General Election 2019: Conservative policies and your finances

We examine personal finance-related pledges relating to tax, pensions, and adult social care, in the Tories' manifesto.

General election campaigns resemble more of a marathon than a sprint, but having handed rival parties an early march last week, the Conservative Party has come last out of the traps.

The party has just launched its manifesto (24 November) and conspicuously absent was a key pledge to reduce tax for high earners, which was made by prime minister Boris Johnson only a couple of months ago.

Below, we explain what was promised and why the policy has been put on the back burner, as well as rounding up other key implications for the nation’s personal finances. 

Income tax cuts for £50,000 to £80,000 absent

During the Conservative Party leadership race Johnson promised to reduce Britain’s tax burden, most prominently claiming he would raise the threshold for the 40% higher-rate income tax from £50,000 to £80,000.

That would benefit roughly four million people, giving £9 billion back to taxpayers. But the pledge, which according to the Institute for Fiscal Studies would benefit roughly the top 10% of earners, has been dropped, at least for now. 

Increase of national insurance threshold

There are, though, tax cuts in the form of a rise in the threshold for national insurance contributions (NICs) from £8,632 to £9,500. This will equate to a saving of around £100 a year for 31 million workers who earn above that amount.

Longer term, the Conservative Party describes rising the NICs threshold to £12,500 as its “ultimate ambition”. This would result in a tax cut of £500 for workers who earn more than £12,500. 

There may be unintended consequences for some, points out Steven Cameron, pensions director at Aegon. He notes: “This will be welcomed by many as a boost to take-home pay. However, under current rules, those not paying any NI lose out on credits towards their state pension. Individuals need 35 years of qualifying NICs to receive the full state pension with those with fewer qualifying years seeing a reduction and receive none if they have fewer than 10 years of credits.”

State pension triple lock

No surprises here: the state pension triple lock has been maintained.

Any reform of the state pension triple lock would prove unpopular with voters, as Theresa May knows all too well. During the 2017 general election, May toyed with the idea of tweaking the triple lock to make it less generous. The triple lock is widely viewed as an expensive policy for any government to maintain, but May was forced to shelve plans after failing to secure a majority. 

Under the triple lock, first introduced in 2010 by the Conservative/Liberal Democrat coalition government, the state pension increases each year by the highest of three measures: inflation, the average earnings increase, or 2.5%.

In the manifesto the Tories say: “The ‘triple lock’ we introduced has meant that those who have worked hard and put in for decades can be confident that the state will be there to support them when they need it. We will keep the triple lock, the winter fuel payment, the older person’s bus pass and other pensioner benefits.”

On this front the Conservative Party manifesto’s pension commitments are in line with Labour’s, which has also pledged to retain the state pension triple lock.

Other pension pledges

But the two parties differ markedly in relation to the Waspi women, those born in the 1950s who have been negatively impacted by changes to the state pension age.

While the Labour Party has pledged to compensate women born in the 1950s for the failure of the government to adequately notify them about changes in the state pension age, the Conservative Party has not made it a policy pledge.

When questioned on the issue by an audience member during the BBC Question Time debate, Johnson said he “sympathises deeply with the position of the Waspi women”, but added that he “cannot promise that I can magic that money for you tonight”. 

Labour's pledge to compensate nearly four million women is estimated to cost £58 billion over five years. It is unclear how the Labour Party will fund this enormous compensation package.

Aegon’s Cameron adds: “The biggest difference (in pension commitments), and it’s a massive £58 billion difference, relates to the Waspi women who found their state pension age increase from 60 to 66 without clear, personalised advance notice. The Tories are not matching Labour’s commitment to compensate them.” 

Elsewhere on the pensions front, the government announced last week it would respond to the ‘taper tax’ issue affecting doctors by covering their annual allowance tax charges for 2019/20. 

A separate pension anomaly the Conservative Party is also seeking to address is the quirk which can result in workers earning under £12,500 missing out on pension tax relief if their scheme or provider uses the ‘net pay arrangement’ method of delivering tax relief, rather than the ‘relief at source’ method.

Steve Webb, director of policy at Royal London, welcomes both developments, but is critical of the “disappointing lack of detail”. He says: “‘It is welcome that the Conservative manifesto refers to two of the various anomalies in the pension tax relief system.  On low-paid workers, the manifesto represents a welcome shift in position after the government has refused to act for several years.

“But on the tapered annual allowance, the measure proposed is far too narrow and may not even work.  The tapered annual allowance affects far more people than senior NHS clinicians and creates complexity and uncertainty in the tax system.  The best solution would be to abolish it outright.” 

Adult social care

On the social care front, details were also lacking, with little more than a guiding principle that no one will have to sell their home to pay for care. There were no concrete proposals regarding how the social care crisis will be solved long term. 

In the manifesto, the Conservative Party said it is committing to £1 billion of extra funding a year for social care, a commitment to seek cross-party consensus for long term reform and “the prerequisite of any solution will be a guarantee that no one needing care has to sell their home to pay for it”. 

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.