As the new Labour government takes office, various sectors are poised for shifts in policy and regulation that could significantly impact their operations. In this article, we explore insights from different departments within our solicitors’ firm regarding the potential ramifications of the new government's policies on their business and clients. By gathering perspectives from various legal disciplines, we aim to provide a comprehensive overview of how these changes could shape the legal landscape and influence client strategies moving forward.
Clinical Negligence/Personal Injury
It is difficult to predict the impact of the new Labour government on personal injury and clinical negligence claims. The previous Conservative government have already implemented various changes to these areas of law, including provision for fixed legal costs in some personal injury and clinical negligence claims. It is unclear at this stage whether the Labour Government will look to revise these rules, as there is concern that this has already led and will continue to lead to people not having access to justice.
Regarding damages in personal injury and clinical negligence claims, the Labour government have already announced that they are reviewing the discount rate. The discount rate is the percentage figure applied to future losses and expenses when quantifying personal injury damages. The outcome of this review is expected in January 2025.
Family
From the family perspective, here are the main points that will come into place with the new government:
- Possible reform of cohabitation law. Presently, unmarried couples who separate do not have the ability to pursue the full spectrum of financial claims that married couples do, e.g. pension sharing, and spousal maintenance. Some Labour figures are supportive of cohabitation law reform although at this stage it is unclear what any specific changes would amount to. They might for example be that such claims can be pursued after, say, a set period of time living together, as is already the position in certain other common law jurisdictions.
- Possible risk of VAT being added to private school fees. This could add to the financial struggles of separating couples whose children are currently being privately educated.
- Possible reform of financial remedies for divorce. The laws which govern this area are now several decades old and the Law Commission has been tasked with undertaking a review. It remains to be seen what their conclusions and recommendations are to and to what extent, if at all, those are taken forward by the Labour government.
- Expansion of availability and accessibility of early years childcare. For working parents, this will certainly ease the pressure.
Private Client
The new Labour government has proposed several changes to the UK capital gains tax (CGT) regime that could impact estates, including those of deceased individuals. Here are the key points:
- Annual Exempt Amount (AEA) Reduction:
Labour plans to reduce the CGT annual exempt amount from £6,000 in 2023/24 to £3,000 for individuals and personal representatives, and from £3,000 to £1,500 for most trustees from 2024/25 onwards
- Reforms to Trusts and Inheritance Tax (IHT):
There is a significant focus on trusts, particularly those involving non-UK domiciled individuals. Under the new proposals, all assets within a trust could be subject to IHT if the settlor has been UK resident for 10 years, impacting both existing and new trusts.
- Rate Increases and Alignment:
While specific rates have not been finalised, Labour intends to increase the CGT rates, potentially aligning them more closely with income tax rates. This could affect the tax burden on estates that include significant gains. These changes are still subject to further consultation and potential adjustment, but they highlight a move towards stricter tax regulations for capital gains, especially in the context of inheritance and trusts. For those handling estates, it is crucial to stay informed about these developments and possibly seek professional advice to understand the full implications.
Employment
Potential Changes and Impacts:
- Workers’ Rights and Employment Protections:
- Stronger Protections: The Labour Government is expected to enhance workers' rights, potentially including increased job security, better protection against unfair dismissal, and more robust enforcement of existing employment laws.
- Right to Flexible Working: We anticipate a push to make flexible working the default, allowing employees greater control over their work-life balance. This could impact employers by necessitating changes in how they manage and schedule their workforce.
- Minimum Wage Increases:
- Living Wage Commitment: Labour has signalled intentions to raise the minimum wage to a true living wage, which could lead to increased operational costs for businesses. Employers may need to adjust their budgets and payroll systems accordingly.
- Trade Union Empowerment:
- Enhanced Union Rights: There may be legislative efforts to strengthen trade unions, potentially making it easier for employees to organise and demand better terms and conditions. This could lead to an increase in collective bargaining and potential challenges for employer negotiations.
- Employment Status and Gig Economy:
- Clarification and Protection: We expect reforms aimed at clarifying employment status, especially for gig economy workers, ensuring they receive the same rights and protections as traditional employees. This could lead to increased costs and regulatory changes for businesses relying on flexible or freelance labour.
- Parental Leave and Family Policies:
- Expanded Leave Policies: Labour may introduce more generous parental leave policies, enhancing support for working families. Employers will need to review and potentially revise their policies to comply with any new requirements.
- Diversity and Inclusion Initiatives:
- Focus on Equality: There is likely to be a strong emphasis on diversity and inclusion, with possible new regulations requiring businesses to demonstrate progress in these areas. Companies may need to implement additional training and reporting mechanisms to comply with these changes.
Expected Developments in the Next Five Years
- We can anticipate a significant legislative agenda aimed at transforming the employment landscape, with a focus on fairness and equality.
- As rights expand, employers may face increased litigation risks, necessitating a proactive approach to compliance and employee relations.
- Businesses will likely need to revise their HR policies and practices to align with new regulations, ensuring they remain compliant and competitive in attracting talent.
Recommendations for Clients
- Clients should be encouraged to stay informed about legislative changes and be prepared to adapt quickly to new requirements.
- Regular reviews of employment contracts and HR policies will be essential to ensure compliance with evolving laws.
- Open communication with employees about changes and their implications will be crucial in maintaining a positive work environment.
- For law updates and general employment changes, you can sign up to our quarterly bulletin here.
Litigation
- Labour intends to reform the regulation of the private rented sector.
- Immediately abolish s.21 ‘no-fault’ evictions. On one hand, this will grant greater security and protection for tenants. On the other, this will have an impact on a private landlord’s ability to retake possession of their property unless the agreed term has ended or they have grounds to evict the tenant under s.8 of the Housing Act 1988 (e.g. rent arrears, antisocial behaviour). Private landlords will not be able to retake their property simply because they want to at any given time. This could result in landlords preferring to offer shorter tenancies to new tenants in the first instance.
- Empower tenants to challenge unreasonable rent increases to combat the cost-of-living crisis. This could result in us seeing more disputes over rent increases and what is deemed ‘reasonable’.
- Extending ‘Awaab’s Law’ to the private sector, which currently only requires the government to make regulations which require hazards in social housing to be remedied within specified timeframes. This will unify the position with respect to both private and social housing and offer better protection against defective residential premises in general. This may potentially be quite onerous for small private landlords who use letting as another income, but the importance of a safe home cannot be overstated.
- Make it easier and cheaper for leaseholders to extend leases.
- These changes will potentially reduce the incentive to become a private landlord but will offer much greater protection and safeguards to renters.
- Bring the ‘feudal’ leasehold system to an end.
- Plan to enact the package of Law Commission proposals on leasehold enfranchisement, right to manage and commonhold.
- Take further steps to ban new leasehold flats and ensure commonhold is the default tenure.
- Tackle unregulated and unaffordable ground rent charges and bring the injustice of ‘fleecehold’ private housing estates and unfair maintenance costs to an end. This could impact management companies financially and will require more from them to justify maintenance costs.