King Charles delivered his speech to Parliament last month following the election. Although called the King’s Speech, it is of course written by the Government and sets out the forthcoming priorities of the new Labour administration.

To help you understand what the next five years may hold, we cover some of the key finance-focused announcements in this article.

Budget Responsibility Bill

During their campaign, Labour pledged that decisions would be made with sound money and economic stability in mind.

The Budget Responsibility Bill requires all significant and permanent tax and spending changes to be subject to independent assessment by the Office for Budget Responsibility (OBR).

The Bill aims to boost party credibility and public confidence by preventing large-scale unfunded commitments that have not undergone such a fiscal review being implemented.

At present, the OBR have to accept figures as provided to them but the new law will give them the right and obligation to challenge figures and assumptions.

Living Wage and Minimum Wage

The Government has committed to delivering a ‘genuine’ Living Wage that reflects the reality for many individuals feeling the effects of the high cost of living.

They also plan to remove the existing minimum wage age bands to ensure that all adult workers can benefit from a fair wage.

The difficulty with this proposal is the potential impact of inflation as employers are forced to pass on additional cost.

Draft Audit Reform and Corporate Governance Bill

Labour plans to introduce a revamped regulator to uphold standards and independent scrutiny of companies’ accounts and accountability for company directors.

A draft Bill will establish the Audit, Reporting, and Governance Authority, replacing the Financial Reporting Council.

The new regulator will have the necessary powers to address poor financial reporting and to build public trust.

The Bill will include important changes such as:

  • Removing unnecessary and disproportionate rules affecting smaller Public Interest Entities
  • A new regime to oversee the audit market, to protect against conflicts of interest and to help minimise the impacts of corporate failures
  • Powers to investigate and sanction company directors for serious failings in respect of their financial responsibilities

This had been proposed for some time and was expected to have been included in the last King’s Speech. This proposal has been welcomed by the accountancy profession.

Pension Schemes Bill

The Pensions Schemes Bill seeks to assist over 15 million individuals, who save through private-sector pension schemes, by helping them to achieve better outcomes from their pension assets.

In order to do this, it will establish a means to consolidate pension pots from across various employments, and look to boost savings for those saving via a defined contribution scheme.

The Bill will also require defined contribution schemes to demonstrate their value as ‘productive investments’, and will also amend rules to enable terminally ill individuals to receive lump sum payments sooner under the Special Rules for End of Life (Pension Protection Fund and Financial Assistance Scheme).

Economic growth and wealth creation

Business investment in the UK has been persistently low, and so the introduction of the National Wealth Fund (NWF) will be central to the Labour Party’s mission to drive growth, to create a greener economy and to prioritise wealth creation.

With an additional £7.3 billion in funding, the NWF – which will work through the UK Infrastructure Bank initially – will make transformative investments nationwide, attracting billions of pounds in private sector investment and streamlining the support available to businesses.

Labour will also introduce a Bill to move power out of Westminster and back to local leaders, giving them the tools they need to drive growth in their own communities.

VAT

Measures will be taken to remove the exemption from Value Added Tax (VAT) for private school fees, which will enable the funding of six and a half thousand new teachers.

It is always unsatisfactory when the Government announce that policy ‘A’ is to fund policy ‘B’. In reality all the taxes collected go into one pot and are used to fund Government expenditure.

The success of this measure is uncertain as the behavioural response of private school fee payers is as yet unknown.

Subsequent to the King’s Speech, the Chancellor has announced that the measure will be introduced with effect from 1 January 2025.

European Union

The Labour Government will seek to reset the relationship with European partners and work to improve the United Kingdom’s trade and investment relationship with the European Union (EU).

This aim will be to achieve more favourable trading conditions and to attract more European investment into the UK and vice versa, leading to increased funding opportunities for businesses, and facilitating growth and expansion.

What is next?

There are still many unknowns when it comes to Labour’s policies regarding personal and business financials, with very little mention of taxes and funding opportunities.

The Budget has now been announced to take place on 30 October 2024 and is expected to make the Labour policies clearer.

We will keep you updated with any updates that happen between now and then, alongside a Budget summary following the event.

In the meantime, we encourage you to ask any questions you may have about these new policies and how they impact your business.

Please contact us if you have any questions about what the new Government means for your finances.

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