New Labour Government – new tax policy

Last week saw the Labour Party sweep to power in the UK’s general election. The Institute’s Tax team and Northern Ireland Tax Committee are now considering how we can engage with the new Labour government on key tax policy issues such as HMRC services, Making Tax Digital for income tax, tax complexity, and a lower rate of corporation tax for Northern Ireland. But what does the change in government mean for UK tax policy? Read on for what we might expect to see in the coming weeks and months.

The former Shadow Chancellor of the Exchequer, Rachel Reeves, has been appointed to the role of Chancellor of the Exchequer. As the first ever woman Chancellor, she made her first speech to His Majesty’s Treasury staff on 5 July. And although not officially confirmed, it is expected that James Murray will take up the role of Financial Secretary to the Treasury (FST), having been shadow FST prior to the election. 

Normally after a general election, the new government would hold an emergency budget shortly thereafter. That is not expected to happen this time around although there has been speculation that parliament’s summer recess might shortened. A new speaker is to be elected later this week on 9 July and parliament will open on 17 July with the King’s Speech followed by debates in the afternoon.  

The Charter for Budget Responsibility, under normal circumstances, requires the Chancellor to give the Office for Budget Responsibility (OBR) at least ten weeks’ notice of a fiscal event and to formally commission a forecast. It is then up to the Chancellor to decide on the date of that fiscal event. Once the date is set, the signatories of the Memorandum of Understanding (OBR, HMT, HMRC, and the Department for Work and Pensions) agree a timetable for that fiscal event.  

In a speech prior to the election and in her first speech as Chancellor on 8 July, the new Chancellor confirmed that Labour will not hold a budget without forecasts from the OBR. This means that the first budget under the new government will take place in the autumn hence an emergency budget shortly after last week’s election has been ruled out.  

More details of Labour’s expected tax policies are set out in a news story from last month and it should also be noted that the new government has also committed to holding just one fiscal event per year, a departure from the bi-annual Autumn Statement and Spring Budget process of the last few years. 

On the Northern Ireland front, over the weekend the newly appointed Secretary of State Hilary Benn MP made his first visit to Northern Ireland since taking up the role and met with the Assembly’s First and deputy First ministers.