Steve Webb: Does it really matter who wins the election?

Later this year, UK voters will go to the polls and the parties will spend the campaign period stressing the apparently fundamental differences between them.

But for those whose work involves helping clients plan for their financial future, how much difference will it make who wins the election?

My short answer – as a reformed ex-politician – is ‘much less than you might think’.

It would be fair to say, of course, that we know relatively little about what a potential future Labour government might actually do in office, and the party itself is probably far more focused on winning the next election than on coming up with a detailed policy prospectus.

Whoever runs the UK at the moment faces severe constraints on their ability to be radical

But from the policy announcements that have been made recently, it is starting to look much more like evolution than revolution, especially when it comes to financial services.

For example, at the end of January, Labour published a document entitled “Financing growth – Labour’s plan for financial services”. Among six policy priorities set out at the start of the document included “enhance the competitiveness of the UK’s financial services sector”, “lead the world in sustainable finance” and “reinvigorate our capital markets”.

What is striking about this document and these priorities is that if the same document had been published under a different cover by the current government, no one would have batted an eyelid.

This apparent continuity of policy raises a fundamental question – if the two main political parties have different ideologies, different priorities and tend to represent different parts of the population, how can they end up saying much the same things?

Any government of any political colour is going to be very interested in using ‘other people’s money’ – such as the assets in pension funds – to deliver its priorities

The short answer is that whoever runs the UK at the moment faces severe constraints on their ability to be radical. The fact the tax burden is at its highest level in decades means the scope for doing more through tax-funded public-expenditure increases is limited.

Meanwhile, government debt and borrowing are still at very high levels (with an associated debt interest servicing costs), so simply borrowing more may not be an option. And more spending is likely to be needed simply to maintain current levels of public services because of factors such as the ageing of the population.

Against this backdrop, any government of any political colour is going to be very interested in using ‘other people’s money’ – such as the assets in pension funds – to deliver its priorities.

Now, it may be argued the Labour Party has made one commitment that would mark a distinct divergence from the Conservative policy agenda. This is the proposed reinstatement of the lifetime allowance (LTA) on tax-privileged pension saving. But even here it is becoming progressively less certain this is what will happen.

Labour has gone very quiet on the LTA change, and chose not to seek to amend the recent Conservative Finance Bill that completed its abolition

Shadow chancellor Rachel Reeves has said there will only be a small number of specific tax-raising measures under a new Labour government. These include increased taxation of non-doms, VAT on independent schools and an end to ‘tax breaks for private-equity bosses’. There has also been talk of changes to stamp duty on overseas buyers and a potential windfall tax on energy company profits.

But Labour has gone very quiet on the LTA change, and chose not to seek to amend the recent Conservative Finance Bill that completed the abolition of the LTA. It seems increasingly likely the LTA will either be brought back at a much higher level, thus affecting far fewer people, or that reform of pension tax will be considered as part of the more wide-ranging review of pensions and retirement promised by the party.

Don’t get me wrong, I think it matters who runs the country and I will certainly be casting my vote when the time comes. But, at least in the short term and with respect to financial services, the shackles of the wider economic backdrop may mean it makes a lot less difference than it might once have done.

Steve Webb is a partner at consultants LCP and was UK pensions minster 2010-15