Labour’s 2024 Election Manifesto: Business Breakdown
We all know there is an election around the corner on 4th July. With any campaigning, the focus on financials and taxation always plays a key part. We’ve pulled together some of the key topics from the various party’s manifestos. Whilst we know the proof is in the pudding in terms of the politicians delivering what they say in their manifestos, it is important for both your business and personal finances that you can identify a direction of travel from these policies.
Our goal is to provide an objective analysis of the business-related policies proposed by each party in the 2024 UK general election. We aim to present the potential impacts on businesses without any political bias, ensuring that our readers can make informed decisions based on the factual details of each manifesto.
This is a LIVE BLOG and will continue to be updated as information is released and analysed.
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The Labour Party has published its manifesto. Labour claims to raise £7.35bn from additional tax – but almost three-quarters of that is from increased tax compliance rather than actual new taxes. The most obvious criticism is a lack of ambition and lack of any proposals to reform the most serious problems with our tax system. © – Dan Neidle
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Business Impact of Increased SDLT for Non-Resident Shareholders
If Labour wins the British election, they plan to increase the Stamp Duty Land Tax (SDLT) for properties owned by businesses or individuals with non-resident shareholders from a 2% additional surcharge to 3%. This change aims to raise more revenue from international property investments.
For businesses, this policy means higher costs when acquiring land or property in the UK. Increased SDLT may deter foreign investments, particularly in commercial real estate, as the additional expense affects overall transaction costs. Companies may need to reallocate funds, affecting their cash flow and financial planning. This could slow down the property market for transactions involving international investors, potentially leading to reduced demand and price adjustments in certain areas.
Businesses with non-resident shareholders will need to reassess their investment strategies, possibly seeking alternative financing or structuring options to mitigate the increased tax burden. Legal advice and lobbying for exemptions may also be considered to minimise the impact. This policy reflects Labour’s commitment to generating revenue through taxation on foreign property investments while aiming to balance the property market dynamics.
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Business Impact of Crackdown on Tax Avoidance
Current Labour Party policy is to raise £5.2bn per year by 2028-29, through a combination of closing non-dom loopholes and reducing tax avoidance in order to close the tax gap. The feasibility of raising this figure is somewhat questionable, as the tax gap is made up of a variety of factors, such as taxpayer errors, avoidance and evasion; Labour don’t specify what they will be cracking down upon.
If they plan to focus simply on avoidance and no other causes, they will find it particularly difficult to reach the £5.2bn figure, as only £1.8bn was caused by tax avoidance, according to HMRC’s own figures for the 22-23 tax year. £1bn of this was avoidance of Corporation Tax, so if Labour does act to close loopholes, this will most likely result in an increase in CT for those using them.
Figure 1: Tax gap by customer behaviour – share of tax gap, 2019 to 2020 to 2022 to 2023
https://www.gov.uk/government/statistics/measuring-tax-gaps/7-tax-gaps-illustrative-tax-gap-by-behaviour
The Chartered Institute of Taxation (CIOT) says that the tax gap can “probably” be reduced further, but added that the law of diminishing returns meant “further marginal gains are becoming harder to come by”.
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Business Impact of “Major Changes to Employment Law”
Businesses can expect significant impacts from the proposed changes to employment law under a new Labour government, set to occur within the first 100 days. These changes could affect hiring practices, employee rights, and workplace regulations, potentially increasing compliance costs and administrative burdens. Companies may need to update policies and procedures to align with new legal requirements, which could lead to temporary disruptions in operations. The actual effects will depend on the specifics of the new laws and how effectively businesses can adapt.
Leaving just over three months for full consultation and draft legislation to get through parliament over a summer recess could be a challenge, but key measures including making flexible working the default from day one, banning one-sided flexibility zero-hour contracts, and day one rights for unfair dismissal, sick pay and paternity pay, among others.
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Business Impact of Capping Corporation Tax at 25%
Capping corporation tax at its current level of 25% could have several effects on businesses and their activities.
For businesses, maintaining the corporation tax rate at 25% provides stability and predictability in tax planning. Companies can make long-term investment decisions without the concern of potential tax rate increases, enhancing confidence and encouraging capital expenditure. This stability might attract foreign investment, as predictable tax policies are a key factor for international investors.
However, capping the tax rate also means that any potential government revenue from future increases is forfeited, possibly limiting public spending or necessitating cuts in other areas. Businesses that benefit from government contracts or public services might feel the impact if government revenue constraints lead to reduced public investment.
Overall, while capping corporation tax at 25% aims to provide a stable tax environment and encourage investment, its effectiveness will depend on broader economic conditions and government fiscal policies.
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Business Impact of Replacing the Business Rates System
Replacing the business rates system could have significant impacts on businesses and their activities, though the lack of details creates uncertainty.
For businesses, the change could mean different methods of taxation, which might either reduce or increase their tax burden. This uncertainty can affect financial planning and investment decisions, as companies are unsure how the new system will impact their operating costs. Without specific details, businesses might hesitate to expand or invest in new projects until the new system is clarified. This uncertainty can slow economic growth and affect overall business confidence.
Overall, while the goal is to reform business rates, the lack of specifics makes it difficult to predict the exact effects, potentially causing hesitation and uncertainty in the business community.
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Business Impact of Publishing a Roadmap setting out Future Business Taxes
Publishing a roadmap setting out future business taxes could have several effects on businesses and their activities.
For businesses, having a clear roadmap of future tax policies would provide greater predictability and stability. This foresight allows companies to plan long-term investments, budgeting, and financial strategies with a better understanding of upcoming tax obligations. It can enhance business confidence and encourage more strategic decision-making.
Additionally, knowing future tax changes in advance can help businesses manage cash flow more effectively and potentially take advantage of any tax incentives or benefits before they change. This could lead to more efficient financial planning and resource allocation.
However, the actual impact will depend on the details within the roadmap and whether the proposed tax policies align with business expectations and needs. If the roadmap includes significant tax increases, it might deter investment and expansion, despite the foresight provided.
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Business Impact of Reforming the Planning System
Reforming the planning system to allow more housebuilding and infrastructure projects could have several significant effects on businesses and their activities.
For construction and real estate businesses, easier planning regulations could lead to increased opportunities for new projects. This would likely result in higher revenues and growth for companies involved in construction, property development, and related industries. More housebuilding and infrastructure projects can stimulate job creation, leading to increased demand for labour and materials.
Businesses in other sectors might benefit indirectly from improved infrastructure, which can enhance connectivity, reduce transportation costs, and improve access to markets. Better infrastructure can also attract more businesses to certain areas, potentially boosting local economies and creating a more vibrant business environment.
However, the actual impact will depend on the effectiveness of the reforms and how quickly they can be implemented. If the reforms are too slow or encounter significant opposition, the anticipated growth might not materialise as expected.
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Business Impact of Setting up Great British Energy and a National Wealth Fund
Setting up Great British Energy and a National Wealth Fund to invest in clean energy industries and create 650,000 jobs could have several significant effects on businesses and their activities.
For businesses in the clean energy sector, this initiative could provide substantial investment, leading to growth and innovation. Increased funding might help develop new technologies, improve existing infrastructure, and expand operations. This could make the UK a leader in clean energy, attracting additional private investment and fostering a robust industry.
The creation of 650,000 jobs would have a broad economic impact, reducing unemployment and increasing disposable income. This could lead to higher consumer spending, benefiting various sectors, including retail and services. Businesses might also find a larger, more skilled workforce available, enhancing productivity and innovation.
However, the effectiveness of these initiatives will depend on their implementation. Efficient allocation of the National Wealth Fund and strategic management of Great British Energy are crucial for achieving the desired outcomes. Additionally, the long-term success of these measures will rely on sustained government support and collaboration with private industry.
Overall, while the proposal aims to boost the clean energy sector and create jobs, its success will depend on effective execution and ongoing support to ensure tangible benefits for businesses and the economy.
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Business Impact of Labour to Block School Fee VAT Loophole
Many parents considering private education for their children may look to pre-pay future school fees in full to save costs, but Labour has announced plans that could impact this strategy.
If Labour wins the election on 4 July, new anti-forestalling legislation will be introduced to prevent parents from avoiding the additional VAT charge on private school fees.
This policy is expected to be detailed in the new government’s first Budget briefing, anticipated in September.
However, the implementation of VAT charges is likely to be delayed until September 2025, as the 2024 school year would have already commenced by the time of the announcement.
Rachel Reeves has confirmed that these charges will not be applied retrospectively, indicating that the 2024/25 academic year will likely remain VAT-free.
The proposed legislation by the Labour Party means that any fees paid in advance for the 2025/26 school year and beyond, before the VAT is introduced in September 2025, could be subject to recovery. This leaves parents in a position where they must carefully consider their options regarding their children’s education.
Introducing VAT on private school fees has been a Labour policy since 2021, with Bridget Phillipson stating that private schools have had ample time to prepare for this change.
The addition of VAT on private school fees is estimated to generate up to £1.7 billion. Sir Keir Starmer has stated that this revenue will be directed towards the state education system, funding the hiring of 6,500 teachers, 8,500 mental health advisers, and 1,000 careers advisers for schools.
Many private schools have already begun informing parents through their websites about the potential future VAT charges. According to Premium Credit, there could be a reduction of up to a third in student attendance due to the additional costs. However, some schools are considering covering part of the extra charges to retain their student population.
