18 July 2024. Published by Emily Snow, Trainee Solicitor
On 4 July 2024, the Labour party won a landslide general election victory – its first since 2005. In the run up to the election, Labour billed itself as the party of "wealth creation", with Keir Starmer hailing this his "number one mission." Starmer stated that his plan for growth was “pro-worker and pro-business”.
So, what does this mean in reality? Here, we analyse a selection of Labour's key pledges and their potential impact on UK business.
1. Tax
Labour has pledged to raise £8.6bn in revenue through tax reforms. This includes plans to:
- Tackle tax avoidance and non-dom tax loopholes;
- Tax private school fees;
- Introduce a windfall tax on oil and gas companies; and
- Raise taxes on profits earned by private equity executives.
However, in a move that may be welcomed by workers and businesses alike, Labour has confirmed it will not increase the levels of corporation tax, VAT, income tax or national insurance.
The new (and first female) Chancellor, Rachel Reeves, advised that Labour will publish a roadmap for business taxation within the next year. With no major surprises announced in Labour's manifesto, businesses will no doubt be keeping a close eye on the government's future plans for corporate taxation.
2. Innovation in Construction and Energy industries
In the Construction industry, the famously politicised words of D:Ream are likely to ring true: things can only get better. Following the combined effects of Brexit, Covid, and the Russian invasion of Ukraine, coupled with high inflation and increased cost of labour and materials, the sector experienced the highest number of bankruptcies in any UK industry over the past three years.
The industry may find reassurance in Labour's plans to:
- Update the National Planning Policy Framework (NPPF);
- Build 1.5 million homes over the next 5 years (including the biggest increase in affordable housing "in a generation");
- Exceed the unmet Conservative pledge to build 300,000 new homes a year; and
- Streamline the planning process and reduce delays.
These plans, as well as the party's commitment to maintain and renew the road network and to launch significant infrastructure projects, could generate a much-needed investment boost. However, businesses should be minded that they are likely to see an increased pressure to comply with regulations, with tougher regulatory compliance being introduced around net zero and social housing.
The Energy sector should also see a boost, with Labour's Green Prosperity Plan promising to deliver a cheaper, zero-carbon electricity system by 2030. A new state-run company, Great British Energy, will be launched, aimed to invest directly in renewable and nuclear projects. Labour will also continue plans to pursue existing new-build nuclear projects. Ed Miliband, the new energy secretary, has announced approval of three solar farms and has overturned rules that allowed communities to ban onshore wind projects in England. The overall infrastructure approval process will be reviewed, with decisions on projects being made at national level to prevent plans being thwarted by local opposition. Labour's renewable energy projects will be funded by £1.2bn raised by the proposed windfall tax on oil and gas companies, along with £3.5bn a year in extra borrowing.
It is hoped that increased innovation in these areas will drive investment. Whether the projected boost to businesses will set-off the effect of additional borrowing remains to be seen.
3. Financial services reform
"Reform" is perhaps the wrong word here, with Labour's policies indicating plans to grow rather than overhaul the UK's existing financial services and its regulation.
Government plans include:
- Making the UK a “global hub” for green finance, including plans to make the UK a global leader in using AI in financial services;
- Introducing longer-term fixed rate mortgages;
- Building on existing measures introduced by the Financial Services and Market Act 2023; and
- Reviewing the pension landscape (more information on this from RPC is available here).
Overall, Labour is unlikely to produce any surprise policies when it comes to financial services and financial services regulation. Businesses may find comfort in the fact that, whilst Labour has ruled out a reversal of Brexit, it has outlined aims to improve the UK’s trade and investment relationship with the EU, by removing unnecessary barriers to trade.
4. Changes to employment rights
Labour has proposed certain fairly significant changes to workers' rights, including:
- Increasing national minimum wage rates, in line with the national living wage;
- Providing all working people (other than self-employed) with full employment rights;
- Increasing protection against unfair dismissal; and
- A proposed ban on zero-hour contracts.
It is unclear how many, if any, of these manifesto pledges will be implemented. Employers should stay up to date of any changes to workers' rights which could profoundly affect the day-to-day running of their business.
Will things only get better?
A recent report by the Financial Times confirms that the UK has had the lowest rate of investment in the G7 for 24 of the past 30 years. In this context, Rachel Reeves' recent promise to turn Britain into a “safe haven” for business investment may appear ambitious. However, Labour – and UK business – can take some comfort in the fact that the economy grew by more than initially estimated in the first three months of 2024. Whether this can be meaningfully sustained and increased will depend on the success of Labour's proposed growth agenda.
