A change in direction? Preparing asset managers for a UK general election
Asset managers are assessing the potential implications of the UK general election on 4 July. To help organisations to prepare for the election, we have created a tracker that analyses the policies of the main political parties as they relate to asset management firms.
Snapshot A summary of the main political parties' policies
Conservatives
We assume that the Conservative Party will carry those policies that it has been implementing while in Government if it is re-elected. There is nothing in the manifesto to suggest otherwise and in respect of the Edinburgh and Mansion House Reforms there is an explicit commitment to do so. The Conservative Party are introducing a new Pension Tax Guarantee. The Conservative Party is to stick by the tax plans it announced at the last budget, eg there will be no change to the treatment of carried interest for the purposes of tax and no increase in the rate of capital gains tax.
Labour
Prior to publishing its manifesto, the Labour Party published a detailed policy document “Financing growth – Labour’s plan for financial services” setting out its ideas. These ideas were further fleshed out in a speech by the Shadow Chancellor, Rachel Reeves, “Britain’s economic future”. The core point to note is continuity. The Labour Party has committed to completing “in-flight” policies, including the OFR, SDR, the British ISA and the Edinburgh Reforms. Labour broadly accepts the current direction of financial services policy, save that in certain aspects, including ESG matters and consumer protection, it wants to go even further. Labour says that any reforms it introduces will be forward looking, meaning that it will not seek to unpick recently completed reforms. There are three main themes to Labour’s proposals:
- Reform of regulators and regulation Labour wants to reassess the financial services regulatory framework to ensure that there aren’t any gaps or overlaps in it and wants to review the FCA Handbook to see whether it can be rationalised in light of the Consumer Duty.
- Direction of investment to particular parts of the economy Labour wants to introduce a Tibi scheme to direct DC pension fund investment into approved funds investing in venture capital, small cap growth equity, and infrastructure investment. For the same reason, Labour are adopting the British ISA. They also want Insurers to invest the capital freed up by the Solvency II reforms into electricity transmission infrastructure.
- Changes to the taxation of carried interest Labour considers the current taxation of some carried interest as capital gains as a tax loophole to be closed and plans to tax it all as income, which would increase the tax rate on that part of the carried interest from 28% to 45%, although the precise details of how this might operate are not yet known.
Other parties
Liberal Democrat The Liberal Democrat manifesto has limited content relating to asset management, with two principal policies: requiring the FCA and PRA to have regard to promoting financial inclusion; requiring pension funds and managers to show that their portfolio investments are consistent with the Paris agreement on climate change. Liberal Democrat Party Manifesto 2024 Reform UK Reform UK refer to their manifesto as a contract.
It does not include a section on financial services, however, it does include a pledge to exempt all estates worth less than £2bn from inheritance tax. Reform UK Contract 2024 Green Party The Green Party manifesto includes a number of policies relating to financial services. On the one hand they want to direct private capital and assets under management to pursue their environmental goals and on the other hand they want to tax financial services much more heavily. Green Party Manifesto 2024 Plaid Cymru Plaid Cymru don't say much about financial services, save that they would reinstate the bankers’ bonus cap. Their policy to tax capital gains at the same rate as employment income would effectively increase the marginal rate of tax on carried interest currently taxable as a capital gain from 28% to 45%. Plaid Cymru Manifesto 2024 SNP The SNP manifesto recognises the importance of financial services to the Scottish economy and includes a specific policy pledge to reintroduce the Right to Buy ISA, as well as pledges to maintain the state pension triple lock as well as an aspiration to raise the state pension a further 6.2% to a “well-being pension” rate. SNP Manifesto 2024
In focus
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