The Queen had a rather busy end to 2019.
Most years, she can spend time working uninterrupted on her one major set-piece event of the year: her speech to the nation on Christmas Day.
In 2019, however, the drafting and rehearsing process will have been curtailed somewhat by not one, but two addresses to Parliament setting out Prime Minister Boris Johnson’s agenda, as she was required to open Parliament twice in three months.
Given that one of Boris Johnson’s first acts as prime minister had been to controversially prorogue Parliament and then establish his plans for the country in the Queen’s Speech in October, one could be forgiven for assuming he would simply dust off the previous goatskin vellum and ask Her Majesty to re-read the same list of priorities.
However, in October, Johnson was fighting an uphill battle against a hostile Parliament, in which he seemed to have few allies and plenty of opposition to any plan he might try to bring forward.
What a difference a General Election can make. With the largest Conservative majority since 1987, Johnson has a much freer hand to introduce a raft of policies that would have quickly been voted down by MPs in the previous Parliament.
So what does all that mean for the tax and estate planning world?
First of all, it’s probably worth noting that Johnson seems keen to ensure some level of continuity – at least until the first phase of Brexit is completed. He has undertaken a very limited Cabinet reshuffle, changing only the Welsh Secretary (after Alun Cairns had resigned in November over his knowledge of a former aide’s role in the collapse of a rape trial) and reappointing Nicky Morgan as Culture Secretary through conferring a peerage on her.
However, the rumours are that this is only a temporary position until Johnson can get the UK out of Europe – still scheduled for the end of January. After that, it is believed that Johnson will seek to drastically cut the number of ministries, with departments such as Work and Pensions, International Development and International Trade all in the potential firing line for being abolished or merged with other ministries.
As for the Queen’s Speech itself, there are a number of areas in which it changed or embellished the plans that were published in October.
Unsurprisingly, the initial focus was on Brexit, with the speech reiterating the plan to leave the EU on 31 January. On post-Brexit immigration, there was confirmation of plans for a points-based system. Whether this will be sufficient to assuage business groups’ fears over a potential lack of an available workforce after Brexit can only be realistically discovered once it is in action.
As in the October version, the Queen’s Speech was keen to emphasise the potential for growth in the post-Brexit world, with the accompanying background briefing document pledging to “ensure that 2020 is a year of growth and opportunity”.
One area where the government will look to develop that growth is in life sciences – a sector that often benefits from tax-advantaged investments such as the Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs). The Medicines and Medical Devices Bill plans to support “the growth of the UK life sciences sector to ensure we remain at the forefront of the global life sciences industry”. This bill puts a bit more meat on the bones of the plans unveiled in the October Queen’s Speech, and builds on the £200 million investment programme to support the very best and most innovative life sciences companies that was announced by the government in September.
It remains to be seen how the government will look to support the life sciences sector, and whether an alternative or complementary option to VCTs and EIS will be introduced to support businesses.
Just like the October version, the December Queen’s Speech and its briefing document made no mention of either EIS or VCTs directly. However, since the October publication, we have had the Conservative manifesto, which specifically referenced both tax-advantaged schemes as great success stories and pledged to continue their use in the next Parliament. It may therefore be relatively safe to assume that new fundraising initiatives from government will seek to complement these existing approaches, and not work to frustrate them.
Another sector that can expect to see plenty of government backing is the environment. Johnson has been rumoured to be planning to bring back the Department for Energy and Climate Change as a symbol of his commitment to the environment and the December Queen’s Speech gave an indication of his plans.
Efforts will include a new bill to “enshrine in law environmental principles and legally-binding targets, including for air quality”, as well as plans to prioritise the environment in the new government’s first Budget. Again, these could offer some good news for small businesses focused on the green economy, and is good for investors who are increasingly looking for investments that make a positive impact on the environment as well as the economy.
Financial services and the focus on science
It is interesting to note that, unlike the October agenda, there is no reference to “ensuring the financial services sector is supported to help meet the government’s commitments on climate change”.
Instead, the December briefing document refers to bringing forward “financial services legislation” more generally, and is focused mainly on supporting businesses in the aftermath of Brexit, rather than giving any clear direction on the exact nature of this legislation or what any measures might look like.
There is no doubting, however, the government’s focus on research and development as a potential driver for the economy. Again, as this is an area that has benefited from VCT and EIS funding in the past (and given the 2018 rule changes should benefit even more in the future), these schemes are likely to play an important role in this push.
Much like the October edition, the December Queen’s Speech was clear on its commitment to science and R&D, with plans to “help accelerate our ambition to reach 2.4% of GDP spent on R&D by 2027”, although any details on this remain sketchy. The government did, however, highlight the sectors it will be championing: life sciences, clean energy, space, design, computing, robotics and artificial intelligence.
Mixed picture on pensions and social care
There will be a new Pension Schemes Bill, which will be designed to give individuals better transparency on their pension pots, with the potential creation of a ‘dashboard’ allowing them to see all their pension savings in one place. This could help people manage their pension investments more effectively and for higher earners, give them greater sight on how they could be diversifying their wealth.
The creation of collective defined contribution pensions, which was proposed in the previous Queen’s Speech, was retained in the December version.
However, there is not such clarity in all areas. There is, for example, no mention of the pensions taper. While Chancellor Sajid Javid said during the election campaign that this would likely be reformed, it remains far from clear what the future holds here. The taper has been credited with significantly boosting investment into tax-advantaged schemes such as EIS and VCT, so the future of how much an individual can put into their pension annually is an important issue for the sector.
Meanwhile, adult social care has long been recognised as one of the key issues facing the country, but attempts to properly reform the sector have eluded governments of all stripes over the past decades. While the December speech pledged an extra £1 billion for adult and children’s social care over the life of the Parliament, the long-term reform will be a more complex process, with the speech promising that ministers will “seek cross-party consensus on proposals for long-term reform of social care”.
Even a partial resolution of the care costs conundrum has the potential to impact the volume of Business Relief qualifying investments. Business Relief has been cited as a partial solution to care cost issues. It allows investors to continue to grow their wealth, while achieving IHT exemption and retaining quick access to their funds in the event of unforeseen health concerns. That said, the growing complexity of financial needs in intergenerational families is likely to continue to drive interest in a relief that offers such flexibility and tax efficiency.
In conclusion, then, we appear to have a little more detail in some areas than in October, but we must now wait for the government’s next major set-piece – the Budget – before understanding how some of these plans will play out in practice.