Some election financial thoughts
Like many others this morning, I suspect, I’m operating on a handful of hours of sleep; late to bed and (very) early to rise, with the excitement of a confounding exit poll encouraging a 4.30am start.
The results are still rolling in as I type this, although Sky News are predicting a Conservative majority of six seats.
Here are some early financial thoughts from this slightly sleep deprived Financial Planner.
How did the pollsters get it so wrong?
We’re hearing about ‘shy Tories’ as one possible explanation to the disparity between pre-election poll results and the increasingly accurate exit poll. I don’t buy this.
In an age of Social Media, we are all sharing more intimate details about our lives and opinions. To suggest so many kept their voting intentions secret from the pollsters for the past few months doesn’t add up.
The polling organisations have seen their credibility destroyed overnight and will have some big questions to answer in the coming days and weeks.
We all expected the rise of the SNP in Scotland. To see them secure 56 seats is beyond all expectations, even I suspect SNP expectations.
British politics in the future is going to look very different; I can see a scenario where Scottish independence is tabled again very soon.
Talking about independence, a Tory majority government means an EU referendum. I’m in favour of this, although not necessarily of the UK leaving the European Union. It’s important that Britain has the opportunity to debate our membership of Europe and vote for the future.
However, the surge in popularity of UKIP (in votes, not seats) suggests the ‘no’ camp in an our EU referendum will have their work cut out for them.
Another theme which emerged last night was the Green surge.
They don’t appear to have secured the additional seat predicted in the exit poll (we had big hopes for our friend Vix Lothian on the Isle of Wight and our client Dee Searle in Tottenham) but lots of third places where they contested seats and a big rise in vote share.
Hopefully, some of the Green Party policies around sustainability and environment will become more mainstream in the future.
Here in our Guildford constituency, Anne Milton was reelected to parliament, boosting her majority at the expense of the Lib Dems.
Nationally, the Lib Dems were hammered overnight, to a much larger extent that even the most pessimistic forecasters predicted. Nearly 40 Liberal Democrat MPs lost their seats, including a number of former cabinet members.
Time will tell over the next few days whether the Lib Dems will have a role to play in a new government, although with a predicted majority of six seats, the Conservatives are unlikely to need their support.
And Labour had a terrible night too. Losing their Scottish seats, including Scottish Labour leader Jim Murphy, was the consequence of a rampant SNP. The defeat of shadow chancellor Ed Balls is likely to accelerate calls for Ed Miliband to announce his resignation today.
The financial markets have reacted very positively to news of a likely Tory majority.
Pound Sterling rallied to a two-month high against the US Dollar, jumping by nearly 2% on news of the exit poll forecast.
The FTSE 100 index of leading UK company shares opened higher this morning in London, currently trading at just over 7,000 points as I type this.
Markets don’t like uncertainty; a Conservative majority and no need for coalition partner support, would create a more certain market environment for investors.
An EU referendum at some point during the next five years would however result in another bout of market uncertainty, so investors will need to consider that.
Assuming we see a new Conservative government emerge today, we will see some interesting financial developments during the next five years, based on manifesto promises.
The personal allowance for income tax will rise to £12,500, the combined inheritance tax threshold for the family home will rise to £1m, although tax relief on pension contributions for higher earners will be cut to fund this tax concession.
We expect to see pension reform plans for next April, with the creation of a second-hand annuity market, carried through to their conclusion under a Tory government.
It is also good news that Dr Ros Altmann will be made a Tory peer, and join the cabinet as minister for consumer protection, under a Conservative majority government (well done, Ros!).
I’ll write another blog once all of the seats have been announced, a new government has been confirmed and we have had longer to digest all of the news.
Do you have any financial thoughts on the election results from last night?