24/05/2024
The Prime Minister Rishi Sunak surprised everybody on 22 May – including many in his own party – with his announcement of a general election on Thursday 4 July.
At the start of 2024, Rishi Sunak said that his “working assumption” was that the general election would be held “in the second half of the year”. His unexpected choice of 4 July just passes that midway threshold, so what happens next?
Election timeline
The run up to the dissolution of parliament will see a week of frantically trying to pass outstanding legislation (including the March Budget’s Finance Bill). The manifestos will probably appear around the second week of June, although there are some suggestions they may be quite thin documents.
23 – 24 May ‘Wash up’ period in parliament for outstanding legislation. 16 bills will either be dropped or pushed through on a consensus basis. The list includes the relatively short Finance (No 2) Bill 2024 which was at the report stage in the House of Commons when the election was called. Parliament prorogued.
30 May Parliament dissolved ahead of 25 day election campaign cycle
5 – 16 June Expected publication of party manifestos
4 July General election
Tax policies so far
What we know on the main party’s tax policies so far is limited and well-flagged:
• The Conservatives want to abolish individual national insurance contributions, but the cost of this is over £40 billion, so falls into the category of long term aspiration rather than short term policy.
• Labour has said it will:
o Extend the tax on non-domiciled individuals beyond the arguably stolen proposals revealed by Jeremey Hunt in March;
o Apply VAT to private education; and
o Change the tax treatment of carried interest for investment managers.
In terms of revenue raised, the three count as minor revenue raisers.
Rachel Reeves, the Shadow Chancellor, has effectively signed up to the spending plans that Jeremy Hunt set out in the spring Budget. Outside the world of politics, these are not regarded as credible. The chairman of the Office for Budget Responsibility (OBR) has described them as worse than fiction. Similarly, the International Monetary Fund’s recent report pointed to the Chancellor’s Budget plans containing a £30 billion black hole that needed filling with tax rises and/or spending cuts.
Post-election landscape
Based on previous elections, we could find out more about the new government’s real tax and spend intentions in a Budget held within about two months of the polls closing. That means we could see an incoming Labour Budget in early September. Rachel Reeves has already said she wants to hold single Budget each year, in autumn.
In any event, the (new) Chancellor is due to deliver a Spending Review for the next three years from April 2025, which cannot practically be deferred beyond November.
Tax announcements might also emerge at that second fiscal even. Autumn brings a number of costly calls on government resources – compensation for the Post Office and blood contamination scandals – to which can be potentially added funds to bail out failing water companies and local councils. The next Economic and Fiscal Outlook from the OBR, theoretically due in autumn, looks a challenge for whomever is Chancellor – and may explain that early election date.
Tax treatment varies according to individual circumstances and is subject to change.
The Financial Conduct Authority does not regulate tax advice.
Sources
https://www.politicshome.com/news/article/rishi-sunak-next-general-election-date-2024
https://www.bbc.co.uk/news/uk-politics-67883242
https://www.instituteforgovernment.org.uk/explainer/uk-general-election-july-2024
https://www.thetimes.co.uk/article/uk-spending-plans-worse-than-fiction-budget-watchdog-says-6wdpxdzh7
https://www.civilserviceworld.com/news/article/obr-calling-government-spending-plans-a-fiction-is-generous
https://news.sky.com/story/imf-upgrades-uk-growth-forecast-but-issues-fresh-warning-on-national-insurance-cuts-and-debt-13140587 #:~:text=In%20its%20annual%20check%2Dup,to%20stabilise%20the%20national%20debt.
https://www.imf.org/en/News/Articles/2024/05/20/mcs052124-united-kingdom-staff-concluding-statement-of-the-2024-article-iv-mission
https://labour.org.uk/updates/press-releases/rachel-reeves-mais-lecture/
https://www.politico.eu/newsletter/london-playbook/let-battle-commence/
https://bills.parliament.uk/bills/3690
Current version of Finance (No. 2) Bill with latest news, sponsors, and progress through Houses
