This month we entered a new era. After nearly 15 years of Conservative Government, we now begin five years under a Labour majority.
I am sure many of you, like us, have questions about what this might mean, and whilst it is still early days, the roadmap for Labour’s policies in the short to medium term is becoming clearer – especially following the King’s Speech this month.
After the usual drama of the opening of Parliament, King Charles rose in his regalia to outline the new Labour Government’s ambitious legislative agenda.
With 40 pieces of legislation on the table, business owners across the UK are eager to understand how these changes will impact their operations and strategies over the next five years.
Ensuring economic stability with the Budget Responsibility Bill
Certainty and stability have been somewhat absent in recent years for various reasons (not least several unexpected international crises), so one of Labour’s cornerstone pledges is economic stability.
This is embodied in the Budget Responsibility Bill, legislation that mandates that all significant tax and spending changes undergo an independent assessment by the Office for Budget Responsibility (OBR). Labour has also confirmed that it will only host one fiscal event each year.
For business owners, this means a more predictable economic environment, with reduced risks of sudden, unassessed fiscal changes.
Such stability is important in fostering long-term planning and investment decisions, enhancing overall business confidence.
A genuine living wage
Labour’s commitment to a “genuine” living wage will be transformative for the UK workforce but will clearly be more challenging for some businesses that struggle to pay it.
By eliminating minimum wage age bands, the Government aims to ensure that all adult workers receive fair compensation.
While this move could increase operational costs for businesses, it also has the potential to boost consumer spending power, which could drive demand for goods and services.
As a result of this, there are some fears that this additional income could lead to inflation, but there are other factors that are greater drivers of the cost-of-living crisis.
Businesses may need to balance wage increases with productivity gains to maintain profitability.
Revamping corporate governance
The Draft Audit Reform and Corporate Governance Bill introduces the Audit, Reporting, and Governance Authority, replacing the Financial Reporting Council.
This new regulator will have robust powers to oversee financial reporting and corporate accountability.
For business owners, especially those of smaller Public Interest Entities, the removal of unnecessary rules can reduce administrative burdens.
However, the increased scrutiny and potential sanctions for serious financial mismanagement necessitate rigorous compliance and transparent financial practices.
Pension reforms for better outcomes
All of us want a better retirement. The Pension Schemes Bill aims to improve private-sector pension outcomes, aligning with Labour’s economic growth goals.
By consolidating pension pots and introducing a standardised test for defined contribution schemes, the bill seeks to boost retirement savings.
For businesses, this means ensuring their pension offerings are competitive and compliant with new regulations, which can enhance employee satisfaction and retention.
Driving economic growth and wealth creation
Persistent low business investment has been a drag on UK productivity. The introduction of the National Wealth Fund (NWF) aims to reverse this trend by injecting £7.3 billion into transformative investments, particularly in green industries.
The NWF will work through the UK Infrastructure Bank, leveraging public funds to attract private investment.
For businesses, this creates significant opportunities in emerging sectors and infrastructure projects, fostering innovation and growth.
Simplifying VAT and enhancing EU relations
Labour’s plan to remove VAT exemptions for private school fees will fund educational improvements, potentially creating a more skilled future workforce.
Additionally, Labour’s intent to reset relations with the EU could lead to more favourable trade conditions, increasing market opportunities and reducing barriers for UK businesses. This could enhance competitiveness and open new avenues for expansion.
What lies ahead?
This is the question on everyone’s lips. While the plans outlined above are ambitious, the devil (as always) will be in the details.
Realistically, we won’t get a full picture of these new policies and the other legislation proposed by Labour until after the summer recess and a subsequent Autumn Budget that is likely to follow.
The anticipated Budget later this year will likely provide a clearer picture of exactly how these actions will affect businesses, until then business owners should prepare for potential changes in tax structures, wage regulations, and investment opportunities as best they can.
As always, we are here to help you navigate the changes and challenges that affect your business, so please feel free to reach out to us for a chat.