Martin Lewis explains impact election result could have on personal finances amid Labour's promise not to raise taxes

Martin Lewis said Labour would find it 'tough' to 'fill the huge black hole in the nation's finances'. The MoneySavingExpert.com founder said the party, which vowed not to increase taxes, would want to 'take action' following the landslide victory but said it would have to be done in a way that 'doesn't cost' unless it was preannounced in the manifesto.

The finance guru appeared on ITV’s Good Morning Britain on Friday morning to explain to viewers what could happen once Sir Keir Starmer officially becomes the next Prime Minister, bringing the Conservative's 14-year run to an end. The Mirror reports that Martin said he expected Labour to make a statement stating the UK's finances were in a worse state than initially feared.

Martin said that any changes would also have to be delivered in a way that would not cost the Government too much money. He said: “What I expect is going to happen in the next couple of weeks, is Labour will get fully into Government and do some form of revelation, saying: ‘Wow, the finances are so much worse than we expected, there’s a big economic black hole, things are going to be very tough,’ and then do some expectation management."

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He continued: "Of course, we all know that already… I've been pushing candidates from all parties of what they’re going to do to fill the huge black hole in the nation's finances. I think what that means for the cost of living, is the Government will be looking at things that do not cost the exchequer a lot of money to do.

“They’re going to need in the first 100 days to make a difference to the country, they’re going to want to show people that things have changed, that they mean action, they’re going to start to deliver. But they're going to have to do it in a way that, where unless it was preannounced in the manifesto, it doesn't cost.”

He said while Labour had promised not to raise taxes, it was important to remember that the threshold for when people start paying tax would remain frozen until 2028, meaning more people would be dragged into paying tax when they started to earn more money, through pay rises or a better-paid job.

Although not explicitly mentioned in the manifesto, Martin said Labour could instead look at raising Capital Gains Tax to help plug the black hole, which is the tax levied on the profit made on the sale of an asset that has risen in value. He said: "They’ve said they won't raise taxes, they’ve also said they won't substantially cut spending, they’ve also said they won't increase government borrowing and they're not planning on printing money, so that is, all four of your hands tied behind your back.

"It means the only thing you’ve got filling that black hole is growth and it will be very tough to have growth at the level that is needed to fill it. I think Capital Gains Tax is, to some extent, probably right for a few percentage points raised there. It is a lot cheaper to make profit than it is to make income. You're taxed a lot less on profit you make, on selling assets, than you are on earning money."

Touching on Labour's pledge to build 1.5million homes over the next five years by reforming planning rules and developing poor-quality green belt areas, Martin said: "Let’s see if they can deliver that one. They’re also talking about finally banning Section 21 ‘no fault’ evictions.

"There is a huge power imbalance between landlords and renters and that needs to change - and I think it will change. The building homes situation certainly should be helpful for mortgage holders."

Regarding pensions, Martin added: "There's been talk for a long time at looking at pensions. They've said they won't change the lifetime allowance back… so it's the annual allowance they could change, it's a much more radical thing. They could limit pension tax relief, so that everybody gets the same, the same tax relief as basic-rate taxpayers.

"At the moment, higher rate taxpayers get more from the state toward their pension because they pay more tax. I think we won't hear much of that until September and we don't really know."