We run through some of the personal finance-related pledges in the Green Party manifesto.
The Green Party’s manifesto launch involved less fanfare than that of the rival parties. However, while the party is unlikely to see much in the way of voter gains, it could end up as part of a junior coalition with other left-leaning parties. That means some of its policies could be given consideration.
Below we run through some of the personal finance-related pledges in the Green Party manifesto.
Universal Basic Income
The party’s flagship policy is the introduction of an unconditional financial payment called Universal Basic Income. The proposal would see everyone, at any earning level, paid at least £89 a week.
However, there will also be a higher payment amount for certain groups. For example, pensioners will receive a weekly payment of £178 - £10 higher than the current state pension. Those earning less than £50,000 per year will receive a supplement of £70 per week for each of their first two children, reduced to £50 per week for each additional child.
The Consolidated Income Tax
Another major policy is the proposal to merge various taxes into one Consolidated Income Tax. The party says it will “merge employees’ national insurance, capital gains tax, inheritance tax, dividend tax and income tax into a single Consolidated Income Tax.”
The idea is that everything an individual makes in a year is subject to the same tax rate, regardless of whether it has come from working, investment or an inheritance windfall.
The problem, says Laura Suter, personal finance analyst at AJ Bell, is that “there is no detail on what that the rate of consolidated income tax would be.”
She continues: “If it’s set at the current basic rate of 20%, that would be a massive giveaway for high earners, cutting their tax rate from a maximum of 45%, and handing them a big income boost. Conversely, if it’s set at a higher rate, say 40%, that would hit low-income families with a whopping tax increase.”
Those who invest, however, will likely face a higher tax bill, having lost the extra tax allowances on capital gains and dividends, which will be rolled into the consolidated income tax.
According to Suter: “Investors would face higher taxes if the capital gains tax allowance and dividend tax allowance were scrapped, meaning that up to £14,000 of investment earnings a year that are currently tax-free would now be taxed.”
As with the Labour Party and Liberal Democrats, the Green Party hopes to “end the injustice whereby people who work for their incomes are taxed more highly than those whose income is derived from wealth.”
The manifesto says that the party will raise £2 billion through a “reduction of tax-free drawdown on pensions to £40,000.”
Tom Selby of AJ Bell comments: “It’s never a good sign when you’re left having to guess exactly what a manifesto pledge means. But given drawdown isn’t ‘tax-free’, we think the Green Party is talking about limiting the tax-free cash people are entitled to from age 55 at £40,000.”
This policy would be bad news for savers, says Selby. He argues: “The ability to withdraw up to a quarter of your fund tax-free is one of the few benefits of pensions most people genuinely understand, so limiting it would create one less reason to save for retirement.”
Selby also takes issue the Green Party’s policy to limit pension tax relief at 20%, the lowest level currently available. He points out that much of middle England is currently entitled to 40% tax relief, and that a reduction would lower people’s incentive to save for retirement.
At the same time, he says: “As with tax-free cash, there is also an intergenerational fairness issue here too. While older workers will have had the chance to claim tax relief at their highest marginal rate while saving in a pension, younger workers will be limited to half this amount.”
Unsurprisingly the party also says it will require councils and other public bodies to divest their pension funds away from fossil fuel-related investment. It will also encourage all private pension funds to do the same.