05. 07. 2024

Election 2024: What does this new dawn hold for accountants?

Election 2024: What does this new dawn hold for accountants?

You didn’t need to be a Conservative Party insider to win some money by betting on the outcome of the hastily called general election.

The more interesting question is what lies ahead for the population at large, our clients and ourselves. If nothing else, we now have certainty and this should settle financial markets, at least in the short term.

By the end, even diehard Conservatives seemed to have lost faith in their leadership, following a series of bad decisions stretching back through eight years and five prime ministers. They will now be seeking a re-set in opposition.

Throughout the past couple of years and the election campaign, Sir Keir Starmer and the woman who we must assume will be the new Chancellor of the Exchequer, Rachel Reeves played their cards very close to their chests, largely parroting Conservative policies and committing to very little.

This means that we enter the second half of 2024 with rather less idea of how the next few years will pan out than many of us would regard as ideal.

Economy is key

The key to everything will be the economy. If Labour really can encourage it to grow faster than at any time in the past couple of decades, then all will be rosy. Realists might have their doubts.

Assuming that the growth doesn’t immediately fire off into the stratosphere – and I will be happy to bet on that – there are only three choices. Move from austerity into double austerity by cutting services even further, change the fiscal rule and borrow more or – a subject dear to the heart of almost every accountant – raise more by way of taxes.

Rather hypocritically, given that he increased taxes to the highest level since just after the war, in the run-up to the election Rishi Sunak spent a lot of time sniping about imaginary Labour tax increases.

Ironically, there were stories in the media about billionaires leaving the UK after Jeremy Hunt announced that he was closing down the tax benefits of non-dom status. It is possible that more will now depart, rather than taking a chance on basing what could be significantly higher taxes. Then again, there is an increasing group of the ultra-rich who appear to believe that they have an obligation to pay higher taxes and will willingly do so.

As the likelihood of a Labour victory became a racing certainty, there were also stories emerging of rich folk crystallising capital gains in the expectation that the rate could increase.

New broom

Now that we can expect the new broom to start sweeping with Labour in place for at least five years and conceivably 10 or longer, it is time to start strategising for our own practices and our clients, quite possibly in that order.

Even though, by repetition, Starmer has begun to make change sound to some like a dirty word, it is almost certainly good news for those in the profession.

I would imagine that a good number of clients have been spooked by stories in the right-wing press about tax hikes. If that is the case, then they will be rushing to our (virtual) doors asking for help.

Whether this means assistance in leaving the country, ideas for mitigating capital gains tax or inheritance tax or, more positively, considering how business prospects might be improved if the government seeks and achieves closer relations with the EU will depend on the nature of your client base.

From a personal perspective, some of us may have to accept that we will be paying more tax in future, but that was baked into the last government’s policies anyway.

Crossing borders

One Labour idea has not received as much coverage as it should have. This is the intention to negotiate with the EU to allow professional qualifications to cross borders again. I imagine that those in larger firms will welcome the opportunity to institute or refresh exchange programmes, while others may be able to recruit much-needed staff who fancy spending some time in the UK.

Having held an election in the middle of the holiday season, the likelihood is that we will remain in the dark for a month or two, especially since Reeves has already announced that she will not be introducing her inaugural Budget until September.

Since change is always exciting, whether good or bad, I for one can’t wait to hear what lies ahead.

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