The hung parliament delivered by the General Election spells uncertainty for our financial lives on everything from tax to pensions, with no party given a clear mandate to deliver on its policies.
Policies that seemed likely to be brought in by an expected Tory win with a larger majority will now be on ice, including the removal of the pensions triple lock, the raising of the 40 per cent tax threshold to £50,000, and plans to overhaul social care.
Meanwhile, ideas put forward by Labour – which gained ground but remains the party in second place – could be pushed to the fore. These range from higher tax rates for those with greater earnings, to preventing further increases in tax-free inheritance, and removing university tuition fees.
With Theresa May failing to win a majority, some Tory plans for our finances could be put on ice but ideas put forward by Labour – which gained ground but remains the party in second place – could be pushed to the fore
Britain has recent form in dealing with a no majority election result.
When the 2010 General Election delivered that outcome, a coalition government was formed between the Tories and Lib Dems. That saw many of the Conservative manifesto plans for people’s finances watered down or ditched, such as raising the inheritance tax threshold to £1million, while some Lib Dem policies were adopted, such as substantially raising the personal allowance.
Here we go through some of the top policies that are back on the table and consider what they could mean for your money.
You can also scroll down for a round up of the three main political parties’ election manifesto promises for our finances. All of this can now be considered up for grabs – and could change imminently if another election is called this year, which some commentators are forecasting.
The pension triple lock could live to see another day
The battle commences: As parties tussle over Number 10, policies are likely to be drawn up and dropped that affect our finances
The Conservative government had planned to ditch the state pension triple lock from 2020. This could have meant slightly lower increases to the state pension every year.
The triple lock guarantees that the state pension increases by a minimum of 2.5 per cent, by the level of inflation or in line with annual earnings growth – whichever is highest.
The Tories had planned to downgrade this to a double lock – taking out the 2.5 per cent element.
Planning to remove the triple lock was one of the most audacious moves by the Conservative government. It is one of the most popular policies among older voters – who traditionally are more likely to vote for the party. Daring to downgrade the triple lock was an indication of just how strong the Conservatives thought their position was.
The election outcome throws this all up in the air.
Would the Conservatives, if they form a minority government, really dare to keep a pledge to downgrade the lock, knowing that we may have to go back to the polls again in the autumn? Or would they play it safe in any future manifesto, despite the potential cost of the policy?
And secondly, the manifesto of the DUP claims that the party will ‘support the maintenance of the pensions triple lock’. If the Conservatives form a government with the DUP, it will have considerable clout – could it use it to push for the triple lock?
Income tax rises remain unlikely
In 2015, the Conservative government pledged not to increase the rate of income tax, National Insurance or VAT. During this campaign, it dropped this, only promising not to increase VAT.
Labour on the other hand promised to renew the pledge on NI and VAT, but said income tax would rise for those earning more than £80,000.
Would a weak Conservative government really dare to start talking about tax rises now?
Certainly there were no concrete plans to raise these taxes, and any move to do so would have relied on a strong government that felt it could weather what would inevitably be seen as negative by millions of taxpayers.
Conversely, the Conservative party promise to increase the personal tax allowance – the amount of money you can earn without paying income tax – is likely to still go ahead.
It is already tabled for next year, with an increase planned to £12,500 from £11,500.
An increase in the personal allowance is also supported by the DUP.
The Tories are also likely to stick to their guns on a long-standing pledge to raise the 40 per cent income tax threshold to £50,000, but this is certainly a policy that could come under threat in any coalition deals or fresh election.
Cut back on pensioner perks and other universal benefits could be reined in
The Conservative government had planned to means test the winter fuel allowance that is currently received by everyone of state pension age regardless of income.
No other party said they would do this.
The move was unpopular among many because it would have involved taking away something from pensioners and was seen by some as a potential administrative nightmare.
This policy could also quietly disappear should there not be a strong enough government to implement it.
The DUP would also be against cutting back on these benefits. It says in its manifesto: ‘The DUP is proud of the universal benefits we have introduced in Northern Ireland like free public transport for the over 60s.
‘Some parties have once again placed universal benefits like the winter fuel allowance in their sights. The DUP will resist any assault on these important universal benefits.’
However it remains to be seen what will happen with other benefits. It is likely that changes that are already in motion will continue, while others could be quietly dropped.
For example, the implantation of changes to bereavement payments has already started and so are likely to still go ahead. This is despite promises from Labour that a Labour government would reverse the changes.
Conversely, a planned change to probate fees – which would have seen some people paying up to £20,000 instead of the current £155 – had never got started, and so is more likely to be quietly dropped.
An energy bill price cap looks likely
The Conservatives promised, if elected, to tackle rising energy bills by introducing a cap on the type of tariff that most households are on – the standard variable tariff.
A similar plan for an ‘emergency price cap’ was also put forward by Labour in its manifesto.
In fact Labour’s version went even further, proposing that the UK’s energy system be moved back into public ownership.
While unpopular with the industry, which is very wary of government interference in an independent market, the energy price cap is likely to have been a vote winner.
Energy bills are one of the biggest expenses for millions of households and a recent investigation by the Competition and Markets Authority suggested that we’re overpaying for our energy to the tune of billions of pounds.
Surely should we go to the polls again, this policy will stay firmly in place. Furthermore a government that tries to implement it is unlikely to meet much resistance as it is supported by both major parties.
The DUP has also pledged to support policies that control energy bills. The manifesto says: ‘Paying for oil, gas and electricity can consume a significant chunk of household budgets. A perception exists that electricity prices in Northern Ireland are high. Whilst prices are undoubtedly high for the largest industrial customers, our approximately 800,000 domestic customers pay just below the EU average for their electricity and considerably lower than their counterparts in the Republic of Ireland.
‘The DUP wants to see our energy companies place further downward pressure on household bills. We will support efforts to better control energy bills and will seek to ensure any such measure operates in Northern Ireland.’
Social care plans could be on hold
Slowing down: Proposals to change how social care for the elderly is paid for are unlikely to move quickly now
Theresa May’s row back on the Conservatives’ social care plans were one of the first signs that the party knew it couldn’t be as complacent as it had hoped about winning a strong majority.
The original plan had stated that people needing care in their own home would be means-tested on their property’s value for the first time, just like those who go into a residential care home are already.
Instead of depleting someone’s assets – including the family home – down to £23,250 as happens now to meet care home bills, this floor would be raised to £100,000 for everyone using care services.
Homes would not have to be sold to meet care bills until after an elderly person and a surviving partner who lived with them had died, and no one with assets below £100,000 including property would pay anything.
Crucially, however, the manifesto plan on social care dropped a previous Tory pledge to introduce a cap on care costs put forward by the Dilnot review – expected to be about £80,000.
The plan caused on outcry, as critics claimed elderly people would face an unfair health and postcode lottery.
No-one knows what kind of help they will end up needing in old age, but certain conditions like dementia can require assiduous long-term care, while others are fatal immediately so require none.
However, supporters suggest that rising care costs will need to be paid for somehow, and this method would mean that those who require care would not have to sell their homes during their lifetimes to pay for care, while care costs of those with valuable assets would not be paid for in full by other taxpayers who may be struggling to make ends meet.
No sooner had the policy been unveiled and backlash triggered than Theresa May added another crucial proposal to the plan – the return of a cap to the amount of money one individual could be asked to pay.
This sum would be decided through a consultation process.
Now the whole shebang has been thrown into jeopardy. What government would risk taking on an issue as prickly as this right now?
Could there finally be support for women hit by changes to the state pension age?
Millions of women born in the 1950s will be left worse off as a result of the government hastening rises in women’s retirement ages over the next few years.
Some 2.6million women received just five years’ notice of an extension to their pension age, many of whom had been banking on being able to retire earlier.
Their treatment led to the creation of the Women Against State Pension Inequality campaign – or WASPI as it’s known.
Until now, the government has maintained that it cannot do anything to help these women.
However, the DUP manifesto says that it will ‘support an end to the unfair treatment of women pensioners’.
If the DUP form a government with the Conservatives, it will find itself wielding considerable power. Will it use this to come up with a deal for WASPI?
Summer holidays could be more expensive this year
The pound has been all over the place this morning against the euro and the dollar.
Last night, as the TV exit polls revealed a potential hung parliament, the pound dropped from $1.295 to $1.275 – with the 1.5 per cent drop the biggest daily move seen since October.
After regaining some ground overnight, sterling slipped again this morning and was trading at a low of $1.264 at 7.30am, before rising back up to $1.271
Sterling has also fallen against the euro from €1.153 to dip below €1.13 but then rise back to €1.136.
A volatile day is expected on the currency markets, and the pound has fallen due to traders’ fears there will be a struggle to form a UK government and that no overall party majority will lead to greater uncertainty over Britain’s future financial direction and what happens with the Brexit negotiations.
This uncertainty could well continue over the coming months, should a weak government form leading to leadership tussles and potentially another election in the autumn. All of this will be seen as detracting attention from Brexit negotiations.
Therefore there is a chance that the currency will also stay volatile, likely to affect those who are planning their summer holidays abroad.
British holidaymakers are already likely to see that their cash does not go as far this year as last, thanks to falls in the sterling since the Brexit vote. This election could make holidays abroad even more expensive.