After months of campaigning the result of general election 2015 remains uncertain. Although many pollsters predict that the Conservatives will be the largest party, the closeness of the result may lead to both the Conservatives and Labour trying to form a Government in the coming days.
What is certain is that we are heading for a Parliament in which a myriad of smaller parties – especially the SNP – could enjoy significantly increased influence. This will be in the context of a less stable Government than we have seen over the last five years and a Parliament in which backbenchers will have more influence than they have had in recent times.
The inevitable result for industry will be a less predictable legislative environment, with deals on a cross-party basis possibly having to be done by David Cameron and Ed Miliband on key manifesto pledges, on a vote-by-vote basis in the House of Commons.
So what should industry be looking out for in this multi-party Parliament?
In general we can expect to see a more consumerist agenda whoever is in power. The Conservatives say they will put Ros Altmann into the House of Lords as a minister for consumer financial services. Equally, Labour have signalled that they will seek out and attack what they describe as ‘vested interests’ across a range of consumer markets – including finance.
On pension policy, both a Conservative and Labour-led Government are committed to a triple-lock on the state pension and the pension freedoms announced Budget 2014. A Labour administration would take further action on transparency and charges, including considering a new charge cap for drawdown products. Any Labour deal with the SNP will intensify scrutiny of consumer outcomes and protections in the new regime. All parties, including the Lib Dems, are committed to restricting higher rate tax relief to fund election campaign pledges, with Labour also looking to reduce the lifetime allowance to £1m.
All parties have pledged to dramatically increase the number of houses built, which will involve unlocking more homes on brownfield land. Whether they deliver, of course, is quite another matter. This will go in hand with Conservative plans to discount homes for first-time buyers and extend the Right to Buy. Right to Buy may become a casualty in any negotiations between the Conservative and Liberal Democrats to form a Government, but is a not a Liberal Democrat ‘red line’ for an agreement. A Labour-led Government will scrap stamp duty for first-time buyers under £300,000, while giving them priority in Housing Growth Areas, and will intervene in the rental market through rent caps. It will also press mortgage lenders to ensure they update customers on any repayment changes.
Fund managers will be carefully watching deficit reduction programmes, especially for any influence the SNP, who have promised to loosen the ‘shackles’ of austerity, may have on Labour’s plans. A Conservative administration would ensure a referendum on the UK’s membership of the European Union, with the Liberal Democrats unlikely to block this. If David Cameron can’t do a deal with the Liberal Democrats will he have to turn to the DUP or even Ukip to ensure this key personal commitment? He may struggle to remain as PM if he cannot.
Labour, meanwhile, will take significant action on corporate governance. They will require companies to publish the pay ratios of top earners, ensure that shareholders approve remuneration packages in advance, and put an employee representative on remuneration committees. They will also introduce changes to corporate takeover rules, require investment and pension fund managers to disclose how they vote on issues and ensure that there are duties on investors to act in the best interests of ordinary pension savers. Again there will be significant support for these measures from SNP, Greens, Plaid Cymru and Liberal Democrats.
Finally, there is some consensus across all parties around corporation tax competitiveness, taking fresh action against tax avoidance and evasion, and not raising VAT or national insurance. A Labour government would mean fresh action against hedge funds and non-doms, a review of HMRC practices, a mansion tax and the restoration of the 50p top rate of tax. The Conservatives have countered with pledges to remove inheritance tax on properties up to £1m, raise the 40p rate threshold to those earning above £50,000 and increase the tax-free allowance to £12,500.
So we know the direction of travel that Conservatives and Labour would like to take through these key manifesto commitments. But in this new political environment, the question will be to what extent it will be in their power to deliver these policies?
Tom Frackowiak is executive director at Cicero Group