- The front-runners for potential Labour leadership candidates are currently thought to be Andy Burnham, Angela Rayner, Ed Miliband, Wes Streeting and Al Carns
- Bond markets have been reacting to political developments, rising sharply when Andy Burnham said he would stand in the Makerfield by-election
- What have the potential candidates said about key personal finance issues?
Sarah Coles, head of personal finance at AJ Bell, comments:
“The uncertainty engulfing the Labour Party right now means we can’t be sure whether there will be a change of leader, who could end up standing, or when it might happen. However, with the list of front-runners starting to emerge, it’s worth exploring what they might mean for your money.
“This is an imperfect science. Some of the potential Labour candidates have been far more vocal than others on everything from tax to pensions. Rayner and Streeting have been in government, where it isn’t always easy to tell where they are following a strongly held view or toing the party line.
“Ed Miliband, meanwhile, has been leader in the past, where his policies were much clearer. However, that was a long time ago, and the political environment has changed significantly in the interim. We can’t rule out the possibility he has changed his mind on key issues.
“As Mayor of Manchester, Andy Burnham has had the freedom to diverge from government policy, which has allowed him to develop some distinctive ideas. But at the other end of the spectrum, Al Carns is an unknown quantity, having said very little on any policy other than where it links to veterans and the armed forces.
“However, many of the candidates have said enough over the years to give a clear indication of where they might stand on anything from benefits to tax and pensions.”
What the contenders could mean for pensions
Rachel Vahey, head of public policy at AJ Bell, says:
“As Labour leader, Miliband backed the triple lock. He also called for clearer and fairer charges on pensions, and for an end to rip off fees. He’s one of the few potential candidates who has said anything remotely substantive on pension policy, aside from Rayner’s leaked memo sent to Rachel Reeves last year, which called for the reinstatement of the pensions lifetime allowance.
“Burnham’s pension views have focused on the needs of pensioners on low incomes, while Rayner’s focus has been on pension rights. Rayner supported WASPI women in their fight for compensation, and led reforms to the local government pension scheme to make all maternity, shared parental and adoption leave automatically pensionable and extend survivors’ benefits.
“Whoever is leading the country later this year has an opportunity to bring certainty and clarity to the debate around the future of pensions. AJ Bell campaigned hard for the government to commit to a Pension Tax Lock ahead of the Budget, launching a Parliamentary petition that reached over 20,000 signatures in a matter of weeks.
“Although both pension tax-free cash and tax relief on pension contributions came out of last year’s Budget unscathed, many people made rushed, often irreversible, decisions based on pure speculation, and there remains a huge risk that the same rumours will re-emerge ahead of this year’s Budget.
“Whoever becomes the next prime minister doesn’t need to be a passenger when it comes to pension tax speculation – they could take a firm grip by committing to stability over the long term. A pledge of this nature would cost the government nothing and show it is firmly on the side of people who do the right thing and save for their financial future.”
Potential tax changes
Charlene Young, senior pensions and savings expert at AJ Bell, says:
“Streeting is alone among the candidates in indicating he’d like to see the tax burden ease. He has said he’s uncomfortable with the level of tax in the country both for people and for businesses.
“Burnham has also mentioned a potential tax cut for lower earners. Among his ideas is to revisit the starting rate for tax, which could mean those on the lowest incomes paying basic rate tax at 20p might pay a lower rate of 10p. However, this shouldn’t be taken as an indication of a low tax approach, and the last thing a system riddled with traps and distortions needs is an extra tax band.
“Rayner, Miliband and Burnham have all mentioned higher taxes for higher earners. Rayner called for the additional rate threshold to be frozen back before all the thresholds were frozen for longer, while Burnham has previously suggested reintroducing the 50p rate of tax. Miliband supported the 50p rate as Labour leader, says he is proud of how Labour has taxed the wealthy and has spoken about the need for the tax system to be more progressive. A tighter squeeze on higher earners, and even a 50p rate of tax, would be a horrible blow for this group. But they don’t have to take it lying down, as actions such as saving into a pension would become even more rewarding, thanks to the higher value of the tax relief on offer.
“Many of the candidates have backed more taxes on wealth. Rayner’s leaked tax memo last year called for removing IHT relief on AIM shares entirely. She also wanted to see the dividend allowance removed completely, and rates raised to match income tax on earnings. In 2020, Streeting said it was unfair for workers to face higher tax rates than investors. He said capital gains should be taxed on the same basis as tax on income.
“Miliband backed proposals for a mansion tax on properties worth £2 million or more when he was Labour leader. Burnham, meanwhile, has suggested revaluation of council tax bands, so those in the most expensive homes pay more.
“Streeting has called for reform of inheritance tax, where reliefs and allowances would be scrapped and replaced with a tax on lifetime gifts. Burnham also wanted to reform inheritance tax, replacing it with a care levy, where the wealthiest pay the most. He has also spoken in favour of a national care insurance scheme to fund long-term care costs – an area he feels Westminster has ‘completely failed to address.’”
What the candidates might mean for investors
Dan Coatsworth, head of markets at AJ Bell, says:
“Burnam’s comments in the past about not wanting to be answerable to the bond market means speculation about his possible leadership has led to gilt yields rising again – although he’s since tried to temper that stance. Rayner is considered the second most risky potential leader for the bond market, while Streeting is seen as the least disruptive.
“A number of potential candidates have called for changes that would make running a business more expensive. Rayner has championed employment rights and would like to see those expanded further, while in 2020 Streeting called for higher corporation tax and taking further action on multinational tax avoidance. Miliband has also spoken out against corporate tax avoidance and opposed Conservative cuts to corporation tax. He has since pushed for tougher green taxes on energy firms.
“Some statements from a couple of candidates have been interpreted as anti-business to one degree or another, including Rayner accusing energy companies of benefiting from global instability while households struggled with rising bills, and Burnham’s statement that essential services, including energy, should be publicly owned. However, Rayner has spoken out in support of some businesses outside of government – criticising taxes on pubs and calling for an urgent review of business rates.
“Streeting is seen as more pro-business. He has argued for closer ties to the European Union, recently describing leaving the EU as a ‘catastrophic mistake’. He has also highlighted the importance of balancing the need to raise revenue from companies with the need to remain an attractive place to do business.
“As energy minister, Ed Miliband has been a strong proponent of the green economy, calling the transition to clean energy the economic opportunity of the 21st century. He wants the UK to take a global lead.”
Views on housing
Sarah Coles, head of personal finance at AJ Bell, says:
“A number of candidates have shown enthusiasm for more housebuilding, particularly social and affordable housing. In government, Rayner supported government housebuilding targets and pushed for more social housing. Burnham, meanwhile, said he wants the government to borrow to build new council housing, and Streeting said in 2020 that councils should be able to borrow to build new homes.
“Miliband supported housebuilding as Labour leader and has since said he wished he had done more on social housing. In his role as energy minister, he has focused on supporting sustainability and driving the warm homes campaign for people on lower incomes.”
The candidates’ approach to benefits
Sarah Coles, head of personal finance at AJ Bell, says:
“Recent stances on benefits have been affected by the roles the potential candidates held in government. Burnham opposed benefit cuts, and while Miliband was said to have been uneasy about them, Rayner and Streeting stood by the government’s reforms. Rayner, however, made it clear she thought there was a better approach and suggested that instead of benefit cuts the government should increase taxes.
“In opposition, in 2013, Miliband proposed welfare reform to refocus it on getting people back to work. His suggestions included a proposal that anyone out of work for a period should be offered a job, paid for by a tax on bankers’ bonuses, and anyone who refused risked losing their benefits. He also supported a benefits cap.
“Rayner is less keen on state help for those further up the income scale. She wanted to reverse changes to the threshold for the high-income child benefit charge, from £60,000 back to £50,000.
“Burnham, with the freedom of being out of Westminster, has considered broader changes. In the past he has argued for a universal basic income, pushed for higher pay and called for a devolved approach to delivering state support.”