The Art of Green Finance

The main parties have now released their manifestos. If, and it is a big if, they stick to their promises what could this mean for your finances?

Exactly what the manifestos might mean for your finances depends largely on your current financial position and annual income, so I’ll look at implications for low earners (yearly household income less than £20,000 for a family of four), middle earners (yearly household income up to £60,000) and higer earners (yearly household income more than £60,000).

I’ll look at each of the main parties in order of manifesto release date.

Liberal Democrats

Lower and middle earners. The Lib Dems say that their priority for tax cuts, “when public finances allow”, will be to cut income tax by raising the tax-free personal allowance, benefitting the vast majority of families and taking more low-paid workers out of paying income tax altogether.

The Lib Dems promise that labour protection laws will at least meet EU standards. They will scrap the lower minimum wage rate for apprentices and ensure that all employees receive the national minimum wage. They will set up an independent review body to look at establishing a national living wage. They will also mandate an increased minimum wage for people on zero-hours contracts. In addition they will increase statutory sick pay and pay for people on parental leave. They will scrap the bedroom tax and restore full universal credit to under 25s.

Higer earners. The Lib Dems are looking into reforming Capital Gains Tax. This tax is paid by less than 3% of the population on profits made after selling items such as art, furniture or shares. Currently tax paid on capital gains is less than that paid on wages.

Pensioners. The Lib Dems would maintain the triple lock on state pensions. They would also compensate women born in the 1950s who lost out when the state pension age increased.

Conservatives

Lower and middle earners. The Conservatives are promising another 2p off of national insurance contributions. In reality any gain from this is likely to be offset by frozen tax-thresholds and resultant fiscal drag.

Higer earners. The Conservatives have stated that they will not raise Capital GainsTax. The Conservatives will also increase child benefit payment thresholds to £120,000.

Pensioners. The Conservatives are promising to protect the state pension with triple lock plus, so that state pension is never taxed.

Green Party

Lower earners. The Greens are promising to raise minimum wage to £15 per hour. They are also promising equal employment rights for all workers from their first day of employment, including those working in the ‘gig economy’ and on zero-hours contracts.

Middle and higer earners. The Greens would remove the upper earnings limit that restricts the amount of National Insurance paid by high earners. This would affect those earning more than £50,000 per year.

The Greens would also reform Capital Gains Tax to align the rates paid by taxpayers on income and taxable gains.

A Wealth Tax of 1% annually on assets above £10 million and of 2% on assets above £1bn is also proposed.

Labour

Lower and middle earners. Labour would abolish the age bands for minimum wage meaning that younger workers would also recieve minimum wage.

Like the Conservatives, the Labour party have said that they would not raise income tax, national insurance or VAT during the life of the next parliament. However, again, like the Conservatives, the Labour party are not planning to raise tax thresholds, so more people will end up paying tax or higher rates of tax due to fiscal drag.

Higer earners Labour plan to apply VAT and business rates to private schools, a policy that is popular with the majority of the public.

The reintroduction of the pensions lifetime allowance, which caused lots of problems for higher paid public sector workers such as senior NHS consultants, has been abandoned.

Families. Labour have pledged free breakfast clubs in every school.

Pensioners. Labour are also promising to protect the state pension with triple lock.

Other considerations:

NHS. The continued decline in the state of the NHS means that many higher earners are choosing to pay for health insurance as a back-up option in case of ill health and poor access to diagnostics and treatment in the NHS. This has a big impact on disposable income. The King’s Fund have detailed analysis on health care plans in the main parties manifestos.

So, who to vote for?

Whichever party wins the general election it seems that we are likely to pay more tax over the course of the next parliament, partially due to fiscal drag. Many would argue that increased taxation and investment in public services such as the NHS is in fact desirable. However, beyond that, there are differences in the finer details of policy that may particularly affect your finances, particularly for higher earners and those with children in private school.

However, your personal finances are probably not the only thing that will influence your vote. You may also be interested in our other election special posts: Vote for our rivers and seas and Why should I vote?