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Labour has made several pledges which will have an impact on households’ finances – but as it takes power it will also face significant challenges with the cost-of-living squeeze continuing to exert its grip.
Sir Keir Starmer will be the UK’s new Labour prime minister after a Conservative rout saw former premier Liz Truss and a dozen serving Cabinet members lose their seats.
Outgoing Prime Minister Rishi Sunak said he took responsibility for the electoral mauling inflicted on his party as it suffered its worst ever result.
At a victory rally in London, Sir Keir said the country can now “get its future back”.
He told jubilant activists “We did it”, adding: “Change begins now.”
Here is a look at what is on the horizon in the months ahead:
The house sales market
The decisive General Election result could help to boost housing market confidence and encourage would-be movers to put their plans into action.
Tim Bannister, a property expert at Rightmove, said: “We can see in our data that in previous election years there has been a slight bounce in home mover activity after an election has taken place – so the same could happen this year in the short term, particularly against a background of a potential bank rate cut on the horizon and lowering mortgage rates.”
Sales have already been picking up. HM Revenue and Customs (HMRC) figures show UK house sales increased for the fifth month in a row in May.
Halifax said on Friday that it believes property values are likely to rise modestly through this year and into 2025.
The Bank of England is expected to cut the base rate at some point, which will ease some mortgage holders’ costs. Many of Britain’s biggest lenders have already been chopping their mortgage rates this week.
However, many of those on the 1.6 million fixed-rate mortgage deals which are ending this year still face much higher rates than they have previously been used to.
House building
Labour has pledged to “get Britain building again”, creating jobs across England, with 1.5 million new homes over the next parliament.
It has said it will support local authorities by funding additional planning officers and it plans to strengthen planning obligations to ensure new developments provide more affordable homes as well as supporting councils and housing associations.
Charlotte Nixon, mortgage expert at Quilter, said: “It is crucial to recognise that such ambitious targets have historically been challenging to meet.
“The success of this initiative will depend on unwavering commitment, significant resources, and effective execution. Building 1.5 million homes within five years is a monumental task that requires not only political will but also the co-operation of local authorities, private developers, and communities.”
William Beardmore-Gray, senior partner and group chair at estate agent Knight Frank, said: “We are hopeful that this election result ends the long period of political uncertainty which has negatively impacted the real estate sector.”
Renters
Labour aims to prioritise the building of new social rented homes and better protect the existing stock.
The party has also promised to abolish section 21 “no fault” evictions and to empower renters to challenge unreasonable rent increases.
According to figures released by Rightmove earlier this week, the average monthly rent being asked across Britain, excluding London, hit a record high of £1,316 in May. This was around 7% higher than a year earlier.
Ben Beadle, chief executive of the National Residential Landlords Association (NRLA), said: “We stand ready to work constructively with the new Government to ensure changes are fair and workable for tenants and responsible landlords and are sustainable for the years to come.
“It is vital however that reform does not make worse an already chronic shortage of rental properties to meet demand.”
First-time buyers
Labour plans a Freedom to Buy scheme, as well as giving first-time buyers first dibs on new developments.
Its housebuilding plans may also help some aspiring homeowners who have been struggling to buy.
Ms Nixon said: “Without a significant increase in the supply of genuinely affordable homes, schemes like Freedom to Buy offer limited relief to those priced out of the market.”
Tax
Labour has pledged not to increase national insurance (NI) or income tax rates.
It has also said it will address “unfairness” in the tax system “so that everyone who makes their home here in the UK pays their taxes here”, as well as clamping down on tax avoidance.
Laura Suter, director of personal finance at AJ Bell, said: “While Labour pledged no increases to income tax in its manifesto, it is allowing an increase in by the back door on day one. That’s because it’s not ending the deep freeze on income tax thresholds brought in by the Conservatives.”
Some people have suggested that Labour may also need to end up looking elsewhere in the tax system for extra revenue.
Pensions
The state pension triple lock, which guarantees the state pension rises each year in line with inflation, earnings or by 2.5% – whichever is higher – will be retained under Labour.
Some commentators have suggested that, while the triple lock provides a vital safety net for pensioner incomes, retaining it will be a challenge, given the ageing population and questions around intergenerational fairness.
Labour has also promised to “undertake a review of the pensions landscape to consider what further steps are needed to improve pension outcomes and increase investment in UK markets”.
Patrick Heath-Lay, chief executive of People’s Partnership, which provides the People’s Pension, said: “I hope that Labour’s pensions review will help revitalise the consensus that drove forward the success of automatic enrolment and create a roadmap for the future.”
He added: “There are also ‘day one’ challenges for the new ministerial team. The pensions dashboard programme (an initiative which will eventually enable people to see all their pensions in one place online) is making progress, but ministers must address key project documents which still require approval, and this must happen quickly if larger schemes are to connect to the dashboards’ infrastructure in April.”
Financial markets and the economy
Jason Hollands, managing director of Bestinvest, the online investment platform, said: “Having carefully nurtured relationships with the City and business community, Keir Starmer and Rachel Reeves will be mindful of the need to build confidence with the financial markets.
“In the near term at least, I would expect Labour to stick to the policies set out in the campaign rather than spring surprise, radical new ones out of a hat.”
Chris Forgan, portfolio manager at Fidelity International, said: “The economy is recovering from a slowdown in 2023 and the outlook is improving. First-quarter growth was driven by an uptick in consumer spending, while real disposable incomes also increased for the second quarter in a row.
“Consumers are saving more which could support further growth next year as confidence builds and savings are converted into spending.
“The inflation picture is also looking more positive. Services inflation is still higher than the Bank of England would like, but we believe it will begin its rate cutting cycle before long, which should further stimulate economic activity.”
Victoria Scholar, head of investment at interactive investor, said: “The relaxed mood across financial markets reflects the fact that Labour’s landslide win had long been predicted by the polls and therefore was already baked into market prices.
“(Sir Keir) Starmer tried to appeal to the markets during his election campaign by positioning Labour as a pro-business party and refraining from announcing plans for major tax increases.
“In stark contrast to Liz Truss’s ill-fated mini-budget in 2022 which sent bonds and the pound tumbling, today’s lack of market volatility and subdued price action suggests investors and traders see the latest election outcome as a democratic vote in favour of a new political era representing stability and calm.”
