What does a Labour Government mean to you?

As expected, Sir Keir Starmer and the Labour party have won the UK General Election with an expected/unexpectedly large/small majority.

The important thing for all farming and landowners is what does this mean for you? The below sets out the Labour manifesto and considers what changes they may implement over their term.

Interestingly the word “farming” only appears twice in the whole Labour manifesto.

Labour’s tax policy was attacked by Rishi Sunak during the election campaign. We will now have to wait and see whether he was right.

Labour was clear that they would not increase National Insurance, the basic, higher, or additional rates of Income Tax, or VAT. However, they did not commit on maintaining the income tax bands, so we could see a change to the starting income bands where you pay 20%, 40%, and 45% tax.

VAT may become levied on school fees; this will increase drawings for many businesses who choose to send their children to Independent school. This will negatively impact cashflow for those affected.

For those businesses trading within a corporate structure, Labour have committed to cap corporation tax at the current level of 25%. This is good news for farming businesses as it gives certainty on their tax rates.

There was also a commitment to retain the annual investment allowance for small businesses. They also indicated they would give businesses clarity on what qualifies for allowances. This will help provide certainty businesses completing big capital projects.

There is always a nervous nature around what isn’t mentioned rather than what is mentioned. Both inheritance and capital gains tax were not mentioned in the manifesto. We will have to wait and see what changes a Labour government might take but given the pressure on public spending and Labours commitment to increase it, the money will have to come from somewhere, likely a combination of more tax and debt. We could see a change to tax rates or reliefs, but any changes could stifle growth that the country needs.

The Labour manifesto was clear in recognising that food security is national security. They also committed to undertaking the following actions:

• Introduce a land-use framework and make environment land management schemes work for farmers and nature. We need to ensure this is not a top down approach and landowners have a voice in this process.
• Work with farmers and scientists on measures to eradicate Bovine TB so that they can end the badger cull.
• Will set a target for half of all food purchased across the public sector to be locally produced or certified to higher environmental standards.

Interestingly, they made no commitment to the existing Defra budget as was promised by the Conservatives. Could this mean that farming business see a further reduction in farm subsidies?

Labour have been clear that they want to reform planning to enable new homes to be built. This should be beneficial to farming businesses with development land and/or barns for conversion.

A worrying statement within the manifesto was that Labour will further reform compulsory purchase compensation rules. This is to ensure that, for specific types of development schemes, landowners are awarded ‘fair’ compensation rather than inflated prices based on the prospect of planning permission. This could have a substantial impact on farming businesses who may have to buy more land to remain a financially viable business.

The cost of labour has increased substantially over the last few years. Any changes to rights and pay would impact on the bottom line and influence future decision making in the business, particularly where finding labour is already a problem.

Labour have confirmed they will:

• Introduce new employment legislation within 100 days of taking government. This will include banning exploitative zero hours contracts; ending fire and rehire; and introducing basic rights from day one to parental leave, sick pay, and protection from unfair dismissal.
• Make sure the minimum wage is a genuine living wage. They will change the remit of the independent Low Pay Commission so for the first time it accounts for the cost of living. Labour will also remove the discriminatory age bands, so all adults are entitled to the same minimum wage, delivering a pay rise to hundreds of thousands of workers across the UK.

Changes to minimum wage could substantially increase employment and direct costs. It could also substantially impact output prices for sectors like Dairy, Pigs, and Poultry where suppliers cost increases may be fed down the chain rather than to the end consumer.

It will also be interesting to see how a substantial change to minimum wage would impact inflation with wage growth in the UK already sitting at 6%.

Many farming businesses have rental properties. Labours plans set out to:

• ensure homes in the private rented sector meet minimum energy efficiency standards by 2030; and
• immediately abolish Section 21 ‘no fault’ evictions, prevent private tenants being exploited and discriminated against and empower them to challenge unreasonable rent increases.

These changes will give much greater power to the tenant. The changes to energy efficiency will increase investment needed by the landlord but this has been a known cost for a period of time.

Changes to Section 21 will cause landlords problems with evicting troublesome tenants. Empowering tenants on rent reviews will likely cap rental income and could make the future of being a landlord for farming businesses unfavourable.

We will see change and reform under this new government and maybe that is needed to drive growth and rebuild our public services.

The impact to the farming community is hard to quantify right now. This is due to the lack of detail within Labour’s manifesto.

It was evident in the change in government in 1997 that the fear of change was worse than the actual change from a tax perspective.

The concern is that the system is much more broken than then. We now must wait and see what this new government will do. Speak to your advisors and plan.