So, where to start with the General Election and what it means for the country as a whole, and specifically, the later life and retirement market? It’s very early days of course, and by the time you read this, who knows what might have happened; however, let me set out my own 10-point view on the aftermath, and how the next few weeks might unfold.
1. Firstly, we appear to have a propped up Conservative Government, or at least we will do once they start looking to the DUP to support their Queen’s Speech. It means we have a wounded Tory Party, still holding onto power, but looking unlikely to be able to go the full five years without going back to the country for another election. Indeed, it might not last five weeks. It will still however need a period of reflection/regrouping with (in all likelihood a new leader) before it will be able to do so. In that sense, Theresa May already looks like she’s on borrowed time.
2. Secondly, young voters will now realise they can make a real difference and we may see a Conservative Party attempting to reach out to them with more sympathetic policies; after all they’re going to voting for a lot longer than their core demographic. Older voters may therefore not be treated so kindly, plus we could see a relaxation of those ‘austerity’ measures which appeared to hit the young and most vulnerable the hardest.
3. But what about that older demographic? What does this mean for State Pension Age (SPA), the triple lock on pensions and the social care measures that must be addressed soon? Let’s not forget that the DUP want to protect the triple lock. At the same time, the Tories must be mindful they have a rampant opposition, who are looking to widen appeal, and will be pressurising them constantly in the belief they can pull apart this ‘coalition of sorts’. Expect to see unpopular measures jettisoned.
4. In that sense, I believe they may still decide to reject Cridland’s SPA recommendations and stick with the current timetable to increase SPA for another decade. Also the triple lock will be retained.
5. The Conservatives seem to have boxed themselves in on social care funding. They may wish to introduce a cap but one of the reasons it was kicked into the long grass before was the cost and complexity of introducing it. They need to do some radical thinking before any Green Paper is published.
6. In a wider housing sense, they may need to get Local Authorities to build houses – as proposed by Labour. Uncertainty is going to mean house prices continue to stagnate and may even reverse slightly. This is not conducive to the private sector building more. They need a vibrant construction sector and evidence that housing supply is continuing to be added to – again a massive issue for millennials.
7. Uncertainty is also going to push up the cost of money. In the short term we may see the end of very low mortgage rates. If markets lose faith in what the future looks like, (which brings the Brexit negotiations back into play), it could mean further increases in rates. This then reflects back into mortgage and equity release pricing, which could mean a further stagnation of house prices.
8. Markets, not the Government, will continue to dictate actions. But, we must also ask how low will the authorities let sterling fall and how much will inflation be allowed to rise before action is taken?
9. As mentioned above, we may see a more compassionate approach to ‘austerity’ and yet another loosening of targets for balancing the budget. There was clearly plenty of support for Labour’s policies on spending more and providing more funding for the NHS, police, etc. However, they must still keep the markets onside otherwise the cost of borrowing for Government and individuals will both go up. Consumers are already carrying a lot of debt – if the cost of servicing that debt increases, it impacts on living standards, which will further impede their ability to get back into power with an increased majority at the next election.
10. Finally, what will happen to the measures dropped in the Finance Bill? For example, reducing the Money Purchase Annual Allowance from £10k to £4k. How much ‘band-width’ will a minority government have to change things around and introduce new policies? Very little I might suggest so we’re unlikely to see anything controversial or radical going through Parliament, particularly whilst Brexit is ongoing, and especially when they’ll have the DUP horse pulling their cart. Having said that we may still see some radical proposals for pension tax relief back on the agenda; for example, they could reduce the amount given but give a little to the lower paid in order to try to widen its appeal. Whatever they plan, they will need DUP agreement.
As Bill Clinton famously said when it came to priorities, “It’s the economy stupid”. We know that weak Government leads to uncertainty which is clearly not good for the economy. There are big challenges to come – Brexit being the main one – however you have to wonder whether they’ll have the political strength and/or support to get very far into tackling them. Time will tell.
Bob Champion is chairman of the Later Life Academy (LLA)