What a Conservative general election win could mean for your money

A date hasn't been set for a general election but the Tory Party has already hinted at what could be in its manifesto.

Blue piggy bank on coins
(Image credit: Getty Images)

It is still unclear when a general election will take place this year, but the Conservative Party has been hinting at policies aiming to boost the nation’s finances as the Tory’s look to cling to power.

Prime Minister Rishi Sunak has refused to commit on a date for a general election but has indicated that it will be in the second half of the year.

It comes as the Conservatives trail behind Labour in the polls and will hope the May local elections provide a boost and give a sense of the public mood.

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Labour recently published a document called Financing Growth, seen as an indication of what economic policies will feature in its general election manifesto and the Conservatives have started to provide some hints.

A new British ISA was launched in the Spring Budget and there have been plenty of financial changes over the past 14 years of Tory rule such as pension freedoms.

There may not be a date set for when the UK will go to the polls but here is what a new Conservative government could mean for your money if they manage to defy expectations and hold on to power.

Maintaining the triple lock

The triple lock, used to calculated how much the state pension should increase by, has become a political hot potato in recent years.

The calculation for each tax year starting in April is based on the highest of average earnings growth for the previous May to July period, September inflation or 2.5%.

It is becoming expensive to fund though and with the payments set to rise by 8.5% in April, critics warn it may cause intergenerational unfairness as the increases are often above current inflation and wage growth.

Labour has previously said it will keep the measure and chancellor Jeremy Hunt has told the BBC that the Conservatives will also retain the controversial payments, claiming a growing economy will help fund it.

“This will bring some comfort to existing pensioners, who are relying on the state pension and worried about any changes,” says Sarah Coles, senior personal finance analyst for Hargreaves Lansdown.

“However, it brings all sorts of challenges around affordability, and raises questions of whether any government might end up increasing the state pension age in order to bring the cost down – pushing it out so far that more people are unable to work to state pension age. 

"We would like to see a review of the state pension system, balancing the needs of today’s pensioners with those of tomorrow.”

Tax cuts

Hunt has focused recent tax cuts on National Insurance during recent updates.

But with a general election approaching, more cuts could be promised to woo voters.

It comes as public finance data shows the government had £7.2 billion extra cash coming in during February compared with a year before, helped by threshold freezes, higher corporation tax rates and inflation boosted receipts.

February borrowing was higher than economists expected at £8.4 billion but the total for the year at £106.8 billion is down by £4.6 billion compared with a year before.

This could give the Conservatives some room to promise tax cuts.

“This is the fourth month in a row when borrowing was down compared to the year before,” says Danni Hewson, head of financial analysis at AJ Bell.

“There are tentative signs that the volatility created by the pandemic and the energy crisis is behind us, though the legacy left behind will weigh on public finances for generations to come”

The Conservative election manifesto will provide an opportunity to make a forthright pledge on tax cutting, says Coles.

“We could see a repeat of the pledge to bring an end to National Insurance over the much longer term,” adds Coles.

“ But Labour will continue to try and weaponise this, arguing that the aspiration is unfunded. We might also see a pledge to tackle stamp duty or inheritance tax – both of which had been floated in the run-up to the Budget.”

There are plenty of taxes that could be ripe for reform.

For example, inheritance tax (IHT) receipts are heading for a record high.

Despite only around 4% of estates paying inheritance tax, critics warn that frozen allowances and higher house prices are pushing more estates into paying the charge.

Rumours of inheritance tax reform failed to materialise in the Autumn Statement and the Spring Budget but the general election may provide an opportunity.

“Ultimately this will also depend on the economic outlook and modelling of the cost implications nearer the time,” says Jason Hollands, managing director at Evelyn Partners.

“A central theme of current Conservative messaging is they have a carefully thought through plan, and Labour does not, which suggests they will be careful about bold commitments that might be picked apart.”

He adds that any tax cuts may already be offset by frozen allowances, creating fiscal drag.

Support for savers and investors

The Treasury is currently consulting on pension reforms that would essentially give workers a scheme that follows them on their career path, helping people keep track of their retirement savings.

Hunt also unveiled plans for an extra British ISA allowance in his Spring Budget, giving investors an extra £5,000, on top of the £20,000 ISA allowance – that can be used to invest in home-grown companies.

This may help people put more money away and keep track of it, if the plans survive consultation and the election period, but Hollands adds that it may not be worth getting excited about.

 “The personal savings allowance remains frozen, as does the core ISA allowance which has been stuck at £20k for several years – with no signs of a hike – while the tax environment for capital gains and dividends has worsened materially,” he says.

“In the new tax year, the annual capital gains exemption – which was £12,300 up until 6 April 2023, will be slashed to £3,000, while the annual tax-free dividend allowance, which was £5,000 up until 2017/18 will be reduced to a paltry £500.

 “This is arguably the worst tax environment for investors is decades and the frozen core ISA allowance limits the scope of mitigating it."

Marc Shoffman

Marc Shoffman is an award-winning freelance journalist specialising in business, personal finance and property. His work has appeared in print and online publications ranging from FT Business to The Times, Mail on Sunday and The i newspaper. He also co-presents the In For A Penny financial planning podcast.