General Election 2017: Labour government would increase income tax and corporation tax but not VAT

24 Jul 2017

A draft of the Labour manifesto draft was leaked to the media this week. Labour Leader Jeremy Corbyn has since said that a final version has been agreed. The information below is about the draft version, so it may be slightly different to the final version expected next week. The CIOT will be reporting in detail on the main political parties' eagerly-awaited manifestos and their potential impact on taxation, when they are launched.

Personal taxation

No rises in income tax for those earning below £80,000 a year – but those earning above this amount will pay an as yet unspecified amount of increased income tax to help fund increased NHS spending No increase in personal National Insurance Contributions No increase in VAT Introduce revenue neutral stamp duty incentives to encourage a good energy efficiency standard at the point of sale Remove the VAT exemption on private school fees to pay for free school meals for all primary school children Increase the rate of Insurance Premium Tax to 20 per cent for private healthcare insurance products to fund free parking at NHS England hospitals for patients, visitors and NHS staff

Business taxation

Raise the headline rate of corporation tax from its current 19 per cent to 21 per cent in 2018-19, 24 per cent in 2019-20 and 26 per cent in 2020-21 (raising £20 billion, the party estimates) putting the revenue into education and skills budgets Reinstate the small profits corporation tax rate - taxes levied on profits below £300,000 would rise to 20 per cent in 2018-19 and 21 per cent in 2020-21 Scrap quarterly reporting for businesses with a turnover of under £83,000. Establish a new employment allowance for small businesses that struggle to pay a higher living wage Introduce a package of reforms to business rates – including switching from RPI to CPI indexation, exempting new investment in plants and machinery from valuations, and ensuring that businesses have access to a proper appeals process – while reviewing the entire business rates system in the longer run; additionally Labour would give special consideration to the needs of rural councils in their re-evalution of business rate schemes Review extending the £1,000 pub relief business rates scheme to small music venues Maintain the apprenticeship levy but give employers more flexibility in how the levy is deployed, including allowing the levy to be used for pre-apprenticeship programmes

Tax compliance

Give HMRC the resources necessary “to clamp down hard on those unscrupulous individuals and companies who seek to avoid the responsibilities that the rest of us meet” Use the leverage of the £200 billion national and local government spends in the private sector to require best practice from firms government does business with on paying tax (among other areas) Take ‘decisive action’ on tax havens - introduce strict standards of transparency for crown dependencies and overseas territories, including a public register of owners, directors, major shareholders and beneficial owners for all companies and trusts.

Employment rights and pay

A 20-point plan for security and equality at work, including an end to zero-hours contracts and equal rights for employees (including temporary and part-time) Shifting the ‘burden of proof’ in the so-called ‘gig economy’ so that the law assumes a worker is an employee unless the employer can prove otherwise Ban payroll companies, sometimes known as umbrella companies, which create a false structure to limit employers’ tax liabilities and limit workers’ rights Give employment agencies and end-users joint responsibility for ensuring that the rights of agency workers are enforced Set up a dedicated commission to modernise the law around employment status. New statutory definitions of employment status would reduce the need for litigation and make improve compliance. Raise the minimum wage to the level of the living wage (expected to be at least £10 per hour by 2020) Lift the public sector pay cap Legislate to reduce pay inequality by introducing an excessive pay levy on companies with high numbers of staff on very high pay. Roll out maximum pay ratios of 20:1 in the public sector and companies bidding for public contracts Overhaul the existing childcare system in which subsidies are given directly to parents who often struggle to use them, and transition to a system of high-quality childcare places in mixed environments with direct government subsidy

Social security and pensions

Review the cuts to work allowances in Universal Credit, and also review the decision to limit tax credit and Universal Credit payments to the first two children in a family. An end to benefit sanctions Reverse social security cuts including cuts to bereavement support payment and the ‘bedroom tax’ Guarantee the state pension ‘triple lock’ throughout the next Parliament so that pensions rise by at least inflation, earnings or 2.5 per cent a year, whichever is higher A commitment to ‘protect the pensions of UK citizens living overseas in the EU or further afield’

Wider fiscal and economic policy

‘Fiscal Credibility Rule’ based on the principle that Government should not be borrowing for day-to-day spending, but that investing for future growth makes good sense The current spending deficit to be eliminated on ‘a forward-looking, five-year rolling timescale’ Leave debt as a proportion of trend GDP lower at the end of each Parliament than at the start When conventional monetary policy is hampered by the lower bound to interest rates, suspend operation of the rule in order that fiscal policy can work with monetary policy to support economic recovery Make the Office of Budget Responsibility responsible to Parliament with a clear mandate to “blow the whistle” on government breaching these rules Manifesto is ‘fully costed’ with all current spending paid for out of taxation or redirected revenue stream

Other relevant policies

On Brexit, accept the EU referendum result and ‘build a close new relationship with the EU’ prioritising jobs and workers' rights; negotiate transitional arrangements ‘to avoid a cliff-edge for the UK economy’ if no deal is reached Minimise tariff and non-tariff barriers that prevent the UK from exporting and creating jobs and economic growth Amend the Companies Act 2006 so that directors’ duty to promote the company for the benefit of the shareholders is extended to others such as employees, suppliers, the environment etc. Deliver a universal superfast broadband (30 mbps) service to all households by 2022 Extend the provision of legal aid entitlement to judicial review Establish a Constitutional Convention to take forward the debate about a new constitutional settlement for the entire UK, with England as much as a priority as Scotland, Wales and Northern Ireland (nothing more specific on devolution than this)