A Labour Goverment
So, there was no last-minute rescue for the Conservative Party who magnificently failed to distance themselves from the sleaze and chaos that had gone before, and which brought politicians to a new low in the public’s esteem. As predicted it was a whitewash.
Rishi tried to focus on the economy, but it was too little too late, maybe he should have clung on for longer. Things are moving fast this year and economies around the world are doing well. According to the official data yesterday, the UK economy grew twice as fast as predicted in May and is accelerating its recovery from the Covid lockdowns. US inflation is also continuing to fall, suggesting rate cuts may still happen this year.
Source: FT 11th July 2024
Sir Keir Starmer has walked into a strengthening economy with inflation largely under control and strong business optimism.
According the ICAEW, the Business Confidence Index rose to +16.7 in Q2 2024, the highest since Q1 2022 and the third successive quarterly rise, up from +14.4 in Q1 2024.
Sterling has risen since the election and is knocking on $1.30 to £1 – it’s up around 16% since a low of $1.11 to £1 at the height of the Liz Truss chaos of 2022.
Conservatives will be looking back at this moment in a few years’ time and wondering how a party usually associated with economic success got it so badly wrong.
Perversely Liz Truss was probably right, the economy would have been strong enough to have withstood tax cuts, but Liz mismanaged the whole situation.
Instead, we had a Conservative Government increasing the UK tax burden at a rapid rate of knots and seemingly doing nothing about it.
The Office for Budget Responsibility (OBR) who Liz side stepped, said in March 2023, and on the back of the Conservative Government’s tax plans: “the UK’s tax burden is set to rise to a post-war high of 37.7 per cent of GDP in 2027-28”.
The OBR put the sharp increase in the tax burden in 2021 down to corporation tax and recovering corporate profits. Remember Liz Truss wanted to reduce corporation tax.
So now we have an increasing tax burden and a growing economy. Tax receipts will be rising rapidly.
Everyone expects the new Labour Government will put taxes up, but with growing tax receipts they have the real possibility of being able to reduce the overall UK tax burden if the economy keeps growing. Let’s see what happens. I don’t think taxes are going to be that high on Sir Keir’s list of things to change, they are already going in the right direction and if anything, it might be cuts not increases we see first.
If you would like to hear more on our views on taxes and markets after the election, we will be publishing a recording of our latest online webinar from Monday evening next week.
- The content of this document is for information purposes only and should not be construed as financial advice.
- Any rates of return used are for illustrative purposes only. Please be aware that the value of investments, and the income you may receive from them, cannot be guaranteed and may fall as well as rise.
- Any rates of tax referred to are correct as at the date of this document and may be subject to change in the future.
