Tony Wickenden: Tax and spending detail is anyone’s guess after the election

But what can we glean from the festive timing of the third election in five years?

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Dec 05, 2019

So the date for the election is set: 12 December. There is ‘clear blue water’ between the policies of the two main parties – more so than there has been for some considerable time.

Many will see this election as essentially Brexit focused. And, of course, the Brexit choice offered by those seeking your votes does seem tolerably clear. A Conservative majority would see the reintroduction of the legislation to pass into law the exit deal negotiated and agreed with the EU by the current prime minister.

A Labour majority would most likely see an attempt to negotiate a softer deal with more enshrined workers’ rights and a likely customs union. Assuming an acceptable deal could be secured from the EU, a ‘confirmatory referendum’ would be held to decide whether to progress with whatever deal is agreed by the new government or to revoke Article 50 and remain in the EU.

The Liberal Democrat Brexit plans centre around a straightforward revocation of Article 50 so as to remain in the EU.

And, of course, some form of hung parliament remains a possibility. The Brexit Party, it seems, could have a real influence on this outcome, as could so-called ‘tactical voting’.

Demands on funds

Aside from Brexit, however, there are other very clear differences between the policies of the different parties. The expected radical nature of the Labour policies will require significant funding. Even the emerging Conservative plans will place demands on public funds and in all likelihood signal an end to austerity.

The Labour plans will incorporate materially higher taxation it seems on both individuals and businesses – not only to fund the revolution it intends to deliver, but also as a pure point of principle.

But what does the timing of the election mean in relation to getting the detail of possible expenditure and taxation?

First, let’s remember this is the third election in five years. Thursday 12 December was the latest possible date in 2019, according to cabinet secretary Mark Sedwill. From that timing a number of points follow:

  • The timing is even more compressed than Theresa May’s 2017 rush to the polls, which started with an announcement on 18 April and ended with polling on 8 June – a gap of 51 days.
  • In 2017, the manifestos emerged about three weeks before the election. They have been published about the same time in 2019 – from around 20 November.
  • Whether the new parliament will start to function before 2020 looks open to question – ignoring the possibility that there is no clear winner, prompting coalition or confidence-and-supply discussions. Last year and the year before, parliament went into recess on the Thursday before Christmas, which would be 19 December in 2019. Again, based on the 2017 election, in theory parliament could begin by swearing in its 650 new MPs on the Tuesday after the election (17 December). It would then need to elect the speaker for the new parliament – even though there has already been an election to replace John Bercow from 1 November for this parliament. The state opening followed eight days after the swearing-in process began in 2017. That would be Christmas Day in 2019.
  • The ‘autumn’ Budget now looks like it will be a January event at the earliest. What that will do for the spring statement is anyone’s guess.
  • The latest formal government economic projection is the Office for Budget Responsibility’s ‘Economic and fiscal outlook’ published on 13 March 2019. Much has changed since then. The chancellor ruled out publishing any revised Treasury calculations based on Boris Johnson’s Brexit deal and subsequently postponed his autumn Budget, which would have been accompanied by an updated economic outlook.

To quote a letter from OBR chairman Robert Chote, that postponement “brought the forecast process to a halt”. However, the OBR is in a bind, as it is required by the Budget Responsibility and National Audit Act 2011 to produce two “fiscal and economic forecasts” each financial year. That same letter from the OBR therefore states it will be publishing an assessment (not a full EFO) of how the changes that have occurred since March (both in terms of data and statistical approach) have affected “the baseline against which the government will need to judge its fiscal policy”.

Tony Wickenden is joint managing director of Technical Connection (a St James’s Place Wealth Management group company). You can find him tweeting @tecconn

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