It’s party conference season which can mean only one thing: promises are being made by the UK political parties left, right and centre to prepare for the election next spring.
With the Liberal Democrat party conference in Glasgow drawing to a close on 8 October we investigate how the political rhetoric and party proposals could affect your finances.
What the Conservative plans could mean for you
The Conservative financial plans revolved around housing policy and cutting tax and benefits.
Income tax – Cuts of around £7.2billion were proposed by the Conservatives. In practice this means raising personal allowances (the amount a person earns before paying tax) from £10,000 to £12,500, as well as raising the 40% tax threshold from its current £41,865 to £50,000 before 2020.
Housing – They also proposed to build 100,000 new starter homes to offer to first time buyers under the age of 40 at a 20% discount. The Conservatives plan to recoup the tax cuts by capping annual benefits at £23,000 per claimant, barring 19-21 year olds from claiming housing benefit and freezing working age benefits until 2017.
A ‘rent to buy scheme’ was also introduced. This involves building new homes to be rented out to young people for below market rents for up to 7 years, enabling them to save for a deposit to buy the home.
What the Labour plans could mean for you
Labour’s plans focused on tackling the “cost of living crisis” and building houses.
Wages – The cost of living crisis (where wage growth has remained below price inflation in recent years, see graph below) would be tackled directly with wage rises and indirectly with job creation programmes.
Labour have proposed to raise the minimum wage to £8 per hour, with promises of tax rebates of up to £1,000 per worker for accredited ‘Living Wage’ employers.
There was also mention of ensuring self-employed workers are not “locked out of mortgages or pensions”, but no concrete policy was outlaid.
Tax – The most notable job creation plan was a proposal to cut small businesses’ tax rates and allocating £30 billion of funds to local authorities to stimulate regional growth.
Extra revenue would be raised by cracking down on tax dodgers, taxing tobacco firms and levying higher taxes on £2 million+ properties.
Housing – To meet demands for housing and slow the growth of property prices, Labour pledges to build 1 million homes; 200,000 a year by 2020.
What the Liberal Democrat plans could mean
The Lib-Dem conference has yet to finish but a key theme has emerged; fighting the Conservative’s proposed cuts on both benefits and taxes.
Tax – They propose to free £37 billion a year by scrapping tax relief on pensions for the better off and scrapping the winter fuel allowance, free bus passes and free TV licences for wealthier pensioners.
In a similar move to Labour they also want to tax high value properties. The Lib-Dems plan to do this with new council tax bands, in particular on homes worth more than £2+ million, believing this should raise £1.5 billion in extra tax revenue.
Benefits – In terms of fighting cuts to welfare, Liberal Democrat delegates backed calls for a review of the Universal Credit system, easing of benefit sanctions and more support for claimants.
No concrete housing plans have yet been advanced, beyond a proposal to reopen the Oxford-Cambridge railway and build 50,000 homes along this corridor.
What you can do now
Whilst these are currently only plans until voted on by parliament, not official government policy, there are steps you can take to prepare should these promises become policy.
• Find a good mortgage rate – It could be time for potential first-time buyers to get acquainted with available mortgages and prepare their finances for buying a home, as both parties seem to be promising to “restore the dream of home ownership”, as Labour put it.
• If you’re hoping to enjoy more income either through tax cuts or wage rises you could consider switching credit cards, finding a new current account or even start saving with an ISA. An improved income could get you better interest rates, higher credit scores or other rewards.
• If you’re concerned about benefits cuts or worried about your circumstances there are many free financial advice charities to offer advice.