Election campaign tax update – Week Four: 15-21 June

The Scottish National Party and Scottish Greens published their election manifestos with demands for Scotland to have full control over tax-raising powers. Other parties, including Reform UK and Plaid Cymru, set out their plans for government, with the former proposing £90 billion of tax cuts and the latter, like the Scottish Greens proposing the introduction of a wealth tax.

Here is our summary of tax and related developments from the past seven days:

Conservatives, Labour and Liberal Democrats

Labour leader Keir Starmer accused the Chancellor of “admitting” to unfunded pledges in the Conservative manifesto. The Conservatives plan to fund their tax cuts with £12 billion savings on welfare, but Labour argues that the money has already been spent, citing a newsletter Jeremy Hunt sent to constituents last week. BBC Verify have fact-checked the claims and think both sides are exaggerating.

Meanwhile, the Conservatives continue to make tax attacks a focus of their campaign.  Chief Secretary to the Treasury Laura Trott said there were “18 tax rises which Labour needs to come clean about”. These are tax cuts which the Conservatives have said they would make – or commitments to keep a relief or not increase a tax – if they are returned to office, but which Labour have been unwilling to match. They include changes to tax on pensions, National Insurance and a number of business tax reliefs.  In response Labour reiterated that it would not increase income tax, National Insurance, or VAT and that its manifesto includes “no plans” that would require tax rises beyond those already set out.

Michael Gove, the Housing Secretary, claimed first-time house buyers would face a “massive” increase in stamp duty land tax from Labour's decision not to match a Conservative commitment to cut the levy. Steve Barclay, the Environment Secretary, said farmers would face ‘ruinous’ inheritance tax bills if tax breaks for agricultural land were scrapped.  Labour called Gove’s claim ‘baseless’ and described Conservative claims as “desperate nonsense”.

On Saturday, Keir Starmer ruled out removing principal private residence relief, saying it “was never a policy so it doesn’t need ruling out, but let’s rule it out in case anybody pretends that it was.” He also ruled out the possibility of a tax on football player transfers after a shadow minister suggested it was an option. Rachel Reeves, the Shadow Chancellor, also said this week that Labour’s proposal to levy VAT on private school fees would form part of the party’s first Budget and they would not come into effect until after that. Due to the party’s commitment to give the OBR 10 weeks to prepare Budget forecasts mid-September is the earliest possible Budget date. This appears to rule out VAT on school fees coming in for the start of the 2024-25 school year.

Lib Dem leader Ed Davey said his party will push a prospective Labour government to bring in more radical tax policies to fund public services . Davey said the Liberal Democrats “believe in making taxes fairer”.

Reform UK

Reform UK published its general election manifesto this week with plans for £90 million of tax cuts and the promise of “major simplification”.

Proposals include:

• Increasing the income tax personal allowance to £20,000 and the higher rate threshold to £70,000
• Raising the inheritance tax threshold to £2 million
• Abolishing IR35 and business rates for high street businesses
• Reducing the corporation tax rate to 15%
• Introducing an ‘employer immigration tax’ (higher rate of employer NI)

The party’s leader, Nigel Farage, said the move to increase the personal allowance was a “standout policy”. However Sir Geoffrey Clifton-Brown, a Conservative and former member of the Public Accounts Committee, called the plans “fantasy economics”. The Institute for Fiscal Studies (IFS) described the plans as “problematic” and said Reform’s sums “do not add up”.

More on the Reform UK manifesto tax and related policies here.

Scotland

The SNP launched  its manifesto on Wednesday with a call for tax powers to be fully devolved to the Scottish Parliament.

Party leader and First Minister John Swinney also said that he would like to see the UK replicate Scotland’s ‘progressive’ approach to income tax and that his MPs would demand an ‘immediate’ emergency budget from the next government.

The party argues tax devolution would allow the Scottish Government to align National Insurance to the Scottish income tax regime, introduce windfall taxes, crack down on tax avoidance and evasion and reform the VAT regime. The SNP also signalled support for Labour’s plan to end the VAT exemption for private schools.

The IFS said devolving income tax on savings and dividends was a “sensible idea”, but argued the devolution of all income tax powers would “add complexity” for taxpayers and authorities.

The Scottish Labour Party manifesto repeated the measures included in Labour’s UK manifesto but also offered hints at the policies of a future Labour-led Scottish Government. Party leader Anas Sarwar answered “no” when questioned by journalists over whether a Scottish Labour government would increase income tax after the 2026 Scottish Parliament election.

The Scottish Greens’ manifesto backed SNP calls for the devolution of tax powers to the Scottish Government and for the Scottish income tax regime to be replicated across the UK (from next April). The party’s plans also include the merger of income tax and National Insurance, reforms to inheritance tax, the end of the distinction between earned and unearned income and a wealth tax on the richest households. The Greens also want to see a £1,000 per head tax on private jet users.

Although the Greens and SNP share ambitions on tax devolution, Green leader Patrick Harvie used a question at First Minister’s Question Time this week to accuse the SNP of being light on the details of how they would use these powers. John Swinney responded to Harvie that Scotland had the most “progressive” tax regime in the UK and that future proposals would be subject to consultation and engagement.

More on the SNP manifesto tax and related policies here.

Wales

Plaid Cymru’s manifesto emphasises increased tax devolution for Wales. The party also promises to:

• Introduce a wealth tax
• Investigate increasing higher earners’ National Insurance contributions
• Reform business rates
• Impose VAT on private school fees
• Equalise capital gains tax with income tax

The IFS said the document “isn’t honest about the implications for public spending and taxation in Wales”.

The Welsh Green Party has proposed a new wealth tax of 1% on assets over £10 million, increasing to 2% on assets exceeding £1 billion. The party leader, Anthony Slaughter, said the money was needed to invest in public services.

More on the Plaid Cymru manifesto tax and related policies here.