Which political party will look after your finances best?
Next month, the nation will go to the polls to elect a new government, with all political commentators and experts agreeing that the result is currently too close to call.
But ahead of 7 May, who does the great British public think will be the best party to look after their finances? In a 2015 election special, I took to the streets of London to find out how people think the coalition has fared and which party they will vote for.
CHRIS HUMPHREY, CHARTERED SURVEYOR, 39
"I think the coalition government has taken us through the toughest financial climate that we have seen for a very long time, certainly in my lifetime.
"There have been a lot of cuts and redundancies because of austerity but I am not at all convinced that Labour would have been able to handle it as well. Labour is suffering in terms of public perception at the moment; people don't seem to have a lot of faith in either Ed Miliband or Ed Balls.
"The changes the coalition made to Child Benefit have had a negative impact on my family, as I earn above the new threshold. Child benefit should be based on household income and not on whoever earns the most.
"I have been particularly interested in pension reforms. These are big changes and the government has done a pretty good job – people should be able to take out what they want from their pension fund. When it was announced, it probably didn't help that the minister (pensions minister Steve Webb) suggested that people could buy a sports car if they wanted to but annuities and other pension products have underperformed for so long that it is good to give people the choice.
"From my point of view, it's nice to have options. When I do retire I could use my money to invest in property, for example, as it's the industry I work in.
"From a selfish perspective, I have a large mortgage and little savings so I would rather it remains cheap to borrow, though I can certainly understand the frustration of those who have a lot of savings and get very little back in return."
"My main economic struggle is getting on to the property ladder.
"Soaring rent means I have minimal income left to save for a mortgage or deposit for a house on the outskirts of London, let alone closer to the centre.
"I believe my generation has been priced out of the market and, unfortunately, previous governments and the current one have failed to address the issue.
"The only solution is to build more homes and I do not feel that any of the major parties have outlined a sensible solution in their current manifestos. I do not hold a lot of hope that the situation will be rectified, whoever is in power.
"Personal Allowance (the amount of income people can earn before they pay tax was scheduled to rise to £10,600 on 6 April as Moneywise went to press but there was talk of this being further increased in the Budget) will have a nice, albeit small, impact on my income and is a small step in the right direction.
"However, other polices of the past five years have had a more negative impact – my sister had to opt out of higher education because of the rise in tuition fees.
"We hear that the Conservatives are the most competent when it comes to running the country's finances and that Labour, and poor old Ed Balls, were responsible for the financial crash but I do believe that all three of the major parties would have handled the economy in broadly the same way and that whoever comes to power will make the same decisions, again with more spending cuts."
CHRISTOPHER BYGOTT, OWNER OF INDEPENDENT COFFEE SHOP LOVE IN A CUP, 38
"I often think politics in this country is like football. Everyone talks about it but when it comes to the match, all the talk doesn't make a blind bit of difference to how the teams perform. I believe the banks should do a lot more to help support small- to medium-sized enterprises (SMEs), particularly after the bailouts which came at the expense of the taxpayers, so that the economy as a whole can perform better and start-ups can get the support they need. This is the biggest issue.
"SMEs make up around 68% of our economy, but when I opened here four years ago, in the midst of the recession, none of the banks wanted to know – one of them didn't even bother to look at my forecast and projections report. I opened my business with £2,000 in the bank and that was it – no one appeared to be lending at all.
"Fortunately, after a lot of hard work and hours, I am currently expanding my business to include a new shop outside London but in the past 12 months I have noticed two things about the wider economy. Firstly, people will always find the few extra pounds for a cup of coffee in the morning (or whatever indulgence they have) even if they don't feel like they are particularly well off.
"Secondly, I am seeing more and more customers use their credit cards to pay, rather than a debit card. I would now say that more than a third of my customers want to pay by credit card, so people are increasingly reliant on their plastic."
PHIL HOLIAN, SHOPWORKER, 30
"Lots of people feel apathetic when it comes to politics in the UK and want a big change. Because of this, I can't see it being anything else than another coalition government when the results come in, as I don't think any of the parties have enough popular support to get a majority.
"I am in favour of more regulation of financial services.
"When you look back to the financial crash eight years ago and ask yourself what has changed in that time, it doesn't seem like a lot to me. There has been a lot in the news recently about tax avoidance – going after the big tax avoiders is an issue that should be dealt with, while I think those who earn the most amount of money should be taxed at a higher rate than they currently are.
"But, overall, I don't think people feel they have much of a choice. I don't agree with much of what has happened over the past five years but the opposition has been so useless that I cannot see what real difference they would make.
"For example, the freeze on energy prices that Miliband has promised would only be for 20 months; it just skirts around the issue of people actually trying to pay their bills.
FELICITY RANGER, SURVEYOR, 25
"As I am a politics graduate, the election and its impact is pretty interesting for me. My generation – who had only ever known Labour governments – were keen to see how different things could be under the current government. Obviously, a global financial crash was still resounding but, as a student, I was optimistic about the progress that could be made.
"I just missed the tuition fee cap but still moved to London to improve my job prospects, with thousands of pounds of student debt, no savings owing to several unpaid internships and a rolling monthly contract with a major multinational company paying capped expenses. I was considered lucky by my fellow graduates, who struggled to find work for up to two years after graduating in various areas of the country.
"Young people have inherited mountains of personal and national debt, with no prospect of financial or social care in our old age, and increasingly, a capital city that is becoming unaffordable except for the ultra-rich – this needs to be addressed by whoever is in charge after May.
"The rent on my flat is unregulated, meaning I have no security over how long I can live there for. This coupled with the difficulties first-time buyers have in trying to save enough for a deposit, means the overall feeling I – and many others – have is one " of hopelessness.
"The main issue that the coalition (and indeed all politicians) now face is one of trust. I will be voting in May but, like the mayoral and local elections of the past few years, I will not be averse to tactical and strategic voting."
VIVIEN GOLDBERG, SCHOOL WELFARE OFFICER, 55
"I don't feel better off in terms of my personal finances since the coalition government came into office. As someone who has always worked in the public sector, I have seen at first hand the results of the cuts, particularly across local government – there has been a vastly increased workload for those working in the sector.
"This increased workload has not been matched by increased salaries, so over the past four years my salary, and that of my husband (who works in social services), has, in real terms, reduced, so we have not been able to save and our standard of living has not improved.
"I know that some cuts have been necessary but I also I think that it would have been right to re-introduce the 50% tax rate for top earners and also tackle tax avoidance much more robustly.
"That said, I am pleased the Isa allowance has been raised so that any spare funds I have managed to put aside will not be taxed. As someone who is mortgage free, any future policies to help savers would be welcome, as would a further reduction in tax for the lowest
paid like me.
"As a parent of two men in their 20s, I fear that they will never be able to get on the property ladder in London, and I think that more needs to be done in this area.
"As for job opportunities for graduates, it can't be right that someone who has studied for three years or more cannot find a job and we need more graduate schemes and paid internships. Any party whose manifesto tackles these issues will get my vote."
What the major parties are promising if they win the election
- Raise the minimum wage to £8 an hour.
- Freeze energy bills until 2017.
- Re-introduce a 50p tax rate for those earning more than £150,000.
- Build at least 200,000 homes a year by 2020 to deal with housing crisis.
- Bring in a ‘mansion tax' on properties worth more than £2 million.
- Aim to achieve an overall budget surplus by 2019/20.
- Income tax to start at £12,500 instead of the current £10,500 level
- Higher-rate tax band of 40% to start at £50,000 instead of £41,900 by 2020.
- Build 200,000 homes at a discount of up to 20% for first-time buyers under 40.
- Protect universal pensioners' benefits including free bus passes, TV licence and Winter Fuel Payments.
- Raise the Personal Allowance to £12,500. Q Increase Capital Gains Tax from 28% to 35%
- Build 300,000 homes a year.
- Stop Winter Fuel Payments and free TV licences for pensioners on the 40% rate of income tax.
There are limits to how much you can invest in any tax year. For 2011/12, the limit is £10,680. Of that, the maximum you can invest in cash is £5,340 and the balance of £5,340 can be invested in shares (individual company shares or investment funds). If you don’t take the cash ISA allowance, you can invest up to £10,680 into a stocks and shares ISA.
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.
Used by the holder to buy goods and services, credit cards also have a monthly or annual spending limit, which may be raised or lowered depending on the creditworthiness of the cardholder. But unlike charge cards, borrowers aren’t forced to pay the balance off in full every month and, as long as they make a stated minimum payment, can carry a balance from one month to the next, generating compound interest. As the issuing company is effectively giving you a short-term loan, most credit cards have variable and relatively high interest rates. Allowing the interest to compound for too long may result in dire financial straits.
Capital gains tax
If you buy an asset – shares, a second home, arts and antiques – and then sell it at a later date and make a profit, that profit could be subject to CGT. You don’t pay CGT on selling your main home (which is why MPs “flipped” theirs so regularly) or any securities sheltered in an ISA. Individuals get an annual CGT allowance (£10,600 in 2010/2011) but if you have substantial assets it’s worth paying an accountant to sort it for you.
Issued by a bank as part of a current account and, in a nutshell, serves as electronic cash. Unlike a credit or charge card, where you get an interest-free period before you have to settle the bill, the funds spent on a debit card are withdrawn immediately from your current account. Unless you’ve arranged an overdraft, if you don’t have the cash in the account, you can’t spend it.