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Johnson versus Corbyn on money – what we know so far

Edie Bond takes a look at Johnson and Corbyn's proposals for tax, pensions and spending so far, and what this could mean for your money.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

Currently polling as the top two contenders for the job, Boris Johnson and Jeremy Corbyn will go head-to-head to become the next prime minister, with the public set to vote on 12 December.

Although Brexit has become an emotive tipping point for people’s votes in this General Election, it’s also important to take a look at what our future prime minister may have in store for our money.

We take a brief look at what we know so far on their proposals for tax, pensions and spending and what this could mean for your money. Official party manifestos are yet to be released, and this isn’t an exhaustive look at every proposal. We’ll be writing more in the coming weeks and taking a deeper dive into the manifestos when they’re released.

Spending

Gone are the days where tax cuts won the day. In the latest round of talks on spending policies, both parties are spend spend spend.

Johnson’s main tagline so far has been to “get Brexit done” so he can move on to the Conservative Party’s domestic priorities – the NHS, crime, education and the economy.

So far spending plans have included announcing a 20,000 rise in the number of police officers, a £14 billion increase in school spending, and a hospital-building programme.

This is all well and good, but it’s been reported that Chancellor Sajid Javid has privately expressed concern that this year’s Tory manifesto is set to contain the most expensive set of policies in history, which will of course drastically reduce room to deliver the sort of tax cuts usually set out by the Conservatives.

Corbyn has shared his vision of “sharing power and wealth with the people”. Spending-wise this would include reducing the working week to four days (within 10 years) and removing the two-child limit for child benefit.

Looking back to the 2017 manifesto, he’d also pledged to give four extra public holidays a year, hire 10,000 new police officers, bring railways back into public ownership, and nationalise England’s water companies.

Pensions

Johnson

Although they threatened to remove the triple lock on pensions, the Tories have kept the pension policy as part of their coalition with the DUP. The good news is that this year pensioners will see their income rise by 4%.

The state pension amount rises each year in line with whichever of three factors is higher – average earnings, inflation or 2.5%. This “triple lock” was introduced by the coalition government, but the Tory party has suggested moving to a “double lock” of average earnings or inflation from 2022.

This will of course be an important policy in this election, given older people tend to head to the polling stations in greater numbers.

The Tories do seem to be sticking with their plans to increase the state pension age. Under accelerated plans announced by the Conservatives in 2017, the state pension age will rise to 67 by 2028 and 68 by 2039, a full seven years earlier than had been proposed.

This isn’t new news, but it might turn off those looking to retire in the next 10 or 20 years.

Corbyn

According to Labour’s manifesto in 2017, they promised to halt proposed increases to the state pension age beyond 66 and commission a review into the current plans. The manifesto also committed to keep the triple lock on pensions for the next parliament.

They’ve also pledged to recognise and compensate women born in the 1950s who have had their state pension age changed. Although this could change in light of the recent Supreme Court case which ruled against any discrimination by the current government.

Tax

Johnson

The current PM has already promised in his leadership to raise certain tax thresholds.

  • He’s pledged to raise the income tax threshold for higher-rate payers to £80,000 (from £50,000). Take home pay for those in this band would increase – for example, someone who currently earns £60,000 per year would keep an extra £2,000.
  • Johnson’s also hinted that National Insurance thresholds could be raised to help pay for this tax cut. To counter that being a hit to lower earners, he’s also hinted he might increase the points at which NI payments kick in.
  • Income tax isn’t the only tax set aside for change. Sajid Javid suggested at the Conservative party conference that he was considering scrapping inheritance tax, but nothing has been confirmed so far.
  • The Tories have also promised to look at the pension tax rules for higher earners, including the lifetime allowance (£1.055 million) and annual allowance (£40,000), after it emerged that NHS workers were cutting their hours to avoid tax.
  • Another unpopular rule they could look at is the taper applied to the annual pension allowance, which reduces the tax-relievable amount that can be saved into a pension for those earning more than £150,000.

Corbyn

Corbyn recently launched his election campaign with a topline pledge to “go after” tax dodgers and address the UK’s “corrupt” financial system, which could be a good indicator of where his tax priorities lie.

  • One policy Shadow chancellor John McDonnell has proposed is lowering the 45% additional income tax rate from £150,000 to £80,000, plus a new 50% rate on income of more than £123,000. This might seem drastic, but McDonnell has confirmed that only the top 5% of earners would be affected by these changes.
  • In Labour’s 2017 manifesto, they included an “excessive pay levy”, which would require companies to pay 2.5% tax on any salary they paid over £330,000 and 5% on any wages above £500,000.
  • The party has pledged to scrap the existing complicated inheritance tax system and simply impose a lifetime cap of £125,000 on the amount you can inherit tax free a “lifetime gift tax.” The threshold would also be set for each child, so two children could inherit an estate worth £250,000 tax free. Any gifts received above this would be taxed as income.
  • McDonnell has also said he would reverse the Conservative cuts to capital gains tax from 28% to 20% for higher-rate taxpayers and 18% to 10% for those on the basic rate of income tax.

Read more of our general election coverage

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General election 2019


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    Important notes

    This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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