What the Labour conference means for your personal finances

What is it with politicians and pork-based incidents?

Former Labour leader Ed Miliband will never forget the time he was snapped inhaling a bacon sandwich (there’s even a Wikipedia page to remind him), Liz Truss delivered a bizarre speech on pork markets, and there was the so-called pork pie plot, a group reportedly assembled to oust Boris Johnson from his premiership.

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The Labour Party Conference 2024 produced the latest episode, as Prime Minister Keir Starmer in a speech on Tuesday urged Hamas to return the “sausages” rather than “hostages”. Sir Keir swiftly corrected himself, but a slip of the tongue on such a sensitive topic was less than desirable.

Social media clearly had a field day, but if we’re being fair, every human has the capacity to say something clumsy every now and then. What truly matters is that Starmer avoids making a pig’s ear of the UK economy.

Thankfully there was more to this event than one unfortunate blunder, although not a great deal. Notably, it was the first time since 2009 that Labour had held its annual conference while in power, providing a timely opportunity to reassure the public that our country’s economic future is in safe hands.

The overriding message was that things will get tougher before they improve. The new government has been in charge for less than three months, but from kiboshed winter fuel payments to gaping fiscal “black holes”, there hasn’t been much to cheer. Starmer, however, is confident that better days are coming down the track as his party attempts to “build a new Britain”.

Here, I round up some of the big personal finance talking points from the conference and briefly look ahead to what’s next.

One step back, two steps forward

On Tuesday morning, a few hours before his address, Starmer tweeted: “Just because Britain isn’t working at the moment doesn’t mean it can’t be fixed. With Labour, the work to deliver change has already begun.”

He added that short-term pain is necessary to achieve long-term gain, a drum that Labour has repeatedly beaten since its landslide election victory in early July. Starmer has said that those with the broadest shoulders should bear the heaviest burden. The question here is, who does this apply to? One’s assessment of broad might be considered narrow by another.

Front-loading the bad stuff is a routine tactic employed by new governments, giving them ample time to drag the economy into ruder health by the time the next election comes around.

“Stabilising our economy is the first step of this long-term plan. The only way we keep prices low, cut NHS waiting lists, and secure the triple lock so that every pensioner in this country - every pensioner - will be better off [is] with Labour,” Starmer said.

More on the impact on pensioners further down, but the measures proposed to shore up the nation’s foundations has come at the expense of the prime minister’s popularity. In late July, Starmer had favourability of +71 among those who had voted for him, but this had plummeted to just +43 at the start of the conference.

This is unlikely to prompt any real cause for concern - not yet anyway. During his speech, the prime minister conceded: “I understand many of the decisions we must take will be unpopular. If they were popular, they’d be easy.”

However, there is a growing sense that the gloominess and talk of impending harsher times might have gone a bit too far. The warning of a “painful” budget to plug the £22 billion fiscal “black hole”, coupled with the lack of indication of where this pain will be felt, has triggered an understandable sense of panic in some investors.

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According to an article in the Telegraph, published last weekend, savers are hooking money out of their pensions before 30 October in fear the government will reduce or abolish pension tax-free cash entitlement with immediate effect.

At ii we have also seen an uptick in activity. There was a 58% increase in the volume of cash withdrawals from self-invested personal pensions (SIPP) that make up part or all the 25% tax-free lump sum entitlement in the first 16 days of September, compared to the same period in 2023.

Investor nervousness is perfectly natural – keeping tax bills low in retirement is a crucial strategy. But it’s important to think carefully before making big decisions with your long-term wealth based on speculation. While changes to pension tax are indeed possible, we still don’t know whether they will come to pass, or what shape they could take. Still, those who hoped Labour would use its annual conference to assuage any concerns here will have been left disappointed.

Reeves did reiterate Labour’s manifesto promise not to raise the headline rates of income tax, national insurance, VAT, and corporation tax. But there was no mention of capital gains tax (CGT) or inheritance tax (IHT).

Elsewhere, Deputy Prime Minister Angela Rayner spoke of her desire to help workers on to the property ladder. “A new planning framework will unlock the door to affordable homes and provide the biggest boost to social and affordable housing in a generation,” she said.

Winter fuel cut controversy heats up

The move to scrap winter fuel payments for around 10 million pensioners hasn’t gone down well in all quarters. In September, the government won a parliamentary vote by a majority of 120 to push through the proposal, meaning the money will now only be paid to those on certain benefits.

Critics claim that many of those affected need these payments to make ends meet.

However, on Wednesday, conference delegates voted by a narrow margin to reverse the decision, further deepening the row.

In an emotive speech, Sharon Graham, general secretary at Unite the Union, said: “Friends, people simply do not understand, I do not understand, how our new Labour government can cut the winter fuel allowance for pensioners and leave the super-rich untouched. This is not what people voted for. It is the wrong decision and needs to be reversed.”

The controversy had already exacerbated after Reeves chose to push the vote back from Monday. While the outcome has left the government somewhat red-faced, it was non-binding, so Starmer can opt to ignore it, which he almost certainly will.

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During their speeches, which took place before the vote was cast, the prime minister and the chancellor stuck to their previous scripts, steadfastly defending the decision to scrap the payments.

Reeves said she wouldn’t shirk the big decisions, while Liz Kendall, work and pensions secretary, defended the winter fuel cut, but added that it “wasn’t a decision we wanted or expected to make”.

Labour argued that the pension triple lock mechanism, which the government has committed to for this Parliament, will help to protect pensioners’ future incomes.

More controversy arrived during Reeves’ address, after nurses snubbed a pay offer while the chancellor was on stage. “I am proud to stand here as the first chancellor in 14 years to have delivered a meaningful, real pay rise to millions of public sector workers,” Reeves said, unaware that news of the rejection had trickled in.

Next stop, the Budget…

This year’s Autumn Statement is the most hotly anticipated set-piece fiscal event in years. Labour’s frequent reminders that tax hikes are needed to balance the books could have sizeable implications for our personal finances.

But Reeves struck a hopeful tone: “It will be a Budget with real ambition. A Budget to fix the foundations. A Budget to deliver the change that we promise. A Budget to rebuild Britain.”

The chancellor stressed the government must be disciplined but pledged no return to austerity. Encouraging words, but again, some clarity about what the government may do, particularly with taxes, was absent.

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In any case, thanks to fiscal drag, a stealthy way for governments to boost revenues by freezing tax thresholds, our tax bills are already rising. This is affecting millions of taxpayers and will impact millions more as the current Parliament plays out.

The government is confident that at some point the gloom will pass and better days will take its place. “My optimism for Britain burns brighter than ever. My ambition knows no limits,” Reeves said.

Around 1:30pm on Wednesday 30 October after the chancellor closes out her Budget speech, we’ll find out if taxpayers share this sentiment.