What a Labour Government means for your Finances

Jessica Amodio
Partner and Independent Financial Adviser at GDA

The result of the general election this summer was widely predicted, so there was not a big reaction from the financial markets, all-in-all, it could be described as broadly positive. So, what are the the likely implications of a Labour government in terms of your finances?

Growth in the economy over time
Labour has said that it will make growth and productivity a priority, and it is expected that they will also attempt to have a more collaborative relationship with the EU, which could lead to smoother trade negotiations, reduced tariffs and more predictable regulation. Business would benefit from greater stability in the political environment, leading to the UK becoming a more attractive place for foreign investment.

Equitites and Bonds
Over the long term, stock markets are not significantly influenced by elections. Both equities and bonds should benefit from greater political stability. Labour’s plans to increase the rate of housebuilding to 300,000 new homes a year is a positive for the construction sectors, while a commitment to increase defence spending to 2.5% of GDP is a positive for the aerospace sector. However, a commitment to remove the North Sea investment allowance is a negative for the oil and gas sector. In terms of gilts, there is expected to be very limited impact, the key factor will be the future path of interest rates and it is expected that the Bank of England should begin to cut interest rates soon.

Taxation
Although Labour pledged to avoid raising income tax, national insurance and VAT, there is speculation that other taxes may be targeted, and combined with freezing income tax bands more people could be pulled into paying higher rates of tax. Areas which could be targeted include: Capital Gains Tax, Pension allowances and reliefs, and Inheritance Tax. We will need to wait until the Autumn Statement to see exactly what Labour have planned however.

This article isn’t personal advice. If you’re not sure whether a course of action is right for you, ask for financial advice.