King's Speech: UK inflation control key as pensions and IHT take back seat

The government will work closely with the Bank of England (BoE) as the UK continues to grapple with a troubled and impressionable economy.

Speaking at the State Opening of Parliament today (7 November), King Charles III said the impact of Covid and the war in Ukraine had created "significant long-term challenges" for the UK.

In his first King's Speech, he outlined the programme of legislation the government plans to progress in the next parliament session, which is likely to be the last before the next general election.

"My ministers will support the BoE to return inflation to target by taking responsible decisions on spending and borrowing," the King said. "These decisions will help household finances, reduce public sector debt, and safeguard the financial security of the country."

In comments of particular interest to the financial services sector, the King also said the government would "take steps to make the economy more competitive" and focus on new competition rules for digital markets and a reform of welfare in the UK.

Despite expectations from the industry around a potential pensions bill, no mention was made of policy changes or movement on inheritance tax (IHT).

"My ministers' focus is on increasing economic growth and safeguarding the health and security of the British people for generations to come," the King stated.

"My government will continue to take action to bring down inflation, to ease the cost of living for families and help businesses fund new jobs and investment."

Commenting ahead of the King's Speech this morning, Aegon head of pensions Kate Smith said she was expecting the government to "try to squeeze a raft of new bills into a short space of time" which could leave little room for pensions.

"The prime minister has also said he wants to show the government is making the right long-term decisions to build a better future," she added.

On the back of the King's Speech, Aegon pensions director Steven Cameron said he was disappointed pensions had been left on the sidelines.

PensionBee director of public affairs Becky O'Connor agreed the omission of any sort of pension bill this morning puts chancellor Jeremy Hunt's Mansion House Proposals on the backburner.

"They may set the direction of travel, but lack a substantial commitment to how these changes will be made in reality," she commented.

On the issue of IHT, Charles Russell Speechlys partner Julia Cox pointed to "notable lack of discussion" on changes but said it was "unclear" where the money would come from if the infamous tax were to be abolished.

"That said the tax take from IHT is not insignificant, so there is certainly a case to be made for keeping it in place for the stability of the country's finances, particularly at such an economically challenging time," she noted. "Moreover, should the Labour Party win the next general election, they may well fill the hole in public finances by making changes to IHT - so those affected could be encouraged to start planning now."

Institute of Economic Affairs director general Mark Littlewood said the King's Speech had been "heavy on intervention, light on liberalisation".

"While the government promised to ‘make long-term decisions to change this country for the better', these announcements risk perpetuating Britain's nit-picky overregulation, high tax, and low growth economic model," he opined.

With an election on the horizon, O'Connor noted the incoming government would likely face "a myriad of crucial decisions".

"Neglecting attention to pensions poses the danger of leaving pivotal reform issues unaddressed, perpetuating a stage of limbo in pension policies," she added.

"All eyes will now be on the chancellor's Autumn Statement," Cameron concluded.