Pound for pound, which party would you champion if you voted with your wallet?

Sam Dunn reports on the outlook for your personal finances under a Labour, Tory or Lib Dem government
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The Independent Online

The pound in your pocket has been particularly prey to party politics in this general election campaign.

The pound in your pocket has been particularly prey to party politics in this general election campaign.

Usually less popular than the traditional stump topics of the NHS and education, personal finance has this time played a big role in the run-up to polling day on Thursday. Council tax and stamp duty have been sticks for the Conservatives with which to beat Labour, while the Liberal Democrats have the wealthy in their sights with a 50 per cent income tax on earnings over £100,000.

Finance has also caused mudslinging aplenty. Lib Dem Treasury spokesman Vincent Cable accused the Tories of "fantasy economics", while Chancellor Gordon Brown called the costings of his shadow, Oliver Letwin, "a multi-billion-pound black hole".

However, it's very hard to calculate just which party's finance policies would benefit you most - and what if your personal politics were to clash with the answer?

It's too simplistic to suggest that a poor, middle-income or wealthy family would be better off with one party than another, says Jonathan Shaw, economist at the Institute for Fiscal Studies (IFS). It might be tempting to vote for policies that seem most beneficial to you, but if your circumstances change, the same policies may no longer be in your best interests.

A point worth considering is that Labour has redistributed wealth towards pensioners and children, says Mr Shaw. "That looks set to continue."

Here are each party's plans for your finances.

Labour

Criticism of the Government has ranged from its tax-credit administration shambles to the lack of a strategy for solving Britain's £57bn pension shortfall. However, Labour says a third term will allow it to address these concerns properly.

On pensions, it will wait until the autumn, when Adair Turner's Pensions Commission reports on the savings crisis. Mr Turner is expected to propose stark choices: a higher statutory retirement age, higher tax, or better incentives to save through a private pension.

The basic state pension (currently £82.05 a week for a single person, £131.20 for a couple) could be in line for change but it's a case of wait and see.

Today, your basic state pension depends on national insurance (NI) contributions made over your working life. For the full £82.05, a man needs to have worked 44 out of 49 years; women who took time off work to look after children have been penalised with a lower pension.

Labour is now understood to be considering a calculation based on residency - a "citizen's pension" - rather than wholly on NI contributions.

On the council tax, it will this year make a one-off £200 payment to households with at least one pensioner aged over 65.

Direct rises in income tax have so far been ruled out, but NI increases have not.

Individual savings account (ISA) limits, letting you save up to £7,000 tax-free, were recently confirmed until 2010.

Subject to consultation, maternity leave will be extended in 2007 from six months to nine months, with a further extension to one year planned; fathers are likely to be allowed to take up some of this allocation.

Conservative

The Tories say they will be able to release £4bn in tax cuts by tackling wasteful public sector spending. First, they would boost pension tax relief for lower- and middle-income earners.

Basic-rate savers currently get another 22p from the Inland Revenue for every 78p they save into a private pension. The Tories plan to increase this to 32p.

Workers in a final-salary company scheme won't see any difference, although it will become cheaper for employers to administer these plans, according to the IFS.

The threshold at which 1 per cent stamp duty is paid will more than double to £250,000, leaving buyers of the average UK home - priced at £156,128, according to Nationwide - with no tax to pay.

The council tax has been targeted too. Pensioners aged 65 or over will qualify for an automatic 50 per cent discount on their bills, up to £500. The council tax house banding review, due to come into force in 2007, will be abolished.

The Tories also say they will restore the link, undone by Margaret Thatcher in 1980, between annual rises in the basic state pension and earnings.

And they will keep both the pension credit and special payments for winter fuel, as well as free TV licences for over-75s.

But the ISA will be replaced by the Lifetime ISA (nicknamed "Lisa"); instead of growing tax free, your money will be matched (at a capped rate) by the government.

Liberal Democrat

The Lib Dems plan an assault on the rich to pay for their proposals. Every pound earned above a new £100,000 income threshold will be taxed at an upper limit of 50 per cent - hitting just shy of 420,000 households, according to the IFS.

This will help to fund any shortfall when, under the Lib Dem proposals, the council tax is replaced by a local income tax. In effect, the amount you have to pay would work out at around 3.75 per cent of your annual salary minus the £4,895 personal allowance.

The child trust fund will go too, with the cash spent instead on primary education and reducing class sizes.

The party will raise the 1 per cent stamp duty threshold from £120,000 to £150,000, but leave the basic state pension for those under 75 unchanged.

People above this age will benefit from a switch to a citizen's pension based on residency rather than NI contri- butions. The level will be set at £109.45 (for an individual) and linked to earnings.

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