Five contentious personal finance policies Tories could pursue

Johnson could use next five years to push through some radical, and not necessarily popular, policies.

With a “stonking” majority secured, Boris Johnson’s government now has five years in which it could pursue some controversial policies that might be unpalatable to some voters.

1. Individuals could pay more towards social care

The funding of social care for the elderly is a growing issue. As the population of the UK continues to age, there will be increasing demand for older-age care. However, governments have so far failed to tackle the issue and provide any clarity on what the state can and will provide and what individuals will be expected to stump up for their own care. 

The issue is politically toxic, particularly even the suggestion that people may have to sell their homes to pay for later-life care. 

Former Conservative prime minister Theresa May attempted to address the issue in her 2017 manifesto. However, the solution she put forward was quickly labelled a "dementia tax" and dealt a huge blow to her election hopes. 

Only a government with a strong majority could risk tackling the issue again. Now in this position, Boris Johnson may feel emboldened to take it on. 

This time around the Tories have been much more vague about social care. The party has committed to £1 billion extra in social care funding per year. But beyond that not much detail.

The government could now take the opportunity to administer some tough medicine – namely that people with assets should be expected to contribute to their own social care.

2. Pensions tax relief could be cut

Tax relief on pensions was worth as much as £40 billion this year. Successive cash-strapped Chancellors have eyed up that growing sum and questioned whether or not it still represented good value for money. 

The current system of tax relief means that the highest earners are the greatest beneficiaries. Basic rate taxpayers see their pensions topped up with an extra 20% from the government, whereas higher rate and additional rate receive 40% and 45% top ups respectively. 

For years, governments have considered replacing this system with a flat rate of pensions tax relief. It would mean a lower tax bill overall, but would likely benefit lower earners, especially if, for example, the flat rate was set at 25% or 30%. 

No government has yet felt able to take this on, and risk upsetting higher earners by removing one of the few - and most generous - tax breaks they receive. 

However, with a strong majority - and new supporters in what were once Labour heartlands - the Conservatives may feel able to revisit it. 

3. Tax could be simplified

The UK tax code is the largest in the world and has tripled in size since the 1990s. A government with a strong majority could take strides to remove some of this complexity. 

The government already commissioned a study into simplifying Inheritance Tax (IHT), one of the least popular taxes. While the recommendations that followed were fairly tame, this was during Theresa May’s hung parliament tenure.

Having a big majority could create an opportunity to make greater changes.

However, promises made in the Conservative party manifesto could end up having the opposite effect. The government has once again pledged not to increase income tax, national insurance or VAT. These taxes combined provide the vast majority of funds to the public coffers.

Should the government wish to increase its income, it will have to look at less-straightforward ways of doing so. Governments in this position often target more complicated or lesser-known taxes hoping that there will be less scrutiny and public anger. Therefore, having tied its hands on its three main taxes, other taxes may rise or gain in complexity. 

4. Bring in the "Everything ISA"

ISAs are meant to be so simple. Put up to £20,000 a year into one and you’ll get no tax implications on any of the deposit or growth inside.

But they’ve grown more complex over time and there is now retinue of ISAs to choose from, leaving normal savers frequently confused. There is now a:

• Cash ISA
• Innovative Finance ISA
• Help to Buy ISAs (now defunct)
• Junior ISAs
• Lifetime ISA
• Stocks and Shares ISA

The Help to Buy ISA has now gone, but plenty of people still hold them. The government could act to create the fabled “Everything ISA.” This would be one simple ISA allowance of £20,000 pots to be spread over whichever and however many ISAs an individual chooses. 

Savers could choose how to spread their money depending on whether they had the time frame and appetite to invest, were planning to buy a home, or wanted to keep their money in cash. 

5. Reform house building policies and stamp duty

Housing is one of the most politically-contentious issue the country faces, although it appears to have been forced down the list of priorities in this election.

The Tories have made a number of proposals for helping more people to own homes, but a lot of it is just tinkering. A more radical approach could do any one of the following:

- Build a lot more houses. This one is controversial though because individuals often resist having additional housing built near their own homes, but also don't want housing built on the green belt. 

A recent Bank of England study claimed that the high cost of housing was down to low interest rates rather than a supply issue. In essence, because property is an asset not a consumable item, low interest rates encourage more people to own and horde property because the long-term returns are much more guaranteed than putting your money into a savings account.

- Get rid of stamp duty for good. Many argue that stamp duty gums up the market because it disincentivises people from moving, it's unfair because it offers a tax break to one segment of the population but not others, and it discourages efficient use of properties.

Empty nesters are sitting on big properties because they don’t want to pay out stamp duty when they downsize, and others stay in homes they have outgrown for the same reason and because there is not the supply of larger homes required. 

- Bring back 100% mortgages. The single biggest barrier for many young people isn’t whether they earn enough money to pay a mortgage, it's that deposit requirements combined with high house prices keeps huge numbers of people out of the housing market.

Bringing back deposit-free mortgages wouldn’t be without risks, but interest rates are incredibly low at the moment. A Tory government would have to repatriate some powers from the Bank of England to do it, but this isn't beyond possibility and would fit with a wider narrative of a post-Brexit government determined to reshape the country. 

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