Martin Lewis has delivered his reaction to Labour winning the General Election and what it could mean for your finances.
The MoneySavingExpert.com founder appeared on ITV’s Good Morning Britain, where he explained what could happen next after Labour secured a landslide victory against the Tories, ending 14 years of Conservative rule. Sir Keir Starmer will arrive at Downing Street later today where he will become the next Prime Minister of the United Kingdom.
But his victory comes against a backdrop of the cost of living crisis, with hard-working families having been crippled with price rises in stores and soaring mortgage rates over the past couple of years. Martin started off by explaining how Labour will likely make a statement soon about how the UK finances are in a worse state than feared.
He went on to predict that any changes to be delivered will have to not cost the Government too much money. Martin said: “What I expect is going to happen in the next couple of weeks, is Labour will get fully into Government and do some form of revelation, saying: ‘Wow, the finances are so much worse than we expected, there’s a big economic black hole, things are going to be very tough,’ and then do some expectation management.
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“Of course, we all know that already… I've been pushing candidates from all parties of what they’re going to do to fill the huge black hole in the nation's finances. I think what that means for the cost of living, is the Government will be looking at things that do not cost the exchequer a lot of money to do.
“They’re going to need in the first 100 days to make a difference to the country, they’re going to want to show people that things have changed, that they mean action, they’re going to start to deliver. But they're going to have to do it in a way that, where unless it was preannounced in the manifesto, it doesn't cost.”
Martin confirmed that Labour has promised not to raise taxes, but it's important to remember that the threshold for when you start paying tax will remain frozen until 2028. This means more people will be dragged into paying tax when they start to earn more money, through pay rises or getting a better paid job.
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The MSE founder said Labour could instead look at raising Capital Gains Tax to help plug the black hole, although this has not been explicitly mentioned in the manifesto, so we don't know if this will happen yet. Capital Gains Tax is the tax levied on the profit made on the sale of an asset that has risen in value.
Martin said: "They’ve said they wont raise taxes, they’ve also said they wont substantially cut spending, they’ve also said they wont increase government borrowing and they're not planning on printing money, so that is, all four of your hands tied behind your back. It means the only thing you’ve got filling that black hole is growth and it will be very tough to have growth at the level that is needed to fill it.
"I think Capital Gains Tax is, to some extent, probably right for a few percentage point raised there. It is a lot cheaper to make profit than it is to make income. You're taxed a lot less on profit you make, on selling assets, than you are on earning money."
One thing that has been promised in the manifesto, is the pledge to build 1.5million homes over the next five years by reforming planning rules and developing poor-quality areas in the green belt. Martin said: "Let’s see if they can deliver that one. They’re also talking about finally banning Section 21 ‘no fault’ evictions. There is a huge power imbalance between landlords and renters and that needs to change - and I think it will change. The building homes situation certainly should be helpful for mortgage holders."
He continued: "There's been talk for a long time at looking at pensions. They've said they wont change the lifetime allowance back… so its the annual allowance they could change, its a much more radical thing. They could limit pension tax relief, so that everybody gets the same, the same tax relief as basic rate taxpayers. At the moment, higher rate taxpayers get more from the state toward their pension because they pay more tax. I think we wont hear much of that until September and we don't really know."