"There will be pressure to cut rates as homeowners feel the financial strain"
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. Matthew Spence, Director at Spence Financial Ltd, weighs in with his thoughts on the outlook for the housing market, potential tax changes and what the Election could mean for public services.
In the immediate run-up to the election, money and financial markets are unlikely to be significantly affected because they are forward-looking and have already priced in most potential outcomes. Despite the usual election-time rhetoric, the current policies from both the Conservatives and Labour do not differ dramatically. However, three key areas where policy changes may have long-term impacts and be directly felt by the general public include:
1. Housing market
Policies related to interest rates, housing supply, and interventions like rent control influence the housing market. Interest rate decisions significantly impact disposable income and property values. There will likely be pressure to cut rates as homeowners with mortgages feel the financial strain, especially with hundreds of thousands of super-low-rate sub-2% fixed-rate mortgages set to expire by the General Election.
Historically, measures to control the housing market without increasing supply (building more houses) tend to stimulate the housing market and drive up both rent and property prices. A quick political win but often with unintended consequences!
2. Tax changes
Political parties propose different tax plans that affect take-home pay and financial health. Some might promise tax cuts for the middle class, while others may aim to increase taxes on higher earners or corporations to fund public services. Understanding each party's tax proposals is crucial for anticipating changes to Income Tax, VAT or other levies, all of which impact disposable income and spending power.
3. Public spending and services
Government spending priorities can shift significantly depending on election results. Increased spending on public services like healthcare, education, or infrastructure could lead to improvements in these areas, indirectly benefiting the public but costing more in taxes. Conversely, a government that focuses on austerity measures might reduce spending on social services, impacting benefits, subsidies, and public sector employment. These changes influence access to services and job stability in public sectors, ultimately having to potential to affect financial security.
