planning system. Since 2019 at least, housebuilding targets have been missed.

“Meanwhile, first-time buyers are facing the toughest conditions seen in 70 years. Labour’s manifesto proposals do seem to offer this group some reasons for hope. Labour would give young people first dibs on new housing developments and help them get onto the property ladder by making permanent the comprehensive mortgage guarantee scheme for first-time buyers.

“The Labour manifesto is titled ‘Change’ and there is no doubt that the housing market urgently needs a genuine and fundamental overhaul. But the question is whether Labour’s changes go far enough or if this manifesto is playing it too safe.”

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