In a shock twist the pollsters called the UK general election correctly. Keir Starmer strolled into Number 10 with the very comfortable three figure majority. Granted the numbers weren’t quite as extreme as some had suggested, but it’s still a proper comeuppance for the Tories. What is quite interesting is that in the UK, we seem out of sync with lots of Europe – they are lurching right, as we’ve gone centre left.

However, this isn’t a political column, it’s financial so what are the key implications?

When Tony Blair swept to power in 1997, he inherited a strong economy from John Major and Ken Clarke with a low net debt to GDP ratio of about 37%. Today that figure is essentially 100%. For context when Labour came to power after World War 2, net debt stood at 251% so it isn’t quite the worst economy they’ve inherited! The annual deficit is predicted to be above 3% this year on Conservative spending plans so Keir Starmer has little room for manoeuvre. This figure is arguably more important than debt to GDP.

Markets have long priced in a Labour government, so the short-term outlook is one of stability. The questions will come once the first budget/financial statement is made (probably) some time in September. How Labour spending plans will be funded will be crucial. Undoubtedly the unions representing public sector employees will think they’ve got more bargaining power now than under Rishi Sunak, but will generous pay settlements reignite inflation just as the Bank of England think it’s under control?

From an investment and personal finance perspective there are many answered questions particularly around inheritance tax, pensions, and capital gains tax. All three look ripe for plunder as Labour has been very careful which taxes they ruled out increasing and these three weren’t mentioned. I don’t think corporation tax was either, but with a fairly high rate already that seems less likely. None of these three taxes will necessarily cause an issue if rises are fair. For example, as long as indexation returns to capital gains, then a CGT hike to match income tax rates would be a reasonable trade off – long term investors benefit at the expense of shorter term traders. However, even if indexation is allowed, it shows the benefits of valuable tax shelters such as the humble, once derided ISA.

Pensions will be the really interesting area – it looks like the lifetime allowance won’t be back, but will the tax free cash element and/or the annual allowance be reduced? It’s very difficult administratively to have a flat rate pensions tax relief so that seems less likely.

Clearly my comments are pure speculation around tax increases, but the money has to come from somewhere. There aren’t many taxes that move the needle.

To more positive areas now and the UK stock market still looks good value – private equity clearly thinks so with the number of bids tabled! Bonds still offer decent value too with or without a rate cut. Indeed, with the exception of US tech and maybe Indian equities, there is plenty of value in global equities. Many areas are waiting for a first US rate cut to be announced.

So, stability in government, probably a good thing when you look around the world today; good value on offer for many investment areas; just watch out for those pesky tax hikes.

The opinions expressed are those of Ben Yearsley, Director, Fairview Investing Consultants and Consultants to EXE Capital Management. The views are those of the author only.

The above does not constitute a recommendation to buy and advice should be sought from your financial advisor. The value of investments can fall as well as rise.