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What could the hung parliament mean for your money?

The election outcome has brought uncertainty to UK politics, but what does it mean for your money?

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For those who missed it, the Conservatives won the most seats at the snap election. But despite their 50 seat lead over Labour, the election left Prime Minister Theresa May without a definitive majority.

This means that the Conservative party will struggle to pass new legislation through parliament and might not deliver on their manifesto plans.

There is also a chance there will be compromise and deals made with smaller parties as the Conservatives use them to broker power.

Ultimately, in what has become something of a theme for recent politics, the only certainty is uncertainty, but we try to pick out from the election fallout some of the things that may be on the cards for your money.

The value of the pound falls

As soon as the exit polls revealed a hung parliament looked likely, the value of the pound fell in value from €1.15 to €1.13 and $1.29 to $1.27.

Whilst this was nothing quite like the fall in value the pound saw around this time last year after Brexit referendum result, it’s worth thinking about whether your summer holiday might be that bit more expensive.

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What the Conservative manifesto proposes

Whilst it’s all bit up in the air at the time of writing, the Conservative party do have the most seats in the House of Commons, this gives them the right to form the government.

So it’s a fair bet that the immediate future could see the plans in the Conservative manifesto and previous budgets come into effect, such as:

  • Increasing the personal allowance to £12,500 and the higher rate to £50,000 by 2020
  • Promoting long-term savings and pensions products, including the Lifetime ISA
  • Banning letting agents’ fees
  • Cracking down on particular practices associated with some leaseholds, such as escalating ground rents
  • Reducing insurance costs for ordinary motorists by cracking down on exaggerated and fraudulent whiplash claims

Though, of course, some of these plans could be “pruned” back as the Conservatives make compromises and focus on political priorities.

Will we see any of Labour’s plans?

It’s unlikely the Conservatives will make any concessions to Labour, who despite dramatically closing the gap, remain very much in second place.

But with much of the unexpected surge for Jeremy Corbyn’s Labour said to be coming from younger voters, it’s possible the Conservatives might consider re-purposing some of Labour’s proposals to woo the younger generation.

So, we might see ideas like banning zero hours contracts and unpaid internships sneak onto the table, but these would likely come directly from the Conservatives rather than Labour.

What could an agreement with the DUP mean?

As a Conservative government is looking like it will rely on securing an agreement with Northern Ireland’s Democratic Unionist Party (DUP), it’s possible we could see some of the DUP’s ideas come through parliament.

Their main manifesto points around on household income seem to align with the Conservatives.

  • Increase the national living wage
  • Further increase the personal tax allowance
  • Freeze then cut or abolish the TV licence and reform the BBC
  • Protecting the pension triple lock

The notable exception is the DUP are committed to keeping universal benefits for pensioners, where the Conservatives have made noises about means testing them.

What will happen to interest rates?

The Bank of England’s monthly review of interest rates is happening this Thursday, could the election result force them into action?

With inflation (average price rises) exacerbated by the falling value of the pound, the pressure is on to raise interest rates from their record low of 0.25%. And the US Federal Reserve has already taken American rates up earlier this year, and is expected to do so again soon (normally interest rates in the UK and US closely follow one another).

Though, it’s not expected that Governor Mark Carney will want to rock the boat right now, with so much uncertainty in the UK markets after the election.

However, if inflation keeps heading in its current direction, a rate rise could be likely at some point in the not too distant future.

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