Although Labour is only just beginning to establish itself, it has been eager to shower the country with a series of announcements, a strategy designed to impress us and show it means business from the start.
It’s a deluge comparable to the persistent rain I endured while exploring the UK’s east coast over the past two weeks.
Which of the two has depressed me more? I’ll leave that up to you, but for the record, I love walking no matter the weather.
Thus, Conservative initiatives designed to tackle illegal immigration (the flights to Rwanda and the desolate barge Bibby Stockholm parked in Dorset) have been swiftly defeated.
Instead, Labour will help fund projects in Africa and the Middle East (worth around £84m) aimed at deterring people from migrating. Good luck with that.
Chancellor of the Exchequer Rachel Reeves has indicated that inflation-busting pay rises could soon be on the way for millions of public sector workers.
Meanwhile, thousands of inmates are to be released after serving just 40 percent of their sentences to ease pressure on an overstretched prison system.
Labour has also promised to get millions of long-term sick people back to work, while Chancellor of the Exchequer Rachel Reeves has indicated that inflation-beating pay rises could soon be on the way for millions of public sector workers.
The amount these workers will receive is expected to be confirmed before the end of the month, but it will cost the public purse a fortune: at least £3bn according to the Institute for Fiscal Studies think tank, possibly as much as £8bn.
While some of you may agree with the direction Labour is taking, what is becoming increasingly clear is that tax rises are just around the corner. Government ministers have already begun laying the groundwork for this, repeatedly criticising the Conservatives for leaving the country’s finances in a sorry state.
What we know about the state of the public purse will be revealed tomorrow, when the Chancellor of the Exchequer confirms there is a £20bn hole in the government’s finances. Tax rises in the autumn budget are a certainty, as sure as night follows day. The rumour mill has already begun, with one report suggesting Reeves is keen to reform the tax breaks citizens get for pension contributions.
It could lead to the introduction of a flat 30% tax rate – good news for basic rate taxpayers who currently enjoy 20% relief, but bad news for around 6 million taxpayers on tax rates of 40 and 45%. In effect, taxpayers on higher tax rates will pay a 10% tax charge on their pension contributions.
However, as I said (repeatedly) before the election, this could be just the tip of the iceberg. Further tax increases are on the way, aimed mainly at the middle classes.
This could lead to a more draconian regime for those making capital gains from property (rentals, holiday homes) or share sales. It could also make it harder to protect wealth from inheritance tax and increase tax on dividend income from shares.
The Labour Party has always despised the creation of personal wealth. The 2024 version is no different.
A sad story of two urban banks
I know it’s pretty sad, but my two-week road trip earlier this month along the east coast wasn’t just about visiting castles (like Alnwick, Dunstanburgh and Scarborough), hopping over to Holy Island for the day, wandering along the glorious beaches of Northumberland and watching the trains cross the Royal Border Bridge at Berwick.
A key component of the visit was looking at the health of the banks in the places I stayed (Norwich, Whitby, Berwick, Alnwick, Scarborough and Cambridge). None of them have escaped the curse of closures, but Alnwick, above, home to the second-hand bookshop Barter Books, in the old railway station, was the one that angered me the most. Although there are still two banks (Halifax and Lloyds) in the city, both will close in January.
Since both of these brands are owned by Lloyds Bank, surely one of the branches could have been saved. The bank says otherwise: they are victims of low usage. Really? Not when I was there.
The only silver lining is that a banking hub will be created once Lloyds and Halifax pack up their bags and ATMs and leave town. Let’s hope the Financial Conduct Authority keeps its promise (see my story on the right) and makes sure Cash Access UK does everything it can to get it up and running as soon as Lloyds leaves for Cleveland Hills.
Visitors relax outside a cafe in the market town of Alnwick, Northumberland
Five-year fixed mortgage rates for new borrowers are slowly coming down, with Nationwide Building Society becoming the first to offer a loan at less than four per cent.
Great news for borrowers, but will the Bank of England dare to cut the base rate when its monetary policy committee delivers its ruling on Thursday? A cut would be very welcome and would be a boost for many borrowers, businesses and the UK stock market. But I think the base rate will stay at 5.25 per cent for another month.
The Tories may be in rebuilding mode, but conservatism still reigns supreme in the BOE. If I’m wrong, I’ll donate £50 to charity.
Centers with too many “exit” clauses
New rules to ensure access to cash nationwide will be introduced in September.
The details were confirmed a few days ago by the Financial Conduct Authority (FCA), which will oversee the new regime and ensure banks act responsibly when closing branches.
The regulator’s intervention will bring some benefits. For example, it will prevent banks from closing the last branch in town before an alternative service, such as a banking centre, is up and running. Centres are community branches that customers of all major banks can use to access basic banking services and sometimes visit to see an adviser from their own bank.
It will also reduce the time it takes to configure hubs.
Some take more than a year to complete, but the FCA will require them to be operational within three months, even if the initial centre is temporary while a permanent home is sought.
However, the FCA’s new rules are not without flaws. There is nothing that forces banks to unconditionally support the centres they fund through payments to Cash Access UK, an organisation set up to build the network of centres.
This means that at some point in the future, banks could change their minds and say that the centers are not busy enough to continue to exist.
Furthermore, there is nothing to force banks (via Cash Access UK) to set up a centre in a city where Nationwide Building Society is the last ‘bank’ standing.
Community bank activists like Derek French have long called for this anomaly to be addressed, arguing that Nationwide does not offer banking services to small businesses. As a result, local merchants in cities where Nationwide is the leader have difficulty accessing (or depositing) cash and banking services.
French argues that if this anomaly is not addressed, banking centres will remain a minority sport. It will also mean that there is no chance of Labour delivering on its election manifesto pledge to install 350 refurbished banking centres on our high streets.
Currently, the number of fully operational centres is 68 and, despite the hard work of Cash Access UK, the network is growing at a snail’s pace.
Perhaps Labour needs to whisper something into the FCA’s ear.
Some links in this article may be affiliate links. If you click on them we may earn a small commission. This helps us fund This Is Money and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationships to affect our editorial independence.
