How your vote could make you richer

With the General Election due on 6 May, which party will make you better off financially?

It may have passed you by but Tuesday this week was an exciting day for me, for two very different reasons.

First, it marked the start of the 2010/11 tax year, so we have another batch of allowances and tax shelters to use. Second, Prime Minister Gordon Brown asked HM The Queen to dissolve Parliament and called a General Election for 6 May.

No Labour government has ever won a fourth consecutive term, so the odds are stacked against Brown & Co.

Hence, bookmakers already have the Conservatives as clear favourites to win a majority, but a hung parliament is a very real prospect.

What’s in it for you?

Today, I’m not going to give you voting advice -- not least because so many politicians are aloof, self-interested and untrustworthy. Instead, I will lay out the tax and economic plans announced by each of the main parties and leave you to decide which party will leave you ahead financially.

Let’s begin with the government of the past 13 years:

Labour: “A future fair for all”

After coming to power in May 1997, Labour enjoyed an 11-year honeymoon during which the economy and wages rose steadily, inflation and interest rates stayed low, and house prices and personal debt soared. Then came the credit crunch of 2007, followed by Britain’s worse recession for 60 years, with the economy shrinking by a record 4.9% in 2009 alone.

Fortunately, our national output grew by 0.4% in the final quarter of 2009, and Labour will be relieved if this recovery continues in the first quarter of this year (the GDP figures are released on 23 April). Of course, Gordon Brown and Chancellor Alistair Darling are seen as the architects of this spectacular bust. However, in last month’s Budget, the Chancellor predicted the UK economy would expand by 1% to 1.5% this year and 3% to 3.75% in 2011 (3.75% seems hopelessly optimistic to me).

Then again, the next parliament will be dominated by efforts to balance the nation’s books. With a budget deficit (taxes minus spending) of around £167 billion in 2009/10, Britain is digging itself deeper into a money pit. Hence, the next Parliament will be dominated by tax rises and public-spending cuts.

Labour has laid out its stall very clearly: it intends to ‘soak the rich’ in order to curb tax rises for the masses.

So far, it has introduced a 50% tax rate for those earning £150,000+ a year (plus a 42.5% rate on share dividends). However, this affects just 300,000 people, or one in a hundred workers. What’s more, from 6 April 2011, higher-rate tax relief for pension contributions will be restricted for those earning £130,000+.

In addition, Labour has also frozen the basic personal allowance at £6,475 for 2010/11, with the higher-rate tax threshold frozen at £43,875 until 2013. Hence, almost all workers will lose out as wages increase and more of their income is taxed at higher rates.

Finally, the basic state pension rises by 2.5% this month, which will help 11 million pensioners. Also, the minimum wage is set to increase by 2.2% on 1 October -- it rises to £5.93 from £5.80 an hour for workers aged 22+.

Conservatives: “Vote for change”

Traditionally, the Conservatives are seen as the “rich people’s party” and this impression is reinforced by having Old Etonian David (“call me Dave”) Cameron at its head.

For example, Labour has frozen the Inheritance Tax nil-rate band at £325,000 until 2014, whereas the Tories plan to hike this threshold to £1 million. Only millionaires would benefit from this move, which raises accusations of elitism.

On the other hand, the Tories have scored a great goal against Labour by planning to scrap next year’s 1% rise in National Insurance Contributions. This led to public approval from 68 company chiefs and business groups, but left Lord Mandelson et al fuming. Another Tory promise is to bring back the married couple’s allowance, thus rewarding stable relationships with tax savings.

What’s more, the Conservatives plan to freeze public-sector pay for a year, cap public-sector pensions, raise the state pension age to 66, and reduce state benefits for well-off households. Another Conservative carrot is to freeze Council Tax for two years, and cut taxes for small businesses.

Liberal Democrats: “Change that works for you, building a fairer Britain”

While the Lib Dems could never secure a parliamentary majority, they would be the kingmakers in a hung parliament.

My former MP Vince Cable -- the only MP to predict the credit crunch -- is at the heart of the Lib Dems’ financial policies. Vince & Co. plan a steep increase in the personal tax allowance from £6,475 to £10,000 a year. This would free 3.6 million workers and pensioners from the income-tax net.

The Lib Dems would also curb public spending by capping public-sector pay, cancelling the replacement for the Trident nuclear deterrent, and getting rid of Child Trust Funds (introduced by Labour in 2005). They plan to cut rates of Corporation Tax, restore the link between the state pension and earnings, and provide greater help for the unemployed.

High earners and investors would pay more tax under the Lib Dems, with tax relief on pension contributions restricted to the basic rate, and the yearly Capital Gains Tax threshold slashed from £10,100 to a mere £2,000. Likewise, homeowners with houses worth £2 million+ would face a ‘mansion tax’ based on the value of their properties.

And finally...

So there you have it -- now it’s up to you to decide which party’s policies will make you richer.

Of course, parties change their policies more often than the wind changes direction, so don’t expect them to make good on their pre-election promises. Furthermore, few of us vote purely for financial benefit, leaving us with lots more to weigh up before voting on 6 May.

Personally, what I’d like to see is politicians acting to ban the everyday financial rip-offs which cheat the public. I’d certainly vote for any MP that introduced new laws to tackle such swindles as extortionate interest rates on credit cards, overpriced insurance, and awful savings rates.

In my view, we need fewer expenses-chasers and more consumer champions in the House of Commons...

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