How a Conservative minority government could affect the pound in your pocket
Neither the Conservatives nor Labour were able to secure a majority victory in last night’s General Election, meaning UK voters are now in the midst of uncertainty given the hung parliament outcome.
The Conservatives have secured 318 seats compared with Labour’s 261 (one seat is left to be counted) and Theresa May has now said her party “will continue to work with friends and allies” in the form of Northern Ireland’s Democratic Unionist Party (DUP) which secured 10 seats.
While a hung parliament leaves no party with a mandate to deliver their agendas, below we outline the Conservative manifesto pledges ‘for a stronger Britain and a prosperous future’ which sealed its fate with a 42% share of the vote, and what could happen to the pre-election promises.
Pension triple lock to become double lock
Since 2010, the state pension has risen annually by whichever is highest out of inflation, earnings growth or 2.5%. The triple lock guarantee applies to the old state pension (currently £122.30 a week) and the new flat rate state pension (currently £159.55 a week).
The Tories then plan to introduce a new double lock where pensions will rise in line with the earnings that pay for them, or in line with inflation – whichever is highest.
Tom McPhail, head of policy at Hargreaves Lansdown, says the Triple Lock is undoubtedly here to stay until 2020 and possibly for longer now as the Conservatives were alone in campaigning for its abolition after 2020.
Ed Monk, associate director for personal investing at Fidelity International, says: “The DUP manifesto included commitments to the state pension Triple Lock, so it feels unlikely the Conservatives will try to push through with scrapping it.”
Auto-enrolment to be extended to the self-employed
About 7.5 million people have started contributing to a workplace pension under the success of auto-enrolment. However, a major criticism is that it didn’t extend to self-employed workers.
May announced that a Tory government would look to extend auto-enrolment to the self-employed. McPhail says he expects to see the auto-enrolment review run its course. “This election result strengthens the likelihood we will now see some of the more inclusive changes such as bringing lower earners and the self-employed into the system.”
Care home costs
The Tory’s social care plans received much backlash from the electorate. Under the current system care costs deplete an individual’s assets, including in some cases the family home, down to £23,250 or even less.
May announced the value of the family home will be taken into account along with other assets and income, whether care is provided at home, or in a residential or nursing care home.
In order to ensure this is “fair”, a £100,000 ‘single capital floor’ would be introduced so that people will always retain at least £100,000 of their savings and assets, including value in the family home.
Steven Cameron, pensions director at Aegon, says the social care funding turned out to be one of thorniest issues of the election campaign with opposing views on how to solve this growing crisis of an ageing society.
“While politicians might now be keen to avoid this emotive and for many unpalatable topic, it would be politically irresponsible to kick it into the long grass. A long term, sustainable ‘deal’ between individuals and the state is needed to give people certainty and ideally would be set by cross-party agreement. Importantly, capping the maximum an individual will ever pay is essential to allow people to plan ahead while also protecting their inheritance aspirations,” he says.
Winter Fuel Payments
Winter Fuel Payments help older people pay for their energy and it’s paid regardless of need, meaning even wealthier pensioners receive the money.
The Tories said if they get elected they will means test Winter Fuel Payments, “focusing assistance on the least well-off pensioners, who are most at risk of fuel poverty”.
The DUP committed to maintaining Winter Fuel Payments, at odds with the Tory promise of means-testing the benefit.
Income and corporation tax
The Tories reiterated their commitment to raise the personal allowance – the amount of income you can earn before you start paying income tax – to £12,500 and the higher rate will climb from £45,000 to £50,000 by 2020.
Corporation Tax is due to fall to 17% by 2020 and May confirmed the party will stick to that plan, because “it will help to bring huge investment and many thousands of jobs to the UK”.
Minimum wage rises
Those aged 25+ receive a minimum of £7.50 an hour. A new Conservative government promised to continue to increase the National Living Wage to 60% of median earnings by 2020 and then by the rate of median earnings, “so that people who are on the lowest pay benefit from the same improvements in earnings as higher paid workers”.
Gig economy worker protection
May said millions of people are enjoying the flexibilities of working in the sharing or gig economy, but these workers face challenges such as fewer pension entitlements, reduced access to benefits, and no qualification for sick pay and holiday pay. The government is awaiting a report reviewing the changing labour market, but in its manifesto, the Conservatives said it “will act to ensure that the interests of employees on traditional contracts, the self-employed and those people working in the ‘gig’ economy are all properly protected”.
Breathing space scheme for people in debt
If re-elected the Tories will adopt a “Breathing Space” scheme, with the right safeguards to prevent abuse, so that someone in serious debt problems may apply for legal protection from further interest, charges and enforcement action for a period of up to six weeks. Where appropriate, they will be offered a statutory repayment plan to help them pay back their debts in a manageable way. This will give eligible debtors time to seek advice and help to apply for a sustainable solution to their debt problem.
Energy price cap
During the pre-election period, May said the Tories “will pay immediate attention to the retail energy market” and as such it will ensure that smart meters will be offered to every household and business by the end of 2020, as well as introduce a “safeguard tariff cap” which will protect customers who do not switch against abusive price increases.
Home building to stabilise house prices
May said the party will meet its 2015 commitment to deliver a million homes by the end of 2020 and aims to deliver half a million more by the end of 2022. The Tories will also free up more land for new homes and it wants to build new fixed-term social houses, which will be sold privately after 10 to 15 years with an automatic Right to Buy for tenants, the proceeds of which will be recycled into further homes.
What about Labour?
Here are the manifesto pledges given by the Labour party:
- Will not impose an increase in income tax for those earning below £80,000.
- Earnings above £80,000 will be taxed at 45% and earnings above £123,000 will be taxed at 50%.
- Guarantee that personal National Insurance Contributions and VAT will not go up.
- Keep the Help to Buy shared ownership scheme in place until 2027.
- Boost the living wage to £10 an hour by 2020.
- Stop all planned state pension age rises beyond age 66 and retain the triple-lock.
- Introduce a care cost cap, increase the asset threshold below which people are entitled to state support, and provide free end of life care.