Last month, King Charles’s address to Parliament highlighted the new Labour Government’s legislative priorities for the months ahead.
His speech introduced 40 proposed laws that included key financial legislation that could impact businesses and individuals over the next five years.
The Budget Responsibility Bill
Labour’s emphasis on economic stability is captured in the Budget Responsibility Bill.
This legislation requires that any major, long-term changes in tax and spending undergo rigorous scrutiny by the Office for Budget Responsibility (OBR).
The goal is to improve public confidence in Government spending and prevent significant financial decisions from being made without thorough fiscal assessment.
For businesses, this means greater predictability in tax policies, which is crucial for long-term planning.
Fair wages and the living wage
In response to the escalating cost of living, the Government is committed to revising the living wage to better reflect current economic realities.
The planned abolition of age bands in the minimum wage structure means that all adult workers will receive equal pay, regardless of age.
This change could impact payroll management and budgeting for businesses, requiring a review of wage structures and compliance processes.
Corporate accountability and governance
The Draft Audit Reform and Corporate Governance Bill proposes the creation of a new regulatory body – the Audit, Reporting, and Governance Authority – to replace the Financial Reporting Council. This new authority will have enhanced powers to enforce financial reporting standards and hold directors accountable, thereby improving public trust in corporate governance. Key changes include:
Simplifying regulations for smaller Public Interest Entities (PIEs) to support small businesses.
Introducing a regulatory framework for the audit market to address conflicts of interest and reduce corporate failures.
Empowering investigations and sanctions against directors who fail in their financial responsibilities.
These changes could necessitate adjustments in corporate governance practices and internal controls, making it essential for companies to stay ahead of regulatory expectations.
Pension scheme improvements
The Pension Schemes Bill aims to enhance the financial security of over 15 million private-sector pension savers by streamlining the consolidation of pension pots from different employers.
For individuals, this could mean easier management of retirement savings across various jobs.
Businesses, especially those with large workforces, may need to update their pension offerings and communication strategies to align with these changes.
Economic growth through the National Wealth Fund
The establishment of the National Wealth Fund (NWF), with an initial allocation of £7.3 billion, is a significant step towards stimulating economic growth and advancing a greener economy.
The fund seeks to leverage private investment, targeting a return of £3 for every £1 invested.
This initiative is likely to create opportunities for businesses involved in major infrastructure and green projects, requiring strategic planning to take advantage of potential investments and partnerships.
Local empowerment and economic development
The Government’s plan to devolve powers to local leaders and metro mayors is aimed at creating regional economic growth.
This decentralisation could lead to more tailored economic strategies, enabling businesses to benefit from locally focused development efforts.
Companies operating in these regions may find new opportunities to engage with local authorities and influence economic policies that directly impact their operations.
Changes to VAT and educational funding
To increase funding for education, the Government will remove VAT exemptions on private school fees, generating revenue to hire approximately 6,500 new teachers. This change will affect families and educational institutions alike, requiring a review of financial plans and tuition structures.
Strengthening ties with the European Union
Labour’s intent to strengthen trade and investment relationships with the European Union could improve trade conditions and boost mutual investment.
Businesses engaged in international trade should prepare for potential shifts in trade regulations and explore opportunities for expansion within the European market.
As the full details of Labour’s financial policies unfold, especially with the upcoming Budget on 30 October 2024, staying informed and prepared will be key.