Labour plans tax on oil and hikes investment in Scotland
Jeremy Corbyn campaigning in Linlithgow last week (pic: Terry Murden)
Labour’s general election manifesto includes a windfall tax on oil companies and will see planned investment in Scotland rise from £70 billion to £100bn.
It will scrap the planned rise in the state pension age beyond 66. The party expects to raise an estimated £83bn in tax on higher earners and by reversing corporation tax cuts.
Jeremy Corbyn unveiled a range of commitments to re-balance wealth through new personal and business taxes to help to “transform” the UK into a low carbon, green economy.
Corporation tax would be hiked fro 19% to 26%. There will be more support for public transport, 300,000 new “green apprenticeships” and loans for people to buy electric cars.
The manifesto repeats earlier pledges to introduce a “real living wage” of at least £10 an hour and free broadband for all through nationalisation of part of BT.
Labour also plans to bring rail, mail, water and energy into public ownership. There will be a tax on second homes, VAT on private school fees, votes for 16 year olds, and a controversial pledge to renew the Trident nuclear deterrent and spend at least 2% of GDP on defence.
Labour promised to equalise the tax treatment of dividends and capital gains tax with normal taxable income.
This would mean abolishing the lower income tax rate for dividend income. The higher rates would be moved to Labour’s income tax rates, which would also increase.
In the party’s costing document, the Grey Book, it estimated this dividend tax cut would raise £9 billion for the government by 2023/24.
Labour also pledged to tax CGT at income tax levels. CGT is currently taxed at 28% for residential property or 20% from other chargeable assets for higher or additional rate payers.
It would also cut the £150,000 income tax threshold for the 45% tax rate to £80,000. Alongside this, a new 50% tax rate would be applied for those earning over £125,000. This was described as a new ‘super-rich rate’.
It would scrap university tuition fees and replace Universal Credit with a new benefits system.
Labour said 95% of taxpayers -– those earning less than £80,000 – would not be affected by increases to VAT, income tax or National Insurance.
Mr Corbyn launched Labour’s General Election manifesto in Birmingham today as the “most radical and ambitious plan to transform our country in decades”, declaring “it’s time for real change.”
Jeremy Corbyn meeting Waspi campaigners from Falkirk in Linlithgow (pic: Terry Murden)
He said: “This is a manifesto of hope. A manifesto that will bring real change. A manifesto full of popular policies that the political establishment has blocked for a generation. Those policies are fully costed, with no tax increases for 95% of taxpayers.
“Over the next three weeks, the most powerful people in Britain and their supporters are going to tell you that everything in this manifesto is impossible. That it’s too much for you. Because they don’t want real change. Why would they? The system is working just fine for them. It’s rigged in their favour.”
The £100bn pledge for Scotland is up from the £70bn previously announced by shadow chancellor John McDonnell. This new figure based on Labour policy commitments will include £20bn of National Investment Bank funds plus £30bn from the National Transformation Fund (up from £20bn) and £50bn in Barnett consequentials (up from £30bn).
Scottish Labour leader Richard Leonard said: “Labour’s £100 billion investment in Scotland will transform our public services, our industries and wider infrastructure. In making this investment Labour is laying the foundations for a better, more just and fairer society where no-one is left behind and where every person is given the opportunities to lead a decent and fulfilling life.
“This extra investment will provide the funding that Scottish Labour would use to build 120,000 new council and social homes, invest £6 billion in retrofitting homes to the highest energy efficiency standards, and bring dignity back to care workers and care users alike with a 25 per cent increase in investment in social care.”
The Scottish Conservatives said a windfall tax on oil and gas companies threatens the future of the industry.
Colin Clark, Scottish Conservative candidate for Gordon, has challenged all SNP candidates to “make it clear that any deal they are plotting with Corbyn must exclude a plan to sell out Scotland’s oil and gas industry.”
He pointed out that North Sea operators are only just recovering from the global downturn in oil prices which resulted in the loss of thousands of jobs, mostly in and around Aberdeen.
Paul Johnson of the IFS: ‘extremely expensive’ (pic: Terry Murden)
The Institute for Fiscal Studies was sceptical about Labour’s plans. “It will be extremely hard simply to deliver anything like this scale of increase in capital spending, at least in the near-term, certainly in an efficient and cost effective way,” said director Paul Johnson.
“If the intention really is to scrap Universal Credit and replace it with an entirely new benefit system then, as the last decade has shown, this would come with the risk of huge administrative complexity and costs.
“A particularly expensive commitment is on the state pension age. Rather than allowing it to rise as longevity increases, Labour wants to keep it at age 66, a very expensive pledge in the face of demographic change. This would add a projected £24 billion a year to spending by the 2050s.
“The commitment to abolish university tuition fees remains an expensive giveaway to the highest earning graduates and has the potential to make it difficult to maintain a system without a cap on student numbers.
“On the tax side the proposals in the Labour manifesto represent an enormous increase in the amounts they want to raise from corporation tax. If their proposals did raise the sums they suggest then we would be raising more in corporation tax, as a fraction of national income, than any other country in the G7, and more than almost anywhere else in the OECD. This would clearly come with substantial risks.”
Johnson’s NIC cut
Boris Johnson has announced that he would raise the threshold for paying National Insurance contributions (NICs) on earnings to £9,500 in the first Budget of a Conservative government. Currently 12% NICs is payable on earnings over £8,632 per year, set to rise with inflation to £8,788 in 2020–21.
Mr Johnson has also said he would raise the NICs threshold to £12,500, but has not specified by when he plans to do this. The Institute for Fiscal Studies says the NICs threshold normally rises with inflation, “so without knowing the proposed timescale of the increase, we do not know how big an additional giveaway this would be.”
LibDems get cautious welcome
The Liberal Democrats’ plans, unveiled yesterday, received a cautious welcome from business. The CBI’s director general Carolyn Fairbairn said: “Their commitment to work hand-in-hand with businesses to create a fairer and sustainable economy, for example by tackling regional inequality, supporting new parents and encouraging start-up businesses, is admirable.”
Dame Carolyn added: “Modernising the R&D tax credit and aiming to raise R&D spend to 3% of GDP are highly welcome.
“But there is a mixed picture when it comes to infrastructure. HS2 is a vital project for the country and one which the Liberal Democrats rightly support. But the third runway at Heathrow is equally important and kicking the can down the road with a moratorium on airport expansions is not a viable option for a leading economy.
“Some of the proposals put forward sound good but are harder to achieve in practice. Business is at the forefront of tackling the climate crisis and the plans to insulate more homes and to increase renewables is welcome. But to electrify all rail lines and ensure all new cars are electric by just 2030 is very challenging.
“Meanwhile, some of the employment proposals raise questions as to how they might work in practice.”
Federation of Small Businesses (FSB) National Chairman Mike Cherry, said: “It’s good to see the Liberal Democrats adopt so many of the proposals we’ve been putting forward to policymakers in recent weeks, and particularly encouraging to see so many measures aimed at helping the self-employed.
“Commitments to increasing parental pay for the self-employed, ending the scourge of poor payment practice in supply chains, and expanding the remit of the British Business Bank are all much-needed. So too are promises to introduce a new start-up allowance and widen the scope of the future high streets fund.
“But there are some problematic pledges here. Backing a tourism tax is the wrong move. This is a key industry for the UK – one that’s struggling under the weight of mounting overheads, not least rising employment costs and utility bills. Another tax to worry about is the last thing it needs.
“The commercial land value tax is a cause for concern – business rates are a disgrace, but it is important not to replace one badly thought out system with another. You could easily end up with a situation where landlords continually insist on big rent increases, citing this new tax as the reason. There must be protections put in place for small businesses – nobody wants business rates times ten.
“Expanding the Apprenticeship Levy – without proper review and reform – could cause all kinds of issues for firms up and down supply chains. With levy funds running out fast, it’s essential that funding levels are increased to enable more apprenticeships within small businesses.”