On the morning after the General Election night before, the identity of who will be in charge of the UK is still unclear.
What happens now?
We’re not the political experts – you can find plenty of media outlets taking their best guesses at how the chips may fall between the main parties.
At the time of writing on Friday morning, the most likely outcome seems to be that the Conservatives – who won the most seats - will attempt to form a government, possibly with the support of the Democratic Unionist Party.
The rest of this article assumes those negotiations are successful, with the Conservatives feeling confident they can push their manifesto agenda through. We won’t go into detail here, but if a deal is not done that puts the Tories into power, then a number of formal processes kick into gear – one of which would give the Labour party a chance to show it could govern.
When (or if!) a government is formed following negotiations, the first thing to happen will be an emergency Budget, where the Chancellor will set out how the new government is going to manage the economy for the next five years.
But there might be a gap between its intentions and what it can actually achieve, given that the other parties could combine to vote down its proposals. Here’s what we think you should look out for…
The Tories have already signalled that they want to increase the personal allowance – the amount you can earn before you pay income tax – from its current level of £11,500 to £12,500 a year.
The original timetable for this was 2020, but we’ll have to wait and see if this is confirmed in the Budget.
Similarly with the threshold for paying higher rate tax at 40%. At the moment it is £45,000, but the Tories want this to rise to £50,000. Again, we’ll have to see what the Budget has to say on this, as well as any hints of movement on the actual rates of income tax paid.
As for the minimum wage. This was scheduled to rise to £8.75 an hour by 2020. Again, we’ll need to see if the new administration wants to stick to the plan, or whether the other parties will be able to influence its thinking.
Insurance premium tax
We’ll also have to keep an eye on insurance premium tax, or IPT.
Just before the election, this leapt up from 10% to 12% of premiums for car, home, pet and medical insurance.
Not much chance of it rising further then, you might think. But I wouldn’t be so sure. Only two years ago, this tax stood at 6%, so the Tories clearly see it as a good source of revenue.
And there’s been talk that IPT should increase to the same rate as VAT – which is 20%.
We might not see IPT rise in the next Budget, but I’d be surprised if it was still 12% a year from now.
On to energy. The Tory manifesto promised a price cap on what it called the ‘poorest value’ energy tariffs, so people will be expecting action, especially as they were promised savings of £100 a year at one point.
Labour has also floated proposals to cap or control energy prices.
We think this approach is flawed. Our figures show that someone on a standard variable rate tariff could save £200 or more today by switching to a cheap fixed rate tariff, with no need for heavy-handed government interference in the market.
What’s more, the likelihood is that government intervention would lead to a reduction in the number and quality of cheap deals, ultimately leaving most people worse off.
We want the new government to do much more to encourage people to switch from expensive tariffs to the cheaper deals that are already available.
Watch this space
So firstly it’s all eyes on whether the Conservatives can form a government or not. If they can, we’ll then see in a forthcoming Budget how much of their manifesto they still plan to implement. Watch this space to see how your finances will be affected.
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