Baseline Fiscal Position.
The existing costed manifesto produces the following net fiscal trajectory, central estimates, annual net flows to Exchequer:
| Year | Net Position | Status |
|---|
| Y1 | −£15bn | Front-loaded costs, LVT not yet fully operative |
| Y2 | −£8bn | LVT ramp-up begins |
| Y3 | +£2bn | LVT and CGT reform at scale |
| Y5 | +£18bn | All revenue measures fully operative |
| Y10 | +£38bn | Water and energy surpluses accruing |
Key point: The £38bn Y10 surplus is the fiscal headroom figure. Everything additional we commit to in this briefing cycle eats into this, and we need to track it explicitly. The Y5 figure of £18bn is the more politically relevant number because it lands within a single parliamentary cycle.
What the £38bn already includes
- Full LVT revenue (investment properties only, primary residence exempt)
- Commercial LVT receipts
- CGT productive-investment reform (zero on qualifying sectors)
- IP and intergroup transfer withholding tax
- Council tax → Local Services Tax replacement (revenue-neutral)
- Bank guarantee contingency for housing transition
- Government construction programme
- Shared equity scheme
- Water and energy nationalisation surpluses (from Y5–Y10)
What it does NOT include (additive costs to track)
- NHS workforce expansion and pay uplift (covered in the NHS briefing)
- Defence expansion (covered in the Defence briefing)
- Infrastructure and HS2 audit outcomes (covered in the Transport briefing)
- Police and legal aid restoration (covered in the Justice briefing)
- Nuclear programme acceleration (covered in the Energy briefing)
- Industrial policy operational costs (British Business Bank capitalisation, regional organiser network)
Tax Architecture.
VAT.
Position: No change. Current rate (20% standard, 5% reduced, 0% zero-rated) maintained.
Rationale: Politically settled, economically functional, administratively efficient. Reopening VAT creates a fight for no clear gain.
Review point: Five-year strategic review in office.
Fiscal impact: Neutral.
Corporation Tax.
Position: Return to 20% flat rate, abolishing the current two-tier system (19% small profits rate / 25% main rate, with marginal relief between £50k and £250k profits).
Rationale
- Simplification. The marginal relief calculation is a compliance nightmare for mid-sized firms.
- Large multinationals effectively pay neither rate due to transfer pricing (which we address separately via the IP/intergroup transfer withholding tax)
- Genuine small firms benefit more from the commercial LST/business rates reform than from a differential CT rate
- R&D tax credits retained in current form (specifically protects productive-sector firms like Oxford F1 teams, biotech, engineering)
Fiscal impact: Modest reduction vs current system. At current corporate profit levels, moving from 25%/19% tiered to 20% flat is approximately −£8bn/year in static terms. Dynamic effects likely make this closer to −£4bn/year as investment responds.
Capital Gains Tax.
Position (existing): Zero CGT on productive investment, defined narrowly:
- Equity in UK-incorporated companies
- 75% of tangible assets located in UK
- Held minimum 5 years
- In listed productive sectors (manufacturing, engineering, biotech, clean energy, semiconductors, defence, agriculture, infrastructure)
- Excludes property, financial services, pure software holding companies
Status: Already in costed baseline. No change.
Inheritance Tax.
Position: Rates and thresholds unchanged. Focus on enforcement reform.
Enforcement priorities
- Close trust loopholes used for land ownership (the issue flagged in previous work)
- Tighten Business Property Relief to exclude passive investment vehicles
- Seven-year rule enforcement, which is currently weakly audited.
- Cross-reference with Land Registry for pre-death land transfers
Rationale: The headline rates are defensible; the revenue loss is in enforcement failure. HMRC estimates the IHT tax gap at roughly £1.4bn/year; closing enforcement loopholes plausibly recovers £600m–£1bn/year.
Fiscal impact: +£600m–£1bn/year from Y3 onwards.
Enforcement reform is politically easier than rate changes. The farmers' LVT/IHT exemption on small productive lots, already in the platform, protects genuine agricultural inheritance.
Income Tax and National Insurance.
This briefing does not set income tax or National Insurance positions; those are reserved for the consolidated platform document.
Non-Doms and Golden Visa.
Position: Replace the current non-dom regime (already abolished by Labour in 2024–25) with a Productive Investment Visa.
Structure
- £2m minimum qualifying investment in UK productive business (equity, not loans)
- Investment must meet the same sector definition as the CGT productive-investment framework
- Ongoing residency tied to ongoing investment maintenance, measured annually via Companies House records, HMRC corporate returns, and Land Registry (to verify no property-sector backdoor).
- 10-year initial tax residency with CGT shield on pre-existing wealth (but not on gains accrued during residency from non-qualifying sources)
- Renewable if investment maintained; revoked if investment exits without replacement
- Separate and distinct from standard immigration routes. This is explicitly a capital-import mechanism.
- Hard cap: maximum 1,500 qualifying visas per year (stops it becoming a mass instrument)
Fiscal impact
- At 1,500 visas/year fully subscribed: £3bn/year minimum productive investment inflow
- Tax receipts from resulting business activity: +£500m–£1.5bn/year by Y5 depending on business scale
- Foregone CGT on shielded pre-existing wealth: difficult to estimate but likely <£300m/year (most recipients would not have realised UK CGT liability anyway as non-residents)
- Net fiscal positive: +£200m–£1bn/year from Y3 onwards
This is not a scheme to sell UK residency. It is an instrument for importing productive capital on terms the British public will recognise as reasonable: if you bring capital to build things here, you are treated as a productive investor.
Pensions (State Pension and Triple Lock).
Position: Triple lock replaced with double lock: higher of CPI inflation or average earnings growth.
Rationale for double lock
- Triple lock (higher of CPI, earnings, or 2.5%) is fiscally unsustainable long-term. The 2.5% floor was designed for a low-inflation era and compounds aggressively.
- Double lock (CPI / earnings) maintains real-terms value and keeps pensioners in line with the working population
- Our industrial policy is explicitly aimed at raising productivity and wages. Under a wage-linked double lock, pensioners share in this growth rather than being insulated from it by a fixed floor.
- Pensioners also benefit materially from council tax → LST transition (which is tax-reducing for most pensioner households)
Fiscal impact
- Triple lock cost above CPI+earnings baseline: roughly £1bn/year per year of above-inflation increases, compounding
- Moving to double lock saves approximately £3–5bn/year by Y5, £8–12bn/year by Y10
- This is a significant contribution to the Y10 surplus
Means-testing is politically radical and would require detailed design, tapering, contribution-record protection, and administrative capacity. It is held for a five-year strategic review in office rather than committed in this briefing. It can be raised publicly as a discussion topic to test the political ground without commitment.
The double lock shift is defensible and increasingly mainstream, with the IFS and OBR having raised similar concerns. The triple lock was calibrated for a low-inflation era; in a post-2022 macro environment it over-delivers and risks intergenerational unfairness. Paired with the council tax to LST transition, pensioner households are protected in real terms through a sustainable mechanism.
Fiscal Summary.
| Measure | Y5 annual impact | Y10 annual impact |
|---|
| Corporation tax 20% flat | −£4bn (dynamic) | −£4bn |
| IHT enforcement | +£0.8bn | +£1bn |
| Productive Investment Visa | +£0.5bn | +£1bn |
| Triple → Double lock | +£4bn | +£10bn |
| Net effect on baseline | +£1.3bn | +£8bn |
These are additive to the existing £18bn Y5 / £38bn Y10 baseline, producing an adjusted headroom of approximately:
This is the envelope within which all additional spending commitments (NHS, defence, police, legal aid, nuclear, etc.) must fit.