UK General Election 2024 results in first Labour Government in 14 years

As the dust settles on the election results, here is a recap of Labour’s campaign promises and possible timings.

• The Labour Party won the UK General Election of 4 July 2024.
• Key next steps include the King's Speech, scheduled for 17 July, as well as a prospective Spending Review and Budget in the coming months (most likely in October).
• In her first major public speech since the Election, the UK's new Chancellor of the Exchequer, Rachel Reeves, repeated the Government's commitment to no increases to National Insurance or the basic, higher and additional rates of Income Tax and VAT.
• In its manifesto, the Labour Party committed to capping corporation tax at the current level of 25% for the entire Parliament and providing a "business tax roadmap" within six months of the election and is expected to consult on its content.

The results of the UK's General Election

The results for the United Kingdom's (UK's) General Election became clear in the early morning of 5 July 2024. The final results confirmed that the Labour Party had won a significant victory and will form a new Government with a majority of 170 — more than double that of Boris Johnson's Conservative Party at the last election in 2019.

Although the majority is slightly less than that achieved by the Labour Party in 1997, the result is a success for the new Prime Minister, Sir Keir Starmer, who will lead Labour into government for the first time in 14 years.

What we can expect from the new Government

We can expect the new Government to focus on deliverable actions in its first 100 days. Labour may prioritize sweeping changes to planning regulations (which does not require primary legislation), allowing new houses to be built and businesses to invest and expand. The Prime Minister and his Chancellor, Rachel Reeves, believe this is one of the most important inputs to unlock growth.

In advance of the General Election, Labour set out five "missions" that will now guide the new Government and on which further details are expected over the first 100 days.

The five missions are to:

1. Kickstart economic growth
2. Make Britain a clean-energy superpower
3. Take back our streets
4. Break down barriers to opportunity
5. Build a National Health Service fit for the future

It is being argued that the Government now has a mandate to push through not just Labour's election manifesto, but also bold reforms that might usually be met with substantial opposition.

Tax proposals in Labour's campaign

In summary, Labour has promised to:

• Replace the current "non-domicile" tax regime with a "modern scheme" (which addresses "loopholes" in the Conservative Government proposals).
• End the use of offshore trusts to avoid inheritance tax.
• Consult on amending the tax treatment of "carried interest."
• Remove the value-added tax (VAT) exemption and business rate (non-domestic property tax) relief for private schools.
• Close the "loopholes" in the windfall tax on oil and gas companies and extend the sunset clause in the Energy Profits Levy (EPL) until the end of the next Parliament. Labour will also increase the rate of the EPL by three percentage points, as well as remove the investment allowances.
• Replace the current business rates (non-domestic property tax) system to "level the playing field between the High Street and online giants, better incentivise investment, tackle empty properties and support entrepreneurship."

Beyond these specific tax proposals, Labour has also promised to:

• Publish (in the first six months) a roadmap for business taxation for the next Parliament.
• Support the introduction of a UK Carbon Border Adjustment Mechanism.
• Mandate UK regulated financial institutions and Financial Times Stock Exchange (FTSE) 100 companies to implement plans that align with the Paris Agreement.
• Reform the apprenticeship levy, creating a Growth and Skills Levy.
• Reform the points-based immigration system by linking immigration and skills policy and strengthening the Migration Advisory Committee.
• Reform how minimum wage is determined.
• Improve tax compliance and modernize His Majesty's Revenue and Customs (HMRC). This will include increasing registration and reporting requirements, strengthening HMRC's powers, investing in new technology, building capacity within HMRC, and renewing focus on tax avoidance by large businesses and the wealthy.

Labour also promised not to make changes in certain areas. For example:

• There are no plans for increases in the rates of corporation tax, income tax, National Insurance contributions or VAT.
• Labour will continue to support the implementation of the Organisation for Economic Co-operation and Development (OECD) global minimum tax.
• Labour will retain the rules on full expensing and the Annual Investment Allowance (though it does want to give firms "greater clarity on what qualifies for allowances").
• It will not reinstate the Pensions Lifetime Allowance Charge.

In addition, Rachel Reeves has previously said: "There are hundreds of different tax breaks. Some are important, but too many simply provide loopholes for those who can afford the best advice. And added together they cost more than our entire NHS [i.e., National Health Service] budget. So, we will look at every single tax break. If it doesn't deliver for the taxpayer or for the economy, then we will scrap it." This suggests that certain issues, such as higher rate relief for pension contributions, could be taken forward during the next Parliament.

What's next?

The King's Speech on 17 July 2024 will be significant. The King's Speech sets out the Government's proposed policies and legislation for the coming session and gives the Government the chance to set out its list of priorities for the coming year. Among other measures, reform proposals for employment practices (including a ban on exploitative zero-hours contracts and enhanced protection for employment rights) and planning are anticipated.

However, though the Chancellor has promised an update on the "spending inheritance" before the summer recess, this is "separate from a Budget." Instead, Ms. Reeves has said she is meeting with the Office for Budget Responsibility (OBR) and a date for the Budget should be confirmed before the summer recess (that is, before the end of July).

The date of any Budget is at the discretion of the Government, but Labour has committed to accompanying a Budget with a forecast from the OBR. That suggests a Budget will be at least 10 weeks off. Given that Labour has regularly talked about action within the first 100 days of taking office, this might suggest a Budget on 9 October (the need for an OBR forecast suggests an earliest day of 18 September).

However, even without a Budget, it is possible that before the start of the summer recess Labour may seek to announce changes or even introduce emergency legislation to act as anti-forestalling measures for changes that would then be detailed in the later Budget.

It is possible that the Budget could be combined with a much larger Spending Review. Spending Reviews are the process by which the Government sets out detailed plans for public spending over a number of years and determines the overall "envelope" that individual departments must spend within over a particular period.

The current Spending Review, set back in 2021, is due to expire at the end of 2024. An early decision for the new Chancellor will be whether to have a relatively short Spending Review period (perhaps just a single year), before a larger event next year or, having examined the public finances, to go for a longer three- or five-year period. Having committed to not raising National Insurance contributions, or the rates of income tax and VAT, finding funding will be difficult for the Chancellor.

Separately, the Chancellor has committed to holding a Global Investment Summit, similar to those held in 2021 and 2023, in the first 100 days of the Labour Government, with the aim of attracting much-needed foreign investment to the UK. Although few details are known about what the Summit will look like, and how it might be structured, we can expect to hear more shortly, given the tight timeframes.

Our team at EY would be happy to discuss the possible upcoming changes and the potential timings or arrange a call with our Tax Policy team for a broader discussion.

For additional information concerning this Alert, please contact:

Ernst & Young LLP (United Kingdom), London

• Chris Sanger, Tax Policy | [email protected]
• Tom Evennett, Personal taxes | [email protected]
• Sarah Farrow, Personal taxes | [email protected]
• Martin Portnoy, Personal taxes | [email protected]
• Michael Lewis, Personal Taxes | [email protected]
• Ruth Donaldson, Corporation tax | [email protected]
• Nick Yassukovich, Employment taxes | [email protected]
• Richard Milnes, Financial Services | [email protected]
• Jenny Coletta, Financial Services | [email protected]
• Georgina West, Stamp taxes | [email protected]

Ernst & Young LLP (United Kingdom), Manchester

• Martin Portnoy, Personal taxes | [email protected]

Ernst & Young LLP (United Kingdom), Reading

• Vaneeta Khurana, Employment taxes | [email protected]
• Sarah Delaney, Indirect taxes | [email protected]

Ernst & Young LLP (United States), UK Tax Desk, New York

• Graham Shaw | [email protected]

Ernst & Young LLP (United States), UK Tax Desk, Chicago

• Sarah Logan | [email protected]