With the UK general election looming, we’re beginning to get a sense of how the next few years may play out.
All the major manifestos are now published, and we’ve been burning the midnight oil to pull out the most important details. Scrutiny has sharpened on what each of the political parties would do should they win the day, along with what each party is bringing to the table.
As the clock ticks down to electoral midnight, we thought we’d take a closer look at what exactly each party has planned, as well as how this might affect your budget. Let’s dive in.
Labour
For several years, Labour has sought to portray itself as the pro-business party. While Sir Keir Starmer has courted the high and mighty of the business world, he has typically been less clear about how his policies might affect British citizens, whether that’s UK residents or long-term expats.
Labour’s manifesto focuses on six main policy areas, few of which appear to have any significant impact on personal finance. There is, however, a commitment to having just one major fiscal event a year, an apparent reference to the Liz Truss minibudget and the chaos that caused.
Elsewhere, there are commitments to help stabilise the NHS and to build 1.5 million homes over the course of the parliament. Plans to invest in a new state energy firm to decarbonise the economy and bring down energy bills over time might seem expensive, but these have been scaled back hugely from the £28bn once promised.
For anyone with children in UK private schools, Labour are set to scrap the VAT exemption and use the revenue to fund new economic initiatives.
The truth is that Labour’s hands are somewhat tied by their own tight fiscal rules. Based on the manifesto, it would appear that they have limited scope to introduce changes that would have a large impact on your immediate day to day finances.
That may be good for the pound, at least in the short-term. Several of Labour’s policies seem crafted to avoid the kind of market volatility we’ve seen in recent years, although as we always say, you can never predict what markets have in store.
Referendum re-run?
And what of Tories’ claims that a Labour government world reverse Brexit, even partially? There is nothing in the manifesto. In search of growth, which is the only way out of the UK’s economic malaise, a new government might be tempted to renegotiate the Brexit deal. However, would the EU allow any kind of easier trading arrangement? Being in the single market at all means free movement of people, and this looks unlikely for this parliament at least.
However, with Labour leaders who campaigned strongly for Remain and until 2019 were advocating a second referendum, some measure of rapprochement with the EU cannot be discounted, especially if there is a hung parliament and reliance on the Liberal Democrats.
Conservatives
The Conservatives have remained committed to their flagship policy of cutting national insurance contributions. According to party officials, the ultimate goal is to eradicate national insurance altogether, although only when economic conditions allow it.
The Tory manifesto puts protecting pensions front and centre. That would be achieved with something the call the triple lock plus, which would uprate the state pension in line with the highest price of earnings and ensure the tax-free personal allowance rises at the same pace.
A commitment to build 1.6mn houses over the course of this Parliament also features prominently. That would be achieved by offering developers a ‘fast track’ to build on previously developed brownfield land and ditching existing EU regulations. Promisingly for first-time buyers, the Conservatives have pledged to permanently increase the threshold for stamp duty to £425,000.
Much like Labour’s manifesto, there is little red meat here for overseas property buyers or expats. The big risk may not come from policy, but rather from the result of the election. Should the Conservatives defy the odds and pull off the most unlikely of election turnarounds, the pound could come under pressure as markets retool their calculations.
Liberal Democrats
Often the forgotten party, the Liberal Democrats may not be quite so peripheral come July 5th. If you believe some of the polls, they may even secure a similar number of seats as the Conservatives. So, what would their policies be if they ended up in government?
The Liberal Democrats are notably warmer than the two largest parties in their language around the European Union. The Lib Dems have pledged to repair the ‘broken relationship’ with Europe, which could be good news for the thousands of Britons who live, work or own homes on the continent. At the moment, that remains an assumption based on the wording in their manifesto, rather than a reflection of a clear policy direction.
Housing is also a big issue for the party. The Liberal Democrats have committed to building 380,000 homes a year (150,000 of which will be social homes). For renters, there are pledges to end no-fault evictions and to raise the length of the standard tenancy to three years.
As ever, the Liberal Democrats are full of sensible policies but lack a clear path to power. The likeliest scenario they would have to enact these policies would be as part of a coalition government, and even that feels fanciful. They may be forced to instead use their increased seat share to influence government policy, but based on the contents of the manifesto, that may have a healthy, tempering impact on the incoming government.
Other parties
Several other parties are jostling to make their names heard over the noise. Some of these are sure to receive strong backing from pockets of the population, so we wouldn’t want to discount them from this conversation.
Reform UK are the youngest of the bunch. New leader Nigel Farage has pledged more funding for the NHS, raising the threshold of stamp duty and capping migration into the country. They are bold ideas, although the costings have been called into question since the publication of the manifesto.
Up in Scotland, the SNP have a fight on their hands against a resurgent Labour. To combat this, John Swinney’s party have promised to restart another independence campaign, guarantee public ownership of the NHS and rejoin the European Union.
The Green party are also hoping to make inroads on a series of pledges that unsurprisingly centre around environmental issues. Cornerstone promises include billions of pounds to fight climate change, insulate homes and decarbonise the energy grid, as well as extra funding for the NHS to cut waiting times and backlogs.
Where there’s uncertainty, there’s risk
The election throws up all sorts of questions, chief among which is what it means for you budget. As we’ve shown, the various political parties are all intent in driving the economy in different directions, and each scenario would have a significant influence on currency markets.
We don’t profess to be clairvoyants. In fact, we would advise dismissing anyone who claims they can predict where currencies will move, and that’s doubly true during an election campaign. So much can happen that any prediction made on Monday can be dead in the water by Tuesday.
What we would say is that it is vital your budget is protected by Thursday 4th July. Markets move in an instant, which means it is entirely possible that all your plans are scuppered without a plan in place to manage your risk.
SCE: Don’t let this election scupper your next transaction. Secure a fixed exchange rate now with a forward contract; call your account manager on 020 7898 0541 to get started.
