Rishi Sunak, who became the UK’s third prime minister in two months after officially taking over from Liz Truss on Tuesday (25 October), is facing tough decisions over a range of tax and pensions issues.
Many questions remain unanswered after months of discussion through the leadership contest and the fallout from last month's Mini Budget.
Talking to Professional Adviser, advisers have shared their reactions about the new prime minister and the potential impact this change at Downing Street could have on their businesses and clients. They addressed concerns about possible plans for tax and green investments, the triple lock and economic issues.
Rowley Turton Chartered financial planner Scott Gallacher said: "I think it's fair to say after the Mini Budget debacle, the appointment of Sunak will be a welcome relief for most.
"However, whilst I don't imagine he will have the rough start that Truss had, I suspect his honeymoon period will be pretty short."
Gallacher added: "Once the short-term relief of his appointment has subsided, and things have stabilised a little, I suspect the reality of higher corporation tax rates and no dividend tax cut will cause concern for many businesses and their directors."
He told PA that he doubted Sunak would be "brave enough", or have "enough political capital" to attack the triple lock with an election just a couple of years away.
In Gallacher's view, the state retirement age is more at risk.
"Even though life expectancy is no longer increasing, so there is no real justification in doing this, it's an easy win that can knock billions of the black hole that is the government's finances," he said. "As always, [Sunak] will try and create some media wins with tax breaks and such. However, as with most budgets, I suspect that this will mainly be smoke and mirrors."
Fiscal statement won't look pretty'
Chapters Financial director Keith Churchouse said: "All mature global economies are evolving to cope with change as we move into a new era of higher inflation, and correspondingly higher interest rates to manage the position, if possible.
"The prime minister needs energy and economic wisdom to achieve considered outcomes. I believe, as it appears does the City, that the Conservative Party now has their man after the debacle of the Truss weeks."
Churchouse added: "However, it should be noted that markets are watching closely and will react if the government makes any more incorrect moves. We could wheel out at this stage the fact that the chancellor, Jeremy Hunt - I am pleased that Rishi has kept him to give stability - is stuck between a rock and a hard place.
"It's far worse than that, and spending cuts I think are inevitable, starting with some diluting of the triple lock, which will make a dent in the savings that need to be made."
Churchouse continued: "We have already had it confirmed that corporation tax will rise, and I think there will be a few other tax advantages that might make the chopping board. Perhaps pension tax relief at higher rates might be one, although this option has been mooted for years and nothing has come of it…yet."
He said he hoped that the balance of 2022 would be a lot calmer for all, including clients, and that the Autumn Budget in mid-November would be a point of clarity. "I don't think it's going to look pretty, and we need to prepare for this."
According to Churchouse, financial planning, and the plans and arrangements implemented over time, are normally about the long term.
"The Financial Conduct Authority's (FCA) Consumer Duty is correctly clear on this point. We have been advising clients to hold firm where needed, and I anticipate this will continue into the future. Volatility is to be expected," he said.
Asked about what developments he expected in the area of green investments, he stated: "I hope they do well, but greenwashing has been hugely unhelpful and as people live in some fear about their finances, investing in green type investments may take a back seat. Greenwashing needs to be reversed, and soon."
‘He can really surprise us'
Personal finance expert Anna Sofat told PA: "I am pleased we have some stability in the markets following the appointment of Rishi Sunak as prime minister. Of an ex-Goldman Sachs and City professional, the markets expect better economic management than the previous government. "As such sterling has strengthened slightly and gilt prices fallen. Both will benefit clients' portfolios.
Lower gilt prices will also help keep borrowing costs down providing further help for those with mortgages."
Sofat added: "Sunak had previously announced a rise in corporation tax which will impact on businesses as will the rise in energy costs over the winter. Let's hope he introduces a furlough-style scheme to help businesses weather the hike in costs."
"I also hope Sunak takes this opportunity to move away from austerity and attempts to bring further privatisation of the NHS and instead invest in public services especially the NHS," she continued. "We need US-style big infrastructure commitment alongside help for people struggling at the bottom. This can be funded by retaining the previously announced increase in corporation tax, a windfall tax for the oil companies and ending the triple lock on pensions which disproportionately benefits the elderly who tend to be asset rich. "Any impact on lower income elderly can be balanced by further help with cost of living via one of grants and/or increases in pension credit." Sofat told PA that she still felt the UK needed a working relationship with Europe.
"I hope he will opt for Norway-style trade deal instead of creating further barriers for trade," she explained. "My fear, however, is that there will be a push for Singapore-style economy with charter cities being given too much freedom and little to no safety net for the vulnerable or the environment."
Sofat said if Sunak went down this route then much of the labour and environment safeguards the UK had via European Union-wide regulation were likely to go resulting in lowering of standards in food and health.
"This does not bode well for healing the divide in our society or protection of the more vulnerable among us," she said.
Sofat added: "A lot depends on the direction Sunak takes. He can really surprise us all by following the middle cautious route with some bold initiatives on energy and environment, as well as reducing poverty. I fear he, like his predecessors and as he did during the selection voting, will play to the extreme right wing of his party. It's all to play for either way."
‘No evidence for competence'
Handford-Aitkenhead & Walker Chartered financial planner Alasdair Walker said: "The fact that the markets appear to trust a Sunak government is a bit of welcome relief after the tumultuous last few months. "My concern is that we have seen relatively little substance in terms of policy plans. I am also concerned that absolutely anybody would look competent in direct contrast to the last attempt at a government, and there may be more optimism pinned on Sunak's competence than we have evidence to support."
