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Labour win 2024 UK General Election – what it means for your money

Labour have won the 2024 UK General Election and Sir Keir Starmer will be appointed prime minister this morning. Here’s what a new Labour government could mean for your money.
Keir Starmer cutout on a red background. Image credit - Alison Jackson via Getty Images

Important information - This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

Labour have won the 2024 UK General Election with a significant majority – gaining over 400 seats, but (and) an estimated 35% of the vote, the lowest share for a governing party in history.

Labour’s big majority in the Commons disguises the support for smaller parties and independents in terms of vote share. This, along with lots of knife-edge results, means the size of the victory will still leave MPs worrying about the safety of their seats at the next election, as difficult decisions are taken in office.

Later today, incoming prime minister Sir Keir Starmer will visit the Palace to accept His Majesty’s invitation to form the next government.

After that we can expect him to start appointing his cabinet, with Rachel Reeves expected to be chosen as the first female chancellor of the exchequer.

First in her inbox will be a thorough look at the nation’s balance sheet. She has set firm fiscal rules that day-to-day costs are met by revenues and debt must be falling as a share of the economy by the fifth year of the forecast.

A budget isn’t expected until autumn. However, planned revenue raisers like VAT on private school fees and an increase of the windfall tax on oil and gas extraction are expected on the agenda in her first fiscal event.

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Driving forward Labour’s five missions will be top of the to-do list:

  1. Kickstart economic growth

  2. Make Britain a clean energy superpower

  3. Take back our streets

  4. Break down barriers to opportunity

  5. Build an NHS fit for the future

The chancellor will also be responsible for creating the conditions for productivity rises and growth in line with the ambition for the UK to secure the highest growth in the G7.

Building trust today should pay off over the four to five years that this government will run for.

This isn’t personal advice. Investments can rise and fall in value, so you could get back less than you invest. If you’re not sure if something is right for you, ask financial advice. ISA, Pension and tax rules can change, and their benefits depend on your circumstances.

How has the market reacted to a Labour win?

It’s a Labour landslide victory bringing in a political new guard which has vowed to make big changes to the UK economy. But given poll forecasts, the result has caused few ripples on financial markets.

The UK stock market lifted a little on the open. The pound was largely unchanged against the dollar, as the exit polls came in and lifted only very slightly as the overall result became clear, hovering around $1.277.

The lack of movement was unsurprising given the overall result had already been priced in.

The priority will be keeping the bond markets calm in the aftermath of the election and not overdoing spending pledges.

However, there could be some tinkering with the borrowing rules at some point in the future, to distinguish between day-to-day spending and investment, to propel long term growth. This could potentially loosen the purse further ahead.

So far, this doesn’t seem to have perturbed the debt markets, with bond investors appearing to be more sensitive to interest rate speculation than the investment plans of an incoming government.

10-year gilt yields barely changed as the exit poll results came in, hovering around 4.2%, down from almost 4.7% last October.

Remember, bond yields and prices move in the opposite direction, so when yields fall, it’s because prices have risen.

This result comes on the heels of a steady rise for the UK market, retaking its crown as Europe’s most valuable for the first time in nearly two years last month.

With political turmoil in France now taking centre stage, the UK looks finally set to enter into a period of financial stability. This has the potential to spark renewed investor interest in the UK.

Looking for more UK investment ideas?

Whether you’re looking to invest in funds, shares or ETFs, discover the UK investment ideas our experts believe have the most long-term potential.

What a Labour government could mean for tax and your money

Labour made some expensive commitments during the campaign, including sticking with the pensions triple lock and ruling out rises in income tax, National Insurance or VAT. However, money will be tight, so there’s still a chance of cuts in services or tax rises later.

Much of the election chat was about tax hikes Labour didn’t rule out, including capital gains tax and pension tax relief. However, we don’t need to speculate to spot some of the looming hikes.

There was a pledge to increase taxes for specific groups of people – including non-doms and independent schools faced with whether to pass on the expected newly-imposed VAT on school fees to parents. There was also silence on frozen income tax thresholds, which will mean even more people paying extra tax thanks to fiscal drag.

Beyond taxation, there were pledges of support during life’s expensive periods – including older age and parenthood.

And for those struggling to buy a home, there were plans to help make property more affordable.

Meanwhile, for those wrestling with everyday costs there were promises of everything from improving the minimum wage to cutting utility standing charges.

However, it’s likely we won’t see these changes come in until the expected autumn budget.

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What a Labour government means for pensions and retirees

Labour’s promised pension review has the ability to transform workplace pensions and give savers more certainty around pension taxation and the future of the State Pension.

The review will aim to give savers better outcomes with further moves to address the small pot problem likely as well as how people can build a lifetime pension, rather than switch provider with every job.

This will help people engage with their pension, address the issue of lost pension pots and drive competition in the industry.

The review should have the State Pension at its core. People need certainty as to what they’ll get and when. That means moving away from the rapid series of hikes in the State Pension age, towards a system that offers more stability.

Pensions taxes will also be important.

Years of tinkering has created a complex, messy system that can make it hard to plan.

Labour’s decision not to reintroduce the lifetime allowance has been welcomed.

This needs to be built on to deliver a system that incentivises people to save with confidence that they won’t get tripped up by complex rules.

In the meantime, we think people should consider continuing to make full use of the allowances available to them to build up their pension, like a Self-Invested Personal Pension (SIPP).

Remember, you can only normally access money in a pension from age 55 (rising to 57 in 2028).

Not sure what all this means for you and your money?

If you’re not sure what to make of the result of the General Election and what it could mean for you, you could consider financial advice.

Our expert financial advisers can help you build a financial plan which will outlast governments and see you through any future turbulence.

If you think you could benefit from expert advice from a professional, get in touch with our advisory team today.

You won't get personal advice on the call, but they'll talk you through the advice service we offer, including charges and connect you with an adviser if you'd like to go ahead.

Image credit: Alison Jackson via Getty Images.

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Written by
Anne-Fairweather.png
Anne Fairweather
Head of Government Affairs and Public Policy

Anne leads campaigns on financial resilience and engaging retail investors. Anne has a long career in policy roles in London and Brussels. Over the last decade she has specialised in financial services policy issues for the British Bankers Association, Nest Pensions and Nationwide Building Society.

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Article history
Published: 5th July 2024