We look at how the general election result could affect your finances, and what you can do about it.
It’s finally over. After six weeks of speeches, manifesto promises, arguments and - possibly - some intense soul searching, the voting’s done and the election results are out.
But while the Conservatives got the most votes, they didn’t elect enough parliamentarians to have an outright majority. The situation, called a hung Parliament, means they’ll need the support of at least one other party’s MPs to pass key legislation, including the Queen’s Speech.
At the time of writing, the Conservatives are in talks with the Northern Irish Democratic Unionist Party (DUP). However, their support isn’t a given, which creates a risk that the government could at some point become unable to govern.
So what does this uncertainty mean for your personal finances?
A holiday abroad just got more expensive
Businesses don’t like uncertainty. Following the result of the Brexit referendum, the Pound’s value dropped. And, while it did pick up slightly in the following months, it dropped again when the election result was announced.
The obvious consequence is that buying foreign currency is now more expensive, which means the cost of a holiday abroad has gone up. So how do you go on holiday without spending an arm and a leg?
Getting a good exchange rate
First things first - avoid buying your foreign currency at the airport or at a hotel. People tend to use these places as a last resort, so the exchange rate is often quite unfavourable. You may also be charged a steep fee or commission on top.
Local ATM withdrawals can be a good way to get foreign currency on the cheap. If you perform the withdrawal in the local currency, you’ll be given the mid-market rate, which is the fairest exchange rate possible. However, do check your debit card’s applicable foreign transaction fees beforehand.
Here are some other tips and tricks on using your card abroad.
Cutting the cost of your flight and accommodation
If you’re yet to book your flight and accommodation, don’t worry. You can bring the cost of this down too by using one simple trick: book on a Sunday.
According to Expedia, business travellers tend to book flights on Fridays, which drives the price up. By contrast, Sundays tend to be slower. This means you could save up to 30%. Not too shabby, right?
Your grocery spend might go up
Another consequence of the fall in the Pound’s value is a likely increase in the cost of groceries. Since the Pound is now worth less, it costs more to import goods into the UK. In turn, supermarkets may have to raise their prices in order to stay profitable.
But don’t despair. Here’s what you can do to keep grocery shopping costs down:
- Shop around
Different supermarket chains are still in competition with each other. This means you can get a better deal simply by comparing different retailers and doing your shopping accordingly.
- Buy local
Locally-sourced products don’t need to be transported long distances to reach you. They also aren’t affected by foreign exchange fluctuations, because they aren’t imported. Retailers often pass on these savings to you.
- Buy seasonal
If a product is in season, it’ll be in greater supply. In turn, this brings its price down. It’s basic supply/demand economics.
The price of your utilities may (or may not) go down
While Conservative and Labour energy policies differ in key areas, both promised cheaper energy bills in the run up to the election.
Since there seems to be cross-party support, you may yet see your utility bills go down in the next five years. With that being said, a hung Parliament requires some level of compromise to work, so don’t hold your breath.
Meanwhile, you can make sure you don’t pay more than you have to by shopping around. Suppliers get their energy mostly from the same sources, so it doesn’t vary in quality from provider to provider. It’s really about price and the level of customer service on offer. Switching is usually quite straightforward too: just choose your new provider, apply for service and that’s that. Your new provider will handle the switch for you, and there won’t be a gap in service.
More to the point, if you use both gas and electricity, consider getting them separately. Research has consistently shown that, while dual fuel tariffs appear cheaper, you’ll usually save much more when you take them out individually.
Your state pension’s future is uncertain
Throughout the election, there was speculation that a new Conservative government would remove the “triple lock” on state pensions. Introduced in 2010, the triple lock aims to protect state pensions from cost of living increases by raising them each year by the higher of:
- the rate of inflation
- as a proportion of the average UK salary (in other words, an increase similar to that of the average wage)
With the Conservatives now dependent on support from other parties, it’s uncertain whether they’ll do away with this popular but expensive policy.
Either way, the state pension is still quite low compared even to the minimum wage. You’re unlikely to be able to keep enjoying your current living standard on it alone. This makes it all the more important to start contributing to your workplace pension or, if you’re self-employed, to invest in one of your own.
Of course, no-one can predict the future. And nothing is set in stone.
But whether the new government lasts the full five years or not, it’s good to know you can minimise any negative impact on your finances simply by putting some extra thought into your spending.