Boris Johnson has defeated Jeremy Hunt in the Conservative leadership contest and will become the new prime minister tomorrow.
He won 92,153 votes compared to Hunt’s 46,656.
Johnson vowed to “energise the country” and said he would deliver Brexit.
But he acknowledged some people “will question the decision” to choose him as the next PM.
Chancellor Philip Hammond announced ahead of the vote that he would resign if Johnson becomes prime minister.
The industry reacts to the news:
- Investment Association chief executive Chris Cummings
“Congratulations to Boris Johnson on his victory in the Conservative leadership contest. Boris Johnson was a great supporter of the City of London when he was mayor, and we look forward to working with him to ensure that the investment management industry continues to thrive and grow under his leadership in government.
“The investment management industry is a crucial cog in the UK economy, managing £7.7trn of people’s savings in the UK and beyond. As the largest investment hub in Europe, it is vital that we are able to maintain our place as a world leader in our field.”
- Fidelity International portfolio manager Leigh Himsworth
“As far as financial markets are concerned, our eyes remain firmly fixed on Sterling, which is reacting, almost by the minute, to the deal/no-deal narrative. And while it is easy to argue that the UK equity markets offer great value versus their peer group, this is especially true of a deal or new referendum scenario. The jury remains firmly out regarding a no-deal as this would be too much of a step into the unknown.
“We may well look back in a few years’ time and regard this period as quite simply one of the best opportunities that we have seen to invest in UK equity markets.”
- AJ Bell senior analyst Tom Selby
Increasing the higher-rate income tax threshold to £80,000
“It didn’t take Johnson long to get his imaginary chequebook out during the Tory leadership race as he promised to raise the 40p income tax threshold by over 60 per cent, from £50,000 to £80,000.
“Coincidentally, this is almost exactly the annual salary of Conservative MPs whose votes he needed to get on the final ballot to members.
“This would represent a £9bn tax boost to four million people, according to the IFS, benefitting the top 10 per cent of earners to the tune of almost £2,500 a year.
“Johnson also hinted the National Insurance thresholds could be raised to help pay for the measure. At the same time, he signalled his intention to increase the point at which NI payments kick-in to boost lower earners.
“While specifics were hard to come by in the Johnson campaign, the IFS estimates every £1,000 increase in the NI primary threshold – which currently stands at £8,632 – would cost the Treasury £3bn.
“Taken together we are talking about a package of reforms costing up to £20bn at a time when a potentially damaging No Deal Brexit appears to be looming ever larger.
“However, Johnson’s tax and NI plans feel like they’ve been scrawled on the back of a ghostly fag packet. They are certainly unlikely to be introduced overnight, and indeed they might never see the light of day at all if a general election is called.
“That said, it is not beyond the realms of possibility that they would form part of a Brexit No Deal package designed to provide short-term life support to the economy.”
Chances of it actually happening: 7/10
Pension tax relief changes
“Johnson has also promised to ‘fix’ the pension tax crisis currently engulfing the NHS. The issue, caused by the tapering of the annual tax-free allowance for people with total earnings above £150,000, has added significant strain to already overburdened hospitals as senior doctors refuse shifts to avoid crippling tax bills.
“The Department of Health and Social Care yesterday proposed flexibilities in the scheme so GPs and high-earning consultants can opt to pay less into their pension and in turn get lower pensions. This, it argued, would mean they could reduce or even eliminate the risk of being hit by annual allowance charges.
“This complex fudge is unlikely to appease those affected, however, and while Johnson has not said how he will ‘fix’ the problem, scrapping the taper altogether would be the obvious solution.
“This could then be used as a starting point for a broader review of the pension tax regime, with a central aim of simplification and increasing the number of people saving for retirement.
“If Johnson does ditch the taper, however, he would blow a £1bn hole in the Treasury’s coffers which would need to be plugged.”
Chances of it actually happening: 6/10
Stamp duty overhaul
“Another part of Johnson’s grand economic plan reportedly involves putting rocket boosters under the property market by scrapping stamp duty on homes worth less than £500,000. This would likely be one of a series of emergency Budget plans unveiled if the UK leaves the EU without a deal.
“The proposed stamp duty cut would represent a major giveaway of up to £10,000 for first-time buyers and £15,000 for other property buyers.
“Clearly that’s potentially good news for those looking to buy a home, although stimulating demand in such a manner without building more houses risks simply stoking house price inflation.”
Chances of it actually happening: 8/10
- Rowan Dartington technical investment manager Donald Maxwell-Scott
“Now the Tory leadership has concluded, I am sure the Brexit impasse will again resume in earnest. There are those market commentators who like to say that our political system is broken, however, a better metaphor for the current situation would be a broken record. It has been skipping and repeating since June 2016 when we voted to leave the EU and we see no sign of this changing anytime soon!
“Theresa May’s hands were tied, and there is very little to suggest that Boris Johnson will fair any better… Boris is already having his hands tied before he walks through the door of Downing Street, so we find it hard to see how he can make any real strides towards finding a resolution.
“Boris likes to think of himself as fairly Churchillian with his use of the English language. However, as Winston Churchill used the English Language to rally the country around him in the face of annihilation, Boris, on the other hand, has a country divided and no impressive use of the English language will do anything to unite the whole country or solve issues like the Irish backstop.
“What does this mean for markets? Due to the political climate being so intrinsically linked to markets we are afraid they are skipping and repeating as well. Expect more of the same.”
- deVere Group chief executive Nigel Green
“Boris Johnson will be an impotent prime minister. Theresa May faced tricky arithmetic in parliament, but her successor will have it even harder.
“After a series of defections from serving MPs and the potential loss of two seats in by-elections, the Conservatives’ parliamentary tiny majority is on the brink of collapse.
“This arithmetic, together with the fact that the EU has shot down Mr Johnson’s Brexit plan within moments of his appointment as leader – signalling it has no plans to make concessions – makes the job of leaving the European Union with a deal almost impossible. No deal is looking increasingly likely.
“Yet this impotency is likely to be Boris Johnson’s secret weapon.
“This is because all he has to do is do nothing to ensure a no-deal happens by default on 31 Oct. Then in early November, he will call an election being able to claim to have delivered Brexit. This will secure him votes from right-wing Conservatives and Brexit party supporters, he will be capitalising on a Labour party with low poll ratings for its leader, and making Liberal Democrat opposition to Brexit and their call for a second referendum irrelevant as the UK would have already left the EU.”
He goes on to add: “Mr Johnson’s impotency, which is fuelling a looming hard break from the EU, will not only work politically, but if it goes to plan, it could also work economically for the UK.
“Whilst it is a huge gamble – and one he seems willing to embrace – a quicker and cleaner exit from the EU could indeed deliver an unexpected boost for the pound and the UK economy as international and domestic investors get the clarity they crave before stepping off the sidelines and investing in Britain.”
He adds: “The surprise could be that a clarity of purpose of a Johnson administration on the overriding issue of the day – Brexit – could well give the pound a lift.
“The importance of clarity for the markets and business should not be underrated. It now just remains to be seen if the former London mayor and foreign secretary delivers on what he has said– or whether there will simply be more Boris bluster, which would sink the pound further and kill-off investment hopes.
“It looks set that impotency will define Boris Johnson’s premiership in the short to medium term. But being the impotent prime minister could suit him very well politically – and economically if his gamble pays off.”