"Don’t let policies solely (which can and will change) drive your decisions"
Three ways the General Election could impact your finances
28 June, 2024
With the 2024 General Election fast approaching, we reached out to a handful of financial advisers to get their take on what it means for your money. Jason Moss, Independent Financial Adviser at Harvest Associates, weighs in with his thoughts on government spending, inflation, and why it's more important than ever to stick to your long-term plan.
We are in peak election fever with all parties trying to flirt new policies at us in a bid to capture our votes. Decrease taxes, increase taxes, pension Triple Lock Plus, add VAT to school fees, increase Personal Allowance, reduce National Insurance, reintroduce the Lifetime Allowance, introduce a wealth tax, or say nothing... We’ve heard it all!
As an Independent Financial Adviser, I avoid speculating on political developments and their potential impacts. Instead, I work with my clients to plan for worst-case scenarios and ensure we have a strategy to make necessary adjustments, no matter what happens. That said, here are a few factors I believe could impact our money:
1. Government spending
Whether the next government can raise enough money through taxation and/or borrowing is one to watch. However, we can all agree that our taxes could be better spent. One to be debated, but spending and efficiencies are needed - we only have to ask someone who is waiting for an operation on the NHS to understand that something needs fixing.
This is a trend across most of our public services. We have to be optimistic that spending and/or better management of our public services will happen. This is something we are all hoping for.
2. Inflation and the Bank of England Base Rate
Inflation is the rate at which prices increase. Often referred to as a "silent killer", it gradually erodes the purchasing power of your money.
Not necessarily impacted by the general election, but parties will argue over how inflation got to the levels it was at (as high as 11.1% in 2022!) and how it got back down to where it is now (2% as at the week beginning 17th June). In the months ahead, we should start to feel the benefits when we visit the supermarket for our weekly shop, amongst other things.
This is also important because now that inflation is at the BoE’s 2% target, many commentators believe the Bank may look to start making cuts to the Base Rate this year. This may be welcomed by mortgage holders across the country. Conversely, savers who have benefitted from a return on cash not seen for a long time will start to see interest rates on their savings decrease.
3. Long-term plans
This is the biggest election year in history with more people across the world going to the polls in a single year than ever before.
Don’t be distracted by political commentary and volatility in the short term. History has taught us that even if we experience volatility in our pension and investment savings (which is normal), markets will recover. Don’t let policies solely (which can and will change) drive your decisions.
It goes back to the old ‘adage’ of not letting the tax tail wag the investment dog. Focus on your long-term plan. If you don’t have a plan, then speak to an Independent Financial Adviser who can help you put one in place.
In all honesty, you are likely to win and lose in some part (whether big or small) as we move into the next parliament. No government will please you entirely.
Harvest Associates is authorised and regulated by the Financial Conduct Authority. FCA registered number is 629749. The above information does not constitute as financial advice. The value of your investments and the income from them may go down as well as up, and you could get back less than you invested.
