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The tax landscape under the new Labour government

The tax landscape under the new Labour government

Tim Stovold, Alison Kerrey,

The United Kingdom’s general election, held on Thursday 4 July 2024, resulted in a comfortable majority in the House of Commons for the Labour Party under Sir Keir Starmer’s leadership. The Labour Party’s political manifesto, first published on 13 June 2024, sets out the tax and public spending policies which they intend to deliver for the British public now that they have been invited to form a new government.

The manifesto needs to be considered in the context of the UK’s current economic climate. The Labour Party have committed to stabilise, and subsequently, reduce debt as a share of national income. In an economic climate of relatively low real economic growth and high debt interest costs, economists note that this commitment will place some restraints on the government’s ability to either increase public spending or cut taxation.

This is, perhaps, why we saw suggestions from the main parties, including the Labour Party, that substantial amounts of additional revenue could be found through various initiatives to close tax avoidance loopholes and improve tax administration processes.

The amounts of additional revenue that the main parties expected to raise in this manner appeared optimistic, but the Labour Party’s figures were perhaps the most realistic at £5.23bn. The viability of the new government’s manifesto pledges will, nonetheless, rest on continued economic growth in line with Office for Budget Responsibility (OBR) forecasts on the basis that the Labour Party’s proposals are being cast as “fully funded”.
In light of how the Labour Party have committed to not increase a number of key taxes, it remains to be seen whether they are approaching the current fiscal climate with sufficient caution given the obstacles they are likely to face.

The private client and  business & corporate tax experts at Moore UK member firm Moore Kingston Smith have provided a summary of the key tax proposals within the Labour Party’s manifesto, together with some brief comments about what these proposals might mean for the future.