For years the complaint from the average British voter come election time was that ‘they’re all the same’.
Not so in 2019, with the party manifestos confirming an ocean of clear water between the parties when it comes to tax and spending.
The Conservatives were the last of the major parties to publish their plans for government, confirming at the weekend a modest set of policy and spending commitments that pundits have called a ‘safety first’ plan - especially when seen in comparison with Labour’s manifesto which set out huge spending increases funded in part by tax increases on wealthy individuals and companies.
Prime Minister Boris Johnson has apparently reasoned that his task with two-and-a-bit weeks until election day - with the polls showing a big lead for his party - is to avoid any policies that can go wrong.
Instead of things that would change, we got a few things that would not. The Conservatives have promised to not raise income tax, National Insurance or VAT during the next parliament. That sits alongside the previously-announced plan to scrap a reduction in the corporation tax rate from 19% to 17% next year. There was also a pledge to continue the ‘triple lock’ for the state pension which means the payment rises by at least the rate of average wage increases, the rate of CPI inflation or 2.5% every year.
On social care - where a so-called ‘dementia tax’ derailed Theresa May in 2017 - Boris Johnson has only promised that ‘no-one will have to sell their home to pay for care’, with a proper plan for the difficult area delayed until consensus can be found for the correct way forward.
All this caution contrasts with the radicalism of the Labour plan, which includes a raise in the income tax rates for those earning more than £80,000, raising the tax on capital gains and dividends to match the rate for income, a pledge to reverse a significant exemption from Inheritance Tax and to restore Corporation Tax back to its 2011 level of 26%.
The cumulative effect of these differences is vast. Perhaps the most startling fact in all the analysis of the manifesto to date is the fact that, based on the parties’ stated spending plans, Labour is promising £28 in day-to-day spending for every £1 spent by the Tories.
Voters wanting a clear choice between the parties certainly have one.
For investors, the election campaign is a reminder that taxation of investments is on the agenda in a way not seen for some time - if ever. By investing through tax-efficient vehicles such as an ISA or a SIPP (self-invested personal pension) you can shield investment gains from tax. That will only become more important if tax rates on gains made outside these tax ‘wrappers’ is removed.
More on the election
Important information: The value of investments and the income from them can go down as well as up, so you may get back less than you invest. Investors should note that the views expressed may no longer be current and may have already been acted upon. Tax treatment depends on individual circumstances and all tax rules may change in the future. Withdrawals from a pension product will not be possible until you reach age 55. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.
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