However you feel about the re-election of the Conservative party on 7 May 2015, one thing’s for certain: we’re stuck with them for at least the next five years. So what can you expect to happen to your finances during this time? This article from debt counselling firm Fresh Finance takes a look at the Conservative manifesto and what it could mean for British people on low incomes and those who are struggling to overcome personal debt problems.
The good news
You might be surprised to hear it, but there are some positives in the Tory manifesto for people who are finding it hard to make ends meet. These include:
- Raising the income tax allowance
The Conservatives have pledged to increase the personal tax allowance (the amount you’re allowed to earn before paying any income tax) to £12,500. They will also link the allowance to the minimum wage, meaning that anyone who earns the minimum wage and works up to 30 hours a week won’t have to pay income tax.
- Doubling free childcare
David Cameron has promised to double the free childcare amount for three and four year old that’s available to eligible working parents from 15 to 30 hours a week. And any additional childcare that’s paid-for would become tax-free. According to the Prime Minister, this could save working couples around £5,000 a year.
- No increases to tax rates
There will be no changes to the current rates of standard rate income tax, VAT or National Insurance so lower earners will be no worse off in this respect. However, you may be less pleased to hear that the threshold for higher rate income tax (40p) will increase to £50,000 – giving wealthier people a tax break.
- ‘Triple-locked’ pension rises
The Conservatives have said that state pensions will be increased by 2.5% year on year using the triple lock system, which may give retired people some reassurance. However, the actual value of these increases will depend on inflation – they could work either way.
On the plus side, pensioners will be able to bequeath their pension savings tax-free after death, which could benefit younger relatives in financial difficulty. The Tories will also cap the cost of residential care, which could prevent some older people having to sell their homes.
The not-so-good news
- Reducing the benefit cap
The current limit on state benefits, which stands at £26,000 a year per household, will be reduced to £23,000. This puts the new cap at a lower level than average wage earnings. The thinking behind this is to encourage more adults of working age and ability to find employment – but will this be the result? We may just end up seeing more households, especially in job-starved areas of the UK, sliding further and further into poverty.
However, people receiving Disability Living Allowance or Personal Independence Payments needn’t worry as their benefit caps will remain the same, offering a level of protection for people who are too ill or disabled to look for work, and who qualify for these benefits.
- Bringing back Right to Buy
You might think this is a good idea at first glance, especially as the Conservatives have said that new, affordable housing will be built to replace each council or housing association property sold.
But think about it this way: people living in local authority or housing association accommodation enjoy low rents and the added bonus of having repairs and maintenance paid for. They’re more likely than private sector tenants to be on low incomes and therefore less likely to have much money to spare.
So whilst they might feel great about owning their own home and snapping it up for a good price under Right to Buy, they could be in trouble when their mortgage rate goes up and they can no longer afford the repayments. And what happens when the boiler breaks down or the roof needs replacing, and there’s no money and no landlord to deal with it?
This manifesto item in particular could turn out to be a real double-edged sword.
We’ll have to wait and see
Like all manifestos for incoming governments, it will be a question of waiting and seeing whether or not the Conservatives honour the various pledges made in their 2015 manifesto. But whatever the outcome, there are still difficult times ahead for thousands of debt-ridden, lower income families across the UK.
Drowning in debt? Talk to Fresh Finance
If you’re having debt problems, don’t struggle on alone. Our qualified advisers will help you find the right way to start clearing your debts. The solutions available from Fresh Finance include Debt Management, IVAs and bankruptcy – contact us today to find out more and discuss your options.