What will the 2017 election mean for your finances?

Theresa May has made the decision to call for a snap election, and all eyes have turned to politics once more. For most people, the most significant consideration is the financial impact the election will have. The country’s political position will have a substantial impact on taxes, small businesses, investors, and savers among many others in the UK. In fact, every person will be affected financially, be it directly or indirectly.

The policies and promises made by each party regarding their stance on financial affairs such as taxes, pensions and investments will be the main contributing factor as to how the new parliament will impact our societies’ finances, as well as the reaction and financial decisions made by the nation proceeding and following the election.

The NHS, care, taxes and the economy are just a few of the major factors which will determine the nations’ decisions on who to vote for in the general election, and only time will tell the full extent of the implications upon the country’s economy, but here we evaluate the immediate repercussions which are likely to take place in terms of each scenario for readers.


In terms of the Sterling…

In terms of the Sterling…

Since the decision to leave the EU, the attention has turned largely to the value of the British pound, which took an initial substantial dip immediately, causing the nation much concern. However, since then, surprisingly the value of the pound has been on a constant rise, contrary to what is expected amongst the uncertainty of nearing a general election. There is no doubt this has caused a certain amount of confusion amongst financial experts.

There are various theories as to why the value of the pound has been rising, including that the election could, in fact, increase Theresa May’s power if they were to lead in the election again. Another theory is that due to the election, the possibility has been introduced that Brexit could be a very temperate process, or that it may not even happen at all. However, experts say that this theory has been introduced on false pretences and that Brexit is, in fact, impending and definite.

So, how worried should we be about the pound taking a turn for the worst and plunging into new depths?

Well, in truth it depends largely on the outcome of the general election happening next week, but the current situation does not look as awful as was at first expected. The risk of a hung parliament is what appears to cause the most concern for the pound sterling amongst financial experts. This is because it would cause a major personal failure for Mrs May, as well as putting Britain in an extremely uncertain position at the most vulnerable moment.


Reaction from the stock market

Reaction from the stock market

For investors, the stock market is another area of concern during the uncertain political time. As it seems, the stock market has also taken a considerable turnaround since the immediate effects of the referendum.

As a general rule, a weakened pound has a benefit on the stock market 100, whereas a stronger pound has a positive impact on the more domestically based stock market 250. The difference is based largely on the currency which is involved.  For example, the blue-chip index makes the vast majority, in fact, 70% of its profits in dollars or euros, whereas the stock market 250 is based much more heavily on the sterling.

In terms of industry, the same rules apply. UK house builders, for example, are gaining in profits, whereas miners and the oil industry, which deals largely in dollars, are on the downfall.


What should investors do?

Recently, it has been found that even the predictions made by specialist researchers and financial professionals have largely been incorrect, for example, it was not predicted that the UK would vote to leave the EU. For this reason, it has been suggested that the only way to ensure you don’t get caught out is to prepare for all circumstances. Look in the opposite direction to everyone else and manage your potential risks instead of assuming what will happen.

There is no doubt that the market is in an uncertain position, and for investors, this can make the process of choosing where to put your money more difficult. In general, the same rules apply as always do in terms of making investments; keep it simple, do your research and invest in good funds. It is also highly advisable to stick with what you know in this time of uncertainty. However, if you are looking to change your portfolio, look towards small and mid-sized UK based businesses, which are less likely to be majorly affected by the results of Brexit.


What about taxes?

What about taxes?

The tax system is one of the most dividing issues addressed in the manifesto of each party; all of them presenting different perspectives on how they envision the process. What’s more, taxes are one of the most important considerations for the voting nation when deciding which party to support, as taxes are one of the issues which widely affect most of the nation.

In a manifesto based on progression, redistribution, opportunity and equality, Labour’s position on taxes is based on the concept that they will target high earners whose salary is more than £70K. For these people, it will be made mandatory for them to pay higher tax rates.

The Liberal Democrats’ standpoint in terms of taxes is based on the idea that the wealthiest people should pay their fare. They intend to clamp down on tax dodging, and tax more aggressively on unearned income such as benefits, interest, and pensions rather than earned incomes which typically comes from a salary and commissions etc.

With main concerns towards equity, tradition, and economic freedom, Conservatives appear not to be changing most of their existing policies, after stating they are largely ‘boxed in’ by their manifesto. However, they intend to scrap the five-year tax lock, which was introduced in 2015 as a pledge not to raise income tax, national insurance contributions and VAT.

However, having been faced with a backbench uproar when an increase in taxes was mentioned, the Conservatives may be forced to go back on any raises they have pledged to make. It has already been suggested by Labour that Conservatives’ priorities are largely in the ‘wrong place’, with taxes due to rise for the self-employed, whilst corporation taxes are being cut.


How will pensions feature?

How will pensions feature?

Pensions are one of the hottest topics in politics recently, mainly because it seems that they are not currently substantial enough for livable circumstances, and there is a certain amount of uncertainty regarding the dependability of future pensions. For these reasons, it will be a key feature on the political battleground this year.

There are many key pension policy issues which are currently in the limelight, and these will be used to form the campaigns presented by each party. Some of the issues which should be addressed include the triple lock on the state pension, the age at which state pension should be received and whether or not this will be due to rise, and benefit pension responsibilities.

Perhaps one of the most noteworthy issues in the financial aspect of the political stances is the triple lock on the state pension. The triple lock currently placed on the pension states that it will rise higher by the average of earnings, inflation or a minimum of 2.5%. Before the announcement of the election, the Conservatives had promised to keep the triple lock in place until 2020, despite the increasing urge to abandon the pledge.

The Conservative party is now in a difficult position, as both Labour and the Liberal Democrats have promised to retain the triple lock if they are elected, so they could face losing votes if they decide to do the opposite.

The potential for Mrs May to terminate the current commitment not to increase the tax, national insurance contributions and VAT also means potential repercussions for people saving for pensions, meaning that there is the possibility for changes to be made to allowances for pensions and taxes.


How will the housing market be affected?

In terms of the property market, it appears that there has not been much in the way of movement in the run-up to the election, opposing the usual trend in which the spring months show more significant shifts.

It seems that this is the best decision to make at the current time too, as it has also been advised by property experts that it is highly advisable to sit tight and wait to see what happens in terms of the movement in the property market.

In the midst of all the uncertainty which comes with the general election set to take place next week, it is to be expected that a brief pause will occur until the results are confirmed, before a surge in activity for at least a small while afterwards.


The main parties’ positions

Following the release of the white paper regarding the housing issue earlier this year, the Conservatives are likely to reinforce their intentions to increase housing facilities in the UK by urging local authorities and developers to accelerate their construction efforts.

Not only this, but these plans also outline that any developers who have obtained land and planning permission for a housing project but leave it remaining undeveloped are at risk of having it seized by the local authorities. Furthermore, councils who fail to meet their aims for developing housing will mean that planning permission is automatically granted to developers who are put on sustainable schemes.

The conservatives are also investing in larger-scale schemes which aim to build houses which will allow people to rent them. Changes to the planning system will also be implemented, giving developers greater certainty so that they can continue.

There is no doubt that there is a need for more housing to be built; therefore, it was to be expected that every party is drawing on this, putting forward new ideas to get more homes built and make living situations more affordable.

Labour have proposed that they will be working hard to build new homes, with half of them being council properties, and has suggested they will focus on building homes which will be more attainable and affordable for first-time buyers.

The Liberal Democrats have taken a different approach again, proposing to ease the restrictions which are placed on housing finance for housing associations and councils. They also intend to establish a housing investment bank to fund new housing projects.

However, surprisingly there has been no sign of any party relaxing the recent constraints on mortgages for buy to let purposes, and no sign to reduce the heightened rates of stamp duty at the top end of the market.


How concerned should you be?

There is no doubt that the current political situation in the UK regarding both Brexit and the imminent snap election is one of uncertainty, and this can be a cause for concern, not only for financial experts, but for the general public, all of who of course are concerned for their own financial positions.

Despite the cause for concern the uncertainty is bringing about, the rise in the pound sterling along with the increase in the value of some stock markets means that currently we are in a stable position, but only time will tell for the future of the market.

In terms of the housing situation in the UK, there appears to be a standstill in the number of people who are choosing to go forward with sales and purchases, and according to housing specialists, it may well be best to sit back and wait for the results.

The stock market is another area of confusion in the current market. Despite some stocks increasing in value, others are decreasing. This appears to be largely due to the location most of their income comes from, for example, those which gain most of their profit from the UK are doing well, whereas those which deal mainly with European and American currency are not as well off. If you are thinking of investing, focusing on companies who are UK based, and small or mid-sized are considered to be the most prosperous currently.

If you are concerned about your position regarding finances and the 2017 election and would like some advice, contact us and one of our professionals will be able to give you all the information you need.

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