The Money Saving Expert has weighed in with his financial forecast for the new government.
The country’s most trusted financial voice has given his rundown of what a Labour win could mean for people’s personal finances.
The country woke up this morning to the news that Keir Starmer’s Labour Party had won the general election by an absolute landslide.
After 14 years of a Conservative government, many people are excited for a change but are unsure of how things are going to map out under the new resident of Downing Street.
Speaking on ITV’s Good Morning Britain earlier today, Lewis explained that he expects the Starmer and co to use the economic damage caused by the Tories as a means of buying some time so they can start to sort things out.
“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,” he said.
“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 pre-announced in the manifesto, it doesn’t cost.”
While Labour have promised the public not to raise taxes, Lewis pointed out that the threshold for when you start paying tax will remain frozen until 2028.
In other words, more and more people will inadvertently stumble into paying higher tax when they start to earn more money, through pay rises or getting a better paid job.
Lewis suggested that one method Labour could adopt in an attempt to plug the economic black hole would be to raise Capital Gains Tax.
While this hasn’t come up in the party’s manifesto, 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.”
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He continued: “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.
“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.”
If you’re feeling full to the brim with political discourse today and fancy some more lighthearted reading material, Martin Lewis imparted some Monopoly wisdom last week.
The financial journalist outlined the one mistake that leads most players to failure in the game of Monopoly, and gave some of his followers advice on how to go further in the iconic board game.
